One of the catch phrases in the Toyota culture is “the art of making things.” Everything I have read, and everyone I know who has worked there suggests that “making things” is a passion there that goes beyond a means to make money.
In today’s finance / MBA driven world, I think too many companies are losing sight of the difference between truly creating value vs. simply gathering wealth. They are not the same.
The “makers” of the world are the ones who are creating the incredible breakthroughs we are reading about every day. Making things is a skill that must be practiced, nurtured, focused. With the pace of technology today, the second you are complacent, you are obsolete.
But that isn’t what I am writing about. I want to discuss the consequences.
A company that works to truly create value has to grasp the process of doing so. They have to continuously seek to understand better ways to do it. They gain competitive advantage not merely from making things, but from improving how they make things. Their focus for improvement is a drive toward building the deep skill within the organization.
Finance driven organizations build different skills. They become skilled at developing accounting models, and analyzing them. And those skills may very well serve them for a long time.
But something is lost. When a company’s understanding of its own manufacturing technology becomes superficial, they may very well still make money. The question is whether or not they retain the ability to achieve a breakthrough when one is necessary.
A number of companies out there are well known for a key product breakthrough. Often, though, behind that key product’s success is another breakthrough that enabled that product to be produced economically.
On the other extreme, many a breakthrough invention has failed in the marketplace, not because it was a bad idea, but because the inventor couldn’t make them.
If you are a company that creates value through the conversion of material into products to sell – manufacturing – take a long hard look at the process of making. Are you experts? Do you, or could you design and build your own production equipment? Those skills, that knowledge, once gone is extraordinarily difficult to rebuild.
The alternative is to becoming beholden to the open market’s ability to meet your needs. This might well work if you have a superb relationship with those suppliers. Most companies don’t.
What is your competitive advantage? How do you create the value that is the foundation for all of your profits? How well do you understand that process? Can you fix it when it breaks? Are you making it better every day? Or are you counting on tomorrow being like yesterday?
Mark,
I couldn’t agree more with what you’ve proposed here. Unfortunately, many companies in the US are either going down this route or have already hit bottom on it. The problem is that nobody seems to have noticed or cared.
Let me propose another reason we (the United States) should never let this happen. For anybody old enough to remember World War II or fortunate enough to have studied how the allies won it, the real reason we won was pure manufacturing might. For instance, most German tanks were technically far superior to the American Sherman. (Most German tanks could put a round clear through a Sherman at distances the Sherman crews couldn’t even dream of.) But our ability to manufacture more tanks than the Germans could allowed us to overwhelm them with sheer numbers. And, the lessons we learned in how to manufacture things during the war spilled over into years of prosperity after the war.
So where am I going with this if the US has preserved its defense industry – which we have. It wasn’t the “defense industry” that made up most of our manufacturing might in WW II. It was private industry that converted (temporarily and effectively) to wartime production that did it. Much of that sector is heading down the path you’ve noted and simply won’t be there if there’s every another “big one.” Some have even proposed that we’ve lost the next world war to our “outsource partners” already. Sad – and most likely true.
Tom