‘There’s a new digital game in town, Even corporations are making decisi FAROLED ANYONE LATELY? ‘You just might have, Whether (oucallitargling, Roshambo, Brjankenpo, ityou've played Rock Paper Scissors, you've Sone I ‘Of course if you're a pica! "American, you associate Rock Paper Selssors (or BES. as its Known to aficionados) with school play ‘Prounds, rat houses dive bars, and the lke Fis ured to decide such supremely Banal thi Rio ocs firs who takes out the trash, or Who Buys ee Ettound: But last January, Takashi Hashivama, ‘Bredisont of Maspro Denko Corp. Japanese Tonics compeny used ito decide @ rathe fontter: whether Christie's or Sotheby's would sell Ris company’s roultimil- fion-dollar art col- ection, A single found of RPS settled question. (Chis Sotheby's Paper Ouch!) Te you're asking yourself why anyone By ycsisssse RPS 10 make Pr. major decision such as ‘Who should sella Cézanne (he centerpiece of Maspro ‘Denkoh’s collection, “Les Grands Avbres au Jas de "Boutfan,” went for a cool S18 Ving not?” Aer Sides: decision makiOg, ‘Sevices known t9 man, TRPS is easy cnouah to play: Each of wo ‘opponents makes a fist, They count cogethen BRS two, three,” while simultaneously Bowne {ng thei Bats After “zee,” each paver changes his iit into one of three weapons: paper, rock, or seissors The rutes—_paper covers rock, rock blunts scissor Bins scissort cure paper—determine the winner 2 Fie gume fo beouufal in ts tsiparite simplicin: + FORTUNE Jone 13,2005 Thowsh anthro- ological soos Frentation of tbe idem fs lacking, it fit originated in ‘Rule. The Official Rock Paper Scissors Strateey Gilie (yon, there ie such a thing), 2 cleverly ‘wlittén handbook by Douglas and Graham Walley, leaders of the World RPS Society there is such 4 thing), offers the fedto Rurope Hom Gantenpo in in trade between the contine 1aEiance the gerne became synonymous with Jean Baprisiz Donatien de Vimeur, comte de RObumbeau (1725-1807), who commanded the ‘Brensh forces during the American Revolution, and ceious point in Atperica, Roshambo became & SSmmon name for RPS. (Today, the South Park kids Gre quite the litle Francophiles, regularly playing Ei dochembens You for 1t—though thelr game is a bit simpler and erveler than RPS: You Kick your Spethont im the eroteh, and the first to fall loses.) Wahambo becarbe a common name for RPS in the ES. A less common name is farang wine origins ate, alas, obSEUrE. “Yous may tl, "WhY not just 2088 8 cola?” The cifference i that while ‘Sonncossing relies eolely on random “SSL ORPS, despite whet mary peo- Bois think, dovmat. Whar’ fascinat- ig about RPS is that i's a compe fio to simultsneously read your ‘Spponent's ind and prevent him "fom reading yours. And ‘nlike uber games that involve reading and ‘misleading your op- ike poke), Jou contin RPS ‘py bhting alone and it’s one of the oldest around. ions with RPS. By Jennifer Grick Winning at Rock Paper Scissors means reading you opponent's mind while preventing him from reading yours.Eventually you have to show your hand. "Winniag st RPS is all bout knowing what your opponent ls going ta do, Suc ‘cess strategizing invoives a series of ‘Sl questions! “Ifyou know that I now that you know that T know "The popular [Bame for this strategy is Sicilian Reason- ing. Part of the erick ie knowing when 9 Stop the series; otherwise you risk overes- ‘mating your opponent's intelligence (and utwiting yourself). Another paris know ing where to start: Ask yourself, “Deep ‘down, 5 my opponent rock, paper, oF scs- Sors?® Guess right and you've probably [Bucssed hie first throw Dow ization called the World RPS Society. Douglas says. They got involved, took things over, and in 2002 eld the organi- zation’s first major public tournament. "The 2002 International Rock Paper Scissors World Championship was held in a bar in Toronto. The sold-out event DSffered $1,200 grand prize, which was ‘on by local “Master Pere” Lavering, who ‘vas Wearing a green bathrobe and a blue raw cowboy hat at the time ‘By 2008 the tournament had nabbed = corporate sponsor, Molson, and upped its brand prize to $5,000. More impressively, ‘achieved that Gber-cool bench= fing Walker of the Worla GERRI mark of near-mainstream RPS Society offersa rough © ;COMINE” success: It became the sub Buide to personality types: SOOM [sev ota shim documentary Fock MutnmmadAi: paper FROCK Paper That sah Rock Per Se- Motandas Gandhi semsers, . 