What Makes a Manufacturing Firm Innovative?

Author(s): John E. Ettlie

Source: The Executive , Nov., 1990, Vol. 4, No. 4 (Nov., 1990), pp. 7-20
Published by: Academy of Management

Stable URL: http://www.jstor.com/stable/4164975

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?D Academy of Management Executive, 1990 Vol. 4 No. 4

Wha maes a anufacturinga

firmLL inniovat ive?

John E. Ettlie, University of Michigan

Executive Overview
In the quest for improved competitive position and longevity, domestic
manufacturing is undergoing significant transformnation. Why then are some
manufacturing firms more innovative in both new processing technologies and
administrative practice? Part of the answer lies in the experience profile of
general managers.

The results of a study of domestic manufacturing plants undergoing

modernization shows that firms that have CEOs with manufacturing experience
also are significantly more likely to implement an aggressive manufacturing
technology policy. That is these firms strive to be first to try out new methods
and equipment, are more likely to actively recruit new technical talent or
develop this talent in-house, are committed to technological forecasting, and
make customers aware of how modernizing the firm will benefit them. An
aggressive manufacturing technology policy can make a big difference when the
company begins its transformation. CEOs take calculated risks when they have
manufacturing experience.

Commitment to training during modernization is much greater when senior vice

presidents and divisional general managers have manufacturing experience.
This suggests that training and development is still very much a strategic
concern in domestic manufacturing, although not as much as technology policy.
Commitment is reflected in plans and practices for training and budgets for
modernization. If training budgets do not reach at least 10 percent of project
cost, commitment may be lacking.

Direct labor savings resulting from modernization and automated assembly

operations are more likely to be emphasized by traditional, senior managers.
Divisional managers with manufacturing experience are less focused on labor
savings as the result of modernization.

The use of new manufacturing systems is much higher when divisional

managers have manufacturing experience. These same managers are also likely
to support administrative experiments to implement new flexible automation
modernization projects. This was not the pattern for senior management.

Based on these results, it seems clear that there is a role and a critical need for
manufacturing-experienced general managers at all levels of the firm. At the
top, it is necessary for creative policy formulation and implementation. On the
management team, it is crucial for commitment to training and development
and at the divisional level for administrative experimentation. Innovative

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Academy of Management Executive

two words together. Today, most of us feel almost as comfortable seeing them side
by side as manufacturing and strategy.

.............................................................................................................................................................................

Manufacturing innovation means more than just the application of new

technology in plants and products. It means the use of administrative
experiments in manufacturing too. Manufacturing managers are learning that to
move foward, they must do more than just imitate foreign or domestic
competitors. Truly novel administrative practices are beginning to appear, even
in some of the most traditional and largest organizations in America.

We recently completed a study of 51 domestic plants which are in the process of

modernizing facilities by implementing new, integrated, flexible automation in
manufacture and assembly (1984-1987). We found that about half of these plants
also contrived to adopt some new policy, such as a technology agreement with a
union, or a new structure like a cross-functional team, so that technological and
administrative innovation would promote competitiveness.' The more ambitious
these projects are, the more creativity is required in designing new organizations
for success. Results can be impressive. The firms we studied averaged a 30
percent improvement in quality-measured by the amount of scrap and rework
eliminated.

In our previous work in the food and food packaging industries, we found a strong
tendency for firms to "accommodate" new products and processes with new
organizational policies and structures. When the food industry began to switch
from rigid to flexible packaging they often added new positions in engineering
and manufacturing and adopted calculated risk policies to adjust to this change in
a mature industry.

We expected a similar pattern in the domestic discrete parts manufacturing

industries which are undergoing a similar change-from rigid or fixed production
to more flexible processing technologies. We believed that firms would use
technological change as an excuse to revamp policies and organizational
structures. A strong correlation exists between the radicalness of the adopted
technologies and the willingness to experiment with new administrative forms, as
in the food industry. In all of the firms, initial investment for hardware and
software technologies averaged between $3-4 million. Every one of these cases
was challenged to capture the value from this new manufacturing potential.

We found virtually no difference in the successful management of flexible

manufacturing versus flexible assembly systems (about a 50-50 split in the final
sample). All of these new technology systems were supplied primarily by outside
vendors.

Why, then, are some firms and business units quicker to see the connection
between technological and administrative innovation? This article offers just one of
the answers to this question and it stems in great measure from the type of
experience that the firm's general managers have had at the time the
modernization program begins. Experience in manufacturing makes all the
difference. But this experience is required up and down the line and has a
different impact on planning and implementation of a modernization program
depending upon where it is found-from the CEO, to the vice presidents, to the
divisional management.

