Students of business history know to take car companies seriously. The era of scale economies was ushered in by a car company - Ford - on its innovative assembly line. While economies of scope were unleashed by another - Toyota - with its equally innovative total production system. So, has Lotus - a British sports and racing car company - just signalled the rise of the the next great step in the evolution of business?
The high-end car market is fierce and Lotus’ new CEO can only afford to innovate frugally - improve without investing. He asks ‘for all three existing car models to be broken down into their parts and laid out on tables and asks all 900 company employees to tag the parts using a traffic-light system: keep, renegotiate supply/redesign, or discard. This ensured everyone understood why these changes were being proposed and resulted in weight savings of 10% and £3,000 from the components bill. It also led to the overall quality of the cars being improved’ (1) and this was all achieved without an expensive re-design of the cars themselves.
Why does this have the potential to signal a radical new breakthrough in business?
Speed and flexibility drive competitive advantage in rapidly changing and unpredictable markets. Resource intensive major projects with long lead times and even longer pay backs are increasingly harder to justify. But this doesn’t mean organisations need to go into defensive mode, just protecting what they have by cutting costs further. It simply means business leaders should adapt better and, helpfully, Lotus has shown the way in three simple steps:
1. Work with finely-grained objects - like the Lotus CEO, break things down to the lowest practical level of action. Rather than re-design the whole car he looked to question the right of each component to be there in its current state. However, if you’re in a service organisation DON’T confuse people for car parts (people are more complex than component parts!). Instead the unit of analysis should be narratives (the micro-stories) that spread like wildfire around your organisation, shaping how people act. Become aware of them and adopt pragmatic steps to get more of the ones you want and less of those you don’t want
2. Leverage distributed cognition - Getting everyone involved not only helps create buy in but more importantly taps into one of the most important maxims of the new business paradigm: answers are already known, but just very widely distributed. Your challenge is to bring those knowledge-rich perspectives online - seeing what’s really happening through the eyes of those who know this best: customers, employees, suppliers etc. Again, capturing the narratives people share and exploring them with tools such as SenseMaker® lets you do this quickly in real-time
3. Ensure disintermediation - finally, and most importantly for business leaders, you must get your hands dirty. As Rumelt states in his excellent book ‘Good Strategy/Bad Strategy’ “Leaders who stay ‘above the details’ may do well in stable times, but riding a wave of change requires an intimate feel for its origins and dynamics.” Don’t let middle-men - internal middle-managers or external ‘experts’ - get in the way of seeing things with your own eyes as this is the only way you can effectively match what is possible (to do) with what is (really) needed.
The next stage in the evolution of business is here and it’s frugal. The barriers to entry are no longer capital-based ones but knowledge-based. Are you on board?
#TheNewSimplicity #SmarterOrganisations #SenseMaker
(1) This story was covered in the UK Sunday Times February 2015 http://www.thesundaytimes.co.uk/sto/business/Industry/article1516483.ece though I came across this in the excellent 'Cynefin Mini-Book' p6 http://www.infoq.com/minibooks/cynefin-mini-book