How Robert McNamara And The Whiz Kids Invented Big Data
History mostly knows him as the disgraced architect of the Vietnam War, but McNamara first made his mark in the corporate world with his mastery of numbers before it was as fashionable as it is today.
PARIS — Robert McNamara was a life-long manager who showed remarkably little interest in people. Those who knew him well described the California native as cold and distant — and he was never taken by the pursuit of material things either. For this onetime top Ford Motors executive, cars were nothing more than a method of transport.
McNamara was drawn, instead, to numbers. He was able to maximize company profits because he knew markets intimately. He could build an efficient organization based on data alone.
The son of a wholesale shoe retailer, McNamara developed a passion for numbers at age 23 when he was admitted to Harvard for an MBA in 1939. McNamara had already graduated in mathematics from Berkeley. The atmosphere at Harvard in Cambridge, Massachusetts, was very different from the one he'd experienced back in California. A new subject was introduced at Harvard that revolutionized the curriculum at the time — financial planning. The school believed this subject could turn MBA students into generalists who could succeed in any sector, marking a turning point in management training.
After he received his degree, McNamara became Harvard's youngest management professor in 1940. But he didn't stay a professor for long.
In May 1942, a senior administration official, Charles Bates Thornton, paid McNamara a visit. The Japanese had attacked Pearl Harbor a few months earlier. Thornton, an assistant to the deputy secretary of defense, had a mission. He was charged with building a department of statistical control that could collect data on aerial warfare in Europe and the Pacific. Thornton needed to find scenarios where the Air Force could intervene and submit those ideas to the military chief of staff. For this, he needed a formation program in statistical analysis for his team. Thornton believed McNamara was the person for it.
McNamara joined him and worked on that project for a year. Thornton promoted him to the rank of a captain in the Air Force.
In his office in Washington DC, McNamara dealt with thousands of numbers to maximize air operations: flight frequency, fuel consumption, crew turnover, loss ratio, number of bombs jettisoned, percentage of target destruction. He drew up the most efficient travel plan for air raids in Japan based on analysis of B-29 heavy bomber's fuel consumption between India and China.
McNamara was also responsible for the strategy to replace high-altitude bombings on military targets with low-altitude bombings on Japanese cities. The military took the decision after his statistical studies took into account the percentage of wooden homes, the civilian casualty ratio and their impact on the population's morale.
It wasn't surprising that Thornton, McNamara and eight others from the statistical control team were called the Whiz Kids.
After the war, the Whiz Kids considered their future. The money wasn't great in the army — one of the reasons they didn't want to continue in the military. That's when Thornton stumbled upon an article in Life magazine about the difficulties faced by automaker Ford. Days later, the Whiz Kids offered their services to Henry Ford II, who had just taken over the company. "We can save your company," they told him in a letter. In 1946, they were all hired.
The idea the team offered was simple — what you do matters less than how you do it. The Whiz Kids, under the leadership of Ernest Breech, reorganized production lines to bring down costs. They set up a cash-flow management system and a dashboard that could analyze all costs involved in making a car. This allowed them to plan the most cost-effective manufacture of a car.
In two years, Ford was making money again. Thornton left the company in 1948, making McNamara the group leader and one of the company's most influential men. McNamara's beliefs surprised colleagues at Ford. He wasn't interested in issues of quality. Armed with statistics and data, he won every argument. Such methods were a novelty at the time and proved to be impressively efficient.
In 1958, he played a key role in the launch of the second-generation Thunderbird, a new four-seater model that was tweaked from the original. In Detroit, where the car was being manufactured, nobody believed it could work in the market. But McNamara was convinced there was a niche for a comfortable and spacious car aimed at young couples with children. His conviction was based on statistical analyzes of not only the living standards and consumption habits of this consumer base but also on the car's cost per unit and the way the automobile industry was organized at the time.
While Henry Ford II suggested creating an entirely new model for the market sector, McNamara responded that it would be a lot simpler and less expensive to modify an existing model. Not only would modifications of resource allocations be marginal, the model would not need a dedicated sales network and scores of engineers.
The Thunderbird was re-launched to great success.
But that wasn't McNamara's biggest feat. He made data calculations that showed there was room on the U.S. market for a compact, fuel-efficient automobile that didn't have unnecessary options. This was sacrilege in the U.S. Manufacturers only produced large cars back then.
McNamara's reasoning was simple. A compact car would be inexpensive to build and could sell in large numbers since it didn't require huge industrial investment. Consumers, too, were tightening their transportation budgets at the time. And that's how the Ford Falcon was born in 1960. The model marked the peak of McNamara's data-driven approach. Ford sold 435,000 Falcon cars in its first year representing a quarter of the company's total turnover.
On November 9, 1960, John F. Kennedy won the U.S. presidential election against Richard Nixon. On the same day, McNamara was named president of Ford, the first person to hold that position who wasn't from the founding family. Eight weeks later, he resigned to join the Kennedy administration as secretary of defense where he would move on to his next challenge — managing American forces in Vietnam.
But by then, McNamara and the Whiz Kids had already made their mark. Financial planning and reporting became an essential part of doing business in companies around the world.