1. Insanity
Currently, it can be read all over the news: a new financial crisis. Some argue that it is already here, while others are reluctant to believe these notions and state that we haven't fallen off the edge into the abyss yet. Nevertheless, with the 2008 financial crisis still lingering in our minds, most people play it safe and carefully evaluate (new) purchases, loans and other expenses.
The same goes for our industries. Capital investments are postponed, expenses are cut, plants are closed and - worst of all - jobs are axed. Though on one hand this seems like a logical move - in particular cost-cutting and letting employees go - during an economic downturn, one might wonder, on the other hand, if this is the only ointment against sour times. Especially since the moves named above turn out to be more harmful in the long run than originally envisioned. Like Albert Einstein said, The definition of "insanity" is doing the same thing every time while expecting different results.
2. Path Dependency
One part of the equation that is often overlooked is the opportunity to reduce cost by producing in a more efficient manner; this was indeed noticed by Ron Moore in one of his best works, "Selecting the Right Manufacturing Tools." Yes, regardless of how unfortunate it may sound, rather than grabbing the opportunity to reduce cost in combination with an increased overall equipment effectiveness, upper management usually makes the choice to slash costs and cut jobs since it is relatively the easiest thing to do, even though it thereby implicitly jeopardizes longer-term performance. Several studies have shown iteratively that DuPont's Vince Flynn was (and still is) right: you just can't cost cut your way to prosperity.
Reducing cost by increasing efficiencies, eliminating failures and failure modes, increasing productivity, reducing energy and material consumption, improving safety, health and environmental records, and practicing overall continuous improvement can be achieved by transitioning the organization towards a proactive culture with a focus on predictive and precision maintenance, thorough failure root cause analysis and follow-up, effective audits, reliability engineering, visual management, detailed planning and scheduling, smart performance metrics, etc.
Many companies in diverse industries are engaged in programs to transition the organization towards business excellence and benchmark performance by incorporating abovementioned conceptual tools and maintenance and engineering philosophies into their way of doing business. Unfortunately, a lot of companies have not been able to achieve this transition towards excellence, which usually means adopting new procedures, routines, rule sets and even paradigms. And very often, those who do manage to reach the top of the mountain don't stay there very long, but rather slip back to their old habits. They are apparently path dependent (often times also referred to as "lock-in").
3. Socio-Technical Entities
This brings us to the rejection of the notion of "technical" or "technological" industries or companies; factories, industries and manufacturing firms are rather socio-technical entities (a term first coined by Thomas P. Hughes in the 1980s). Apart from their technical artifacts that compose their production systems, companies also inhabit immaterial or epistemic elements, such as maintenance and engineering logic, operator procedures and routines, problem solving tools, search heuristics, reliance on dominant management and engineering designs (which are not by definition the best ones, consider the battle between VHS and BetaMax videotape), etc. The social and technical parts of a socio-technical system co-evolve in the sense that they influence, shape and adapt to each other. For instance, there is not only one way in which an alarm clock can be used; it can be used to wake someone up or to trigger a bomb.
Due to their socio-technical nature, industries experience a so-called "path dependency" regarding their development (which can be good or bad) in the sense that they are not only confined to their physical artifacts (for example, once you have built a refinery, the physical infrastructure will guide operator routines), but also by their immaterial/epistemic elements, such as the procedures to build a new pipeline, failure investigation methodologies, problem solving tools, search (e.g. problem solving, opportunity identification) that sticks to existing routines, etc. To give an example where this can turn out to be detrimental, in his earlier mentioned book, Ron Moore adequately describes how certain conceptual tools can lead to inefficient problem solving (e.g. the Fishbone diagram) or poor outcomes (e.g. the 5-Why method). This actually builds upon Paul Feyerabend's seminal work, "Against Method" (1975), where he states that people and organizations should not be trained in one particular tool, but rather in the ability to properly assess when to use which tool.
If industries, given their socio-technical tenet, have the tendency to be path dependent in their development, then this might explain how it can be that numerous companies can't achieve and maintain business excellence (which after all implies a new set of philosophies, strategies, values, routines and methodologies). This coincides with earlier notions by Hammer and Stanton in "The Reengineering Revolution: A Handbook," where they state that change is the result of rethinking processes that guide and shape our work, and Jim Collins in "Good to Great," who notes that it sometimes takes only one new person with a fresh look on things to achieve business excellence.
4. The Multi-Level Perspective
One way this can be visualized is with the multi-level perspective (MLP) as depicted in Figure 1.
