The 'Loose Brick' concept is well known in Japan but virtually unheard of in the West. It is a key element in the Risk Management Element in 'Hoshin Kanri' (Reference David Hutchins Book) The over all objective of Hoshin Kanri is to create an organisation in which everyone from the top to the bottom is working towards making that organisation the best in its business.
However, in reality it goes well beyond simply being the best. Not only do Japanese companies operating Hoshin Kanri based Management Systems plan to be the best but also they look for every opportunity to exploit their competitors weaknesses. This is the the basis to the Loose Brick concept but there is more. Not only do they look for their competitors 'loose brick' but at the same time they try to make sure that they do not have one themselves.
BENCHMARKING - IN SEARCH OF THE LOOSE BRICK
It could also be considered as the 15th point that Deming did not see!
It is not surprising that Dr Deming missed it because the Japanese rarely ever mention it; why should they? since it is their most deadly weapon in the field of economic competition!
In the UK we have a similar concept which we call the ‘Achilles Heel’. However, unlike Japanese managers and past military leaders, it is not used by us very much if at all. We talk about someone’s Achilles Heel, meaning their weak point but it is rare that having identified it we ever use the knowledge to exploit the weakness for our own advantage. Conversely, neither do we spend much time seeking to find any weak points of our own that might give a market opportunity to our competitors. In failing to do either of these, we leave ourselves vulnerable to attack. We understand this militarily but not commercially.
To illustrate the power of the ‘loose brick concept, we can look at a number of case examples.
In 1980, Rank Xerox controlled almost 100 percent of the world market for plain paper copiers. By 1985, that market had plunged below 50 percent and was rapidly headed downward toward 40 percent. The same thing happened to Caterpillar at the hands of Komatsu. It also happened to the motorcycle industry in the 1960’s, the TV industry in the early 1970s and is still repeatedly happening in other industries.
In the UK during 1973 there were about ten major manufacturers of telephone sets : McMichael, Sobell Bush, Ultra, Decca, HMV, etc. But one year later, only Ferguson remained and that was a special case. Sony, Hitachi, Toshiba, JVC, Panasonic, and several others replaced local TV brands.
In every case, the same phenomenon occurred: no warning followed by overwhelming assault. The evidence was all around, yet virtually no one seems to have recognised that these events had a commonality, and the consistency with which this has happened over so many decades promises that it will continue to happen into the future unless there is some counter strategy. In spite of the attention given to Japanese industrial strategy, and the attention given to total quality related concepts, there still remains a further element that has eluded the attention of those who are struggling to counter this market-dominating offensive.
The secret is simple. In Japan, it is often referred to as the “loose brick” syndrome. The concept is not entirely unknown in the West, where it is often referred to as “looking for the Achilles heel” or vulnerable spot. In the Japanese version, however, it means looking for the competitor’s blind spot.
The concept is evident in the Japanese approach to business. In the West, particularly the USA, almost the reverse of this approach holds true. It is strikingly apparent when comparing the typical American companies approach when launching a new product with those of their Japanese counterparts. Americans, and to some extent other Western countries, tend to announce what they are going to do; the Japanese tend to tell you what they have done.
Western organisations announce their intentions months or even years in advance, often with extremely high levels of publicity. The Japanese on the other hand, rarely, if ever, do this.
The downside of the Western approach is obvious. Competition is alerted, counter strategies develop, resistance from other sources may energise. Expectations on the part of the target consumer often rise beyond the levels that may eventually be reached. When such expectations are encouraged by the media, occasionally the situation may get out of hand.
What Western companies never seem to learn is that while there is an obvious advantage to being the first in the market, the product or service must be exceptional if it is launched with a blaze of publicity. Otherwise, the publicity and consumer attention will be focused on the failed expectations and not on positive features. In this case, it is almost certainly better to be second into the market with a product that offers one of the disadvantages.
All of this commentary is relevant to benchmarking, but it focuses on an aspect of benchmarking different from what has been discussed in Western media. Generally, much of the attention in the West has been given to benchmarking against best practices. Where competition with Japan is concerned, attention focused specifically on one aspect of benchmarking will almost certainly prove to be yet another false trail and will inevitably lead to disillusionment, as has been the case often with quality circles, just-in-time, project-by-project improvement, statistical process control, the Taguchi method, etc.
