Intelligent Manufacturing € February € 1996 € Vol. 2 € No. 2

Manufacturer's Library

When Lean Enterprises Collide: Competing Through Confrontation, by Robin Cooper, Harvard Business School Press, 379 pages, $35, ISBN 0-87584-540-1

This book reveals a new theory of competition in which lean manufacturers become locked in a head-to-head race to create the most innovative products at the lowest prices. These firms engage in constant and lightning-fast leapfrogging in pursuit of transitory gains. This is the confrontation strategy and, according to the author, it will shape the competitive landscape for lean enterprises --one in which sustainable advantage ceases to exist and niche firms cannot survive -- now and for years to come.

The book indicates that the key to success in such an environment is the careful balance of cost, quality and functionality -- the "survival triplet" -- in which cost is the critical element. The author describes eight innovative cost management techniques -- including target costing and value engineering - that have emerged in Japanese manufacturing to manage costs across the value chain.
Leading manufacturers must use aggressive cost management along with total quality management (TQM) and time-to-market to develop products with the appropriate mix of quality, cost and functionality to satisfy the customer.

Evidence of this relentless confrontation strategy and the hidden role of cost management within it emerged during the author's five-year study of the management systems inside 20 Japanese companies, including Olympus, Nissan, Citizen and Komatsu.

Cooper is director of the Institute for the Study of U.S./Japan Relations in the World Economy at Claremont Graduate School.

Beyond Business Process Reengineering: Towards the Holonic Enterprise, by Patrick McHugh, Giorgio Merli and William A. Wheeler III, John Wiley and Sons, 212 pages, price TBA, ISBN 0-471-95087-4

In this book, the authors describe how holonic networks and the virtual companies within them have been implemented by such manufacturers as Ford, Chrysler and Hewlett-Packard. As the authors explain, a holonic network is a group of businesses that, acting in an integrated and organic manner, is able to configure itself to manage each business opportunity that a customer presents. Each business in the network provides a different process capability and is called a holon (see Intelligent Manufacturing, April 1995). Each configuration of process capabilities within the holonic network is called a virtual company.

By combining the core competencies of many individual holons within the network, each virtual company is more powerful and flexible than the participating members alone. Each business in a virtual company is chosen because of its excellence. They form a team where members do not negotiate cost; that has been predetermined by the holonic network's pricing formula (each value-adding step is worth a given percentage of the final sale price -- which is decided by the market).
All holons in the network agree to a set of design rules. This, in turn, allows for the flexible use of capability worldwide.

A holonic system is a natural extension of business process reengineering (BPR). In holonic networks, core business processes are not just optimized to provide break points in customer value -- they are reengineered for every order. Holonic networks and the virtual companies that form within them are a practical operational response for all businesses whose customers seek customized products and services. These "prosumers" define the core business process performance which must be achieved by the holonic network.

The core business processes in virtual companies stretch far beyond the boundaries of the individual holons and by definition they meet consumer demands for cost, quality, speed, innovation and service. Thus, conclude the authors, businesses in a holonic enterprise can leverage their customer relationships, maximize their margins and achieve business performance.

The authors are management consultants: McHugh and Wheeler are with Coopers & Lybrand, and Merli is with Galgano and Associates.

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