23¢/esore form The Movie wilt bere Teonardo da Vincl asked GpeSSQPS: sed lar this you ‘who sould win ina mareh between Superman and Lex Tuthor Walker dida’t hesitate: Superman's rock beats Luthor’ eissors, Eleeninere on the evolutionary chain, ie predicts that = mmateh between Bart Simpson snd Brie (Cartman would result in a draw: a perpet- ual sting of rocks. TRPS's Value asa tiebreaking tool for de- ciding everyday matters is ess well recos- ‘nized in the US. than in Asia, bat atleast ‘one domestic company is using t, Thought Works Inc, 2 Chicago-based IT services company with offices around the works sass RPS gives its 700 or so employecs an easily ‘anslatable way to break tes and make de sions. The company’s US. people-support Gizector,Jonn Hundreiser, says the most expensive round of RPS he ever lost was beer who would pay the dinner bil for 22 people at a restaurant in Bangslore thst Slant accept credit cards If the World RPS Society's brothers ‘Walker have anything to do with ft this Side ofthe planet just might catch ip to the ‘East. Their mission began ten years ago on Scala nigh at the Walker familys corage In Canada, when Douglas and Graham after a few drinks, played a best-of-13, hatch of RPS to decise who wots 69 03" Side to get more wood for the fire. After the match was ver (Douglas ost), hay dis. Cussed their strategies and the patterns they observed in each other's play and {Quickly realized thar there was ¢ lot more to playing RPS than random chance. ‘The Walkers did a bit of sleuthing and Giscovered a "pretty much defunct” orgs" Mike McKeown, 25, doc mentary filmmaker Suse fa Calgary, Alta. rerved sx writer dines for ane producer Lest you thiai the ies mockumentary, let's make this pos clear The events it chronicles are ver feal. “Once people see the bright light fang cameras and hard-core compcticor fnd giant checks, they really want to winy Says McKeown, “I ruly is just as excith 85 any world-championsbip event. Maybe ven more #0, since not many events allow fhe fallen competitors 10 come back anc: heckle the winners in their final rounds. ‘Current RPS World Champion Les Rammage describes the atmosphere a "WWE meets chess mects Siar Trek. Since winning, Rammage, who enters the contert on s wim, nay never been nore awesome in the eyes of his ugh tere, ages 7 and 9: Walt Disney World in ‘ited the whole family down to Orlando. threw a parade, and aamed him geand ‘marshal. Tapen Went into a minor media frenzy over Rammage “The uses of RPS aren't unlimited, of course Douglas Walker points cust that Stwoulda't be much use settling political arguments, for instance, becauve "the Daskbone of the game is the honor of 13 people playing i” So what's the biggest {hing Walker himselt has ever psy od for? ‘Arhouse, against his wile (Douglas lost again), And what the biggest macchup ‘could imegine? Jesus ve. Darwin. rank," e says, "T would like to have the svolution-ereationtom debate resolved, ‘once and forall.” BdRe-engineering Strategic Management Werner Ketelhéhn AX vor 1ias eew sain anour business process ‘re- engineerirg’. ‘redesign’ or ‘innovation’. Most major corpora.ions have launched worldwide ‘delayering' dlownsiz ng” or ‘rightsizing’ campaigns with mixed vesauts. Jat most af these efforts have concentrated ‘on Loadquarter reduction or manufacturing process Imnprovcir es, Uased either on continuons improve- ment &,+104e:203 or radical ‘breakpoint’ changes. To understand, n doteil, three major management pro- ses! (650 Figuce 15, each satisfying a different obj ia J. Antieipcting cuswemer neods; 2. Quick response to custoraer orders: and J. New :roduet developmant Hack otic of Laos mejor processes triggers a par- tucalar soc of activisies ia tho company's business syster.! Scme of these activities may he identical, c-bers may {urn out to be completely different. The aclizitios triggored to anticipate and serve tho annual arket dsa:d define the company's core business system: whilst those triggered to serve specific. cus- eater arders form another subset of activities. The activities involved in new product development form yet a third subset of activities. The concept is elear: to achieve different objectives we usually trigge® different activities in a company’s thusiness system, We can even seo these activities in a repetitive time sequences FAést, some activities are aimed at eveloping new pYoducts, rm the prouct development business sysiem other activities are designed to anticipate and produce the ane:o' outpyt, i.e. dhey form the core business sys- tom: asks, anotor set of activities are sed to service specific customer orcers, i.s. they form the quick response business system. Of course, Uiese szesese EE2Z552 BEEPS £28332" Sofz8ae 222545" 53255 822535 & azass 3 FES as3se | 2 Zesas |gs |2is 5252 [28 | 238 SimZe alk [ire BREE GER ede” ala [oe 85 Ges [228 22 2168 |ard 23 igs |3es ga ees 2 ze a BS . To co-ordinate the activities of all participants in their business system, Benetton and Toyota explicitly separated entrepreneurial from professional activities. Managing fiows of information, cash and goods became the ~ distinctive competence of sinior entrepreneurs. This created two independently | co-ordinated and distinct organizations: The social and the'professional organization. The author discusses ways of creating these organizations. activities demand co-ordination across functions! and company boundaries; so in all three cases we need (o clarify accopatability of the pezple respon sible for multi-functiona} teamwork, Cooperating with Suppiiers and Customers ‘Tho co-ordination of hess three majos management processes is achieved by managing the flows through the indusiry's enterprise system.’ Managing infor nation, goods and cash flows through enterprise sy toms was the basis of the success of ‘lean corporations such as Benetton and Toyota* Effective management of these flows requires in the first place, nurturing good business relationships with suppliers and cus- lomors—i.o. notworking activities Traditional competitive thinking recommends pressure on supplior margins by designing com- ponents internally, managing co-apetitive bids, and contractirg the lowsst bidder for specified deliver Gf siandard guslity parts. Toyola, instead. argani pliers Lao several functional tiers. Different| Objective | Anticipate Quick Product See | Demand Response Development laformetion’ || Howda we kaow) |) How should we) ¢ || How shoclc ve doweknow | ocass customer | decide what products Questions | _ what wl sl proce decide wha ing] Howshouldwe | How should we Manufeetstina) eee fervcp his | How should we Questions domanc? eer? ovelog this produc? Financiat | How should we | tow dowe nance | How dowe hance uestions: ee vese activities? this development? vest efforts? ups ’ . “ People Wnois assigned to | Who does whatin the | Whole nvalved Questions | these activites? | business system? | ne brags Figure 1. Major management processes. rosponsibilities were assigned to firms in each tier. First tier suppliers, for instance, were responsible for the development’ of entire component systems: brakes, transmissions. otc. They were encouraged first to specialize to avoid competition, and then to talk to each ather to improve their processes. Second tier suppliers specialized in system components, and wore encouraged to associate for joint developments At Toyota, assembling amounted to only 15% of tho total manufacturing process in a vehicle. Other activities dealt with assembling 100 major com- ponents: engines, gears, bearings, suspension, trans- mmission, brakes, elc., made out of approximately 10,000 parts. Thus make or buy decisions were sec- ondary to improving buyer-supplier relationships, i.e. how to work smoothly, reduce costs, improve quality, deliver on time, maintain contractual arrangements, et. Honetton did not invest in retail outlets. A part- nership situation evolved in Ialy between Benotton and its self-employed agents, who were responsible for locating and setting up stores. The agents, who at the boginning were mostly personal friends of Luc- iano Benetton, selected small entrepreneurs who were willing to invest in and run Benetton stores Agents ran groups of stores, usually in one geo- graphical location, Luciano Benetton, in tum, selec- ted agents personally. Over the years the agents developed their own partnerships with store owners, offering them guidance on merchandising and retail- ing, display, and product selection. If the noed arose, an agent had to take over part or all ofa store owner's debt. Although the agents were literally Benetton sal- esmen, they were not direct employees: they actually ran independent companies. The agents’ incentive was the chance to invest in and take part of tho profits from these highly successful and fast growing retail outlots. The agents were paid a 4% commission on the value of all goods shipped from Benetton’s factories. Benetton dictated merchandising policies that reflected the company’s overall image and pro- motional strategies. The agents were responsible for ensuring that these policies were built into every, retail outlet. Stores were to be decorated and laid ouit according to standard Benetton designs with the grann and white logo above the shop window, Shop owners were obligad to buy only Benetton clothes, to achieve a minimum acceptable sales level, and to follow gui /dlolines for mark-ups and promotions. Return of mer- fas not accepted Hoth Benetton and Toyota worried about ways of increasing the profits of all the participants in their husinoss systems. They protected their suppliers and customers, They sought to er fixed costs through specialization. But specialization in the enterprisn system can be easier to accept if there is a ctmsted’ core company co-ordinating the roles of upstream and downstream? members of the systen cove supporting everybody's profitability. \ common feature at Benetton and Toyota