OpEx Review -- August 2012 -- Edition 3

OpEx

A TBM Consulting Group Publication

Review

August 2012 | Issue 3

Pactiv’s Perfect Engine: Turning Improved Productivity into Cash and Growth Pactiv’s CI journey is less like the colloquial, ambling lean journey and more like a crosscountry relay race with no finish line.

Many lean companies describe their continuous improvement efforts as long, purposeful journeys down a never-ending road. This hasn’t been the case at foodpackaging giant Pactiv. Since its first kaizen event in the food service segment in April 2007, Pactiv has pursued a CI strategy more like a cross-country relay race with no finish line: Train, stick to the path, execute the crucial hand-offs, and if the weather changes suddenly—don’t get distracted—keep moving and push harder than you think you can.

“I ask for 130 percent of goal,” says Greg Noethlich, formerly Pactiv’s VP of Operations and now President of Prestone, a sister company.

www.tbmcg.com

Far from running out of steam, Pactiv’s 12,000 employees get stronger as the race continues. From 2007 to 2011, the company grew revenues by more than $1.6 billion through acquisitions funded by freed up cash. In 2010 alone, employees at Pactiv’s 55 sites collectively freed up $250 million in cash and drew the attention of Auckland private-investment company, Rank Group, which purchased it in 2011.

“The company went from being capital-oriented to being working-capital oriented — it’s gone from worrying about productivity to worrying about cash,” said TBM Consultant, Glenn Kubisiak, who worked at one of Pactiv’s Hefty plants in 2007 and 2008. “That’s a whole different attitude as far as running the company.” (continued on page 4)

ALSO IN THIS ISSUE: 2| Leadership: Seaman Co-President John Crum 6| Maintenance: A TPM system approach 8| Case Study: Quality improvement for medical implants 10| Strategy: Beyond operational excellence at Apple

Leading Thoughts

OpEx Review

August 2012 | Issue 3

Alignment Feeds Pactiv’s Success When I made my first visit to Pactiv in 2006, it was made clear to me that this would be the company’s last attempt to make lean work. They had tried two other times, and TBM would have the last at bat.

Fortunately, we became a team, and together we hit a home run.

Today, Pactiv is applying operational excellence across the enterprise to improve profitability, asset utilization, supplier performance, and to successfully integrate new products into its manufacturing processes.

The organization continuously achieves best-in-class performance because of this effort. Pactiv’s results include: •3 8 percent EBITDA improvement in just one year

Leadership Insights – Q&A

2012 Perfect Engine Award Co-Winner: Seaman Corporation Seaman Co-President John Crum shares his insights on the coated fabric company’s ongoing pursuit of operational excellence.

After six years, how ingrained is Seaman’s LeanSigma® program?

Participation is driven from the top to the bottom.

Approximately 90% of our associates participate in LeanSigma events, including the senior management.

It’s all about leading by example. Our owner and CEO, Dick Seaman, constantly reminds our associates of the gains that we’ve made and that this is an ongoing journey

•8 percent reduction in plant conversion costs •1 1 percent improvement in productivity •1 2.6 percent improvement in sales per employee since 2009.

Performance has earned Pactiv TBM’s The Perfect Engine Award for operational excellence this year, along with Seaman Corp., which also is using the LeanSigma® approach as part of a strategic roadmap for value creation and growth.

I’m still involved in Pactiv’s LeanSigma work, and two men have provided a common thread during the six years of incredible change: John T. McGrath, now Pactiv CEO but formerly VP of Sales, and Kevin Quinn, VP of Manufacturing and Engineering. Their cooperative work is a testament to how crucial alignment is to achieving success through lean.

From the beginning they had a unified vision: One invoice.

One order. One truck. Today, that vision has become one of a company that can achieve exceptional growth with remarkable efficiency. In other words, a perfect engine.

Dan Sullivan is Executive Vice President of TBM. He can be reached at dsullivan@tbmcg.com.

