Thursday, November 8, 2012

Economy I and II - Never the Twain Shall Meet?

By Pascal Dennis

In a previous blog I introduced the idea of Economy I & II

The former comprises private sector companies like Apple, Amazon, Toyota and GE.

These companies face withering competition every day.

As a result, they're wonderful at creating value, but not so good at creating jobs.

Economy II, by contrast, comprises government and quasi-government organizations like schools, universities and hospitals.

These organizations face comparatively little competition (or in the case of government agencies, none at all.)

As a result, they're wasteful and inefficient -- but good at creating 'jobs', of a sort.

But Economy II is bankrupting America (and Europe, for that matter). Economy I can no longer create enough off-setting value and wealth.

What to do?

Conservatives argue that Economy II can only be mended by applying the disciplines of Economy I.

Essentially, this means enabling and applying Lean thinking:
  • Understanding your customers, and thereby, value & waste,
  • Visual management and 5 S,
  • Standardized work,
  • Jidoka (building quality into the process,
  • Heijunka (level loading), and
  • Point, flow and system kaizen

Enablers to this approach include education and health care vouchers that put choice into the hands of the customer.

Liberals ("progressives") argue that the philosophies & techniques of Economy II are not necessary and wouldn't be effective in any event.

A better approach, they argue, is to elect capable, charismatic political leaders, who can reform Economy II by force of personality.

They cite Rahm Emanuel, mayor of Chicago, as such a leader.

What do I think?

Being an engineer and a businessperson, I'm naturally inclined to the practices I learned at Toyota.

The past twelve years, our Lean Pathways team has applied them with great success in a variety of industries.

Toyota thinking is rocket fuel. Stick to the recipe and wonderful things happen.

This is the evidence of my eyes and whole being.

The liberal/progressive argument seems, forgive me, to entail 'magical thinking'.

Even if it were based in fact, how many Rahm Emanuel's are there? And what happens when Rahm inevitably resigns as mayor of Chicago?

(Insiders say Rahm is there for one term.)

The broken processes mean a rapid regression to the bankrupt mean.



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