The importance of managerial manufacturing experience, which links production

capabilities and new technology, starts with project planning. Many firms report
that software is the single biggest problem of a modernization project.

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Ettlie

Manufacturing software that runs, audits, schedules, maintains, and monitors new
manufacturing systems is typically not delivered on time, does not meet original
expectations, and has high fix-up costs. One major reason for this problem is that
companies do not understand what their general requirements are when they
start these large projects and the majority of firms learn requirements as the
program unfolds.2

Software that implements the firm's general requirements is a strategic issue and,
therefore, a general management responsibility. General requirements derive
from strategies and policies. How is manufacturing going to meet orders? What
should be made and what should be bought? General managers with
manufacturing experience are more likely to know how new technology fits into
the formula when they answer this question. They know how to relate production
and technology.

The importance of manufacturing experience for understanding technology

extends to the division, as well. In his book, Managing Technology in the
Decentralized Firm, Al Rubenstein presents a persuasive case for the
specialist-experienced general manager of a division with a generalist outlook.3
The special case of his theme that interests us is how the production specialist in
the division manager's role manages the modernization of the unit. Rubenstein
calls the team view versus the speciality view of supporting staff services one of
the crucial points of strain in running a decentralized operation although his
observation about the problems that the team view precipitates is not obvious.
One of the fine distinctions here has to do with how these groups are used to
putting out fires versus working on longer-term projects. Distinguishing between
direct and indirect support groups is another way of looking at it. A clever
division manager is likely to take a different approach by utilizing indirect support
staff for planning not firefighting. We predicted that a division manager with
manufacturing experience would take a different approach to introducing new
processing technology.

Perhaps the most well-known writing on managerial experience is the article by

Hayes and Abernathy on managing our way to economic decline.4 The central
theme of the article concerned the experience and training of chief executive
officers, but for this discussion we extend the theme to include all general
manager levels in the firm.

The balance of this article is devoted to showing how manufacturing experience

among general managers makes a difference in modernization deployment.
Leadership counts when the correct experience is there. In the course of
presenting our results, one begins to see how the face of American manufacturing
is changing as we prepare to enter the last decade of this century.

General Managers with Manufacturing Experience

Our research was influenced strongly by Hayes and Abernathy and their now
well-known article on managing our way to economic decline.4 Among other
things, they found a sharp increase in corporate presidents' professional origins
toward "financial and legal areas," in the 1960s and 1970s (p. 74). This trend is
gradually changing. The Wall Street Journal (October 18, 1988) reported on a
study by Management Practice Inc. which found that the source of CEOs from
finance declined from 21.8 percent to 17.3 percent between 1984 and 1987. CEOs
from production or operations increased from 33.1 percent to 38.9 percent during
the same period.

Essentially, we were interested in discovering if the functionaIl experience of

general managers had any relationship to the genesis and success of
manufacturing innovation. As Hayes and Abernathy may have suspected, the

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Academy of Management Executive
Essentially, we were
interested in
discovering if the
functional experience
of general managers
had any relationship
to the genesis and
success of
manufacturing
innovation.
10
general managers' experience does make a difference but not always in the
way we expected.
In 1987, we visited 39 plants and asked if the CEO, executive vice president, and
division management, had manufacturing experience in their backgrounds. We
did not attempt to quantify the details of this experience, such as length of
manufacturing experience, location (domestic versus overseas), or division focus.
We were simply interested in establishing whether the general manager had been
a manufacturing manager before entering a division manager, vice president, or
CEO position. This would exclude, for example, general managers who had
advanced through the accounting, legal, or marketing departments. Engineers
may or may not have been distinguished some report in the manufacturing
hierarchy of manufacturing firms. However, this straightforward method makes
gross distinctions similar to the literature on the subject.
A simple majority (18 companies, 51.4 percent) of our respondents said their CEO
and division management did not have manufacturing experience. We found that
when the CEO did have manufacturing experience, the firm was more likely to
buy a new manufacturing system with radically new technology embodied within
it. Similarly, in companies where modernization was occurring 17 of 31 companies
or 54.8 percent reported that division management, had no previous
manufacturing experience.
Only a third of the companies had an executive vice president without
manufacturing experience. Not all the firms we visited had this position. Key
respondents were often referring to a senior vice president on a management
team but not usually the CEO or COO. Sometimes this was a manufacturing
vice president, or a corporate operations general manager. There was clearly
more variance in answers to this question.
Manufacturing Modernization
To examine the importance of this manufacturing experience factor, we evaluated
four areas that are critical in domestic plant modernization. First, we were
interested in how aggressively the firm implemented its manufacturing technology
policy. This was found to be a reliable predictor of technological actions in over
300 manufacturing business units in earlier work.5
We carefully developed a standard set of questions in this area and then reduced
the set of inquiries to four essential behaviors and philosophies:
(1) Does the firm have a long tradition and reputation in its industry of being first
with new methods and equipment?
(2) Does the firm actively engage in recruiting the best qualified technical
personnel in engineering and production?
(3) Is the firm strongly committed to technological forecasting? And if so, what
methods are used?
(4) Does the firm advertise its new process technology to customers?
We found that firms answering yes to these four questions tend to be
technologically innovative (use new processes to launch new products and market
strategies). We also found that during the last four years, there is a tendency for
these firms to use administrative innovations to deploy factory modernization
programs. This is especially true when the technologies are expensive and
sophisticated-not just off-the-shelf versions of existing practice. We predicted that
CEO manufacturing experience would count most for implementing strategy with
an aggressive technology policy in modernizing plants.
Second, we were concerned with commitment to training because it is so
important to the success of major modernization programs. We developed eight
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Ettlie

