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|Friday, April 11, 2014|
TOM COX | OB BLOGGER
Auto recalls come and go. The current recall is for ignitions. Previously it was, I believe, floor mats. Next it’ll be turn signals, or perhaps fuzzy dice. (My tone here is light, however let’s not forget that faulty ignitions and floor mats have killed people.)
An auto recall like the one for ignitions is an instance of a company suffering financially for what I would claim is foolishness.
How does the GM ignition recall stem from foolishness?
Step back from the details of the recall, and ask yourself: when have you ever purchased a car because you liked the ignition?
Never. Nobody does.
Meaning and Implication
What does that mean, and what does that imply?
It means that, from a product design perspective, the ignition is best categorized as “unavoidable mission critical waste.” In other words, it doesn’t add any additional value to the customer (thus in lean language is “waste”), but you can’t leave it out (“unavoidable”) and people can die if it fails (“mission critical”).
It implies that, GM should never have been designing and building ignitions in the first place.
The auto industry is starting to share more costs across manufacturers for complex and challenging design work, like new transmission design, and certain new engine technologies. For example, GM and Ford have been co-developing transmissions since 2002, and recently extended that agreement.
What we’re not yet seeing, and I think we should — and you should do this in your own business — is wholesale outsourcing of “unavoidable waste” components to specialist companies.
I last wrote about this in “Strategic Execution – Please Stop Innovating” and “Strategic Execution – Outside the Core.” Here’s the grid showing the Four Quadrants for business processes:
As I said then, “The only place you should innovate in-house, is in that strategic area where your firm is unique (i.e. Apple’s user interface). Every other function should be managed differently – either partnering with a specialist firm (recruiting); hiring a commodity firm (payroll); or being ‘as good as the best’ in your industry (project management).”
Here’s the same grid showing the Four Quadrants applied to product design features — here “market differentiating” still means “people love and buy your car because of this” and “mission critical” means “people will die if this part fails”:
The only product features you should design and build in-house, are in that strategic area where your firm is unique (i.e. BMW’s handling, Volvo’s safety). Every other function should be managed differently – either partnering with a specialist firm (fenders and bodywork); hiring a commodity firm (upholstery); or being “as good as the best” in your industry (ignitions).
Car Ignition Recalls
Because of the life-or-death stakes involved in automotive design and construction, you should only outsource a key component like ignitions to a specialist firm that is strong and healthy enough to do exceptional work, and you must hire independent experts to verify the quality of their work.
In a scenario like this, it would be trivially easy for General Motors to notify their ignition maker that they have evidence of ignition failure leading to a failure of airbags to deploy, and that no more ignitions will be ordered until the design flaw is fixed.
However GM has to be careful not to throw the ignition supplier to the wolves, because GM still needs ignitions.
Virtues of the Free Market
One of the great virtues of the free market is that people feel psychologically free to demand more from people they hire, than people they might just work with, and a second great virtue is that, faced with market pressure, under-performing vendors stop under-performing — either by going out of business or by improving their work.
GM couldn’t get its various silos of people to share information effectively to fix the ignition, and when they failed, none of those people suffered any bad consequences immediately or directly. This is typical of bureaucracies.
Contrast that with the scenario of the outsourced ignition maker. Within a few minutes of being informed that orders would cease until the design was fixed, that organization would be VERY motivated to communicate across silos, and failure would have direct consequences.
What You Should Do
Here’s what you should do with your product:
1. Lay out a copy of the Lean Design Grid
If you can’t find anyone to outsource to, consider creating a stand-alone in-house team to take on that work.
You can spin them off as a startup once they hit their stride, to the benefit of you, your industry, and all of society.
What kind of car ignition recalls is your industry facing? How can you turn that to your advantage?
Tom Cox blogs on leadership for Oregon Business.
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