From Products to T-Generators: Redefining the Roles of Operations, Marketing, and R&D

One of Eli Schragenheim’s most thought-provoking insights is the distinction between what operations and marketing truly deliver. Operations, he argued, produce products. Marketing, on the other hand, sells t-generators—the tangible or intangible entities that generate throughput.

This distinction opens the door to a deeper rethinking of organizational roles. If marketing is not merely about pushing existing products, but about shaping and selling throughput generators, then the function of R&D cannot remain confined to “product development.” R&D must be integrated into marketing’s mission of designing and evolving t-generators—whether they take the form of products, services, or even innovative business models.

The Redefinition of Roles

1. Operations: Builders of Capability
   Operations’ role is clear and stable. They are responsible for transforming resources into reliable outputs—whether physical products, digital deliverables, or service executions. Their success lies in efficiency, quality, and dependability. Operations are the foundation on which throughput potential rests.

2. Marketing (including R&D): Designers and Multipliers of Throughput
   Marketing’s mission is not simply to promote what operations produce. It is to define and develop the t-generatorsthat maximize the organization’s throughput. This means understanding customer needs, market dynamics, and competitive landscapes to identify what kind of t-generators can create sustainable streams of value.

   R&D belongs here, not as a separate silo. Its task is not just to “invent” or “improve” products, but to co-create with marketing new and more effective throughput generators—be they subscription models, service packages, ecosystems, or platforms. This reframing aligns R&D’s creativity with the ultimate economic engine: throughput.

3. KPI Realignment
   Traditional KPIs often measure marketing by sales volume and R&D by the number of new products launched. This misses the point. If marketing plus R&D is truly about generating throughput, their KPI must reflect the net throughput potential created by the portfolio of t-generators.

   • Not “How many products did we launch?” but “How much throughput capacity have we created?”

   • Not “How many leads were generated?” but “How effectively are our t-generators sustaining throughput growth?”

Why This Matters

Most organizations unintentionally limit R&D by tethering it to operations. The result is incremental product improvements that do not necessarily translate into stronger t-generators. By placing R&D under marketing, innovation becomes market-driven, strategically aligned, and directly linked to throughput.

This redefinition also clarifies the boundaries:

• Operations excel at execution.

• Marketing (with R&D) excels at conception and value creation.

• Together, they form a coherent system where throughput is not left to chance but is deliberately designed and reliably delivered.

Conclusion

Organizations that adopt this perspective will unlock a sharper division of labor, a more focused set of KPIs, and above all, a deeper alignment with the fundamental goal of business: to maximize sustainable throughput.

When marketing and R&D unite around the design of t-generators, and operations delivers them with excellence, the organization as a whole achieves clarity of purpose and strength of execution.

A Universal Standard for Care: Applying Jess's Rule to All Service Sectors

 

A Universal Standard for Care: Applying Jess's Rule to All Service Sectors

Jess's Rule, a new patient safety initiative in England, establishes a clear, proactive approach for healthcare professionals. Named in memory of Jessica Brady, who tragically passed away from cancer, it mandates a "three strikes and rethink" protocol for General Practitioners (GPs). This rule formalizes the critical practice of reconsidering a patient's case after three appointments for the same or similar unresolved symptoms. While it's designed for clinical settings, the core principle behind Jess's Rule—a commitment to re-evaluation and persistent problem-solving—is a powerful model that can and should be applied across every service industry.

The fundamental goal of this rule is to prevent avoidable harm by encouraging a pause, a re-assessment, and a push for a deeper solution when initial efforts fall short. This isn't just a clinical imperative; it's a universal principle of quality assurance and customer care. Whether you're a financial advisor, a software developer, a mechanic, or a customer service agent, you are responsible for delivering a service that meets a client's needs. When those needs aren't met on the first, second, or even third attempt, a new approach is essential. Adopting this framework can build trust, improve outcomes, and enhance service standards across the board.

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The Three-Step Rule to Rethink Service

To universalize this powerful concept, we can distill Jess's Rule into a simple, three-step framework that any service professional can follow.

1. Acknowledge and Track: When a client returns with the same or a similar issue for the third time, it's a signal. Do not treat it as a new, unrelated problem. Acknowledge the history and track the previous attempts to solve it. This shows the client that you're listening and that their issue's persistence is a priority.

