Category Archive

How to Land Planes – And Why America (as always) Lags

By Shlomo Maital   

 air traffic control radar – obsolete?

    It is human nature to want to do things the way they’re always done, because, well, doing things different (and better) means change, and change is often uncomfortable and requires some thinking. 

   Take, for instance, the way planes land.  With expanding air travel, and zero infrastructure investment in America, airports are congested and delays pile up. 

  The old way to land planes uses radar-based air traffic control.  Radar sweeps the air every 6 seconds.  Air controllers watch radar screens and tell pilots what to do.  A jet aircraft can go a long way in six seconds. (At 600 mph, it travels a mile in six seconds).  So air controllers keep wide buffer zones between flights.  Planes get ‘stacked’ and descend in ‘steps’, wasting expensive jet fuel.

   There is a better way.  Use satellite technology (GPS), which tracks position to within 10 meters.  Would you feel safer if your flight were tracked to  10-meter accuracy, rather than 1 mile accuracy?  Using GPS technology to land planes means far less congestion, less fuel wastage, less delay, and better use of airports and landing strips.  Planes simply reach the airport and land directly, guided precisely by GPS.  America’s Alaska Airlines will begin using GPS for landing  at Seattle-Tacoma Airport starting in June.  [Global New York Times, April 4, 2012, p. 17]. 

   Why, then, isn’t GPS landing technology adopted?  Well, of course, money.  It will take huge sums to replace radar-based air control with GPS air control – by one estimate, $42 b. by 2025.  The thing is, if you compute the rate of return, on fuel saving and safety, it’s worth it. 

   GPS landing technology is a strategic operations innovation.   Alaska Airlines is pioneering in it, because it has to land in very bad weather in small Alaska airstrips nestled between mountains.  The GPS “NextGen” technology is a battleground between Federal regulators and airlines about who will foot the bill.  New planes have this technology.  But older ones need retrofits that cost $340,000 per plane.  For fleets of thousands of planes, that’s a fortune.  As airline losses mount, reluctance to spend that cash grows. 

    Perhaps consumer pressure can help.  GPS technology is far safer, and less prone to errors, than air controllers’ radar.  Let air travelers ask their travel agents, is the plane you are booking me on GPS-equipped?  Why not?   Consumer pressure can perhaps accelerate operations innovation,  when the federal government lags.

                                            Crowd-Sourced Businesses: Innovating HOW, Not What!

By Shlomo Maital   

Threadless T-Shirt Designed by User

How do you create great innovative new products?  With a dynamic (and hugely expensive)  (and inevitably expansive) R&D department, right?

●  Not according to made.com, an online-only furniture retailer. It has no inventory, and no warehouse.  Products are crowd-sourced. Visitors to its website submit designs.  The best become prototypes and are posted. Registered made.com members then vote.  The most popular furniture pieces are then made in China, shipped in containers, and delivered to buyers directly from the Port.

● Threadless.com.  Founders Jake Nikell and Jacob DeHart launched a “thread”, asking people to post T-shirt designs.  The designer gets cash and some free T-shirts, the best of which can be made.  Ten years later, threadless.com has nearly $30 m. (2009) in revenue, 1,200 designs a week are submitted, and winners get $2,000 plus $500  in vouchers.

● Fluevog, a Canadian shoe company, launched OpenSource footwear in 2002.  Customers (known as Fluevogers) upload designs.  Winners have shoes named after them. 

   Is this cheap exploitation? Is it destroying the jobs of R&D engineers and designers?  Or is it a new wave of management innovation, one that focuses on the ‘how’ things are done, rather than on the ‘what’ is done? 

    Innovator – can YOU crowd-source a product or service, not currently designed in this way? 

    And, would you WANT to? 

Tear Down These Walls! Make Every Worker an R&D Employee!

By Shlomo Maital   

  In a speech at the Brandenburg Gate near the Berlin Wall on June 12, 1987, President Ronald Reagan spoke directly to USSR President Mikhail Gorbachev, telling  him,  “Tear down this wall!”   Two and one half years later, the Berlin Wall fell – on Nov. 9, 1989.

