The Value of SDM, John Fallu, SDM ’02 alum says education taught him about leadership

John FalluBy John Fallu, SDM ’02
Vehicle Systems Supervisor
Automatic Transmission Engineering Organization (ATEO)
Ford Motor Company
September 23, 2003

Editors note: A variation of this article originally appeared in a Ford publication, “Team Review.”

Wow! An opportunity to take part in a master’s degree program at MIT and it’s almost over.

Almost two long years ago, Ram Krishnaswami and I were fortunate to be selected for the Systems Design and Management (SDM) master’s degree program at Massachusetts Institute of Technology (MIT). The SDM program involves a combination of distance learning (live videoconference classes) and time spent on MIT’s campus (week-long business trips to MIT each quarter plus one full term on campus). Over 30 leading companies sponsor students to the SDM program to develop the tools and experience necessary to understand and improve the socially and mechanically complex systems they work with inside of their corporations.

Given the nature of automobile transmissions, the complexity of problems we deal with, and the organizational and engineering changes we experience, Ram and I thought SDM would be a good fit….if we could cut it! Given MIT’s reputation as a premier university and for its premier workload, committing to the hard work and extensive time away from family that this program requires was a difficult and intimidating choice. While my two daughters might say otherwise, the Systems Thinking Fundamentals taught by SDM, along with having an SM from MIT, make it worth doing.

This article will share some key learning experiences we’ve brought back to Ford. These high level summaries of four “required reading” pieces will underscore some key take-aways.

Not only have these readings improved my knowledge base, but I know now that it was even more important for me to be open to this new knowledge and willing to alter my perspective to consider how to use it back at ATEO. Spending four months immersed in an entrepreneurial-learning environment like SDM gave me ample opportunity for my perspectives to change, but back in the Ford environment, the daily pressures and demands make it tough to deploy new tools and attitudes.

The real challenge for you and me is to develop an outsider’s perspective on our work culture so that rather than getting stuck in the same rut of years past, we can take a fresh look at current issues and future products and develop different ways of working. By doing so – instead of continuously reacting to outside forces and demands – we can understand the directions in which we are being pushed. We can then start to develop our own plans that satisfy or resist pressures from the outside, yet provide the needed direction for future success.

The first book that I’ll refer to is called “Clock Speed” by MIT’s Charles H. Fine. It deals with the business strategy of supply chain management. Professor Fine has studied numerous industries and has mapped out a generic industry cycle that most go through. The path from vertical to horizontal integration and back again has been played out in numerous industries, current and past. Our company, for example, started as an extremely vertically integrated company. The Rouge facility, after all, brought raw materials in and shipped finished automobiles out. Since that time, as certain components have become more generic or commodity-like in terms of availability, it has made less sense to maintain vertically integrated strategies, hence the development of full-service suppliers and the Visteon sell-off. Looking even closer to home, our new partnership with GM to build automatic transmissions follows directly along the path described in Professor Fine’s book. (Seems only fitting for Ram to be leading this endeavor and writing his thesis on this type of partnership management!)

Moving from managing industries to managing innovation, our group read two books stressing the importance of new products and process development. The two books are “The Innovators’ Dilemma” by Clayton M. Christenson (Harvard) and “Mastering the Dynamics of Innovation” by James Utterback (MIT). These books explain how innovation typically enters industry, how mainstream firms typically respond, and how new and old players wrestle for dominance over time. Reading them provided an understanding of what is typical for industrial cycles in which up-and-coming firms eat away at small, low-profit markets until they develop the strength and market presence to work their way into higher margin markets typically coveted by mature firms. In the auto industry, think of the Japanese and, now, Korean automakers that have made their mark in low-cost vehicles. After establishing a customer base and reputation, they move up-market into higher margin vehicles, stealing coveted profits away from established competitors. Improving on the modest results these authors predict for our industry (and others like it) presents a real challenge for Ford and Ford employees. Our ability to maintain existing markets and to create new markets will demand continued flexibility as we move into a hyper-competitive future. Despite the authors’ gloomy views, the real challenge – establishing goals and directions that are in-line with the direction of the industry and the markets in which we compete – is up to us.

Some lessons for understanding how to build a company with the ability to react to new opportunities and challenges are found in a book by MIT Professor Peter Senge, entitled “The Fifth Discipline,” which looks at holistic systems thinking and the kind of organizational learning required to react effectively to industrial challenges. Professor Senge describes systems dynamics as: reinforcing dynamics – which support change and balancing dynamics – that may work to counteract change and maintain the status quo. Understanding and modeling both types of dynamics are important as we try to grow and change for the better.

Through these books, and the advanced degree experience in general, I now begin to see the reasoning behind some of our corporate strategies. While some of Ford’s actions may seem reactionary, they may actually fit into the big picture of organizational growth and change. And that’s a reassuring takeaway!

Good reading to everyone! The knowledge is out there; all we need is to invest the time!

A few more recommended books:
Leading Change
by John Kotter

Leading Product Development
by Wheelwright and Clark

The Goal, Critical Chain, and It’s Not Luck All
by Eliyahu Goldratt