Learning by design - organizational learning - The Mandate for Learning

Chief Executive, The, July-August, 1995

Many large companies use periodic planning cycles as opportunities for organizational learning. At Emerson Electric, an elaborate and structured cycle of periodic meetings and events gives CEO Chuck Knight and other senior executives the opportunity to train and develop division general managers, broaden management's understanding of corporate goals and objectives, teach new concepts, and transfer good ideas from one part of the company to another. Such practices have allowed the company to overcome the economic cycles that plague virtually every other manufacturing company and to record nearly 40 years' worth of annual increases in earnings, earnings per share, and dividends per share.

A growing number of companies use simulations, experiments, and pilot programs to learn and make adjustments - before they make major commitments. As a technique, simulation began and is most highly developed in the military and defense industries, where it is used to examine responses to all kinds of contingencies. But the power of the concept also has intrigued many companies, which now use elaborate computer simulations to allow management teams to visualize how competitors might respond to a decision to expand capacity, increase prices, or drive for additional market share.

At the Timken Co., the world's leading maker of tapered roller bearings, simulations go well beyond computer models. In considering whether to open a new bearing plant, the company relied extensively on the latest techniques in computer-aided design and simulation. But before going ahead with the final design, Timken tested it in a decidedly low-tech manner. At the company's R&D center near Canton, OH, engineers built a "cardboard city" - a full-scale cardboard mock-up of the new process. Timken brought in several dozen machine operators and explained the new operation to them. Then they ran a series of simulations with the operators actually walking from cardboard machine to cardboard machine, and they watched what happened. Afterward, the machine operators offered hundreds of suggestions. The result was fewer start-up problems and a much improved operation.

Effective learning organizations not only learn how to improve, they also improve how they learn, often by reflecting collectively on their experiences. Unfortunately, the value of collective reflection often doesn't become evident until it's too late. For example, many of the companies that pioneered disk-drive storage units for small computers are no longer factors in their industry, largely because of their approach to learning from their environment. Most of them dutifully surveyed their customers about such matters as whether 8-inch drives would continue to meet their needs or whether they would prefer smaller units. For the most part, however, these customers were makers of mainframe computers and other big equipment; larger drives satisfied them. Because these surveys did not include potential customers, the disk-drive companies missed the fact that the explosive growth of personal computers would transform their industry. New suppliers entered the field, and the pioneers fell by the wayside.