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The New Economics for Industry, Government, Education

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Overview

In “The New Economics for Industry, Government, Education (Second Edition),” W. Edwards Deming explains several key issues around management and its lack of success in its current and traditional state. He introduces a theory known as “Profound Knowledge.” Deming also focuses on the key concept of a system and what makes one successful in several different areas ranging from Industry to Government to Education. He concludes with an examination of system variation and how it relates to processes.

Key Points / Themes

new-economics
  • Managers need to drastically change their traditional practices and principles in order to be more successful managers.
  • The Theory of Profound Knowledge focuses on three key themes: Appreciation for a System, Knowledge of Variation, and The Theory of Knowledge.
    • Appreciation for a System – understanding a system and how it works with other components to create a need for communication and cooperation.
    • Knowledge of Variation – understanding that variation is a part of life and knowing the difference between a stable state and an unstable state.
    • The Theory of Knowledge – understanding that management is a form of prediction.
  • The Red Bead Experiment highlights the following:
    • Demonstrates an example of rigid and poor management that is often utilized by traditional managers.
    • System variation is part of any and every process.
    • All employees perform within a system that has components that are beyond the workers’ control.

Contribution

The second book in the Lean Six Sigma series is integral to a manager’s journey in transforming their organization. The Red Bead Experiment is an excellent example of how a broken system or process can not only demotivate employees but also cause frustration among management. It’s key that managers review processes and work with employees to determine ways in which the process can be improved. Employees understand the system and can often make suggestions that may be overlooked by management. In addition, management must also search for ways to improve processes since not all improvements can be made by employees. As Deming points out throughout the book, some improvements are simply out of the control of employees.

Questions/Ideas to Consider

  1. What systems are prevalent in your organization?
  2. As a manager, how can you gain a better understanding of the interconnectivity of the components within the system?
  3. What are your views on Deming’s thoughts on competition?
  4. How did the The Red Bead Experiment impact your views on systems?

What’s Next?

Next month we review “Design for Operational Excellence” by Kevin Duggan.

In the meantime, consider the questions above. We’d love to hear about management and systems in your organization, both good and bad.

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