2. Pause and Re-evaluate: Stop the standard process. Acknowledge that the initial approach is not working. This is the "rethink" stage of Jess's Rule. Instead of simply repeating the same troubleshooting steps, take a moment to re-evaluate the situation from a fresh perspective. What have we missed? Could there be an underlying problem we haven't considered? Consider bringing in a colleague for a fresh pair of eyes. This collaborative approach can often uncover solutions that were previously overlooked.

3. Escalate and Act: Once you have re-evaluated the situation, it's time to take decisive action. This might mean escalating the issue to a senior specialist, recommending a more comprehensive diagnostic check (like a full system audit instead of a quick fix), or pursuing a different solution altogether. The goal is to move beyond the superficial and address the root cause, ensuring the problem is resolved for good.

This three-step process is not about assigning blame; it's about building a culture of relentless problem-solving and accountability. It transforms a frustrating, repetitive cycle into a structured, proactive effort to deliver genuine value and prevent avoidable failures. Just as Jess's Rule seeks to save lives, a universal service rule can save time, money, and customer relationships, ultimately elevating standards for all.

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So, You Think the Government Knows Best, Eh?

So, You Think the Government Knows Best, Eh?

You ever just sit back and look at things? Really look at them? And then you scratch your head and think, "Now, how in the blazes did we get here?" I do it all the time. Especially when it comes to things run by the government. They mean well, bless their hearts, they really do. But sometimes, when the government gets its hands on something, it’s like watching a clown try to defuse a bomb with a rubber chicken. It’s supposed to be serious, but you can’t help but laugh, nervously, of course.

Take, for instance, this business with travel. I heard about some kid over in Britain – a smart one, too – who figured out it was cheaper to fly all the way to Berlin and back to Sheffield than to just hop on a train from Essex. Berlin! Think about that. He flew internationally and still paid less than a domestic train ticket. Now, if you asked any sensible person – and mind you, I’m talking about sensible people, not bureaucrats with their heads stuck in a spreadsheet – if that makes any sense, they’d tell you no. It’s like buying a whole cow when all you want is a glass of milk, but the milk costs more than the cow. It’s absurd!

And why is it absurd? Because someone, somewhere, decided that a particular train line, or perhaps the whole train system, needed to be a monopoly. "Oh, it's for the public good," they'll say, puffing out their chests. "Efficiency. Standardization. No messy competition." Hogwash! When you take away competition, you take away the incentive to be good. You take away the reason to care if your customers are happy. Because where else are they going to go? Nowhere, that’s where.

It’s like when the post office was the only game in town. You wanted to send a letter? You waited. And you paid what they asked. And if it got there eventually, well, that was a bonus. Now, we’ve got FedEx, UPS, drone deliveries on the horizon. Why? Because someone said, "Hey, maybe there's a better way to get this package from here to there." And suddenly, the mail service had to pull up its socks. Or at least, try to.

The government, bless its heart, it’s like a well-meaning relative who’s just not very good at business. They’re great at laws, at protecting us from… well, sometimes from ourselves. But running a business? Making sure things are efficient and cost-effective? That’s a whole different kettle of fish.

When you’ve got a monopoly, whether it’s trains, or utilities, or even certain government agencies, there’s no pressure to innovate. No pressure to cut costs. No pressure to be friendly. They just exist. And we, the public, pay for it. Through our taxes, through higher prices, and sometimes, through the sheer frustration of dealing with a system that seems designed to confound rather than serve.

You see it everywhere once you start looking. The slow lines, the convoluted forms, the endless waiting. Why? Because they don't have to be better. They don't have a competitor breathing down their neck, threatening to steal their business if they don't shape up.

So, the next time you hear someone say, "The government should run everything!" just remember that kid flying to Berlin to save money on a train ticket. And ask yourself, "Is that really the kind of 'efficiency' we want?" Because if it is, then I’ve got a bridge to sell you. And it’ll probably cost less than a bus ticket across town.

The Dragon's Discount: Why Chinese Businesses Embrace Extreme Price Wars and Their Unfolding Global Consequences

 

The Dragon's Discount: Why Chinese Businesses Embrace Extreme Price Wars and Their Unfolding Global Consequences

The strategy of extreme price cutting, often dubbed a "price war" or "頂爛市" (top-rotten-market) in Chinese, where businesses drastically lower prices to eliminate competitors and subsequently dominate the market for future profit maximization, is not unique to China. However, Chinese manufacturers and businesses, particularly in their export and increasingly in their domestic markets, appear to exhibit a pronounced preference for this aggressive competitive tactic. This paper explores the underlying reasons for this inclination, its current global impact, and, more critically, the looming unintended consequences for the world manufacturing scene, consumer mindset, and even the Chinese makers themselves.

