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No one needs to be convinced that technology can be an engine of growth. We see all around us examples of companies that have exploded upon the scene and rocketed into prominence on the basis of a new technology or a new product. But that is to view this component in a narrow sense as the technology of a product or an industrial process. Whereas the component technology is equally applicable to a trucking company or an air freight forwarder. In its essence, technology is the know-how that enables a company to produce and distribute a product or provide a service to the market. It includes the equipment companies employ for sales, design, production, storage, delivery, accounting, training, measurement, etc. It includes the knowledge, know-how and skills they employ for all these activities as well. Each of the five components can be energized in several different ways. In this chapter, we explore two basic strategies for energizing technology: implementing values and integrating technology more closely with the other four components. The values most directly related to technology are innovation and creativity, quality, safety and maintenance of equipment. INNOVATION AND CREATIVITY There are three levels of technology-productive, innovative and creative. Productive technology is any technology which has a practical utility. By innovative technology, we mean technology which has been improved to add greater value, function, economy or quality. Creative technology contains an original element. It is not just improved, it is something new. Technological creativity can be achieved by combining or relating technology to the other four components in new ways. These are some basic principles for identifying potential areas of technological innovation and creativity:
Add one new dimension to the value of the product A change in any aspect of the product or service can add a new dimension to its value or convenience. Minit International introduced shoe repairing to prestige department stores and train stations throughout Europe to make the service more accessible. California wine is now being sold to Europe in milk containers in order to reduce the costs of transportation. What new dimension can you add to the products or services you offer, to the way they are packaged or the places they are available?
Integrate new and old technology
Look at technology from the market's point of view
Create or innovate technology to meet psychological needs
Look for innovations that reduce cost QUALITY Quality applies to everything-product, service, production technology, showroom displays, packaging, accounting, etc. Regardless of where this value is applied, quality has the power to improve morale, reduce costs and minimize the necessity of re-doing work. Effective implementation of quality involves the five stages outlined earlier in this book-a firm commitment, setting clear and quantifiable standards, assigning responsibility, putting in the right systems to achieve and monitor performance, and training for the right skills. America's basic manufacturing industries have been under enormous pressure over the past decade to improve quality in everything they do. The commitment to quality is no longer a matter of choice. It is a pressing necessity. Larger customers are insisting on better quality from all their suppliers. In many industries customers are not waiting for vendors to raise their quality standards. The customers are imposing their own. The companies most committed to quality have two sets of standards, the one imposed by the customer and the one they impose on themselves, which is significantly higher. In the olden days quality control departments and inspectors were responsible for quality and empowered to stop production lines and reject products below standard. Today the structure for quality has changed. Everyone has a responsibility for quality. Machine operators are being given the responsibility to monitor their work and the authority to send back substandard parts that come to them. Systems such as statistical process control are being used to provide immediate feedback on quality deviations as they come off the machine. Training is being given to managers, supervisors, operators and workers to improve awareness and skills for quality. Wherever such a comprehensive approach to quality improvement is introduced, the results are impressive. The experience of Sectional Tool and Die of Ohio is typical. John Babbitt, the founder, launched a major quality program last year. He hired a quality manager who reported directly to the CEO, developed a detailed quality manual, introduced statistical process control systems, and did extensive training. Instead of giving all authority to the quality control inspectors, machine operators were made responsible for monitoring the quality of parts they produced and they were given the systems needed to do so. This really got people involved in finding ways to improve quality. The effort had a dramatic impact on his people and his profitability. Energy, motivation and productivity went way up. The scrap rate fell from 5% to 1%, which added $250,000 to the company's bottom line on sales of $6 million. Quality has no end and no limit. Think about quality in your company. What more can you do to improve it? PUTTING TECHNOLOGY IN PROPER PERSPECTIVE Technology is so powerful, that those who are deeply involved with it sometimes forget that in business it cannot function by itself. The full productive and creative power of technology becomes available only when it is kept in proper balance with the other four components. Vipont Pharmaceuticals was established back in 1968 as a research company to develop products based on sanguinaria. During its first 13 years in business, it never sold a product. By the time Larry Frederick became CEO in 1981, the company had spent the $4 million invested in it over the years and had a negative net worth of $500,000. About the only thing the company had left was a very good product and a great technological potential. The product was the toothpaste. The potential was a technology for using sanguinaria to treat gum disease, which the company felt could help Vipont become a $500 million company. In order to bring the toothpaste to market and create the financial and organizational basis for developing the new technology, Frederick and his team had to build up the other four components of the company. They resorted to some creative financial techniques to raise additional capital. They recruited talented and experienced people to head up marketing, sales, and research positions. They put in sophisticated systems for planning, budgeting, financial