Tag Archives: Productivity

Updates from McKinsey

Why your next transformation should be ‘all in’
By Chris Bradley, Marc de Jong, and Wesley Walden – Business transformation programs have long focused on productivity improvement—taking a “better, faster, cheaper” approach to how the company works. And for good reason: disciplined efforts can boost productivity as well as accountability, transparency, execution, and the pace of decision making. When it comes to delivering fast results to the bottom line, it’s a proven recipe that works.

The problem is, it’s no longer enough. Digitization, advanced technologies, and other forms of tech-enabled disruption are upending industry after industry, pressuring incumbent companies not only to scratch out stronger financial returns but also to remake who and what they are as organizations.

Doing the first is hard enough. Tackling the second—changing what your company is and does—requires understanding where the value is shifting in your industry (and in others), spotting opportunities in the inflection points, and taking purposeful actions to seize them. The prospect of doing both jobs at once is sobering.

How realistic is it to think your company can pull it off? The good news is that our research demonstrates it’s entirely possible for organizations to ramp up their bottom-line performance even as they secure game-changing portfolio wins that redefine what a company is and does. What’s more, “all-in” transformations that focus on the organization’s performance and portfolio appear to load the dice in favor of transformational results. By developing these two complementary sets of muscles, companies can aspire to flex them in a coordinated way, using performance improvements to carry them to the next set of portfolio moves, which in turn creates momentum propelling the company to the next level.

If you want to see where you’re going, it’s best to start with a point of reference. Our choice, the power curve of economic profit, came out of a multiyear research effort that sought to establish empirical benchmarks for what really makes for success in strategy. To create Exhibit 1, we plotted the economic profit (the total profit after subtracting the cost of capital) earned by the world’s 2,393 largest nonfinancial companies from 2010 to 2014.

The result shows a power curve that is extremely steep at both ends and flat in the middle. The average company in the middle three quintiles earned less than $50 million in economic profit. Meanwhile, those in the top quintile earned 30 times more than the average firm in our sample, capturing nearly 90 percent of all the economic profit created, or an average of $1.4 billion annually. more>

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Updates from Siemens

The best reason to adopt cloud innovation software
By Blake Snodgrass – The decision on cloud timing varies based on each company’s scenario. The first step in the transition is to understand what your company’s goals are in the first place. The change driver may be reaching the limits of an existing solution, requiring new capabilities to support digital transformation, consolidating acquisitions, or choosing to modernize IT infrastructure. The impetus for moving to the cloud helps set the right objectives.

The cloud should not be the driver, in the same way that the goal of a software implementation should never be to “go live” with the software. There has to be some tangible business value. For product innovation and engineering software, what better reason could there be than to improve product innovation and engineering performance? The cloud is a means to an end. The real value is helping manufacturers improve the pace and level of innovation.

Improving product innovation and engineering is the bread and butter of CAD, CAE, PLM, and other engineering solutions. These solutions help provide the capabilities engineers and designers need to innovate efficiently. They offer collaboration capabilities that enable product development teams to work together so they can move faster and avoid introducing errors from disjointed processes. They also help coordinate processes and manage product development projects to ensure that projects are executed effectively.

Perhaps that’s old school, and clearly, on-premise solutions can deliver most of these benefits. But the cloud offers some special help here, as well. Today’s engineering teams are working with increased complexity and disruption, adopting new materials, systems-oriented designs, advanced manufacturing methods, and more. To remain efficient, they need to not only innovate their products – they need to innovate their innovation and engineering processes.

How does the cloud help? Traditional software deployments lock in processes and capabilities until the next upgrade cycle. With the cloud, innovations, functionality, and techniques developed by the software vendor can be made available on an ongoing basis. Access to new features allows engineering teams to take advantage of new software capabilities faster. more>

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Updates from McKinsey

How to develop soft skills
As today’s skill shift accelerates, it is essential that organizations enhance and expand development initiatives for business longevity.
By Julie Avrane-Chopard, Jaime Potter, and David Muhlmann – As automation and artificial intelligence dramatically change the nature of work, employees must fine tune the social and emotional abilities machines cannot master. To encourage this behavior, employers must adjust the ways they assess, educate, train and reward their workforce on soft skills such as collaboration, communication and critical thinking.

