As country we have grown up dramatically in the last 30 years but our political, legal & civil services have failed to keep pace. As a nation that aspires to “moving up the value chain” we need to find leaders who actually know what this means and who can make this happen. No longer are we prepared to accept “intellectually blank assertions” (no presentation of the analysis, evidence, data, or plan for consideration) from patronising politicians or clergy who seem to think that we are incapable of understanding what’s going on and what it takes to actually deliver for the country.
The days when the bank manager, the politician, the parish priest, the solicitor or the doctor are the only educated people in town are long since over and that smoozing and pulling strokes was how we measured political success. Politicians in general and Fianna Fail in particular however have failed to recognise this passing. In the same way that Lehman Brothers and other Financial Institutions have suddenly disappeared off the face of the earth, so will go our current political parties unless they recognise and lead by example, the modern, well educated people that is Ireland Inc.
I grew up in the Ballyfermot of the 60’s and 70’s. On my way to secondary school I passed the local “FAS” centre (then ANCO) and watched through the large glass windows, years and years of lads being taught how to lay bricks, build a wall and knocking it down only to build it up again.............and this at a time when the only building jobs were in England!!
Our current “solutions” border on the same level of limited thinking..............more training (necessary but insufficient and definitely not a short to medium term solution) and “moving up the value
chain” (what about the 20-30% who will never be knowledge workers capable of moving up the value chain, at least not for the next 50 years or never if we fail to help those with special needs!
I have long believed that coalition of experienced business executives could add some tremendous value to building and better shaping Ireland Inc. than many of the people currently tasked with this challenge.
In light of current events I thought it might be a good time to try something along these lines and we have set up a group on the business networking site, LinkedIn, which seems a perfect place to get things started. To date we have had a huge response and many of the national radio stations have picked up on it including Mid West Radio who did an on-air interview with myself on their current affairs program, “Tommy Marren” this morning.
Given my own particular interests, I believe that we have a tremendous competence in the private sector of managing large, complex national and multinational business but the evidence as presented in our public sector shows us to be bordering on a third world country.
With all due respect to the political, academic and consulting advisors who provide certain but insufficient expertise, I’d like to see a “board of expert practitioners” available to the government to bring real expertise to solving many of the problems that exist in the economy.
I have set up a Blog http://rebuildingirelandinc.blogspot.com/ and a group on Linkedin http://www.linkedin.com/groups?gid=1801970&trk=hb_side_g
Tuesday, February 17, 2009
Monday, February 9, 2009
The Fallacy of Moving Up the Value Chain for Ireland Inc.
Much has been written and spoken about Ireland Inc’s plans to “move up the value chain” as the future saviour of our economy. Unfortunately most of it is coming from people who wouldn't recognise a value chain if it was sitting beside them.
The Value Chain concept was popularised by Michael Porter in his 1985 book “Competitive Advantage,” where he defined value as the amount buyers are willing to pay for what an organisation provides. He defined the Value Chain as the combination of steps within an organisation that together provide value to customers.
As few modern organisations are completely self contained they rely on Suppliers (Supply Chain) and Distributors (Demand Chain) to compete successfully.
This “Chain of Value Chains” forms a Value System where ideally each organisations specialises in a value aspect, creating an optimised Value Systems or Value Chain.
Implicit in the notion of “moving up the value chain” is that there is a “hierarchy of value” running through the Value Chain (from left to right in the graphic above taken from the Value Chain Group) with R&D being the highest form of value adding activity and on down to Building, Fulfilling, Sales & Support being the lower value activities.
Assuming for the moment that this is true ( and there is much evidence to the contrary), the problem for an economy such as Ireland in pursuing a “move up the Value Chain” strategy is that it does nothing for providing jobs for the large part of our workforce who are never going to be able to fill these so called high value adding roles.
What seems to be forgotten is that the Value Chain is more like a “Value Pyramid” when viewed from a job creation perspective.
Only a relatively small number of jobs are available in the high value creation activities as against the larger volume of jobs available in the so-called lower value added activities.
For Ireland Inc. to focus the bulk of our efforts and future on chasing these high value added jobs is a bit like Toyota deciding its only going to make Lexus cars and ignoring the other market segments.
Unless we plan to abandon those people who for the foreseeable future are going to remain (unless we radically change our childcare, welfare and education systems) a large minority, if not a majority of the workforce, then we have to find a portfolio of solutions that cater for the diverse competencies that exist in the Irish labour force now and in the future.
Telling the 1,900 people (3,000 high value add jobs were retained) who were made redundant at the Dell plant in Limerick that our national strategy is to move up the value chain is to condemn them and many of their children to a life of unemployment.
The Value Chain concept was popularised by Michael Porter in his 1985 book “Competitive Advantage,” where he defined value as the amount buyers are willing to pay for what an organisation provides. He defined the Value Chain as the combination of steps within an organisation that together provide value to customers.
As few modern organisations are completely self contained they rely on Suppliers (Supply Chain) and Distributors (Demand Chain) to compete successfully.
This “Chain of Value Chains” forms a Value System where ideally each organisations specialises in a value aspect, creating an optimised Value Systems or Value Chain.Implicit in the notion of “moving up the value chain” is that there is a “hierarchy of value” running through the Value Chain (from left to right in the graphic above taken from the Value Chain Group) with R&D being the highest form of value adding activity and on down to Building, Fulfilling, Sales & Support being the lower value activities.
