Winners and Losers

in one sense, the productive edge is a sequel to made in America, a book that summarized the conclusions of MIT’s Commission on Industrial Productivity on the overall performance of the U.S. economy in the late 1980s. The commission (of which I was a member) analyzed firms in eight sectors of the economy and identified striking similarities in what the most successful firms in those industries were doing. Most features of what we called “best practices”(such as breaking down internal organizational barriers, flattening hierarchies, developing closer links with customers and suppliers, adopting innovative human resource practices, committing to continuous improvement, integrating new technology with production and marketing strategies) were relatively well known even then, and have since become conventional wisdom. But what was most striking about the leading firms was their ability to see these practices not as independent solutions but rather as part of a coherent system. While most companies had settled for piecemeal reform, the most successful firms recognized the need for systemic change and the importance of aligning their organizational practices with one another.

But that begged another, deeper question: Why? Why had those firms and not others understood the need for dealing with change as a whole, not as a set of separable tactics to be selected as if from a menu? To answer that question, my colleagues at the MIT Industrial Performance Center and I more recently went back to many of those same companies.

As we went from one firm to another, we got a surprise. We had expected that market pressures would be the strongest impetus to transformation. But the top managers we interviewed frequently pointed to another source. Even though the market is never absent from the manager’s mental screen, market perturbations seemed to be playing a less direct role than we had imagined. More often, the driving force for change seemed to be coming from within.