Soft skills, which are commonly defined as non-technical skills that enable someone to interact effectively and harmoniously with others, are vital to organizations and can impact culture, mindsets, leadership, attitudes and behaviors. These skills fall into the following categories:

  1. Advanced communication and negotiation skills
  2. Interpersonal skills and empathy
  3. Leadership and management skills
  4. Entrepreneurship and initiative-taking
  5. Adaptability and continuous learning skills
  6. Teaching and training skills

A key difference among today’s large-scale skill shift and those in the past—including the transformative transition from agriculture to manufacturing—is the urgency for workers who exhibit these capabilities.

Developing required soft skills and ensuring employees, and in turn organizations, are set up for success isn’t as simple as popping in a training video. Instead, companies must change their employees’ processes and behaviors—a much harder task.

Assessment is an important first step. Sizing the soft skill gap proves particularly challenging, since they typically lack systematic evaluation and certification mechanisms. HR departments must be equipped with a framework that codifies soft skills and defines their respective evaluation criteria.

For example, several European firms are employing “stepping stone” initiatives to build a digital platform to help workers evaluate their soft skills, know their strengths and development needs, gain access to specific trainings, and get certified.

Effective reskilling requires blended learning journeys that mix traditional learning, including training, digital courses and job aids, with nontraditional methods, such as peer coaching. One retail giant has distributed over 17,000 virtual reality headsets that immerse employees in unfamiliar situations, such as their first Black Friday sales day, and is training them in new tech, soft skills and compliance.

People naturally operate based on incentives—they do what is rewarded. To encourage people to not only begin their soft skill learning journey but to continue with it, rewards and incentives are critical. more>

Productivity Does Not Explain Wages

As long as we believe the neoclassical farce, we will know nothing about what causes prices.
By Blair Fix – Let’s start with the evidence trumpeted as proof that productivity explains wages. Looking across firms, we find that sales per worker correlates with average wages. Figure 1 shows this correlation for about 50,000 US firms over the years 1950 to 2015.

Mainstream economists take this correlation as evidence that productivity explains wages. Sales, they say, measure firms’ output. So sales per worker indicates firms’ labor productivity. Thus the evidence in Figure 1 indicates that productivity explains (much of) workers’ income. Case closed.

Yes, sales per worker correlates with average wages. No one disputes this fact. What I dispute is that this correlation says anything about productivity. The problem is simple. Sales per worker doesn’t measure productivity.

To understand the problem, let’s do some basic accounting. A firm’s sales equal the unit price of the firm’s product times the quantity of this product:

Sales = Unit Price × Unit Quantity

Dividing both sides by the number of workers gives:

Sales per Worker = Unit Price × Unit Quantity per Worker

Let’s unpack this equation. The ‘unit quantity per worker’ measures labor productivity. It tells us the firm’s output per worker. For instance, a farm might grow 10 tons of potatoes per worker. If another farm grows 15 tons of potatoes per worker, it unambiguously produces more potatoes per worker (assuming the potatoes are the same).

The problem with using sales to measure productivity is that prices get in the way. Imagine that two farms, Old McDonald’s and Spuds-R-Us, both produce 10 tons of potatoes per worker. Next, imagine that Old McDonald’s sells their potatoes for $100 per ton. Spuds-R-Us, however, sells their potatoes for $200 per ton. The result is that Spuds-R-Us has double the sales per worker as Old McDonald’s. When we equate sales with productivity, it appears that workers at Spuds-R-Us are twice as productive as workers at Old McDonald’s. But they’re not. We’ve been fooled by prices.

The solution to this problem seems simple. Rather than use sales to measure output, we should measure a firm’s output directly. Count up what the firm produces, and that’s its output. Problem solved.

So why don’t economists measure output directly? Because the restrictions needed to do so are severe. In fact, they’re so severe that they’re almost never met in the real world. more>

Updates from Adobe

December 2019 Giveaways
Adobe – Experiencing good design, illustration, photography, motion graphics, and video is like a gift—and it’s a gift that you, the creative community, give us at Adobe every day. So in return, we’re giving you gifts.

They range from Photoshop actions to lettering sets to texture packs and more. They’re all high quality, free, and copyright-free, and you can use them in any project, personal or commercial.

