Wisdom of Crowds Group B

Holly E Galloway
The lag time between sketch and floor poses a problem for the fashion industry because it lags behind what the customer wants and needs in the industry. The company Zara overcomes the inefficiencies of the fashion industry by using fast and flexible distribution to retailers. This flexibility allows Zara to quickly adjust to customers ever changing demands. Zara believes that this flexibility is its core competency. It does not outsource because this would cause Zara to lose its ability to respond quickly and precisely to consumer demands. This advantage of outsourcing is that it may be cheaper to let a factory in China dye its fabrics, but the cost savings is offset by the loss of ability to control and coordinate its own resources.
Hollywood gangster films illustrate three different styles of company management: The Corleone family of Godfather retains the structure and coherence of a traditional corporation, the tightly knit group from the movie Heat is like a successful small business with high levels of trust and specialization between members, and the Reservoir Dogs model allows for a hand picked group with diverse abilities specifically needed for the job, which is very similar to outsourcing. Zara seeks to blend the advantages of these models into one.
It was assumed that 20th century corporations all had to work the same way. They were hierarchical organizations that desired full control over its supply chain. It was this assumption that lead to the economic decline of the American corporation. The new idea of employee empowerment during the 1990’s led to happier employees but it did not lead to higher productivity. Collective decision making was confused for consensus. This “can’t we all get along” approach, gave way to seemingly endless layers of management which was contradictory to the phenomenon of the wisdom of a crowd. On the other hand, attempting to run a company from the top-down is a futile task. The rigid structure discourages free flow of information among levels of the bureaucracy. Additionally, the lack of diversity among top management led to a decline in innovations among American companies in the 1970’s and 1980’s. It was these problems that led to the downfall of the American car company.
The success of Silicone Valley companies led to an emphasis on a more decentralized management structure. However; the problem of “inauthentic behavior” still permeated most organizations. One problem was the hostility of superiors towards opposition from subordinates. The incentive systems encouraged people to be deceptive because pay is based upon performance relative to expectations. This led managers to set targets that were easily reachable by low-balling estimates than engaging in accounting gimmickry to meet goals. During the 1990’s, firms found a way to instill a sense of ownership among employees. Stock options aligned the individuals interests with the corporations because in the stock market people get paid based on what they do not whether they do what they are expected.
Ideally decisions about local problems should be made by people close to the problems. Decentralization makes people more engaged by handing them more responsibility for their own environments and actions. It also makes easier coordination because companies rely on workers to find new more efficient ways of getting things done. Paradoxically during the 1990’s, companies paid attention to the virtues of decentralization, but also treated CEOs like superheroes. However; there is little evidence to suggest a single individual can consistently make superior decisions when faced with uncertainty.


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