 With this lesson, we are opening a third area of human performance application. For perspective, we started out with the microcosm of the work group. We learned what worked within that performance-oriented gathering of people. We saw the impact of scientific management and development of the foreman to replace the authority-oriented boss. Our second section focused on human performance matters found within the larger business organization. We learned to see the challenges commonly found in modern management. We learned to see where waste was common and where performance might be increased through its elimination. In this section, we will address unstructured gatherings of people. We will be looking at entire industries, groups defined by political areas of governance. We will be using what we learned in the study of human performance in smaller and better-defined groupings to apply performance orientations to these larger, unmanaged efforts. We have already ventured a ways into this subject with our discussion of the historical impact of incorporation on industry in general and the automobile industry in particular. We are looking at the whole industry as a basis for seeing our historical challenges and the resistance of leadership to change. A starting concept is the honors heaped upon the American auto industry leaders and recognition of them for the importance of the work they have done. They represent the growth of American industry and its success. It was right there with business growth into the corporate giants of today. It was right there with the establishment of the design and operation of complex interrelated production efforts and huge production line operations. It was essential in the development of mass production. It is even partly responsible for the development of performance engineering and production management. It employed some of the most advanced and inventive designers and engineers providing them a venue for their culturally important activities. It supported the growth of American society by supporting personal freedoms that are inherent in the industry's primary product. It supported growth in other industries by developing mechanical vehicles for carrying parts and materials to almost anywhere in our growing nation. We also have a transition from family to corporate business. The conversion largely started with Henry Ford and a family business. To leverage the benefit of its potential customer base it had to grow. An investment by others was sought. The corporate model proved useful in this with the purpose still being contained by the initiating family. It shifted to the corporate model more and more as others stepped in to assume part of this wonderful new industry with its largely unsatisfied base of potential customers. Those who led these growing efforts gained great wealth and prestige as leaders. They were serving a sense of value in American society and it was by their initiative and drive that people were able to take advantage of the new transportation potentials. In short, they became the models for other industry leaders. Their techniques and approaches to leadership became the models for the structure and operation of both their own competition and the development of other industries. The family in charge approach became the common basis for incorporation. The same had also become familiar in the sense of military leadership and the principles of administration developed by leaders such as Henry Fayol. Those who would govern were familiar with the benefits of privilege and getting results and they also promoted the authoritarian model through passing laws of incorporation that shielded these leaders from accountability for what the corporation did. Along with the development of larger corporate businesses, we find development of larger business management in the authority based model. It dovetailed nicely with the leader family concept for collection of senior business executives who could then see to running the massive enterprises. It all seemed to work so well except in production. In production there was another model, one based on teaming. It worked in the production environment to such effect that attempting to take charge of the production effort led to immediate challenges and loss of performance. Isolation of the uncontrolled production effort followed naturally. It was obviously not being run properly, but it was effective. Management separated itself from production using the obvious technique of simply assigning performance as a general responsibility and letting performance people do what worked for them. It was us and their management. The split between management and labor was also modeled in the auto industry. It seemed a paradise for those few business leaders who ran these businesses. They had a huge and eager market for their product. They benefited greatly on a personal basis and they really were in charge, at least until the unions formed. They only competed among other like businesses. And there was that scramble to assure that everyone who could afford the product was able to secure one. It worked wonderfully to the benefit of those who were privileged. And they were honored and recognized for their leadership and for being in charge, at least until foreign autos started coming onto the domestic market. We have been over this a few times and you have seen the basics. These leaders shared vision. They might have been competitors for a piece of the vast American customer base, but they had like offerings under the direction of like leaders in other automobile businesses. It was a purpose driven monopoly. They had agreement on the business model that they would use in competitive efforts to capture a larger share of that customer base. It was even like a monopoly when dealing with those cantankerous unions. It was not like there were all that many differences in how they dealt with union representation or the principles and provisions of how they