Engineering Management in the New Millennium

Dr. C. M. Chang

Only to be used by instructors who adopt the text: C. M. Chang, “Engineering Management: Challenges in

the New Millennium,” Pearson Prentice Hall (2005)

Copyright © 2005 by Dr. Carl Chang

2

Approaching the New Millennium

• Emerging Future Trends• Differences in Companies in New and Old

Economies • Characteristics of New Era Companies and

Strategies in Production, Distribution and Service• Transition to the Knowledge Economy - Examples • Personal Strategies for the Future• Contributions in the New Millennium• The Challenges Ahead

3

Emerging Future Trends

B. Enterprise Integration

A. Customer Focus

C. Supply Strategy

D. Knowlege Managment

4

Emerging Future Trends

F. Population Diversity

E. Changes in Organizaitonal Settings

G. Migration of Jobs

H. Globalization

5

(A) Customer Focus

• Process (speed, transparency, self-help)

• Customer service (quality/reliability - Service Profit Chain Model)

Leadership Good Placeto Work

EmployeeSatisfaction

EmployeeRetention

EmployeeProductive

Value toCustomer

CustomerSatisfaction

CustomerLoyalty

RevenueGrowth

Profitability

6

(B) Enterprise Resource Integration

• Integrated Communications Systems -Information sharing

• Wireless Applications

• Leveraged legacy systems

7

(C) Supply Strategy

• Work Outsource: Production, back-office work, logistics, after-sales customer service, procurement, inventory management, new product design, and others

• Integrated parts suppliers - automobile component firms with flexible production maintained at capacity

• Integrated service organizations – Offering financial advisement, accounting, insurance and banking for many firms

8

(D) Knowledge Management

• Preservation of know-how critical to knowledge-intensive companies

• Dissemination

• Wide-spread applications to add value

• Supply chains of knowledge agents and centers

9

(E) Organizational Changes

• Type one - Assemble and market products/ services to consumers: (1) retain core competence and outsource others, (2) form Supply chains, (3) focus on customer’s needs, (4) become Virtual organizations

• Type Two - Supply specialized products/ services to client companies: (1) build flexible production facilities (e.g., cells) to respond, (2) vertically integrated

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(E) Organizational Changes (cont’d)

• Transition from One to the other - Virtual organizations produce commodity-like products well - When breakthrough, leading edge performance is needed, no perfect information exists for product specification, virtual companies may swing back to vertical enterprises (e.g., Cisco in Optical Networks)

11

(F) Population Diversity

• U.S. Census Bureau Prediction (2004):

• Women and minority attain key positions

Population Composition 1995 2050

White (Non-Hispanics) 73.60% 50.10%Black (Non-Hispanics) 12% 14.52%Hispanics 10.20% 24.40%Asian/Pacific Islander 3.30% 7.86%Native Americans 0.70% 0.90%

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(G) Migration of White Collar Jobs to Other Countries

• Job migration - Clerical, chip design, customer service, software programming, tax preparations (jobs following procedures)

• 3.4 million jobs by 2015 to low wages countries (China, India, Ireland, The Philippines, India, Mexico, and Russia)

• Pressure on American workers - How to justify the high wages with the value they create?

13

(G) Job Migration to Other Countries (cont’d)

Job Migration

Texas Instruments

Accenture

Sun MicroSystem

Bell Labs

GE

Caltex

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(G) Job Migration (cont’d)

• (1) Caltex Petroleum - shifted service and professional jobs from Europe and U.S. to Ireland, Jamaica, India and the Philippines

• (2) Bell Labs has large research centers in Bangalore and Hyderabad, India

• (3) Sun Micro-System hired Russian scientists for software and microprocessors research.

15

(G) Job Migration (cont’d)

• (4) Accenture (Anderson Consulting) pays 1/3 to 1/4 of US wages to Philippine workers

• (5) General Electric shifted some 1000 customer service jobs to New Delhi, additional centers for handling payroll, design and billing services are planned

• (6) Texas Instruments has its integrated circuits designed in India, since 1986

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Engineering Graduates

US Graduates as Percent of Total (5 Countries)

0%

10%

20%

30%

40%

50%

1989 1999 2009

Year

Perc

en

tag

e

BS

MS/PhD

5 Countries: USA, China, India, Mexico, The Philippines

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(H) Globalization

• Clear trend in the new Millennium (Market, resources, technologies); most companies will be actively involved

• United Nations Forecast: Five largest GDP-based national economies in the World by 2020: (1) China, (2) US, (3) Japan, (4) India, (5) Indonesia

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US Companies

Old Economy

Companies

New Economy

Companies

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Old Economy Companies

• Rigid hierarchies and Clear boundaries

• Capital Intensive, fixed tangible assets centered

• Small price/book value ratios

• Shareholders are owners

• Functions are vertically integrated, emphasizing self-sufficiency, stability and incremental growth

Bottom

First Lavel

Middle

Upper

Top

20

Old Economy Companies (cont’d)

• Rivalries among competitors motivate employees and drive success in marketplace

• Going concern

• Communications follow chain of command

• decision making is resources centered - efficiency driven

• Slow transactional processes, with business data available monthly

21

Knowledge Economy Companies

• Flat organization with small core and extensive alliance/partnership networks, with fussy company boundaries

• Idea-intensive, with digitalizable and commodity-like goods (data, software, entertainment, cars, computers, jeans etc.)

