Smart Management!

No, I am not joking.  Besides, I really want to end 2012 with the last post on a high note.

A few recent reports, from different media outlets, on “in-sourcing (and here)” and “octopus management” have highlighted some smart management practices.

Learning from octopus’ decentralized adaptive strategies, such as localized camouflage or ejecting ink, the Department of Defense has reportedly authorized soldiers in Afghanistan to work directly with the locals to determine where IEDs, improvised explosive devices, might be placed.  This is called “Petraeus Doctrine” (some irony here, no?) which has helped reduce the casualty of our soldiers in Afghanistan.  (If you, like me, are now thinking “No shit, Sherlock!” the link does not elaborate on what doctrine preceded the Patraeus Doctrine, but one wonders: Were our troops supposed to ask the Pentagon or State Department where in Afghanistan the IEDs might be placed?)

Octopus vulgaris

Octopus vulgaris (Photo credit: Wikipedia)

Rafe Sagarin, a marine ecologist, proposed that we can learn much from the octopus, and others of nature’s survivors, to fight against terrorists.  By that he meant, while the octopus nervous system is highly centralized and organized, the cells are able to “make local decisions” to meet threats from the environment.  Mr. Sagarin further elaborated some lessons from other natural systems in which many entities have built-in redundancy, not unlike a fail-safe mechanism, to face constant dangers.  Further, in nature, animals don’t “plan, predict, and be perfect;” it’s about using redundant and sometimes expendable parts in order to be flexible.  After all, nature presents unpredictable predicaments; being flexible seems the logical (natural?!) response.  Mr. Sagarin’s assertion seemed counter-intuitive at first, but has gained much traction in the last decade with the DOD.  Thus born the “Petraeus Doctrine.’

The octopus principle is basically “think globally, act locally.”  No amount of strategic planning, however fabulously conceived and written, can quickly defuse a local problem.  Too many corporations and big organizations are obsessed with strategic planning; they spend way too much money and time for very little long-lasting effects.  There is simplicity and beauty in allowing and relying on ground personnel’s local decisions to keep the system moving smoothly.  A prime example is Southwest Airlines’ operations.

"out of box?"

“out of box?”

The “in-sourcing” is based on different principles, but the goal is similar:  Bring about desirable outcomes effectively.  Opposite to the well-deservedly maligned out-sourcing practice for past decade and more, in-sourcing has been picking up some steam across many industries.  It is a welcome “out of box” thinking and practice by some industry giants, such as GE.  I question if the in-sourcing is truly an “out of box” thinking because the outsourcing was never really a convincing and good strategy. If executives had been honest and paid proper attention, they would have come to the realization that “in-sourcing” is more logical.  Be that as it may, it is still a welcome turn around.  Apple recently announced that it’s bringing back some manufacturing to the States.

What these major technology companies have discovered is that for many products that had been outsourced, the costs were actually higher than expected.  Trouble-shooting and corrections require frequent air travel and much cross-cultural misunderstanding, and mistakes are more easily made and more costly to correct than they could be.  What’s fascinating to me is that many managers knew at the time that outsourcing wasn’t really an optimal strategy, but since everyone else was doing it, they had to.  It’s the herd mentality.  It also illustrates the inevitable damage resulting from competitive thinking and posturing without understanding.  And I am still baffled why, when facing competition, many organizations opt for the strategy of copying what their competitors do – how is there strategic advantage in doing this?

As technology companies began to grasp the hidden costs of outsourcing, they started to revive many of their former production facilities in the States.  In the current “in-sourcing” thinking, there is much more smooth communication, from design, engineering, manufacturing process, to finished products.  And given the rapid innovative changes taking place these days, a product’s relevance may last only a few years.  Thus, it would be much more economical to do all the work in the States.  The ever-increasing cost of shipping (fuel prices) has been an important contributing factor as well.

Garment industry isn’t likely to follow this trend though.  There is little innovation involved.  Irreparable mistakes (What would they be: Wrong colors? Different buttons?) don’t really require frequent flying between design houses in the States or Europe and the production sites in Asia.

What is the link between octopus management and in-sourcing management?  It lies in this fundamental philosophy:  When one is willing to relinquish power and top-down control, the possibilities flow readily.  And when the top managers are willing to listen to the ideas of people on the ground, all kinds of learning can take place.

I am once again reminded of Dan Pink’s TED talk – where he highlighted so well what motivates people:  Autonomy.  Mastery. Purpose.  

Let’s hope for more success stories in 2013.

Have a great holiday!  I will resume 1/6/2013.  Till then,

Staying Sane and Charging Ahead.

Direct Contact:  taso100@gmail.com

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