   Those four words, ‘tear down this wall’, apply to innovation as well.  To all CEO’s:  Tear down the wall between your R&D engineers and your employees.  Involve ALL your employees, down to the mail clerk, in coming up with winning new innovations, in products, services, processes and operations.  Innovate everywhere.  And get everyone to innovate. 

   A 15-year-old book, by Alan Robinson and Sam Stern, Corporate Creativity: How Innovation and Improvement Actually Happen (1997) is worth re-reading.  The book shows how midlevel execs and junior employees are really familiar with the work, are close to the ‘coal face’, and know what needs improvement.  If you listen to them, really listen, you can do wonders. Problem is, few CEO’s listen to them. 

   Here are a few examples.  (some are cited by Naomi Darom, The Marker, March 29, p. 11).   * American Airlines flight attendant Kathryn Kridel observed that most of the large 200-gram $250 caviar cans for First Class passengers were thrown away. She recommended 100 gram cans instead.  Nobody listened, for two years.  Finally American Airlines did listen, saved $567,000 a year and gave Kridel a check for $50,000.  Not listening cost them over $1 m., at least.   * Dr. Spencer Silver invented a pressure-sensitive adhesive, at 3M, tried to market it internally for six years (!), and failed – until co-worked Art Fry invented Post-It notes and built a machine to make them. * A Florida pilot complained that each time he took off from Miami, he had to make a huge detour around an air force base – that was abandoned, having been destroyed by a hurricane.  He was encouraged to complain to the Federal Aviation Administration – and the detour was abolished, saving $900,000 yearly in fuel. 

   Every organization needs a system that encouraged, sparks, motivates, defines, processes and sorts employee-generated suggestions, both large and small.    Above all, every organization needs to make employee-generated creativity a key part of its culture, and a part of every job description.  Tell your workers: Do what you do well!  And while you do it, see how you can change what you do, to make it better, faster, cheaper, and see if you can help fellow workers do the same.  Often, simply recognizing good ideas is sufficient reward; you don’t need to throw large sums at idea-generators. 

   So – tear down those R&D walls.  Everyone is R&D.  Workers to whom senior management listens become more committed, more energized, and more empowered. 

 Innovate: Not “What” But “How”?

Nike’s Flyknit

By Shlomo Maital  

 Nike Flyknit

So, innovators,  what is the question?

   Is it “what shall I innovate?”  That question focuses on new gadgets.

   Why not ask,  instead, “how shall I do what I do, better and different?”  That question focuses on processes and on operations.   I think it is hugely underinvested. 

   Here is an example.  (Described in Matt Townsend’s excellent innovation blog in Bloomberg BusinessWeek, March 15, 2012).  Nike tried to sell a flimsy mesh sneaker called the Sock Racer in the 1980s.  It was comfortable but not durable enough.  Nike never gave up. Now it is introducing a 5.6 ounce running shoe called the FlyKnit.  It’s made from synthetic yarn woven together by a knitting machine!  This is a totally new process for making running shoes.  The manufacturing process is computer-controlled.  The upper part of the shoe is knitted in a single piece, which is then attached to the sole.  This cuts labor costs and offers huge opportunities for personalization.  And it may even bring labor back to America.  Traditionally, shoes are assembled from pieces. This is labor intensive and ideal for China.  “This is a complete game-changer,” according to Charlie Denson, president of the Nike brand.  “Eventually we could make these shoes anywhere in the world.”  Even in America!

    The Flyknit will cost $150 and will be sold in July.  Lightweight shoes are growing in popularity, and grabbed nearly a third of the $6.5 b. U.S. running shoe market.  The lightweights are growing at a torrid 14 per cent yearly. 

   Nike’s process innovation involved, first, a decision to create a shoe that replicates a sock, then, second, mimicing how socks are made.  A team of engineers and programmers took a machine used to knit sweaters and re-engineered it to weave the upper part of sneakers.  Tiny synthetic cables are knitted into the weave around the midfood for support.  CEO Mark Parker started at Nike as a designer; he quickly saw the potential of this process innovation and pushed it.  Very smart of Nike to appoint a designer as CEO.  He gets it. 