Send OpEx newsletter feedback and story ideas to opex@tbmcg.com.

2 | OpEx Review | August 2012 | www.tbmcg.com

To address the quality issues I understand that you started with standard work and shortening changeover times to reduce lot sizes. When did you start to focus on inventory?

We deliberately decided to build our LeanSigma capability first, before tackling our inventory. A lot of companies start by reducing inventory to get the cash flow impact right out of the gate, and it actually makes the sales force and the customer cringe. We made sure we had quality processes in place, and had reduced About Seaman Corp.

Headquartered in Wooster, Ohio, Seaman Corporation has two additional production facilities in Bristol, Tenn. using advanced weaving and coating technology. The plants manufacture coated fabrics for commercial roof systems, architectural structures, geomembrane liners, truck tarps, and many other applications. Founded in 1949, the privately held company employs approximately 310 people.

Leadership Insights – Q&A, continued

20 percent and, because of the cross-training and the standard work and how we do things here, we can take that in stride. It’s not a big deal. We have really created a lot of flexibility and agility in our business.

We’ve also been able to reinvest in new capabilities.

We recently made a $5 million capital equipment investment. Some of that money comes from our LeanSigma savings. When we put in the new equipment, we didn’t have to build a new building because we had freed up enough space in our existing operations.

In addition, using TBM’s 2P process, we were able to optimize the design of the equipment so that it will not only produce a superior product, but have a highly efficient operation.

Culturally, is there anything about being a private, family-owned company that has made the LeanSigma implementation easier or more difficult? our changeover times, from four hours to one hour in some cases. Once people saw that we could produce and deliver any order within a week, they realized that we didn’t need six or eight weeks of supply. Then, with the support of sales, we’ve been able to increase our annual finished good turns from 4 turns to 11 turns.

Can you describe what your quality and productivity improvements, and enhanced responsiveness to customers, have enabled Seaman to achieve in your markets?

Our quality and productivity improvements have allowed us to remain competitive in the industrial fabrics and roofing industry. The raw materials for industrial fabrics come from petro-chemicals. As I’m sure you know, chemicals have had significant raw material price increases over the last couple of years. Our LeanSigma cost improvements have allowed us to partially outset many of the raw material cost increases.

Because of our fast response times, we’re able to deliver our product to customers faster, driving the top line by getting new customers, while maintaining our high market share. With our LeanSigma environment, we can flex our capacity quickly. Our demand can fluctuate

Our owner, Richard Seaman, has always been progressive in his approach to the business. Dick has always had tremendous passion for innovative ideas for both products and processes. Once Dick Seaman started seeing results and fully understood the process, he pressed us to institutionalize the LeanSigma principles as part of our culture.

Due to the family culture here everyone is engaged in the business. It’s like having 300 owners. They all want to see the business do well. I think we are a “Can Do” company. We are not a company that resists change. The people here are willing to stretch and to reinvent things and commit to breakthrough performance versus just being satisfied with small, incremental changes.

For more information about the early years of the company’s LeanSigma journey, see the case study, “Seaman Corporation Is On the Transformation Fast Track,” at tbmcg.com. As part of our recognition of the TBM 2012 Perfect Engine Award co-winners, we will feature an updated report on Seaman’s LeanSigma efforts in the next issue of OpEx. John Crum was interviewed by business journalist David Drickhamer.

OpEx Review | August 2012 | www.tbmcg.com | 3

Pactiv’s Perfect Engine, continued from page 1

teams were able to improve productivity beyond the 2005 level by November. CI efforts at other plants in Frankfurt, Ill., and elsewhere, produced similar results.

The CI work that year and into 2008 focused on manufacturing, involved much one-on-one teaching about how to identify waste, and laid the foundation for what would later become the Pactiv Production System. Largely, it was about learning to see waste where no one could see it before.

