Capitalism and free market enterprise are the building blocks of American economic dominance. They’re the reason so many US companies can deliver quality products and services to market quickly and profitably. Though seemingly ubiquitous here in the States, pockets of industry lack some of the most crucial aspects needed to operate efficiently in a free market. Without these crucial building blocks of efficient development, free enterprise disintegrates, production becomes uneconomical and products fail to reach market.
The first building block of efficient product development is the presence of an authentically diverse customer base. Obviously, capitalism needs diversity of competing suppliers for the sake of cost and price controls. Conversely, a functioning market needs diversity of demand to ensure the survival of the supplier base. Free enterprise takes two to tango. Authentically diverse buyers each have their own set of requirements and incentives. The success of one must be independent of the success of others. As an example, selling ammunition to two different military services may appear as a situation with diverse, or at least fundamentally different, demand sources. Closer inspection reveals a different story. Likely, both services need the ammunition to perform the same function(s), so both services have identical product requirements. Suppliers of those bullets have no incentive to pursue alternate design paths or manufacturing techniques which could drive performance up costs down. Imagine if every licensed driver in the US wanted a car with a combustion engine, decent mileage and four doors, which cost between $20,000 – $25,000. Would Tesla have an incentive to develop electric cars? Would Mercedes or BMW be inclined to deliver thrilling performance and luxury interiors? Would Toyota have any reason to price their vehicles under $20,000? Analogous to the ammo supplier example, in that hypothetical driver situation, every auto manufacturer – should more than a few survive – could spend whatever time and money was needed to build & deliver. They needn’t worry about beating their lower-cost competitor to market or delivering a vehicle so luxurious no indulgent buyer could resist. If a customer base is singular and static, suppliers have no incentives toward innovation, performance or cost controls.
A second important building block needed to develop products & services is individual creativity. Individuals here can mean individual people, divisions within a larger organization or small businesses. enuine creativity drops dramatically as organization size grows. Creativity, or innovation to use a popular buzzword, fuels achievements, breakthroughs and discoveries that form the backbone of successful development. Despite its necessity, creativity drops dramatically as organization size grows. Larger organizations develop processes and frameworks internally in the name of risk management and “idiot proof” efficiency. Those one-size-fits-all processes thwart creativity, expedite sclerosis and close doors on opportunities. Worse yet, they diminish the morale of highly skilled workers who feel constrained executing menial, unsatisfying tasks. As an example, military acquisition adopted the systems contractor model years ago, surely at the “suggestion” of a defense lobbyist. Government-side supporters argue such a model better balances producer-supplier risk. The systems model is a mosaic of well-defined, dependent processes tailored to the complexity of any given program and stage in that program’s life cycle. The systems model means that Government PMs are forced to choose a single contractor part and parcel, taking the bad with the good. In a parallel universe, skilled PMs and engineers could intelligently procure individual pieces of hardware, sub-assemblies or supporting services on an ad hoc basis. Instead, the popular systems framework – with its labyrinthine framework and cornucopia of processes – is hit or miss at best, often making military acquisition cumbersome, discouraging and ineffective.
The third building block is an unwavering focus on the all-important return on investment (ROI). To borrow a line, ROI isn’t everything, it’s the only thing. A business that invests in efforts to keep costs low reaps the return of a larger profit margin. As a different example, Apple Inc. invests its huge cash reserves to deliver the highest quality products at the highest price points to near-obsessive followers. Despite Apple’s willingness to spend as necessary to deliver the best, even they let only the potential return on such investments guide their decisions. Apple, with its grip on top industry talent, could have implemented such features as waterproof phones or proximity-based commands (think waving your hand over the screen). Samsung implemented these; Apple passed. Apple’s record revenues told how that story ended. To a layman such as this author, it appeared as though Samsung chased the “coolest,” most marketable features in hopes that a reward in the form of a market would later materialize. As seen, decisions to develop and implement the most cutting edge technologies often present a challenging ROI analysis. In an example analogous to that of Samsung & Apple, the pursuit of state-of-the-art for its own sake sets some military acquisition programs on a path to failure. When a team doesn’t structure programs using ROI, PMs and engineers fall into the trap of assuming that desirable technology will necessarily add value in operation. They fall into the “optimism trap,” seduced by an idealistic vision of the final product and its reflected glory. Optimism is just one saboteur, but ROI analyses must always be the objective guiding light.
The fourth building block to efficiently develop a product or service is the conduct of value-added work. Organizations must continually distinguish the valuable activities that advance the project from the aimless ones that exist to keep hands and feet moving. Plainly, teams must eschew “busy” or “make” work. It’s a natural human instinct to respond to adversity by simply doing something. When viewed in contrast to thoughtfully weighing options, that instinct often leads to wasted time & effort, project setbacks and yet more adversity. What’s worse, it feeds the myth that more is always better and stokes a reverence for complexity over simplicity. An affinity for the complex can turn a lean business into a bureaucratic Titantic. To compound the problem, organizations force the “round” brains of creative, empowered employees into the “square holes” of rigid, ill-fitting processes. As an organization’s love for complexity grows, employee morale drops, efficiency erodes and mistakes pile up. The solution, of course facetiously, is to implement more processes or add remedial steps to the current ones. Without an eye to value that all the activity does or doesn’t add, the “make work” monster is fed. One final comment is that this building block naturally extends from the prior, on ROI, but the two are subtly different. ROI analyses anchor an organization’s risk profile & decision-making, whereas eliminating “make work” optimizes output and keeps employees motivated.
A fifth building block of product development in a free market is the need for domain mastery and qualification of influential decision makers. This sounds obvious but is rule frequently ignored in military acquisition. More often than not, senior officers and civilians with backgrounds in intelligence, information systems (IS) or operations strategy assume roles in weapon development, business integration or sensors & systems programs. This reality is borne of a desire to expand the breadth & depth of a person’s career, but in practice causes inefficiency and errors in translation. Another excellent example of an unqualified decision maker grossly mismanaging his organization is New York Jets owner Woody Johnson. A descendant of the Johnson & Johnson (JNJ) clan, of bandage, cold medicine and baby shampoo fame, Woody Johnson has demonstrated his ignorance of professional football operations. His personnel decisions from the top down have been ill-conceived and unsuccessful, and his response to over a decade of Jets ineptitude is to keep doing what he’s been doing. Sadly, the only success Woody Johnson’s achieved is his ability to keep Meadowlands seats filled. Tickets, parking, food, drinks and concessions have steadily risen in price as the product being delivered has steadily declined. Arrogantly, Woody Johnson believes he’s qualified to run the Jets simply because he could afford to buy the team. His gross failures prove otherwise, just as the myriad schedule and cost overruns of military programs prove that a former IS expert should not lead weapons systems R&D. Without some level of domain mastery, decision makers unknowingly sabotage the efficiency of their product’s development.