Building a ValueWeb
WITH a ValueWeb |
The
way that I accomplished this was by applying the
relationships and methods that I had created in
collaboration with the pool companies and subcontractors.
I produced a drawing (plan) of the back yard. On
it was the entire design. The price of each phase
of work was stated along with the schedule (date
and time of day) and a list of materials required
and crew and equipment necessary. The client (technically
acting as owner-builder) wrote me a set of checks
(in advance) for each phase of work. Each was in
an envelope. The contractors had learned that when
I said be here, at this time with these materials,
equipment and people that they could rely
on a clean site, proper layout and supervision and INSTANT payment. They had no sales cost,
engineering time, bidding costs, scheduling complexity,
supervision requirements, and collection complexities.
All they had to do was divert a crew for an hour
(or a few) as specified and immediate contribution
to their bottom line was accomplished. Added benefit:
training for their crew by Matt Taylor. I was on
site each day, for all crew hours, managed my other
crews by wireless and then went on to other work
when that days sequences were complete.
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On
the way to other projects, I did a couple of pool
layouts myself. This kept me in good physical shape,
connected to the business and paid for my salary
and truck. The money made from the rare custom and
fully featured back yard environments dropped
to the bottom line of our business. In this 7 year
process, work that typically was time consuming,
frustrating, expensive and risky because simple,
rewarding and profitable.
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It
should be noted, that when I started this process
- 7 years before the example given - I executed
a custom pool and landscape of the same scope and
complexity (triangles instead of circles) and it
cost $21,000 and took three months - all considered
a financial bargain by the owner and a construction
miracle by the contractors at the time. This project
totally consumed me for four months. This last project
employed about 50 hours of my time (about half of
which I was able to do other tasks in my portable
office on site).
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THIS
IS WHY I SAY THAT 75% OF THE TIME AND HALF THE COST
OF ANY CONSTRUCTION PROJECT IS TYPICALLY WASTED - victim of the burden imposed by the organizational
structures, the contracts, the build process, design
ignorance and owner interference. This is a statement
of huge significance. It is also something that
virtually no one has wanted to hear in over 30 years.
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The
cost and impact of building can be radically reduced.
This makes room for better design, higher quality,
more sustainable materials and energy solutions.
When we are told that these values cannot be afforded
this is within a game that imposes upon itself a
huge inefficiency tax. This requires, however, that
several circumstances be brought together over a
period of time: A steady volume of work. Total understanding
and rationalization of the building possesses. Trust
built up over a long period. Elimination of all
possible overhead redundancies. A knowledgeable
systems integrator on the site. Strict Rules-of-Engagement totally enforced. Also, appropriate use of
technology. In this case, as will be elaborated
below, the first NavCenter and Motorola
wireless in every crew truck in the system. The
complete system has to be engineered - not just
the build part; this means, the engineering
of the pool as a basic product, the sales process,
the financing process, the drawing and contract
documentation process, the scheduling process, the
field supervision process, the field layout process,
the build process of each specific trade, the feedback
process between pool builder and trades AND individual
workers, the pool startup and turnover to owner
process, the relationship with the owner process.
Over a 7 year period, each of these processes were
refined through multiple iterations of work until
risk, mistakes and sloppiness of every kind was
eliminated.
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This
was an eloquent system of building.
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A system that can be applied to many different
business and production circumstances.
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When
I encountered the swimming pool industry in Arizona
in the mid 60s it was already groping its
way to a primitive value web model. Over a six year
period we were able to develop this impulse into
an explicit system of work that today would be called
a value-added, mass-customized-product, just-in-time,
lean-construction (production), extensively out-sourced,
supply chain system.
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Every
step from the customer meeting and sale through
financing, design, construction, clean-up, first
customer us and maintenance was developed into a
single system that cut more than 20% off of the
product cost and guaranteed delivery of the pool
(from sale to swimming) in 10 days at the height
of the season.
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It
also resulted in a significant increase in quality
- aesthetic and mechanical. This completely refuted
the often stated principle that between reducing
time, better quality and lower cost you can have,
at best, two of the the three.