“We talked about vibrancy, we talked about 5S, and we talked about some of the fundamentals of lean,” says Mike Hatto, a TBM consultant who worked with the Canandaigua teams. “Within a week’s time we put in place a plan to do one kaizen event a month.”

Greg Noethlich, President, Prestone; Kevin Quinn, Vice President of Manufacturing and Engineering, Pactiv Corporation; and Anand Sharma, Chairman & CEO, TBM Consulting Group, Inc.

Pactiv has sustained and expanded CI gains using workbooks that are the outcome of annual strategy deployment planning and are used by four levels of the company—each with its own workbook designed for that level— to guide and document daily CI work. Company leaders provide the workbooks and ample war room space for supervisors, managers and teams to use to choose, plan and implement CI projects that enable the sites to meet financial goals set during strategy deployment.

2007: Laying The Foundation Pactiv’s lean relay had a traditional start. The company’s Canandaigua, N.Y., thermoforming plant wanted to reverse a trend of lagging productivity, which started in 2005. Using traditional assessment of the plant followed by a series of rapid-improvement events,

Pactiv Acquisitions 2002-2011 Year

Company

2002

Winkler Forming

2005

Newspring

Getting to this stage took time, though, to train and hone lean fundamentals.

2003 2003

“Throughout all the different endeavors, the bottom line kept improving because the fundamentals were there,” Kubisiak said. “As far as sustainment goes, once you educate people, they look at things differently.”

2007 2010

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Before the year ended, the kaizens at Canandaigua and other plants had demonstrated significant opportunity for improved productivity and decreased costs. For example, in the thermoforming area at Canandaigua, cases produced per man-hour increased 67 percent post-kaizen, and throughput per machine-hour improved 25 percent. At Frankfurt, kaizen teams demonstrated an 83 percent improvement in machine setup time.

2010 2011

Jaguar (Mexico) Rock Tenn

Prairie Packaging Reynolds PWP Dopaco

Revenue ($ millions)

No. of Plants

120

3

110

2

95 60

500 520

175

465 $2,045

1 2 4 6 4

6 28

Pactiv’s Perfect Engine, continued

While the results of these and the other front-line improvements were impressive, Pactiv leaders knew that they couldn’t stop there. Enterprisewide problems that could block growth potential persisted: • Plants were working independently, without networked strategic alignment.

• Success stories were insular, and progress spotty.

• Sustaining gains was tenuous.

• CI work was not clearly tied to the corporate bottom line.

“There was also a dawning awareness that they were going about this in a disjointed effort and so weren’t leveraging what they could,” Hatto says.

2008: Value Streams Elevate Learning, CI Work This drove Pactiv leaders to start organizing work by product line so they weren’t duplicating efforts: Building on the knowledge the company gained in 2007, Pactiv reorganized into value streams in 2008.

Part of the reorganization was building the early company-wide CI infrastructure, which included corporate-level regional CI leaders and widening deployment of the Pactiv Production System, the company’s unique interpretation of lean systems management.

“ When other companies were doing badly, Pactiv was out buying its competition. In 2008 they were not even acknowledging that there was a recession.” ­— Glenn Kubisiak, TBM Consultant

The Process – Strategy Deployment LEVEL I • • • •

Growth

xecutive Team E (AIP) Productivity SWOT Analysis Talent Management Annual Improvement Priorities Monthly Update Countermeasures

LEVEL II • • • • •

MANUFACTURING

alue Streams V SWOT Analysis Bottom-up Plan Development Annual Improvement Priorities (AIP) Monthly Update Countermeasures

ENGINEERING

MARKETING

LOGISTICS/PIC

FINANCE

LEVEL III/IV • P lants, Warehouses, Sales Teams • Workbooks – Specific Projects – Time Bound • Monthly Update Countermeasures

According to Hatto and Kubisiak, they installed the system by introducing it to multiple plants within a value stream with a single event at one plant. In the foam value stream, for example, three to five people from each of the sites would come for a kaizen event at one plant, and then would set up a calendar with the regional CI leaders for each plant to conduct a replication event because they all have similar equipment and processes.