was the way they chose to organize their business systems. Thoy both followed a co-operative strategy with their suppliers and customers, \ key common point is the rolationship of the core company with upstream suppliors and downstream dealers. agents and store owners, The real commercial department at Benetton for instance was formed by tiie agents and Luciano: thy took risks, made invest- nents, woro in charge of an area, found now store- hwnors. iliscussed new store openings, decided on the location of new stores, decided whether there w room for new stores, decided on the merchandise, strategy continuously, and also par- licipated in formal corporate strategy discussions. rhe same type of relationship was found in Toyota's dealership system in Japan. A distinctive competence in these networks is the dense web of relationships between owners, CEOs, and professionals whose social bonds, mutual respect and loyalty, to each other and the system, were co-ordinated at the core lo achieve common objectives. ehandise discussed he Network Organization Manages Flows Hocr-ordinate the activities ofall participants in thoir enterprise system the people at Benetton and Toyota explicitly separated their entrepreneurial from their professional activities. Managing information, fin- and physical flows became the professional's distinctive competence, whereas co-ordinating social interactions became the distinctive competence of the sonior entrepreneurs. This recognition of the exis- lence of two separate and distinct organizational forms. each ane with clear and different objectives, is what the ‘network’ organization represents The network organization can be managed with two independently coordinated organizations: the social organization formed by a network of entrepreneurs or CAs in established businesses, and the professional ‘onyanization, staffed by managers whose role is to supsport the activities of the members of the network. \n analogy for this twin organization can be found in the human body. The sncial-entrepreneurial organ- ization is roprosented by the brain, where thousands of transactions and interpersonal interactions can be died simultaneously. ‘The professional organ tion can be represented by the nervous, motor and \ reultoryajnims “The nervous sysiom carries infor- lows; the motor system represents the low of gootls: and the circulatory system carries the energy (monoy) needed for the functioning of the other two systoms. Another commen feature at Benetton and ‘Toyota was the importance given to the management of flows through their business systems. ‘As with the functioning of the brain, interpersonal interactions in the social organization, and cor- rosponding causal relationships, are extremely dif- ficult to understand, let alone describe. They are based on experience, holistic views and intuition ‘Tho social organization involves numerous sim- ullaneous interactions and transactions between entrepreneurs. The members of the social organ- ization share a sense of destiny, have common beliefs, values and atlitudes. This sense of unity grows out of years of intimate co-operation in purstit of common objectives. Complex skills and knowledge are shared by the mombers of successful networks becauso the Hike! to do business, and feel comfortable with each other. They ‘know" and ‘understand’ how to work Logathor. ‘This co-operative behavior is based on suc cessful formal and informal social relationships nooding reinforcement from value added to the other's business, ovary time they interact. ‘The professional organization can he explained more easily. Explicit procedures can be designed, management processes developed: tasks can be croatod, existing bodies of knowledge can be used, technologies can be adapted, techniques can be found, computer programs can be written, robots can be programed, and people can be trained to learn clear and explicit techniques and procedures. So this organization is staffed by professionals" whose responsibilities are clearly defined, and hence their performance will be increased by systematizing the ordination of their activities. We can explain the activities of professionals in the same way we can describe the functioning of a machine, “The management of lows creates an ‘activity-based overhead’, what I call ‘Underfoot,’, created to support the activities of all CEOs and entrepreneurs in the enterprise system. These activities, and tho tech- nologies used to execute them, are easily defined. By making Benellon’s ‘machino organization’ function, for instance, their store owners gladly pay for the charges generated by Benetton’s POS sysiem, because it can increase their full price sales to about 75% of the collection ordered in the season Networks are Twin Organizations ‘The management of flows creates a different view of managing functions. Managing information flows, apg PN ES(de flows of goods, and monetary flows incroases their relative importance in the firm. Benetton’s organ- izational chart includes four vital positions: theCEO, the-itiformation manager, the logistics manager and the-financial manager: they play a key role. Benetton would be a Mammoth organization with close to 15,000 unionized workers and more than 36,000 store employees were it not for its network of sub- Contractors and agents, But at Benetton, there is no need for several layers of management and the huge personnel department that goos with the traditional strcture of an integrated company. Traditionally, discussions of organizational forms have been constrained by the assumption that cor- porations have only one organizational structure. Sociologists added an informal organization, one which executives need to understand to get things done in a corporation. This is why we talk about effective managers and their networks of people both inside and outside their companios. Ignoring the existence of internal and external social etworks in corporations and industries, often Creates hybrid organizational forms. These hybrid organizations are neither designed for social inter- ‘actions nor for achieving professional objectives. So, their management teams are subjected to enormous pressures to perform social functions within partial- pachine organizations, and professional functions in somi-political organizations (see Figure 2). ‘A key feature ofa network organization isa different au pragmatic way of coordinating the bu: cystom. Network organizations eliminate overhead osts and create underfoot i.e.. support activities, by conceiving the links in their business system as ariver flowing information, goods, and money. It is the job ‘of the core company to create support activities by selting up a ‘machine organization’ that will effoc- tively manage the flows through tho system. As a result, the entreproneurs participating in the cor- poration’s business system can specialize and con- Centrale on managing their relationships, once they are provided with a solid base on which to stand their businesses: How do we go About Managing Flows? To create a machine that provides underfoot to the members of a network, we must first understand what tire the needs for information, goods and money for fll mombers of the social network. Only then we can ‘do something about mphasis on managing flaws can be traced to a simple insight which was independently implemented both at Benetton and Toyata. Under Dr. Ohno’s leadership, the problem solving tools used at Toyota to understand their assembly plants wore first applied to co-ordinate an expanded manufacturing system including sub- contractors—and then expanded further to include the company’s delivery system as well, Dr. Ohno's team looked at the whole enterprise system asa single huge manufacturing and delivery system, and prob- ably asked some simple industrial engineering que tions: How does the process flow diagram for the whole system look? How does the corresponding information flow diagram look? How does the cor- responding cash flow diagram look? and, How can we improve tho throughput of these three flows in the system? In other words, instead of sooking answers to these questions just in their own assembly operations, they were extended to include the whole system of busi- nesses and the activities within these businosses— involved in manufacturing and delivering Benetton’s apparel and Toyota's vehicles. Conceptualizing the whole enterprise system as one Mammoth manu- facturing plant. ‘At Bonetton, the ideas used to co-ordinate many small subcontractors were expanded to support the activities of the company's vast network of agents and stores. Benetton's professionals were forced, by the ‘onal character of their business, to think in deft- time periods: the Spring and Fall collections. They were forced to think in terms of activities needed to Inunch a collection before a specified date Seasons force apparel companies to think in terms of activities needed to mest the deadline. Once this is dono, people try to control these activities in w that accelerate the throughput in the system. This why the concept of ‘Quick response to market needs’ now widely known as time based competition, first appeared in the fashion industry. By viewing enterprise systems as we do manu: facturing systems or as giant plants, a whole world of concepts, tochniques and thinking approaches open up for use in strategic management, Industrial engin- eors developed these frameworks decades ago, but ‘somehow these ideas have mostly been applied at the factory lovel. What the people at