The commonality between all these concepts is that they are concerned with doing the same things better. This is important but it is not enough. No one concept alone ensures that a company is doing the right things. Neither does it help when it comes to doing what the Japanese do best: shifting customer expectations away from areas of competitor competence.
Automotive market penetration
Before Japanese automobiles entered the Western markets, competition among Western auto manufacturers in Europe and the USA was focused on technical innovation and differentiation by major differences in styling. For example, the Morgan, Vauxhall, Jaguar, Austin, Rover, Wolesley, and Citroen were all instantly recognisable by their distinctive appearance.
At the time when Japanese automobiles first appeared in the early to mid 1960’s, the then British Motor Corp. was attempting to attract potential customers with hydro-elastic suspension and the transverse engine. Such innovations were clearly more elegant from an engineering point of view than their predecessors, but they lost out in the marketplace to the simple Datsun. Why?
The Datsun had a radio as standard and the Austin/Morris 1100 did not. The Japanese were aware that the average customer was unlikely to understand the technology of sophisticated suspension systems. To the customer, an auto is an auto, but a radio as a standard item has value added at no extra cost. This was a highly visible differentiator that changed customer’s expectations overnight.
This single factor was one of the more profound changes in the history of the motor car since the advent of mass production.
In the eyes of the public, this Japanese company had done something no other manufacturer had even attempted to do. Datsun recognised that the customer is king. Western manufacturers, however, were product-oriented. In this regime, the assumption is that the manufacturer or provider of the service is the expert and knows what is best for the consumer. Of demand consistently exceeds supply, such a strategy may appear effective. But, when supply exceeds demand, it can prove fatal.
Western manufacturers did not learn from this experience. Japanese manufacturers continued to attempt to provide what the consumer required and, eventually, the Japanese had overtaken their Western counterparts by the mid 1970’s. The loose brick in the case of automobiles was the manufacturers “we-know-best” mentality. Even today with all that has happened in the industry, few Western auto manufacturers appear to understand what continues to happen to them.
Most auto manufacturers have developed total quality strategies. Almost all have introduced project-by-project improvement, supplier control, and other quality-related services and disciplines to improve reliability, reduce stocks, shorten lead times, etc. None appears to have recognised the loose brick concept. BMW, for example, still produces cars without features that are standard in competitors cars. Toyota, of course, is impacting BMW’s market in the USA and elsewhere.
Television market domination
The case of television was different. The loose brick was not the product, its features, or its attitude in response to customers. Instead, the target was the dealer. With a product such as television, it is difficult to introduce features not easily copied or add to the attractiveness of the product without also adding significantly to its cost.
Moreover, research indicated that for such products, because of the lack of distinctive differences in appearance or price, it is somewhat easy for a supplier to influence the end user toward his product. With TV, there were two key possibilities: first, to be able to offer good margins for sales, possibly leading to price wars and accusations of dumping; second, to provide a significantly more reliable product.
The attraction of a differentiator such as reliability was that the difference may be apparent to the seller because of significantly fewer warranty claims, which would be far less apparent to the competitor. The difference was not apparent to the end users initially. All that customers knew was that their TV sets kept working.
Early on, Philips conducted a defensive study to learn why the Japanese were so successful in diverse markets. Philips found few differences in price or appearance. But where the Western standard for reliability was 6 percent, Japanese manufacturers had achieved an incredible 0.5 percent. At that time, such performance capability was seemingly impossible. Philips did not surrender but decided instead to equal Japanese competition in product reliability within one year. As a result, Philips is one of the few Western electronics giants to remain in competition. The difference in reliability as a major exploitable weakness was a classic case of the loose brick strategy.
The Caterpillar example
The case of Komatsu against Caterpillar is another example. When Caterpillar joined with Mitsubishi Heavy Industries in 1960, Komatsu, as a small operator, recognised the possibility that it could be forced out of business. To prevent this while using the loose brick strategy, Komatsu created the slogan “encircle Caterpillar”. At that time, it appeared almost as achievable as a flea surrounding a herd of elephants, but it was a long term strategy.