questions restricted to actual training actions, such as whether training sessions

were documented. We believed that division managers with manufacturing
experience would push for training during modernization.

Third, we were interested in the differences in percentage direct labor savings

attained after modernization (21 plants reduced direct labor an average of 24
percent, with a 10 percent median reduction). Fourth, and finally, we focused on
actual system utilization (two-shift basis, under computer control) which is
supposed to improve drastically with the application of integrated, flexible
automation. Overall, utilization averaged about 72 percent for our last plant
samples in 1987. We thought divisional managers with manufacturing experience
would be more concerned with utilization than labor savings. CEOs and executive
vice presidents should be less concerned with these issues.

Manufacturing Experience Counts

We took these two input factors, manufacturing technology policy and training
commitment and two output factors, labor savings and utilization, and compared
the three levels of general management with and without manufacturing
experience. The results are summarized in Exhibit 1.

Mean Scores

Manuf'g Direct Utilization

Tech Commitment Labor of New
Policy to Training Savings System

CEO has Manuf. Yes 15.1 14.2 38.2% 73.0%/o

Experience No 12.3* 13.9 10.9%0 70.4%
Exec VP has Yes 14.7 15.1 35.4% 73.4%
Manuf. Exper. No 12.3 13.6* 14.9% 69.7%

Div. Mgmt has Yes 14.7 15.1 26.6% 79.90/o

Manuf. Exper. No 13.0 i2.6* 37.2% 60.9%*

Statistically significant difference between means.

turing experience, the firm scores 15.1 on manufact
not have this experience.)

Exhibit 1. Manufacturing Experience of General Managers and Four Measures of

Modernizing Plants

First, as expected, we found that firms with manufacturing-experienced CEOs are

significantly more likely to implement corporate strategy with an aggressive
manufacturing technology policy. Firms modernizing plants that had a CEO with
manufacturing experience scored 15.1 on the manufacturing technology policy
audit, while firms with a CEO without this experience scored 12.3. Although the
pattern is similar, the mean differences are not significantly different for the next
two lower levels of general management. We concluded that the experience has
to be at the top to really make a difference in policy implementation. We have
consistently found that an aggressive manufacturing technology policy is
significantly correlated with both technological and administrative innovation for
manufacturing modernization.

In light of these results, it is not surprising that we also found a significant, direct
relationship between the radicalness of the technology and the experience profile
of the CEO but not the other two levels of general management. If the CEO has
manufacturing experience, the firm is more likely to take a calculated risk on high

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Academy of Management Executive

technology in manufacturing, presumably because the risk is absorbed in

manufacturing technology policy that is a joint implementation effort. Furthermore,
since there is no relationship between high technology and other general
management experience profiles, it is clearly a strategic commitment and decision
for the firm or business unit.

The result for commitment to training is reversed. The significant differences are at
the executive vice president level and division management, but not for the CEO.
That is, firms with senior vice presidents and at least one division manager with
manufacturing experience were significantly more committed to training.

As suspected, training and development is a visible issue for senior

managers-perhaps, defined in broader terms than we normally think. Will
management development be part of training? Very likely it will be.

Looking at the profile of training and development in our sample of modernizing

firms, in 10 (31 percent) of 32 top management received some training as part of
the deployment process. The percentage increases further down the organization
chart. Thirty-eight percent of the middle managers were trained, 56 percent of the
supervisors, 56 percent of the engineers, 66 percent of the skilled trades and 84
percent of the operators.