control and tracking customers. The company which had been treading water for thirteen years suddenly starting growing rapidly. Its ability to generate increasing sales and profits over the last few years has also enabled it to invest the funds needed to accelerate development of its technology for gum disease. Vipont's growth illustrates how dependent technology is on the other components for its full development and flowering. Larry Holt, vice president of Finance, agrees. "All five components were important." Until the other four components were suitably developed, the potentials of its technology could not be exploited. The full creative potentials of technology can be tapped by exploring the linkages between this component and the other four. MATCHING TECHNOLOGY WITH MARKET One of the reasons Mesa Airlines has been able to survive the heavy competition from other commuter and regional airlines has been its knack for properly matching its equipment with the needs of the market. Some other new airlines rushed to buy big, fancy Boeing aircraft and then lost heavily flying the highly competitive, larger commercial market routes in order to fill all the seats on the bigger planes. Mesa followed a different strategy. It decided to fly only the lower volume commuter routes, where it could maintain a cost advantage and bought smaller 19 and 13 seat aircraft to suit its strategy. CEO Larry Risley explains, "The thing that has propelled our growth has been the ability to recognize the potential markets and fit the right size equipment to those markets. We size the equipment to the market demand, even if it means going to smaller equipment. I am not concerned about how many people I can carry, as much as I am about how many people I can carry profitably." Robert Ross may not have understood or appreciated government regulations too well, but he certainly understood and appreciated what his customers wanted. Their biggest concern was with the safe disposal of solid hazardous waste that could not be easily burned. Incineration of liquid wastes was relatively easy, but disposal of solids was so difficult that many commercial incinerators would not touch them. Years ago Ross and his son Gary began experimenting with better ways to handle the incineration of solids. After years of experimentation, they came up with a technology that enabled Ross Incineration Services to incinerate solids profitably and made it a technological leader in this important segment of the industry. LINKING TECHNOLOGY AND ORGANIZATION Just as the market can energize the development of technology, organization can too. When the demand and price for incineration of solid wastes skyrocketed in the early 1980s, Ross Incineration found giant Fortune 500 companies literally standing in line to avail themselves of its services. Its only problem was that the technology it employed for handling solids required frequent shutdowns for cleaning and maintenance. As a result the incinerator was operating less than three weeks in the month. To meet the demands of its customers, it became essential for the company to keep the incinerator operating at the highest levels of efficiency with the minimum of unscheduled shutdowns. Maureen Cromling and Gary Ross realized that they did not have the organizational structure in place to achieve and maintain such high levels of performance on their incinerator. So they hired in a new vice president of operations and a more qualified plant manager to build up a structure that could achieve higher levels of operational efficiency. New systems were put in to monitor and analyze performance of the equipment. Detailed schedules and preventive maintenance procedures were established to reduce down-time to an absolute minimum. Coordination between sales, transportation, the loading dock, and the testing laboratory were improved to ensure non-stop flow of materials. Virtually every activity and system related to the incinerator were reviewed and upgraded to improve performance. The new organization enabled Ross to increase the annual through-put of the incinerator by nearly 100%. Organization can have an energizing impact on R&D as well as on production. The structure of R&D should be tailored to the unique needs of that department, with somewhat of an academic as distinct from a purely commercial atmosphere. We have already described the type of organization Linear Technology uses to bring out the creativity of its chip designers-close coordination with production and the market and freedom to choose the products they work on. The research division at Gartner Group is structured to provide maximum freedom to the individual researchers within well-defined guidelines. The division is divided into more than a dozen service groups focusing on different aspects of the computer industry. The research method has been systematized to ensure consistency and uniformity. There is also a quality control manager to ensure accuracy and objectivity. In addition there are weekly product meetings at which researchers present their findings to their peers, who may challenge and openly criticize them. Gartner's research division is plagued by one inherent organizational weakness. The job of a program director, as presently defined, is so complex and demanding that the company has difficult recruiting people to fill these positions. "My biggest fear," says vice president Craig Symons, "is how are we going to meet our personnel requirements in the future. We expect the program directors to be the world's best presenters, prolific writers, good on the phone with customers, gurus on their special field." This illustrates to what extent the structure of an organization can influence the development of technology. PEOPLE AND TECHNOLOGY The development of technology is directly linked to the way a company recruits, trains and motivates people. Gartner has a very rigorous recruitment screening process to ensure that it selects only the very best candidates. All applicants have to prepare reports and make their presentations to demonstrate the verbal and written skills. In the past, Gideon Gartner himself conducted training programs for the researchers to ensure that they fully understand the company's approach to information research. Earlier we described the unique salary incentive system Gartner employs to ensure that researchers remain highly sensitive to the needs of the customer and do not get carried away by their interest in the subject for its own sake. ENERGIZING TECHNOLOGY IN YOUR COMPANY Think about the know-how of your business. Apply these twelve strategies to energize technology in your company.
PROFIT PLANNING
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