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Rise, fall - and rise - studied; A 'Toynbee' look at US industries

By David R. FrancisBusiness editor of The Christian Science Monitor / July 7, 1983



Boston

Two business school professors have tried to analyze American industries in much the same way the famed historian Arnold Toynbee did for civilizations and biologists have for organisms.

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What, they ask, prompts some industries to thrive, others to wilt and die?

Oversimplifying, Toynbee held that where life was too easy, as in the food-rich tropics, or too hard, as in the Arctic, people tended not to create great civilizations. But those living in temperate climates, he maintained, were more often faced with the right amount of challenge and developed strong civilizations. Biologists talk of mutations that enable organisms to survive a changing environment - if the change is not too drastic.

Similarly, Paul R. Lawrence, a professor of organizational behavior at the Harvard Business School, and Davis Dyer, an assistant professor of management at Boston College, find that industries (or companies within an industry) readapt best to an ''intermediate level'' of challenges from their changing environment.

In a new book, ''Renewing American Industry'' (Free Press, New York, $22.95), the two authors look in depth at how seven industries have adapted to change over time. These are automobiles, steel, hospitals, agriculture, residential construction, coal, and telecommunications.

Generalizing from these studies, the authors conclude that many of the nation's current industrial problems stem to a considerable degree from poor organization. Companies do not anticipate and adapt to changing economic conditions. It could be that other problems are factors in an industry's decline - government regulation that is too much, too little, or too inconsistent; worldwide recession; unfair competition from abroad; shortsighted managers; greedy labor unions; obsolete technology; or some combination of these.

The authors' history of the various industries is relatively straightforward and well done. Their general analysis becomes rather academic, however, with tables and charts and newly created jargon. They talk, for instance, of ''information complexity'' and '' resource scarcity.'' Information complexity refers to the number of variations in the business environment affecting a company's production decisions - whether it has a monopoly or plenty of competition, whether its products are made with one technology or many, whether it serves one customer or many, whether it is subject to few government regulations or many, and so on. Resource scarcity refers to the difficulty in getting the manpower, materials, money, or other resources needed to survive and grow.

So, if information complexity is extreme and resource scarcity severe, a company may not survive. Contrariwise, if these conditions are too easy, a company may become so soft, inefficient, and lacking in innovation that it cannot meet challenges that eventually come along.

The authors make some general suggestions for helping a company survive, among which are:

1. Managers must attempt to achieve both efficiency and innovation simultaneously. The auto industry, the authors say, became efficient in turning out cars but not sufficiently innovative, not giving auto workers enough responsibility or opportunity to improve the production process, and was twice caught with big cars when small cars were demanded by the customers. Hospitals put too much emphasis on innovation in the way of expensive treatment, sending up costs, and not enough on efficiency.

2. Employees throughout an organization must be involved in the effort to achieve efficiency and innovation for this to succeed.

3. Both government and industry can help in the readaptive process, depending on the circumstances. There must be a balance between total free enterprise and complete state ownership and control. The farming industry, for instance, has had a constructive relationship with the government.

4. A company must make a strong strategic commitment to being a world-class competitor.

5. It must have a reasonable power balance among its various key functions, such as finance, marketing, research and development, and production. There must also be a reasonable power balance among the top, middle, and bottom of the organization.

In an interview, Mr. Lawrence concluded that it is not inevitable that because a corporate organization gets older, it must become stale or sick.

He believes American auto producers are ''on the right road'' to becoming ''first class.'' But, he adds, it will be tough to beat the best of the Japanese competition.

''You are still going to need sympathetic government policies,'' he said. ''Even doing the right thing, they will need more time.''

He also figures the nation could have ''two or three'' world-class steel producers, and praises Inland Steel and Armco for their progress. But he believes the steel companies are slower than the auto companies in dealing with their problems, perhaps because of an earlier history of relatively benign and modest forms of competition.

Mr. Lawrence hopes the steel and auto companies will work out a better pattern of labor-management relationships, less adversarial, with more attention to productivity and more realistic wage bargaining. ''We are making some significant changes in this country,'' he notes.