We also evaluated two performance outcomes of modernization-direct labor

savings and utilization. We selected these because both have become
controversial in the strategic modernization debate. Direct labor savings is no
longer considered to be the major benefit from modernization. Indirect labor is
now the target for reduction. Utilization is a measure that typically improves with
new technology but eventually is traded off with inventory savings in JIT
(just-in-time) purchasing and production systems. That is, some idle time may
actually minimize total costs.

Labor Savings
Firms with CEOs and senior VPs having manufacturing experience report
significantly higher labor savings after modernization-38 percent versus 11
percent and 35 percent versus 15 percent, respectively.

This comparison is not significantly different for divisional managers, however, the
means trend reverses. Divisional managers with manufacturing experience have
modernization projects reportedly netting only 27 percent labor savings while
those without manufacturing experience report a 37 percent savings, similar to the
next two levels up in the hierarchy, but with opposite experience patterns.

Some reflections on these results are in order. First, the savings seem quite
high-perhaps because many of the systems we studied in the last round of plant
visits were flexible assembly systems which can either replace large numbers of
people or make a smaller number of people very productive. Alternatively, plants
never actually achieve these savings other than on paper, because they often
reassign people. This labor savings is realized in other cost savings.

Second, the emphasis on labor savings among manufacturing-experienced senior

managers may reflect a broader, yet more traditional view of economic planning
in manufacturing. Newer ways of justification that include inventory savings, cost
of quality savings, and rewards for flexibility or innovation are just becoming
popular. Even then, the business units where plants are modernizing typically do
not include these savings in the justification, but merely take the additional
benefits of these non-labor-balsed results to cover the unanticipated cost of being
innovative in manufacturing.

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Ettlie

A strong generational effect may also be reflected in these data, although we

have no information to directly document this idea. Newer managers with
manufacturing experience may be more likely to emphasize a broader range of
costs and benefits in new programs.

Utilization
Division managers with manufacturing experience report utilization average of
nearly 80 percent-well above the overall sample mean of 72 percent. Plants
being modernized in divisions with managers without this experience report a 61
percent utilization rate.

Conversely, no difference in average utilization levels with new factory

automation was reported among manufacturing-experienced versus
non-manufacturing-experienced CEOs and senior vice presidents. It seems to
matter at the division level, but not higher in the firm.

We also analyzed several combinations of "pooled" effects of managerial

experience profiles such as the consequences of having just one, two, or all three
levels in the firm with manufacturing experience. Using one-way analysis of
variance, utilization was the only area where the cumulative effect of having all
three levels with manufacturing experience was statistically significant (82
percent). Having one experienced manager, however, was second (76 percent), so
it wasn't a linear effect. The simple comparisons in Exhibit 1 seem to be just as
useful for this measure, at least for this sample of firms and the modernization
issue.

We also examined the possibility that a CEO with a manufacturing experienced

executive vice president might be the most successful combination. This was not
statistically significant. Our limited sample of cases, which did not include the
amount or type of manufacturing experience, might account for these limited
results. This is clearly a path for future research.

Administrative Experiments
We believe that the modernizing firm learns from its new program experience by
novel administrative practices. Early in each interview, we asked what novel
administrative practices were being used to initiate innovative process
technologies. We organized the new practices by theme for each firm using the
respondent's emphasis and interviewer's notes for comparison. These
administrative innovations are summarized in Exhibit 2.

Administrative Experiment f (%)M

Engineer-Blue Collar team 6 (29%)

New Structure 6 (29%)
Business Unit Technology Strategy 5 (24%)
Technology Agreement 2 (10%)
New Job Concept 1 (5%)
Sociotechnical Teams 1 (5%)

Based on 21 reports of some type of admini

Exhibit 2. Case-Derived Administrative Experiments for Modernization

As in our second data collection, engineer-blue collar teams were among the most
frequent themes in these administrative experiments. The structured interaction of
manufacturing engineers or engineering managers and skilled trades was most
typical although sometimes operators and design engineers were included. Six (29