Figure 1: The multi-level perspective (Geels 2002)
It is a middle-range theory that was conceived ithe Netherlands where it originated in the realm of science and technology studies (STS) in order to conceptually display mechanisms of variation, selection and retention (key notions in evolutionary economics) regarding innovations on the transition towards sustainable development.
The MLP consists of three levels, of which the one in the middle is arguably the most important one: the level of regimes. First coined in the beginning of the 1980s, but elaborated upon around the turn of the millennium, regimes are defined as "rule-set or grammar embedded in a complex of engineering practices, production process technologies, product characteristics, skills and procedures, ways of handling relevant artifacts and persons, ways of defining problems; all of them embedded in institutions and infrastructures" (Geels 2004). In this definition, a distinction can be made between formal, cognitive and normative rules. Formal rules refer to standards, regulations, policies, etc. Cognitive rules cover rules of thumb, search heuristics, guiding principles, etc. Normative rules convey behavioral norms, sense of identity, role expectations, and so on. Niches (the lowest level in the MLP) can be defined (as it is done in literature on sustainability transitions) as the locus where innovative activity takes place and where time-limited protection is offered against dominant selection rules. The landscape level is defined as an exogenous environment that influences both niches and regimes.
Change in the regimes is fundamental to structural change in socio-technical systems. The logic goes that regime instability (e.g., when actors diverge and disagree on basic rules) and/or landscape pressure can create a "window of opportunity" for niches that can break through and get a firm hold on the regime level; thus transitions come about when processes at multiple levels link up and reinforce each other, resulting ultimately in a transition of the socio-technical entity.
5. Projecting the MLP on Business
Translating this into the daily practice of modern day business (though the definitions of the MLP levels aren't taken too strictly), one could say that in our contemporary age:
- the "landscape" level is characterized by the global economy;
- the "regime" level by the established artifacts, procedures, conceptual tools, search heuristics, values, beliefs, and so on;
- the "niche" level by the innovative, new and non-traditional insights, paradigms, beliefs, strategies, procedures etc.
Even more specific, referencing back to the beginning of this article, the current situation for a lot of companies is that existing regimes (i.e., the existing way of doing business) are threatened by the landscape level (i.e., the current/looming global economic crisis). Often enough, these regimes have not included efficiency/productivity harboring activities (such as precision maintenance, reliability engineering and root cause analysis) into their daily practice, and therefore, these activities belong to the niche realm. Even more, due to their path dependency, regimes will even actively oppose niches from breaking through to the regime level (training or communication equals deployment: "this is how we have always done it," "this won't work here," "we don't have the funds for that"). As explained earlier, if these niches can't break through to the regime level and become dominant routines and paradigms, it might spell disaster for the socio-technical entities, i.e., the companies under current global economic circumstances.
The question, therefore, is to what extent are existing regimes - which are not fit to lead the company through economic tough times - path dependent in the sense that they are not easily shook up by economic turmoil or promising niches? Examples of strongly path dependent, socio-technical systems where niches have the toughest times putting a dent in existing regimes are the energy and infrastructure networks. Though far from being fully explored (both theoretically and empirically), the advantage of the MLP is the relative ease with which complex, large-scale socio-technical entities can be structured. Furthermore, another advantage lies in the fact that the MLP has the ability to guide an analyst's attention to those issues that are relevant for transitions of socio-technical entities.
6. Conclusion
The MLP can thus be interesting for upper management, consultants, change managers, etc., who want to identify key bottlenecks (e.g., resisting regimes) and opportunities for the transition of socio-technical entities towards a more viable design, and want to answer the question why certain organizations can't seem to make the transition towards business excellence. As a matter of fact, the MLP can be used as part of the plan-do-check-act cycle on the road to benchmark performance. The heuristic device has proven its merit in science and technology studies where it has been used to analyze past transitions, and it is even used as the foundation for the policy approach, "Transition Management," in the Netherlands on the road towards sustainable futures.
References
- Collins, J. Good to Great. Why some companies make the leap... and others don't. Business Contact, Amsterdam: 2001
- Feyerabend, Paul. Against Method. Outline of an anarchistic theory of knowledge. Verso, s.l.: 1975
- Geels, F.W. Technological transitions as evolutionary reconfiguration processes: a multi-level perspective and a case-study. 2002 Research Policy 31 (8/9), 1257-1274
- Geels, F. W. From sectoral systems of innovation to socio-technical systems: Insights about dynamics and change from sociology and institutional theory. 2004 Research Policy 33 (6-7): 897-920
- Hammer, M., Stanton S. A. The Reengineering Revolution. A Handbook. HarperCollins, New York: 1995
- Moore, R. Selecting the Right Manufacturing Tools. What Tool? When? Reliabilityweb.com, Fort Myers: 2012
