First Friday Book Synopsis

"…like CliffNotes on steroids…"

Balancing Push and Pull Approaches to Improvement

Brad Power

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog’s “Conversation” series. To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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Almost every process improvement initiative I’ve researched over the last three years in more than 50 organizations has been pushed from the top.

These mandated-from-above programs include Lean Six Sigma initiatives with experts (“Belts”) in command, big IT implementations, and reengineering of major end-to-end processes. While most of these interventions produced tangible business benefits, they often didn’t stick. Because the top-down pushes imposed changes from the outside, front-line people went along, but they didn’t own or internalize them.

For me the lesson is this: Companies should complement a top-down push with as much bottom-up pull as possible to sustain momentum and avoid regression back to previous, inferior levels of performance.

Consider the competition between push and pull camps in a major oil company. An executive in the company’s finance operations adopted a Six Sigma belt-driven approach to reduce costs in the company’s global shared service centers. (The centers employ several thousand employees who provided accounts payable and receivables services to the firm’s business units.)

The company put 10% of its service center employees through a very practical, low-cost “green belt” training program. The firm then tasked each employee with a specific project to cut costs, armed with their tools and training. In the first year, each service center worker identified cost cuts from $15,000 to $30,000. The oil company lopped off 10% of the service centers’ cost base in the first year, followed by 11% the next.

However, the program had several internal critics, who believed the belt-driven approach offered only transient benefits. They would have preferred a lower-profile approach that relied on service center managers — not Six Sigma experts — to do the heavy lifting of identifying inefficiencies and making changes. In other words, this camp favored a bottom-up pull approach, although it would have allowed for a few experts and training focused on managers and supervisors as part of their jobs.

Which camp is right? Many executives are attracted to push approaches, especially senior managers who need big results fast. They like the notion of using experienced improvement experts (internal or external) to drive projects with short ramp-ups and delivery times. For example, GE runs process improvement projects with Six Sigma Master Black Belts, Black Belts, and Green Belts armed with explicit financial targets. GE’s attitude is, “Tell me how much money you want to save, and I’ll tell you how many Belts you need.”

If you want to shake up your organization in a way most of your people are not positioned or predisposed to attempt, the top-down approach is very alluring. You get immediate attention by announcing a program, paying for external or internal advice and training, and setting clear financial targets. Using experienced consultants can lower your risk. At the very least, they can give you political cover if the initiative fails; you can blame it on them.

However, the push approach comes with complications. Project interventions led by outside experts usually carry the promise of sizable results, but they often aren’t sustained. When the project is over and the consultants leave, the process tends to revert to its previous state. Accountability for sustaining the changes often isn’t transferred from the consultants to someone in the organization. In addition, using outside experts implicitly demonstrates management’s distrust of the workforce, which is de-motivating. Further, a company can miss the opportunity to transfer knowledge from the process experts to its people. Finally, the improvement experts (and I am one!) can often have a superior attitude and be zealots with a hammer, so that everything looks like a nail.

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The push approach to process improvement has serious limitations — in order for it to be successful, senior executives must also create pull from front-line workers. If there are continual changes in a company’s markets or strategy, that company will most likely need to make productivity improvements part of everyone’s job. To increase worker commitment and satisfaction, it will need to inspire every one of them to think about how they do their work and how they can improve it.

In my next two posts, I’ll look in greater depth at the challenges of pulling improvement ideas from the front lines, using examples of companies such as Toyota which have shown how to do it.

Question: How have you seen organizations effectively balance their push-and-pull approaches to improvement?

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To read the complete article, please click here.

Brad Power (bradfordpower@gmail.com) is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

 

Saturday, June 11, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , | Leave a comment

Avoiding Catastrophic Failures in Process Improvement

Brad Power

Here is an excerpt from an article written by Brad Power for the Harvard Business Review‘s “The Conversation” series.  To read the complete article, check out the wealth of free resources, and sign up for a subscription to HBR email alerts, please click here.

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Do you have a process improvement program under way that you feel is going well?

In process improvement programs, when things get tough it ALWAYS comes back to money: How do we make money from these process changes? What kind of return can shareholders expect, and when? In this case, the answers were not there, the effort was stopped, and a new management team took over.

What can we learn from this failure? How can you avoid this happening to you?

