LMJ October 2014 by Lean Management Journal

$65 – £45 – €50

Issue 8 Volume 4

| October 2014 | www.leanmj.com

You’ve got a friend in lean Exploring how to be a good lean boss and the importance of employees in a lean enterprise Organisations and interviews featured in this edition include: Nationwide Building Society, Hitachi Consulting, BMA Consulting, HP Tronic, Richard Schonberger, Chris Rowe, John Bicheno and Friedemann Lutz. IN THIS ISSUE: The lean CFO and the economics of lean Nick Katko, senior consultant at BMA Consultants brings his expertise as CFO to LMJ and discusses the best way of implementing lean. De-proliferation: the third path of lean Researcher Richard J. Schonberger, Ph.D. analyses why lean fails at a supply level and how organisations can change this expensive cycle by embracing the third line of lean. Tapping the reservoir potential: your employees Friedemann Lutz, director at Valeocon Management Consulting, teaches how to unlock the most valuable resource a company has in terms of creating a culture of continuous improvement. From process excellence to business transformation Jonathan Gray, VP at Hitachi Consulting, explores why lean transformations fail despite the best expertise.

editor’s letter

Dear reader, One of the most important aspects of lean, that is often overlooked, is the people. The workforce makes the processes pass or fail. To ignore the problems in the staff at an organisation is to doom your lean transformation. You can regiment all the machinery and set a factory floor to work like clockwork but if the staff refuse to play ball out of hesitance towards lean, or their own manager’s inability to convince them of the benefits, then you may as well pack up and go home. No lean practices can be introduced when staff are worried it will result in job cuts, or if they have been bullied into adopting a new style they haven’t been properly briefed on.

Editorial

Commissioning editor Andrew Putwain a.putwain@sayonemedia.com

Managing editor Victoria Fitzgerald

v.fitzgeral@sayonemedia.com

Editorial director Callum Bentley

c.bentley@sayonemedia.com

D e si g n

Art editor Martin Mitchell

m.mitchell@sayonemedia.com

This issue of LMJ delves into the thorny topic of how employees are the number one resource within any company and how a workforce must be coaxed into believing in lean. Tapping the potential of employees is covered by Friedemann Lutz, of Valeocon management Consultancy, who shows us how to engage staff in continuous improvement for the benefit of the customer. Consultant Chris Rowe explores the idea of converting staff to lean through the lens of Dr. Steve Peters’ revolutionary guide The Chimp Paradox. He reveals how to prevent workers disrupting a lean transformation by keeping their inner chimps contained and not letting the gut reaction control work processes.

Designers Alex Cole, Katherine Robinson,

In this month’s case study, Linus Brodén of HP Tronics, highlights how a focus on kata finally helped to achieve continuous improvement at the organisation after a series of failed attempts.

In order to receive your copy of the Lean Management Journal kindly email a.putwain@sayonemedia.com or telephone 0207 401 6033. Neither the Lean Management Journal nor SayOne Media can accept responsibilty for omissions or errors.

LMJ Board member Sarah Lethbridge teams up with Ben Cuthbert, of Nationwide, for a sector focus piece on how the building society has consolidated its reputation as number one for customer satisfaction by building its own internal lean team to help employees retain its title. Lethbridge and Cuthbert also share how the development created a stress-free process of everything from applying for a mortgage to organising a funeral.

design@sayonemedia.com

Terms and Conditions Please note that points of view expressed in articles by contributing writers and in advertisements included in this journal do not necessarily represent those of the publishers. Whilst every effort is made to ensure the accuracy of the information contained in the journal, no legal responsibility will be accepted by the publishers for loss arising from use of information published. All rights reserved. No part of this publication may be reproduced or stored in a retrieval system or transmitted in any form or by any means without prior written consent of the publishers.

Richard Schonberger, Ph.D., explores de-proliferation; the ugly stepchild of the three branches of lean. Schonberger analyses how undervaluing is a shot in the foot for any organisation attempting to maximise efficiency. Regular features in our October issue also include Bill Bellows Lessons from Deming, which this month focuses on the idea of whether speed and simplicity always equal efficiency or whether something a little more time consuming could be the better deal in the end. Other regulars include John Bicheno reviews Jeffrey Rothfeder’s Driving Honda: Inside the World’s Most Innovative Car Company, 2014. We also round up the latest from the online land of lean with our social media page and more events.

Victoria Fitzgerald, Managing Editor.

co n t e n t s O C T O B ER 2 0 1 4

co n t e n t s

04 Lean News 05 Introducing the editors 06 Intro

Jacob Austad discusses the importance of a workforce to a cultural shift in a lean transformation. Without them is it doomed to fail?

P r i n cip l e s & p u r pos e 07 The lean CFO and the economics of lean Nick Katko, senior consultant at BMA Consultants, shares his expertise from years as CFO at various financial organisations and discusses the best way of implementing lean.

12 De-proliferation: the third path of lean Author and researcher Richard J. Schonberger, Ph.D. analyses why lean fails at a supply level and how organisations can change this expensive and time-wasting cycle by embracing the third line of lean.

18 Tapping the reservoir potential: your employees Friedemann Lutz, director with Valeocon Management Consulting, teaches how to unlock the most valuable resource a company has in terms of creating a culture of continuous improvement.

21 From process excellence to business transformation Jonathan Gray, VP at Hitachi Consulting, explores why lean six sigma transformations fail despite the best expertise and how to lower the rate of unfulfilled continuous improvement programmes.

2 7 S e c t o r Foc u s : Mortgage Brokers Customer centred lean design at Nationwide LMJ’s editorial board member and lean services manager at Cardiff Business School, Sarah Lethbridge espouses the building society’s leaned mortgage lending practices with a view to customer relations and input from Nationwide’s senior change manager, Ben Cuthbert.

3 0 S p e ci a l f e a t u r e The rise of the lean paradox Consultant Chris Rowe explores the ideas raised in The Chimp Paradox, by Dr. Steve Peters and how this can relate to the beginning steps of a lean transformation.

3 3 L e sso n s f r om D e mi n g Beyond management by extremes In this month’s Lesson from Deming, LMJ editorial board member Bill Bellows explores the idea of managing in the middle ground and why simplicity and speed might not always be the most efficient way.

35 Lean online We bring you all the latest news and discussion from our LinkedIn and Twitter pages

3 6 B oo k r e vi e w University of Buckingham’s John Bechino reviews Driving Honda: Inside the World’s Most Innovative Car Company by Jeffrey Rothfeder.

3 8 Ev e n t s Case Study

Find out about the latest lean events coming your way

24 Skill development and mindset change through structured practice

Linus Brodén, demand chain officer at HP Tronic, a contract electronics manufacturer in Sweden, presents a case study which explores how a lean transformation got underway at its factory.

Elizabeth House, Block 2, Part 5th Floor, 39 York Road, London, SE1 7NQ T +44 (0)207 401 6033 F 0844 854 1010 www.sayonemedia.com. Lean management journal: ISSN 2040-493X. Copyright © SayOne Media 2014.

www.leanmj.com | October 2014

LMJ Lean could help Indian healthcare

Lean implementation cost debate rumbles on

A research report has shown that the adoption of LSS measures could help reduce the waiting times for public hospitals in India. Research in the International Journal of Healthcare Technology and Management shows adapting rural hospitals to lean principles could mean patient queues shortening by 91%, while consultation times could be reduced by about a third. Shreeranga Bhat and a team from St Joseph Engineering College, in the region of Karnataka, applied lean principles to a hospital to ascertain possible improvements in quality and care for patients. Their work demonstrated possible ergonomic improvements from start to finish, in the process of the healthcare environment, were obvious. As well as improvements of handling patient records, progression of patients from the treatment room to their ultimate discharge and the process of prescribing medication and advice. The approach was also able to uncover problems with staff morale, training and administrative issues.

San Francisco General Hospital Image courtesy of of BrittElizabeth on Flickr

New boss at Lean Enterprise Institute The Lean Enterprise Institute (LEI) has announced that Mark Reich, director of strategy and operations, is its new chief operations officer. Reich will oversee day-to-day operations, including marketing and finance, plus business units responsible for training, conferences, publishing, and research partnerships with organisations engaged in lean transformations. Before joining LEI in 2012, Reich was general manager of the Toyota Production System Support Center where he implemented the Toyota production system and managed its introduction in several industries, including automotive, food, furniture, and healthcare. “I look forward to strengthening our understanding of the lean community in order to better collaborate with them and learn with them during their lean transformations,” said Reich. Reich’s appointment was just one of several changes announced: Danielle Blais, manager of the onsite education program, becomes co-learning partners development manager and John O’Donnell, former interim COO, becomes executive director with oversight over the Lean Global Network, the Lean Education Academic Network, and the newly organised Public Service Value Network.

If you have any news that you think would interest and benefit the lean community please let us know. Send submissions to the commissioning editor Andrew Putwain: a.putwain@sayonemedia.com

In other areas of the world, however, lean continues to be a controversial topic in healthcare. A recent decision in California for the San Francisco Department of Public Health to pay $1.3m (£777k) to Rona Consulting Group in order to help transform San Francisco General Hospital, which is developing an acute care ward, has raised eyebrows. The contract was awarded despite unions reminding city officials of staffing cuts during the economic downturn in 2008, which still have not been restored. The hospital where the consultation is taking place is estimated to be understaffed by 90 nurses. Those jobs cuts are fuelling the fear that lean’s implementation is just a smokescreen for more to be made. Heidi GehrisButenschoen, a spokesperson for Rona Consulting, said the goal of transforming work practices under the Toyota management system is to improve patient care. “When we work with anyone, we go out to the gemba, and we observe,” Gehris-Butenschoen explained. The observations help hospitals identify where waste can be reduced, she added, such as moving a supply cabinet if time is being taken up by crossing the room to get to it.

I n t r o d u ci n g

yo u r

editor s

Our experienced editorial board members contribute to the journal providing comment against articles and guiding the coverage of subject matter.

René Aagaard Telenor, Denmark

Brenton Harder Commonwealth Bank of Australia, Australia

Zoe Radnor Loughborough University, United Kingdom

RenÉ Aernoudts Lean Management Instituut, The Netherlands

Paul Hardiman Industry Forum, United Kingdom

nick rich Swansea University, United Kingdom

Jacob Austad LeanTeam, Denmark

Alice Lee Beth Israel Deaconess Medical Center, USA

Ebly Sanchez Volvo Group, Sweden

Bill Bellows President, In2:InThinking Network

Sarah Lethbridge Cardiff Business School, United Kingdom

Peter Walsh Lean Enterprise Australia

David Ben-Tovim Flinders Medical Centre, Australia

Jeffrey K. Liker University of Michigan, USA

Peter Watkins GKN, United Kingdom

John Bicheno University of Buckingham, United Kingdom

Torbjørn Netland Norwegian University of Science and Technology (NTNU), Norway

wendy wilson Warwick Manufacturing Group, University of Warwick, United Kingdom

Gwendolyn Galsworth Visual Thinking Inc., USA

joseph paris Operational Excellence Society

Steve Yorkstone Edinburgh Napier University, United Kingdom

More information on our editorial board, their experience, and views on lean is available on the LMJ website: www.leanmj.com www.leanmj.com | October 2014

I NTR O DU C T I O N W R I TTEN

f you want to know about the troubles in your organisation it might be a good idea to talk to your employees. They know because they are the ones doing the job, taking customer orders, assembling the products, driving the trucks, delivering the products to the customers, doing the maintenance on production lines, carrying out after market service and all the other things you can’t see by looking at numbers in a spreadsheet. This edition of the LMJ is dedicated to articles discussing the importance of employees in an organisation’s lean transformation. Articles on the lean CFO, Jonathan Gray about engaging process excellence, Nationwide, and Friedemann Lutz article on tapping the reservoir of continuous improvement potential all aim to give you different views and insight to learn from.