interacted with those union authorities. Their union contracts were consistent with those of other auto manufacturing businesses. The major leverage of corporate union activities was a greater grasp of unity. The union could threaten to benefit one manufacturer at the expense of the others, shifting market share. And then we stop and consider the meaning of market share as a concept. The privileged understanding is that their customers will have to come to them and their businesses if they want the product. It is like a dairy farmer who knows that his cows come to be milked because they will end up hurting if they do not. And yes, it is back to that reference. The farmer takes care of the cows because they are his source of income. He attends to their needs to keep them productive because that is where he and his family achieve what they value. The farmer does the best he can to own the cows, penning them into areas he controls so they do not wander off into someone else's farm. He guards his cows so that others do not steal them away. That vision breaks down for the business that harvests income from automotive customers. They are not cows, not owned by the business, not penned in. They are free to get what they value in other places. Market share? That is how many customers the business can attract to purchase their corporate product. Market share is a way to address a division of the customer base. Market share is an us and them concept as surely as a division between farmers and cows. In our business example, the cows are not owned but are free to go to any available barn. There are a few other farmers and the cows still have to go somewhere if they are to be milked. The farmer's task is to attract as many to his barn as he can. It is still a workable situation for the farmer but then someone shows up with a truck equipped to relieve the cows of their milk, he does not even have a farm, just a facility to service the cows. This is like the foreign auto industry intrusion into the United States market. It is someone who would capture a share of the market even though he has no farm. It is a wholly different business model and it is being set up in real competition with those who own the farms. The picture changes. What do our auto business leaders do about this intrusion? Do they just sit back and let some foreign business sell to their customers biting into their market share? It is not just a threat to profit. It is a threat to the entire industry and how it has operated. If these intrusions actually start to capture a customer base, it is at the expense of the domestic industry. If the domestic industry suffers, it looks bad for the leadership. The challenge rises up. Why aren't you doing what those foreign businesses are doing? How are they able to do what you aren't doing? How are they able to serve your customers? And the answer goes back to that symbiotic black box relations to customers. The purpose of the business is delivery of value to customers so that they return income. The purpose of customers is to provide income in order to gain what customers value. This exposes the farmer model for what it is and us and them approach to business. It looks on how the privileged leadership can gain what it values by delivering what customers are willing to buy. The performance alternative is that the business and customers are part of the same relationship. What benefits one at the expense of the others is waste. That should be eliminated. What optimizes value is teaming the corporate effort with the customers to earn by delivering what the customers value. This is a very different business model. We reflect a culture that is, at the time of this recording, not even considered for implementation. The modern leader would have serious difficulty with this, noting that the customers do not work for the leaders. There is no way to direct them to accept what leadership is willing to provide. How can leadership properly direct customers to what they should be doing? And there it is right out in the open. We know how to bring people together. If you are unwilling to pay them, then you have to bring them together as volunteers. For that, you have to have a shared purpose. You all have to have value the same end result. You have to establish a trust relation or there will be no teaming. And the obvious challenge is that privileged business leadership won't even team with its own employees. It denies any reason to team with customers. There are to be beneficiaries of the exercise of privilege. The leaders are to run the business and customers are to value what they receive. We are back to that observation that what we have with privileged industrial leadership does create, sell, and deliver vehicles. It does accomplish things. It does get things done. This is not the challenge, but that privilege is not very good at getting things done. Once the performance, the privilege approach is less effective than application of teaming. Our performance challenge is one of management and that is not even possible until we have something to accomplish through those who are active in the industry. With this, you are immediately propelled in a direction that has not been previously available to people and it is the management of whole industries. Something that government has taken on as a task, but public management efforts seem to have no fixed direction. Their efforts in one administration largely oppose the efforts and accomplishments of a few years back. The word for that is not management, it is waste. We find efforts that serve the economic benefit of some people at the expense of others. Again, that is obvious waste. We find efforts proposed in alternative directions without clear direction or public support for any of them. This subject is massive and ongoing waste. This is just modeled by the automotive industry where the focus is on getting undecided people to purchase what the individual business has presented as its product. One