1. Quickly deliver tangible results.

The leadership got impatient waiting for demonstrated results. The analysis and design phase of a “bet your company” process change needs to be done thoroughly. However, two years without any tangible results will strain any executive team’s patience. To compound this problem, the project team declared victory after having only a process design and an energized work force. Everyone got caught up in the concept of large-scale change before they had realized how hard it was to implement. None of the implementation phases had really begun, let alone delivered any benefits. Their publicity got ahead of reality.

I was once asked to help a large company that had spent two years laying out current and future financial process models. The management team was running short of patience for results and wanted me to help them bring changes to fruition. One process owner had found that the company had many legal entities in each country, each of which required expensive tax processing, many of which were unnecessary. We quickly initiated a program to reduce the number of legal entities, saving tens of thousands in each country, while longer-term process improvements progressed in parallel.

As my consultant friend Chunka Mui proposed in a recent post at Forbes.com, the best way to make a big change is to “think big, start small, fail quickly, and scale fast.” While the design may be grand, leaders must deliver short-term results by starting small and proving the concept (or not). The maximum time to results should be three to six months.

2. Tie process changes to clear financial results.

When executives make large investments, they naturally expect a large payback. The company in our story got so excited by its process blueprints that it forgot to develop a clear financial case. The division head did not “sell” his vision upwards very well, and his boss, who was not a big supporter from the outset, ultimately had him fired “Strategy Maps” and “Hoshin Kanri” matrices are tools for showing how process improvements drive financial results. Process champions must have them ready for the day when the CEO or CFO effectively says, “Show me the money.”

3. Engage the finance organization.

Finance was on board at the company in our story. But the reengineering team did not push hard on articulating real and measurable benefits and holding people accountable for them.

As I noted in a previous post “Keep Your Operations in Shape by Focusing on Management Processes,” performance measurement (which is usually managed by finance) is one of four critical management processes for improvement program success. One way to engage the finance function, as practiced by GE and other disciples of Six Sigma, is to build a system tracking the financial benefits of each improvement project. The system must be reviewed and validated by finance.

[Note: It comes as news to me that performance measurement "is usually managed by finance." However, finance should be included when (a) creating a cross-functional team, (b) selecting metrics, and (c) evaluating performance measurement data.]

In a future post, I will discuss more than 20 ways managers can make process improvement an ingrained part of their organization. But generating benefits, demonstrating where they came from, and getting the support of finance are perhaps the most critical for the survival of an improvement program.

Question: Have you seen cases of catastrophic failures in process improvement programs? What were the key mistakes that caused them to fail?

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Brad Power is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

Tuesday, April 12, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , | Leave a comment

Uniting the Religions of Process Improvement

Brad Power

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog (March 7, 2011). To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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When they set out to turn around processes that have become woefully inefficient or ineffective, most companies choose one of four process improvement “religions”: Lean, Six Sigma, Business Reengineering or Business Process Management (BPM).

After hearing about its success at another organization, many companies choose just one. For example, several companies embarked on Six Sigma programs after their CEO heard about GE’s success with the approach, and many other companies have adopted Lean because of Toyota’s success.

It’s like adopting a diet or exercise program that a friend has used and lost 50 pounds.

But some companies realize they need to go beyond making episodic improvements. They try to institutionalize process improvement — that is, put in place the right mechanisms in their management systems so that their business processes don’t become grossly unproductive in the future. That is, they try to build continuous improvement into their DNA. It’s like the difference between going on crash diets every two years and fundamentally changing one’s eating and exercise habits.

But moving from episodic process improvements to having the wherewithal to improve processes continually is a tall order because of five key challenges I highlighted in a previous post: competing demands for attention, competing mindsets and behaviors, strategic irrelevance, traditional management processes, and the pain of disruption.

If an organization tries to institutionalize process improvement based on the tenets of just one process religion, it will run into trouble because no single religion has all the approaches for sustaining organizational attention to improvement. Lean has the most complete set of approaches for continuous improvement among the four religions. But a company that embeds Lean thinking into its DNA may occasionally need the hard financial results that Six Sigma can produce. In addition, Lean converts have a predisposition against adopting large, centralized IT solutions, which may cause them to ignore useful approaches from the BPM religion.

The result: Organizations need to consider every possible approach, not just those offered by one religion. To stay with the diet and exercise analogy, being aware of multiple diet programs will help you pull out common themes and arrive at a tailored program that works best for you.