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Academy of Management Executive
We believe that the
modernizing firm
learns from its new
program experience
by novel
administrative
practices.
14
percent) of the 21 plants that used some form of administrative innovation relied
on a version of an engineer-blue collar team. Examples include planning
committees with blue-collar involvement in system design, the use of a quality
circle to design an FMS, teams in and between manufacturing cells with a close
physical and philosophical link between programmers and operators for design
and manufacturing.
Tied for the most frequent type of administrative innovation was the use of a new
structure for implementation. Examples are decentralization of corporate
manufacturing engineering, the installation of area (dedicated) maintenance from
plant-wide service, a common computer-integrated manufacturing management
position where design and manufacturing engineering report to a common
person, the use of a maintenance supervisor and skilled trades as operators
versus typical area supevision of an automated system, and the consistent and
sustained use of an adopted form of management by objectives.
Five (24 percent) of 21 administrative expeeriments were in the business unit
technology category. The most pronounced example involved the use of a flexible
factory to implement a new company strategy to manage component suppliers,
and customers. The emphasis was on gaining control of supplied part price and
quality and being able to move freely from one part family and group of parts or
materials to another, across vendors. It also involved contracting out purchasing
for nonproduction stores-a radical shift for this company. Other examples
include introduction of a "greenhouse" within a plant-an area set aside for
production technology experimentation-and integrating it into daily operations.
All these firms have a specific strategy being implemented by the new technology
program not a trial and error process of equipment replacement.
The last two categories include very important technology agreement examples
and the use of radically new job concepts and sociotechnical teams within a
flexible system.
Although themes represent the essence of these cases, they do not include all the
innovations used in each plant. There were two examples of scheduling
experiments in the study, one in the first panel and one in the third panel. These
new work schedules involve process-industry-type work weeks-4 working days
and 12 hours, alternating with 3 working days. Teams often have a problem
coordinating their efforts in these circumstances, so the outcomes of the
administrative innovations will be interesting. There are also training experiments,
some funded by state and local agencies supporting these plants.
Some of the most innovative and exciting administrative experiments discussed by
respondents could not be counted in Exhibit 2. These experiments were just getting
started or proceeding in parallel with modernization to be integrated and
coordinated later. JIT purchasing or scheduling was the most typical example of
the latter condition. An interesting example of the former in-progress
administrative experiment was a technology agreement that allowed any person
losing his or her job to new technology to have the first option to be retrained to
work on the new system.
Another reason why we didn't report all of the new practices is that
representatives asked us to keep these new practices secret. In general, we
noticed a trend toward secrecy as modernization projects progress.
We have observed numerous cases of innovative deployment in domestic plants,
including those from our last data collection in 1987, but this domestic experience
is not the norm. During this project's three-year data collection period, the
incidence of administrative experimentation has remained fairly constant at just
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Ettlie

more than 50 percent of the plants we visited. Domestic manufacturers have

become more innovative and successful, but still have a way to go. As it turns out,
the role of manufacturing-experienced division managers is important to the
innovators.

Of the 14 divisions where at least one general manager had manufacturing

experience, 11 (79 percent) used an administrative experiment as part of the
deployment strategy. No direct relationship existed between senior manager
experience and use of administrative experiments. For CEOs and executive vice
presidents with manufacturing experience, only 40 percent used administrative
experiments to modernize.

Division managers with manufacturing experience are twice as likely as their

senior manager counterparts to use a novel policy or structure for modernization.
As Rubenstein found in his work, these division managers are more likely to take
calculated risks. This suggests that the link between experience and actions at the
higher levels is through strategy implementation. In this study, we substituted
manufacturing technology policy. At the division level, the manufacturing
experience factor was critical in precipitating administrative innovation.

Division managers with manufacturing experience were significantly more likely

to support new policies and structure for modernization. For vice presidents and
CEOs, it didn't make any difference if they had manufacturing experience. The
clear implication of this finding is that the planning of modernization can be
centralized and orchestrated-and to some extent we have evidence that this is
desirable but when it comes to implementation, these decisions should be
decentralized to division and plant managers. These are the managers that can
match new policy and structure with new products on flexible processing
technologies.

How Managers' Experience Counts for Successful Innovation

Obviously, general manager experience does make a difference to a firm. When
manufacturing firms modernize production facilities, successful innovators initiate
these programs by taking calculated risks and follow through by matching new
technologies with new policies and structures. Manufacturing experience among
managers is critical for this to happen at AT ALL LEVELS of the firm. For strategy
to be implemented, manufacturing experience must be present at the top.

Specifically, we found the following while visiting 51 plants during the last 4
years.