CI leaders gave each plant time-specific performance goals scaled up to the kaizen-demonstrated capabilities. About a month later, CI leaders would audit the project to make sure the team was using PPS standard work and tracking to meet expectations.

As this was happening, the Pactiv CI effort was being elevated to the systems and philosophy level, and knowledge was rapidly building throughout the organization.

Additionally, as more costs were taken out of the business, the company had more cash for acquisitions and to weather the 2008 and 2009 global recession.

“All of the work that we were doing with them was allowing them to buy other companies during the recession,”

Kubisiak says. “When other companies were doing badly, Pactiv was out buying its competition. In 2008 they were not even acknowledging that there was a recession. There’s no question that the work they did in those years helped them to make important acquisitions.”

2010–11: Strategy Deployment Improves Alignment, Performance As Pactiv grew through acquisition, the need to replicate its processes and practices became a critical need, as did the need to do a better job of sustaining gains and tracking progress toward high-level strategic goals. The time had come to introduce strategy deployment, and this is when Pactiv leaders created the four-level approach to achieve alignment.

Today, lean CI is embedded in the company’s go-forward strategy, although with an increased emphasis on wringing out costs and freeing up cash.

Editor’s Note: Pactiv and Seaman Corp. each received TBM Consulting Group’s Perfect Engine Award in June 2012.

See page 2 for an interview with Seaman Co-President John Crum.

OpEx Review | August 2012 | www.tbmcg.com | 5

Management Briefing

TPM: Achieving Maintenance Excellence 8 Steps to Better Equipment Reliability, More Capacity and Sustained Improvement

By Doug Kiss You’ve launched your continuous improvement (CI) initiative. Product lines have replaced process villages.

There’s more floor space. Supervisors and executives are closer to the gemba after experiencing 5S, visual factory and managing for daily improvement.

Standard work has made abnormalities more visible, and Six Sigma methodology has corrected problems that have plagued the operation for years.

The results are showing on the bottom line, and Accounting has credited your CI effort as a large contributor. Fair skies and smooth sailing, right? Well, partially right. Momentum like this— effectiveness like this—needs growth to sustain.

But many organizations are hesitating to make investments needed for growth. Often the roadblock is finding, preserving and expanding manufacturing capacity.

The tenuous global economy has held back some capital investment, but some company leaders could also be cautious because they have been dissatisfied with equipment lifespan and/or lifecycle costs despite using Total Productive Maintenance (TPM) as part of an operational excellence program.

If TPM did not produce results or sustainment at your company, perhaps it was because you took a tools approach rather than a systems approach. Instead of being viewed as a fixit (or fixit-prevention) measure, TPM should become the foundation of a larger maintenance vision that supports strategic high-level goals.

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Equipment-Maintenance Challenges Let’s look at equipment-maintenance challenges that are common among manufacturers and cause problems such as downtime, reduced speed, product yield and the unknown costs/availability of parts and time associated with restoration of lost capacity: • Austerity has forced a general degradation of equipment condition in the past decade. The maintenance

skills base has eroded due to attrition, a decline of technical school graduate availability, and a tendency among companies to drop maintenance mentoring/apprenticeships.

Maintenance departments often lack basic and specific skills, and few have taken the time to quantify the gap, let alone plan to bridge it.

• Production departments are focused only on “making the numbers.” Basic

daily care and equipment monitoring are not performed by the person who is operating or tending the equipment. We find operators using

workarounds and special tricks and tools to limp things along. Some of these are good ideas but are seldom shared as best practices.

• Computerized Maintenance Management Systems often are not in place or poorly used. No useful

data is available quickly—equipment history or spare parts inventory/cost.

Good data and history are essential for making good decisions about modifying preventive maintenance, stocking or ordering spare parts, and upgrading or purchasing equipment.