All we ask is that you don’t re-distribute them. more>

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Updates from Siemens

Rocket Lab to use Siemens software to explore new frontiers of space
Siemens – Rocket Lab plans to implement Siemens hi-tech industrial software to help digitally manage the lifecycle needs of the business. The software is from the Xcelerator portfolio, which is from Siemens Digital Industries Software and includes Teamcenter®, the world’s most widely used digital lifecycle management software, and NX™ software for computer-aided design (CAD) and manufacturing.

This announcement comes as Rocket Lab prepares to integrate all its design, engineering and production systems to establish an end-to-end digital thread that enables increased transparency and efficiency across various offices.

Speaking on the decision, Rocket Lab’s Vice President of Global Operations, Shaun O’Donnell, said: “As we’ve grown, so has our production capacity and the platforms associated with various products and processes. Using Teamcenter, we’ll be able to combine various aspects of data related to the same part, assembly and system to maintain a single source of truth across the life cycle of the product. Also, as we grow, NX will give our designers increased performance and stability to cope with larger assemblies.”

“Investing in the right digital platforms that allow us to easily scale with growth is critical to the sustainability of our business. With offices around the world, we rely heavily on the access of relevant information that impacts the efficiencies of our production processes,” said Mr. O’Donnell. more>

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Updates from Adobe

Hitting the Right Notes in Illustration
By Joe Shepter – At some point in their lives, everyone draws,” says illustrator Gabriel Silveira. “Some people continue to draw, but most stop.”

That’s the humble way the 35-year-old Brazilian describes his path to becoming a highly sought-after professional illustrator. Silveira’s futuristic and intensely graphical creations have graced the pages of magazines like ESPN, Wired, and the Harvard Business Review, and enhanced brands and events like Loot Crate and the MCM London Comic Con.

He admits that as he was growing up, he was much more of a fan than a prodigy. Early on, he discovered the Brazilian cartoonists Laerte and Angeli, as well as Franco-Belgian bandes dessinées, becoming fascinated with artists like Hergé and Moebius. From there, he moved on to American titles and developed a particular affinity for the X-Men. Along the way, he noticed that the comic books didn’t merely have an author; they also credited an illustrator.

This sparked an idea that emerged when he graduated from design school in 2005. After struggling to find a design job in Sao Paulo’s competitive advertising scene, Silveira landed a position as an assistant for noted Brazilian illustrator Carlo Giovanni, with whom he trained diligently for nine months. When Giovanni decided to take his practice in the new direction, he generously shared his editorial contacts with Silveira, who quickly established himself as a talented freelancer. more>

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Updates from McKinsey

Digital transformation: Improving the odds of success
By Jacques Bughin, Jonathan Deakin, and Barbara O’Beirne – or established companies, the pressure to digitize business models and products has reached new intensity. McKinsey research shows that the best-performing decile of digitized incumbents earns as much as 80 percent of the digital revenues generated in their industries.

Ascending to that elite group is far from easy. In a new survey of more than 1,700 C-suite executives, we learned that the average digital transformation—an effort to enable existing business models by integrating advanced technologies—stands a 45 percent chance of delivering less profit than expected. The likelihood of surpassing profit expectations, on average, is just one in ten.

The good news is that executives can decisively increase the chance that a transformation focused on digital enablement will beat performance expectations.

Our latest research shows that exceptionally effective digital transformations are distinguished mostly by the practices that executives choose to follow. Adhering to a well-defined set of transformation practices lifts the likelihood of exceeding profit expectations to more than 50 percent—about five times better than transformations that involve none of these practices. What’s more, the same combination of practices works for every type of digital-enablement effort that our survey covered. more>

The Unwinnable Trade War

By Weijian Shan – There are at least two reasons why Chinese exports to the United States have not fallen as much as the Trump administration hoped they would. One is that there are no good substitutes for many of the products the United States imports from China, such as iPhones and consumer drones, so U.S. buyers are forced to absorb the tariffs in the form of higher prices.

The other reason is that despite recent headlines, much of the manufacturing of U.S.-bound goods isn’t leaving China anytime soon, since many companies depend on supply chains that exist only there. (In 2012, Apple attempted to move manufacturing of its high-end Mac Pro computer from China to Texas, but the difficulty of sourcing the tiny screws that hold it together prevented the relocation.)

