Magazine article Industrial Management

Research Priorities in Marginal Companies

Magazine article Industrial Management

Research Priorities in Marginal Companies

Article excerpt

Perhaps the most meaningful and obvious definition of a marginal firm is one that is not making money. This is not totally accurate, because a small, high-technology start-up may not make money for quite some time, but may possess a bright and high-growth future. Typically, marginal firm in a depressed manufacturing environment, using Connecticut as an example, is one in a traditional industry faced with high local labor costs, substantial tax and energy expenses, an aging physical plant and dated manufacturing equipment. Although it may not compete with foreign interests, a marginal firm may find it hard to compete with more modern companies in low-cost states, and may simply find it hard to satisfy contemporary customer demands for JIT and TQM performance. With low profitability, the firm finds financing costly, difficult to obtain, and unavailable for major renovation or rejuvenation. Unless it can study and restructure itself, the marginal firm struggles with daily problems and faces a bleak future.

Research in a marginal firm is typically viewed by its management as frivolous, akin to studying ways to improve engine efficiency while the hull continues to flood and the pumps fail. Yet research may be desperately needed to obtain the following objectives:

* To define a survival strategy--what is the essential business of the firm, is it still viable, and, if so, what must be done to make it profitable?

* To increase productivity--where are productivity problems, and what new technology or new methods can solve them?

* To introduce new products, new materials and new processes.

* To design optimal systems for scheduling, costing, production planning, logistics, procurement and quality management.

Consultants are heavily involved in assisting client companies in reaching these objectives. This assumes that hard-pressed firms are sufficiently able to use and to pay consultants. Quite often, marginal firms slowly release engineers, planners, and other middle managers who are in positions to work with consultants and implement recommendations. One small firm in Connecticut, reeling from decreasing orders from troubled airlines, let go all its qualified engineers and continued with a cadre of technically-oriented foremen. When a foreign engine manufacturer approached them with potential business they were unable to respond at the required technical level, and lost the opportunity. One difficulty with consultants is that they come, make recommendations, and leave. The client is left to implement the ideas and make them work. If a competent technical staff is not present, nothing gets done, and the consultant's efforts are wasted. A small team of technical people capable of implementing new concepts, learning new technology, and doing the required internal research is essential to successful utilization of consultant recommendations. At $1,500 a day or more, a consultant's work is a costly thing to waste. Yet, a marginal firm that needs consultant support is often a firm that cannot effectively use it once received.

Since research is not a task one usually assigns to a consultant, it is a job function a firm must assign to a qualified, motivated employee, supported perhaps by state assistance from a manufacturing assistance center, advanced technical center, or similar economic development unit. Most of the states now offer such services. Typically, assistance comes in the form of a consultant team drawn from academia, the ranks of retired executives, or from small, often one-person consulting firms. Certain research topics may become projects in a university laboratory, subsidized by state funds, with the results transmitted to the client for implementation. Any state assistance is slow in coming, however, and does become public knowledge. Therefore it is not suited for projects that must be kept secret for proprietary or competitive reasons. For example, a firm supplying very high-quality surgical cutters to a demanding distributor may not want that customer or a competitor to know they are forced to use 100 percent inspection to meet quality acceptance standards at the customer's plant. …

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