• Maintenance and Production don’t partner and share ownership of the equipment. If maintenance skills

are below par and spare parts are not tracked or managed, preventive maintenance likely takes too long and causes significant equipment downtime. The other result is that everyone sees that Production does not value equipment maintenance.

A TPM event is a start to fix problems.

However, a long-term plan is needed to create manufacturing capacity necessary for growth.

Management Briefing, continued

The benefits of TBM’s system approach to TPM are that you create a roadmap of what needs to be done and so have a vehicle for enhancements, course corrections and communication; know how you are going to do it; and know how to measure the effects and returns.

Any lean organization could find itself up against equipment effectiveness and machine capacity as a barrier to bringing the benefits of operational excellence to bear. This may be the result of less-thansuccessful efforts in the past or simply the last part of the puzzle to be put together. In either case, it’s important to understand that the end goal is not TPM, but maintenance excellence.

Creating TPM Systems for Long-Term Benefits TPM events often don’t show payback or sustain because they are one-offs: The systems that support the equipment effectiveness are not put into place; the measures that support the effort are not created; or the wrong measures are forced.

TBM’s methodology for helping clients move beyond the TPM “tool” stage to the systems stage includes these eight steps: 1. Knowing the current state.

We start by examining the production floor, the maintenance department(s) and the equipment.

Area owners and operators provide input for an assessment, which is a systems view of where the factory is from a standpoint of maintenance excellence. We use a progression benchmark, often in the structure of bronze/silver/ gold to determine the level of lean progression. The output provides parameters for priority and scope, as well as a solid reference in structuring a get-well plan.

2. Establishing a steering committee or ownership structure. While

Doug Kiss is a Senior Management Consultant at TBM. He can be reached at dkiss@tbmcg.com.

This Management Briefing has been modified for OpEx. For the complete version, go to the Resource Center at www.tbmcg.com.

TPM can be described as a “bottom-up” effort (meaning without support from the top), it still requires a team to set goals and identify good measures for full implementation and sustainment.

These are set as the organization establishes a “maintenance vision.”

3. Identifying critical equipment.

One of the causes of less-thanoptimum TPM implementation

is the enormity of the scope—and therefore the scarcity of—resources to get the work done. Using a criticality matrix and numerical scoring criteria, we take the “emotional noise” out of the identification and let the data tell us what equipment is truly critical.

4. Determining the condition of each piece of critical equipment.

Looking at each sub-system on the equipment (hydraulics, pneumatics, controls, etc.), we can code the condition based on the current state. This not only helps with the planning of TPM improvement events, but also helps organizations plan and prioritize upgrades, overhauls, rebuilds and purchases.

5. Conducting a maintenance skills assessment, implementing a skills matrix. Gaps in skills must

be addressed. The first step is to identify what basic skills are in need of enhancement and what machine/process-specific expertise needs to be upgraded.

6. Creating a communications plan and determining initial metrics/measures. It is necessary

that both maintenance and production organizations know the why/how/when, and that changes are in store.

7. Prioritizing and planning workshops/events/training.

8. Implementing, assessing and improving.

OpEx Review | August 2012 | www.tbmcg.com | 7

Case Study

Proactive Defect Resolution: Medical Device Maker Avoids Shutdown, Achieves Full FDA Clearance with No Failures A basic tool continuous-improvement teams use to discover “hidden” quality problems is process mapping. Often, the root causes of long-entrenched problems become so obvious during mapping that it stuns and—well—embarrasses those who’ve been overlooking the problems day in and day out.

But when the product is a highly engineered implantable medical device with an extremely complex supply chain (multiple lots of raw materials) and production processes (both process and discrete manufacturing; and a high frequency of production-machinery component changes), the sources of defects are not as obvious and can take months to identify.

This was the case with a TBM client company that makes implanted medical devices.

