MIT Global Operations Conference 2009

I'm jumping back into academic life by attending the MIT Global Operations Conference. This is run by SDM (my program)/LGO (nee LFM) and focuses mostly on managing global supply chains. My manufacturing background focuses almost entirely on the factory floor, so this is an illuminating new way to think about a much bigger system.

The corporate types deliver slick talks with a message of "we did X and it had Y result." Of course, the speakers only discuss success so Y is a parade of victory and growth. There is little discussion of how they did X and why they rejected the alternatives. I can see why so many business discussions take the form of "What is our cloud/social networking/outsourcing strategy?". Some executive heard that X is a path to success. And it may very well be, but these talks have little support for why that is.

The academic talks are more nitty-gritty. Many take the form of comparisons across companies or industries for a pragmatic look at what works, when it works, and why it works. Or, more interestingly, why things fail. We learn about global compliance regimes for labor standards. We learn about open vs closed corporate architectures and what kind of markets they work in. We learn about creating products versus creating platforms. We learn about why logistics costs have increased from 9% to 10% of GDP since 2003. We boggle at the increased materials consumption of our economy and wonder what to do about it. I'm engaged and digging it. (It's also a reunion of my favorite MechE professors. Harry West and David Wallace are both here. Cool.)

The academics and corporate types all agree on a few things:

  • The US is not an exciting market. It is saturated, static, stable, and old. US and EU sales merely provide a comfortable source of cash to enable entry into China, India, and Brazil. The middle class is exploding there. It's where all of the meaningful growth is going to be for the next generation.
  • GM is dead. Everyone talks about it in the past tense. "Detroit" as a concept is synonymous with decay, decline, and a bottomless hole of debt. The most interesting idea here came from Charles Fine, which is that post-buyout GM had the opportunity to recast itself to be an integrated enterprise like Airbus: publicly owned, cozy with the unions, having collaborative supplier relationships. Airbus is sick, but Fine suggests that this architecture may be the right way to survive in a mature market. But they're not going that way, depriving us of a good case study.
  • There is a casual dismissiveness about six-sigma manufacturing methodologies. Yes, they say, it's important. But if you apply robust methods to a wasteful process, all you get is a more reliable wasteful process.
  • There is a new vocabulary I'm going to have to learn. ERP, SCM, BRIC, SCOR, GSCF, Keiretsu. I'll get it all soon enough, but I'll never be able to unselfconsciously say things like "We're going to uniquely advantage our integration."

1 comment:

  1. Karl, I certainly hope you WILL be able to say "we'll leverage our sustainable competitive positioning to integrate our value-added supply chains as we move our cheese into emerging markets and tackle the challenges of the ninth habit, all in a single one-minute feedback session." ... if only at a Roadkill performance.

    You'll find an interesting problem with business research is that a lot of it is methodologically flawed. Check out "The Halo Effect" by Rosensweig(?) for a more thorough discussion of this than I could ever give.

    One big problem you'll hear from businesspeople themselves is the near total confusion of correlation and causality. You touch on it in your post, even. You'll hear a lot about X causing Y, without anyone looking for examples where X happened but Y *didn't*, or examples where X didn't happen where Y did.

    There's also the error you point out: that we start by looking only at successful outcomes, so we omit the learning from failures. We then go so far as to assume that the successful outcome was /because/ of what we did, rather than /in spite/ of what we did.

    And lastly, even the definition of "success" is loaded with fuzzy, ill-definedness. Success defined as share price is different from success defined as lives improved, or communities beautified, or free cash flow, or low turnover, or ... Most of the time, the companies to study are chosen first for simplistic financial measures, and then they're examined. What we rarely see studied are companies who achieve success along the other dimensions but not necessarily top-1% performance on the financial dimension.