     Shoemaking hasn’t changed for decades.  Innovative Nike has finally thought about HOW shoes are made, now only about which shoes are made.   Time to market is crucial; and the biggest time, apparently, in the life cycle of running shoes is the time the shoes spend on boats, in containers, coming from Asia.  Eliminating that ship time could give Nike a huge advantage, and even bring manufacturing jobs back to the U.S.

    Innovator:  Can you change how you make your goods and services, and not just which goods and services you make?  If so – you may just create substantial competitive advantage.  

MF Global: Now We Know Who Stole the Money

By Shlomo Maital   

 MF Global? Doubtful…

   Last December 14, I uploaded a blog about MF Global, and the $1 b. in investors’ money that was ‘missing’.  (The Inside Story About MF Global: $1 b. of Customer Money Is STILL Missing). 

    An active investigation has been ongoing since.  At the center of it is former U.S. Senator,  NJ Governor and Goldman, Sachs head Jon Corzine, who ran MF Global when it went broke.  The issue is: What was his role and responsibility, in MF Global using its investors’ funds to cover its own trading losses?

   Now, comes a tiny back page piece, reporting that U.S. Congressional investigators have uncovered evidence, that Corzine himself sent email messages telling workers to use MF Global’s investors’ personal funds (for which MF has a fiduciary responsibility) to cover its growing overdraft.  The overdraft was caused by Corzine’s taking a huge, wrongheaded $6.3 b. bet on European sovereign bonds (he bet they’d drop like a stone; they did not).   To place his bet, he leveraged his firm’s assets by as much as five times! 

    Corzine told Congress that he never ever told his workers to use investors’ personal funds to cover the overdraft.  Now, it appears that a “senior official” of MF Global sent an email to workers, in Oct. 2011, stating that Corzine himself authorized transferring $200 m. from an account of an investor, to cover an MF Global overdraft, on its account with J.P. Morgan Chase in London.  

   Now, lying to Congress is definitely a felony, that should bring a jail term, a lengthy one.  Will Corzine go to jail?  Doubtful.  Did he authorize stealing investors’ private funds?  For sure.  Did MF Global wreck the basic trust that is so essential, between investors and the investment companies that manage their money?  It did. 

    And will this tiny back-page piece about Corzine’s culpability go almost un-noticed?

    It will, and it has.  Alas. 

   Here, by the way, is the relevant section of the US penal code:  (a) Except as otherwise provided in this section, whoever, ….knowingly

and willfully – (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact;  (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title, imprisoned not more than 5 years..”

Innovation Where It Counts: Save Lives, Don’t Invent Gadgets

By Shlomo Maital  

           A simple idea in economics is this: Put your money where it brings the highest marginal return.  In medical care, America is disastrously failing to do this. The result costs thousands of lives!

          According to a study by AARP (American Association of Retired Persons), published in their March 2012 Bulletin, “hospital errors cause 100,000 deaths yearly” in the U.S.”.  These are all preventable deaths, notes the author Katharine Greider!   These deaths are equivalent to a hurricane that would wipe out the entire population of South Bend, Indiana! 

     A study of Medicare found that 1 in 7 patients died or were harmed by their hospital care! How about those odds: 14.2 % you’ll be harmed or die.   “The number of patients who die each year from hospital errors is equal to four jumbo jets crashing each week,” notes the author.   U.S. surgeons operate on the WRONG BODY PART as often as 40 times a week!

     A small investment  in operations innovation could remedy this, and substantially cut the death toll.  For example: Supply each nurse and doctor with an MDA (medical digital assistant) that provides instant comprehensive information on each patient and connects to a central databank.    Some 1,500 lives were saved in 18 months in Michigan intensive care units, when a checklist was introduced for handling catheters!  Just a checklist!