Why Chinese Businesses Seem to Prefer This Strategy

Several factors contribute to the observed prevalence of extreme price cut strategies among Chinese businesses:

• State-Led Industrial Policy and Subsidies: The Chinese government has historically, and continues to, provide significant direct and indirect subsidies to key industries and state-owned enterprises (SOEs). These subsidies, which can include cheap land, preferential loans, energy cost reductions, and export rebates, lower production costs for Chinese firms, allowing them to sell at prices that would be unsustainable for unsubsidized foreign competitors. This effectively creates a "safety net" that enables protracted price wars.
• Massive Production Capacity and Economies of Scale: China's rapid industrialization has led to immense production capacity across numerous sectors, often exceeding domestic demand. This overcapacity creates a strong impetus for companies to aggressively pursue export markets and expand domestic market share, even at razor-thin or negative margins, simply to keep factories running and avoid layoffs. The pursuit of greater economies of scale through high-volume production further incentivizes lower prices.
• Intense Domestic Competition: The Chinese domestic market itself is fiercely competitive, with a vast number of local players vying for market share. This internal "blood sport" for survival sharpens their competitive instincts and normalizes aggressive pricing as a primary weapon. Companies that thrive in this environment are naturally inclined to apply similar tactics when expanding internationally.
• Long-Term Strategic Vision and Patience: Many Chinese businesses, particularly those with government backing or strategic importance, often operate with a longer-term strategic outlook than their Western counterparts. They are willing to endure short-term losses for the prospect of long-term market dominance and the ability to dictate prices once competitors are eliminated. This patient capital approach contrasts with the shorter-term profit pressures often faced by publicly traded Western companies.
• "Made in China" Reputation and Value Proposition: While "Made in China" once primarily signified low cost, Chinese manufacturers are increasingly producing high-quality goods. However, the initial entry into many global markets has often been through price leadership. Once established, they may seek to move up the value chain, but price remains a powerful lever for market penetration.
• Weak Intellectual Property Enforcement (Historically): While improving, historically weaker intellectual property (IP) enforcement in China meant that R&D investments could be quickly replicated, reducing the incentive for innovation-led competition and pushing firms towards price as the primary differentiator.

Global Impact at the Moment

The immediate impact of this "Dragon's Discount" on the global economy is multifaceted:

• Downward Price Pressure and Deflationary Tendencies: The influx of aggressively priced Chinese goods puts immense downward pressure on global prices across a wide range of industries, from solar panels and electric vehicles to consumer electronics and textiles. This can contribute to deflationary pressures in importing countries, which, while seemingly beneficial for consumers in the short term, can stifle economic growth and investment.
• Displacement of Domestic Industries: Local manufacturers in many countries struggle to compete with the often-subsidized and low-priced Chinese imports. This can lead to factory closures, job losses, and a decline in domestic manufacturing capabilities, particularly in developed economies.
• Increased Consumer Choice and Affordability (Short-Term): For consumers, the immediate benefit is access to a wider variety of affordable goods. This can improve living standards and stretch household budgets.
• Supply Chain Concentration and Vulnerability: As Chinese manufacturers dominate more sectors, global supply chains become increasingly reliant on China. This concentration creates vulnerabilities, as disruptions in China (e.g., pandemics, geopolitical tensions) can have far-reaching impacts on global product availability and prices.
• Trade Tensions and Protectionism: The aggressive pricing tactics often lead to accusations of "dumping" and unfair trade practices, fueling trade disputes and protectionist measures (e.g., tariffs, import restrictions) from affected countries. This can escalate geopolitical tensions and disrupt global trade flows.

Unintended Consequences Further Down the Road

Looking beyond the immediate impacts, the long-term consequences of this extreme price war strategy are more insidious and potentially detrimental to the world, the global manufacturing scene, consumer mindset, and even Chinese makers themselves:

To the World Manufacturing Scene:

• Erosion of Innovation and R&D: When price becomes the sole or primary determinant of competition, there is less incentive for companies to invest heavily in innovation, research and development, and product differentiation. A "race to the bottom" on price can stifle creativity and lead to a stagnation of technological advancement globally, as companies cut corners to reduce costs.
• Loss of Manufacturing Diversity and Resilience: The elimination of non-Chinese competitors reduces market diversity and creates monopolies or oligopolies dominated by a few large Chinese firms. This not only limits consumer choice in the long run but also makes the global manufacturing ecosystem less resilient to shocks, as there are fewer alternative suppliers.
• Quality Degradation: To maintain extremely low prices, some manufacturers might compromise on quality, durability, and safety standards. This could lead to a global landscape of cheaper, but ultimately less reliable and shorter-lifespan, products.
• Deskilling of Workforces: As manufacturing shifts to regions with lower labor costs and less emphasis on high-value production, workforces in developed economies may experience deskilling, with a decline in specialized manufacturing expertise.

