Building a Chain of Customers: Linking Business Functions to Create the World Class Company, by Richard J. Schonberger, Free Press, New York, 1990.

Richard Schonberger’s newest book, Building a Chain of Customers, starts out with an intriguing premise: every worker has a customer, be it the next department, office, shop, or person. Since the key to world-class performance is total dedication to serving the customer, the key to crossing functional bar- riers is to help each individual identify and serve his/her customer(s) - the next link in the value chain. Serving internal customers with the same dedi- cation to total quality that we apply to external customers is a mindset that can produce the company of the future, built around focused, multifunctional teams of highly motivated employees.

This is an interesting, fresh point of view. Unfortunately, Schonberger si- desteps the most difficult implications of his perspective and derives from it some extraordinarily simplistic prescriptions for the organization of the 1990s. The end result is a book which contains many interesting individual ideas, but not the unified, thematic approach to management that the title promises.

After detailing some of the key management concepts of the 1980s Schon- berger begins with a remarkable assertion -that there is a single set of world- class strategies that applies to any business. This throwback to “one best way” management theories flies in the face of virtually all the research supporting a contingency perspective on strategy, but Schonberger explicitly argues that trade-offs are myths. The only strategy is continuous improvement of the same things year after year, based on customer needs and competitive opportunities.

This leads Schonberger to make a series of vague strategic prescriptions. The world-class new product strategy is to make sure the product is “good”; the world-class product-line strategy is to do what you are or can be “good” at; the world-class strategy is to meet and beat market prices, and constantly upgrade worker skills. What is the manager to do with this type of strategic prescrip- tion? Schonberger simply argues that he who does everything well will prosper, and terms this a “universal strategy”.

The book then prescribes the optimal organization design: organize around the customer first, and around the product if this is not feasible. Many scholars would argue with the contention that functional organization is never appro- priate. Additionally, Schonberger overlooks the complexity of organizing around the customer; if a firm sells multiple products in multiple geographic locations, should it organize by geography or by product? Schonberger is intent on focus, dedicating each subunit of an organization to one customer or product. Though focus has its merits, the enterprise as a whole must coordinate its focusedunits, looking for synergies and economies of scale and scope, an organizational de- sign problem Schonberger ignores.

The rest of the book moves through chapters on the total-quality viewpoint,

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employee involvement and ownership, organizational learning, waste reduc- tion, incentive systems, product design integrated with manufacturing and marketing, customer/supplier partnership, and flexible production. Though presented as “new thinking,” most of the ideas here - such as activity-based costing, quality function deployment, pay-for-knowledge, and cross-functional training - will be quite familiar to readers of the business press. Schonberger’s chief contribution is putting them in one book, spiced with numerous anec- dotes and analytical tools.

Schonberger attempts, with more or less success, to link these ideas to his overarching concept that every employee needs to serve his/her next customer. In some cases this provides interesting insights, for example, employees might understand design for manufacture more thoroughly if they grasp the concept of internal customers. Readers looking for ways to “sell” ideas such as design for manufacture may benefit from the way Schonberger positions them.

Scholars will find that Schonberger does not grapple with the conceptual or practical difficulties of operating an internal market where every link in the value chain is treated as a customer. For example, the author provides little guidance for how to deal with the conflicting demands of many different inter- nal customers. His discussion of incentive systems overlooks the problem of collective goods: why should an employee focusing only on his/her internal customers ever do anything for the benefit of the company as a whole? It also ignores the problem of transactions costs: employees who are completely re- sponsive to the demands of internal customers will end up developing assets specific to that customer, locking them into that relationship. Ultimately one’s dedication to serving a particular set of internal customers can lead to inflex- ibility and an inability to choose intelligently between vertical integration and outsourcing.

The primary value of Richard Schonberger’s book is that it discusses many of the most exciting ideas of the past decade, enriched with the author’s illus- trations of how to apply them. Those looking for a single work with chapters on this set of topics will find this well-written, interesting reading. The idea of treating the value chain as a sequence of customers is intriguing, but serious students of management will have to wait for a thorough, sophisticated treat- ment of the concept.

Reviewed by Philip ANDERSON

Johnson Graduate School of Management

Cornell University Ithaca, NY, USA