The third eye

Shoji Shiba

Quality management guru Shoji Shiba tells Business Standard that you need to be a little crazy to achieve breakthroughs.

Shoji Shiba doesn't want to be featured in the "Think Tank" column in The Strategist. "I want you to write about the mistake I made," he insists, adding that "My Biggest Strategic Mistake... and What I Learnt From It" provides valuable insights into what not to do.

It's difficult to imagine Shiba making mistakes. He's one of the world's foremost authorities on quality management "" he's a member of the International Academy of Quality and in 2002 was awarded the Oscars of TQM, the Deming Award for Individuals.

The author of several books on the subject, Shiba is currently professor emeritus at the University of Tsukuba, Japan, and was a visiting and adjunct professor at the Massachusetts Institute of Techonology where he taught TQM at the Sloan School of Management.

Shiba says he realised his "mistake" some time in 1996 after reading Andrew Grove's Only the Paranoid Survive.

In the book, the Intel co-founder speaks of "10X" change "" when one of the six elements that determine how an organisation's business is conducted changes, and the change is significantly larger than what the business is accustomed to.

At such "strategic inflection points", the organisation has the choice of either pursuing a new direction, or dying out. Reading Grove's prescription for moving forward, "I was shocked," Shiba recalls.

He explains his feelings. Shiba is credited with creating quality awareness in Hungary and the US in the 1980s and 1990s, following close on the heels of his success in Japan in the 1970s.

But after reading Grove's change strategies, says Shiba, he realised that "I had been teaching incremental improvement. I am supposed to find new trends and convert people using my knowledge. But all I had done was teach management within the same vision."

The finding that what he had done in the past 30 years was just a "small part" of management was distressing, says Shiba. "I was arrogant because of my past success.

I had become blind to the changes within industry," he says now. He stopped teaching incremental improvements and focused his energies on the thinking that society needs new businesses to grow. The result was breakthrough management.

Breakthrough or break down

Breakthrough isn't really separate from TQM, Shiba's earlier field of specialisation "" it's a logical extension that shows the way ahead. Most people think TQM is only about incremental improvement.

Actually, says Shiba, there are three distinct historical trends in assessing progress.

The first is controlled production "" seen in the US in the 1930s and 1940s, when mass production first took off with the wholesale adoption of assembly lines.

In the 1960s and 1970s, Japan created the incremental improvement ladder, supported by a consumer revolution that demanded better quality and easier-to-use products. Breakthrough production really started around 1995-96, again in the US.

This was a period of great "" 10X "" change, whether economic, political, or technological.

Shiba believes India is now facing 10X changes. "India is taking off," he says. But he adds a caveat. "Right now the share of the manufacturing sector in GDP is very low. If you don't expand manufacturing in the future, your country won't develop. Manufacturing is the driver of growth."

From "m" to "M"

Most Indian companies still follow traditional concepts, says Shiba. They need to unlearn their previous ideologies and methods before they can successfully embark on breakthrough management.

According to Shiba, the old way of thinking about manufacturing is "m". Manufacturing is just a process in the factory, preceded by design and followed by sales.

The new way is "M". In the new thinking, R&D is a critical component of product design, which comes before production. Even production is dependent on good supply chain management, which means procuring from the cheapest markets globally.

Supply chain management is just as important after production, when the product has to be shipped across the world. Sales, too, aren't just sales: customer relations and marketing are key.

All these activities, says Shiba, are part of the manufacturing process. From products to architecture

The "unlearning" process continues into the classification of industry. The traditional division of industrial activity is on the basis of the end-product: chemicals, pharmaceuticals, automobiles and so on. Shiba recommends applying Japanese professor Takahiro Fujimoto's "architecture" concept: classification based on the "system" of production.

Activities can be considered as either integral or modular, he says. Automobile production, for instance, is integral "" all parts of the vehicle are inter-related and inter-dependent.

A PC system, on the other hand, is modular: it consists of separate parts, such as the monitor, the CPU, the printer and so on.

Different types of production need people of different temperaments. While modular production is best for people who are good at thinking systematically and in a linear fashion, teamwork and process orientation is critical to integral production.

The point he's trying to make is that countries should opt for the mode of production "" and therefore, the products "" that fits their culture. For instance, Japan is best suited to integral production.

China and the US, in contrast, are modular. India, too, says Shiba, should select activities that best suit the temperament of Indian workers.

What would that be? "That is for Indians to decide," he says.

The eye of wisdom

Be like the Buddha, Shiba recommends. The first eye is control: after all, if you have no control over quality and processes, no one will trust you.

The second eye is incremental improvement: existing customers need to be kept happy. That means constant improvements in quality and products to ensure repeat and increased sales.

The third eye of the Buddha "" the eye of wisdom "" is breakthrough. "Without breakthrough, you have no future," declares Shiba. The position of the third eye "" above the other two "" is significant, he adds.

An organisation's leaders have to assume the responsibility of breakthrough "" the creation of new direction and strategy cannot be delegated; it must come from the top.

When does the third eye open? Shiba says there are generally three sources of breakthrough in any company. The first is a current crisis: sales fall and you need to do something urgently to save your company.

The second is when you're smart enough to foresee a future crisis. And the third is when you see what's happening in the world outside and use that information to catalyse your company.

"If you are stable, you need just two eyes. But India is developing very rapidly. It needs the third eye to point it in the right direction," says Shiba.

Nothing to do with logic

Is breakthrough management difficult to implement? Shiba treats the question with scorn. "If you think about how easy or tough it is, you cannot have breakthroughs," he dismisses.

"Breakthrough is not rational. It is a crazy mentality."