   Yet America continues to spend $8,000 a year on medical care, double that of France or Canada, investing in very very very expensive procedures instead of investing in innovations that improve operations, prevent errors and save lives.  For example:  open heart surgery costs $324,000 (!), a heart transplant, $287,000, a liver transplant, $235,000; and a heart valve procedure, $133,000.  These operations are done all the time. 

    It is true in general that there is massive underinvestment in strategic operations innovation, in companies.  But in hospitals, this costly mistake kills huge numbers of people – and it is simply ignored.

    Why?

Goldman Sachs: “Clients are ‘Muppets’”

By Shlomo Maital

 Goldman, Sachs client?

 An Op-Ed piece by former Goldman Sachs senior manager Greg Smith * has drawn enormous attention.  If you thought Wall St. had mended its ways, after nearly destroying global financial markets and after the Occupy Wall St. movement – think again.  Little has changed, according to Greg, who quit the company.  Here are a few juicy excerpts:

*  “..the environment [at Goldman Sachs] is as toxic and destructive as I have ever seen it…

*   “Culture was what made the place great for 143 years. It wasn’t just about making money. But…today I attend derivatives sales meetings where not one minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off them.”

* “Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets”. Integrity? It is eroding.” 

*  “Goldman Sachs today has become too much about shortcuts and not enough about achievement.   People who care only about making money will not sustain this firm – or the trust of its clients – for very much longer.”   

     Actually,  I wish that Goldman Sachs clients WERE indeed Muppets.  The leading Muppet, Kermit the Frog, has down-to-earth realism that would protect him from the robber barons of Goldman.  For instance, in talking about his relationship with Miss Piggy (Goldman Sachs?) Kermit says,  “Miss Piggy and I have a professional acting relationship. I act like a professional, and she acts like we’re having a relationship.  Miss Piggy really hasn’t mellowed much. Piggy is a prima donna. And her reputation proceeds her, I’m afraid, just like her snout.”  

   Get real, Goldman Sachs.  Like Greg and Kermit say:  We’re on to you!

• Greg Smith, Why I am quitting Goldman Sachs,  NYT March 14, 2012 

Are YOU for Sale?  Living in a Price-Tag Society

By Shlomo Maital

 The Price-Tag Society

  Are YOU for sale?  NO?  Are you sure?  There is a terrible joke about a well-heeled man who offers $10k to a classy blonde for the right to spend a night with her.  When she refuses, he tells her, well, now we know what you are, it’s just a matter of negotiating the price.    More and more, our society is behaving like that man.  Everything has a price.

    Writing in The Atlantic (April 2012),*  philosopher Michael J. Sandel offers these examples of a price-tag society:  You can buy the services of an Indian surrogate mother for $8,000 (1/3 the going rate in America).  You can emigrate to America for $500,000 (that gets you a green card).  You can sell space on your forehead to display commercial advertising (a single mom in Utah was paid $10k by an online casino to install a permanent tatoo of the casino’s Web address on her forehead).  You can be a human guinea pig in a clinical trial, for $7,500.  You can fight in Somalia or Afghanistan (for a private contractor) for $1,000 a day.  If you’re a second-grader, you can earn $2 for reading a book. 

   “We live in a time where everything can be bought and sold.  Over the past three decades,”,  notes Sandel, “markets – and market values – have come to govern our lives as never before. We did not arrive at this condition through any deliberate choice. It is almost as if it came upon us.” 

   The problem with the price-tag society –one of many problems – is that it is grossly unfair.  Those who have money can buy anything, including privileges. Those who lack it cannot buy anything, because everything costs money.   Even democracy has a price. Lobbyists in America pay line-standing companies, who pay homeless and others $15-$20/hr. to stand in line to hold a place for a lobbyist who wants to attend a Congressional hearing.   Conservatives say this is great for the homeless and the unemployed.  Others think it is less than great, when money buys even the chance to hear (and influence) Congressional discussions. 