While looking for the blind spot, Komatsu discovered that though Caterpillar was a giant in the developed world, it had very little presence in underdeveloped counties. Not wishing to alert the competitor too soon, Komatsu began to develop a network of product support and distribution throughout all continents away from the gaze of its major competitor. By the late 1970’s the plan was complete and the economic strength of Komatsu in the early 1980’s, Komatsu made a direct assault on Caterpillar’s markets. Caterpillar was unprepared and slow to respond. Consequently its market share slumped from 90 to 40 percent.
What do all of these examples have in common? In every case, the target industry or company had an exploitable blind spot or weakness. The Japanese competitor had identified that weakness, then developed the means to exploit it. There were no quick fixes. Each case was carefully researched, thoroughly throughout, and launched with stunning effectiveness.
The example of Datsun’s auto radio may seem thin compared with the other examples, but in fact it represented a profound change in thinking. Japanese knew that Western auto builders would not respond. First the radio came as standard, then wing mirrors, mud flaps, cassette players, and so forth. Of course, the industry has eventually responded to this, but how long did it take and how much market share had been lost first? There are indications that we have not yet learned from these experiences. They are still happening.
What benchmarking is
When used as part of an industrial strategy, loose brick strategy forms a leading part of Hoshin Kanri or management by policy. Management by policy begins with the vision or mission statement by the company president complemented by the collective vision of the board of directors. Mission statements are goal-orientated as supplemented by statements of core values of the enterprise. Since the achievement of these aims requires success in the marketplace, and is affected by the equivalent aims of what would appear logical to find out what these are and how they are intended to be achieved, then to adjust the strategy accordingly.
Additionally, it is necessary to study the relative strengths and weaknesses of the competitor with a view to negating the strengths and exploiting the weaknesses including the blind spots or loose bricks. This is known as benchmarking.
This work must be done by a company’s director with the aid of specialists. In Japan, directors have the time to do this because they have deployed problem solving on a day-to-day basis through the organisation. The Western companies have not yet learned to do this effectively. Consequently, the directors, senior managers, and specialists in these companies spend too much of their time solving everyone else’s problems.
As an illustration, the directors of Komatsu spend an average of six months a years engaged in Hoshin Kanri activities - attempting to run rings around Caterpillar and other competitors. Typically, Western directors may have only three days concentrating on this type of behaviour.
Benchmarking as part of Management by Policy has eight elements:
1. Find the loose brick by researching the competition, including its distribution n process and marketing policies.
2. Identify best in class competitors and their strengths and weaknesses.
3. Find best-in-class processes including their equivalents in parallel industries.
Sometimes businesses in parallel industries do the same things in different ways, and these are worth studying. (People in the same industries usually do the same things the same way).
4. Find the best people policies; these can come from any industry.
5. Identify best-in-class technology.
6. Identify best-in-class financial performance. These data are probably the easiest to
obtain and subjected to benchmarking by easy access to public company reports.
7. Study business strategies across a spectrum of industries with particular focus on
those that have produced stunning results in terms of market penetration.
8. Study the root causes of failure of some companies that have collapsed.
A good competitor can be a valuable resource. Survivors in the future will be fit, fast, lean and hungry. They will know their competitors as well, if not better, than they know themselves.
Loose bricks are not always evident. Survival may require that a firm’s executives think like their best competitor.
It is founded on the principle that when properly developed each individual is the expert in his or her own job. The object being to use every ounce of creativity.
Bill Gates referred to this as being 'Corporate Intelligence'.
Hoshin begins with the creation of the VISION. What are the ultimate goals of the organisation?
The next question is 'how can we achieve the VISION? what resources do we need?
This involves every Function and every level. For the achievement of their role in the VISION what is their Mission?
Against all of these criteria, how good are we now? What are our strengths and weaknesses? How do we retain the strengths and how do we deal with the weaknesses? We need the help of Quality Function Deployment to manage this and to convert Critical Success Factors into KPIs
We need the Continuous Business Improvement Process at all levels to close the gaps on the KPIs. This involves the organisation of Self managing Work Groups, Project Teams, Continuous Benchmarking to monitor the market place and our internal performance.
We also need to both keep an eye out for when someone is using the Loose Brick concept against us and where we can use it against them.
This is the essence of Hoshin Kanri and it is not simply 'Policy Deployment' much as some would have you believe.
Also the following link will take you to David Hutchins slide presentation given at a European Organisation for Quality Congress in Budapest (Hoshin Slides)