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Chapter 14 -

Engineering Management in the


New Millennium
Dr. C. M. Chang
Only to be used by instructors who adopt the text:
C. M. Chang, “Engineering Management: Challenges in
the New Millennium,” Pearson Prentice Hall (2005)
Copyright © 2005 by Dr. Carl Chang
Approaching the New
Millennium
• Emerging Future Trends
• Differences in Companies in New and Old
Economies
• Characteristics of New Era Companies and
Strategies in Production, Distribution and Service
• Transition to the Knowledge Economy - Examples
• Personal Strategies for the Future
• Contributions in the New Millennium
• The Challenges Ahead
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Emerging Future Trends

A. Customer Focus

B. EnterpriseIntegration

C. SupplyStrategy

D. KnowlegeManagment

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Emerging Future Trends

E. ChangesinOrganizaitonal
Settings

F. PopulationDiversity

G. Migrationof Jobs

H. Globalization

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(A) Customer Focus
• Process (speed, transparency, self-help)
• Customer service (quality/reliability - Service
Profit Chain Model)
Employee
Leadership Good Place Employee Retention Value to
to Work Satisfaction Customer
Employee
Productive

Revenue
Growth
Customer Customer
Loyalty Satisfaction
Profitability

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(B) Enterprise Resource Integration

• Integrated Communications Systems


-Information sharing
• Wireless Applications
• Leveraged legacy systems

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(C) Supply Strategy
• Work Outsource: Production, back-office work,
logistics, after-sales customer service, procurement,
inventory management, new product design, and
others
• Integrated parts suppliers - automobile component
firms with flexible production maintained at capacity
• Integrated service organizations – Offering
financial advisement, accounting, insurance and
banking for many firms
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(D) Knowledge Management
• Preservation of know-how critical to
knowledge-intensive companies
• Dissemination
• Wide-spread applications to add value
• Supply chains of knowledge agents and
centers

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(E) Organizational Changes
• Type one - Assemble and market products/ services
to consumers: (1) retain core competence and
outsource others, (2) form Supply chains, (3) focus
on customer’s needs, (4) become Virtual
organizations
• Type Two - Supply specialized products/ services
to client companies: (1) build flexible production
facilities (e.g., cells) to respond, (2) vertically
integrated
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(E) Organizational Changes
(cont’d)
• Transition from One to the other - Virtual
organizations produce commodity-like
products well - When breakthrough,
leading edge performance is needed, no
perfect information exists for product
specification, virtual companies may swing
back to vertical enterprises (e.g., Cisco in
Optical Networks)
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(F) Population Diversity
• U.S. Census Bureau Prediction (2004):
P o p u l a ti o n C o m p o s i ti o n 1 9 9 5 2050

W h it e (N o n -H is p a n ic s ) 7 3 .6 0 % 5 0 .1 0 %
B la c k (N o n -H is p a n ic s ) 12% 1 4 .5 2 %
H is p a n ic s 1 0 .2 0 % 2 4 .4 0 %
A s ia n / P a c ific Is la n d e r 3 .3 0 % 7 .8 6 %
N a t ive A m e ric a n s 0 .7 0 % 0 .9 0 %
• Women and minority attain key positions
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(G) Migration of White Collar
Jobs to Other Countries
• Job migration - Clerical, chip design, customer
service, software programming, tax preparations
(jobs following procedures)
• 3.4 million jobs by 2015 to low wages countries
(China, India, Ireland, The Philippines, India,
Mexico, and Russia)
• Pressure on American workers - How to justify
the high wages with the value they create?
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(G) Job Migration to Other
Countries (cont’d)
Sun C altex
MicroSystem

Texas Job
Bell Labs
Instruments Migration

A ccenture GE

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(G) Job Migration (cont’d)
• (1) Caltex Petroleum - shifted service and
professional jobs from Europe and U.S. to Ireland,
Jamaica, India and the Philippines
• (2) Bell Labs has large research centers in
Bangalore and Hyderabad, India
• (3) Sun Micro-System hired Russian scientists for
software and microprocessors research.

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(G) Job Migration (cont’d)
• (4) Accenture (Anderson Consulting) pays 1/3 to 1/4
of US wages to Philippine workers
• (5) General Electric shifted some 1000 customer
service jobs to New Delhi, additional centers for
handling payroll, design and billing services are
planned
• (6) Texas Instruments has its integrated circuits
designed in India, since 1986

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Engineering Graduates
US Graduates as Percent of Total
(5 Countries)

50%
Percentage

40%
30% BS
20% MS/PhD
10%
0%
1989 1999 2009
Year

5 Countries: USA, China, India, Mexico, The Philippines


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(H) Globalization
• Clear trend in the new Millennium (Market,
resources, technologies); most companies
will be actively involved
• United Nations Forecast: Five largest GDP-
based national economies in the World by
2020: (1) China, (2) US, (3) Japan, (4)
India, (5) Indonesia