example for understanding the waste of competition building cars so that people will survive a crash. Why not build cars to float so the passengers survive falling off bridges or design it with such atmospheric controls that passengers is protected from airborne illnesses? The first warning flag goes up immediately. The government issues a law that all cars must have protections. Just how valuable is it to people? Would they choose not to purchase vehicles that lack those protections? Someone had to take that choice away from people or they might make the wrong decisions. It was leaders refusing what people might value in favor of what they value. The challenge is how much this costs and what it is worth to those who seek to purchase a car. The answer is that the industry neither knows nor cares. It is like the farm family that insists that there are hiring subordinate managers to clean up all the cow droppings for the health of the cows, sending them out into the fields with shovels and buckets. About this time reality comes crashing in and it is the intrusion of foreign autos. It is that some people are actually buying these in total disregard of the work of the domestic industry and the decisions of its leaders. More laws are passed. Those foreign products have to honor the decisions of American industry leaders. The decisions are denied to the American customers. Our lesson in this is pretty obvious. The industry leaders talk about competition like other businesses, but it is only for those who get to milk the cows. The real us and them has been industry leadership and their customers. Modern industrial leadership is not just unwilling to honor customer decisions. They will actively seek to eliminate any decisions they do not like. And there are those foreign imports. Even after the industrial leaders have done their best to keep them from being competition, they still are. And a number of American customers who should be buying what the industry has determined to be best for them are buying from foreigners. There are uncomfortable limits in what the leader can decide for their customers to buy and it is not just what the leader considers to be a matter of competitive advantages. Customers are the true decision makers, not industrial leaders. Expensive advertising is needed to convince those customers of what they should value. Another flag goes up. Advertising has little effect on how many people are going to buy cars. It is a significant cost that is added to the price of cars without any effect on what the customers will receive. There is a price in supporting what business leaders decide to do and it has to include convincing those customers that leader decisions have value. As we mentioned earlier, there was the teachings of Dr. Deming that something was wrong in American business management. Those foreign manufacturers listen to them a little more effectively than our American counterparts and their ability to produce products increased to the point where they became competition. Dr. Deming had been standing on the porch ringing their bell for decades but they didn't want to hear his contrary warning messages. Reality was knocking on the door but the industry was not eager to respond. Privilege does not answer to others and so in 1978 Volkswagen opened its own production facility in the United States and the competition could no longer be ignored. Foreign businesses had come to town and opened shop in spite of all that domestic leadership could do to rule over the customer base. In repetition of past lessons the strength of our privilege rule is stability, not performance. Resistance to change will go far beyond what is necessary or reasonable. Expeditors to preserve ongoing processes and rules will be accepted far beyond any threat of additional expenditures on behalf of beneficial changes. That is the consistency in our history. It is a history of privileged rule. The pressure had to be relieved and Dr. Deming obviously knew something that was not being accepted by American industry and so American industry leaders started to pay attention. The result was acceptance of continuous improvement. It was a rejection of what this quality control oriented specialist taught in favor of a new slogan for their efforts. He not only discouraged management from interfering with working production effort but also discouraged management by slogan. Management was not looking to change but to find further authorization for what they already believed was right management. In the 1990s we had a movement that sums up the senior leader approach. It was worker circles where workers were gathered to tap into their knowledge of performance. It was to finally harness the real potency of their knowledge, the knowledge of the people who were doing the work to get the benefit of their expertise. It quietly slipped off the radar. Another of those practices that was right in every sense of senior management but that did not yield results. The reason it did not work is instructive. It is setting it up alongside the development of performance management. The first and most effective lesson of scientific management was that you needed to have performance studies they needed to be directed by people who were not focused on doing what they had learned. A remarkable difference is that workers were far more effective when performance expert designs their work processes. In this understanding senior leaders were trying to get back to the 1800s management disempowering their own production managers, reducing them to people who make assignments and collect results on behalf of the business. It was one more attempt to reverse the benefits gained in the early 1900s. In the automotive situation leadership found the situation of loss of public support to be a threat to their continuation and privilege. Their knee-jerk reaction was not based on change but on finding someone to blame and to advertise how wrong their customers were to buy