I came across an article recently that, at first blush, stuck me as just another accounting driven manufacturing company racing down the road to ruin at breakneck speed. A long storied New Zealand appliance manufacturer called Fisher and Paykel launched a "Global Manufacturing Strategy" a few years back, which everyone knows means lay everyone off and run to the cheapest corner of the world management can find. In these guys' case it means lay off the folks who have been working in their plants in New Zealand and Australia and make everything in Thailand and Mexico. The justification is the 'lack of scale' in New Zealand and 'distance from market'. Never mind that they have just about no market in either Thailand or Mexico so they are hardly going to find the 'scale' they seem to so desperately need in those places. The bottom line, of course, is that these guys are clueless when it comes to manufacturing so they are looking for people who can compensate for poor manufacturing practices by doing it cheap. The true bottom line is that these great financial minds defaulted on their loans this year and sold 20% of the great old company to the Chinese in order to survive.
What is disturbing about this particular story, however, is the undercurrent in New Zealand business thinking that seems hell-bent on trashing the manufacturing, value creating sector of the New Zealand economy in the most Americanesque manner possible. The Kiwi brain trust seems to have no shortage of very valid criticisms of United States economic thinking, but is rushing to imitate our hollowing out of manufacturing as closely as possible. And the New Zealanders are drawn to China like moths to the flame.
I met a guy at the Lean Accounting Summit named Kimball Fink-Jensen from the Kaizen Institute in New Zealand who has all the right ideas – no doubt there are people there who have a clear understanding of lean thinking and what it will take to restore New Zealand's manufacturing strength, but the voices of manufacturing ignorance are blowing so hard guys like Kimball are shouting into a hurricane. He is doing great things with lean within New Zealand government operations. Too bad those same government folks are not driving it into the private sector, rather than pursuing a course of selling New Zealand to the Chinese.
A fellow named Mike Pratt was the dean of the Management School at the University of Waikato for 18 years before heading out on the consulting trail, but not before he pulled together the big thinkers in New Zealand to spew a massive report called "A Vision For World Leading New Zealand Manufacturers – A Strategic Framework" that reportedly studied all of the leading companies and laid out the road map for success. Abraham Lincoln once accused a political opponent of being so clever he could convince people that a horse chestnut was the same thing as a chestnut horse. His opponent had nothing on the good professor who penned 164 pages concluding that manufacturing is no longer about making things. Other folks can do the making while New Zelanaders should focus on financing, training and, of course, innovating. Needless to say, the boys at Fisher and Paykel are front and center of the excellent companies New Zealand can learn from, according to the dean.
The whole thing is essentially a 'cut and paste' job from the American academic philosophies that led to hollowing out the US economy. Now I am sure the University of Waikato is a fine place, after all, their web site lists 84 areas of interest a kid might have that the University will help him or her pursue. They list over 200 career titles one might hold once they have matriculated from the University. However, manufacturing management is nowhere on either list. I would think the good dean, who has a solid solid background in accounting, would have figured out how to teach manufacturing at his own school before he took it upon himself to teach all of New Zealand.
While the local newspapers are full of editorials about the US rightfully being to blame for the world's economic mess, the readers and writers of those editorials are rushing to follow Pratt's thinking and imitate us – go figure.
Consider the thoughts of one Bernard Hickey who writes about economic matters and recently proclaimed on the pages of the New Zealand Herald that China is New Zealand's manufacturing 'saviour'. He wholeheartedly endorses the idea of selling out New Zealand manufacturing to the Chinese, and bailing out of the country in order to get scale and logistical advantage. And he is foursquare in support of the Fisher and Paykel strategy that essentially accomplishes neither. He also seems to have read the US academic strategic blather and has concluded that, when doing a SWOT analysis – Strengths, Weaknesses, Opportunities, Threats – the geography of New Zealand fills all of the negative side of the page, and anywhere people are cheap and anything Chinese fills the positive side.
New Zealand has entered into a ground breaking free trade agreement with China and they are selling out not only manufacturing, but cattle to the Chinese in staggering numbers. The locals have a track record of being unkind to the cows, apparently, and are losing money in the dairy business. Presumably, the new Chinese owners learned cattle management in California and will make the cows happier and more productive than the Kiwis could. Of course that is nonsense, but Chinese money coming into New Zealand is apparently viewed as a positive regardless of the implications – and Mr Hickey clearly understands that there are very serious negative implications, including a big drain on New Zealand's intellectual capital and value adding jobs.
Not to worry, however, because in the end New Zealanders will own a share of companies making stuff in cheap places all over the world – especially China and the profits coming back in will make up for the fact that nobody in New Zealand has a manufacturing job any more. At least this is the thinking of one of Mr Hickey's fellow thought leaders at a place called interest.co.nz.
There is hope for New Zealand, however faint. The same folks at New Zealand Trade and Enterprise who publish the report on how manufacturing is no longer about making things offer lean traning. The fact that lean is all about an intense focus on value creation, while the good professor seems to think that manufacturing is all about skimming money from non-value adding peripheral activities, is a bit of a contradiction, but perhaps the folks at NZTE are merely hedging their bets in case financing Chinese manufacturing turns out to really be the best course for New Zealand's future. Regardless, lean thinking is not dead in New Zealand. The question is whether there is enough critical mass remaining of Kiwi manufacturing to avail themselves of lean thinking before the financial and academic community make sure that the only jobs for New Zealanders are in serving coffee at Starbucks to the new Chinese owners of the country.
The best thing New Zealand can learn from the American academic and financial communities is how not to do it – as the current state of the world and America's economy proves. The wealth of New Zealand is a function of the value they create through manufacturing and agriculture. Letting someone else make the thing the Kiwis invent and owning the Kiwis' cattle is the worst thing they can do. Managing with lean enterprise principles – the kind Kimball and others can teach – and focusing on value creation and enhancement will enable New Zealand to regain its economic strength. The Chinese are not their "saviours". They will destroy the great country's economic foundation.