Friday, 4 May 2012

Management skills cannot replace entrepreneurship

Exaggeration and over-generalization are common logical mistakes. This is why, to a good extent, we have grown insensitive to them. The human mind is naturally inclined to analyse facts, look for patterns, identify common causes, and draw conclusions to be used in the future. This is how knowledge is acquired and expanded.

Even when facts are insufficient to sustain complex logical connections, our thirst for certainty can lead us to exaggerate and over-generalize. Logical errors do not base their appeal on evidence, but on man's desire to control his environment and predict the future.

The problem with inconsistent ideas is that they don't work.

* Every minute that you devote to arguing in favour of a logical error is a wasted minute.

* Every time that someone tries to implement it in real life, waste will be the likely result.

"Pursuing the impossible is the wrong kind of ambition," wrote Emperor Marcus Aurelius in his Meditations in the year 176 C.E. "Unfortunately, such attempt is common to many men."

Just-in-time production techniques are widespread in Japan. Since their introduction 50 years ago, just-in-time principles have greatly contributed to reducing the cost and increasing the quality of complex industrial products such as motor vehicles.

In our days, this philosophy enjoys universal popularity amongst managers and has become a central subject of study in business schools around the world. Running a factory according to just-in-time principles involves six steps:

  1. Determine which features customers want in a product.
  2. Identify the steps that are necessary to manufacture that product.
  3. Eliminate any steps that are not needed.
  4. Ensure that each step is performed at a constant speed (just in time).
  5. Avoid over-production and under-production at each step.
  6. Maintain process stability by allocating sufficient resources to each step.
Just-in-time thinking has proven highly effective in car manufacturing under conditions of growing market demand and stable consumer preferences. Nevertheless, its positive results in that area cannot not be taken as a success guarantee under all conditions. That would constitute a case of exaggeration and over-generalization.

Assuming that what is true under certain circumstances has universal application can lead us to mistakes in other areas. As it frequently happens, reality shows us a more complex truth:

  • DEVELOPING A VISION IS A KEY ENTREPRENEURIAL FUNCTION. Human behaviour cannot be mathematically predicted. Surveys of consumer preferences have proven repeatedly ineffectual. No success formula is written in stone. Determining what new products should look like is a key entrepreneurial decision.
  • SEIZING OPPORTUNITIES IS THE ESSENCE OF ENTREPRENEURSHIP. Process regularity and employment stability are highly desirable, but markets often disrupt the best intentions. There is no way to predict with certainty how many products will be sold and at which price. Assessing the strength of consumer demand is an essential task of the entrepreneur.
  • FORECASTING TRENDS REQUIRES ENTREPRENEURIAL THINKING. Constant production speed (just-in-time) is not an end in itself. Consumers always have the final say. Determining which production and delivery speed suit markets best is a fundamental entrepreneurial decision.
Despite its extraordinary contribution to enhancing quality and productivity, the just-in-time approach cannot replace the role played by entrepreneurs.

"When the eye looks at the world, it wants to perceive every colour," observed Marcus Aurelius two thousand years ago. "When the mind looks at reality, it should be open to perceiving all circumstances."

Look at reality with your own eyes, assess where the best opportunities lie, and decide which course of action you should follow. No formula can replace the entrepreneurial mind of the individual.


[Image by not a hipster under Creative Commons Attribution License. See the license terms under]