(1) When the CEO has manufacturing experience, the firm uses a significantly
more aggressive manufacturing technology policy to implement strategies. The
firm strives to maintain a reputation of being first to try out new methods and
equipment, aggressively pursues the best technical talent, is committed to
technological forecasting with established methods that document trends, and
makes sure customers know about its modernization efforts. The pattern is
similar for lower management, but the difference is most pronounced at the
top.
(2) The company's commitment to training during modernization is higher when
senior vice presidents and divisional managers have manufacturing
experience. This means that training and development is still a strategic
concern, but not as much as technology policy. What is more, if senior
managers do not support tratining, the modernizing plant will not follow
through. If commitment to training is desirable, some senior managers should
have manufacturing experience. Otherwise, training budgets requiring 10
percent or more of project funds will not be alpproved.

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Academy of Management Executive
At the division level,
manager
manufacturing
experience leads to
enlightened
post-purchase audits,
substantially higher
utilization of new
systems, and a
propensity to use
administrative
experiments.
Appendix 1. Assessing the
Firm's Manufacturing
Technology Policy
(Adapted from Ettlie, 1988)
16
(3) Direct labor savings from modernization is more likely emphasized by
traditional senior managers, higher in the firm, and for automation of assembly
operations. Division managers with manufacturing experience are less
concerned with this result, and are focusing measurement on other areas such
as inventory, cost of quality, and indirect labor.
(4) Utilization of new manufacturing systems is much higher when division
managers have manufacturing experience.
(5) Administrative experimentation is more likely during modernization if division
managers have manufacturing experience.
It seems clear that there is a role and a critical need for
manufacturing-experienced general managers at all levels of the structure of
domestic firms. At the top, it is crucial for productive and innovative policy
implementation. On the management team and in the divisions, this
manufacturing experience promotes training and development commitment.
Sometimes these programs are subsidized by the government which may account
for the general manager's interest in training.
At the division level, manager manufacturing experience leads to enlightened
post-purchase audits, substantially higher utilization of new systems, and a
propensity to use administrative experiments. Most of the crucial implementation
decisions for modernization should probably be delegated to division and plant
managers.
We were surprised that training was a concern for senior vice presidents,
although this was predominant only among manufacturing-experienced
managers. We were also surprised to see that direct-labor savings from
modernization is beginning to be de-emphasized among
manufacturing-experienced division managers.
Manufacturing is starting to reassert itself as a parity function in the strategically
oriented firm. But balance-not overkill with other functions should be sought.
The importance of manufacturing experience at all levels of general management
is obviously important to the successful firm. But for the innovative manufacturing
firm, functional balance should be pursued. Planning for this type of management
succession and development is paramount in successful domestic enterprises.
Since 1979, we have surveyed and interviewed managers in more than 300 firms
to quantify adoption of new materials, new products, and new production
processes policies. We established a set of questions to characterize these policies.
Answers to the following questions can be used as a good barometer of
manufacturing technology policy and the ultimate success of these efforts to
radically modify a business unit by managing change. Have several members of
the management team evaluate the company or business unit and resolve any
differences of opinion before scoring.
Scoring
To score your firm's manufacturing technology policy, add up the circled numbers
for statement A through D. The response to statement C should be "agree"I or
"strongly agree" only if a formal method of technological forecasting such as the
Delphi technique, dynamic modeling using regression analysis, or the like, is
indicated. Otherwise, reevaluate the score. Once you have obtained a sum score,
compare your company to the domestic plant study respondents with the following
interpretation ranges. Make sure that any opinion differences among managers or
other important evaluators are resolved before final scoring and summation.
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Ettlie

Manufacturing Technology Policy

Below are some statements that could be used to describe a firm's long-range plans for new
product or service introduction and the adoption of new production processes. Please indicate the
degree to which you agree or disagree with each statement.

Strongly Strongly
Agree Agree Undecided Disagree Disagree

A. We have a long
tradition and
reputation in our
industry of
attempting to be
first to try out new
methods and
equipment. 5 4 3 2 1
B. We are actively
engaged in a
campaign to
recruit the best
qualified technical
personnel
available in
engineering or
production. 5 4 3 2 1

C. We are strongly
committed to
technological
forecasting. 5 4 3 2 1

Method used for such forecasting:

D. We advertise our
new processing
technology to our
customers. 5 4 3 2 1

Score Interpretation

18-20 Your firm is probably among the top few (5-10%) in the world
that can aggressively pursue new technology by incorporating
new products and processes and managing these new
technologies persistently. True and valid scores of this
magnitude are rare, typically achieved by firms installing
demonstration or showcase factory-of-the-future manufacturing
plants.

16-17 Scores in this range are more typical of firms that are
undertaking broad-based modernizing of facilities and
manufacturing systems. But these are still rather rare on the
domestic scene during the middle of this decade.