It’s vital that everyone in the organisation learns how to properly execute a lean business strategy

When you read the articles you don’t have to agree with the statements and learning - they are only there to provide different views which maybe are usable during your own transformation. Dr. Deming once said: “Everything is right in its own world. But what world are we in? – that’s the question”. As readers of the articles we should remember this and be curious on what lead to the conclusions and why. In my world I try to start by understanding why, before what and how. I’ve learned this helps me be more decisive in defining the right problems and not only the symptoms. It also helps me to be more creative and open minded in finding solutions. I learned this foundation serves as a better platform in talking to, learning from and involving the experts (the employees) as they instantly know I’m there trying to help and not to cut costs. Lean and systems thinkers have seen thousands of consultants trying to understand the business by looking at already described instructions, flowcharts and check-lists. And far fewer starting their learning journey by going to the gemba, finding the facts by studying what really happens in

J a cob

Austad

everyday work carried out by the employees. The best foundation comes from gemba walks, because this is where the action is and it always involves the employees. They know the action because it is their job and everybody loves to talk about what they do. Often they also tell you what should be done to improve. If they don’t, I learned the cause to be because I was a bad listener and observer and therefore not able to ask the right questions and pay real interest. This is why we as lean thinkers always talk about the importance of showing respect for people. Numerous transformations have failed because the solutions were not sustainable. In my network we often discuss this fact and try to find new evidence and insight on why. We often come back to the difference between making improvements for the employees, to the employees or with the employees. Doing it for and to the employees is often something the management team state when the results and solutions are already decided in strategy meetings This is a we-know-best approach. Doing it with the employees is when leaders involve the organisation, listen, find the facts, test the ideas and support the implementation of solutions developed together. The result is sustainable solutions, a culture of continuous improvements based on changes in customer needs and ideas on how we can create a better tomorrow for our customers. I’ll argue that unfolding the potential in each organisation is to involve and pay attention to the most valuable resource in any lean transformation the employees. I encourage every reader to engage in the debate sharing learnings from your lean transformations and to read this edition of the LMJ as examples on what the authors have learned so far in their world.

p r i n cip l e s & p u r pos e

The lean CFO and the economics of lean A

chief financial officer (CFO) is responsible for an external financial reporting system as well as an internal management accounting system. The financial reporting system is regulated by accepted accounting principles and the CFO’s responsibility is to produce GAAP-compliant financial statements. The primary reason for this is so external users of the firm’s financial statements can fairly assess and understand the company’s financial condition.

Nick Katko, senior consultant at BMA Consultants shares his expertise of years as CFO at various financial organisations and discusses the best way of implementing lean.

A CFO also uses a management accounting system to control business operations and to make sound financial business decisions. As a CFO, they are the architect of the company’s management accounting system. They need to design around the operating practices of their company so it meets the needs of management. Figure 1.1: Traditional management accounting system

The architecture of the organisation and what needs to be done by people in their roles Exploring the economics of lean

Figure 1.2: Lean management accounting system

Lean companies have a different operating control environment, almost the 100% opposite of traditional manufacturing. Lean companies control production by producing to demand and creating flow. Business decisions that drive improving the delivery of customer value and productivity will drive profitable growth. The day the company adopts lean, the CFO faces an immediate challenge: they must be the architect of a lean accounting system to replace the current management accounting system. The functional requirement of a lean management accounting system is to drive lean forward and achieve financial success. The foundation for a lean management accounting system is the economics of lean.

READ A B O UT : The responsibilities of a CFO during a lean transformation

and absorption, as well as lowering the cost of inventory is viewed favourably.

In traditional manufacturing, operations are controlled by and measured against a production plan. Inventory must also be controlled because there is so much of it, which also has a material impact on financial reporting. Business decisionmaking that drives improving efficiencies

The economics of lean explains the strategic aspects of making money from a lean business strategy. Lean principles, practices, and tools can be very confusing to people, and companies, without prior lean experience. The economics of

www.leanmj.com | October 2014

Th e l e a n C F O Nic k K a t k o

Figure 2.1: Operations built on lean practices

growth rate, and should be better than industry averages. The supply side of the equation focuses on the firm’s supply of resources. The supply of people, machines and facilities are responsible for creating and delivering customer value. By focusing on creating flow and continuous improvement, the productivity of resources will improve. Using lean practices to create flow means resources will be able to maintain productivity levels regardless of short-term fluctuations in demand. Continuous improvement practices mean the productivity of resources will achieve consistent annual improvements in productivity of 10-20%.

lean explains how the combination of lean principles, practices, and tools change the laws of supply and demand for the company. Lean will do two things for the company: Drive it to create more value for customers; Continuously improve productivity. Creating more value for customers drives revenue growth; improving productivity drives cost management, which results in increasing profits as lean matures. The economics of lean is the mantra as the lean CFO.

Th e e co n omics o f l e a n

The economics of lean can be explained in basic terms of supply and demand. Figure 2.2: The economics of lean

Let’s look at demand first. By focusing on creating and delivering customer value, the demand for the company’s products or services increase and the company can command better prices. Financially, this means the growth rate of revenue should increase compared to historical

Everything about lean sounds easy, but it’s hard to do because a company is basically working against itself when it comes to becoming lean. It takes a great deal of discipline to break away from traditional thinking, daily fire-fighting, and the inertia to keep doing things the same way

The financial impact of maintaining and improving the company’s resources’ productivity is the rate of increase in the cost of those resources (i.e. operating expenses) will slow down and be less than the growth rate of revenue. The difference in growth rates between revenue and costs means the company will make tons of money with lean. Sounds easy, right? Everything about lean sounds easy, but it’s hard to do because a company is basically working against itself when it comes to becoming lean. It takes a great deal of discipline to break away from traditional thinking, daily fire-fighting, and the inertia to keep doing things the same way. It’s about human nature. The comfort of the known, the current state of business processes and all the problems that go along with them, is more acceptable than totally different business processes that obliterate the current way of thinking. Fortunately there is a solution: measures. A key to financial success with lean is measuring based on how lean works. As for the CFO, they are the resident expert on measurements.

Th e l e a n C F O – k e y t o s u cc e ss wi t h lean

So where does the CFO fit into all of this? A CFO charts the financial strategy of the company. Whatever the business strategy, they need to project the financial impact of the proper execution of the strategy. They also have oversight

p r i n cip l e s & p u r pos e

of the management accounting system: the measures and methods that are used internally to measure how well a company is performing at any time. How they present the financial benefit of lean and how they determine how to measure it will be the determining factor of whether a company adopts lean as the business strategy or thinks of lean as part of a business strategy.

Itâ&#x20AC;&#x2122;s vital that everyone in the organisation learns how to properly execute a lean business strategy

The lean CFO needs to understand the economics of lean so they can align the financial strategy with how lean makes a company money. The CFO needs to make the necessary changes to financial measurement and reporting systems to measure the execution of the lean business strategy. This is the single most important factor preventing companies from realising the true financial potential of lean. The ability to translate the language of lean into the language of money will make it clear to everyone in the business why the proper implementation and daily execution of lean practices are necessary. The CFO is the resident expert (and owner) of the measurements. It is very important to change the financial and operational measurement system so the measures drive lean behaviours. Traditional measures, of course, will drive traditional behaviours. That is what they are designed to do. But these traditional measures will obscure and undermine the vital changes required by the economics of lean. If the CFO changes to a lean business strategy, they cannot account, control and measure it using the old methods. The most important contribution of the CFO is to lead these changes. To go lean, a CFO

must understand how the principles of lean create the economics of lean.

Fiv e l e a n p r i n cip l e s Figure 2.3:

The economics of lean are based on the five principles of lean: Customer value Value streams Flow and pull Pursue perfection Empower employees. Adopting a lean business strategy means these principles become the way of life for the company. These principles permeate the entire organisation: its cultures, operating practices, and management style. Letâ&#x20AC;&#x2122;s take a look at how these principles impact measuring and reporting. The number one objective of a lean business strategy is to provide value to the customers and to the markets. This requires two things. First, a company must clearly understand value from the customerâ&#x20AC;&#x2122;s perspective. Second, it must actually deliver the exact value the customers want. By doing both, a company will change the dynamics of its relationships between itself, its customers, and its competition. These are the reasons

Figure 2.4.1: Traditional organisational structure

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Th e l e a n C F O Nic k K a t k o

Figure 2.4.2: Value stream organisation value stream managment 1: Three value streams created based on distinct material flows 2: Manufacturing support workers assigned full time to one value stream 3: SG+A functions assign one person to value stream team. These team members have dual reporting responsibilities to value stream team and home department 4: Value stream manager is CEO of the value stream

why measurement and reporting systems need to be changed. The CFO needs to measure how well any operation delivers customer value, at any time. What exactly is value and how is it delivered? Itâ&#x20AC;&#x2122;s easy to identify when you look at the products or services customers buy. These products or services must meet certain quality specifications and delivery standards. Lean companies understand value is more than just the product or

service. Customer value is created every time a customer has an encounter with the company. Think of all the encounters the customers have with the company outside of the actual use of a product or service: placing an order, receiving and paying the invoice, after-sales support, navigating a web site and the ease of talking to a person in a company. This is the reason lean companies identify, organise, and manage by value streams. The second principle of lean is working by value streams. Value streams are not departments. A value stream is the sequence of process steps from the time a customer

Figure 2.4.3: Value stream organisation - corporate structure Corporate departments do not totally disappear in value stream organisation. Small teams of functional experts are responsible for setting strategic direction of company in areas such as quality and procurement. This execution of that strategy resides at the value stream level with the value stream team.

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places an order to the time the customer receives the product or service, executed at the proper time. Value streams are the profit centres of a business. These are the reasons why measurement and management systems need to be aligned around value streams, because the only way to increase profitability is for value stream performance to improve. All financial and operational measurements must be changed to focus on the performance of value streams.