• Focusing on time to market, cost reduction through technologies supplied by alliance

22

Knowledge Economy Companies

• Flat organization with small core and extensive alliance/ partnership networks, with fussy company boundaries

• Idea-intensive, with commodity- like and digitalizable and commodity-like goods (data, software, entertainment, cars, computers, jeans etc.)

• Focusing on time to market, cost reduction through technologies gained from alliance

CorePartner

4Partner

2

Partner 1

Partner3

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Knowledge Economy Companies (cont’d)

• High market value to book value ratios

• Shareholders not solid owners, as ideas in people’s heads can not be chained down - risk factor

• Virtual organization with changing partners

• Collaborate, not competing against competitors to achieve win-win advantages

• Some companies get acquired over time

24

Functional Integration of Knowledge Economy Companies• Cisco Systems -Performs all administrative

functions over the internet, owns only 2 of 34 plants, handles only 10% of orders by hands

• Dell Computers - Has inventory for 6 days only

• General Motors - Build-to-Order system for cars in 10 to 12 days in the future

25

Modern Companies

PursueGlobalization

Use NewTools

Communicate& Transact

EvaluatePerformance

DiverseWorkforce

EmployeeRelations

CustomerFeeback

Product Customization

Team Structure

CustomerLoyalty

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Characteristics of Modern Companies

• Solicit real-time customer feedback (Internet- based communications tools)

• Target market segment of one (mass customized products/services)

• Induce customer loyalty with personalization of customer relationship

• Create enduring relations with employees to connect to company’s business partners

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Characteristics of Modern Companies (cont’d)

• Adjust to diversified employee composition (40% of workforce on temp basis by 2010, talented business superstars represented by agents)

• Organize team structures to remain flexible

• Assure instant Information flow and efficient transactions

• Do performance evaluation constantly

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Characteristics of Modern Companies (cont’d)

• Use advanced tools (resources planning, enterprise integration, supply chain management, customer relations management, web-based transactions,) to reduce staff and improve efficiency

• Pursue globalization proactively

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Business Partners

Supply Chain Management

Customer Relationship Management

Customers

Employees

Financial Management

Human ResourceManagement

Investors

Enterprise Resource Planningand Application Integration(Production, Engineering,

Decision Support,Knowledge Management,

Marketing and Sales Management, Procurement,

and Other Business Operations)

Public RelationsManagement

Communities

Organizational Design of a Progressive Enterprise

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General Electric - An Example

• Four Initiatives: (1) Globalization, (2) Service, (3) Digitalization, (4) Six Sigma - Quality Assurance

• Jack Welsh/Jeff Immelt - Continuous mobility

• “No back office” - Digitize or outsource those parts of businesses not touching the customers

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Strategies To Make Companies Great in New Century

• Speed - Treat time to be more valuable than money and buy for speed

• Talents - Attract, motivate, empower and retain the very best talents, as ideas are key assets for any companies

• Focus - Go for long-term market position and dominance, rather quarter-to-quarter performance improvements

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Strategies To Make Companies Great in New Century (cont’d)

• Customer Orientation - Follow what customers want and create customer-driven supply chains

• Productivity - Outsource non-core activities, buy technologies and digitize the rest

• Operations - Streamline operations using advanced software technologies to adapt to changing marketing environment

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Personal Strategies for the Future

• Get post graduate education - learn how to read fast, digesting information efficiently, learn quickly.

• Understand products and markets in transition, induced by changing technologies

• Communicate well, compromise effectively and be a master o changes

• Create/manage external business networks

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Personal Strategies for the Future (cont’d)

• Be familiar with capital (venture capitalists) and financial markets (security analysts)

• Nurture leadership skills (acting like a conductor of a symphony orchestra)

• Size technological opportunities to benefit the company

• Stay away from non-core, standardized or digitalizable functions

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Conclusions

• Engineering - Technical excellence and social compatibility in workplace are both important

• Management - Broad knowledge and interest, managerial perspective, training (lead, organize, plan and control) and aptitude to manage are success factors

• Engineering Management - Insight to use technologies for creating business benefits

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Conclusions (cont’d)

• Knowing what to do is not enough, practice will make it perfect

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References

• Di Kamp, “The 21st Century Manager: Future-focused Skills for the Next Millennium,” Kogan Page (January 1999)

• “The 21st Century Corporation,” Business Week, pp 75-212 (August 28, 2000)

• Jeffrey A. Schmidt, “Corporate Excellence in the New Millennium,” Journal of Business Strategy, p. 39 (November 1999)

• Peter Haapanieme, “Leadership in the New Economy,” Chief Executive Journal, p. 63 (July 2000).