14-15 This range of scores was the average obtained in the domestic
plant study. These firms have all embarked on at least one
significant modernizaition effort that we studied. Therefore, if
your firm scored in this range, you are among progressive
companies during the middle of this decade.

12-13 Although this score is below the average in the domestic plant
study, many firms that are just beginning the planning cycle of

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Academy of Management Executive

modernization fall in this range. Often members of these

organizations have to be convinced that the general managers
talking about change are willing to back it up with the
necessary resources. Selling these programs in firms is typical of
cases in this range.

10-11 This score range can indicate a firm just coming up to speed in
planning for incremental change or one sputtering in its efforts.
That is, if a firm is temporarily resting on this score, it may be
going up or going down in technology aggressiveness, or it may
be floundering without an action plan.

9 or below Firms scoring in this range usually do not plan to modernize

their facilities or to introduce any new products. They may
desire the status quo rather than new technology or may be
recovering from the failure of a new technology project, such as
a robot problem, or from a new product failure. A company can
bounce back from this position, but it takes time and a strong
leader. Alternatively, the market is so mature or saturated, the
firm might be better served by shifting resources elsewhere.

Note: Average scores change slightly. For individual cases, the scores often
change significantly over time and need to be rechecked and compared with
large samples of similar business units and firms. For example, there has been a
trend in our domestic plant data for firms to become more secretive about the
modernization project as it progresses, and item scores have dropped on question
4 about advertising new technology to customers and publicity in general.

Appendix 2. Evaluating Below is a list of questions related to your firm's system training experience.
Commitment to Training Please indicate if the activity has occurred by circling 1 if no, or 2 if yes. Include
for Modernization comments where needed. Make sure everyone responding agrees on the answers
before scores are summed.

No Yes
1. Specific system training objectives were established ........ .......... 1 2
2. The content was made meaningful to the trainees by showing
how the information to be learned benefited them personally ..... 1 2
3 Appropriate media (e.g., video tapes) were used to augment
and clarify points during the training sessions .1 2
4. Time was allotted for additional practice when a skill or concept
wasn't learned the first time through .1 2
5. Plenty of feedback on trainee performance was
trainee during training sessions and at the end of training 1 2
6. The quality of materials, instruction, and facilities reflected the
importance of the system .1 2
7. Trouble shooting guides, procedur
were reviewed by the end users for
ease of use, and revised where necessary .1 2
8. In-house instructors were identified for on-going trai
refreshers or training updates .1 2

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Ettlie

Scoring
Since "yes" is scored 2 on the questionnaire, and "no" is scored 1, simply add the
total score for all eight questions. The interpretation of your total score follows.
One caution and a suggestion. Training commitment should be gauged by all the
key members of the deployment team as well as management. Make sure no one
is excluded. If there is any significant divergence in opinion, it should be resolved
before scoring takes place. Furthermore, we have found an additional, ninth
question to often be very useful in this audit, and it can also be added:
"Cross-training (a person training for more than one job related to the system) was
conducted to insure that training employees would be available in key positions,
should they open."

Score Interpretation
16 If you scored 16, you do have a few peers among domestic
manufacturers modernizing their facilities, but your business unit
or firm is well ahead of the pack. Verify that all members of the
planning or deployment team actually agree that this is your level
of commitment, and if less than 10% of the budget for the project is
being allocated to actual training expense-including supervisors'
time, question the score. If true, your firm is in the top 35% of
manufacturers.

15 About 27% of our sample scored 15 on the Training Commitment

audit and you are just slightly behind the leaders, but still ahead
of the pack. Apply the same test (10% budget) as leaders.
14 Your training commitment is average among domestic
manufacturers. Your team would have had to agree with 6 of the
eight training actions listed in the questionnaire. About 12% of
domestic manufacturers score in this category.
11-13 If your team scored your firm from 1 1 to 13, you have some
distance to go to catch up to the average firm in America that is
modernizing, and an even greater challenge to catch the leaders.
About 15% of domestic firms fall in this category.

8-10 Your firm or business unit is in the bottom 11% of modernizing

firms. Your unit has probably not budgeted any significant
resources to training and if it has these resources are either not
being spent on training or have not been allocated correctly. There
should be a balance of resources expended and allocated to the
technology vendor(s) for training and to in-house training.
Supervisors are the most typical people chosen to do this in-house
training, so they should be among the first to be trained.

