Learning consortia can play a critical role in boosting the performance of participating members. However, while the formation of a consortium is promising, members must manage it well if they are to achieve and sustain their learning goals. These authors describe their experience with a consortium and suggest best-practice guidelines that can help members achieve their anticipated goals.
“No company can go it alone”
Yves Doz and Gary Hamel
Background
For manufacturers, the last twenty years have witnessed a radical change in the business environment. Reduced tariff and non-tariff barriers, the emergence of China as an economic powerhouse, and the virtual disappearance of information asymmetry, itself a result of accessibility to the worldwide web, have meant that manufacturers in industrialized countries now face a daunting task. To remain globally competitive, these firms must become even more diligent in pursuing productivity improvements. But the fact is, “No company can go it alone.”
In this article, we explore a novel approach that a group of North American firms – the High Performance Manufacturing Consortium (HPM) – pursued to meet this challenge. Our interest in understanding this form of improvement model – leveraged learning through consortium efforts – has some additional urgency. Consortia have been formed recently in the United States, Canada and Australia, among other countries, largely based on a leap of faith. In the United States, recent initiatives by the Association of Manufacturing Excellence (AME) have promoted the formation of similar learning communities. By learning from the HPM experience, we offer advice to other companies considering forming their own learning consortium.
The HPM Consortium
The formative years (1990-1992)
In 1990, automated controls designer Allen Bradley and a small group of key suppliers embarked on a journey to become world-class manufacturers (Stuart et al. 1998). At the time, Allen Bradley faced severe resource constraints, an increasingly competitive marketplace and a product line that customers thought was overpriced and had weak customer service. However, with Allen Bradley’s limited bargaining power in the supply network (Allen Bradley represented less than 5 percent of any supplier firm’s business), tough negotiation tactics, power-based dictates effective in the traditional tiering of suppliers, and the use of the supplier association model (kyoryoku kai) stood little chance of forcing suppliers to become more productive and quality conscious.
Instead, Allen Bradley chose a looser form of supplier association. The guiding principle of the new association, later relabeled the High Performance Manufacturing (HPM) Consortium, was to begin a journey to “world class” as a group of 12 equals, including Allen Bradley and a variety of firms of varying size, including Samuel Steel (large) to local suppliers of fasteners and printing (small).The Consortium’s first step was to undertake a comprehensive external audit of each member’s production and management processes. The evaluation system included over 50 detailed performance metrics that were aggregated to represent five steps for achieving world-class excellence (Figure 1). The audit had a sobering impact on all consortium members, including Allen Bradley, since its score was hardly exemplary.
The scorecard was used annually as a principal driver of activities pursued, and to gauge each member’s progress against the world-class metrics. Identified weaknesses served as the raison d’être for the formation of a Special Interest Group (SIG). SIG members would identify a learning topic; contract with an educator/consultant for background articles, reports and workshop delivery; ensure attendance of their key personnel; perform a pilot test on one member’s process; share with and learn from fellow SIG members based on these pilot results, and eventually disseminate the lessons learned through a series of company-based workshops and process-improvement initiatives. The SIGs were aided by a dedicated, independent facilitator who matched external knowledge experts with the SIG’s specific needs. By learning at a group level, the SIGs were leveraging their scarce resources to achieve productivity-enhancing objectives — hence the leveraged-learning consortium label. Consortium members became project leaders and principal change agents. Since many of these projects involved improvements in work processes, they required broad based “process owner” participation, ensuring that tacit knowledge moved from the consortium network decision makers to the front-line employees. The fact that the consortium firms were mostly medium sized and single-plant facilities, and that the critical decision makers were party to the in-plant implementation effort, aided the knowledge-diffusion process immensely (Grant and Baden-Fuller (2004).
The learning years (1993-1997)
In subsequent years, projects were selected from a list of internal requirements or opportunistic external scanning; they focused on best practice. For example, after attending a conference on imaging technology, one member thought that the technology might be applicable to his firm’s blueprint storage and retrieval problems. He discussed the concept with three other members who could also benefit from learning more about the technology. They then formed an SIG and asked the facilitator to organize a two-day workshop open to all consortium members. A total of six firms participated. Subsequent SIG topics discussed during this period included internet access for group members, access to data for benchmarking firm performance, the formation of a virtual training center, development of a customer service course, team-based problem solving training, facilitator training for problem-solving groups and high-technology seminars.
