The topics under discussion ranged from Professor Mintzberg’s experience of being in on the beginnings of operations research (OR) just after the Second World War, his thoughts on how the field has developed since then, and discussion of a key question ORTEC is currently concerned with: that of how to bring operations research to the boardroom.
With his background in operations research and his extensive work on business strategies and organizational structuring, Professor Mintzberg is of particular interest to us here at ORTEC, and ideally placed to consider the issue of how to bring OR to the boardroom. Asked for his thoughts on this issue, Professor Mintzberg reflected on his own experience of working in operations research:
“Your question takes me back about 50 years to when I was working at the Canadian National Railway in operational research. At the time I also had contact with people in Air Canada, and operational research was very entrenched in those two companies at the time: in fact the chief executive of Air Canada was an OR guy. Also going back, I remember an occasion when I was on a panel and I had to introduce the Chief Executive of Swedish/Swiss company ABB – also an OR guy who built the company up with the merger. In my introduction, I said something like “I only know two Chief Executives of major companies who came up out of OR and one was just fired!” I remember he got up and thanked me for this very encouraging introduction!
“In response to your question on what status OR has in a company, obviously it would appeal to companies that have very large volumes of very quantifiable activities such as in the case of the Canadian National Railway. The issue we worked on at the CNR was what you might call one of the world’s biggest inventory problems: how do you get the right car to the right place, how do you minimize the movement of empty cars, how do you predict demand for empty cars of each kind and the supply of empty cars of each kind, and so on. There were 100,000 cars of various types and grades out on the tracks, all of which had specific uses. So, you have grade A, B, C, D box cars – grade A box cars can take newsprint because there are no nails on the floor, and then there are flat cars and container cars, etc. as well as 150 or so major yards in Canada.”
One of the issues we experience at ORTEC is that awareness and knowledge of operations research gets less and less the higher you go in an organization. At the level of operations, it is recognized as an important subject, but sometimes it is necessary to go higher up in the organization to get approval for a project. ORTEC asked Professor Mintzberg whether he recognized this problem:
“I think this has to be recognized as a problem for every kind of staff group, whether it’s HR or strategic planning or budgeting: in a sense every staff group wants the attention of senior management. Certain industries seem to have a record of supporting OR; this was certainly the case at Air Canada, which did a lot of very influential OR work. That’s how one of their managers became Chief Executive of the whole company! So, in those cases where OR comes to people’s attention, they are concerned about it and support it and make it central.
The place where art, craft and science meet
“This could be a clue: an ex-student of mine at Harvard Business School (Robert Simons) did some research on what kind of analytical processes or ‘systems’ chief executives use, and, his finding was that chief executives tend to pick one system and favor it, for example a budgeting system in one case or an HR process in another case. So, in companies that have very large statistical kinds of activities, such as airlines and railroads, the issue becomes how do you get the chief executive to recognize OR as the system he or she should adopt for their company. And then you’ve got to have some pretty sophisticated leaders in the OR department in that company who will look at and appreciate the managerial side of problems and not just focus on the analytical side. Because my argument about management is that it’s the place where art, craft and science meet. There’s an artistic element to management and a craft element – which I think is the most important, based on experience. And there’s a science side, which is working systematically by analysis within the management process. Then the question becomes have you convinced people that OR should be central to the science side. Here, I guess the answer lies largely in, as I said, what kind of an industry you’re talking about. So, if you’re talking about an advertising agency I’m sure they can find uses for OR, but it would never be really central.
“It could be that part of the problem is success, in the sense that a lot of these techniques particularly modeling techniques just get incorporated into corporate behavior without being acknowledged or recognized as OR, even though they started with OR. But, they gradually infiltrate into analytical processes and become part of the accepted way of doing things.”
Further to the question of how to bring OR to the boardroom, Professor Mintzberg was asked for his thoughts on the best way to make a connection between business strategies and supply chain strategies, and to suggest a good definition of a business strategy that is easy to relate to a supply chain strategy?
“…an effective strategy is basically anything that works.”
“I think the use of the word ‘generic’ probably summarizes my perception on this, which is that effective strategies are not generic. I mean sure they can be categorized the way Ford did, but an effective strategy is basically anything that works.
Anything that is important is strategic.
“The story of Pilkington Glass perfectly illustrates this. An engineer at Pilkington’s had an idea for a new way to make plate glass by floating it on a bed of molten zinc. After 7 years they worked it out, patented the process and all the other glass companies had to adopt it. My point here is, go find me a text book where a production process is described as strategic. But Pilkington’s changed the whole industry because of a production process. My conclusion from all this is that anything that is important is strategic. So, I don’t see a formalized relationship between supply chain processes and strategy. I think it all weaves into what kind of a company you are and what you are doing. To the extent that strategy is generic, you could look for links; but interesting strategies aren’t generic, they come up in all kinds of strange ways.”
This prompted the question, “Do you think generic business strategies are of no use at all?”
Hullabaloo about generic strategies
“They’re a way of categorizing and understanding things. Porter has probably discouraged more strategic thinking than he’s encouraged. Another example I use is Ikea: central to Ikea’s strategy is selling unassembled furniture, so you can take it home in your car. Their website tells you how this came about: a worker tried to put a table in his car and it didn’t fit, so he took the legs off. And so he wondered, if we have to take the legs off, maybe our customers do too? That’s where the strategy came from. So, if that’s the origin of strategies, then all this hullabaloo about generic strategies doesn’t really help you very much, it just puts you into boxes.”
The discussion then turned to the different strategies within a company, such as the business, marketing, financing strategy, etc. all of which impact on and need to be aligned to the supply chain strategy. Prof. Mintzberg was asked to give an opinion on how all these strategies should be aligned:
“Of course the different strategies within a company should be aligned… But let’s follow this through. When Ikea decided to market furniture in unassembled form that had huge implications for the supply chain processes. Obviously, in terms of where you get it, how you pack it, how you design it – everything – the whole thing from beginning to end. So, once you decide that’s the direction you’re taking, then you design your supply chain processes accordingly. Another example is Walmart where supply chain is so significant for how they function that it’s not possible to have a strategic conversation without it.
“So, there are all kinds of relationships. Porter’s stuff is fine as an input to the strategy process, in other words this is where we are positioned, this is where our customers are positioned, these are the threats, these are the opportunities, these are our competitors and so on, and all that can feed into strategy, but it doesn’t give you strategy. Strategy is a creative invention; it’s about synthesis, not about analysis, although analysis feeds in. Supply chain could be central to what you’re doing if you’re Wal-Mart. Wal-Mart must spend a huge amount of time discussing supply chain issues, it’s so massive to what they do. But, if you’re a chain of barber shops, you’re not going to spend a lot of time discussing supply chain strategies. So, you really have to think about what the industry is, because even big industries may not generate those kind of statistics…”
Photo’s Courtesy of http://www.mintzberg.org/, Owen Egan, 2010.
Edited by Helen Bailey. Interview: Geerhard de Vries(ORTEC)
Part 1 of 2