Some argue that well-run companies operate comfortably within their capabilities. But what about the opportunities they miss, Robert Heller asks, by never taking risks or testing their limits?
Most managing directors would be unimpressed if told by the subordinate running a division that the system was being driven 'right to the ragged edge'. Neither would he or she win much favour by saying that 'things are running at borderline out of control' inside the company. Managers are expected to operate smooth systems that are able to cope seamlessly with all situations. Driving the system 'right to the ragged edge' (used to describe the situation at Boeing) implies that any further increase in load will cause systemic collapse. 'Borderline out of control' (ditto Intel) surely means teetering on the brink of chaos. Either description - actually applied to each company by its boss - sounds like classic mismanagement.
Yet the two companies are brilliantly managed by any criterion. Their problems are those of overweening success. Boeing is striving to raise monthly output from 18 planes a year ago to 43. And Andy Grove of Intel, having rewarded his shareholders with a 131% gain in 1996, is stretching himself and his company more than ever to 'compete to win' - even though in microprocessors Intel has minuscule competition.
Such stretching inevitably has its limits. Peter Senge of MIT uses the phrase 'limits to growth' to describe the ineluctable, often unseen boundaries to expansion. As Britain's boom continues, more UK companies will come up against those obstacles. The constraints may not be limits to physical output in the factories, but those imposed by shortages of engineers, or sales staff, or key components - or the simple ability of the system to cope.
Some argue that a well-run company operates comfortably within its capabilities and never nears the limits of control. However, a fast-track concern, growing as rapidly as the limits will allow, will always be short of capability and will always test its control systems to the utmost. If a business is doubling in size every three years, every control specialist from accountancy to IT will be straining muscles to keep up with the sheer pace. That's no failing but a mark and guarantee of excellence - if, that is, you believe that the best performance comes from being stretched. People working against pressing deadlines often produce their best work, or think they do.
But from time to time living on the edge can go horribly wrong. In the late '60s and early '70s EMI threw away its potentially marvellous world market lead with brain-and body-scanners by going over the ragged edge and right out of control. The programme never emerged from crisis mode: prototypes, rather than finished products, were delivered from ineffective production lines to unhappy customers; and the apparently golden profit stream evaporated as the uncontrolled extra costs came home to roost.
A crucial difference separates planned crash management and managing in continual crisis.
There's a case for saying that most companies stay too far away from the ragged edge. Lack of familiarity with danger is a danger in itself - that's proved every time companies cross the borders of control, stumble into loss and embark on a turnaround. Companies such as ICI and Courtaulds - using fewer managers, not more - achieved prodigies of renaissance under the cosh. Presumably the relevant energies were always available. Not only were there spare management resources, but individual managers were being under-used - and no doubt many profitable opportunities went begging.
The danger of living in the comfort zone is that management gets too complacent, and the sense of urgency disappears. Inside large companies, plans and proposals made at somebody's urgent behest time and again vanish onto the back burner. Doing nothing seems less risky than taking action.
Unhappily for UK firms, this convenient lack of activity all too often extends to a company's research and development practices - the DTI has revealed that, among the world's 300 largest R&D spenders, the 18-strong British contingent only coughed up 2.3% of sales - against 4.4% for the group as a whole.
The figure for Intel is 8.7%. Less R&D spending means fewer projects - and projects provide the answer to the conundrum of control versus momentum. Corporations need highly controlled frameworks but, within those, projects of all shapes, sizes and urgencies can test the limits. Even monster programmes like the Halifax's bank conversion can be forced through against lung-bursting deadlines by fast-track methods: by breakdown into a myriad specific tasks, allocated to effective teams and co-ordinated by fully informed, hands-off leadership. Organisations can excel themselves on these occasions. But too often, once the task is complete, programme management recedes into the past, and business continues as usual - at a pace far below true capacity.
'Ragged edges' and that 'out-of-control' feeling are failures in one sense - signs of less than excellent planning and under-provision against contingencies. But these are nothing compared to the missed opportunities of companies which never strive to achieve the impossible.