Matsushita example of Top-down approach to deploy targets

Targets Series#2 : Matsushita example of Top-down approach to deploy targets

Here’s a live case that I read from The TQM Magazine, Volume10, Number 6, 1998 by Yoshio Kondo. I liked it and thought it is very apt and also interesting to read.

“Matsushita Electric Industries’ Car Radio Division received a demand from one of its customers for a 10 percent price reduction. The leadership team put their heads together to try to meet this request but, after much discussion, reached the conclusion that they would be unable to achieve such a large price cut even by implementing all the cost reductions they could think of. They therefore decided to convey this to the customer. When this information reached the company’s chairman, Konosuke Matsushita’s ears, he said, “Whenever we receive a demand for a price reduction from our customers, it is our practice at Matsushita to work out how we can achieve an even greater cost reduction – in this case 15 percent. Please think about this again”. After receiving this instruction from their company’s founder, everyone involved started investigating the possibility of reducing costs even more thoroughly and eventually succeeded in cutting them by 13 percent. When this success was announced to him, Matsushita reportedly made a personal visit to the automobile company that had requested the price reduction and said, “Thanks to your request for a 10 percent price reduction, my company has succeeded in reducing its costs by 13 percent. We are extremely grateful to you”.

It is an example of successful top-down deployment. What made it work?

  • Demand came from customer directly
  • Matsushita’s stature & position – People had immense respect for him, but he was also the Chairman & Founder
  • This was in Japan and happened in the middle of last century

You and I know that it’s not possible for Managers to demonstrate such authority in today’s matrix culture. All the fat has already been sucked off and there’s nothing much to squeeze further in the system.

In spite of these deficiencies, it’s easy for a manager to give a one-way message and walk-off. So top-down is still very popular.

There’s a great opportunity to adapt ‘catch-ball’ technique which overcomes most deficiencies of top-down approach.

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