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US Companies

Old New
Economy Economy
Companies Companies

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Old Economy Companies
• Rigid hierarchies and Clear
boundaries
Top
• Capital Intensive, fixed tangible
assets centered
Upper
• Small price/book value ratios
Middle • Shareholders are owners
• Functions are vertically
First Lavel
integrated, emphasizing self-
sufficiency, stability and
Bottom
incremental growth

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Old Economy Companies
(cont’d)
• Rivalries among competitors motivate employees and
drive success in marketplace
• Going concern
• Communications follow chain of command
• decision making is resources centered - efficiency driven
• Slow transactional processes, with business data
available monthly

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Knowledge Economy Companies
• Flat organization with small core and
extensive alliance/partnership networks, with
fussy company boundaries
• Idea-intensive, with digitalizable and
commodity-like goods (data, software,
entertainment, cars, computers, jeans etc.)
• Focusing on time to market, cost reduction
through technologies supplied by alliance
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Knowledge Economy Companies
• Flat organization with small core
Partner
and extensive alliance/
1 partnership networks, with fussy
company boundaries
• Idea-intensive, with commodity-
Partner
Core
Partner like and digitalizable and
4 2
commodity-like goods (data,
software, entertainment, cars,
computers, jeans etc.)
Partner
• Focusing on time to market, cost
3
reduction through technologies
gained from alliance
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Knowledge Economy
Companies (cont’d)
• High market value to book value ratios
• Shareholders not solid owners, as ideas in people’s
heads can not be chained down - risk factor
• Virtual organization with changing partners
• Collaborate, not competing against competitors to
achieve win-win advantages
• Some companies get acquired over time

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Functional Integration of
Knowledge Economy Companies
• Cisco Systems -Performs all administrative
functions over the internet, owns only 2 of
34 plants, handles only 10% of orders by
hands
• Dell Computers - Has inventory for 6 days
only
• General Motors - Build-to-Order system for
cars in 10 to 12 days in the future
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Modern Companies
Customer Product Customer Team
Feeback Customization Loyalty Structure

Employee Diverse Evaluate


Relations Workforce Performance

Communicate Use New


& Transact Tools

Pursue
Globalization
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Characteristics of Modern
Companies
• Solicit real-time customer feedback (Internet-
based communications tools)
• Target market segment of one (mass
customized products/services)
• Induce customer loyalty with personalization of
customer relationship
• Create enduring relations with employees to
connect to company’s business partners
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Characteristics of Modern
Companies (cont’d)
• Adjust to diversified employee composition
(40% of workforce on temp basis by 2010,
talented business superstars represented by
agents)
• Organize team structures to remain flexible
• Assure instant Information flow and efficient
transactions
• Do performance evaluation constantly
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Characteristics of Modern
Companies (cont’d)
• Use advanced tools (resources planning,
enterprise integration, supply chain
management, customer relations
management, web-based transactions,) to
reduce staff and improve efficiency
• Pursue globalization proactively

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Organizational Design of a Progressive Enterprise

Business Partners

Supply Chain Management

Investors
Employees
Enterprise Resource Planning
and Application Integration
(Production, Engineering, Financial
Decision Support, Management
Human Resource
Management Knowledge Management,
Marketing and Sales
Management, Procurement,
and Other Business Public Relations
Operations) Management

Customer Relationship Management Communities

Customers
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General Electric - An Example
• Four Initiatives: (1) Globalization, (2)
Service, (3) Digitalization, (4) Six Sigma -
Quality Assurance
• Jack Welsh/Jeff Immelt - Continuous
mobility
• “No back office” - Digitize or outsource
those parts of businesses not touching the
customers
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Strategies To Make Companies
Great in New Century
• Speed - Treat time to be more valuable than money and
buy for speed
• Talents - Attract, motivate, empower and retain the
very best talents, as ideas are key assets for any
companies
• Focus - Go for long-term market position and
dominance, rather quarter-to-quarter performance
improvements

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Strategies To Make Companies
Great in New Century (cont’d)
• Customer Orientation - Follow what customers
want and create customer-driven supply chains
• Productivity - Outsource non-core activities,
buy technologies and digitize the rest
• Operations - Streamline operations using
advanced software technologies to adapt to
changing marketing environment

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Personal Strategies for the Future
• Get post graduate education - learn how to read fast,
digesting information efficiently, learn quickly.
• Understand products and markets in transition, induced by
changing technologies
• Communicate well, compromise effectively and be a
master o changes
• Create/manage external business networks

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Personal Strategies for the Future
(cont’d)
• Be familiar with capital (venture capitalists) and financial markets
(security analysts)
• Nurture leadership skills (acting like a conductor of a symphony
orchestra)
• Size technological opportunities to benefit the company
• Stay away from non-core, standardized or digitalizable functions

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Conclusions
• Engineering - Technical excellence and social
compatibility in workplace are both important
• Management - Broad knowledge and interest,
managerial perspective, training (lead, organize, plan
and control) and aptitude to manage are success factors
• Engineering Management - Insight to use
technologies for creating business benefits

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Conclusions (cont’d)
• Knowing what to do is not enough, practice
will make it perfect

