The Wisdom of Chairman Ko

Striding into work wearing an utterly nondescript gray business suit, Ko Nishimura may be the walking embodiment of Shibui, a Japanese concept that refers to a state of uncluttered, beautifully efficient austerity -- the perfect balance between not enough and too much. Although his net worth, which recently totalled more than $50 million, continues to grow as does the stock price of his electronics-manufacturing company, the spry, 61-year-old CEO of Solectron Corp., the world's largest and fastest-growing contract manufacturer, still leaves for work each morning from the same modest San Jose, California tract home that he and his wife have lived in since 1964.

At 6:00 AM sharp, the former IBM engineer turns his decade-old, but perfectly maintained Honda Accord into one of Solectron's overflowing parking lots. He then searches out a space near its faceless world headquarters, in Milpitas, California, and walks to his 12-by-12-foot cubicle, which, despite its modest size, is still the largest office in the building.

"I'll bet it took you 15 minutes to figure out which tie would go with the suit you're wearing," he says, plopping down in a drab conference room just across from his cube. "I can dress in two minutes!" He proudly explains that his socks are all the same color -- as are most of the dress shirts that his wife irons for him and the suits and ties that she hangs in his closet. "I can grab any suit, any pair of socks," he says. "It's foolproof!"

Since taking the company's helm eight years ago, Nishimura has grown Solectron into a megacontractor with $6 billion in annual revenues. His method for success is a strategy for high-tech manufacturing that owes much to the sparing efficiency that defines his wardrobe. His off-the-rack suits and plain-white shirts won't land him on the cover of GQ magazine, but their top-quality materials and efficient tailoring ensure that nothing is wasted in making him as presentable as he needs to be -- and not a single pinstripe more. "Being the best in manufacturing means eliminating waste and knocking out unnecessary costs," he says simply. "You have to find that gray zone between too much and not enough. If you go too far, you're gaudy and wasteful. If you don't go far enough, you're shoddy and inelegant."

Just how Nishimura and his Solectron colleagues maneuver into that elusive sweet spot provides a lesson in the powerful marriage of old-school, Ben Franklin-esque management values and today's e-everything economy. The most radical technologies and revolutionary business models are indeed changing the way companies like Solectron function. They are necessary -- but not sufficient -- to ensure profitability year after year. That's especially true when it comes to the nuts and bolts of contract manufacturing, a burgeoning, albeit decidedly unglamorous, industry.

The way this zone of the economy works is simple and relentless: High-volume original-equipment manufacturers (OEMs) outsource their actual manufacturing to contract manufacturers like Solectron. The OEMs get lightning-fast turnaround on their orders and quality high enough to give them the confidence to put their own brand on each product that is built for them. The contract manufacturer, in return, earns a razor-thin profit.

In many respects, this is trench-warfare competition in the high-flying new economy. But the requirements for winning -- and there's no question that Solectron does win, not only contracts and profits but also more than 200 quality and service awards and the 1991 and 1997 Malcolm Baldrige National Quality Awards -- bear out Ko Nishimura's teachings about the essentials of good management, good strategy, and good customer service.

Solectron's rise to glory comes a scant decade after business observers were lamenting the death of manufacturing in the United States and of American competitiveness in the proud, yet dirty-fingernailed, world of production. Nishimura's Solectron has responded to those obituaries. One key lesson from Solectron: Globalization may be changing the face of manufacturing, but the actual source of a manufacturing company's success is decidedly local.

Winning today takes more than strategically placing state-of-the-art factories around the globe. It takes workers who have both the incentive and the authority to effect the necessary changes that will create the next small but important efficiency in the manufacturing process and to accommodate the next small but inevitable change their OEM customers demand. It takes speed in responding to ever-shrinking product life cycles, and it also takes focus to meet uncompromising, just-in-time delivery schedules.