from those foreigners. It had to be the fault of the foreigners selling their cheap second rate knockoffs of valuable American products. It was denigrating those who bought them as being misled or foolish. It was presenting foreign cars as tin cans instead of real vehicles. There was a real effort to put new regulatory requirements upon the vehicles claiming new requirements as public necessities. A matter of note is that the American industry had been building cars without these things like safety glass windows for several decades and it wasn't all that important until they had real competition. They had built cars without seatbelts and suddenly these nice to have details became industry mandates. No car could be sold without them. Of course, this made little difference. Foreign manufacturers were every bit as competent at handling these details as were American businesses. A political solution was tariffs artificially raising the prices of important products to protect domestic industry and its leaders from unwanted competition. Consider who it was who wanted that protection artificially raising prices to give domestic industry an advantage was not a service to the customers. The people who government leaders had been elected to represent it wasn't for the workers so much as for the unions. And on a third front it was appealed to the American government as a fair play of freedom. It was a claim that the cheap labor in other nations was to play. It was how they could push their second rate wares in competition with the quality work being accomplished under American leadership and by properly paid American workers. But then customers did not work for the industry and had no deep interest in supporting privileged American leadership in running their businesses. They were aware of claims of inferior products built by foreigners but found themselves addressing the actual products so that they could make comparison. Customers make the only decisions that really matter. The decision to buy or not to buy the offered product. They do not concern themselves with the conditions of the workers or the sales slogans of the producers when the products are set before them for comparison. Customers make their decisions on what they value and it generally includes how well the product meets their needs and wants in comparison to the price they have to pay to get it. Denial of reality may be personally satisfying but it is not a good strategy for profit or accomplishment. The American customer base has increasingly accepted the quality and economy of foreign automobiles and then the final insult foreign auto manufacturers building their cars on American soil using American workers meeting American requirements and there is nothing that our domestic industry could do about it. The claims of shoddy products were obviously wrong. The claims of cheap and abused labor would no longer work. Tariffs failed. These foreign companies were every bit as able to meet our regulatory restrictions. The dynamics here are fairly simple. The American auto industry had been fully in charge of an important and wonderfully American industry. Its profit potential was huge. Its potential customer base was huge. Its leadership was given the range and empowered to act as earlier businesses were not. It was soon provided all the human and financial resources it needed to grow and prosper. The corporate authority was handed to these leaders and they had both access to political leaders and their admiration and support. They were even able to suck the petroleum and road construction industries along with them. New houses were being sold with garages for family cars. The auto was a symbol of what it meant to be American. A symbol of freedom. It all worked so well for a few decades. Domestic businesses could build and sell to its all captive customer base and good profits were their reward. It all worked until they were faced with competition that did not share in the way businesses were run. A few performance ideas that had crept into foreign business approach opened a new concept of competition. That assured domestic base wasn't going to honor the right decisions that were coming out of Detroit. They weren't going to honor the arrangement with union leadership. Quite to the contrary, some of them saw personal benefit in purchasing those foreign vehicles. Slowly at first the cruel reality of customer independence, customer choice intruded into the halls of industry power. Ever so slowly, the reality was unwrapping our leaders' sense of privilege. The real source of power was not in the boardroom. It was a customer's personal privilege of buying the vehicle that satisfied personal needs and wants at reasonable cost. The real power did not come from doing the right things or from overcoming internal industry competition. The purchase power of the customer ruled over everything else. Paying massive amounts to the right people was not going to change the purchase decisions of customers. The only result that seemed to matter was the product that was delivered for customer purchase and their individuals' decisions to buy or not buy that car. Surely you would think our industrial leaders would have to learn from this, but then again change is always resisted by privileged leadership. If something has to change, the general technique is to direct the change to others. Consider the more recent push to driverless cars. Wouldn't it be wonderful to let some machine drive their cars for them? Think what it would do for safety for all those disabled customers who can no longer drive. Our industrial leaders seem to have learned very little. What of the customer decisions? What of black box cost and benefit the decisions of the customers? Why do people buy cars? Is it to have someone else drive them? The answer is that the industry is still trying to build the cars it wants to sell, not the cars people would decide to buy. The more intensely leaders in our domestic industry