Seth Godin's post today on The Factory in the Center speaks to the changes that are taking place in business today. Here's a relevant situation that I experienced ten years ago that still resonates with me today.
I was asked by a consultant friend to be part of a team that was going to re-engineer the production process of a hosiery mill. The company made the kind of men's dress socks that you find in department stores, outlet malls, Sam's Clubs, etc.
This family owned business was started by the father in the early 1940's. Now his son, son-law, and nephew were running the business. The father came to work everyday, even in his 80's, but the son ran the business. The son-in-law the marketing side and the nephew the production line.
It was the nephew who begin the process of change. He saw that they were running out of money. He persuades his uncle, the mill's founder to take a pay cut. He then convinces everyone that they need to change how they manufactured socks.
The problem was it took six weeks to make a pair of socks. There were 17 steps in the process. Each step had it own set up and staff to operate it. The problem was that each station operated independently of all the rest. The essential job was to produce inventory for the next station. As a result there was a lot more inventory sitting on the floor than there were orders.
The solution was to implement the Theory of Constraints system of organization. In effect, it was to connect each station with the one before and after it and only produce inventory from actual orders. This approach was implemented and within a few months, the length of time for manufacturing socks went from six weeks to six days. That change process was a success.
Imagine the excess capacity that they now had. To paraphrase, a famous sports saying, "Ladies and gentlemen, the constraint has left the building." This meant that once the production process was fixed, they needed to expand their marketing efforts to produce more orders. They were never able to do this, and within a year and a half closed the mill.
The problem in this instance was the inability to transition to a new way of understanding their business. I remember conversations about shifting from making socks to managing the inventory of stores by tracking sales, and producing only enough product to keep the store shelves stocked. Unfortunately, the family was stuck in a 1940's manufacturing mindset, and could not make a fast enough transition to a new way of operating. If they had made this shift 10 years before when they began to see the hand-writing on the wall, then they would probably be in business today.
Seth asks ...
What happens when the factory goes away?
You are no longer an owner. You are still a debtor, most likely, and employed by someone who out-thought you in order to change faster and more effectively than you did. That is if they would even hire you.
We all must understand that there is LESS inherent risk in changing than in not changing.
If you think you can keep doing what you've always done. Good luck. If you are right, you are the exception, not the rule, and you should get on your knees every night and thank God that you were in the right place at the right time to survive what others have not been able to do.
You can change your ideas. You can change who you know, listen to, and hang out with. But if you are not changing how your business is organized and functions, then all the rest is going to have a hard time being sustainable over the long term. This is just the way it is today.