• Additional 29 References are cited in Curse Notes

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Summary of the Two-Course Sequence

• (1) Organizing• (2) Planning• (3) Leading• (4) Controlling• (5) Engineers as

Managers/Leaders• (6) Engineering

Management in New Millennium

• (7) Cost Accounting• (8) Financial Accounting and

Analysis• (9) Managerial Finance• (10) Marketing Management• (11) Web-based

Management/Engineering Enablers

• (12) Globalization

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Manage/Lead/Act/ThinkManage/lead/act/think Focuses

Inside Core competencies, cost and quality control,Production and engineering functions

Outside Emerging technologies, supply chains, Market orientation, customer relationship

Today Organize, control, plan, leadTeams and projects, do things right

Tomorrow New projects, new core competencies, new products,New markets, do the right things

Local Implementation details, local adjustments

Global Global resources, global scale and scope, Global mindset and savvy

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Pyramid Building

• Manage on the inside and outside, lead from today to tomorrow, act locally and think globally

• Two Course sequence builds individual pyramids, which, when constantly nurtured and reinforced brick by brick, will allow engineers to be visible and recognized as leaders above the crowds for a long time to come.

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Plan, Lead, Organize and Control (Self, Staff, Teams, Projects, Global Issues)

Engineers as Leaders (Cost Accounting - ABC, Financial Analysis - EVA, Marketing Mgmt, Web Enablers)

Customers Value Addition, Supply Chains Mgmt

VisionInnovation

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Question # 14.2

• Leading technological innovation is a major challenges for engineering managers in the new millennium. What are some of the success factors for technological innovation?

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Question # 14.3

• The new millennium is expected to experience continued changes in communications technologies, business practices, worker diversity, customer empowerment and marketplace conditions. Name a few leadership qualities which are deemed essential for engineering managers to achieve success in the new millennium.

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Answer #14.3 (Leadership)

• L – Listening, leveraging own capabilities

and strengths

• E – Empowering, entrusting people,

enthusiasm

• A – Action driven, attitudes, accountability,

ability to motivate others

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Leadership

• D – Determination, decisiveness in setting directions, detail-orientation in management approach• E – Energy, empathy, effectiveness, efficiency• R – Rewarding, respecting, risk taking, reinventing oneself• S – Setting personal examples, servicing people, showing missions/vision

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Leadership

• H – Honesty, honorable objectives• I – Innovative, integrity, interpersonal skills, inspiring capabilities• P – Persistence, positive outlook, proactive communications

Sources: Dave Fleming 2002, “Leadership for a New Millennium,” Emerging Leaders Institute; John H. Zenger and Joseph Folkman, and Joe Folkman, 2002, “the Extraordinary Leader,” McGraw Hill Education, Europe (June )

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Examples of Choice-Boards

• Choice-Boards offer customization of needed product - Allows companies to sell first, then produce (low or no inventory and financial costs)

• Dell Computers - Computer systems (memory size hard-drive, modem, monitor, keyboard, etc.)

• Levi’s - Spin Jeans (fit, style, color)

49

Examples of Choice-Boards

New Economy

Companies

American Quntum Cycles

DellComputers

Mattel

NikeNapster

CiscoSystems

Levi's

Proctor &

Gamble

Choice-Boards offer customization of needed products - Allows companies to sell first, then produce (low or no inventory and financial costs)

50

Examples of Choice-Boards (cont’d)

• Dell Computers - Computer systems (memory size hard-drive, modem, monitor, keyboard, etc.)

• Levi’s - Spin Jeans (fit, style, color)

• Proctor & Gamble - Cosmetics and perfumes (50,000 choices)

• Nike - Sneakers (features, styles and colors)

51

Examples of Choice-Boards (cont’d)

• American Quantum Cycles - Motorcycles (seats, handlebars, paint color)

• Napster - Downloading music to burn custom CDs

• Mattel - My Design Barbie - build a custom doll (hairstyle, color, complexion, eye color)

• Cisco - Custom design router, switches and hubs using its Marketplace portal

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Success of Digitalization

• Bank Transaction: $1.25 by bank teller, $0.54 by phone, $0.24 by ATM, $0.02 via Internet

• Procurement (Corning): $140 for procuring parts and supplies by people, $11.7 via Internet-based catalog system

• Recruitment: $128 for normal human based routine, $0.06 by digitizing the process and eliminating labor

• General Electric - $50 over the phone for customer inquiry, $0.50 via Internet