In 1995, three new member companies were added, two of whom had no supply arrangements with Allen Bradley. To be included in the consortium, an applicant would have to be accepted by a majority of existing members, who assessed the prospective member for what it could bring to the group. By the summer of 1997, the Consortium had grown from the original 12 firms to 18, of which five had no current or prospective sales to Allen Bradley. The list of companies seeking to join the Consortium continued to grow.
The Consortium had developed and refined its vision and mission as follows (the highlighted words are the Consortium’s):
- Vision: To be a High Performance/World Class Supplier Consortium of independent suppliers of quality products and services who compete and win against the world’s best.
- Mission: To work together to enable each member to optimize their competitiveness in a win-win environment, using shared resources and experience.
One member commented on the group’s evolution and Allen Bradley’s diminished influence:
“The mission of the group now is quite different. Teaming together to solve common problems and to achieve world-class standards would best reflect the current orientation.”
The learning stops (1998-2002)
The enthusiasm and progress made by Consortium members was impressive. But it was not to last, as we discuss below. In order to assess why things changed, it is helpful to consider the following:
Structure: The Consortium’s membership had grown from its original 12 members to 18 firms. Since 1997, new firms had been drawn from outside the original Allen Bradley supply base. Recent additions included Volvo Motor Graders Limited, Lennox Industries, GE’s Power Management Division, Steelcase Canada, Avnet Electronics Marketing, Orenda Aerospace and Mancor Industries Inc. The lone service firm, an original Consortium member, was an industrial B2B supplier.
Activities: Many of the features and activities described earlier proved to be sustainable. Firms formed special interest groups (SIG) around learning themes and chose whether or not to participate. The role of facilitator, a central information conduit that helped firms to identify critical needs and sourced appropriate educational expertise, continued. A weekly newsletter containing management lessons and announcements of upcoming events continued unabated. The Consortium members continued to meet on a quarterly basis, with board meetings always including a host-member plant tour and a discussion of planned process-improvement ideas.
Some new initiatives had begun. A partnership exchange program had been designed to leverage expertise within the Consortium even further. Consortium knowledge experts were identified for a variety of learning topics and volunteered their time, typically 1-2 days per month, to visit a member firm’s facility to help facilitate conceptual learning and application. An extensive book and video library was now available for the members to access. An e-chat line had been developed with open access to all member firms’ employees where operational challenges could be posed and solutions provided. Overall, the range of activities represented an impressive and unparalleled list of learning endeavors.
The learning agenda: Before 1999, results from the annual performance assessment became the principal driver of activities pursued. Common weaknesses identified during the audit process served as the reason for the SIG formation and improvement projects undertaken. Since then, however, the Consortium has adopted the Lean Enterprise Institute’s (www.lean.org/Lean/Index.cfm) concepts as its unifying purpose, and formalized a partnership arrangement in December, 1999. There was considerable overlap between the metrics used in the performance scorecard the Consortium adopted in 1990, the SIG activities pursued during the decade, and the activities incorporated in lean thinking (Womack and Jones 1997). They have similar roots in Toyota’s renowned just-in-time production system developed by Taiichi Ohno (Ohno 1988; Ohno and Mito 1988). Any observer of the Consortium’s activities would conclude that they had actively, collectively and consistently pursued lean thinking during the entire period, albeit under a different guise.
Leadership and governance: Previously, the Consortium’s learning had been project specific and often directed at middle and junior management levels. Since 1998, there had been a considerable increase in the amount of workshops and training sessions conducted at the shop floor level. As the firms began requesting a greater number of these workshops, the facilitator created a parallel educational delivery firm to satisfy that need.
In addition, the facilitator began assisting other regions and countries with the development of the other consortia and they have subsequently been replicated across Canada, in Australia and the United States. Each Consortium was somewhat different, with varying membership costs, objectives and demographics. However, all of them emphasized learning and improvement. The facilitator also undertook a leadership role in both the Canadian Manufacturers and Exporters (CME) and the Association for Manufacturing Excellence (AME). Involvement in conferences sponsored by these organizations consumed a considerable amount of time and energy.
Why the learning stopped
Given all this activity, one might ask why we refer to the period 1998-2002 as the years in which the learning stopped. Evidence that supported this characterization was gathered using three methods. First, there was the annual performance evaluation scorecard. Some data measures are quantitative while others are principally qualitative in nature. The scorecard is the principal measure of learning outcomes and has been consistently applied throughout the period by the same assessor ensuring trend reliability. Various forms of these “world class” scorecards exist in different industries; this one had been modified from its original developed for use in the auto industry by the National Center for Manufacturing Sciences (www.ncms.org).
