Red Beads, Management Tools and the Elusive Quest for Strategic Advantage

Management tools do not automatically confer strategic advantage.  In principle any commercially available modern management tool from Total Quality Management to Lean Six Sigma, from Supply Chain Management to Price Optimization Models, is available to any and all paying customers on equal terms.  Two competitors in the same industry space may employ the exact same suite of management tools, but it is a good bet that their relative performance will vary considerably over time.  I don’t find this particularly surprising: generally speaking I subscribe to the view of competitive strategy vis a vis productivity enhancement tools eloquently expressed by Michael Porter in his 1996 Harvard Business Review article “What is Strategy?”  To wit: “Competitive strategy is about being different.  It means deliberately choosing a different set of activities to deliver a unique mix of value”.  That is to say, the act of hiring a Process Re-engineering implementation team or reinventing oneself overnight as a Learning Corporation will not automatically confer sustainable advantage.  Rather it is how (and if) those tools are integrated into a portfolio of aligned, mutually reinforcing organizational activities distinctive from those of competitors that will most likely make the advantage difference.

This makes sense to me.  Nonetheless I am often astonished by the frequent tendency among many corporate decision-makers to conflate the application of some management tool with a fabulous consultant-ese moniker into a “magic bullet” that will effortlessly change the organization overnight from a laggard to a market driving leader.  Then, as egregiously as they confer magic powers on the tools, after a few fiscal quarters the decision-makers realize they are not getting sustainable performance improvement, decide in their infinite wisdom that the inherent inadequacy of the tools is at fault, and consign them to the trash heap of unrealized expectations.

meaningful tools or random noise?

This misguided tendency – to ascribe awesome powers to something and then discard it for the wrong reasons – brings to mind one of my favorite management lessons: a timeless exercise developed by W. Edwards Deming called the Red Beads Experiment (actually, what I call “timeless” Deming himself calls “a stupid experiment you will never forget”).  Deming was one of the founding fathers of Statistical Process Control, itself a prototype of the management tools that abound in our age, and something of an iconic hero for several generations of Japanese business leaders dating back to the 1950s.  The phrase “you can’t improve what you can’t measure” is often attributed to Deming, though not always in the right context.  A more accurate reflection of his philosophy would perhaps be “measuring the wrong thing is much worse than not measuring at all”, and that brings us back to the Red Bead Experiment and its lessons for managers of today in the use and misuse of performance management tools.

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Quantitative Intuition: It’s Not Counterintuitive (Nor an Oxymoron)

Think of the best salesperson you know: if you’re fortunate, perhaps someone in your company or, less happily, in a competitor’s firm.  What are the qualities that make this person excel at the job of sales?  In a classic Harvard Business Review article “What Makes a Great Salesperson” (July-August 1964) David Mayer and Herbert Greenberg likened a star salesperson to a heat-seeking missile: “Sensing what customers are feeling, they [the sales stars] are able to change pace, double back on the track, and make whatever creative modifications might be necessary to home in on the target and close the sale.”   Whereas most of us have intuitive abilities to a greater or lesser extent, excellent salespeople lever this intuition with strong empathy skills (sensing what the customer’s needs are) and the relentless personal drive necessary to cross the finish line.  If they could, managers would bottle this elusive elixir of talents and have all their salespeople drink it, every morning of every day. Read the rest of this entry »

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