Lessons from the American Century

Written by James Jurack, CEO, Birchwood Consulting Exclusively for Manufacturing Today Submitted by Trade Press Services September 2008

At the turn of the 20th century, America embarked on a prosperous new era that was to become known as the American Century. Americans seemed almost possessed with national pride and a spirit of “can-do.” Anything was possible, and American enterprise could make it happen. However, by the end of the century, that entrepreneurial spirit had all but disappeared. Managers in many established manufacturing sectors had abandoned their appetite for risk and their drive to be innovative. As they lost their competitive edge, they began to look inside their companies to generate cost savings, greater efficiency and higher productivity through programs such as Kaizen, TQM, PRM and Six Sigma. But none of these “flavors of the day” really changed anything. Workers became cynical and just paid lip service to each trend until it went away. Price became the primary differentiator, and outsourcing became the most logical solution to keeping prices low. It was a bleak picture at the end of the 20th century. But not all is lost. There is a way to rekindle the “can-do” spirit of last century’s business leaders. It’s not too late to make the 21st century another American Century.

What Do Customers Really Want?

American enterprise lost its spirit of success when it took its eyes off the ball — satisfying the end user. In advancing their manufacturing processes, companies turned away from solving customer problems and satisfying customer needs, toward the goal of producing profitable products. An external, customer-facing view was replaced with an inward-facing view. Remember the old adage that a customer who buys a drill does not want a drill, but wants a hole. Generally speaking, customers want cost-effective, powerful, durable solutions to their problems.

In the early 20th century, manufacturers were solving customer problems. John Deere, for example, developed the steel plow for settlers who found wooden plows ineffective in the heavy sod of the Great Plains, and Caterpillar developed its tractors for the soft soils of California’s San Joaquin Valley. All great developments were the result of inventions that solved real customer problems.

Research among end users invariably reveals four top product differentiators that are more important to customers than price:

1. Partnership. Customers want personal relationships with the people who sell and service products. They prefer to buy from manufacturers who are as interested in the customer’s business as in their own, and they want someone they can call for help when problems arise.
2. Solid products, which are reliable, durable and easy to service. They don’t want million-dollar equipment that is down for days because of a faulty five-dollar computer chip.
3. Excellent product support. Customers want well-trained service personnel and parts that are readily available.
4. Value. Customers want a reasonable price, which need not be the lowest price. They also want excellent resale value, which contributes to low owning and operating costs over time.

John Deere and Caterpillar are worldwide market leaders for a reason — they are still looking for better ways to solve customer problems. For example, at a time of rising environmental consciousness, Caterpillar has developed an engine that is as fuel-efficient as it is non-polluting, while John Deere continues to add value to its agricultural customers by adding cutting-edge features, such as a global positioning system for tractors that helps disperse fertilizer optimally.

What Really Inspires Employees?

When American manufacturing took its eyes off the ball — solving the customer’s problem — and focused on the internal challenge of efficient, profitable production, it sent the wrong message to employees. Kaizen, TQM and similar programs imply that employees are not efficient enough and are producing less than good quality. They imply that companies cannot be competitive unless employees “shape up.” Rather than being part of a solution, employees then see themselves as part of a problem and lose their motivation.

The second lesson from the American Century is how to engage employees. Americans love a challenge. They love to compete, and they want to know how their efforts stack up. There is a story ascribed to Andrew Carnegie when he was building the first U.S. Steel plant. He asked the first shift of workers how many tons of cement they had poured. They said 75 and he wrote that number on the floor with chalk. The next morning, the second shift had crossed out 75 and written another number, above 80. The third day, the third shift had replaced that number with one above 90. Whether people work in factories or offices, the simple task of letting them know how they stack up creates the competition everyone loves and maximizes their output.

Five steps can regenerate employee excitement and move companies closer to their customers. They are:

1. Develop systems to provide rapid feedback to employees on the production floor. They need to know what customers really think of their products — not months down the road, but at the end of each month. They need to know what problems customers are trying to solve and how their products compare in the marketplace. Based on this knowledge, they can improve. They become part of the solution.
2. Train managers to seek out honest, creative ideas from employees. This is not about suggestion boxes, but actual solutions to customer problems. How well are the company’s products working, and how could the customer’s problem be addressed more effectively?
3. Give employees the freedom to experiment and fail. Edison failed a hundred times before he got the light bulb right. When employees receive negative feedback on experimentation and failure, they shelter themselves by leaving all creative endeavors and decision-making up to top leadership. They become unmotivated cogs in a wheel. On the other hand, when they are allowed to present ideas and experiment until they have the bugs worked out, they become engaged craftsmen who contribute to the success of the organization.
4. Instill, recognize and reward professionalism, going beyond monetary rewards. Recognition in front of peers and superiors inspires people to keep looking for better solutions to customer problems.
5. Manage toward competing more effectively by instilling the attitude that employees are competing not just for their own jobs, but for the company’s market share. If they win the game, everyone will be successful.

Manufacturers often lament high labor costs and the need to compete with low-price foreign countries. The fact is, competitive success is not determined by the number of hours that employees work or their hourly pay, but by what they put into those hours. Inspired employees create and build products that solve customer problems and therefore sell themselves.

The Next American Century Starts

Now There is nothing wrong with efficiency and productivity initiatives, but they are far from a panacea. The problem is that looking inward excludes the customer from view. It also sends a message that employees are part of a problem, not part of a solution. An exclusively internal focus cannot lead to employee engagement, innovation or higher market share. The way to rekindle the “can-do” spirit of the early 20th century is to instill an entrepreneurial spirit in employees, challenging them to create ever better products and services based on accurate knowledge of what end users want. When customers get reliable, durable products that solve their real-world problems and are backed by the excellent service that comes from a true partnership, they will become evangelists for your brand.

About the Author:

James Jurack is President of Birchwood Consulting International, LTD, a worldwide business development and marketing consulting firm providing solutions for durable goods and capital equipment manufacturing industries. For further information, please visit www.birchwoodci.net or call 262-241-9900.