- - - - - - - - - - - - - - - - - - - - - - - - - --

Endnotes Work in this area was supported by the
National Science Foundation, the Industrial
Technology Institute, and the University of
Michigan. The opinions in this article are the
author's and do not necessarily reflect the
official position of the funding sources.
Research assistants on this project were
Ernesto Reza and Christopher Getner.
Comments on an earlier draft of this article by
Karl Weick are gratefully acknowledged.
1J.E. Ettlie, Taking Charge of Manufacturing
(San Francisco, CA: Jossey-Bass Publishers,
Inc., 1988).
The basic idea, methodology and findings of
our study in this article are presented in this
book. The idea that successful modernizing
firms tend to match their technologi
administrative innovations is supported with
case and survey data.
The methodology of the study, also presented
in the book, is summarized here:
Sample
The sample was compiled by merging lists of
announcements of significant, multiple
component, flexible manufacturing, and
assembly systems from several sources. Trade
publications such as Automation News,
Metalworking News, all the major robotics
publications, and American Machinist were
screened for announcements of system
purchases.

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Academy of Management Executive

Participating plants were operated primarily
by large firms, with the vast majority (34) in the
first panel having more than 500 employees.
Plants also tended to be large, with about 60
percent having more than 500 employees on
site. The same distribution held for third panel
data after replacement. Of the 39 plants visited
in 1987, 16 (41 percent) had fewer than 500
year-round, full-time employees. The smallest
plant had 12 people, the largest had 12,000, and
the median plant had 850 employees. This
report is limited to just the 1987 interview data.
Nineteen of the cases (48.7 percent) were
classified as flexible manufacturing systems
while the balance were flexible assembly
systems.
Respondents
Over 100 personnel were interviewed in the
first panel data collection starting late fall 1984
and winter 1985. One primary respondent was
identified in each case, although we usually
interviewed 2 or 3 people at each plant. These
primary respondents were most often middle
managers (53 percent). This pattern was
virtually identical in the second data collection,
one year later, because no new cases were
added. In the third panel, more top managers
responded (20) and fewer middle managers (10)
but combined they accounted for 30 (76.9
percent) of the primary information.
2 J.E. Ettlie and C.E. Getner, "Manufacturing
Software Maintenance," Manufacturing Review,
June 1989, Vol. 2, No. 2, 129-133.
Manufacturing software development and
maintenance has emerged as the number one
problem delaying the timely deployment of
effective modernization in domestic plants. In
this article, this issue is addressed and data
from plants undergoing significant change in
their operations is used to investigate
satisfaction among plant users with
manufacturing software maintenance. The
authors find that users are more satisfied with
the maintenance process when some software
development is delayed until after the first
release of the new system. They conclude that
the underlying problem is the lack of
understanding of general requirements and
methods for assisting in the conversion of
performance objectives into requirements.
'A.H. Rubenstein, Managing Technology in
the Decentralized Firm (New York, John Wiley &
Sons, Inc., 1989), especially pages 77-81.
Rubenstein's book is one of a few
comprehensive treatments of managing
innovation in the decentralized firm. In
particular, his distinction between managing
direct versus indirect support staff is essential
to understand. Chapter 4 is the only treatment
in print that we are aware of that gives
concrete actions which can be used to
overcome the "not invented here" problem.
4 Robert H. Hayes and William J. Abernathy,
"Managing Our Way to Economic Decline,"
Harvard Business Review, July-August 1980, 67-77.
Perhaps one of the most quoted articles ever to
appear in the HBR, this article needs no
introduction. It started many research projects,
including this one and brought sharp focus to
the issue of the experience profile of general
managers in American companies in the 1980s.
5 J.E. Ettlie and W.P. Bridges, "Technology
Policy and Innovation in Organizations," in
Johannes M. Pennings and Arend Buitendam
(Eds.), New Technology as Organizational
Innovation (Cambridge, MA: Ballinger
Publishing 1987), 117-137.
This book chapter summarizes three years of
work on the concept and measurement of
technology policy. Now this has become a very
fashionable and important issue and argument
in most manufacturing firms in North America.
It is widely believed that Europe 1992 will
reorganize plants using technology as a major
criterion-much of the technology normally
maintained centrally, is likely to be
decentralized after 1992.

About the Author John E. Ettlie is the Director of the Office of Manufacturing Management
Research, School of Business Administration at the University of Michigan. He is
also associate professor of Operations Management.

He earned his Ph.D. in Industrial Engineering at Northwestern University in

1975. Ettlie has held several contract research, consulting, and university
positions and has published over 45 articles on the management of
technological change.

His current interests include the management of manufacturing software

development and maintenance as well as the new policies and structures
needed to orchestrate simultaneous engineering programs.

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