Resource Materials on the Hidden Factory

Project Background (Work in Progress)

My graduate studies were in the design and implementation of control systems (think feedback loops, prediction horizon, mathematical modeling/digital twin, real time error detection and countermeasures, etc.). I was hired out of school to "control this system we built". By Day 3, I realized that all the theory I learned required a few conditions (assumptions) to be true, including the fact that the underlying system was at least, somewhat stable. In other words, there was no entry in the Laplace Transform table to represent the people running back and forth through the facility responding to tasks that apparently no one planned or prepared for, but the system deemed necessary (finding missing physical objects or information, putting out fires (figurative and literal ones), responding to urgent customer calls, etc.). Then I realized my job was not so much to design and implement control systems, but to stabilize the current system so control system theory would apply.

It turns out that my observations were by no means unique; the phenomenon is known as the hidden factory, coined by Dr. Armand Feigenbaum (author of Total Quality Control). My current work is synthesizing the following concepts:

  • the Hidden Factory
  • Jay Forrester's System Dynamics
  • Little's Law

and applying this to real systems in order to produce measureable results in performance and risk reduction in a sequenced, predictable manner. I teach this material in Professor John DC Little's course and am currently developing a workbork for implementation, which is based on using the new technologies of Industry 4.0 and the Industrial Internet of Things. I also teach a Sloan Executive Education course on this material ( ). Also, feel free to contact me @


Resource Materials on the Hidden Factory

  • Go to the source
    • an excellent interview with Dr. Armand Feigenbaum, the "Father of the Hidden Factory".
        • "I found that if we supported it and if I exposed myself with respect to it rather than just making a speech; if I was the quarterback, the creator of the playbook, and if I was willing to go out on the field rather than just remain in the stands and watch somebody else scrimmage, it would succeed. That, simply, is the responsibility of management."
    • the second part of the interview, with some exceptionally deep insights
        • "Many companies still don't know what things cost ..."
        • "In too many cases, we've simply automated waste ..."
        • "From an operating point of view, anywhere from about 20% to 40% of total capacity of many American companies is tied up in this hidden organization. Part of the reason is that it is never addressed because of this silo effect -- going at the improvement on a bits-and-pieces basis."
    • Accounting Views on the Hidden Factory
      • an HBR classic on the Hidden Factory from professors in the accounting discipline (I owe Prof. Miller a phone call). Read the quotes, and see if you can date these as 1985 or 2019.
          • “All that we succeeded in doing with our monstrous new computer system was to replace $10-an-hour workers with $30-to-$50-an-hour technicians whom we can’t hire anyway because of their scarcity.”
          • “When we automated, direct labor expense was reduced, but total costs increased because of the increase in overheads.”
          • Note how the accounting category for Hidden Factory is "Overhead".  See also overhead exhibit in George Stalk's HBR paper (referenced below)
      • The HBR article on Time Driven Activity Based Costing
      • George Stalk's classic on Time-based Competition
          • the exhibit on Flexible Manufacturing showing the Indirect line item comparing Japanese and US companies. Again, the Indirect line item should appear as "Hidden Factories" on the accounting ledger
          • "It is even more time-consuming, however, to get the correct parts to the job site after they have missed the initial shipment." - good example of how the hidden factory grows
          • also note reference to Jay Forrester's HBR classic, and the role time delays have on overall peformance of a system. This is a control systems concept - happy to discuss Laplace Transforms at length with interestd parties.
            • Forrester, J. (1958) Industrial Dynamics A Major Breakthrough for Decision Makers. Harvard Business Review, 36, 37-66.
    • Operational Perspectives
      • The Roger Bohn classic urging us to "Stop Fighting Fires". Roger is a colleague of mine. Worth reading in its entirety.
          • Of particular note is the introduction of Diagnosis into the process - You’re a victim if three of the following linked elements are chronic within your business unit or division.
      • Steve Spear's article on relationship between fixing defects and leadership development.
      • Wickham Skinner's classic - The Focused Factory. My added take - Hidden Factory to Focused Factory to Transformed Factory
        • Also notes that factorie need to produce/expand product lines to maintain profit margins. Unfortunately, factories "like" to do the same thing over and over again (heijunka):
          • "The factory is asked to perform a mission for Product A which conflicts with that of Product B. Thus the result is a hodgepodge of compromises."
          • From my perpective, a factory spontaneously spawns a hidden factor when it encounters a conflict such as the one above. The skilled manager (front line team) takes this hidden factory and converts it to a focused factory; much in the same way that Toyota acknowledges workarounds, but through a disciplined approach - the Countermeasures concept.
    • My current work