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References
• Di Kamp, “The 21st Century Manager: Future-focused Skills for the
Next Millennium,” Kogan Page (January 1999)
• “The 21st Century Corporation,” Business Week, pp 75-212 (August
28, 2000)
• Jeffrey A. Schmidt, “Corporate Excellence in the New Millennium,”
Journal of Business Strategy, p. 39 (November 1999)
• Peter Haapanieme, “Leadership in the New Economy,” Chief
Executive Journal, p. 63 (July 2000).
• Additional 29 References are cited in Curse Notes

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Summary of the Two-Course
Sequence
• (1) Organizing • (7) Cost Accounting
• (2) Planning • (8) Financial Accounting and
• (3) Leading Analysis
• (4) Controlling • (9) Managerial Finance
• (5) Engineers as
• (10) Marketing Management
Managers/Leaders
• (6) Engineering • (11) Web-based
Management in New Management/Engineering
Millennium Enablers
• (12) Globalization
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Manage/Lead/Act/Think
Manage/lead/act/think Focuses

Inside Core competencies, cost and quality control,


Production and engineering functions

Outside Emerging technologies, supply chains,


Market orientation, customer relationship

Today Organize, control, plan, lead


Teams and projects, do things right

Tomorrow New projects, new core competencies, new products,


New markets, do the right things

Local Implementation details, local adjustments

Global Global resources, global scale and scope,


Global mindset and savvy
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Pyramid Building
• Manage on the inside and outside, lead from
today to tomorrow, act locally and think globally
• Two Course sequence builds individual pyramids,
which, when constantly nurtured and reinforced
brick by brick, will allow engineers to be visible
and recognized as leaders above the crowds for a
long time to come.

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Vision
Innovation
Customers
Value Addition,
Supply Chains Mgmt
Engineers as Leaders
(Cost Accounting - ABC,
Financial Analysis - EVA,
Marketing Mgmt, Web Enablers)

Plan, Lead, Organize and Control


(Self, Staff, Teams, Projects, Global Issues)

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Question # 14.2
• Leading technological innovation is a major
challenges for engineering managers in the
new millennium. What are some of the
success factors for technological
innovation?

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Question # 14.3
• The new millennium is expected to
experience continued changes in
communications technologies, business
practices, worker diversity, customer
empowerment and marketplace conditions.
Name a few leadership qualities which are
deemed essential for engineering managers
to achieve success in the new millennium.
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Answer #14.3 (Leadership)
• L – Listening, leveraging own capabilities
and strengths
• E – Empowering, entrusting people,
enthusiasm
• A – Action driven, attitudes, accountability,
ability to motivate others

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Leadership
• D – Determination, decisiveness in setting
directions, detail-orientation in
management approach
• E – Energy, empathy, effectiveness,
efficiency
• R – Rewarding, respecting, risk taking,
reinventing oneself
• S – Setting personal examples, servicing
people, showing missions/vision

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Leadership
• H – Honesty, honorable objectives
• I – Innovative, integrity, interpersonal
skills, inspiring capabilities
• P – Persistence, positive outlook, proactive
communications

Sources: Dave Fleming 2002, “Leadership for a New Millennium,” Emerging Leaders Institute; John
H. Zenger and Joseph Folkman, and Joe Folkman, 2002, “the Extraordinary Leader,” McGraw
Hill Education, Europe (June )

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Examples of Choice-Boards
• Choice-Boards offer customization of needed
product - Allows companies to sell first, then
produce (low or no inventory and financial costs)
• Dell Computers - Computer systems (memory size
hard-drive, modem, monitor, keyboard, etc.)
• Levi’s - Spin Jeans (fit, style, color)

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Examples of Choice-Boards
Choice-Boards offer customization of needed products - Allows
companies to sell first, then produce (low or no inventory and financial
costs)
Dell
Cisco Computers
Levi's
Systems

New Proctor
Mattel Economy &
Companies Gamble

Napster American Nike


Quntum
Cycles
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Examples of Choice-Boards
(cont’d)
• Dell Computers - Computer systems
(memory size hard-drive, modem, monitor,
keyboard, etc.)
• Levi’s - Spin Jeans (fit, style, color)
• Proctor & Gamble - Cosmetics and
perfumes (50,000 choices)
• Nike - Sneakers (features, styles and colors)

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Examples of Choice-Boards
(cont’d)
• American Quantum Cycles - Motorcycles
(seats, handlebars, paint color)
• Napster - Downloading music to burn custom
CDs
• Mattel - My Design Barbie - build a custom doll
(hairstyle, color, complexion, eye color)
• Cisco - Custom design router, switches and hubs
using its Marketplace portal
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Success of Digitalization
• Bank Transaction: $1.25 by bank teller, $0.54 by phone,
$0.24 by ATM, $0.02 via Internet
• Procurement (Corning): $140 for procuring parts and
supplies by people, $11.7 via Internet-based catalog system
• Recruitment: $128 for normal human based routine, $0.06
by digitizing the process and eliminating labor
• General Electric - $50 over the phone for customer inquiry,
$0.50 via Internet

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