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In
this system, as many as a thousand pool projects
could be tracked at once and the entire network
of construction crews coordinated minute-to-minute
over a twenty mile radius to accomplish multiple
work sequences on each pool in a single day. A fully
equipped swimming pool construction requires 23
crew (size of 1 to 6) hours over 9 tasks. When we
practiced by building a new display
pool we would typically start early Saturday morning
and be swimming Sunday evening.
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Why
swimming pools? Partly it was opportunity. I had
designed some custom pools that the builders were
having trouble building. When I showed them how
easy it was, I was pulled into their industry. Why
I stayed with it was threefold. First, the swimming
pool as a piece of construction technology is interesting.
It involves most of the trades in discreet combinations.
It is heavy enough to require significant
equipment and organization. There is a high variety
of finishes and and many, many different conditions
that generate different design requirements. By
nature, the units are spread out, geographically,
generating significant logistical problems. Second,
they are production items in that, despite
a great variety of designs, the underlying structure
allows for the leveraging of volume components and
techniques. Third, the customer is intimately involved
but not dogmatic about the design and techniques
of building as is, traditionally, the circumstance
of house or office building.
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These
are ideal conditions for testing new construction
and organizational methods. It should also be noted
that by the time I started this work, I had ten
years experience in designing, building and developing
housing, apartments and high rise structures in
4 states. I had personally performed every task
involved: R&D, sales, design, construction layout
and management, enterprise management and every
trade involved in the production of a pool.
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I
knew every step and sequence. I had already discovered
that merely changing the sequencing of a project
could yield significant decrease in construction
time (motel for Royal construction, 6 months to
six weeks, as example). Also, I had a passion. When
I entered architecture, I was told that any change in design drove unacceptable construction
costs. It was clear to me that the conventional
way of building was intrinsically more complex than
many of the suggested alternatives. Over the ten
year period, I both learned the trade and accomplished
significant cost/time reductions in conventional
building. I did this in ways that allowed for better
design to be accomplished. I was not satisfied as
were many architects of my generation to regale
builders, throw their hands up in the air and accept
high costs, poor construction and long delays to
completion as normal. I wanted to know why and I wanted to know HOW to build better.
Imagine an artist who knows nothing about paint
and directs the creation of a work via
sketches and descriptions from a distance - that is the condition of an architect in a traditional
practice model.
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This
is important to would-be system integrators. DETAILS are significant. Knowledge of the entire process
is a requirement. On very large complex challenges
- the F-15, as example - this means a sophisticated
System Integration Team and appropriate participation
of the entire ValueWeb membership. The F-15, involved
over 900 units distributed worldwide, operated by
several air forces. Each plane has 500,000 parts,
50,000 of which are unique. The system has been
maintained and evolved (upgraded) over a 35 year
period with the expectation of remaining viable
for another 10 to 15 years. Up to an many as 40,000
people, are involved in designing, engineering,
building, fielding, maintaining and using the system.
These circumstances result in a huge configuration
management problem. Complexity of this sort requires GROUP GENIUS.
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The
swimming pool system we put in place was simpler.
However, at its full expression, about 40
people were involved in the design and maintenance
of the process at any given time. Most of these
were the workers who built the pools.
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Because
the swimming pool is complex enough to be nontrivial
and small enough to support what today we would
call rapid-prototying - and because there is clear
competition between contractors - this is an ideal
environment to demonstrate the efficacy of alternative
technical and process techniques. Feedback and innovation
was accomplished on a weekly basis.
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Another
advantage is that, in the 60s, this industry
was not made up of sophisticated players. Generally,
most builders had learned by doing and were repeating
mistakes learned from those who taught them. This
was an industry ripe for learning. I
found out that it is easier to teach uneducated
people how to do it well than sophisticated folks
who are educated with every reason why
it cannot be done. In the end, we established a
system that had a true economic measure: at the
end of the week, everyones check told them
how well we had done. This was the only time in
44 years of work experience that I have seen a compensation
system put in place that actually worked, was fair
and encouraged both individual and group performance.
