We used to supply a lot of manufactured components to the famous motorcycle manufacturing company 'Ideal Jawa' in Mysore. At that time they produced 1500 motorcycles each month. Produced under license from the Czech manufacturer Jawa, beyond doubt it was India's finest motorcycle,
I often accompanied my Dad, Uncle and quality staff whenever they visited the Jawa plant in Mysore for a number of issues.
I observed, but did not realise until much later, that the plant had a rather large workforce yet there were very few managers, supervisors and other staff.
Ideal Jawa was owned and managed by the dynamic duo Irani brothers Rustom ji (Commercial) and Farouk ji (Technical).
Rustom ji & Farouk ji personally worked very hard, driving the system with great success. Exporting their bikes to 61 countries, yet unlike many in the automotive industry they ran their organisation with a very lean team.
Jawa products were well built with few quality issues. Management ramped up production to 9000 bikes per month with little seemingly little effort within a few years. That quantity may not seem much but in percentage terms that was a 500% increase The company was a huge success for almost three decades.
What were the lessons from the success?
- Excellent Product design : The bike was so well designed as a product that it was forgiving of manufacturing and operating errors . The reliable and pleasurable bike just throbbed on.
- Excellent tooling and process design: The plant and equipment had been supplied and installed by Czech engineers and technicians. The process was so stable and the tools and equipment so reliable that no tinkering, or changes were required at all.
- Excellent process control: Good process design with good built in controls coupled highly stable processes, made manufacturing almost idiot-proof.
- Small and lean management team made the company responsive in manufacturing and kept costs very low.
- Highly centralised management gave a very high degree of control over productivity, quality, costs and responsiveness.
Demand for Jawa bikes far exceeded supply.
Typically in a market where vehicles were rationed rather than sold quality and costs always take a beating. Yet Ideal Jawa was the bike which had a considerable price premium over other makes, yet it had the lowest manufacturing costs and best quality.
This performance was realised mainly due to the adoption of a highly centralised, silo type organisation structure with committed people straddling the top of the silos giving the following advantages ;
- Scalability. The company was able to expand with little effort, merely duplicating processes and staff.
- Stable environments facilitated tight inventory practices and other cost controls.
- High responsiveness and very tight control.
- Low managerial overheads
- High quality
Serious competition emerged when Government of India permitted Japanese motorcycle manufacturers such as Honda, Suzuki , Yamaha and Kawasaki to enter the Indian market with Indian partners and world class products.
A few years Ideal Jawa was on the back foot with its customers shifting gradually to the relatively more sophisticated, and fuel efficient Japanese bikes. Ideal Jawa brought out the Road-King and the Oil-King model motorcycles which were considered acceptable by the market but market share kept on falling. Soon thereafter the elderly Rustomji fell ill and passed away and a few years later Farouk ji also passed away.
The company reins were taken over by the remaining brother Noshir from Pune, but it was too late to save the company. The legendary company eventually stopped production soon thereafter.
The organisation was highly centralised, with a hardcore silo type structure. Once set up and established properly the plant almost ran by itself, using relatively less trained low cost workers.
The very strengths that gave Ideal Jawa it's success became its greatest weakness. The organisation in spite of its dominant position and strengths eventually failed and went into bankruptcy. With no succession planning and no decentralisation it was a reciepe for failure.
As my friend Sudhir Ullal pointed out silo type organisations are best for certain situations and types of set ups.
Imagine you are in a third world country or in the underdeveloped part of our country itself, where skilled people are in short supply , silo type organisations become a necessity particularly when seeking good results in a relatively stable environment.
The problem came when the needed to innovate products and their designs. When they had to develop new tools and procure new types of equipment. Ideal Jawa had not invested in these areas and was unable to respond.
What are the lessons from the failure?
- No one lives forever. No succession plan was developed. As the owner-managers aged they were unable to cope and there was a huge leadership- management vacuum. No replacements had been developed.
- Highly centralised silo type organisation and management structure proved ineffective in developing viable products or acquire necessary technology infusion.
- Yesterday's rules were good for yesterday's needs and competition.
A typical example in today's day and time is the Government policy of giving massive tax breaks for 10 years to organisations for setting up new plants in newly formed state of Uttarakhand.
Many manufacturers and ancillaries are struggling with their new units there. They are using unstable processes, employing lower skilled employees who cannot fix or debug problems like their counterparts back in Delhi, Pune, Bangalore Chennai etc.
Results from new plants is wholly unsatisfactory. Manufacturers in such cases need to follow the Ideal Jawa initial approach and gradually add more complexity and flexibility as they ramp up capacity as fresh people who receive training and skills within the manufacturer's plants become available for actual deployment.
Another example is, when Toyota wanted to start building car manufacturing plants in the United States. They did not bring in the latest and cutting technologies and many management innovations. They introduced very stable plants with time tested technology and management practices, keeping it as simple as possible.
The more the components and more the complexity of a system, the higher the risk of failure, made further complex by operating in new or uncertain environments with a new team of people.
Once Toyota got established they started introducing higher and more sophisticated technologies and more complex management systems. They had a good beginning and till date have a fantastic success rate.
Deep analysis and deeper understanding proves that there is no one universal way to tackle issues and challenges. However there may still be room for silo type organisations in several situations and environments.
*** My friend Sudhir Ullal who has been working for nearly 20 years in Fortune 500 Companies and for a management consultancy for past 6 years gave some interesting and highly feedback and analysis on Silo Type organisation. His inputs led to the analysis of a situation observed 30 years ago but understood only now and hence the penning of the above article.
His analysis is reproduced below for interested readers.
I really liked this article and do agree with your thoughts in general on silos, especially the parts of the management overhead and the command and control structure. However, you did not point out the benefits of silos which to a large extent can run without any management overhead once the processes within the silo are defined. Each silo is responsible for a function within a process and can do it very well without the need for management oversight. Some of your thoughts appear to be tied to the manufacturing industry, however there are other variations that come into play with a service organization.
Within service organizations, silos can rapidly scale up for volume and repetitive function very rapidly which cannot happen in an organization where say "engineering" and "operations" are combined. I can give you detailed example of where there would be complete failure if silos did not exist.
One other point I would like to make on the example you put forward on government employees; "Can this explain why Government organisations and departments are a power unto themselves and fail more often then they achieve?"
I believe this is more cultural than organizational.
The example of government you gave is prevalent everywhere and I believe requires a special type of person who wants to work for the government. These people would not succeed in the commercial sector.
You did ask to provide other solutions and my solution is change management. Organizations should constantly change with the right controls in place. The leadership need to understand change and be able to explain to their constituents the reason for the change. Change is an important element of organization process and without it organizations become monoliths that cannot adjust to changing environments and as such tend to fail, i.e. GM, Chrysler, Bearingpoint but not Toyota, KPMG, etc