| Good morning, everyone. |
| In the last few lectures, I've been dealing with business finance, |
| but now I'm going to move on to business systems. |
| And in today's lecture, |
| I'm going to talk about what can go wrong when businesses try to copy their own best practices. |
| Once a business has successfully introduced a new process - |
| managing a branch bank, say, or selling a new product - |
| the parent organisation naturally wants to repeat that success, |
| and capture it if possible on a bigger scale. |
| The goal, then, is to utilise existing knowledge |
| and not to generate new knowledge. |
| It's a less glamorous activity than pure innovation, |
| but it actually happens more often, as a matter of fact. |
| However, surprisingly, |
| getting things right the second time is not necessarily any simpler than it was the first time. |
| Now, there's been a lot of research into how companies can repeat their previous successes, |
| and it certainly hasn't been confined to the United States. |
| It seems that most large industries are trying to repeat their own successes, |
| and manage the knowledge they've acquired - |
| but even so, it has been shown that the overwhelming majority of attempts fail. |
| A host of studies confirm this, |
| covering a wide range of business settings: |
| branch banks, retail stores, real estate agencies, |
| factories, call centres... to name but a few. |
| So why do so few managers get things right the second or third time? |
| Let's consider one reason for failure - |
| placing too much trust in the people who are running the successful operation, |
| the 'experts' shall we say. |
| Managers who want to apply existing knowledge typically start off by going to an expert - |
| such as the person who designed and is running a successful department store - |
| and picking their brains. |
| Now, this approach can be used if you want to gain a rough understanding of a particular system, |
| or understand smaller, isolated problems. |
| The trouble is, even the expert doesn't fully grasp the whole thing |
| because when it comes to complex systems, |
| the individual components of the process are interwoven with one another. |
| The expert never has complete access to the necessary information. |
| And the situation's complicated even further |
| by the fact that experts are usually not aware of their own ignorance. |
| The ignorance can take various forms. |
| For instance, a lot of details of the system are invisible to managers. |
| Some may be difficult to describe - |
| learned on the job and well known by workers perhaps, |
| but impossible to describe in a way that's helpful. |
| And there are some things that people know or do that they're not even aware of. |
| Now, let's consider two types of mistake |
| that can occur when a manager actually starts to set up a duplicate system to replicate a successful process. |
| Firstly, perhaps he forgets that he was just trying to copy another process, |
| and starts trying to improve on it. |
| Another mistake is trying to use the best parts of various different systems, |
| in the hope of creating the perfect combination. |
| Unfortunately, attempts like these usually turn out to be misguided and lead to problems. |
| Why? |
| Well, for various reasons. |
| Perhaps there weren't really any advantages after all, |
| because the information wasn't accurate. |
| Or perhaps the business settings weren't really comparable. |
| More typically, the advantages are real enough, |
| but there are also disadvantages that have been overlooked. |
| For example, the modifications might compromise safety in some way. |
| So, what's the solution? |
| Well, I don't intend to suggest that it's easy to get things right the second time... |
| it's not. |
| But the underlying problem has more to do with attitudes than the actual difficulty of the task, |
| and there are ways of getting it right. |
| These involve adjusting attitudes, first of all... |
| being more realistic and cautious really. |
| Secondly, they involve exerting strict controls on the organisational and operational systems. |
| And this, in turn, means copying the original as closely as possible. |
| Not merely duplicating the physical characteristics of the factory, |
| but also duplicating the skills that the original employees had. |
| Reliance on a template like this offers the huge advantage of built-in consistency. |