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The
system grew organically. We worked with four competitor
pool companies over a 7 year period. One of the
companies we worked with, over a two year period,
through their entire startup process. We supplied,
at various times and in various combinations, the
following services: system integration, schedule
management, research in components, product design,
field supervision, subcontracting. At the peak of
the process we employed, ourselves, the entire ValueWeb
in the production of our own custom pools. We also
manufactured some low volume custom components.
Typically, we negotiated a new contract each year
and then provided our services exclusively to one
company for that period. This was also the pattern
for all of the subcontractors in the system. What
happened, then, was competition moved from between
companies to competition between networks. Networks
that resorted themselves every year. Thus, techniques
and methods migrated to all of the competing pool
companies. Competitive advantage was seen as a yearly thing. Each subcontractor was very aware that they
negotiated, annually, for both revenues per unit
and for volume. The pool builders and the subs were
very conscious, each negotiating season, of trying
to attract the BEST TEAM with with to play
the season. They also worked, together, with intensive
collaboration to reduce, time, waste and cost for everyone in the system - not just for themselves.
Competitive advantage meant how many pools could
be delivered, in a short season, at what price point
to the customer, with what features and for what
level of quality. Competition was fierce in season.
Sharing was ubiquitous between seasons. It was when this completion exceeded the rules-of-engagement and turned ugly that this nascent ValueWeb was shattered. I will discuss this sad aspect of the story in Part Four. A ValueWeb architecture is extremely vulnerable in today’s world of mixed-economy “Shock Capitalism.”
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The
customer truly gained in the process (which is a
rare thing despite all the rhetoric). Construction
workers achieved incomes as high as 30 and 40 thousand
dollars (in the 1960s) and the pool builders maintained
a gross profit of 25% unheard of in this industry.
The price of the pool dropped every year, the feature
set increased, time to swim declined radically and
quality (horrible when we started) soured.
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At
the end, a 20 ft. by 40 ft. pool with automatic
cleaning, heating, copious amounts of decking, trimmed
out in a first class way sold for $4,000, was delivered
in 10 days (sale to swim) and was seamlessly coordinated
with other work such as landscaping, outdoor furnishings,
building additions and other objects: walls, planters,
gates, etc. The technique by which this was accomplished
is decribed below (The Model).
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At
the end, I was able to build totally custom pools
at the same per-unit cost, using the same
contractors in the same time frame. Imagine a back
yard with a pool made up of four intersecting circles,
of different levels, a fountain rising up from the
intersection of three of them, raised, cantilevered
circular decks of concrete and laminated (4x6) redwood,
circular trellises offering shade, extensive landscaping
and lighting, custom enclosure walls (of complex
shape) and ornamental steel inserts and gates -
all build in 10 DAYS, in season for a complete price
of $7,500 (1970 money). This was the peak of my
capability as a designer builder). I have never
matched it since - the closest being the Cambridge facility nearly 30 years later.
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(insert
multi-circle pool design)
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The
swimming pool industry, in the 60s, in Phoenix,
was characterized by frequent bankruptcies of financially
unstable small contractors, sloppy work, a bland
product, time delays, high costs and a myth-based
selling process.
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Any
attempt at customization from the standard rectangle
or kidney drove the costs through the roof. Coordination
with the many other suppliers and contractors necessary
to complete a back yard environment was almost totally
nonexistent. Cooperation was almost totally nonexistent
- and, were there was cooperation it was mostly
corrupt with back door payments, finders fees and
locked in deals all to the buyers detriment.
Owners were lied to, manipulated and ignored once
a contract was signed. Quality was unbelievably
bad. Often the pool was built in an easement leading
to law suites and expensive fixes. There was little
discipline in the system and the actual structural
integrity of the units were often compromised by
improper placement of materials. No one was making
much money. Typically, owners who signed their contacts
at the beginning of the warm season got to swim
in the fall. From end to end it was a sleazy process
dominated by suede shoe salesman - charisma and
high pressure substituted for engineering performance
and quality.
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It
was not that people did not want to do better -they
did not know HOW. It was a circumstance driven
by ignorance. The BELIEF was that this was
intrinsic and things could not be approved unless
unbelievable amounts of money were spent.