We also conducted a series of one-on-one interviews with ten member firms, representing approximately 60 percent of the Consortium. The interviews were designed to gauge the level of member awareness, participation and interest in a wide range of consortium activities (e.g. plant visits, special interest groups, use of educational material from the consortium library, use of the consortium’s partnership exchange program, etc.). In addition, we interviewed the Consortium’s facilitator, whose records provided information on educational program registrations, borrowings from the library and member firm use of both the e-chat line and partnership exchanges.
Finally, we gained fly-on-the-wall access to a number of quarterly board meetings in which progress reports, company updates, new member proposals and educational presentations took place. Both the one-on-one interviews and the quarterly board meeting analysis provide reasonable measures for assessing learning inputs.
We found that there was a large gap between the Consortium’s available learning opportunities and recent learning outcomes. While there were a host of symptoms of weak learning and leveraging, none was more obvious than the current status of the annual performance-benchmarking exercise shown in Figure 2, including the minimum and maximum member score to illustrate the performance disparity among companies.
The progression of scores in the mid-20 percent range during the early years to over 70 percent of world class by 1997, a six-year period, was impressive and represented a significant improvement in productivity, quality and learning outcomes (annual improvement rates are indicated in Table I). But since 1997, there had been a gradual and steady decline in performance. We did anticipate a decline in the rate of improvement toward world class simply because of natural upper limits; but we had anticipated that the upward trajectory would nevertheless continue. Even more revealing, insufficient interest by Consortium members meant that the formal, quantitative assessment of the Consortium’s progress in 2000 and beyond was no longer available.
Table I: HPM Consortium Rate of Improvement toward World Class
| 1992 | 1993 | 1994 | 1995 | 1996 | 1997 | 1998 | 1999 | |
|---|---|---|---|---|---|---|---|---|
| Improvement Over Prior Year (%) | 49.8 | 20.1 | 12.4 | 1.4 | 39.0 | -0.7 | -3.4 | 2.2 |
Other less obvious indicators of weak learning were evident during our recent Consortium visits, including:
- Limited engagement in the partnership exchange program: The partnership exchange of leveraged consulting advice had been rarely used and was almost exclusively the result of prompting by facilitator/staff rather than as a matter of course.
- Limited use and/or awareness of the facilitator’s educational and resource material: Despite an impressive video and book library, member firms had not borrowed books or videos.
- Inconsistent Special Interest Group (SIG) activity: There were only four active SIGs, one of which was devoted to how to rectify the lack of enthusiasm for the performance scorecard process. Most of the SIGs had uncertain future meeting dates and a spotty record on project completion. Many SIGs had been created and abandoned prior to any SIG specific workshops and meetings being held.
- Weak knowledge, categorizations and leveraging of all member companies’ business and management competencies: In many cases, the knowledge categories described in the expert list were narrow and topic-specific, making broader application of that knowledge hard for other firms to appreciate and assess for their broad usefulness (e.g. FEA – Finite Element Analysis, VPP Global Star Program).
- Limited attempts to push world-class initiatives to other organizations in the extended supply chain: Despite the fact that 70 percent of most firms’ cost structure is a function of purchased goods and services, extending the learning to member firms’ suppliers was not a priority.
- Absence of any audit system: There was no established process for assessing each member’s contribution to achieving the Consortium’s vision and mission. Neither was there any formalized cost/benefit analysis to determine the value each member derived from Consortium participation. Member firms could provide no quantifiable evidence to support their continued participation.
Overall, there was considerable evidence of malaise and waning enthusiasm in the Consortium. We concluded that, somewhere between 1997 and 2000, the Consortium’s emphasis and commitment to learning had stopped.
Learning from the Consortium’s recent challenges
Learning can be considered a form of technological progress (Ayres 1968; Burgelman et al. 2001). This fact helped us segment the time periods into three distinct learning phases, as shown in Figure 3 and summarized in Table II.
Table II: Characteristics of the HPM Consortium Over Time
| Parameter | Stage 1: The Formative Years (1990-1993) | Stage 2: The Learning Years (1992-1997) | Stage 3: The Learning Stops (1997-2002) |
|---|---|---|---|
| Underlying Mental Model | JIT/Lean | JIT/Lean | Lean/JIT |
| Learning Approach (Depth of Learning) | Project Specific | Operating System | Operating System |
| Breadth of Learning & Application | Low | Low/Medium | Low/Medium |
| Learning Drivers | Audit Report | Internal | External |
| Formalization | Low | Moderate | High |
| Member Diversity | Low | Low/Moderate | High |
| Social Bonds | Medium/High | High | Moderate |
| Facilitator Focus | High | High | Moderate |
| Outcome Success | Medium | High | Low |
The Consortium’s early years can be characterized as the “learning to learn” stage. The firms involved needed to find a common purpose, a common measurement yardstick and a management-improvement approach that could be applied across industries. The result was early frustration with the Consortium’s governance structure, but some positive immediate gains in project-based outcomes.
