by Stanley M. Davis, Simon and Schuster, 1989.
Stan Davis’s classic where he outlines how consumers will require goods and services anywhere, at any time and with minimum matter. Sets out the benefits of mass customisation. It is the job of businesses to manage the consequences of events which have not yet happened.
(Reviewed by Edgar Wille in June 1999)
(These book reviews offer a commentary on some aspects of the contribution the authors are making to management thinking. Neither Ashridge nor the reviewers necessarily agree with the authors’ views and the authors of the books are not responsible for any errors that may have crept in.
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Ex Harvard faculty member turned consultant, Stanley Davis has produced a stimulating book which tracks back to the present from the kind of future he believes will emerge. The book's uniqueness lies in the fact that through his expertise in organisation structure he became interested in physics when he saw that both physics and management were concerned with `the interrelationships of the parts of a whole' (a dictionary definition of `structure'). The intention of this book is to give new meaning to time, space and matter in shaping tomorrow's business and organisation. He sees them as resources and not as constraints. Written some years ago, the book remains relevant, by the strength of its analysis.
Davis says that in the past business has managed the aftermath - the consequences of events that have already happened. `In the new economy, however, we must learn to manage the beforemath, that is the consequences of events that have not yet occurred'. This exciting concept permeates the book and transforms our perspective to managing from a future perspective rather than anchoring ourselves in the past. We need feedback from future expectations as Bertalanfly put it. (Past experience can still give us feed forward, but the future is not the mere extrapolation from the past).
The first dimension of physics considered by Davis is time. The industrial world has focused on time from the corporation's perspective, the producer's schedule, working hours, delivery dates, etc. Focusing externally on the customer transforms the corporate sense of time. Customers use our time up until they decide to buy. After that we are using their time. So we must shorten the elapsed interval between the identification of the customer's need and the fulfilment.
And modern technology can do this. There are thousands of services from making spectacles to developing films where customer waiting time has been cut from days to minutes. The aim is that `whenever the customer needs the product or service offered it should be immediately available'. Not during working hours, the next day, or after the weekend or when the transport is available, `but any time, instantaneously'. Davis recognises that this is easier in high tech industries, but suggests a conceptual shift toward real time in all industries. He gives illustrations from banking where immediate account debiting by automatic tellers at any time is benefiting both bank and customer.
Information has a time value, whether it is by inspecting the production line in real time, answering a mortgage query promptly, undertaking to service your equipment at a specific time, so that you don't have to hang around. Computer typesetting enables newspapers to include later news. Computer design in manufacture enables a rapid leap from design and development straight to consumption.
So the technology is there, but the thinking hasn't caught up. Instead of the model which uses the present organisation as the vehicle for getting to the future, Davis proposes a different concept of time, where the organisation's leaders must lead `from a place in time which assumes you are already there, and that is determined even though it hasn't happened yet'. The present is seen as the past of the future. As ITT boss Geenen said `You read a book from beginning to end. You run a business the opposite way. You start with the end, and then you do everything you must to reach it'. Put like that it seems obvious, yet the thrust has been to base the future on extending the past, with organisation and structures created to serve that past.
And Davis stresses that every member of the organisation - not just the leaders - need to be clear just how their job implements the future envisioned. The organisational changes needed are not made in big, occasional leaps, but they are happening all the time in small steps to make the future possible. They keep pace with the unravelling future. They do in fact unravel it. Strategy tells you what the business is going to look like; organisation tells you how you are going to get it to be that way. The visionary leader sees the future as here already - the task is to take steps for others to work in the light of that new reality.
It's a matter of a future mindset, developing all the time to keep pace with the unfolding future. And for the customer it means now - real time. Consumers need products and services any time: those who provide them in real time have the competitive advantage: and this means no lag time between identification and fulfilment of the need. If this is irritatingly idealistic and impractical to us, Davis would say we're still rooted in the past: if so, the future will never be ours.
Place is the next dimension. Perhaps this is more obvious. This may be easier to consent to. It's not that long ago that heavy calculators sat on special frames: now we carry them in our wallets. Miniaturisation involves microspace. Electrical impulses, representing information, demolish space as well as time as they utilise the new technologies of lasers, fibre optics, etc. Over 275,000 transistors and a million electronic components on a quarter inch square, or less, of smelted sand! The reduction in space means quicker and more complex processing and vastly decreased costs.
