The Scene

Beta International, a large manufacturing conglomerate, has made substantial progress in its operations and business performance. A few years ago, Bob Neurath, CEO, set forth a 10-point strategic plan for process improvement that focused on getting back to basics.1 After all, he reasoned, if we aren't tenacious about getting the basics right, how can we expect to get anything else right? Driven from the top, this focus has yielded substantial gains for the company. Asset performance has improved, unit costs are decreasing, safety performance continues to improve, and market share is increasing in many markets, holding steady in others, and only declining in a few markets that are on strategic watch. Profits have moderately increased in most business units and holding steady in almost all others.

But, performance is simply not good enough. Return on capital is only about average in most business units. Intense pricing pressures from foreign competition, particularly Asian manufacturers, are continuing to drive down prices and hold down margins. If downward pricing pressures are stemming from Asia, Bob muses, then there is no doubt that companies like Wal-Mart, with their guaranteed lowest-price strategy, will only further intensify those pressures. The low margins resulting from these pressures limit Beta's ability to invest in research and development (R&D) for new product and process development, new capital projects that flow from this R&D, as well as strategic acquisitions better aligned to...