Three recent announcements shed some light on things to come, maybe.

The first contained the candid and revealing comments of Bernd Pischetsrieder, VW's CEO since 2002, in a recent Wall Street Journal article (VW Chief Confronts Corporate Culture, WSJ; Sept. 19, 2005). Recognizing the need for but difficulty in changing a deep-seated culture, Mr. Pischetsrieder says he is undertaking a broad revamp of management, "changing both people and priorities." He also admits that management was too slow to react when it became clear the company was headed for trouble. The article points out the company's desire to reduce wages and lengthen work hours. Mr. Pischetsrieder notes that labor costs are just 15% of the cost of the car and asks, "What about the other 85%?" Refreshingly, he was quoted as saying, "Sometimes in a situation like this, you need different thinking…to give a signal to the internal organization that we need a different approach."

The second was the announcement of Kerk Kerkorian's interest in increasing his stake in GM and securing a seat on the board. While he still claims no interest in getting involved in the management of the business, most industry watchers feel he will, at some point, make a move to improve the company's performance in order to improve his financial position. Just as VW needs different thinking, GM seems mired in an inbred version of "narrow think" when it comes to managing its way out of its current situation. Let's hope Mr. Kerkorian can stimulate different thinking. (It is interesting that he has also invested in Volkswagen recently.)

The third was an article, also in the Wall Street Journal, on research regarding managing: Rethinking the Quality-Improvement Program, WSJ, Sept. 19, 2005. The gist of the article is that process management tools such as Six Sigma help improve existing products and routines but can hinder the ability to innovate. Even GE, which still touts the merits of Six Sigma, is reportedly backing off some of its emphasis on it. One executive was quoted, "There are times when it is overkill." Motorola, which invented Six Sigma in 1986, acknowledges their defect rate is actually Four-and-a-Half Sigma.

The reason these three announcements are significant is that they denote a shift in thinking. The world is changing and the more we can open up to different thinking, the more likely we are to respond successfully to the challenges our businesses face.

At a recent meeting of operations management professionals, a logistics expert described to the audience the complexity of a "typical" automotive supply chain. The number of parts managed exceeded 20,000 and the challenge to reduce complexity was enormous. The audience consisted of people from a variety of industries including steel fabrication, healthcare, distribution, and foundries. One gentleman from the healthcare industry was unimpressed by the automotive complexity. It turns out he deals with well over 30,000 unique part numbers with even more demanding customers and tighter delivery commitments.

In other words, complexity exists everywhere, partly brought on by the increasing width and depth of the supply chain, regardless of the industry. The natural result, when traditional thinking is applied, is often an increase in inventory levels to accommodate, and in some cases mitigate, the damage complexity can do to the customer-supplier relationship from missed deliveries, quality issues, and extended lead times.

Problem is, there's a new factor that makes the inventory response the wrong one. Offshore competitors whose costs are often 20-25% below yours can eat your lunch, metaphorically and literally, by providing your customers a cheaper product with equal quality. They usually maintain buffer inventory as well, but it costs them 20-25% less than yours does. As a result, to stay competitive, you have to deliver to the customer in a timely, responsive way without incurring the cost of building and carrying inventory. It is time for new thinking.

Oh, and if you think that being lean will bail you out, remember that because of offshore competition, your selling prices are probably 20-25% too high. If you spend your time improving your processes so that you can do the wrong thing better (in this case build more inventory), your business still loses to the competition.

There's no more time for incrementalism. It is time for new thinking.