Despite the inherent complexities of the product and production processes, a CI team was able to identify the sources of the defects using common LeanSigma mapping and statistical tools, and the company resolved the problems and returned to full production with full clearance from the FDA and no reported failures in the field.

In-house researchers had discovered one defect during designof-experiments testing on an unrelated product-design issue.

The researchers discovered that during implant, a crack would form in the device. The team tested several more devices and observed the same outcome.

During these tests, the researchers uncovered a second previously unnoticed defect—a surface irregularity.

Ultimately, the team concluded that the surface irregularity was cosmetic and did not affect product performance or patient experience; however, the company’s high quality standards required correction.

The crack defect could have been more problematic: Had any defective devices been shipped and discovered as defective after a surgery, a surgeon would have had to remove the defective device and replace it. This additional surgery could cause scarring and other complications for patients.

The company expanded the investigation to include both defects after already suspending production and partnering with TBM to facilitate a kaizen to find the root causes of the crack.

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During the subsequent multi-month process, two unique challenges presented themselves. First, the inspection method that had identified the surface irregularity had never been used before, and team members believed that the irregularity was not a “new” defect, but simply one that had never been noticed before. Once the defect became apparent, though, it was impossible to “un notice” it to try to replicate previous inspection techniques. A second challenge was that although the defect rate was extremely low, many of the expensive units had to be deployed for testing while production—and hence sales—were suspended. So financial considerations put additional pressure on the team to resolve the issue as quickly and efficiently as possible.

Testing of process-related variables was an obvious path to pursue for root-cause analysis. But because it was not known how long the defects had existed before they were detected, and because of the high number of variables, parameters for testing (where to begin and which changes to consider) were not obvious.

According to TBM Senior Management Consultant, Beth Morrison, the team started with a simple process-mapping

Case Study, continued

activity that ultimately provided invaluable insight into which variables to consider, where to focus experimentation, and how seemingly small changes were having a big impact on processes. “We drew a chart on the wall that showed successful past production leading into when the defect was detected, and then started writing on the wall—to scale— all of the things that had changed over time.”

“ The timeline may not have been an ‘aha’ tool, but it did make visible to everyone how changes that had been considered small could potentially have a major impact on production performance, especially in combination with other changes.”

As team members gathered information for each research assignment (i.e., When did we change the raw materials lots? When did the new lots go into production? When did we change the lots of the device-application tool? When did we put in a new water-filtration system? When did we start a new cleaning procedure?), all of the activity— regardless of who performed the assignment—was documented and made visible to the team.

been an ‘aha’ tool, but it did make visible to everyone how changes that had been considered small could potentially have a major impact on production performance, especially in combination with other changes.”

With insight from the timeline, the team conducted research to see if there was some combination of parts and materials that had led to the defects. Additionally, the team conducted experiments on different ways of using the device in the field, i.e., how it would be implanted, as well as changes to how the device’s materials were manufactured.

The team also tested inspection methods for consistency using standard measurement systems analysis tools (attribute agreement analysis and expert re-inspection techniques). Also important was the use of the external resources (SEM technology) to validate what the internal team had found.

The problem-solving tools the team used led to discovering the root causes of both defects. Both of these issues were corrected, one defect being addressed through an improved assembly method and the other through a new finishing method.

The resulting timeline stood 30 inches tall, 10 feet long and covered about 18 months of process changes. At first, it hung in a conference room, but someone had been given the job of capturing it electronically, so it was moved from the conference room out into the hall so the person could work on it without disturbing people in the conference room.

This serendipitous move elevated the timeline from a simple kaizen-team mapping tool to a method of providing deeper and wider visibility into end-to-end manufacturing processes.