`The technological ability to transform micromatter, by compacting it in space is at the heart of the new economy: transforming time, space and mass to be more useful to people. They are resources, not blocks. Four-volume Tokyo Yellow Pages on a 3.5 inch compact disk, flat clear television screens as wide as a wall, 3D television; shrinking the size of products without otherwise changing them; telecommunications where much more is packed into time-space because speech is two-thirds silence, products from wrist watches to telephones which can go everywhere with you instead of you going to them; executives with portable computers doing their spread sheets on the plane. All these are here and there is more to come- to erode space. Home-care health services tied to diagnostic computers; electronic home banking; processing where the customer is - as with the Polaroid camera or the self-assembled hi-fi system. The manufacturer's chain of goods and services ends in the hands of the consumers, in their own physical space`.
And commercially to make products and services less fixed in space increases their competitive edge.
Another element in space liberation is what Davis inelegantly call 'disintermediating' - reducing the number of go-betweens, such as stockbrokers, retailers, wholesalers and television programmes. DIY (eg IKEA) has `disintermediated' a host of fields: sales organisations are running their own financing organisations (eg cars); mail order is thriving and so things comes direct from the originating space to mine with great cost saving. Small businesses contribute considerably to this trend.
This reduction in intermediates is significant in service industries where distribution through a sequence of mediators accounts for 45 to 80 per cent of operating costs. The increased use of direct courier services has reduced space by reducing time-as in Federal Express deliveries.
Over capacity, in oil refineries for example, has led to a rethink and a downsizing, rather than carrying capacity to meet minority needs (80 per cent of the business comes from 20 percent of the customers). `Downsizing is a redefinition of how large a space is optimum for a company to occupy.` This is a wider definition than the usual one of getting rid of people.
The co-operation of separate global businesses in alliance to contribute their own part to end products has obliterated space to the benefit of consumer and producers. (eg AT&T creating an alliance with some twenty-five companies from Europe to Taiwan, from Japan to Texas, from Spain to Korea). All these companies also reorganise their internal space.
In this reorganisation the network, with its flexibility and responsiveness, is replacing the rigidities of the hierarchical approach where everyone knew his or her own space and was limited by it. Each member of such networks is, in effect, at the centre of the network. `Networks are co-operative, not competitive. They are true grass roots; self-generating, self-organising, sometimes even self-destructing. They represent a process, a journey, not a frozen journey. Middle managers are increasingly not in the space below senior managers and above supervisors in a hierarchy. Rather they are in the middle of the customer-employee relationship. That is their place.'
Where you work is less significant, with saving in time money and effort, by not commuting to crowded city centres. Social needs have slowed this down somewhat but it will come; the ultimate in decentralisation - which after all is about place.
Another interesting concept from Davis is the idea of contradictions occupying the same place simultaneously, like the ice-cream and pudding of Baked Alaska. `Managers who can hold opposites in their vision simultaneously can win the Kingdom.' Matrix organisation and networking is made possible by the technology, so that any parts of the whole that need to communicate with each other do so instantaneously. Any place! Any time! See too, how this changes the old command flows up to the appropriate level and down again. Now straight across because the information technology, still within rules in the program, can find people and bring them together as if in one place. Hierarchy proscribes. Network facilitates.
'Matter is energy slowed down to a velocity that the mind can comprehend', so we should
pay attention to the intangible features of our business.`Matter is not all that
matters'. In the new economy the value added comes increasingly from intangibles, things
whose importance does not lie in their material existence. As Theodore Leavitt put it,
The throw-away economy of disposable razors, diapers, even cameras, despises matter and elevates service. But this is only one side of it. More fundamental, isn't business more and more about `allocating intangible resources (mind, time, information) to create intangible products (software, advertisements, investments) and intangible services (personal shoppers, health, education) for intangible market segments (conservatives, compulsives, swingers)'.
Even companies like IBM, classified statistically as manufacturers, have only a relatively small part world-wide of their employees in industrial manufacturing! Industrial techniques have in the past stressed `efficiency of outputs', the new `no matter' approach stresses `effectiveness of outcomes'. (Michael Packer, Technology Review, Feb/March, 1983). Less and less matter is used in the actual manufacturing process and more and more information to control the residual activities.
Information is the tool, support and medium in creating final goods and services - even if some of these are material.
Much in this part of the book is brought here into the framework of the physics model. There is a well known story from a tool company `You are not in the business of selling drills. You are in the business of selling holes.' The tangible product is used only to fulfil an intangible need. Laser drills in the future will drill the holes, the laser is energy not slowed down by the square of the speed of light. So a powerful-nonmaterial drill. Goods are sold on the basis of immaterial emotions, values, perceptions, attitudes, expectations and other human traits. Excellent companies don't put the customer first or the employee first. With that orientation whichever comes first, the other doesn't. Instead, excellent companies use a holistic approach: they put the intangible customer-employee relationship first.