    Oscar Wilde once said that a cynic is someone who knows the price of everything, and the value of nothing. I have used this definition often, to define “economist”.  Have we economists created a society, where everything has a price, and NOTHING at all has a true value?  Because some things are so intrinsically valuable, they should never ever have a price tag, subject to the laws of supply and demand, rather than the laws of fairness, ethics, and justice.   Not everything needs a market.   There is a limit to the realms of our lives where economics rules.  It’s time to define those limits.  Economists, get out of the way. 

• What Isn’t For Sale?  By Michael J. Sandel. 

 Innovation/Global Risk

Oreo Cookies: Happy 100^th Birthday – What’s Their Secret?

By Shlomo Maital  

   We almost missed it.  Oreo cookies are 100 years old.  In 1912 Nabisco developed the Oreo at its Chelsea factory in New York City.  It was actually launched as an imitation of Hydrox cookies, made by the Sunshine company.  Nabisco’s superior marketing and advertising eventually led to Hydrox’s demise.  The Oreo cookie is simply a sandwich — two chocolate wafers with a crème filling. 

   Nobody knows the origin of the Oreo name.  Wierdly, Oreo cookies became the best-selling cookie in China, in 2006, after Kraft foods made the cookies far less sweet (Asian palates are far less fond of sweets than American palates) and sold them in small packages to reduce the cost of a package. 

    Oreos have a high-tech link.  Lou Gerstner, who became CEO of IBM in (I believe) 1993,  rescued the crumbling IBM, because he knew how cookies crumble – he had been CEO and Chair of Nabisco.  His marketing skills came in handy for the super-nerdy IBM. 

    Nabisco has of course proliferated Oreo varieties (I counted about 30), with different sizes, shapes, fillings, etc. – all to capture supermarket shelf space. But the original Oreos is still the most popular.

    The big mystery is,  what is the secret of Oreos?  Why has it had such a long and successful life?  Is Nabisco just really good at maintaining a legacy cash-cow product?  Does the cookie simply taste good?  Does it combine taste with ‘fun’ (remember how as a kid, you separated the wafers and licked the cream, deliciously circumventing parental restrictions on candy?)   Does Oreos benefit from nostalgia, as parents enjoy buying Oreos for their kids, because they themselves loved Oreos when they were kids?

 Innovation/Global Risk

Before You Die: Tell Your Fans Why You Did It

By Shlomo Maital  

Ding Yu Interviewing Death Row Man

This is the ultimate reality show. In China, a program with 40 m. viewers interviews Death Row inmates, sometimes just minutes before they die.   The interviewer, wearing silk scarves, perfect hairdo and immaculately dressed, contrasts sharply with the distraught interviewees. Her name is Ding Yu. Many of the prisoners confess their crimes and beg forgiveness from family and friends, before they are executed.   A documentary has been made, Interviews Before Execution, which will be viewed worldwide on BBC2. 

  The interviewed prisoners sit in leg irons, with a prison warden attending.  Ding Yu starts with some trivia (favorite foods, colors) but then cuts to the chase, asking about motives, crimes, feelings, fears.  Her goal seems to be to wring apologies from the distraught prisoners. 

  Her program has run now for five years, and has a prime-time Saturday night slot on national TV.

   Ms Ding has covered more than 250 cases in Interviews Before Execution. She told a child killer: ‘Everyone should hate you.’ Her interviewees also included a jealous divorcé who stabbed his ex-wife in front of her parents.  The shocking and macabre interviews have made Ding Yu, a household name across China.  In one scene, a prisoner in his 20s falls to his knees before his parents, who have been allowed to see him. He pleads: ‘Father, I was wrong. I’m sorry.’  Moments later, his parents see him about to be led away to his death. His distraught mother apologizes for beating him once as a child and implores her son: ‘Go peacefully. It’s following government’s orders.’   Prison officers then push her aside and drag him away.   In another scene, a firing squad of about 20 men is briefed by a senior officer before executing condemned prisoners. ‘Some criminals will be very tough and difficult. That means they’ll be dangerous,’ the officer tells them.

    The death penalty is wildly popular in China.  The Chinese believe strongly that for some 55 different crimes, death is deserved.