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As
example, when my first custom pool design -
which
had 16 corners, three levels and masses of custom
tile was bid for ten thousand dollars, I questioned
the builder. He said that it would take days to
lay it out and form it, that the lines could
never
be maintained after excavation therefore the design
would look terrible and the no one could do
the
tile work the way I had it designed (coming out
of the pool and over the bond beam). I pointed
out
the the actual materials of the pool were the same
as a typical 20 x 40 and he agreed but sighted
outrageous
labor costs. I asked him what would be the costs
if I did the layout, formed the pool, established
both grades and lines with offsets so the various
trade could re-string the lines at will when
building,
and, if I took care of the time myself - what would
be the cost? He gave me a cost 10% over a standard
pool (the 10%, he admitted, was for security.
Done I said. He asked me when I was
going to lay it out and set batten boards. I told
me the date. He said he would drop by sometime
to see the process. I told him he had better be
there between 8 and 10 am because I would be long
gone afterward. He refused to believe it but said
he would be there at 8 to watch my crew do the impossible.
Needless to say owner, pool builder with his entire
supervisory staff showed up at 8 and were surprised
to see the crew called Matt Taylor.
In one and a half hours the the job was done and
I had the layout contract for 2,000 pools. My sojurn
had begun.
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They
simply did not know how to layout a swimming pool
accurately. Two to three inches deviation was considered
normal - straight lines impossible (see Layout).
Similarly, when it was time to do the decking (which
did not follow the pool but wove in
and out of it and the landscape), I started an hour
ahead of the crew pouring and finished by the time
they got the first section in (see: pouring concrete).
Easy. It is a METHOD or it is a disaster
- no middle ground in things like this.
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They
wanted to know how all of this was achieved with
no dimensions on the drawing and I had to explain
what a module was.
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As
for the tile, I went to the tile store, bought the
tile (about three times as much as for a normal
pool and custom (a total of 300 extra dollars).
The pool builder sent his time contractor over,
he looked at the pool, saw what I wanted and started
to leave the job. Fortunately, his truck was blocked
by mine. An more fortunately, I had a couple of
six packs of beer in my truck. And, lucky for me,
I knew how to lay tile (see: American Pool Building).
We had a great time, got really drunk and produced
a tile effect never seen before. The tile man became
my best advocate, worked out a fair price and became
the tile king of the NEW fabulous way to add accent
and color to your pool. Mass customization had begun!
He made a fortune of it and within 3 years refused
to do those puny bathtub installations
that once were the standard.
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The
shape of this pool was not the way it was for only
esthetic reasons - although the result was spectacular.
The yard was narrow. Even a small kidney-shaped
pool could not fit in. That is why I was hired in
the first place. The conventional would not work.
I designed a zoned pool where the basic
functions of diving, swimming laps, playing and
sitting could all be done simultaneously without
interfering with one another (each has flat bottoms
at the best debth required for the function.. This
intent drove the shaping (which provided great variety
for design play and problem solving) and also allow
me to fit the pool into the narrow yard with out
removing all the trees (only one had to go) - another
owner requirement.
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In
one stroke a new pool type was born. It became the
Tri-Level Pool, dozens, maybe several
hundred, were built and one pool salesman made a
career of doing only this kind of pool by copying
my custom pools and adding his own versions. He
got quite good at it. He also leaned when it was
important to bring the work to me (about one out
of ten as it turned out).
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There
are several discreet lessens from this part of the
story:
Find
out exactly what the problem is. The trade
person knows what s/hehas been taught. If
not an innovative personality, s/hewill most
likely not challenge these (hidden) assumptions.
This does not mean that there is not skill,
talent, nor the desire to do better. The PRIDE is usually there beneath the surface beat
down by years of UpSideDown Economics. Ignorance
(not a pejorative term) is ruling the situation.
Don't
teach. EXTRACT the critical part from the system that runs by unforgiving protocols
with attending negative economic consequences.
DO the new procedure on a contractual, arms
length, Input/Output of the existing system.
Take the downside risks away from those in the system. Plug your result back into the
system with minimum interference.
Put
the new solution into the system (transfer)
when people want it.