The day the company adopts lean, the CFO faces an immediate challenge: they must be the architect of a lean management accounting system to replace the current management accounting system

A subtle, but important, difference between value streams and business processes is value streams focus on order fulfillment: meeting customer demand and generating revenue. Business processes also meet customer demand, but they do not generate revenue. As mentioned previously, lean is a comprehensive business strategy that impacts the entire organisation, not just the factory. The responsibility of the lean CFO is to change measurement systems so the delivery of value can be measured consistently and frequently throughout the entire business. Every business process delivers value. Value streams create and deliver value to paying customers. Internally other business processes deliver value to internal customers or other stakeholders. Every business process needs the same basic measures. Lean companies recognise its supply of resources creates and delivers customer value. A companyâ&#x20AC;&#x2122;s resources are its people, machines and facilities. These resources work in the value streams and other business processes. The number one objective for every value stream is to maximise the amount of time it spends on creating customer value. The primary issue is every value stream and every business process contains waste, and waste prevents value from being created. Lean companies want every value stream to do two things very well, all the time: flow demand through the value stream as quickly as possible, and relentlessly eliminate waste. In order to accomplish these two objectives, value streams need to be able to manage flow and waste. This requires a fundamental change in the measurement of operations away from traditional cost-based measurement

Figure 2.5: Linking lean principles to the economics of lean

systems. Measuring flow and waste will result in tremendous gains in productivity. The lean CFO must move the company away from traditional cost-based measurement systems in the early stages of lean. Itâ&#x20AC;&#x2122;s vital everyone in the organisation learns how to properly execute a lean business strategy and the best way to do this is with new measurements. For a lean strategy to work, it means everybody, everywhere, all the time focusing on creating value. This is the principle of empowering employees. The primary objective is for people to take action: to deliver value, improve flow, and eliminate waste. Lean measurement and management systems need to focus on actions and outcomes, not simply reporting numbers. This means these systems need to be simple and easy for everyone. The right information needs to be reported as frequently as necessary to ensure the right actions are being taken. Measurement and management systems need to be redesigned with the users in mind: every employee. The traditional approach to measurement and management systems is to increase the dependence on ERP systems. Lean takes the opposite approach and the CFO needs to lead the company away from complex measurement systems no one understands, to lean-focused ones.

Wrap-up

The economics of lean form the foundation for all the changes that need to be made by the lean CFO. There is a tremendous amount of money to be made from a lean business strategy but most people canâ&#x20AC;&#x2122;t see this because existing measurement and management systems are not designed with lean economics in mind. The lean CFO must redesign all measurement and reporting systems to unlock the financial potential of lean.

www.leanmj.com | October 2014

p r i n cip l e s

READ A B O UT : Bringing the third line of lead to the forefront Where mistakes are being made with suppliers and distributions Designing a dependable, customer focused operation

p u r pos e

De-proliferation: the third path of lean Author and researcher Richard J. Schonberger, Ph.D. analyses why lean fails at a supply level and how organisations can change this expensive and time-wasting cycle by embracing the third line of lean.

he effective implementation of lean progresses along three major pathways. One, the lean core, is widely employed. The second, lean in supply and distribution, is treated separately and, in comparison, employed weakly. The third, de-proliferation (DP), has scarcely been recognised as a route to lean at all. Yet DP can achieve much of the lean agenda all by itself though large-scale reduction of what the lean core and lean supply/distribution have difficulty in dealing with: diverse system

elements: parts, stock-keeping units (SKUs), operations, tools and machines, suppliers and customers. Separately, the three lean pathways receive only flurries of executive-level interest, resulting in a lack of impetus and staying power. Corrective action calls for treating DP as a key route to lean, and promoting the three pathways jointly as a competitive force, centering on leanâ&#x20AC;&#x2122;s primary mission: quicker, more flexible, higher quality response all along the value chains to customers.

p r i n cip l e s & p u r pos e

De-proliferation, has scarcely been recognised at all as a route to lean

Lean’s primary purpose is customercentred. It aims to deliver the customer a quick response with high quality, and flexibility in synch with changing demand patterns. Lean does its work by reducing lead times and throughput times, while exposing issues for timely correction. Lean harnesses the pull of demand from the final user such that it ripples back along the chain. That backflow embraces three major contributory stages: design, operations, and supply and distribution. Trouble is, lean in operations gets more attention than lean in design and lean in supply/distribution. Research shows that, globally, supply is loaded with inventory, and distribution is loaded even more: logistics channels are fat, not lean. And lean in design - primarily a matter of de-proliferation as applied to products and productive resources - is scarcely recognised as a lean fundamental; if it were avidly pursued as such, main effects would be showing up as reduced channel inventories. We should be treating all three stages of the value chain as primary, interwoven lean pathways. Without such welllinked inclusiveness, lean seems sure to continue as an initiative whose methods and competitive importance are seen by executives as worthy of only sporadic attention and involvement.

Th r e e d omi n a n t l e a n p a t hw a ys

Lean core: Centered on operations and related support, the core is made up of human and physical methodologies.

The lean value chain

Lean core (lean in operations)

Lean supply/ distribution

De-proliferation (lean in design)

Lean in human resources includes cross-training, job rotation, few job classifications, and operator-centred quality and maintenance. Lean as applied to physical resources includes, most prominently, cells, kanban, quick setup, small lots and containers, dockto-line delivery, downsized/right-sized equipment, and point-of-use tools and materials. Being physical, the latter can be captured in before-and-after photos or film. Lean supply and distribution: Lean in the external logistics channels features supplier certification, quality at the source, small lots, bar-code/RFID hand-offs and accounting, exact-count containers, and milk runs. In addition, advanced practices in supply-chain management (SCM) have emerged largely in the retail sector interfaced with manufacturers. Included are

supplier-managed inventory, crossdocking, quick response, fast fashion, and intensive collaboration. De-proliferation: DP is about reducing variety, as applied to part numbers, end-product SKUs, brands and models of machines and tools, suppliers, and customers. A well-developed aspect of de-proliferation is design for manufacture and assembly (DFMA). Following discussion, on the role of DP as a critical lean methodology and key to unlocking the potential of leandriven competitive strategy, includes DFMA’s contributions.

D e - p r o l i f e r a t io n d oi n g l e a n ’ s wo r k

Presume what we usually consider as basic lean methodologies (quick setup, cells and frequent small-lot deliveries) are unknown. Key results of those lean practices, however, may still be realised, because DP can, by itself, do much of lean’s work. DP does so through largescale simplification and reduction of what quick setup are obliged to deal with: proliferating mixes of everything from component parts to product portfolios to customers. Many companies never seem to seriously face up to growing complexity arising from proliferation. Others, for example, Nestlé USA do so, but irregularly; after years of inattention to multiplying options and models, suppliers and customers, someone in authority noticed the resulting erosion of customer service and growth of costs, and charters a DP effort.

www.leanmj.com | October 2014

Rich a r d J . S cho n b e r g e r D e - p r o l i f e r a t io n : po t e n t l e a n p a t hw a y

Nestlé USA attacks p r o l i f e r a t io n

In 2012 Nestlé’s U.S. operations were struggling. A new management team soon found root causes. For example, its seven independent U.S. business units, running 87 factories, were buying items such as safety shoes and hair nets from more than 100 suppliers. “Because the units weren’t talking with each other, Nestlé, the world’s biggest food company, couldn’t get the best bulk discounts in its biggest national market.” Solutions came quickly, including reducing the number of suppliers Nestlé uses to just a handful. Similarly, Nestlé cut the number of suppliers of flavourings from 48 to four. In addition, Nestlé’s end product variations— flavors, sizes, and so on—which had been proliferating for years, were slashed “by 43 percent to simplify operations.” Annie Gasparro and John Revill, “Nestlé Prunes Brands as U.S. Struggles,” Wall Street Journal, 2014 Instead of allowing proliferation to run free-rein for years before reacting, why not clamp down on it systematically and continually? One of the few companies that makes de-proliferation a continuous effort is Illinois Tool Works (ITW). ITW does so via its long-standing 80-20 strategy aimed at mitigating the variety of complexity factors plaguing nearly all organisations. So whether via 80-20, DFMA, or other means, DP disentangles convoluted flows that confound lean’s best intentions.

D e - p r o l i f e r a t io n a s comp a n y s t r a t e g y at ITW

At Illinois Tool Works (ITW), continual application of DP is a pillar of company strategy, prominently presented as such in every annual report for more than 10 years. At ITW the primary mechanism for DP is 80-20—that is, a focus on the 20% of the items which account for 80% of the value. Common applications include simplifying product lines, the customer base, the supplier base, and business processes, systems, and measurements The 80-20 strategy blends well with ITW’s other well-known strategy, that of acquiring numerous smaller industrial companies yearly, and subjecting each to its 80-20 formula, thus to wring out losers in order to focus attention on winners. Illinois Tool Works Inc.,2013,

In general, the failure to see DP as basic lean stems from limited vision, both from the lean community and from the stalwarts of system/product/process design. While ITW takes a broad brush to DP through its 80-20 strategy, DFMA offers a wellestablished systematic methodology that, through communisation of component parts, bears directly on the lean core.

D e - p r o l i f e r a t io n / DF M A a n d t h e l e a n co r e

It should be obvious why large reductions in parts and suppliers, with resulting quicker, simpler manufacture and assembly, should be seen as lean-elemental. A google search of lean and DFMA, however, brings up only a few linkages, none convincingly stated. Wikipedia says, “applying DFMA is to identify, quantify and eliminate waste or inefficiency in a product design. DFMA is therefore a component of lean manufacturing.” The logic is weak. In focusing on wastes and inefficiencies, that kind of statement would apply to many management initiatives, dating back to the works of Frederick W. Taylor a century ago. To clarify why DP/ DFMA, deserves a central place in the lean agenda, we need to probe lean’s core practices. Consider a lean-manufacturing methodology, quick setup, and its relationship to DP/DFMA. Lean adherents see quick setup/quick changeover as lean’s primary method of delivering quick responses. That is because the typically outsized array of component parts and finished goods models resulting from conventional product design requires many time-consuming setup and changeover steps. Bruce Hamilton, former general manager of United Electric Controls, implemented JIT/ lean and explained why no amount of quick changeover was enough: “Through our use of SMED (single-minute exchange of dies) we reduced many lot sizes to one - but even for that one piece, we had to activate our entire production system.” DP/DFMA to the rescue: design for manufacture (DFM), by standardising parts, reduces setups and related system activities. Design for assembly (DFA), by reducing a multi-part design to a single part, eliminates all changeover-related activities. Both reduce numbers of suppliers, deliveries, and transactions that accompany purchased materials. DFM may result in libraries of standard features, readily usable in new applications. Such is the case at Gloucestershire-based Renishaw Plc: formerly hundreds of different tool assemblies were required to set up and produce its commonly ordered components; today, working out of its parts library, it only has about 70 different tool sets. Renishaw says it employs DFM not for cost but for lead-time reduction.

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In another example, robotics manufacturer GE Fanuc applied DFM to more than 300 variously sized circuit boards, leading to 98% of them fitting into a standard length and width form. That and other DFM applications reduced setup times by more than 80%. Affected purchasing activities for the boards themselves would have been similarly reduced.