“Other people in the company—not just those on the team—were also able to comment on things that had changed,” Morrison said. “The timeline may not have

OpEx Review | August 2012 | www.tbmcg.com | 9

Strategic Vision

As Apple’s Success Attests, Operational Excellence Isn’t Everything, But It Is Essential

By Anand Sharma

Operational Excellence

The death of Apple’s co-founder and CEO, Steve Jobs, and release of his biography last year gave business owners and managers many opportunities to reflect on the life and accomplishments of an incredible business leader. Jobs’ remarkable and successful resurrection of Apple can’t help but make us think about the performance potential of our own companies, and the legacy that we want to leave behind.

Very secretive on the supply chain side of its business, Apple isn’t known for operational excellence or lean production methods, mostly because it subcontracts manufacturing and assembly of its products and components. Still, it repeatedly manages to meet dramatic demand spikes with every new product launch. But from a value perspective—as in recognizing, creating and providing value that its customers are willing to pay for, a.k.a., innovation—very few companies in history have been so successful.

If it were easy to replicate Apple’s success, the company wouldn’t be a

Strategic Growth

Strategic Growth Model

Leadership

Disciplined Execution

Operational excellence isn’t everything.

You might be surprised to hear such a statement coming from me. After all, for more than two decades now we’ve helped clients become more operationally effective—by many orders of magnitude—and achieve vastly superior financial performance.

But operational excellence is only one path to superior market performance.

Another path is probably best illustrated by a company that’s never far from today’s business headlines: Apple.

Value Innovation

Organizational Mission & Core Values

subject of endless fascination. Still, there are elements of its value-creation model that other business leaders can learn from and build upon.

The Strategic Growth Model that I will explore here begins with an organization’s mission and core values, and combines operational excellence with value innovation through disciplined execution.

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Connect that which you VALUE to that which you DO The mission and core values of an organization empower people by defining behaviors and clarifying rules of engagement. Our core values at TBM— which I won’t recite here—reflect our focus on providing clear economic value to our customers and treating our employees with the utmost respect.

Strategic Vision, continued

Apple’s Core Values Connect to Leaders, Employees and Consumers “ We believe that people with passion can change the world for the better... And that those people who are crazy enough to think they can change the world, are the ones who actually do.”

—Steve Jobs,1997

A company’s mission and values should make it clear for everyone what is expected and accepted. Ideally, for such values to have resonance, they will connect personally with leadership, employees and customers. Of course, management behavior and decisions must always reflect the company’s values.

Become a Market Maker To avoid becoming a commodity producer, manufacturers must regularly develop and offer forward leaps in customer value. By gathering relevant customer insights and unarticulated needs, and applying proven analytical tools, companies can uncover new, exclusive knowledge about their markets and customers. Following this value innovation approach, they can then translate this knowledge into unique products and services.

For example, consider the key competitive issues and factors in your markets. Do the answers to any of the following questions reveal any new paths to customer value?

• What product or service factors that the industry takes for granted can be eliminated?

• What factors could be reduced well below the industry standard?

• What factors could be raised well beyond the industry standard?

• What services could be created that the industry has never offered?

The mindset of the leadership team must also change. You have to think less about your customers as companies that buy your products, and more as people who you want to help be more successful.

Think less about building on what you’ve always done, and more about what could be done. Think less about current industry conditions, and more about how those conditions can be shaped and transformed. Think less about doing more with less, and more about doing something that’s never been done before.

A Vision Without a Plan Is a Dream The loftiest and most visionary strategy means nothing if it can’t be executed.

According to one research study, only half of companies report some success executing their strategic plans, and only one out of three report significant success when it comes to execution.

The Japanese quality expert, Ryuji Fukuda, noted that most business strategies and transformations fail primarily because of a lack of direction, resources, time and cooperation. He created the X-matrix to monitor and address such issues as part of the strategy deployment framework. The strategy deployment process makes it possible for managers to align an organization’s energy at all levels, implement

countermeasures when expectations are not being met, and hold people accountable. It incorporates buy-in from your leadership team and makes everyone focus on the most important areas for the future of the organization.