Managers! Manage the context. Let your subordinates manage the content.
Sell the sizzle not the steak.
There is under the No matter heading a section on the fully automated factory and sub-contracting of functions. The employment implications are not discussed, assuming that increased wealth and reduced costs will benefit everyone.
Productivity is defined, not in tonnes of goods produced (matter) per employee, but in value added (non-matter) per employee.
Turning to international trade in intangibles:
"In sum the new service exporters deal with intangibles on a world-wide scale. They depend on creativity, information, communication and distribution in an any time any place world more than their industrial older brothers who produce material goods in fixed time, space and often costs."
A little philosophy ends this section. Where do you locate the place in space of a non material `thing', when `no matter things' exist in every place at the same time? New perceptions in science as to how the world works have to filter through to the management of the future.
This is a section resolving apparent contradiction. Mass production of the unique goods required by the customer. And the technology now permits it. The shirt for example can be part customised and wholly mass-produced at the same time. And the business has to move in the same direction, so that every part contains within it the basis of the whole, (eg a customer driven workforce). This chapter gathers a number of practical miracles which permit this. Some of them are also management models.
Holography! If the three-dimensional image is broken the whole can be reconstructed from any part. The whole code exists at every point in the medium. This is a wonderful model of the effective enterprise. The holographic organisation! The practical transformations from holography are also discussed.
Parallel processing! The move in computers from step-by-step sequence toward a simultaneous approach, where many processors handle different parts of a job at the same time. As well as vast practical effects, eg for mass customising, it is another model of the organisation of the future.
Customised chips, with customers putting what they want on to them. And how about AT&T transplanting a clump of just ten atoms, reshuffling them to produce precisely the semi-conductor properties wanted!
Biotechnology and genetic engineering! No need to be frightened. Drugs that no longer just attack the disease, but the fundamental cause buried deep in molecular biology: antibodies which seek out and lock on to a specific target, killing only the cancer cells without destroying healthy tissue. Protein engineering which modifies specific chemicals in the body to block disease processes,
Customised catalysts! Twenty-five per cent of the GNP of the USA is spent in manufacture with the aid of catalysts, developed by trial and error. The breakthrough is occurring where catalysts can be designed instead of discovered.
Davis then picks up how these technologies will combine to create mass customising: shoes for his big feet and for the little feet of others all from one mass run with immense savings in time and cost. Niche marketing will be facilitated. Customer selection too - using holography to design the exact car they want.
This concept modifies 'globalisation' which says everyone everywhere wants the same, (eg CocaCola) and says, everyone, anywhere can have the mass customised item they or their culture prefers. This will prevent the sad erosion of diversity and reverse the relentless homogenising of the world, giving the opportunity for uniqueness to flourish again. Mass production brings the benefit of scale - but mass customising will permit differentiation and individuation.
These technological examples lead Davis back to business models - to the ultimate logic of mass customising where the individuals are not cogs in a wheel, but where `each individual is the organisation'. Each individual (like the holograph) is seen as a whole within the corporate whole; as the whole business and whole organisation at the level of the individual. The intrapreneur concept (the internal entrepreneur) is an expression of this idea! Where people work `almost entirely for themselves within the corporation', customising their results to their own intentions within the mass(ive) corporation, to the benefit of both. Franchising is a mass customising concept, so is the condominium and the shopping mall.
The chapter ends by emphasising the need to move away from either/or, eg centralised/ decentralised; planning/implementing; important/urgent; task-oriented/people-oriented; cost /quality; flexibility/order and so on. Mass customising is a model to answer these contradictions. Remember the hologram: if the image is broken, any part that remains will reconstruct the whole. For this to happen, all information about the whole exists in each and every one of its parts. The concept is mind-boggling: the entire corporation residing in each employee, in each product, in each service. `The shift from a mechanical to a holistic paradigm is occurring in science and technology. It is logical therefore that it will move next into our constructs of business and of organisation.'
This chapter gathers up the threads and gives the examples of Federal Express as a company which gained competitive edge by treating time, space, `no-matter', as resources, not constraints: with a mindset that starts and ends with the whole, that doesn't treat parts in isolation or as incomplete pieces of larger puzzles, that emphasises relationships and that understands parts in their relationship to one another and to the whole.
No doubt many of the concepts require debate and some of its ideas may seem esoteric. But the general thrust is impressive. It concerns `a holistic reality, where universal dimensions become resources applied to science and technology, and offering clues to business, organisation and people for a better life'.