Hybrid Vigor gives me something to think about. Although they pioneered the field, GE is finally selling its appliance business:
The decision fits the pattern that Kaj Grichnik and Conrad Winkler discussed in S+B (and in their new book Make or Break), that companies see manufacturing as a cash cow and non-core to their business. They ask the question in this article “How important is industrial capacity to a nation’s well-being?” and offer an alternative:
Old, fossilized plant footprints can become nimble networks; confrontational labor relationships can evolve into constellations of joint interest; outmoded supply chains can be transformed into clearly defined, mutually beneficial partnerships; and stolid aging factories can be retrofitted into showcases of lean manufacturing. Only those companies that appreciate manufacturing, invest in technology, and innovate in this field are likely to prosper.
Networks, labor, partnerships, lean manufacturing. These are all intangibles. Yes, the future of manufacturing lies in a company’s ability to manage its intangibles.
I was especially struck by this case because I often use GE as an example when I talk about intangible value in companies. Despite its significant reliance on manufacturing and infrastructure, GE has traditionally been known for its management capability, for Six Sigma, for being smarter that most—all intangible aspects of business. People instantly get it when I explain that the future of an industrial company like GE is dependent on how well it manages its intangibles.
A week or so ago I was musing about the success of Samsung in the appliance business. I didn't know until this month that they made refrigerators, and they're very nice ones too.
I wonder if some of the intangibles of an innovative company like GE is passed on when units are spun off to other countries with arguably cheaper labor bases. For example when IBM sold the ThinkPad, my favorite brand of laptop computer, to Chinese Lenovo, did all of the lessons of Boca Raton accrue? Experts may recall that back in the early 90s when IBM was cranking up fabs in Florida there was a lot trouble they got into over its profitability - was IBM even smart enough to do it right? Their smarts finally paid off in an excellent product, but are those intangibles passed on, or do consumers not even care any longer about excellence in increasingly sophisticated commodity products?
I'm at the point at which I don't care about VCRs and small analog televisions. Innovations that led me to pay 300 bucks for each now in the hands of a downscaled market might not matter any longer. This is particularly interesting with regard to the energy efficiency of refrigerators. As some of you may know, the labeling mandated on all refrigerators sold in the US alerted consumers to the long term cost of their operation in terms of their electrical efficiency. It cost more to use the fat copper wires and energy efficient motors in the manufacturing process resulting in a higher price for the smart American consumer, goosed as we were by environmentalist legislation to be energy efficient. But in the long term the American consumer saved operating costs on this durable good. Will such matters be considered at all in the global market for refrigerators when GE's intangibles no longer apply?
Hmmm.
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