Watering the Soil The final component of the strategic growth model is leadership. The business leaders who I have worked with personally share some common personality characteristics. They are great communicators who can clearly convey their vision for the future. They realize we have two ears and one mouth for a reason, and therefore prize the inputs of others. They are zealots whose passion is contagious and who can be deliberately unsettling when necessary in order to release pent-up creativity. Finally, they are servants who derive their greatest satisfaction from putting their skills, position and experience in service to others.

In closing I’d like to leave you with two questions to consider. What do you need to be “more of ” or “less of ” as a leader to transform your business for strategic growth? And, how do you want to be remembered? This strategic growth model can help get you there.

This article is based on TBM President and CEO Anand Sharma’s leadership presentation at the TBM Executive Exchange in June 2012.

Blue Oceans: The Value Innovation Metaphor If a company limits its innovation efforts to increments of what already exists, trying to outperform rivals to grab a bigger share of the market, it’s swimming in waters bloodied by competition, a red ocean. But if your company can identify an unfulfilled need and respond with a unique solution, it creates its own blue ocean free of competition where demand is created rather than fought over.

— Paraphrased from Blue Ocean Strategy,

by W. Chan Kim and Renée Mauborgne, 2005

OpEx Review | August 2012 | www.tbmcg.com | 11

Updates and Events

New TBM VP to Focus on Growing Drug, Medical Device Markets Continuing TBM’s tradition of fostering mutual education through its client relationships, Mark Pope has stepped into the role of Vice President for the Pharmaceutical and Medical Products Practice. These industries will explode over the next 30 years, as developing countries grow economically and healthcare spending in industrialized nations tilts drastically toward older citizens with more healthcare needs.

“My goal is to help TBM serve pharmaceutical and medical products markets not only through

the application of traditional lean manufacturing methods, but to help those industries understand that operational excellence can accelerate time-to-market for new healthcare products and speed the achievement of firms’ internal goals.”

As a TBM leader, much of his focus will be on new-product development, which he sees as the greatest opportunity for operational excellence in these industries.

Prior to joining TBM, Pope was the Vice President of Business Excellence for Pfizer Pharmaceuticals. He led an internal consulting group of 30plus people focused on operational improvement within Pfizer’s global operations focused on material revenue increases, new capabilities development and cost efficiency. In two years, his leadership delivered $200 million in incremental revenue and $1 billion in SG&A cost reductions.

AIM for OPERATIONAL EXCELLENCE

“The cycle of both drug discovery and drug development on the pharmaceutical side of the house is extensive. The average drug takes eight to 10 years from the time the new molecular entity is developed through human clinical trials, and the registration processes with regulatory authorities. Devices have a shorter cycle than drugs, but have a lot of room for improvement as well.

“Compressing these cycle times and bringing new technology to the market for the betterment of the disease state and the human experience is absolutely critical.”

Publisher: Anand Sharma: asharma@tbmcg.com

®

Executive Editor: Angela Scenna: ascenna@tbmcg.com

September 19–20, 2012 • Atlanta, GA

Three OpEx tracks: Growth, Leading Change and Improving Profitability.

Accelerate value creation and master new OpEx strategies at this year’s LeanSigma® Global Summit.

Contributors: David Drickhamer, Doug Kiss, Beth Morrison, Mark Pope, Angela Scenna, Anand Sharma, Dan Sullivan, Tonya Vinas Art Direction and Design: Crossbow Group, crossbowgroup.com Printing: Carter Printing & Graphics, Inc., carterprintingnc.com

Visit www.LeanSigmaGlobalSummit.com

OpEx Review is a publication of TBM Consulting Group 4400 Ben Franklin Boulevard Durham, North Carolina 27704 800.438.5535 www.tbmcg.com

12 OpEx Review | August 2012 | www.tbmcg.com

TBM, the TBM logo, and LeanSigma® are registered trademarks of TBM Consulting Group, Inc.

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