try to push people to accept their preferences, the fewer customers they are likely to have. So what is the modern goal? It is to eventually make a driverless car a requirement to take the decision away from those foolish customers who would dare to choose or just something else. It is working toward taking charge of the customer base running their decisions too. We have chosen to address the automotive industry as an example not as an isolated and unique happening. There is the very real challenge of the same sort of us and them leadership trying to manage the customers in a significant portion of our economy. An example, one that is both also revealing in its own way is the highly honored computer industry. This of course is the flagship of modern technology. It has given us everything from the supercomputer of the 1980s to the modern smartphone. Just think of all the things that these modern conveniences can do. You have been developing performance perspective. What it can do is not performance. It can accomplish and deliver to you as the customer. The disconnect with performance was driven home for me in the early 1990s. To set the stage consider the black box for a personal computer. The value is determined by the performance cycle with the user by what comes from the user to that computer that needs to operate and what goes back to the user that the user gets the value. Yes, you have been given a performance tool that can address value relations, use it. The original word processor applications focused on this value relation. When the user pressed the key the appropriate letter appeared on the screen to give indication that the keystroke was accepted. There was an administrative improvement. It was to honor the real capacity of what the computer could do and changed priorities to focus on that. The change was to let the computer work to completion of processing before it showed the letter on the screen. As a fast typist I was able to get ahead of the machine when it had reformatting tasks to properly display what was being typed in. Where the prior program would display the keystrokes as they occurred and flip to a new screen when formatting caught up. Anything until the machine had completed what it was programmed to do. It was what the machine was programmed to do that was given priority not the needs and wants of the user. We have had the value of computing machinery limited for us from that time forward. When the challenge faced by the users was so obvious the answer was by increasing the speed and capacity of the machines. Not any recognition of the waste was taken with users. The waste was considered more important to good computing than serving the user. The industry has done a remarkable job of eliminating the personal computer as a working tool for getting things done. Your use is now monitored by others over network connections and they run programs on your supposedly personal computer that largely fix things that are not broken. You are sold computer programs but find that you receive is more like rentals than ownership and to the question of your needs and wants that are being satisfied there is the disturbing answer that people have no history of those needs and wants. The industry is active in creating these. It is the industry working to manage its customers. Your needs and your wants are not even addressed as drivers in this industry. We have built an entire culture designing to continue managing their product even after you purchase it. We are still learning to see waste. Consider the field of computer security. With the personal computer as a personal device there was no problem with security. That problem is foreign competition in running the computers. It is unfriendly competition, interference with the barons of this industry running things. It is someone else who is treating customers different in competition with how domestic leaders would run their customers' computers. There are huge challenges to being a modern user and they have been created by the automation industry trying to run things. But we also have a wonderful example of customer demand applying management to the industry. When a number of companies were selling early multi-user computer systems their largest customer was the federal government. They had competing data systems and approaches so that changing from one computer to another was a monumental task often involving all that past data being converted and formed so that the new computer could recognize it. Led by a naval officer government procurement centers did a study of how to remedy this. The two major results of their efforts were ASCII text as a government data standard and COBOL as a standard programming language. The government was not going to buy any new equipment until it used ASCII for storage and retrieve the data that would run programs in COBOL. It is the customer telling business leaders what they have to do if they wanted to keep their customer base and the rest is history. When it comes to business the customer decisions are the ones that count. That simple black box is your working tool. It is a way for you to find your own focus on performance matters. It is a way for you to communicate performance matters to others even as it is used in this presentation. And part of the value is in its simplicity. You will not need to actually draw the box to come to your own understanding your own vision. The examples in here will be sufficient for most common applications. You learn to ask the right questions. Who is it who is deciding what car I get to drive? Who is it who is deciding what programs I purchase and run on my personal computer? If the answer is something like the right people then you know enough to look for the waste. You get more and more to the point where the warning flags go up when people present what they have by listing all the things it can do instead of what they want to get done. They will have difficulty even recognizing the waste.