An overriding problem with regard to lean is that executives tend to view its key elements divisively

DFM reduces a multi-part design to a single part, requiring no setup adjustments at all. In some cases a nosetup part may get its own production equipment - perhaps a fully-depreciated conventional machine that had been collecting dust in off-site storage. Or, where the part is purchased, a single supplier with similar dedicated production facilities may realise the benefits. Whether made or bought, in re-rigging the facility to produce only one part - with zero setup and zero defects - no one cares if it operates but two hours a week. Design for assembly takes a further step: changing the product’s design so it altogether eliminates certain parts. In cases where lean-though-DFMA eliminates the part, it far outperforms lean’s quick-changeover mode. Aside from that, DFA yields components common to multiple models, such that the need for changeovers in assembly reduces to products requiring special components. Quick setup and changeover, however, is but one element of the lean core to which PD/DFMA does journeyman’s service. Others include cells and onepiece flow, kanban, and space reduction. Cellular manufacturing - the factorylayout component of lean - takes a long step toward lean’s ideal of one-pieceflow. DFMA, in shrinking part counts, simplifies cell formation. At the same time it shrinks space to store, hold, and handle parts, simplifies circuitous transit routes, and does away with space-consuming storage, handling, and transport gear. Moreover, the low part counts favour kanban as an efficient way to deliver parts to the cells - from stores or directly from outside

suppliers. In kanban’s role as a queue limiter, queues may sometimes go as low as one piece, that piece residing on single kanban squares within compact cells. In the ideal, enabled through DP/ DFMA, there is room for multiple cells, each devoted to its own one-piece-flow component part or end product, each of which does the work of multiple part numbers prior to DP/DFMA. DP/DFMA even has facilitating effects on an important aspect of lean accounting: reliably determining product costs. The explanation: it becomes simple to allocate costs to products when made from small numbers of component parts contained within short, simple flow paths; difficult and dubious when many parts and flow paths are involved.

D e - p r o l i f e r a t io n and the external v a l u e ch a i n

De-proliferation of parts/SKUs contributes as well, to the following SCM-related aims of lean: supplier reduction, local sourcing, and frequent, small-lot deliveries. DFMA attacks large varieties of purchased direct materials, and, even larger arrays of service parts, which tend to proliferate as product portfolios evolve. Both require sourcing from numerous

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Rich a r d J . S cho n b e r g e r D e - p r o l i f e r a t io n : po t e n t l e a n p a t hw a y

suppliers, whereas small arrays, achieved through commonising, permit reduction of the supplier base. As the number of suppliers shrinks to a few essential, order volumes from each increase, sometimes to the point that a key supplier may elect to relocate next door. With shortened transport distances, suppliers no longer have reason to ship infrequently in full truckloads. That mode gives way to small-lot material-handling, and perhaps delivery daily or more often, just in time.

De proliferation can, by itself, do much of lean’s work

Lean/DP/SCM comp e t i t iv e strategy e x e c u t iv e a t t e n t io n

An overriding problem with regard to lean is that executives tend to view its key elements divisively. That is, the three lean-value-chain components are treated as three separate initiatives, with responsibilities residing at lower levels of different functions. Compounding the problem, lean has long been burdened by being promoted in terms of eliminating the seven deadly wastes—which has a decidedly lowlevel ring to it. Waste elimination has a worthy role in lean, and is easily taught and applied at low levels. However, it is not lean’s essence. Senior executives’ lives revolve around what they see as large-sized strategic issues. So it is natural for them to devote themselves to those and to delegate other matters: DFMA to design engineering, lean to operations, production portfolio to marketing, supplier development to procurement, and so on.

This state of affairs is not the fault of the executives. Rather, it stems from narrow thinking in the greater lean/DP/valuechain community itself - such silo-thinking becoming ingrained upward and into the executive suite. Correction centres on repositioning lean and its three major pathways to where they are, rightfully, seen as basics of competitive strategy; competitive because their primary purpose and positive impact flows through marketing and sales to customers; strategic because that impact is wide (three pathways leading in the same direction), and, if high-level support is there, enduring. We are persistently told that initiatives such as lean, DFMA, and SCM must be consistent with company strategy. Sometimes, however, strategic wisdom needs to swim in the other direction from the improvement initiatives up the hierarchy to the top. Getting that wisdom moving upward requires all of us to modify all our materials accordingly.

FURT H ER READ I NG : Bruce Hamilton, foreword in G. D. Galsworth, Smart, Simple Design: Using Variety Effectiveness to Reduce Total Cost and Maximize Customer Selection, 1994. “Maximum Efficiency,” Manufacturing Engineering, May 2005. John Teresco, “America’s Best Plants: IW’s Third Annual Salute: GE Fanuc,” Industry Week, 1992 “Unbelievable Levels of Quality,” Industry Week, 1988 Richard J. Schonberger, “Coping with Takt-time Tyranny and Capacity Confusion—Part 1,” Target, 2013

T H E M A N U FA C T U R E R

WEEK OF EXCELLENCE 25–27 November 2014 Exclusive events for manufacturing leaders, to provide you with the knowledge, expertise and connections that will set your company apart from its competitors and prosper in the year ahead.

The Manufacturer Directors’ Conference 26–27 November 2014, The ICC, Birmingham This is the premier conference for senior manufacturers who have a clear focus on expanding and creating long-term growth in there company. TMDC will discuss the industry trends for both the year ahead and future predictions for the next 10 years.

themanufacturer.com/TMDC #TMDC2014

The Manufacturer Top 100 26 November 2014, The ICC, Birmingham An elite event to recognise the Top 100 manufacturers in 4 categories: an inspirational leader, driver of cultural change, bold investor in new markets and the young pioneer. Have you checked if you are on the list?

themanufacturer.com/Top100 #TMTOP100

ERP Connect 27 November 2014, The ICC, Birmingham ERP software is business critical therefore it is essential that the procurement and selection process is correct. A poor decision can cause financial and even personal consequences. ERP Connect is a unique event brining together all the leading ERP solution providers for one-day in one place.

erpconnect.co.uk #ERPconnect

The Manufacturer of the Year Awards 27 November 2014, The ICC, Birmingham Join us to celebrate the winner of The Manufacturer of the Year Awards 2014 and to revel in the strength of British manufacturing. The event will be attended by over 1000 of the industry elite at this black-tie gala making the event the perfect setting to strength your network of contacts.

themanufacturer.com/Awards #TMAwards2014

Attend two or more events to benefit from our multi-booking discount. Please call our events team on 020 7401 6033 (Opt 3) or visit themanufacturer.com/WoE for more information.

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Tapping the reservoir of continuous improvement potential: your employees Friedemann Lutz, director with Valeocon Management Consulting, teaches us how to unlock the most valuable resource your company has in terms creating a culture of continuous improvement. R e a d a bo u t : How to engage your workforce The importance of implementing new ideas Benefits of knowing what’s important to the customer

stablishing a sustainable continuous improvement culture; this sounds like a dream to many organisations, nearly as distant and unattainable as perpetual motion. But in contrast to perpetual motion there are a number of companies where continuous improvement does work. What is interesting is that while a number of manufacturing companies have come much closer, many service companies (such as banks and insurance companies) or non-manufacturing units (such as R&D, finance, HR, customer service) of manufacturing companies struggle with turning the potential for improvement into reality. It’s insightful to start with a few examples of where continuous improvement does not work: one organisation, a well-respected bank, had a very striking feature: everybody I talked to had great pain in admitting that something may not work perfectly in their area of responsibility. There were situations where people nearly started crying when confronted with facts and they had no choice but to admit something was wrong. It’s important to reiterate through

the process that problems have to be seen as opportunities to improve rather than someone’s fault. In another organisation, an insurance company, underwriters actually came up with a process which reduced the lead time for issuing policies in a business to business context from ten days to one day. They had designed and piloted the process, then ran into the problem that among the decision makers actually nobody was interested in this radical improvement. Some managers found it intellectually interesting, but eventually decided not to implement it mainly because they wanted to avoid raising expectations among sales people and clients, fearing they would be measured against higher standards in future. We have also seen that lean or other improvement initiatives have been used to reduce employment. Would you engage in something, whatever the name, which leads to the unemployment of you or your colleagues? As a positive example I’ll discuss a financial services organisation, which has

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systematically gained important market share over the last 15 years, since it was set up. What is striking at first sight here is the big number of unsuccessful projects they have undertaken. Around 40% of projects fail and are abandoned after a few months. Now there is clearly an improvement potential in this fact, but I mention it here to illustrate the culture behind it. People are encouraged to try and test new ideas and make mistakes, so overall the organisation has been successful with this approach.

Your employees are a huge reservoir of potential, most of which stays unused but can be continuously employed to improve processes and results

But there is more to this example: the top management has very ambitious goals - but only a few of them - and communicates them at every occasion. New ideas are always sought and are quickly implemented and tested. IT is very quick to respond and implement solutions so a new product or change can be launched within weeks (sometimes days) instead of months or even years as in other organisations. And if the idea does not live up to expectations it is quickly abandoned and the team naturally gets another chance. Continuous improvement has several essential ingredients which need to be present together for it to be sustainable. First, there needs to be engagement by employees on all levels. Your employees are a huge reservoir of potential, most of which stays unused but can be continuously employed to improve processes and results. How to create engagement? Many elements can be combined. Meaningful, realistic but ambitious goals are a foundation. Ideally, they should stretch us outside of our comfort zone. A goal of improving 5% or 10% can usually be achieved by working slightly harder in the tried and true methods. An improvement goal of 25% or more forces us to rethink the entire process and positively challenge the old ways of working. Success is a big contributor to creating engagement. Most people find experiencing success rewarding in itself and will engage just to have more success. That is why visualisation of results with very short updating cycles is so powerful. Knowing that I have

been successful during the last hour, or at least day, is a powerful motivator for further engagement. Here comes an important point for financial services or other non-manufacturing processes: often it is difficult to directly measure results. If tasks are not repetitive, just like running IT projects, developing new marketing strategies or even treating difficult customer enquiries, results are usually difficult to measure in numbers and to visualise. It is much more difficult than the number of products produced in a manufacturing environment. Here we have to get creative and sometimes use indirect measures instead. For example, project progress, ticking off tasks or other ways of making progress visible. Once we have overcome the uneasiness of making our work transparent this can be a very powerful mechanism. But because of this difficulty with measurable clear metrics, the remaining contributors are even more important. Seeing the impact of my own actions, identifying improvement potential, generating ideas and implementing them is probably the most powerful motivator for engagement. This is where most organisations utterly fail. Many people complain about problems in their teams and processes. In fact, they love to complain. Many organisations ask people to submit improvement ideas. Usually they begin flowing in at a high rate, then later, the river of ideas becomes a little stream before it eventually dries up. Why? Because most organisations are incredibly poor at implementing them. One company we recently talked to had a backlog of 1800 ideas to be implemented. That is more than they have been able to implement over the last three years. We believe that employee ideas are at the core of continuous improvement and they need to be implemented quickly. The three steps essential steps of continuous improvement are: 1. Identifying improvement potential; 2. Generate improvement ideas; 3. Implement. This cycle has to become a daily routine as close as possible to the place where our processes are happening and not through a separate idea committee which will take weeks to decide, and months to implement. The most powerful question is, what can we do better tomorrow? Daily implemented small improvements add up to big results over time. The closer improvements can be linked to measurable results, the easier it will be to gain momentum, but if results of work are not measurable, as in many non-repetitive processes as discussed before, the fun factor becomes even more important.

www.leanmj.com | October 2014

T a ppi n g t h e r e s e r voi r o f co n t i n u o u s imp r ov e m e n t po t e n t i a l F r i e d e m a n n L u t z

If success is something that cannot be expressed in numbers, it has to be fun to test new ideas and to improve. Obviously we need the absence of fear and a feeling of job safety for work to be fun. In a climate of fear people usually revert to old and proven methods and donâ&#x20AC;&#x2122;t try new ideas, which is a prerequisite for improvement. The team should be fun; the meetings, the work environment, the boss, and the learning itself, should all be fun. Combined with ambitious goals (remember, all ingredients need to be there) fun at work will increase engagement and subsequently form a foundation for continuous improvement. Of course the role of the direct manager is important. Besides agreeing ambitious and challenging goals, the direct manager has a very important role to play in asking challenging questions that invite every team member to develop improvement ideas. This is important, because when employees develop ideas themselves they will be more committed to them and subsequently engage much more in the implementation than if the ideas have been imposed to them by their manager or an outsider. This is especially true for white collar workers although it applies to production line operators as well. So mangers should drive the improvement with questions like:

on support for line managers to change their habits in this respect.

