A Blueprint. Corporate Governance by Fred R. Kaen

By Fred R. Kaen

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But nobody had told the manufacturing department about the promotions. ” 43 Conquering Complexity in Your Business It is very common for small entrepreneurial companies to flourish because they have a decision value stream that has only two to three layers, nodes, or activities in it. As the company grows in management layers and offering complexity, the decision value stream lengthens out to a dozen or more activities or decision points between the initial thought and impact on a customer. ” Consider the probability that a great idea will be rejected by any one decision maker in your organization.

Over the years, this drive to grow power ratings resulted in over a dozen different products built on seven separate mechanical designs and scores of electrical designs in just the 10 kw to 80 kw range, with few fabricated or purchased parts in common. At that point, the products in that power range generated a gross profit margin (GPM) of 15%, which resulted in breakeven performance at best. In desperation, Mike went to the public library and read, among other things, about Toyota’s drive to make many different final products out of a small number of common subassemblies.

They reduced complexity in the product line by eliminating products that could not generate positive Economic Profit because of the cost of doing business with those customers. Subsequently, they could focus their process improvement efforts on fewer products, and were able to complete numerous projects built around specific Lean, Six Sigma, and internal complexity targets. That led to substantial reductions in lead time (their processes got faster and faster). Drop 2, which occurred when lead time approached 3 days, may be more surprising.

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