You gotta hand it to the boys at Wharton. They sure are way out there on the cutting edge of management thinking. It seems fitting that in this 60th anniversary of Shingo’s paper, "Production Mechanism of Process and Operation", in which he explained the importance of optimizing the process flow across the entire organization before trying to optimize any individual functional operation within the process, that the Wharton fellas would break new ground with a startling paper titled "A New Tool for Resurrecting an Old Theory of the Firm".
Hold on to your hats, now, while I share with you the revolutionary thinking they have refined to the point of being ready to share with the rest of us. It’s just a theory, mind you, but they think they might really be onto something.
They are suggesting, "that executives should understand how the many distinct functional components of a firm — production, distribution, product mix, human resources — interrelate to achieve the proper fit. For a firm to establish an effective, overarching strategic position relative to its competitors — what management theorists call "firm positioning" — the varied functional elements should, ideally, be complementary and reinforcing."
Can you imagine that? Executives should know about all of the functions? And even know how they fit? And to think that they should even make those functions complementary and reinforcing!!! It’s enough to make your head spin.
After careful study, the Wharton faculty observed that maybe, just maybe, "Without this systemic way of looking at companies, the researchers say, firms run the risk of engaging in compartmentalized thinking that can lead to the adoption of practices that are a poor fit and work to the firms’ disadvantage." How about that? Worrying about functions, rather than processes, might work to a firm’s disadvantage! What will they think of next?
Of course, all of this is way out there in the theoretical realm. They cannot validate it in any practical manner (like going to Toyota, Danaher or Harley Davidson, for instance), but they think there might be a close analogy in the "field of biology, the part-whole relationship problem is the relationship between an organism’s genetic structure, which contains a vast number of elements, and the organism’s phenotype (or overall structure of the organism) and, in turn, its fitness" In fact, they like this analogy so much they have decided to call the brand new insight of theirs a firm’s ‘fitness’. (Those of you without advanced, elite school educations will probably continue using the slang term, Value Stream, when talking to each other, but it would behoove you to learn this MBA term – fitness – in case you should ever make a wrong turn on your way to the restroom and accidentally wander into the executive suite.)
They have also stumbled onto the notion that, if a company like HP wants to imitate a company like Dell, they ought to think about how they would align their ‘fitness’ with their customer’s requirements. They view this as a particular challenge execs should be aware of before rushing headlong into adopting this untested new idea.
This is real progress for the Wharton boys. If they keep up this sort of innovative thinking, in another fifteen or twenty years the holder of a Wharton MBA might actually know as much about competing in the global manufacturing wars as a graduate of the local community college, leaving me with no one to laugh at.