Strategic Planning and Process Redesign

Posted by 22 September, 2008
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STRATEGIC PLANNING AND PROCESS REDESIGN

So what does GE do now? Its circuit breaker business provides a good example. This stagnant SBU in a mature industry would have flunked all the screening tests, but with a billion in yearly revenues, it hardly seemed appropriate to divest it and leave the market to competitors Seimens and Westinghouse. Besides, if any lesson had come out of the old planning models, it was that profits did not necessarily come from high-share, high-growth SBUs. (As Stephen Hardis, Eaton Corpora­tion’s vice president of planning, put it, “It’s great to say, ‘Why don’t we all go into growth businesses?’ But those are not all highly profitable. If there’s a hell for plan­ners, over the portal will be carved the term cash cow.”)33 Instead of divesting, GE consolidated operations-from six circuit breaker plants to only one (in Salisbury, North Carolina).34 Solving this problem in just one location seemed like enough of a challenge.
Then management assessed the problem, but not in the conventional way, by asking planning staff and consultants for a report. Instead they formed an interdisci­plinary team with specialists from manufacturing, marketing, and design, and asked them to figure out how to make the manufacturing process profitable. The group de­cided to compete on the basis of speed, and adopted the goal of reducing manufac­turing time from three weeks to three days.
This radical change could not be accomplished given the existing process, in which GE engineers designed a unique box for each customer using a selection from GE’s 28,000 parts, then factory workers assembled the boxes by hand. So the team re­designed the product line, paring parts to 1,275 while still allowing customers the ability to customize their boxes. Next the team developed an expert computer system that could automatically convert customer requirements into instructions for the fac­tory machines. This eliminated the engineers and the delay needed for custom design­ing. The team also added more machines, increasing the automation of the production process.
Finally, the team tackled personnel problems on the factory floor. The key issue was delays associated with decision making. According to a Fortune reporter:

The solution was to get rid of all line supervisors and quality inspectors, reducing the organizational layers between worker and plant manager from three to one. Everything those middle managers used to handle-vacation scheduling, quality, work rules-be­came the responsibility of the 129 workers on the floor, who are divided into teams of 15 to 20. And what do you know: The more responsibility GE gave its workers, the faster problems got solved and decisions made.
Because of these changes at GE, costs dropped, quality improved, and cus­tomers believed they had more features from which to choose. Delivery was made in three days, as hoped; the backlog shrunk from two months to two days; employee morale was up; and market share was growing despite the flat market. The 1989 sta­tistics, for example, were quite amazing: Productivity was up 20 percent, and ROI was above 20 percent. But it was not easy to turn this dog into a star; the project began in 1985, four eventful years before the stunning results we report. Everything had to change, from product line through production process to corporate structure and cul­ture. Not every line manager is capable of leading such a transformation, but it defi­nitely takes a line manager to do it. No central planning staff would undertake such goals, or succeed if it did. Still, the new planning approaches are tougher on manage­ment. Managers must champion change; they must be willing to push authority down into the organization; and they must learn to use, and work in, teams. As GE’s Roger Schipke puts it, “Now it’s a question of ‘Can they develop a strategy for their busi­ness?’ Some will make that cut, some won’t.” When he took over the major appliance group, only one of the four top managers reporting to him made that cut. The others were fired.
Success with the new planning approach also requires reducing the barriers be­tween company and customer-touching customers and listening in the proactive sense described in lesson 1. For example, GE now promotes an answer center in TV ads and on product packaging. Staffed 24 hours a day, the center may be reached via a toll-free call. Several million calls are logged annually. Frank Sonenberg of Ernst & Young’s Consulting Group says that, “By making information easily available to con­sumers f General Electric] builds brand loyalty in a tough competitive field.”

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