Some export-oriented manufacturing is leaving China, but not for the United States. According to a May survey conducted by the American Chamber of Commerce in Shanghai, fewer than six percent of U.S. businesses in China plan to return home. Sixty percent of U.S. companies said they would stay in China.

The damage to the economy on the import side is even more pronounced for the United States than it is for China. Economists at the Federal Reserve Bank of New York and elsewhere found that in 2018, the tariffs did not compel Chinese exporters to reduce their prices; instead, the full cost of the tariffs hit American consumers. As tariffs raise the prices of goods imported from China, U.S. consumers will opt to buy substitutes (when available) from other countries, which may be more expensive than the original Chinese imports but are cheaper than those same goods after the tariffs. The price difference between the pre-tariff Chinese imports and these third-country substitutes constitutes what economists call a “dead-weight loss” to the economy.

Beijing’s nimble calculations are well illustrated by the example of lobsters. China imposed a 25 percent tariff on U.S. lobsters in July 2018, precipitating a 70 percent drop in U.S. lobster exports. At the same time, Beijing cut tariffs on Canadian lobsters by three percent, and as a result, Canadian lobster exports to China doubled. Chinese consumers now pay less for lobsters imported from essentially the same waters.

The uncomfortable truth for Trump is that U.S. trade deficits don’t spring from the practices of U.S. trading partners; they come from the United States’ own spending habits.

The United States has run a persistent trade deficit since 1975, both overall and with most of its trading partners. Over the past 20 years, U.S. domestic expenditures have always exceeded GDP, resulting in negative net exports, or a trade deficit.

The shortfall has shifted over time but has remained between three and six percent of GDP. Trump wants to boost U.S. exports to trim the deficit, but trade wars inevitably invite retaliation that leads to significant reductions in exports.

Even a total Chinese capitulation in the trade war wouldn’t make a dent in the overall U.S. trade deficit. more>

Updates from Siemens

Electrolux implements worldwide 3D factory and material flow planning
Siemens – Based in Stockholm, Sweden, Electrolux AB sells appliances for household and commer­cial use in 150 countries around the world. With around 58,000 employees and 46 pro­duction sites, the company develops and manufactures products of numerous brands: in addition to Electrolux, the top brands Grand Cuisine, AEG, Zanussi, Frigidaire and Westinghouse enjoy a particularly high reputation.

In 1996, the German AEG brand was acquired from Daimler Benz, together with several divi­sions and locations of the group. This is how the factory in Rothenburg ob der Tauber, founded in 1964, came to Electrolux, which today produces 600,000 stoves and 1,400,000 cooking ranges per year for the European market.

We attach great impor­tance to implementing in detail the essential product characteristics of each brand in development and production,” reports Bernd Ebert, director of Global Manufacturing Engineering − Food Preparation at Electrolux. Based in Rothenburg, Ebert ensures that all Electrolux cooking appliance factories imple­ment uniform processes and systems.

As part of a comprehensive digitalization strategy covering all areas, 11 digital manu­facturing projects are on the agenda of the Swedish global corporation. Ebert has assumed responsibility for two global proj­ects with the highest priority. They aim to create “digital twins” of all manufacturing sites: In the virtual manufacturing project, an advanced planning tool was selected and introduced for early design verification to develop products that are production- and assembly-friendly. For example, assembly sequences and movements will be planned and optimized three-dimensionally to pre­vent collisions. The prerequisite for this is the development of three-dimensional fac­tory layouts, which is the focus of the sec­ond project, 3D factory layout. The layouts will be created using a standard factory planning tool that can simulate both the plant and the material flow on the basis of 2D data in order to optimize capacity and efficiency.

Software selection began in 2014, when only a few had powerful software for 3D factory planning. A small, specialist team led by Ebert worked closely with the company’s IT department in Stockholm. Starting in 2015, Teamcenter from Siemens PLM Software was deployed there as a strategi­cally important product development plat­form for product lifecycle management (PLM) at Electrolux.

Discussions about Siemens’ future strategy led to an offer to test a pre-release version of the 3D layout software Line Designer in an early adopter program. more>

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