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Overview
Product Details
| ISBN-13: | 9780060971847 |
|---|---|
| Publisher: | HarperCollins |
| Publication date: | 08/02/1991 |
| Edition description: | Reprint |
| Pages: | 736 |
| Product dimensions: | 5.31(w) x 8.00(h) x (d) |
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Chapter One
Facing Up to the Need for Revolution
Can America make it? A huge trade imbalance, a sliding currency, falling real wages and a dismal productivity record. A decade ago, these were the hallmarks of a struggling British economy. Today they characterize an American economy which is struggling...against fierce competition from the Far East.
Financial Times (of London)
May 9. 1987
Excellence Isn't
There are no excellent companies. The old saw "If it ain't broke, don't fix it" needs revision. I propose: "If it ain't broke, you just haven't looked hard enough." Fix it anyway.
No company is safe. IBM is declared dead in 1979, the best of the best in 1982, and dead again in 1986. People Express is the model "new look" firm, then flops twenty-four months later.
In 1987, and for the foreseeable future, there is no such thing as a "solid," or even substantial, lead over one's competitors. Too much is changing for anyone to be complacent. Moreover, the "champ to chump" cycles are growing ever shorter — a "commanding" advantage, such as Digital Equipment's current edge in networks that allow vast numbers of computers to interact with one another, is probably good for about eighteen months, at best.
There are two ways to respond to the end of the era of sustainable excellence. One is frenzy: buy and sell businesses in the brave hope of staying out in front of the growth industry curve. This is the General Electric idea: in the last six years, it has acquired over 325 businesses at a cost of over $12billion, and dumped more than 225, getting $8 billionin return.
The second strategy is paradoxical — meeting uncertainty by emphasizing a set of new basics: world-class quality and service, enhancedresponsiveness through greatly increased flexibility, and continuous, short-cycle innovation and improvement aimed at creating new markets for both new and apparently mature products and services.
The latter is Ford's approach to transformation. Quality really hasbecome Job One at Ford. The once all-powerful finance function hasassumed a less dominant role, and manufacturing, the prime source ofquality, is no longer low in the organizational pecking order. And product development techniques have been set on their ear with the unconventional, but wildly successful, Team Taurus approach; it combined supplier, worker, dealer, and customer input from the start.
If the word "excellence" is to be applicable in the future, it requires wholesale redefinition. Perhaps: "Excellent firms don't believe in excellence — only in constant improvement and constant change." That is, excellent firms of tomorrow will cherish impermanence — and thrive on chaos.
The Accelerating American Decline
You need not look far to find cause for alarm:
1. Our average business productivity grew at 3 percent a year from 1950 to 1965. From 1965 to 1973, the rate was 2 percent; and since 1973, it's barely crept along at 1 percent. Manufacturing productivity looks worse. It grew at 2.5 percent a year from 1950 to 1985; that contrasts with Japan at 8.4 percent, Germany and Italy at 5.5 percent, France at 5.3 percent, Canada at 3.5 percent- — and much-maligned Britain at 3.1 percent.
2. U.S. per capita GNP, called by some the truest measure of a nation's international economic standing, slipped below Japan's in 1986;
it also trails the per capita GNP of such European nations as West Germany, Switzerland, Sweden, and Denmark.
3. The average wage for a 25-34-year-old white male declined 26 percent from 1973 to 1983 in constant dollars; the comparable figure for 35-44 - year-olds was little better, a decline of 14 percent. This figure is more useful to look at than others. Given the increase in work force participation by women, overall family income has slowly risen. But the economic fate of the individual white male remains the bellwether indicator of progress (or lack of it).
4. The national savings rate, long the lowest in the industrial world, continues to decline. Despite supply-side economic stimulants such as the 1981 tax cut, savings as a share of disposable personal income plummeted from 7.5 percent to 3.9 percent from 1981 to 1986. At year's end 1986, it stood at 2.8 percent. Only our dramatic shift as a nation from premier net lender to premier net borrower has kept investment afloat.
5. In 1986, 138 banks failed, the largest number in one year since the Great Depression; the pace in 1987 is ahead of 1986's. By contrast, 10 banks toppled in 1981.
6. Economists estimate that as many as 30 million people have been dislocated by the "restructuring" in manufacturing during the last decade. Since 1980, the Fortune 500 have shed a staggering 2.8 million jobs.
7. The plain truth is that every major manufacturing or service firm — from the Bank of America and Citicorp, to Du Pont and General Motors, to IBM and Intel and the Hospital Corporation of America — is undergoing trauma.
Alarming as these indicators are — and a host of similar ones — it is the chaos in trade that is most revealing of our poor performance. It alone provides the harsh, industry-by-industry evidence of our decline.
The fact that the trade deficit is currently (April 1987) running at $152 billion, despite the dollar's plunge against the yen and mark since September 1985, is a powerful indication that, while the problem may have been exacerbated by the dollar's strength of a few years back, we are getting clobbered primarily because of the generally poor quality of what we produce and a failure, as a result of questionable service and slow responsiveness, to make use of our onshore, close-to-the-world's-biggest-market advantage.
Textile-makers all but gave up decades ago, and begged for protective relief, while foreign wages were and are often still low, the industry's repeated failure to modernize and adapt to new market needs was the root cause.