We have seen that lean has been used to reduce employment. Would you engage in something that leads to the unemployment of you or your colleagues?

What do we need to do to avoid these errors from happening? What would need to happen in order to improve productivity by 30%? These questions will help the workforce contribute, rather than managers coming up with solutions themselves, which is always very tempting. We have found the key to success is dedicated training and hands Upside down organisation

Hierachy seen as a needing command approach to management where commands follow a top down path.

Each layer offers leadership to the level above through support, coaching and empowerment.

Managers should devote considerable energy and time to supporting the employees in implementing their own ideas. A helpful idea is the concept of the reversed pyramid where the role of a manager is about supporting their employees to do a good job and achieve results rather than to tell them what to do. Again these are long established habits can be changed effectively only with a sustained effort. Another element to continuous improvement, less essential but helpful, is to know the process end to end, the context of what is happening before and after a specific customer interaction. This of course allows everybody to optimise the whole and not one part of the process at the expense of the other. If asked for improvement ideas people will certainly come up with some solutions that may make life for other units up- or downstream more difficult. This can be avoided if they know what is happening overall and what it takes for those other steps in the process to be successful. Especially important for service processes is also to know the customer: their preferences, expectations and first of all their customer experience. It is shocking how infrequently people from headquarters of banks or insurance companies have seen and experienced real customers buying or using their products and services. Or how often quality people try to resolve quality issues without understanding what is really happening on the shop floor. Regular shadowing of customers, sales and customer services situations should be a must if continuous improvement is to improve the value for the customer. The same is true for non-manufacturing units in manufacturing companies, who should regularly shadow their internal clients in order to be able to support them better. Just think about what percent of all peopleâ&#x20AC;&#x2122;s potential in your organisation is actually used. Creating a sustainable continuous improvement culture is a long journey, but the rewards in the form of realising the dormant potential of all employees are huge.

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From process excellence to business transformation

Jonathan Gray is VP at Hitachi Consulting, the management and technology consulting arm of Hitachi. Here he explores why lean six sigma transformations fail despite the best expertise and how to lower the rate of unfulfilled continuous improvement programmes.

READ A B O UT : The barriers to a successful lean transformation Why things go wrong and how the right leadership can fix it Delivering tangible and sustainable business results

o achieve tangible business value from continuous improvement initiatives we must move beyond process excellence and the primary focus on method and tools. Lean and six sigma techniques have been adopted by many industries; however, we are seeing 50-70% of initiatives fail to reach their full potential, and then hitting a wall after initial improvements are made. Role-modelling lean leadership behaviour, which truly empowers and engages employees in the transformation journey and ensuring improvements are connected end-to-end. This is by aligning initiatives to core business strategy and ensuring improvement targets go beyond cost reduction; focusing on time-based and service level competitiveness that are the central tenets to real business transformation. However, there are often significant barriers which must be overcome in order to affect lasting change.

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p r oc e ss e x c e l l e n c e t o b u si n e ss t r a n s f o r m a t io n J o n a t h a n G r a y

Hitachi Consulting lean leadership maturity model

Senior leadership teams must be practically, rather than nominally engaged in moving beyond steering committees and sponsorship roles to fully embracing transformation initiatives and role-modelling the required behaviours they request from others. This must involve true collaboration at all levels and the actual break-down of organisational silos – a much bandied term, but one which often does not get any real traction – through a shift in focus from tools to change management and leadership development. Employees must be given the accountability and authority to be empowered. Leaders must translate words from leadership presentations and demonstrate them in dayto-day business life, whilst coaching others to achieve the same, throughout the organisation. Leaders must teach lean thinking. There is a logical sequence to overcoming these barriers and it starts with the change organisation itself.

What are the new skills r e q u i r e d i n a ch a n g e o r g a n is a t io n ?

Learning change management and coaching in a classroom is a world away from doing it in reality. It is critical internal change teams to understand the working context of the people they are supporting, so they can relate change activities to the daily lives of employees and the performance of their business. What is more, in this way change teams are perceived as jointly responsible for the success of those activities, demonstrating a higher level of commitment to results defined and delivered together.

Lean and six sigma techniques have been adopted by many industries; however, we are seeing 50-70% of initiatives fail to reach their full potential

To effectively change behaviour at any level, change teams must go beyond transactional interactions – typical of interactions with senior leaders and managers – as the conversation moves away from process and toward the individual. Being able and willing to move into a more interpersonal relationship when required is critical to success. This is a component rarely found in any job description, but should be a high priority when selecting members of a change team. Lastly, while leadership development coaching is about supporting leaders to engage, motivate and empower people, in reality, the biggest problem for many leaders and managers today, is time. Leaders can have fantastic people skills but if their calendars are too full with extensive travel time or meetings, they simply have no time to demonstrate it. Personal effectiveness is an equally important skill set. Leaders must be able to create time to think, in order to prepare, delegate and coach team members. This is an often forgotten but core competence of internal change teams - to support leaders to rise to the challenge.

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L e a d e r s m u s t r o l e mo d e l ch a n g e – t h e l e a n l e a d e r ship m a t u r i t y mo d e l

H ow d o w e b r e a k d ow n o r g a n is a t io n si l os ? A team is by definition, a mutually accountable group with complementary skills, committed to a common purpose. However, senior leadership teams are often treated as distinct groups of highperforming individuals, while shared goals are often distilled down to financial performance, which can appear abstract in the day to day. Finding a more perceptible shared objective can appear difficult. But in fact, it is business transformation itself that should be the common goal. The goal: drive performance improvements across the end-to-end value stream and create a rewarding place for people to work. This will result in a high-performing organisation and create an environment for true continuous improvement. Integrating business transformation governance directly into the business performance management system locks improvement activities directly to business results, creating pull throughout the organisation. To successfully secure business targets, teams must work together to mitigate risks and support each other in implementing end-to-end improvement initiatives.

Everything said here relies on leaders being open to learning and change themselves, and creating a learning environment for those around them. Successful business transformation which delivers rapid results and lasting change cannot occur if all levels of the organisation are not involved equally. This is why lean and six sigma methods and tools, when used in isolation, are not enough to deliver lasting operational transformation. Instead, they should be used as part of a broader approach to driving continuous improvement. The lean leadership maturity model articulates the evolution of lean deployment in most organisations. Organisations start by deploying rigorous standards, prescriptive tools and audits to measure implementation with leaders driving implementation through compliance to standards. This will initially deliver strong results but over time improvements will slow down and results will plateau; you have hit the wall. To get over the wall the focus must move to flexibility, experimentation and lean thinking. This needs a different approach to leadership. Leadership must focus on reinforcing lean behaviours through situational coaching. Critical to success, is the time commitment from leaders to coach and support their teams in the implementation of lean. Time spent at gemba, coaching teams and supporting continuous improvement must be the first priority, and if demonstrated consistently, is truly transformational.

W hich o r g a n is a t io n s d e l iv e r ch a n g e b e s t ?

Those that deliver change well tend to have strong values and are consistent in their approach to driving performance and implementing change, their leadership behaviours and focus on long-term impacts. Not to be mistaken with personal style, which is always unique to the individual, behaviours can and should be consistent. Those leadership behaviours must support the values of the organisation and be specific to what the organisation does and how it works, and are relevant to everybody with people leadership responsibility, from executives to middle managers to team leaders.

This is why lean and six sigma methods and tools, when used in isolation, are not enough to deliver lasting operational transformation. Instead, they should be used as part of a broader approach to driving continuous improvement

“The worst behaviour you demonstrate is the best behaviour you can expect of others” is a powerful statement, because it is simple and true. An organisation cannot have multiple standards of leadership behaviour if it hopes to create a consistent way of working and a high performing culture delivering breakthrough performance.

www.leanmj.com | October 2014

C A S E S TUD Y H p t r o n ic

Skill development and mindset change through structured practice READ A B O UT : The differences of a kata approach Bringing the transformation to the administration area of the organisation How it helped bring cohesion and communication

e’ve been working with lean in our manufacturing areas since 2007 and made several attempts to introduce it into our administrative processes but have never been successful.

Linus Brodén, demand chain officer at HP Tronic, a contract electronics manufacturer in Sweden, presents a case study which explores how a lean transformation got underway at the factory.

We tried to find situations where we could apply the lean toolbox, but this has been harder in the administrative areas and the results always slipped back after a couple of weeks. We haven’t been able to create any long-term commitment, which may be because there hasn’t been a clear connection between the toolbox and what we as a company are trying to achieve. Our efforts have been focused at eliminating waste, almost randomly, and with no clear target. In February 2014, we were introduced to the improvement kata and coaching kata practice routines, as a part of a project with Produktionslyftet, a business development programme in Sweden to help manufacturing companies improve their competitiveness based on lean principles. These routines combine a pattern of scientific thinking with principles of deliberate practice, to make scientific thinking something anyone can learn.

We tried to find situations where we can apply the lean toolbox, but this has been harder in the administrative areas and the results always slipped back

CASE S TUD Y

The kata approach was different from what we have heard before. It’s more on the leadership and management side and, instead of focusing on the lean toolbox, kata focused on defining a challenge and target condition and provided a clear procedure of iterative experiments to strive for it. The approach can be applied in any situation and practiced again and again. This was our key to successfully introducing lean principles in our administrative processes; we didn’t focus on the toolbox. We focused on a challenge and the means to get there. Our management team, with the assistance of a coach from Produktionslyftet, defined a three year challenge: to increase production by 50% with the same number of personnel and floor space. We started our kata work in four areas: sales, purchasing, engineering and a joint group that we call the quotation process.

Th e r o l e o f s t r u c t u r e d p r a c t ic e Since the start we have conducted approximately 150 experiments and have achieved several target conditions on the way to the overall challenge. We are following the experiments daily using coaching cycles with the five coaching kata questions. Our coach, Lars Danielsson, has pointed out that coaching cycles are where the scientific routine gets established in our minds as a habit. Coaching cycles help to teach the improvement kata pattern, in the mind of both the learner and the coach. When you hear the idea of improvement activities every day it’s easy to be reluctant, I was. But when you start to experiment and see the results, you get it. Before we started kata, I believed a two hour meeting was better than a couple of ten minute meetings. Today, after three months with experiments, I’ve clearly changed my mind. - Emil, Sales Manager In the beginning it felt odd to repeatedly ask the same questions as a kata coach, but the more experience you gain, the

The whiteboard to visualise the quotation process that the kata team developed. Sales, engineering and purchasing meet here every day at 08:30.

more the importance of a structured coaching routine gets clearer. You have a standardised way of reminding yourself and the team of the target condition. It keeps you on track so you don’t lose focus and start with experiments that aren’t relevant for the current target condition. The five coaching kata questions help you to be more efficient and focus on what we learned from the last experiment and our next step, instead of entering a never ending discussion of possible solutions. Perhaps the most important point is that while we are working on real goals, we are also practicing.