To the Consumer Mindset:

• Entrenched Expectation of "Cheap": Consumers may become accustomed to persistently low prices, leading to an unwillingness to pay more for higher quality, ethical sourcing, or innovative features. This can create a vicious cycle where businesses are forced to continually lower prices to meet consumer expectations, regardless of product value.
• Reduced Brand Loyalty and Value Perception: When products are seen as commodities primarily differentiated by price, brand loyalty diminishes. Consumers may become less discerning, prioritizing the lowest price over other attributes, potentially leading to a decline in overall product quality and service.
• Environmental and Ethical Blind Spots: The relentless pursuit of low prices can obscure the true environmental and social costs of production (e.g., unsustainable resource extraction, poor labor practices) if those costs are not reflected in the price. Consumers might inadvertently support practices that do not align with their values.

To the Chinese Makers Themselves:

• Unsustainable Profitability and Industry Consolidation: While aiming to drive out competitors, protracted price wars can severely erode the profitability of even the dominant Chinese players. Many Chinese companies are already reporting significant cash burn and declining margins, as seen in the current EV market price war. This inevitably leads to massive industry consolidation, where only a handful of the strongest (often state-backed) firms survive.
• Diminished Brand Reputation and Trust (Long-Term): While initial market penetration through low prices is effective, a persistent image of "cheap" can hinder Chinese brands from moving up the value chain and establishing a reputation for premium quality and innovation globally. This can limit their ability to command higher prices and build lasting customer loyalty in the future.
• Internal Deflationary Spiral: The domestic price wars can contribute to deflation within China, making it harder for companies to maintain profitability and potentially leading to a broader economic slowdown. This is already a concern with falling producer and consumer prices in China.
• Dependence on Export Markets and Geopolitical Risk: The reliance on export markets to offload excess capacity makes Chinese manufacturers vulnerable to protectionist measures, tariffs, and geopolitical tensions. This can create instability and uncertainty for their long-term growth.
• Stifled Domestic Innovation: If the primary competitive strategy remains price, Chinese companies might also face a similar erosion of innovation within their own domestic market, hindering their long-term technological advancement and global competitiveness beyond just cost.

Signs of These Negative Impacts

The signs of these negative impacts are already emerging:

• Intensifying Domestic Price Wars in China: Sectors like electric vehicles, consumer electronics, and even coffee are experiencing brutal price wars within China, leading to significant financial losses for many companies and calls for government intervention to prevent "abnormal pricing."
• Rising Trade Protectionism Globally: Increasing tariffs (e.g., EU and US on Chinese EVs), anti-dumping duties, and import restrictions on Chinese goods are direct responses to perceived unfair pricing and market displacement.
• Consolidation and Exit of Manufacturers in Western Countries: Companies in industries facing intense Chinese competition are either exiting the market, being acquired, or significantly downsizing their manufacturing operations.
• Complaints about Quality and Durability: While anecdotes, a growing consumer sentiment questioning the long-term quality of some ultra-low-priced goods, regardless of origin, may indicate a shift in consumer expectations beyond just price.
• Deflationary Pressures in China and Some Importing Countries: Persistent drops in producer and consumer prices in China, and concerns about imported deflation in other economies, are indicative of the sustained downward price pressure.
• Shift to Second-Hand Markets: In China, the deepening deflation and economic uncertainty are leading consumers to "cut down on large expenditures" and increasingly opt for second-hand luxury items, a symptom of altered consumer mindsets and a search for value beyond new, cheap goods.

In conclusion, while the extreme price cut strategy has been a powerful tool for Chinese businesses to gain market share and drive global industrial transformation, its long-term, unintended consequences present a complex and potentially detrimental outlook for global manufacturing diversity, innovation, consumer perception, and the sustainability of the Chinese industrial model itself. The world is grappling with the immediate effects, but the deeper implications of a "race to the bottom" on price demand careful consideration and proactive policy responses from all stakeholders.