The middle years showed rapid progress to “world class” as the firms learned from each other and introduced “best practice” in obvious areas of weakness. This phase can be characterized as “picking the low hanging fruit,” as each initiative yielded considerable synergies. The Consortium started to shine once a strong social network bond had been formed and after it moved beyond an Allen Bradley-controlled initiative. There was an enthusiastic spirit and culture reinforced by continued positive feedback on the broad world-class performance scorecard. The rapid learning was further reinforced by outside interest in the Consortium’s efforts and a long list of firms wanting to be “club” members.
Finally, the Consortium was able to enter the third and most challenging stage – sustaining the learning momentum. By this time, the incremental improvements were much harder to effect on the plant floor and yielded considerably smaller measurable impact due to the law of diminishing returns. The evidence points to fact that the Consortium was no longer headed along trajectory “A”.
Management insights
What can we learn from the Consortium’s successes and challenges and what guidance can we offer to other consortia?
1. Understand management model limits – Learning to unlearn
The Consortium members chose “lean” as a principal organizing activity for a full decade; this choice served them well. A firm that is leaner than other direct competitors should have a lower cost structure, use its assets more efficiently and be more responsive to changes in customer demand. But this does not necessarily translate into a sustainable competitive advantage (Dyer and Singh 1998; Hayes et al. 2004; Porter 1998). With much work, lean principles can be duplicated in rival firms, eventually resulting in a diminished role as a customer perceived differentiator. Certainly, the gap between North American automotive firms and their Japanese rivals has narrowed dramatically in terms of plant productivity and quality. And if an overemphasis on the pursuit of lean leads to underemphasizing product innovation and/or customer understanding, firms will not be well served. As Treacy and Wiersema (1995) explain, organizational success is a function of three key areas of competency: operational excellence, product leadership and customer intimacy. Firms must excel and dominate at least one dimension and perform at least adequately on the remaining two.
We summarize our findings by proposing a model of consortium learning, depicted in Figure 4.
The Consortium’s evolution can be thought of as transitioning from pockets or islands of excellence in the earlier years (e.g. an SIG project on cell manufacturing) to disciplined excellence through the pursuit of lean manufacturing in the rapid learning years (e.g., superior manufacturing operational efficiency). The challenge for the Consortium after 1997 was to recognize the need for a further transition, this time to systemic superiority (e.g. world class excellence across all manufacturing, marketing and support activities). To meet this challenge would have required the Consortium to expand knowledge pursuit into areas such as leadership, customer intimacy and product innovation, areas that only most recently have received the HPM’s attention and focus.
2. Develop a needs-driven agenda
A major factor behind the Consortium’s earlier success was the needs-driven approach to SIG formation and project subscription. Common weaknesses revealed in the annual performance audit became the key driver of the learning agenda as shown in Figure 5.
Instead, adoption of the Lean Enterprise Institute’s model for success represented an externally generated agenda-setting approach. Consortium member commitment to these topics and activities was correspondingly lower. It is indeed telling that the most active current (in 2002) SIG, one with definitive meeting dates and a clear project purpose, is involved in adopting the revised ISO 9000: 2000 certification process, an HPM-driven agenda item. Internally driven agendas ensure greater member commitment, and greater commitment leads to more effective implementation. We found that the Consortium had inadvertently deviated from its original mission, something it has recognized only recently.
Adopting the desired needs-driven approach will also modify the facilitator’s role immensely. Instead of disseminating Lean Enterprise solutions, the Consortium’s agenda becomes internally driven and the search for solutions may require a more diverse range of management experts. The answer to members’ challenges is likely to extend well beyond the lean tool basket. To do so, the Consortium may require additional facilitating assistance. One could envisage, for example, the requirement for multiple facilitators, depending on the Consortium’s current needs. Flexibility to adapt to new mental models will require flexibility in both the choice of facilitator and his/her role and responsibilities.
3. Build and rebuild the social network
For a number of reasons (e.g. need for shared experiences from higher-performance benchmark firms, need for innovative work processes), the Consortium’s diversity had to increase. The increased diversity (weaker network ties) reduced redundancies in knowledge and information and might have inspired more radical innovation and change (Burt 1992; Granovetter 1982; Hansen 1999). But the management challenge such diversity introduces is difficult and, initially, was not well understood by Consortium members. As the new members came on board, the existing Consortium members, believing that what had served them well in the early years would suffice, did not adapt quickly enough to meeting this newer diversity challenge. Many opportunities for learning from each other were missed. Moreover, this diversity challenge is not likely to diminish anytime soon, as noted by one HPM Consortium member:
“I believe as time goes on, diversity among members may grow. I can see some service companies outside normal manufacturing at some time joining the HPM.”