Assuming for the moment that this is true ( and there is much evidence to the contrary), the problem for an economy such as Ireland in pursuing a “move up the Value Chain” strategy is that it does nothing for providing jobs for the large part of our workforce who are never going to be able to fill these so called high value adding roles.
What seems to be forgotten is that the Value Chain is more like a “Value Pyramid” when viewed from a job creation perspective.
Only a relatively small number of jobs are available in the high value creation activities as against the larger volume of jobs available in the so-called lower value added activities.
For Ireland Inc. to focus the bulk of our efforts and future on chasing these high value added jobs is a bit like Toyota deciding its only going to make Lexus cars and ignoring the other market segments.
Unless we plan to abandon those people who for the foreseeable future are going to remain (unless we radically change our childcare, welfare and education systems) a large minority, if not a majority of the workforce, then we have to find a portfolio of solutions that cater for the diverse competencies that exist in the Irish labour force now and in the future.
Telling the 1,900 people (3,000 high value add jobs were retained) who were made redundant at the Dell plant in Limerick that our national strategy is to move up the value chain is to condemn them and many of their children to a life of unemployment.
Obliterate Costs, Don't Just Manage Them.
As much as 80% of the costs incurred by service and knowledge worker organisations are non-value adding and can be eliminated .
Not only can they be eliminated but doing so improves the organisations service, quality, profitability, revenues, customer and employee satisfaction.
The reason for this is very simple, service and knowledge worker organisations in the main have failed to value and build a core competence in the Discipline of Operations Management which, when practised in its highest form, is referred to as Operational Excellence.
Operations is the engine of execution in an organisation and after many years of promoting a “winning strategy” as the holy grail of management, the business and academic world are now recognising that organisations who can execute extraordinarily well, will out-perform those who don’t, regardless of their strategy.
This is because true Operational Excellence executes in both directions, delivering products and services to customers and providing feedback on business performance. Immediate and reliable feedback allows an organisation with a weak strategy, product or service to adjust quickly to the external environment.
Many organisations, now recognising this deficit are looking at some of the advanced operational concepts such as Lean and Six Sigma. While this is to be welcomed, organisations with little existing formal operational training are struggling, finding that the gap between where they are and where these methodologies aspire to take them, daunting.
Unfortunately many consulting businesses whose main competence is in providing advice (strategy) fail to recognise the enormity of the gap and how clients are supposed to bridge it (execution).
A new breed of organisation has now evolved to provide organisations with the practical support necessary to build Operational Excellence as a core competence.
Known as Master Practitioners, these companies are owned and resourced by Operational Excellence practitioners with many years of training & experience in developing these competencies in all types of organisations.
Organisations who have worked with Master Practitioners in Operational Excellence have seen reductions in costs of 15%-35% in less than 9 months while seeing their customer service and staff satisfaction ratings soar.
Despite the apparent contradiction, staff morale and customer satisfaction are inversely correlated with excess cost. This is because many organisations, despite their best intentions , throw resources at problems rather than eliminate problems at source.
Managers who have not been trained in Operational Excellence have a tendency to break the organisation into small teams to better manage and control. Despite its apparent attraction, such decisions are at the root of creating the hidden high costs of complexity and coordination.
True Operational Excellence empowers staff and managers to realise their tremendous potential by eliminating the barriers to excellences which are usually, albeit unknowingly, self inflicted.
Not only can they be eliminated but doing so improves the organisations service, quality, profitability, revenues, customer and employee satisfaction.
The reason for this is very simple, service and knowledge worker organisations in the main have failed to value and build a core competence in the Discipline of Operations Management which, when practised in its highest form, is referred to as Operational Excellence.
Operations is the engine of execution in an organisation and after many years of promoting a “winning strategy” as the holy grail of management, the business and academic world are now recognising that organisations who can execute extraordinarily well, will out-perform those who don’t, regardless of their strategy.
This is because true Operational Excellence executes in both directions, delivering products and services to customers and providing feedback on business performance. Immediate and reliable feedback allows an organisation with a weak strategy, product or service to adjust quickly to the external environment.
Many organisations, now recognising this deficit are looking at some of the advanced operational concepts such as Lean and Six Sigma. While this is to be welcomed, organisations with little existing formal operational training are struggling, finding that the gap between where they are and where these methodologies aspire to take them, daunting.
Unfortunately many consulting businesses whose main competence is in providing advice (strategy) fail to recognise the enormity of the gap and how clients are supposed to bridge it (execution).
A new breed of organisation has now evolved to provide organisations with the practical support necessary to build Operational Excellence as a core competence.
Known as Master Practitioners, these companies are owned and resourced by Operational Excellence practitioners with many years of training & experience in developing these competencies in all types of organisations.
Organisations who have worked with Master Practitioners in Operational Excellence have seen reductions in costs of 15%-35% in less than 9 months while seeing their customer service and staff satisfaction ratings soar.
Despite the apparent contradiction, staff morale and customer satisfaction are inversely correlated with excess cost. This is because many organisations, despite their best intentions , throw resources at problems rather than eliminate problems at source.
Managers who have not been trained in Operational Excellence have a tendency to break the organisation into small teams to better manage and control. Despite its apparent attraction, such decisions are at the root of creating the hidden high costs of complexity and coordination.
True Operational Excellence empowers staff and managers to realise their tremendous potential by eliminating the barriers to excellences which are usually, albeit unknowingly, self inflicted.
Subscribe to:
Posts (Atom)