Agility and Optimism

Those who follow this blog know that I like Adam Werbach’s ideas on Sustainability:

 

 

Thriving in perpetuity in a globalized economy is no mean feat. Strategy is critical. Executing that strategy is at least as important. Consider these two groups of products:

Photographic films

Kindle

Typewriters

“Fracking” technology

TV Picture Tubes

Containerized freight

Newsweek in print

Cell phones

Phonograph Records > Cassette Tapes > CDs

Toyota Production System

The group on the left illustrates the hazards that rapid technological change and globalization can pose even to very well established and familiar products, and to the firms that produce them. The group on the right exemplifies the huge business opportunities the same conditions create.

Zoomed out” View of Organizational Agility

The term “agile manufacturing” usually refers to methods for improving the responsiveness of manufacturing activities — particularly production, supply chain and new product introduction — in order to react more quickly to changing customer needs.

The pursuit of Sustainability requires another, more “zoomed out” [1] view on organizational agility. This “agility” means an ability to anticipate and respond to potentially disruptive change that can affect the organization at the strategic or business model level. This organizational agility includes:

  • A means for constantly monitoring the global economic environment and recognizing changes that could significantly affect your business, positively or negatively.

>> In my view, this is a good opportunity for joint action with other firms in your industry, through a trade association.[2]

  • A method to assure that identified changes come to the attention of management in a timely manner.

>> A comprehensive organizational management system needs include a regular, systematic review of plans and progress. The frequency of such reviews depends on the specifics of your firm and industry. To begin, review quarterly, then increase or decrease frequency based on experience. Inputs from monitoring process mentioned above should be on the agenda.

  • A procedure for evaluating each potential change, developing an action plan, and following through on that plan.

>> Create a Proactive Action process, similar to the Corrective Action and Preventive Action processes that most manufacturers already have in place. Use tools like Ishikawa diagrams [3] and / or a modified form of Failure Mode Effects Analysis (FMEA) [4] to begin the evaluation.


A Caveat


Daniel Kahneman won a Nobel Prize in Economics for his work on how people make economic decisions. He recently wrote a comprehensive, but quite readable book [5] on that subject. Dr. Kahneman’s book offers an important matter to keep in mind as you and your organization confront strategic issues.

Dr. Kahneman says that most small business people have a naturally optimistic outlook. Their optimism helps them manage the many snares and snarls that business brings. However, optimists are also subject to several important cognitive biases in their thought processes and decision making, of which they may not be aware: [6]

  • Optimists “focus on our goal, anchor on our plan, and neglect relevant base rates…” (“Base rates” refer to the general statistics of classes. For example, only 35% of U.S. small businesses survive for 5 years)
  • Optimists “focus on what we want to do and can do, neglecting the plans and skills of others.”
  • “Both in explaining the past and predicting the future, (optimists) focus on the causal role of skill and neglect the role of luck. (They) are therefore prone to an illusion of control.”
  • Optimists “focus on what (they) know and neglect what (they) don’t know, which makes (them) overly confident in (their) beliefs.”

In short, be careful not to trip over your own optimistic nature. When possible, validate your assumptions and conclusions outside of your business, especially when strategic decisions are involved.


Chuck at ReneThoughtful comments and experience reports are always appreciated..

…  Chuck Harrington (Chuck@JeraSustainableDevelopment.com)

P.S — When it is time for your firm to seriously pursue Sustainability, contact me — C.H.

Note: This blog and associated website (www.JeraSustainableDevelopment.com) are intended as a resource for smaller manufacturers in the pursuit of Sustainability. While editorial focus is on smaller manufacturers, all interested readers are welcome. New post are published weekly.

 

 



[2] For more on trade associations, see On Joint Actions, this blog: http://blog.jerasustainabledevelopment.com/2012/07/25/on-joint-actions.aspx

 

[3] For more on using Ishikawa diagrams, see Green and the Zoom Lens Mind, this blog: http://blog.jerasustainabledevelopment.com/2012/02/22/green-and-the-zoom-lens-mind.aspx

 

[4] For more on FMEA, see Downside Up – Risk Management, Part 2, this blog: http://blog.jerasustainabledevelopment.com/2012/09/11/downside-up—risk-management-part-2.aspx

 

[5] Kahneman, Daniel, Thinking, Fast and Slow, Farrier, Straus and Giroux, New York (2011), especially Chapter 24, The Engine of Capitalism.

 

[6] ibid, page 259