Consortia in general will need to take care as they diversify. Successful consortium and network alliances rely on a careful balance of critical ingredients to achieve successful organizational learning outcomes. Achieving organizational learning starts from a recognized need for a specific knowledge base, advances to a knowledge accrual process and ultimately leads to learning transfer and diffusion. What might work under a specific set of circumstances (i.e. participant firms, learning agenda, learning approach) is most unlikely to be appropriate under a different set of circumstances. Just like the ideal learning organization must be adaptive, so to must the consortium itself. Consortium management must recognize that these dynamic factors create a new consortium, and that time and effort are required to rebuild and renew the social network upon which learning is so dependent. In the Consortium’s case, as the overall environment changed in the late 1990’s, not enough effort was placed on revisiting the mission, vision and learning objectives of the new set of members. One HPM Consortium member commented on the most recent transformation to correct this:
“Early years were focused on theoretical learning. Members at that time didn’t feel comfortable that they had a sense of where they needed to go. The last few years have seen a decline in consultant-type learning which has been replaced with member-to-member sharing forums. The Consortium itself is starting to learn a little more about leveraging between consortia”
Consortia can help
More and more consortia are being formed to achieve performance excellence and as a collective approach for leveraging scarce resources. In Australia, for example, the Victorian Government has committed $500,000 (AUD) to support consortia formation over a three-year period, though it is desperately seeking evidence of success and best- practice frameworks. Likewise, a recently formed consortium in Oregon has received over $1 million (U.S.) in funding, but it has no good roadmap for success. With the recent initiative of the Association for Manufacturing Excellence in the United States to promote consortia as a means of learning and process improvement, there is a pressing need for expertise in consortium management. Our hope is that, with the proposed guiding steps outlined above, we have provided some initial help in this regard.
References
Ayres, R.U. (1968). Envelope Curve Forecasting in Technological Forecasting for Industry and Government. ed. James R. Bright. Prentice Hall: Englewood Cliffs, N.J.
Burgleman, R., Maidique, M. and Wheelwright, S., (2001). Strategic Management of Technology and Innovation. McGraw Hill: Boston, Massachusetts
Burt, R.S. (1992). Structural Holes: The Social Structure of Competition. Harvard University Press: Cambridge, MA.
Doz, Y.L. and Hamel, G. (1998). Alliance Advantage: The Art of Creating Value through Partnering. Harvard Business School Press: Boston, MA., p. ix.
Dyer, J.H. and Singh, H. (1998). The Relational View: Cooperative Strategy and Sources of Interorganizational Competitive Advantage. Academy of Management Review. Vol. 23, No.4, 660-679
Granovetter, M.S. (1982). The strength of weak ties: A network theory revisited. In P.V. Marsden and Lin, N. Social Structure and Network Analysis: 105-130. Sage: Beverly Hills, CA
Grant, R.M. and Baden-Fuller, C. (2004). A Knowledge Accessing Theory of Strategic Alliances. Journal of Management Studies. Vol. 41, No.1, 61-84.
Hansen, M.T. (1999). The Search-Transfer Problem: The role of weak-ties in sharing knowledge across organization subunits. Administrative Science Quarterly. Vol.44, No.1, 82-111
Hayes, R., Pisano, G., Upton, D. and Wheelwright, S. (2004). Operations, Strategy and Technology: Pursuing the Competitive Edge. John Wiley: New York
Ohno, T. (1988). Toyota Production System: Beyond Large-Scale Production. Cambridge, Massachusetts: Productivity Press
Ohno, T. and Mito, S. (1988). Just-in-Time for Today and Tomorrow. Cambridge, Massachusetts: Productivity Press
Porter, M. (1998). What is Strategy? Harvard Business Review. November -December, pp.61-78.
Stuart, I., Deckert, P., McCutcheon, D and Kunst, R. (1998). A Leveraged Learning Network. Sloan Management Review. Vol. 39, No.4, 81-93.
Treacy, M. and Wiersema, F. (1995). The Discipline of Market Leaders. Addison-Wesley: Reading, Massachusetts.
Womack, J. and Jones, D. (1997). Lean Thinking. Simon and Schuster; New York, N.Y.