Let
everyone celebrate in the success.
The tile man; the salesman adapted the methods.
The Pool builder ran full page ads within
10 days of finish. The perception of the possible shifted. The new became the standard.
First, as an option, ultimately as a main
line offering.
Understand
the specific technologies and skills
required to make the new process work - and
work economically. The old way may
seem stupid but it lives in a complex web
of interactions. The change can radiate out
in a myriad of unknown ways and negatively
impact a bunch of people. KNOW these
connections. Understand the end-to-end consequences.
Midigate negative results.
Know
when to innovate to what degree. This was
not my first pool. It was the fifth. I wanted
to do the Tri-Level design from the beginning
but waited until I knew enough of the industry
(in detail) and a clients requirements
demanded something other than the standard
schema. This presented the window for innovation.
My first pools were innovative designs in
many ways, but the bottom profile was a standard
slope. |
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This
one pool started a process that changed an industry.
There were several innovations for the time and
place: Cantilevered decking over the pool edge (no
coping - a new way of forming). Flat multilevel
pool bottoms (structural consequences, steel tying
changes, impacts on the automatic cleaning systems
and water circulation). Multi-sided shape of the
pool and syncopated decking (layout
and forming complexities). Tile instead
of decking over part of the pool (bond beam) perimeter
(requiring exact bond beam geometry and workmanship;
replacing large tile pieces with mosaic tile - not
a standard at the time). Integration of the pool
with the house and landscape (issues of grading,
water run off, leaves in the pool, access from the
house, safety concerns).
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Each
of these potentail impacts had to be addressed.
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It
turned out that there were only a (real) few blocks
between a mundane design and an exciting and far
more functional one. Those blocks could be removed,
by removing them from the traditional process, demonstrating
how easy it was to do the work and then transferring
the process back into the common protocol. An architect
that never gets out of the drafting room cannot
do this. When THINK work is separated from
DO work all kinds of unnecessary barriers
result and cannot be resolved. I was able to do
this because we were a design office AND a contracting firm. We were also willing, when necessary,
to do R&D by absorbing these R&D costs and
guaranteeing to the owner we would replace any thing
he did not like (or did not work) after he had USED it awhile.
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(insert
Tri-Level Pool plan)
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The
organizational transformation process is accomplished
on the level of the organizations products
- not management. Extract, do, demonstrate, transfer,
explain the principles at work - in that order.
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The
MG Taylor Enterprise Application
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From 1979 to 1982, Taylor Associates (now MG Taylor)
created the basis for the work it is doing today.
The Weak
Signal Research and philosophical base had been
laid down 1974 to 1979. In the first three years
of its existence, MG Taylor built its
first environment,
developed the basis of the Modeling
Language, created and refined the DesignShop process,
fielded an RDS experiment and operated the first client NavCenter
(Mentor Corporation). We formed a corporation, created
a Board of Directors, received investment and sold
the company. The beginnings of a ValueWeb was established.
We serviced a small, national client base of medium
sized organizations.
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From 1982 to 1985, the Acacia years, the information
factory concept was refined. We concentrated
on one client and its customer base enjoying,
for the first time, steady revenues and a budget
sufficient to staff beyond what was just required
to produce client work. What is now AI stayed in Boulder as a network member organization
and was not reintegrated until the early 1990s.
It was in this period that we gained the operational
excellence required to deliver our service products
at volume and profitably. On an event basis, we
have been profitable ever since. In terms of an
organization, overhead to operating profit, we have
been profitable, break-even and at a loss, annually,
in approximately equal shares. In total, we have
accumulated a loss of about three million (out of
42 million revenues). With a total capital contribution
of about 500 thousand dollars this means the entire
cost of creating our products, service and the four
business units that deliver them has been less that
four million dollars. In 1999, we had a valuation
of 10 million.
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The
sale of the business to Acacia involved some breaking
up of the organization but most of it stayed intact.
The piece that spun out later came back
in. When the enterprise as a whole left Acacia this
was the first time it was somewhat shattered. Most
KnowledgeWorkers, the archives and physical facilities
stayed inside Acacia. The principle gain of the
Acacia years, besides financial stability and the
refinement of operations, was the opportunity to
work with a moderately large organization though
a protracted change process.
