Planning to Be the Best

Posted by 22 September, 2008
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In the old strategic planning, goals often reflected desired financial returns or con­ventional wisdom about what was reasonable in the circumstances. But the Japanese competitors did not play by the same rules. They saw nothing wrong with tilting at en­trenched leaders in photocopiers or autos, for example, even though entering the U.S. markets for these products meant violating the prescriptions of the BCG and GE portfolio models. And GE’s circuit breaker business went way beyond conventional ex­pectations, making such radical improvements that it was able to grow profits, quality, and share despite a no-growth market. Where do goals such as these come from, and how can they be implemented when the more modest goals of the old strategic plan­ning were so often missed? The case of Xerox will help answer these critical questions.
In 1983, when Xerox CEO David Kearns decided to stem the flood of competi­tion, he announced the beginning of a total quality campaign. To the uninitiated, total quality sounds like tougher quality control, more inspections. It is not. Total quality programs eliminate quality inspection and focus on doing it right the first time. (“It” may be fitness to standard, fitness to need, or fitness to latent need, as discussed in lesson 1.) This means every person must do his or her job right, or stop the process if he or she does something wrong. Total quality involves suppliers and distributors as well. (MeAlpin Industries, a Xerox supplier, now sends its managers to a Xerox quality course, designs its parts with a Xerox team, and endures Xerox auditors on its factory floor.) Total quality touches every process in the company, from manufacturing processes to sales and customer service processes. To accomplish total quality, Xerox puts in charge those people who know each process best: the front-line workers.
This type of program involves a big change for most companies-a change in corporate culture. Employee initiative must be encouraged, and employees can no longer be punished for mistakes. They will not report them otherwise. Employees must be trained in the statistical methods needed to monitor and improve the quality of their own work. And they must learn to work together in teams to solve problems or think of ways to work better.
The first move Kearns made to kick off Xerox’s quality program was an appeal to the company’s 100,000 workers-the task of championing customer needs would fall to them.39 And they have proven more than able to meet such challenges. For ex­ample, in 1990, a team of people from sales, distribution, and accounting determined how to save Xerox $200 million in inventory costs.
Perhaps the hardest part of changing the corporate culture is admitting openly what is wrong with the old one. Whatever is wrong, however, is at the root of any problems and must be grubbed out. The old culture becomes a conservative force, preventing employees and managers from focusing on customer needs and limiting the rate of organizational learning and change. At Fuji Xerox, the company’s total quality program began by admitting that there were some rather serious problems, and that they were systemic rather than the fault of any one manager or group. Hideki Kaihatsu, one of Fuji Xerox’s directors, explains:

The first step was to understand the problems facing the company and why these prob­lems occurred. This soul-searching analysis revealed many surprising facts:

T Our leadership had become fragmented and inconsistent.

T Our managers had become complacent, arrogant, and
had lost their sense of urgency.

T We did not pay close enough attention to
customer requirements.

T We found our product development process
particularly sloppy and not acceptable.

T  We depended too much upon U.S. design capability.

T  The product development process was slow and
there was little cross-functional co­operation.

T We did not recognize the value of maintaining strong
bonds with our suppliers.
In the days of the old strategic planning, a manager’s career could have been ruined for coming forward with even one of these criticisms. In fact, that’s one rea­son consulting firms flourished: When one knew the messenger would be killed, one was eager to hire someone else to deliver the message, regardless of price! But Xerox’s disastrous performance forced its managers to put these games behind them and take an honest look at their company. The result was an almost incredible list of major problems.
Solving them was not as simple, however, as setting the solutions as strategic goals. How could change be accomplished, and how much change was a reasonable goal? How could the goals be broken down into smaller, more attainable tasks? The answers could not be found within Xerox; the needed changes were too radical. But surely they could be found somewhere; there were undoubtedly companies that could provide role models, companies that were the best at each of the individual processes Xerox had to rebuild. With this realization in mind, Xerox created one of the most im­portant of the new planning techniques: benchmarking.
Case Study: Benchmarking at Xerox


Benchmarking began at Xerox in 1979 as a way to analyze compet­ing products. According to Robert Camp of U.S. Marketing for Xerox’s Business Services, “Selected product comparisons were made; operating capabilities and features of competing copying ma­chines were compared; mechanical components were taken apart and scrutinized. “42 This reverse engineering of competing products was a natural response to the inroads made by Japanese competi­tors. But with Xerox’s quality program. benchmarking was extended beyond product comparisons, to include process comparisons and companies from other industries.
For example, Xerox used L.L. Bean for benchmarking. Camp tells the story:

When Iwel first informed our management that we were going to assess ourselves against L.L. Bean. There was disbelief. But we had much to learn from them. The L.L. Bean statistics that dealt with their warehouse order picking . . . showed that they were able to do it almost three times faster than Xerox.

This meant that L.L. Bean could fill customer orders faster than Xerox. When Xerox adopted a computerized system like L.L. Bean used, one that “made a conscious effort to sort the orders and minimize the picker’s travel distance” according to Camp, Xerox also was able to fill orders faster. This is an example of what Xerox now calls “func­tional benchmarking.” The following are the definitions of the four benchmarking methods Xerox uses:

1.       Internal benchmarking compares a company’s operations with an internal exemplar, for example, a plant that has innovated suc­cessfully in certain areas.

2.   Competitive benchmarking makes comparisons with individual competitors; reverse engineering of a competing product is one example.

3.    Functional benchmarking is when “we compare function against function across wide sections of different industry types,” as in the L.L. Bean comparison.

4.    Generic benchmarking looks at fundamental business processes that tend to be the same in every industry, such as taking orders. servicing customers, and developing strategies. For these generic practices, Xerox “looks at a wide cross-section” from different in­dustries “to make sure that we have in fact identified those in­dustry best practices,” again according to Camp.
The benchmarking process in its various forms gives Xerox a practical way to set radical goals-the company simply finds some other company that is the best in a certain (often narrow) area, and studies how the company became best. CEO Kearns of Xerox defines it succinctly as “the continuous process of measuring products, ser­vices and practices against the toughest competitors or those com­panies recognized as industry leaders. ” It must be a continuous process, according to Kearns, because “we realize we are in a race without a finish line. As we improve, so does our competition.” Xerox cannot afford to become complacent, and the new planning tools give the company the ability to compete effectively in the cur­rent environment. Kearns adds that “Five years ago, we would have found this disheartening. Today we find it invigorating.”

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