Benetton and Toyota have done, is to apply industrial engineering approaches to the problems of co-ordinating the bus nesses involved in their business systems. They su ceeded in soparating the mechanically manageable ‘activities—flows through business systems—from the more sophisticated management of relationships. But they also went one step further and created two par- allel organizational forms: one to function es machine providing underfoot, and the other as a pol itical system to manage relationships. “Through the years they found that the simplest and most important tools for co-ordinating the enterprise system aro three process flaw diagrams: goods pro- cessing flow diagrams, information processing flow diagrams and_cash_processing-flow diagrams. They form the backbone for analysis and change in a com:Emphasis on Social, Relationships Low “ Low High Emphasis on Professional Activities [i Fisure 2. Hybrid organizations are ‘stuck in the middle’. pany’s business system. Essentially, they can be used! ‘o construct a holistic view of the processes involved, find bottlenecks, balance capacities and change toch nologies throughout the system, Systems Balancing ho most important objective in these three process flow diagrams is not only to understand the relation- ships among all activities, but also to eliminate all inventories in the system; to declare war on inven- tories of raw materials, semifinished goods, finished goods, opinions, untapped data, unprocessed: data, tmusod intelligence, idle cash, and unsatisfied fin, ancial needs. When this is achieved, the company enjoys Just In ‘Time in all three flows. JIT in raw tnalorials, semi-finished goods and finished goods. JIT in data collection, creation of intelligence, knowledge and learning. And JIT in all cash flows through the system. This way, all processes in theso three flows will be characterized by short processing runs, fre- quent change of formats, perfect execution the first time around, no inventories in the system, and hence _ the lowest possible delivered costs with the available technology. This creates truly low delivered costs at superior quality. What Jones, Roos, and Womack's team called the Lean Corporation At Toyota and Benetton they take special care of balancing the capacities of the participants executing different activities in the system. This must be done in all three flows to obtain optimal effectiveness, Those three flows aro interdependent: information, products and cash must flow in co-ordination and al required rales if the entire system is to function smoothly with- out bottlenecks and rework areas. The key to ‘systems balancing’ is to break down a complex product or service into its components and activities, and then find a way to distribute these activities among suppliers and customers so that no bottlenecks occur in the flows and the participants do things right tho first time around. Thus, when con- sidering systems balancing we must see that the throughput of the system increases as the spo- Clalization of the companies participating in it increases. Otherwise, why would we broak down the whole and distribute activities among differont par. ticipants in the onterprise system?. feed Hypothesis about. { Enterprise System Critica Improved Business Activities [| Understanding System Flow Charts Ficure 3. Continuous improvement in strategic management. How can this be Imitated? The first step in the study of management processes, is to identify the major activities that need to be per- formed to accomplish each one of the three major objectives and processes shown in Figure 1. Next, we break down each major activity into a set of inter- related smaller processes. This is done for each one of three types of customer needs. For each we produce a detailed map of the processes needed to satisfy cus- tomer demand. Managing flows is a top management activity because it forms the core of strategic management, Managing the ‘machine organization’ essentially cre- ates the support: to the whole system. At Benetton, managing flows was the responsibility of top ‘managers. Thus, it is reasonable to expect that for a company to engage explicitly in such endeavor, top management must be able, not only to define the enterprise system in which the company competes, but also to understand and describe all the activities in the company's business system. This is, no doubt hard work, because it demands a complete and sys- temic understanding of the industry and how the company serves its customers’ needs. Moreover, defining and representing a company's activities in an industry also requiros detailed under- standing of the competitors and why they chose the activities in their business system.’ Since there ara no correct of incorrect perceptions of an industry or for that matter a company, there will not be either a cor- rect or an incorrect network or flow diagram for a company’s business system, ‘To create consensus on network and flow diagrams an iterative process is called for (see Figure 3). Agree- ments are stronger when the diagrams are used andimpooved consisiently thromgh the years. Flow char- Lio by teams of exrettives, creates a shared ander anding of how the company works. and the trade-olf Sailable in each activity. ‘This results in comtinnuons Payprovenont in strategic management Ho balance a company’s business systens, top man onent amest fis Jenduets and) services are made, ‘This Hoiailed knowledge and understanding of all the activities involved in mannfacturing and delivering the product or service; the time iC takes to carry oul wv activities: their lor existing and now -Imolagins: the quality obtained with different pro: sses; and the order of procedence amang the activi- Top amanagement niust also have a target pioluction or service rate for their business; i. 0, how many units por week, month, or year is the system supposed to deliver, where fand whon? The goal is to sliver the required number of units with the best quality. at the Jowest cost and at the right stems balancing deponds on accurate capacity, cost and time estimetos lor each activity and business Gail in the system, But it also requires consistont application of the “Thinking” procoss mentioned shave, This means that supplier relationships and the understanding af the suppliers’ capabilities lies at the onatra of balancing thes flows, Moreover, to achieve iapeovemonts in Uiroaghpat, the antire system must in: studio so as to facititate the activities partormed by all the suppliers and customers. participating in i. For instance, making sure thal uncertaint removed from suppliers and customers is important for their specializations, quality improvements and cost reductions, Toyota's Hefjunka is an example of how a corporation provides its suppliers with a steady Curilorstind the details af how their raquires 1 Aprocess is set of activities inked to produce specitic out customars, Business processes are, shen, means fo conchict hi activities performed insida and outside the company's bis 2. Aeonpany's bi product or servis, 122 aystem is defined by the sequence of activities, jetwoen the suppligr of raw materials and the final consumer. \ le perate in amore stable environment. What is the best way to organize the activities in the syston? How mary first tier, and second tier sup pliers are needed? Would it be better to have more or fow0r suppliers in tive system’? What is thie best way to hauulle deliveries? ‘These questions emi be answoten! using actionshased learning processes (i.e, trial and error Joading to continuous: improvement). Hoel industry has its own characteristics and there are fow gonoral rales that ean bo followed. Practical experi- ‘once in the industry helps to make these choices, but Ioarning from experimentation helps eve more. Our prescription requires a lot of work, but such efforis pay off, Corporations where management eon coistrates on managing flows are able to ‘mass cus tomize’ their producis and services il for establistad products so thal they can Summary Haxing insights is not the ke lies in creating enough support so thit everybody Js nitted to porsistent and consistent action, ‘The approach recommended shove has helped beth Bonotton and Toyota to co-ordinate their enterprise systomis, and they are also being used effectively hy other corporations. Our priéscription is tor industaial Ioadors ta ‘think out’ foyf diagrams for their business * systems, ‘Thoy won't hil the “right” systems bain on the Girst-try, but consistent and persistent appli tation of our proscription will enable them to gain ir own business complexity. This is sk approach to manage the flows and improve tho co-ordination of their suppliers’ and customers’ ities. The payoffs will be handsome. problam, te difficulty ingss. They are collections of 8 aystein, sed to dloliver the 2. An intiusty's enterprise systom isthe seque tee of existing businesses operating | ~woen Sa tam ive an ratailore; nnanuacturina managers ate favnil ‘enterprise syste wnt delivery chains, #9 ana systemic view. 4. The infer ch Rawr York (1990). ®. Downsttenin businessos are the set of canpotitors establish Pin otic alo Salat aleRTaEetan sunshier of rom materials and she final consumer ofthe proc iar th eotionry ehaine eampasnd of ants, exporters wih supply chains roe tha view of the general manage asi ineluelos both supply $F earvien, Pinisaliy about Tosuin contained in this article was taken thom The Machine That aged The Werld, Danial T. Jones, Danial Roos andl James P. Womack, MacMillan,