Question

There are various change efforts that occurred in an manufacturing organisation (or department). How would you measure them as first-order or second-order change, or both? Please give some example. (1000 words)

Answer 1

First-order change is all about making moderate adjustments to organization, to people or processes. It works within the existing structure. It would mainly focus on making an existing process better or more accurate, making incremental changes.

Second-order change is about organization being reinvented, work tasks being reengineered, the rules of the marketplace being rewritten, and the fundamental nature of organizations changing. It is often described as ‘transformational’, ‘revolutionary’, ‘radical’, ‘disruptive’, or ‘discontinuous’. It involves seeing the world in a different way, challenging assumptions, and working from a new and different worldview.

The major reason for change in manufacturing industry is from the customers. The way customers can now work with any supplier in the world and get quick response, better communication, less bureaucracy and customization. They also expect suppliers to know about their changing needs.

Major categories in manufacturing organizational change are:

1) Changes in process: Application of full set of tools, multi skilled workers

2) Change in function: coordination and control: Teamwork building, cross-functional movement, network relationships with suppliers and customers, information transparency, participative management

3) Changes in value and human behavior: Open communication and information sharing, continuous improvement culture, knowledge learning and sharing

4) Changes in power within the organization: Decentralized responsibilities, autonomous leadership.

First-order changes are much easier to make, because we are always tempted to look for a single cause for a problem. Thinking is hard, and we’ll do quite a lot to avoid it. With a first-order intervention, we tend to just look at the symptoms and their immediate cause, rather than considering the system as whole. Sometimes first-order changes work, and the efficiency of the system improves. They are most likely to be successful where the problem has a single cause – for example, a slow broadband connection that means not everyone can get online when they need to. Speed it up, and the problem goes away. Very often, there are reasons why a first-order change won’t work. One reason could be when the problem provides a ‘secondary gain’ for one or more of the people involved.

A secondary gain is a benefit that someone gets as a side-effect of having the problem. For example, workers might be instructed to hold shorter meetings, because management has identified the amount of unproductive time spent in meetings as a problem. But if the meetings are the only time you feel listened to and valued, the temptation will be to stay in the meeting for as long as you can. In that situation, while the ‘shorter meetings’ rule might be obeyed for a while, but if the need for being listened to is not met anywhere else, meeting times will tend to creep up again because of that ‘secondary gain’.

First-order change can also fail when the problem occurs in a complex system. Very often, the attempt to solve the problem will itself cause problems down the line or elsewhere in the system.

So, a higher order change is required in the following cases

1) If the problem keeps recurring and the fixes are not able to sustain

2) If the intervention solves the immediate problem but causes other problems elsewhere in the system, or after a time lag

3) If there are multiple contributing causes to the problem

4) If the problem carries a ‘secondary gain’

Second-order change involves new ways of doing things, changing values and goals, and probably structural change in the organization as well. This can be quite scary to most people, especially where changes are imposed from above or outside, and you don’t have any input to them.

A good example of a second-order change is Southwest Airlines, founded by Herb Kelleher. At a time when everyone in the airline business knew that you couldn’t possibly fly from point to point profitably and that the only way to run an airline was to fly in and out of major “hubs,” Kelleher decided that the conventional wisdom was wrong and created what has become the most profitable and successful airline in the U.S. He challenged the existing industry beliefs and created a new set of beliefs about running an airline.

A third-order organization is always operating from questions rather than answers. It is an organization that is always willing to question and change its beliefs and culture.

Major change areas which have changed over the past in manufacturing are:

1) Technology- Introduction of robotics, automated manufacturing techniques, 3D printing etc. have revolutionized the way manufacturing is being done. This kind of change requires internal processes to be changed, educating the existing supply chain parties to learn about the change and add this into the chain. This is a clear example of a second order change in the industry.

2) Offshore production - This was a cost driven change, aimed at reducing manufacturing cost by outsourcing certain processes to places where the cost of execution is lower. The existing processes remain the same and if the complete process steps are off shored then it’s a first order change otherwise it’s a second order change. If there is an interaction with offshore and onshore manufacturing process, it’s an example of both first order & second order change

3) Focus change - More focus on efficiency and process improvement. This involves second-order change as this involves change in the way organization was operating previously. For example in the previous century manufacturing was focused on high employment numbers but now focus is on automation and skilled laborer’s.

4) Leveraging Data and Analytics - This change involves new functions being created in the supply chain to improve efficiency as well as profitability. The function is a second-order change involves multiple interaction with the supply chain participants.