Archiv der Kategorie: Change management

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Boundless growth – nothing more than a sales argument

The only thing that seems to grow endlessly in the universe so far is the universe itself. And counterintuitively, it expands faster and faster. It could take longer than the Earth exists to reach the maximum, if it could at all. Otherwise everything follows the course of becoming and perishing. Everything comes into being, matures, has an effect for a certain time, and then disintegrates until it has disappeared. Let’s think of a balloon that gets bigger and bigger when we inflate it. The rubber is stretched with increasing effort. The pressure in the balloon is rising. If we do not stop adding air, we reach its maximum and with an additional waft, it inevitably bursts. The lifespan of people is too short in order to observe all lifecycles. But even without the ability to fully follow it, we observe origins and dissolutions in both small and large dimensions. Nothing provides an indication that it could grow boundlessly.

Nevertheless, banks and financial specialists sell their products with the argument that today’s growth in supply is a sure indication that they are a safe investment – after historic collapses since the tulip crisis in the 17th century or the global economic crisis of 1929 or the bailout of the banks in 2008. Although the factors that speak against it are obvious.

  • Growth needs energy from outside
    A closed system is not able to grow (see here) – within the energy remains constant. As the growing stock index, questions arise, where the required momentum and energy come from and who suffers the loss of energy. If you look at the past economic successes, you always find victims – South America, due to the conquistadors; Asia, due to European colonies. Nobody has anything to give away and banks and insurance companies need a lot of energy to keep their administration running. The example of the banks shows us where the energy comes from. A German bank no longer pays interest and demands a raised fee of four to eight Euros for paper transfers.
  • Capacity limits
    If the capacity limits were previously determined by the work performance of the employees, the digitized businesses are limited by the performance of the technology and the activatable attention of the customers. Which computing power and bandwidth are available? How fast can robots process physical things? How autonomous do artificial intelligences act? How to be noticed by the customers? How do you motivate them to buy? Speculative trades with stocks and bonds reach their limits, when they collapse despite their lack of substance – today they already account for a multiple of the real economy.
  • Boiled Frog Syndrome
    The difficulty with growth arises, when it happens unnoticed. The Boiled Frog Syndrome provides a plausible metaphor for this. A frog blunders into a pot full of water, which is slowly heated on a stove. He does not notice the increase in temperature, since the temperature change takes place in small steps. First 40, then 50, 60, 70, 80 degrees and the frog happily paddles around in the pot. At 90 degrees, he’s surprised because something is strange. 100 degrees, the water is boiling. The frog notices the evil, but is no longer able to save himself. The step-by-step disaster is only noticed, when it is too late. The same applies to growth, until it collapses. There is no hope that there will be no collapse – except: aprés moi le deluge (after me the deluge).
  • The turkey problem
    The unpredictability is illustrated by Nassim Taleb in the book The Black Swan using the example of a turkey. A turkey lives in a cage. Every day at the same time a flap opens, a hand appears and throws food into it. The turkey learns that every time someone tampers with the hook, the feeding takes place. He gets used to it and approaches the flap daily at a certain time, hoping to be fed. That’s how it goes every day until the fourth Wednesday in November, the day before Thanksgiving. This day radically changes the turkey’s life. Anyone who has inflated a balloon until it bursts is familiar to the surprise, when the balloon bursts unexpectedly with a loud bang.

Is it ethically justifiable to recommend stocks with an indication of a few years of growth, just because nothing has happened so far? Why doesn’t our common sense tell us that this growth rhetoric is wrong? Just a few names to remember: Nixdorf, Mannesmann, Karstadt, Lehman Brothers, American Airlines, ENRON. Since everybody is the master of its accounts and decides for himself whether to engage in a gamble of growth. However, it would be desirable that the general public would not have to step in again in the next crash. Or that disappointed investors try to socialize their losses afterwards. Even if the client investor wanted to buy profit, no loss, the protection of the customer’s interest in a game is absurd – part of the game is losing. They get what they paid for.

Bottom line: It is difficult to understand that our perception of growth is so poorly developed. And it may be that this is a natural weakness of living beings, who want to protect themselves in the long run and therefore build up stockpiles. But it is condemnable that people profit from this weakness. That is why we should take every opportunity to realize that there is no growth without boundaries. Therefore, no one should afterwards be compensated for lost profits. In the end, these transactions serve only to immediate commissions to financial and insurance brokers, who live on false promises. Boundless growth is nothing more than a sales argument for the good of the broker.

SSS – Supplier Satisfaction Survey

Henry Ford emphasized on mastering the entire value chain. He ran a rubber plantation to ensure the raw material for the tires. In northern Michigan he operated mines and shipped the iron with his own freighters in order to produce the required steel in his own smelting plant. This gave him 100% vertical integration. Today’s car manufacturers have reduced down to twenty percent. These companies have evolved into integrators, initially assembling their products on platforms and now out of modules. OEMs (Original Equipment Manufacturer) are still in the driving seat, but with suppliers of increasing size and influence, which are gaining more and more room to act. This will foreseeably turn the balance of power upside down and the OEMs will depend on the goodwill of their suppliers. By then, at the latest, SSSs will have evolved that will find out, what the suppliers value most, in order to continue delivering to the OEM.

This reversal of the relationship between manufacturer and supplier requires a new, or at least a different interpretation of the satisfaction criteria.

  • Adequate performance
    Ever since López de Arriortúa contaminated GM’s and later VW’s cooperation with suppliers, his legacy has continued to impact in the form of one-sided advantages of the OEMs. At the latest, when supplier satisfaction in terms of the ratio between expenses and earnings regains importance, the purchasing departments will return to old values – cooperation based on partnership, win-win, and mutual support.
  • Future prospects
    The upfront services that are tailored for the customer, need good prospects for the vendor, otherwise the investment will be at the expense of the suppliers. The orientation of the deliverer towards the most promising companies ultimately forces the non-cooperative customers to take care of the external services themselves. The winners are the companies that perform their role as integrators to the satisfaction of both sides – e.g. by sharing and jointly developing long-term forecasts.
  • Smoothness
    An important factor is easy cooperation. This is disturbed by exaggerated administration in the form of complex processes and lack of provision of required data. Every manufacturer has its own requirements, a huge army of contacts and compliance rules that prevent trusting cooperation. Frictionless and simple procedures would help both sides.
  • Relationship quality
    It has been a long time since the Extended Company was proclaimed. Today, we are talking about platforms. The boundaries of the company no longer determine the relationships, but the respective task. For this reason, the employees must find ways to work in the steps of the process in harmony, trustingly and openly together with the partners – respectfully, promptly, and bindingly.
  • Image
    In the past, it was important to be a purveyor to the court. This created a reputation that influenced all other businesses. The former „courts“, today’s corporations, have lost this reputation, because they squeeze out their suppliers to the last drop in favor of their own balance sheets. In order to survive in the future with module-based approaches, it is important to regain the former image so that it is something special to work together again.

Bottom line: SSS will place the cooperation between manufacturers and suppliers on new pillars. In the long term it must be worthwhile for suppliers to work again for certain companies. The avoidance of any kind of waste through formalisms will make the difference. In the end, cooperation does not take place between companies, but between people. And there the quality of the relationship must be moved again into the foreground, without pulling the Compliance card in each step. If the suppliers get some more of the manufacturer’s image, SSS will probably be so favorable that the future is secured for everyone.

P.S.: Those who cannot or do not want to think in this direction will sooner or later have to rebuild their modules themselves.