Training

words by > Timothy S. Mescon Ph.D.

BE THE BEST

*Why do some businesses succeed where others fail?

Few business leaders can overlook the challenges facing global enterprises today. Remaining competitive in a world market with hugely diverse labor rates, environmental standards, quality of life demands and political agendas is demanding and exhausting. Some believe that US manufacturing simply cannot compete internationally and cede long-term growth in production industries to the Far East, Eastern Europe, Central and South America and beyond.

Yet, according to Mickey Levy, chief economist at Bank of America, the US economic performance over the past several years has been remarkable. Real GDP has risen at a 3.3 percent average annual pace since the 2001 recession trough. Exports have been growing at a healthy pace. And labor productivity in the non-farm business sector has increased
2.7 percent annually over the past two years and shows every sign of being sustained.

No two industries in this country look more diff erent in terms of responding to market changes and global challenges than the aerospace and automotive sectors. Th ey refl ect the “how to” versus the “how not to” and demonstrate without question how US-based companies can compete and win with the proper vision, strategy and execution.

How To

Boeing, now in its 90th year, is the world’s leading aerospace company and the largest manufacturer of commercial jetliners and military aircraft combined. Headquartered in Chicago, the firm employs 153,800 employees in 48 US states and 67 countries, with major operations in the Puget Sound area of Washington State, and St. Louis. Total company revenues for 2005 were $54.8 billion—and in the first quarter of 2006, revenues rose 12 percent over the same period of 2005.

Boeing has a long tradition of innovation and continues to expand its product line and services to meet emerging customer needs. Presided over by Jim McNerney Jr., who previously served as CEO of 3M, the company is driven by three core values:

1. Run healthy businesses
2. Leverage strengths into new products and services
3. Open new frontiers

Most importantly, the recurring theme at Boeing is simple, direct and understood by all: “Focus on execution.” Th is mantra has promoted leadership in the industries that Boeing chooses to serve and has elegantly positioned the enterprise as a global leader. Th e results are dramatic, and Boeing has systematically transformed European plane maker Airbus into the perennial runner-up.

How Not To

We’ve all heard the hackneyed, old-school maxims like “It’s hard to turn a battleship” and “You can’t teach an old dog new tricks.” Phrases such as these appear to plague the US automobile industry, which at times seems incapable of refocus or redirection.

High gas prices continued to pull down sales by the top two US automakers in July, with General Motors selling 22.5 percent fewer vehicles than in July 2005, and sales slipping 34.4 percent at Ford. Toyota, by contrast, credited its 11.5 percent sales boost to its many fuel-efficient off erings.”

GM had previously announced plans to close a dozen plants by 2008, and in June revealed that 35,000 hourly workers had agreed to retire early or accept a buy-out off er. Bill Ford, chairman of Ford, also intends to close 14 manufacturing plants in North America and cut between 25,000 to 30,000 jobs by 2012 as the company tries to stem its losses and adjust to its new, significantly lower market share.

All the while, Toyota has roared confidently into its position of preeminence in global manufacturing, while at the same time Carlos Ghosn, CEO of Nissan and Renault—both of whom are enjoying stellar years—has launched investment/merger/alliance discussions with General Motors.

So why do Ford and GM appear to be moving in the wrong direction? A lot of it is about the lack of strategic agility, inability to respond to market needs and an absence of a sense of urgency. While gas prices hover above $3 per gallon, Ford and GM have insisted on continuing to promote, push and market larger, gas-guzzling vehicles. Meanwhile, DaimlerChrysler is ready to introduce the red-hot Smart Car—a hip sawed-off , hyper-fuel efficient green machine—into the US market.

Simply put, the Ford/GM product line is tired and way too big. And that’s a classic illustration of “how not to.”