The five coaching kata questions help you to be more efficient and focus on what we learned from the last experiment and our next step, instead of entering a never ending discussion of possible solutions

A n e x a mp l e o f imp r ov e m e n t a c t ivi t y

In the quotation process we defined a target condition that described a work flow process with increased integration between the involved departments, and an outcome metric of 85% RFQs complete within standard time. To increase the integration between the departments we started to experiment with ways to visualise the process. The work with this target condition resulted in a daily seven-minute meeting using a whiteboard to visualise the flow and a set meeting agenda. Everyone involved agrees that they now have much clearer picture of what’s going, as well (positive) crosstalk between the groups has increased. The rate of achieving the standard lead time has increased from an average of 60% to 85% (May 2014) and 90% (June 2014).

Before we started experimenting toward this target condition, there were countless complaints of lacking resources and the involved departments didn’t hesitate to blame each other. After the target condition was met, I haven’t heard any complaints and we are finally working as one group instead of three different departments. Veronica, Plant Manager Together with the work done toward target conditions in sales, purchasing and engineering, we are now able to measure the throughput time, quality and resource

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C A S E S TUD Y H p t r o n ic

The normal elements of a learner’s kata storyboard. This one is in the sales department.

we have previously worked with improvement projects that have a clear start and end. We talked about continuous improvements, but haven’t really understood what that meant in practice. The fact that improvement isn’t something you can take a break from was a big mindset change. This is still something that we work on every day, since it’s very easy to fall back to old habits. Secondly, before we started to work with kata we always focused our improvements activities by picking the lowest hanging fruit with no clear direction. The kata approach is different; you have define a target condition and focus on the improvements needed to achieve it. Here it’s also quite easy to fall back to old habits, especially whenever you try to experiment against obstacles that are hard to overcome and solve. Today I have much better understanding of the sales process, my colleagues’ work and why we make certain priorities. - Lars, sales department

allocation through the entire quotation process; defined as “when we receive the RFQ until we deliver the quotation to the customer”. The interesting thing is that this was developed out of a specific need and through following the pattern of the improvement kata, not something we benchmarked from someone else and then tried to copy.

S om e k a t a l e sso n s l e a r n e d

We have also had our share of difficulties with kata. Firstly, there are a lot of areas where you have to change your mindset: for example,

Lastly, it’s hard to learn how to formulate good target conditions. You have to find something that’s outside your current knowledge threshold, without using verbs (as if you were already there) and make it concrete enough so you know when we reached it. You’re defining where you are going without knowing how you will get there.

What’s the next step?

We are still in the early steps of deploying kata, but in the future we want this to be a part of HP Tronic’s DNA. Therefore our main focus is more of the same; create the habit of daily experiments. By experimenting with ways to follow up our improvement activities in the management team, expanding kata to other departments, and developing more kata coaches, we aim to create a pattern that will become normal through the organisation. If we are successful, then the organisation can meet all sorts of challenges with the help of structured experiments into the unknown.

SECTOR FOCUS

N a t io n wi d e

SECTOR FOCUS

Customer centred lean design at Nationwide READ A B O UT : The leaning of one of the most criticised and regulated sectors How Nationwide has put the customer first The ways this was done from both sides: the customer and the company

LMJ’s editorial board member and lean services manager at Cardiff Business School, Sarah Lethbridge espouses the building society’s leaned mortgage lending practices with a view to customer relations and views from Nationwide’s senior change manager, Ben Cuthbert.

ationwide is the world’s largest building society and is run for the benefit of its members. Being a building society means that they are free to reinvest profits to improve the products and services they offer. Consequently, customers’ must trust Nationwide to make the right decisions and directly feel the benefit of success. Ben Cuthbert gives us a rundown of where Nationwide has got it right:

Th e c u s t om e r is k e y

We are a customer focused organisation. We won’t be satisfied until we are consistently seen as the number one financial service provider by our customers, and indeed we have achieved and maintained number one for service on the high street for some time now. So we continually review what we are doing to improve services - this is where the lean thinking methodology and a focus on

continuous improvement can really help to make a real difference. We’ve understood that to achieve the status as number one for financial services, we have to create a continuous improvement culture in everything that we do, and so have invested in developing our people.

A p r o g r e ssiv e his t o r y o f d e v e l opi n g l e a n p r a c t i t io n e r s

We began when a team of five black belt practitioners were established to undertake focused reviews within business units to analyse, design and implement change. Although this unit was successful, progression could not be achieved at pace without more practitioners giving greater scope and so a change of approach was required to increase progress. Our idea was to move from a central team doing lean to others to a decentralised approach, creating lean capability within existing business units, thus developing a continuous improvement culture of selfsufficiency. We wanted to be able to train our own people ourselves, so we sought accreditation of our own training system by working with the Lean Enterprise Research Centre at Cardiff University to achieve lean competency system status. Through our training programmes and the development of online materials, two

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S E C T O R F O C U S N a t io n wi d e

qualifications could be achieved - a yellow or green belt in LSS. The learning approach we took was to provide students with the opportunity to learn at a quick pace but to also be flexible enough to ensure individuals could work to a programme that suited their individual needs.

situations. This included reducing our average process time from over 17 days to eight and reducing our complaints by half. We were nominated for the LSS award for the improvements we have delivered in our subject access request process (SARs). With the recent industry wide insurance mis-selling investigations we experienced a 700% increase in our customers requesting SARs, creating obvious operational demand challenges. For us to react to these challenges we had to look for opportunities to optimise our current processes using lean expertise. The introduction of a reduced SAR process, which required less than half the effort of the full, resulted in over a 50% reduction in resource requirement and reduced our overall lead time by 75%.

The success of this programme has resulted in c.1400 people accredited to yellow and c.40 to green belt grade to date. By creating this capability across our operations, continuous improvement has become part of peopleâ&#x20AC;&#x2122;s working day. Additionally, we have created 40 continuous improvement analyst (CIA) roles. Qualified to green belt level, the CIAâ&#x20AC;&#x2122;s focus is to work within our operational departments and drive operational improvements using lean principles. Whilst analysing processes within the operations, they are able to identify both quick win enhancements, which only require a process tweak but also, to spot opportunities for larger change. By implementing these roles we are able to realise cost efficiencies, improve the customer experience and drive a lean culture.

Turning learning i n t o posi t iv e p r a c t ic e

We have been recognised for our lean achievements within our bereavement services area, when we were shortlisted for the British Quality Foundationâ&#x20AC;&#x2122;s LSS awards. By re-engineering the way we handle bereavements we could more than double the amount of cases where funds were released the same day as notified. The benefit to our customers this provides is immeasurable. Relatives and friends are obviously extremely upset when their loved one has passed away and the last thing they want to deal with is a complicated and protracted process to release funds - funds that could be needed to pay for a funeral, for example. Our desire for simplicity and customer service is the core value of our approach to continuous improvement and is clearly evident here. In the same project, we also improved the workflow of our complex cases to prevent delays and provide a much more tailored approach to very sensitive

We recognised that if we continued to process new business in the existing way it was likely to lead to a process that was on average 35% longer for our members whilst adding a similar percentage of extra cost into the business

B u i l d i n g o n p r oj e c t s u cc e ss a n d c r e a t i n g the right culture

We recognise that creating new capabilities amongst our people is important, but empowering them to enact change is just as crucial. Training and development activities can do so much, but really enabling our people to speak out when something is in the way of excelling at service is key. This allows them to remove the barriers to putting our members first and give them the opportunity to inspire trust through being decent and straightforward. In support of this thinking, we held events called Being Number One where we invite our colleagues to throw away the rule books and any other reason to be negative and tell us everything and anything which would enable them to be positive. The events are organised into different sections and activities, each focusing on a different topic e.g. technology. We asked individuals, what should our technology do in order to make us number one? Vast amounts of ideas and improvements were identified and presented back to the group, and post event would be investigated for do-ability. We also set up an internal website to keep collecting ideas and statements from people on what we should or what they have done differently in the spirit of being number one.

Usi n g co n t i n u o u s imp r ov e m e n t f o r o u r mo r t g a g e p r oc e ss

We have employed this spirit most recently when improving our mortgage process (because of changes imposed on the industry through the mortgage market review (MMR)). We realised that due to additional eligibility and affordability checks on mortgage applications demanded by the MMR, it was possible that the process could become frustrating for customers. Having highlighted this we were keen to address the issue to make sure that we streamlined the process. We know that buying a home is stressful and we want to help make this process easier.

SECTOR FOCUS

I wasn’t ringing them every other day to check how my application was proceeding or when the valuation was going to take place, automated text messages made the process transparent

We recognised if we continued to process new business in the existing way it lead to taking on average 35% longer for our members whilst adding a similar percentage of extra cost into the business. For us this situation presented an opportunity to use a lean approach. An opportunity not only for us to drive the changes, but also for our raft of process experts who undertake mortgage processing day to day to stretch their continuous improvement legs with the new skills. We needed to understand the customer view and expectations of their mortgage provider. We held an event in London and met mortgage customers who had recent experiences with a variety of different providers. The information collated really bolstered and supported our views and ideas, whereas other inputs made us consider new ideas about how we could go that extra mile.

the customer and improve their service including: A welcome box for all customers who move into a new home with essentials like cleaning materials and tea; Make a specialist team of people available for cases that are more complex; Set expectations to customers and brokers of what we will need from them and expected timescales; Regular text and email contact to keep customers and advisors informed; Phoning customers rather than writing to them if we need more information; Application to offer within nine days, which is industry leading. By deploying lean principles, we can continue to identify ways to make a difference to customer experience whilst at the same time helping us to make brilliant commercial decisions.

vehicle to achieve elegant simplicity. Holding the mortgage customer focus group was invaluable in ensuring that this simplicity was at the heart of the redesigned service.

Ensuring process visibility at every possible moment. These were the text messages that I received:

Text 1: Let me know that the mortgage product I had requested had been reserved and that they would “be in touch again shortly”. Text 2: My mortgage application has been received and that they would let me know how the processes progress. Text 3: The mortgage valuation was booked, the date, and that they would be in touch when they had received the report. Text 4: They had received a satisfactory valuation report. Text 5: They were delighted to inform me that they had now issued a formal mortgage offer and that they look forward to completing on this offer (stages 1-5 happened within a week). Text 6: My solicitor had requested mortgage funds to be released by a certain completion date and if that date did not suit, then to please inform my solicitor.