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1985
to 1990 were the ad-hoc years. The enterprise
functioned as a network, had no fixed assets, did
not market and worked predominately inside large
organizations such as Capital Holding and GM. We
used the Acacia
Center (that we had designed for them) as a
place to do infrequent events. We later took over
this Center and operated it for a couple of years.
The Capital Holding relationship exemplified our
pattern of work that lasted until 1995: we did a
DesignShop process focused on some specific problem
(in this case, a merger), build them an environment
(in this case two, one in 1997 and a larger facility
in 1992)
and facilitated their process through a multi-year
transformation process (1987-1994). there were usually
three of us as overhead and a network of about 15
to 20 KnowledgeWorker that performed work on a contract
basis.
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It
was 1996 to 2001 that MG Taylor laid the
foundations of a standing business.
In this brief period, MG Taylor (and now, knOwhere,
Yolke, AI, iterations) has gone through several
classical phases of development, de-evolution
and recreation. This was highlighted by the establishment
of the knOwhere Stores (Hilton Head 1996, Cambridge
1997, Palo Alto 1997), the relationship with EY
(1995 - 1998 and the sale of the Cambridge facility
to them), the integration of AI (1996) and the establishment
of our own production facility (1998), the peak
of our employee base (over 30 in 1998, 20 in 2001
across all Business Units), the creation of separate
Business Units (1999) and revenues fluctuating between
5.5 and 9.9 million per year. Through out this period
our structure was a hybrid of traditional corporate
structure, extreme outsourcing to the network, extensive
partnering with a larger company and extended virtuality.
This has been a high performance organization in
product/service delivery and unstable in traditional
management.
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It
should be noted, however, that we have been profitable
- and not - in each of the eras (other than 1979
to 1982) and that there are simple correlations
to be found, among the many variables, that drove
these results.
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Chief
among them, of course is the ratio of fixed overhead
to net revenues. This is determine by volume and
our ability to scale up and down quickly enough
to keep our ratios in line. This issue is made complex
because our product/service delivery shifts rapidly
in both location and in what our customer/clients
buy. This last factor is caused partially our lack
of critical mass but more from the nature of our
market. For example in 1995, our revenue was mostly
generated by DesignShop events delivered by RDS
deployments to several clients all over the US.
In 1996, the majority came from one client (EY)
delivered primarily in the Hilton Head knOwhere
Store. In 1997 and 98 mostly DesignShop events from
one client (EY and their clients) delivered in our
three knOwhere Stores, two EY environments and one
client NavCenter. In 1999 and 2000, a number of
different services including three NavCenter transfers
to a diverse client base delivered through the Palo
Alto knOwhere store and from within the client NavCenters
in several states. During this period, direct AI
WorkFurniture sales became one third of the business
involving large environment sales one year to a
few clients and many small environment sales the
next to many clients all over the world.
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In
this same period, we entertained three serious merger/purchase
options and two large joint ventures. While some
of this is the consequence of being a small business
in start up most of it is the consequence of a highly
volatile market. A true ValueWeb architecture will
mitigate some of the impacts caused by this volatility.
This will move the impacts away from the operating
business level to the web-enterprise level were
traditional market volatility is better dealt with.
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The
Swimming Pool Model evolved to deal with certain
circumstances: seasonal fluctuations, economic cycles,
wide geographic distribution, time-demanding buyers,
a design-focused product (mass customization), a
new product (low cost consumer pools), fast growth,
untrained workers, quality issues, brand competition
and the integration of multiple products/services
from multiple organizations. These circumstances
match up nicely with the circumstances of the MG
Taylor Corporation and affiliate corporations. These
circumstances are widely shared among industries
and organizations of all kinds all over the world.
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|
Matt
Taylor
Palo Alto
March 8, 2001
SolutionBox
voice of this document:
INSIGHT POLICY PROGRAM
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click on graphic for explanation of SolutionBox |
posted
March 8, 2001
revised
February 18, 2009
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Copyright©
Matt Taylor 2001, 2002, 2009 |
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