Interview by: Alistair Craven
Conrad Winkler is a vice president of Booz & Company, based in Chicago, and an expert in manufacturing strategy, manufacturing transformation, and supply chain management.
He was previously a nuclear submariner in the US Navy. He holds an MBA from Northwestern University’s Masters of Management in Manufacturing programme (a joint programme between the Kellogg Graduate School of Management and the McCormick School of Engineering and Applied Sciences), and a BS in mechanical engineering from Massachusetts Institute of Technology.
He is a long-standing contributor to strategy + business on manufacturing, supply chain, and other operations-related topics. In a world of emerging markets, changing work forces and accelerating innovation, manufacturing is once again a key corporate issue. Manufacturing expertise is once again a strategic competitive advantage, distinguishing winning companies (like Procter & Gamble, Lego, Toyota, Zara, and Tata) from those that have let their capabilities languish.
Along with Kaj Grichnik, Conrad Winkler has collaborated to create an up-to-the-minute exploration of the new era in manufacturing and the requisite strategies for success. Chock full of profiles of the best manufacturing innovations in every business sector from pharmaceuticals to autos to consumer products, and revealing the most effective manufacturing innovations and strategies, Make or Break introduces you to the forces reshaping the industry.
Q: Your book details the “new era” in manufacturing. Can you give us some background information on this “new era?”
Conrad Winkler:
Manufacturing has gone through a dark period where most of the benefits that companies garnered from manufacturing was structurally moving parts to low cost countries and outsourcing production to someone else. But some manufacturers made manufacturing a competitive advantage, and reaped huge rewards – companies like Toyota, Zara, Procter & Gamble. Now, the easy outsourcing to low labour has already been done for many companies, and there are additional challenges – material shortages, disgruntled workforces, complicated networks, product variety, and capacity issues – with very demanding customers.
So companies now have their “make or break” moment. They are going to need to compete or they are going to lose their competitive position. The difference between those who can compete and those who cannot will become much more stark. Many companies realize this and are putting manufacturing back on their agenda. Others are still treating manufacturing as a cost reduction opportunity, with no competitive advantage.
Q: The book is rich with practical case examples. Which case study would you cite as the most impressive from your research, and why?
Conrad Winkler:
In many ways, P&G is the most impressive. This is a company in consumer products that everyone thinks of as only a marketing company – but that actually pursues competitive advantage in its manufacturing and supply chain in an unprecedented manner. Also, MasterBrand Cabinets is exciting because of the way the company built a manufacturing network that gave it a low cost position and enabled it to grow in every way, while beating back the import threat.
Q: You note very early on that the prospects for manufacturing have “never been better.” What brings you to this conclusion?
Conrad Winkler:
The ability to differentiate through manufacturing strategy and manufacturing excellence are quite significant. Manufacturing technology continues to evolve in ways that are exciting.
Q: According to your book, “manufacturing myopia” is even more prevalent today than it was four decades ago. How come?
Conrad Winkler:
Many companies have come to view manufacturing in a very narrow way – year over year cost reduction, but without giving thought to competitive advantage. Years of low cost country sourcing made companies complacent with this role, only now to wake up with poor process technology, slogan over-saturated workers, and missed opportunities to put in lean manufacturing in Greenfield locations.
The manufacturing function has often been placed under supply chain management – not a bad thing to do – but the result has been less focus on manufacturing. The strategic manufacturing skills have atrophied in many cases.
“The difference between those who can compete and those who cannot will become much more stark. Many companies realize this and are putting manufacturing back on their agenda.”
Lastly, process technology is often not viewed as a competitive advantage – especially as all process equipment is often sourced rather than being developed in-house.
Q: Interestingly, you comment that the CEO and top team in an organization tend to be oriented towards the marketing and promotion of products, without a feel for the operational costs and difficulties. What can be done to change this?
Conrad Winkler:
Manufacturing needs to regain a seat at the table and CEOs need to look to manufacturing for competitive advantage. Manufacturing organizations need to bring in talent capable of developing manufacturing strategy, as opposed to just crunching numbers or running plants.
Manufacturing should develop some central manufacturing process technology efforts to make investments in process technology and manufacturing capabilities possible. Competitive product, process and cost comparisons are usually not done with any rigour. Shifting to focused intelligence and external benchmarking can be a driver for organizations to understand the value of developing their own capabilities.
Q: How important is it for manufacturing companies to be environmentally aware?
Conrad Winkler:
The economics and PR side of environmental awareness are significant. Now with energy process reaching sky-high, companies and manufacturing will be forced to become more aware if they had not been to start with.
Q: You have found that one quality that all sound manufacturing strategies share is “resilience.” Can you tell us about this?
Conrad Winkler:
Resilient organizations can be held accountable for delivering competitive advantage and meeting commitments despite the forces arrayed against them. It is the resilient manufacturing organization that holds to its core mission, its main improvement plans, that reacts to setbacks by finding ways to improve more in other areas. This kind of organization adopts a culture of improvement and confidence.
“A core asset is something that is nurtured, that is treated like it can be a source of advantage. Without the company believing that manufacturing can be an advantage or disadvantage, it is impossible to invest.”
A resilient strategy does not say “move this product” but rather says “gain competitive advantage in these four ways – and in today’s environment, do X but be ready to do Y”
Q: Chapter four suggests that companies able to treat manufacturing capability as a core asset equal in importance to marketing or finance can develop a “natural advantage.” What do you mean by this?
Conrad Winkler:
Honda is considered by many as an “engine” company because of its focus on powertrains and engines for many uses. But manufacturing has also become a core capability. Honda is now one of the most flexible auto manufacturers in the world thanks to the emergence of manufacturing. Now manufacturing is treated as a core capability that delivers advantage in every car that is produced.
A core asset is something that is nurtured, that is treated like it can be a source of advantage. Without the company believing that manufacturing can be an advantage or disadvantage, it is impossible to invest. There is no one answer on this. The tricky part is realizing that at any one given moment in time, process technology may look stable but you cannot predict that it will be stable forever.
Q: Can you briefly tell us about the role and importance of process innovation?
Conrad Winkler:
Process innovation is a huge driver of success and differentiation. Anyone can copy a product but you cannot copy a process unless you have very difficult to obtain competitive intelligence. That is why P&G, Honda and Toyota continue to do a mix of in-house and outsourced process technology – always holding the latest innovations internally – always ensuring that they have the advantaged process technology.
Q: Your research indicates that manufacturing leaders spend up to 27 per cent of their time in internal meetings, yet only 13 per cent with suppliers and customers. What are the implications of this?
Conrad Winkler:
Manufacturing leaders need to be part of the value creation for the end customers and, while they should not be salespeople, their role becomes much more powerful as they better understand their customer requirements. Nothing turns around a quality problem the way contact with the customer can.
Internal meetings are not always “bad”, but over time we have come to view manufacturing leaders who can spend a mix of time on developing manufacturing strategy to have competitive advantage in the eyes of the customer, setting the manufacturing system/process for their organization, and systematically ensuring high performance. These leaders are more likely to be successful than those stuck in internal meeting that do not drive to better decisions.
Q: Do you have any closing statements you wish to make?
Conrad Winkler:
The manufacturers’ moment is in front of us. The networks are complex, the capital costs are large, the opportunities are enormous and the challenges just as big. But those who figure it out and deliver competitive advantage for their companies will reap rewards.
August 2008.