A customer’s view by Sarah Lethbridge: Workshops and design forums were undertaken to incorporate new lending policies, innovative technological designs, new operating models and processes in order to meet new regulatory demands. Whilst validating our proposed changes against our customer principles and experience measures we were able to refine a design which satisfied the success criteria. Using technology, we were able to minimise and focus interactions during the application process to elements where customers wanted to interact with us, or regulation dictated it or where critical human decisions were required. Doing this enabled us to largely mitigate the service level impacts of the new regulations. From this piece of work we have come up with a number of ways to help

As you may have read in our previous edition’s introduction, I recently bought a new house and, as a previous satisfied customer of Nationwide, decided that I would stick with them for my new mortgage. As soon as the process started I could detect the hallmarks of a lean approach. I’m aware of their use of the lean competency system and Nationwide were also kind enough to house a demand mapping module of our MSc Lean Systems, so I knew how dedicated they are to continuous improvement. To me, their story clearly conveys several important lean messages:

1 2

The importance of simplicity within lean service design. The importance of using the voice and mind of the customer as a

To me, this level of process visibility was impressive. Not only from a speed perspective, but also from a customer satisfaction perspective. Buying a house is a worrying time and yet I felt reassured that things were progressing. These simple automated texts were helping me to feel more in control of a process that in reality, I had very little control of. It also saved Nationwide work; I wasn’t ringing them every other day to check how my application was proceeding or when the valuation was going to take place. Automated text messages made the process transparent. Fred Reichheld taught us about the importance of the loyalty effect for business growth. I think Nationwide, through their customer centric lean service design, have made their products pretty difficult to turn away from.

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S P E C I AL FEATURE T H E R I S E O F T H E LEAN P ARAD O X

READ A B O UT : The mental barriers to accepting lean The mentality of a group that can prevent a successful lean transformation How Dr. Peters’ model can be applied to a diverse range of lean scenarios

The rise of the lean paradox Consultant Chris Rowe explores the ideas raised in The Chimp Paradox, (2012) by Dr. Steve Peters, that human beings are often constrained by their inner instinctive thought processes and not by reasoned logic. In this article he explores how this can relate to the beginning steps of a lean transformation.

he publication of The Chimp Paradox by psychologist Dr. Steve Peters has been the subject of widespread attention. His model of the human mind has been credited with Liverpool Football Club’s return to greatness and Olympic medals for Sir Chris Hoy and Victoria Pendleton. The latter suggesting he was “the most important person in [her] career”. The question then is what does Peters’ model have to offer lean? The psychological barriers faced by elite athletes seeking to improve their performance are similar in their nature to those faced by individuals who are introduced to lean; Peters’ model provides an accessible framework to understand these obstacles, and provides guidance on how to effectively overcome them. This article will introduce the key elements of his model and some simple techniques that can be used in the organisational context. The important point Peters makes is the inner, instinctive chimp often interferes with the human and needs to be

Emphasise that the lean approach will allow them more control over how the work they do gets done

S P E C I AL FEATURE

If, for example, an individual has experienced the introduction of lean into an organisation, and that introduction resulted in redundancies and increased workload, the chimp is likely to predict that the current situation will lead to a similar outcome. This mental shortcut of applying history to the present is often useful, but in this case, it may lead to incorrect assumptions about the intentions of a genuine lean approach, and lead to a psychological barrier to cooperation.

managed. From a lean perspective, managing the chimp is important so that the human can work with lean, and develop the lean mindset. We will discuss how the model can be used as a framework to understand the psychological barriers people may face when they are introduced to the lean concept, and what practical measures can be taken to help people overcome those barriers.

D r . P e t e r s ’ mo d e l : a s u mm a r y

The model is based on established psychology; it describes the mind as three interacting elements: The human: is based on the frontal lobe, the area of the brain that deals with analytic, logical thinking, and works with facts. Peters encourages people to associate themselves with this part of the brain; it could be argued that this is the most important part of the brain for lean thinking. The chimp: is based on the limbic system. It works independently and is responsible for feelings, impressions and gut instinct. This part of the brain does not need permission from the human (frontal lobe) to function – it is its own master. Other characteristics of the chimp are impulsiveness, the need for safety, and a dislike for change unless it’s considered positive. The chimp also has a significant influence over motivation as it has primary control over emotion. The computer: this is spread throughout the brain, it’s described as the storage area for programmed habitual thoughts and behaviours; both the human (frontal lobe) and the chimp (limbic system) have access to it. This element of the mind holds useful programmes known as autopilots, and faulty programmes known as gremlins and goblins. Gremlins and goblins are significant elements of the model as they lead to the misinterpretation of situations by both the chimp and the human.

G r e m l i n s : obs t a c l e s t o l e a n a d op t io n Th e g r e m l i n o f p r io r e x p e r i e n c e The limbic system (chimp) is concerned with protecting the individual and does so by interpreting information from the computer in order to make snap-judgments. One of the obstacles to lean adoption may be a persons’ prior experiences of lean, and the associated snapjudgment it leads to.

The psychological barriers faced by elite athletes seeking to improve their performance are similar in their nature to those faced by individuals who are introduced to lean

In practical terms, the time and effort for individuals to adopt a lean mindset along with its associated tools and techniques will differ from person-to-person. This depends on the snap-judgment they have made, and how negative their prior experience has been.

R e movi n g the gremlin: comm u n ic a t io n s u ppo r t e d by a c t io n

Any snap-judgment made by an individual is unlikely to be overcome quickly, and will require significant contradictory evidence to allow the person to move on and allow the human to take over from the chimp. One technique to overcome an individual’s negative first-impressions is to communicate honestly, openly and consistently with them. It’s then vital the words are supported by the associated actions. Their chimp will actively search out anything that can be interpreted as dangerous, and due to analytical bias is more likely to identify evidence that supports its negative view of the situation than evidence to the contrary. This understanding suggest early steps in the introduction of lean should be carefully planned, communicated and managed to avoid any opportunity for misinterpretation.

A c a s e s t u d y : poo r chimp m a n a g e m e n t

Recently a distribution company introduced lean six sigma (LSS). The approach taken was to introduce a consultant who was there to understand what everyone was doing, and who was, according to some employees, earning thousands of pounds per day. This

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S P E C I AL FEATURE T H E R I S E O F T H E LEAN P ARAD O X

approach had three significant consequences:

needs to understand and accept the positives it can derive from it. The development of a personal vision has a number of effects:

The people in the organisation interpreted the situation in a negative way and were unlikely to place the adoption of lean in the safe category required for their humans to interact with it.

It will increase motivation to learn. Motivation is something that is heavily influenced by the chimp, and is required for people to fully immerse themselves in the lean approach.

2 3

The experience of LSS those people had will influence the interpretation of future interactions with it.

The time between the introduction of LSS and the delivery of any of its associated benefits had been lengthened. It will take an unknown amount of time to undo the first impressions of employees.

The apparent lack of detailed communication about the purpose of the consultant, and what they we’re there to do, immediately opened the door for the misinterpretation of the situation: a zoo had been created. From the perspective of developing lean thinkers, this approach could not have been handled much worse. The barriers to adoption were up and the humans had little chance to respond.

A b e t t e r w a y : e x e r cis e t h e chimps

One of the techniques for managing chimps is to exercise them, in other words, let the chimps have time to voice their concerns. This has its risks, but if facilitated well, it allows visibility of the issues people have adopting the lean mindset. One example of where this is particularly useful is in early meetings. Using the example of the distribution company, a simple step would have been to have meetings with employees where the purpose of the consultant had been explained. A key element of the meeting would be allowing people the time to let their concerns out into the open. As explained later in the article, the meeting could also be used to help people establish a vision of what lean will mean for them - an important step in their acceptance of the lean concept. As Peters explains, the chimps will eventually tire and go back into their cage and allow the humans to come to the fore. But they cannot be ignored. This example emphasises the need to balance the management of time, and the need to manage people. It is worth remembering the objective of a meeting is rarely the agenda, it’s moving towards a lean organisation, and in most situations the chimp needs to be managed before the human can take control.

R e movi n g t h e g r e m l i n s : h e l p p e op l e t o ob t a i n a posi t iv e p e r so n a l visio n

As mentioned, one approach to move past any negative impressions of lean is to help people develop a positive vision of the environment it will create for them to work in. If people are to develop as lean thinkers, their chimp

It will help overcome any negative impressions by providing an alternate outcome to the one stored in the computer.

According to Peters, there are a number of practical things that can help to facilitate people obtaining a vision:

If something suggests more control for the individual, more autonomy and more opportunity, then it will be interpreted as a good thing

1 2

Allow people the time to think about lean and understand the benefits of it. Emphasise that the lean approach will allow them more control over how the work they do gets done; it is essential this is then allowed to happen.

Allow people to make their own plans – hand over responsibility for lean to them. Allowing people to create and contribute to the plan often settles the chimp and allows the human to be involved.

All of these suggestions are on the understanding that motivation is often based on the idea of what’s in it for me. If something suggests more control for the individual, more autonomy and more opportunity, then it will be interpreted as a good thing. It’s useful to note the chimp’s motivation is very different to human motivation; typically based on survival and improving status.

M a k i n g p e op l e a w a r e o f t h e i r chimps

Experience suggests the one thing that’s most helpful in managing chimps is by introducing people to the model; it has broad appeal, and is readily accepted by most. The strength of the chimp model is its resonance with diverse groups who can apply it to their own and other’s behaviour. Providing people with a light-hearted way to express the unavoidable emotions of the working environment is invaluable. Chimps are normal, and should be expected; but they need to be managed and taken care of if lean is to flourish.

S P E C I AL FEATURE L e sso n s f r om D e mi n g

S P E C I AL FEATURE

Beyond management by extremes In this month’s Lessons from Deming, LMJ editorial board member Bill Bellows explores the idea of what’s better, diversity or the quickest process? Extremes or the measured response?

People get awfully tired, get nowhere, pulling in opposite directions W. Edwards Deming

While organisations pronounce that standards are everything, what can be said of the limits to uniformity and variability reduction pursuits, pulling towards zero? Does context matter?

n the spirit of standardisation that is growing in popularity in organisations around the world, is there room for diversity? That is, is variety really the spice of life, or does it represent a non-value added effort, if not simply waste?

to finances, what can be said about cost goals? Should they, as well, always be less-is-better in purchasing, in which case we buy on price tag alone, even when selecting a surgeon? Can the same be said for cycle times or is fast not always better? At what expense? Is less fat always better, or, do whales, as well as humans, have body fat for a reason? What about salt intake? Is less always better?

In other words, should variation always be reduced to zero? Is there a place for an aircraft manufacturer to offer their airline customers 108 shades of white paint, as did an aerospace company in the 1990s? Or, would it be better to remove colour as a potential market place differentiator and, instead, offer any colour you like as long as it’s white.

A recent New England Journal of Medicine study found higher risks of high blood pressure for excessive salt intake, yet higher mortality from cardiovascular causes for low salt intake. Might there be value in a middle ground goal?

And what of inventories, always striving for zero; but what if less isn’t always better? In consideration of the manufacturing concept of single-minute exchange of dies, why not single-second? In regards

While organisations pronounce that standards are everything, what can be said of the limits to uniformity and variability reduction pursuits, pulling towards zero? Does context matter? In consideration of a greater system, is less variation always better, with a goal of zero, should everything be standardised, including language and right-handedness? Or, should advancements in the implementation of standardisation include a context for advocating when and where to pursue standardisation? Can lean practitioners shift their achievements from compliance excellence of the tenets

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S P E C I AL FEATURE L e sso n s f r om D e mi n g

of lean to contextual excellence and room for fat? At times, multiple languages and multiple software systems, assisted by translators, might provide a more systemic solution. A more economically viable solution, in which the investment in variety is off-set by the systemic savings. From zero defects to JIT production, zero remains an admired stretch goal and also represents one of the two endpoints of management by extremes. The other is infinity, as in the pursuit of better, coupled with the ambition to continually improve. For example, a friend once shared her work goal of recruiting, week after week, new members to a health club. Upon suggesting to her supervisor that adding more members would eventually require a facility with more space and more exercise equipment, without which lines would form and members would defect to competitors, she was advised to focus on recruitment.

In my studies of robust design under Genichi Taguchi, I was reminded of the grouping of zero and infinity as two of the three common goals when applying his methods of quality improvement

Meanwhile, working in isolation, a co-worker focused on reducing costs by not investing in additional space and equipment. As expected, customers came and left. I liken this organisational behaviour to my left wrist and right wrist being given different goals for pulse, my lungs being given an independent respiration goal, with my vision system, and pulmonary system given their own goals. What would happen to my body if these goals were simultaneously achieved? While pulling in opposite directions, would I live long to tell about it? In reviewing goal setting let me flash back to my engineering training in heat transfer and fluid mechanics, when my graduate advisor drilled me and my peers on how to address the technical assignments we would receive once employed. “There will be situations,” he predicted, “where you will be given five minutes to perform an analysis and, in most cases, there will be three possible answers; zero, one, and infinity.” He coached us on how to quickly assess the context and choose from these three options. Little did I appreciate how often zero and infinity would appear together, as stretch goals, as they do in management by extremes. Years later, in my studies of robust design under Genichi Taguchi, I was reminded of the grouping of zero and infinity as two of the three common goals when applying his methods of quality improvement. An early consideration was the selection of the performance characteristic for the product or process being improved, and its corresponding goal. Characteristics which were ideally zero were

known as smaller-is-best. Those ideally infinite were labelled larger-is-best. The third category was reserved for situations where a finite value was ideal. As with salt intake, these were branded nominal-is-best characteristics. Upon reflection, Taguchi eventually explained the systemic weakness of both smalleris-best and larger-is-best goals and encouraged the wider use of nominal-isbest goals, with appreciation of a greater system for end use. As an example of a more systemic approach using a nominal-is-best strategy, consider the health care advances associated with removing a colon, a procedure known as a total colectomy. For patients with Crohn’s Disease and diverticulitis, plus various forms of colon cancer, this procedure has been a life saver. Some 20 years ago, a surgical team could routinely perform a total colectomy in less than two hours, often performing multiple procedures in a single day. Fast forward to today, when this procedure can be performed in eight to ten hours. With all of the advances in medical science, how could the added six to eight hours of process time possibly symbolise an improvement? Yet it does represent progress when considering the patient’s recovery time, not to mention shorter hospital stays, faster return to diet, and less pain from the incisions. The longer procedure is needed to accommodate the use of an advanced laparoscope, one which requires several 6mm incisions and one 2.5cm incision. The lower overall cost of solutions, such as this advancement, represent an incentive to think systemically and well beyond the mechanistic attractiveness of management by extremes. While Deming was an advocate for continual improvement, he appreciated that a focus on improvement requires a method. That is, by what method, including with what resources, will we perform the improvement? And, will the improvement be done with respect to a greater system of operation, or, are the so-called improvements achieved in isolation, pulling in opposite directions? Let goals of zero and infinity be reminders of the potential dangers of management by extremes.

lean online

LEAN O NL I NE

ROUNDING UP THE MONTH’S DIGITAL COMMUNICATIONS ON LEAN

LMJ LinkedIn

LMJ Twitter

Another month’s worth of interesting discussion points have arisen on the LMJ LinkedIn page. Our top contributor Steven Boyd, international operations manager at Tokheim asks about lean thinking 5S philosophy.

Lean aficionados are heavily into their Twitter so we will take this week to showcase some of the best users that the @LeanMJournal follows to give you some new blood for your timeline.

What method would help a team to accept and live 5S through a philosophical perspective?

Lean in Healthcare is associated with Huddersfield University and is dedicated to improving access to health services.

A philosophy is about beliefs, faith, conviction, ideology, ideas, values, principles, ethics, attitude and school of thought.

Lean in Healthcare

5S is readily explained by a method of application, we see many organisations and consultants apply the process prescribed practically. But who can teach a management team the true meaning, and link the practical common sense process back to a philosophical perspective. Can this only be achieved through daily demonstration? To try and convert any human being to live, breath, dream about the way they work through a 5S paradigm is difficult. I am totally converted, but it has taken years for me to truly understand the power of 5S. I accept it from a philosophical perspective, my expectations are that our local management team should think this way. My problem is that we don’t have ten years, and it also makes me think about the poor consultants that thought the same about me ten years back they and had the same challenge trying to convert me. My views at this stage are: Kata: create daily leadership and training cycles (PDCA) with each team member that lets us share the benefits and true understanding. Go and see: try to visit other organisations that have embraced the 5S philosophy and let the team feel the passion and to understand the perspective from an independent view. Can you give me any other suggestions on how I help a management team believe?

@UoHLeanHealth • Dec 17 Angle for my journal paper: Looking at how variations in customer demand and participation can influence service redesign #inspired Lean speaker, author and blogger Mark Graban is an expert on lean in the healthcare sector and has many interesting views and insights.

Mark Graban @MarkGraban • Aug 29 Reading yet another #leanstartup article that confuses the method with bootstrapping. EnnaLean are a hands on organisation that want you to see the benefits of getting involved in the gemba.

EnnaLean

Follow commissioning editor @AndrewPutwain. It’s the quickest and easiest way to get your views on LMJ heard. Raise issues with me, discuss lean or tell me if you would like to write for us

@EnnaLean • Aug 21 Seeing that the best Kaizen is not to explain in a classroom or have lessons on it. It is best to go to the gemba, OJT, and do something. Visit our LinkedIn page: www.linkedin.com/groups/Lean-ManagementJournal-4315504 And don’t forget about LMJ’s Twitter: @LeanMJournal

www.leanmj.com | October 2014

BOOK REVIEW LMJ board member John Bicheno reviews Jeffrey Rothfeder’s Driving Honda: Inside the World’s Most Innovative Car Company, (2014).

f course, as lean enthusiasts we are aware of the almost endless stream of books on Toyota and TPS. But, if you are like me, not much is known about Honda. Yet Honda has a significant record, including: The world’s largest manufacturer of engines – cars, lawnmowers, motorcycles, generators, jet skis, and turbofan jets. Continually profitable, unlike Toyota, with a 600% improvement in US share price (vs 300% for Toyota). Success in world motorcycle championships and Formula 1. Again in contrast with Toyota. More models made on a single assembly line than any other manufacturer, and more use of own factory equipment than any other manufacturer. In 2012, Honda’s warranty claims in USA were 1.3 % of sales, against Toyota’s 2% and VW’s 3.5%. Honda, the book claims, is the engineers’ company, being far more innovative than its Japanese competitors. A story is told about the soil breaking ceremony at Honda Lincoln when a starter motor failed to work. The CEO, undeterred, bent down and made adjustments and the engine worked. Far from being seen

as a PR disaster, this event was seen as a success – how many CEOs could do that? The book contains a chapter on the history of Honda, including the founder Soichiro Honda’s insistence on technical expertise and on employees being imaginative and original in their thinking. Rothfeder says that Honda’s messier approach uses conflict and contention as a philosophical underpinning and a means to create practical knowledge to influence corporate decisions. Rothfeder criticises lean, and particularly six sigma, for being unduly focused on waste and deviation reduction, to the detriment of innovation and agility. He also criticises the farming out of design, engineering, and manufacturing as happened with Boeing’s Dreamliner. Somewhat similar to Jeff Liker’s Toyota Way, Rothfeder outlines Honda’s principles. Embrace paradox: do not copy or imitate. Use waigaya – not a Japanese word, but a translation could be hubbub – with idea generation followed by heated discussion and dispute until proven or vanquished.

Real place, real part, real knowledge: somewhat similar to lean’s gemba, these three together make up sangen shugi. Perhaps notable is that this dictates the need for localisation of management. Respect individualism: well, we have heard a lot about respect in lean, but Honda seems to take this further. A particularly interesting chapter is Honda’s innovation machine. I see similarity with Toyota here, but perhaps the distinguishing features are the closeness with R&D, the use of own equipment, and similarities with TRIZ in respect of S-curve thinking. Overall, this is a different book. Stimulating in as far as we have heard so much about Toyota. Challenging in respect of the degree of decentralisation that seems to be inherent. The book is full of anecdotes, and I certainly would have liked a lot more detail about actual practices. But it is excellent to have an alternative view, whether you agree with it or not, and for these reasons it makes for a most worthwhile read.

e v e n t s There is currently an expanding pool of events available for the development of the lean community. They offer both general and sector specific opportunities to renew your enthusiasm and gain new perspectives through communicating with lean contemporaries.

U P C O M I NG LEAN e v e n t s i n c l u d e :

4 t h E u r op e a n L e a n i n I . T . S u mmi t October 15-17, 2014, Paris, France

Meet leaders from the information technology sector who are applying lean strategies and shaping their success. Speakers Include: Pierre Masai, VP & CIO of Toyota Motor Europe Nunzio Cali, CTO & CIO of AlmavivA, Fred Mathijssen, European Technology Senior Director of Nike Sari Torkkola, CIO of Patria Carlos CondĂŠ, Chief Technology evangelist for Amazon Web Services EMEA Lean IT practitioners from ING Bank, BNP Paribas, Bombardier, LeMonde.fr and more will also share their experience To book your place or for more information visit: www.lean-it-summit.com/

L e a n S u mmi t I n d i a

November 5-6, 2014, Bangalore, India The Lean Summit is a two-day mega event designed for mid- to upper-level managers, with a focus on sustaining their lean journey at the transformational level, and providing them the insights into innovative ways to enhance their lean journey. Highlights include: Deep knowledge development from the best known sensei in the lean world - John Y Shook, Chairman of Lean Enterprise Institute Jose Roberto Ferro, President Lean Institute Brazil A variety of learning situations, including keynotes, interactive learning sessions, and CEO panel discussion To book your place or for more information visit: www.leaninstitute.in/lean-summit

UK L e a n S u mmi t 2014 - Lean T r a n s f o r m a t io n : P r a c t ic a l N e x t S t e ps

November 17-19, 2014, Kenilworth, UK The Lean Enterprise Academy is holding its annual UK Lean Summit. Highlights include: Presentations, learning sessions and lean master classes Providing insight into practical ways to get started, deepen or enhance your lean journey Enabling participants to build their own network of lean thinkers Bringing together the best lean practitioners and sensei in the lean world for participants to learn from Workshops on leading edge topics What does it take to move beyond legacy assets and mind-sets to involve users in creating new lean solutions? How to build a management system to spread lean across the organisation? How to develop leaders to implement, sustain and expand lean transformation? What are the key elements of lean transformation? What is the role of a lean team in a successful transformation? What are the key lessons learned from applying lean thinking in different sectors (government, health, industry, retail and service) both internally and across the supply chain? To book your place and for more information visit: www.leanuk.org/events

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