Consider this example. Many companies adopted Six Sigma in the late 1990s. They trained experts in improvement projects (“Black Belts“) who then drove initiatives that achieved large financial results. In some of these companies, senior managers were dubious about the claims. They suspected there was some backsliding or double counting because the results were almost too good to be true. Many of those organizations then embraced Lean for different set of tools for improvement projects, tools that helped them connect project results to key strategic measures. They also stressed organizational learning (meaning, capturing the methods of Lean so that other parts of the organizations could adopt them). Adding another religion helped these companies embed continuous improvement into their DNA.

If organizations want to keep their processes up to date continually, they need to be able to use many approaches to embedding improvement in their management systems. Let’s review the distinguishing features of what each religion has to say about sustaining improvement.

1. Six Sigma zealots say “Belts,” lots of training, and performance measures are what matter.

Motorola pioneered the Six Sigma statistical tools, but it was GE that built the training programs and the hierarchy of accreditations or “Belts” (Green, Black, Master Black) with which it is so strongly associated. People who have earned these belts drive projects with clear financial targets set at the top organization, with progress monitored by the CFO. Six Sigma zealots argue that if you train enough people, you get a cultural transformation. You instill process improvement into the corporate DNA.

2. Business Reengineering’s high priest said core process owners, process maturity, and performance measures are what count.

Reengineering focuses on radical changes in core, end-to-end processes. In addition to laying out an approach for making one-time improvements, Reengineering’s high priest (the late Michael Hammer) had advice for organizations wanting to sustain improvement. He implored their leaders to create and track end-to-end process performance and establish an organization — including process owners and councils — to support the processes. He also advised them to continually assess their processes against a model of process maturity — PEMM for short — which he unveiled in an HBR article.

3. Lean “senseis” (teachers) say strategy deployment, executives as coaches, and front-line problem-solving sustain improvement.

Followers of Lean, which is based on the Toyota manufacturing approach that made it the leader in automobile quality (the Toyota Production System), believe top executives need to break down strategic objectives into implications for process improvements to get everyone moving in the same direction. For example, to improve customer satisfaction, an insurance company decided to focus on reducing the number of service requests over 30 days old from 40% to below 5%, which translated into activities in 30 departments. All organizational levels must identify and solve problems, but senior managers must tell front-line workers why efficiency is critical at all times, and then help them remove waste and improve service to customers.

4. BPM missionaries say processes and process knowledge embedded in software, an enterprise architecture, and a central process management organization sustain improvement.

Most missionaries of the BPM religion come from a heritage in information technology. They believe companies can sustain process improvements if their people use a company-wide software system (such as an ERP application), which has standard processes embedded in the software. They also advise companies to use business process management software to map and document process flows and how work should be executed and to monitor performance. They also believe in building a BPM “Book of Knowledge” (a codification of process improvement “best practices”) and a BPM “Center of Excellence” (a central organization where process experts reside and develop guidelines and procedures for documenting and analyzing business processes).

A few companies that lead in sustained process improvement have drawn from the best of each religion to embed continuous improvement in their organization.

Shell Oil’s downstream (refining and retail) businesses have rolled out a global implementation of enterprise software SAP with standard global processes (as the missionaries of BPM would preach). The company has trained its people to be Shell Sigma Belts (following the precepts of Six Sigma), and appointed process owners and established an elaborate process governance structure (as Hammer would have recommended). What’s more, the company helped develop Hammer’s PEMM concept and is now training Lean managers.

Chemical company Air Products has adopted nearly every approach for sustaining improvement from all four religions. Sloan Valve appointed core process owners several years ago following the Reengineering playbook. The manufacturer has since introduced quality techniques (“kaizen” events), as well as Lean strategy deployment methods and tools.

There is no reason that organizations wishing to sustain process improvement should not draw on all these ideas, becoming “Unitarian Universalists” and bringing together the best of each religion.

Request: What approaches have you seen companies adopt that have kept their attention on process improvement? Have any of these companies combined the approaches of different process religions?

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Brad Power is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

 

Thursday, March 24, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , | Leave a comment

What the C-Suite Needs to Do for Process Improvement

Brad Power

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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As I said in a previous post, not all companies need to improve the same processes to the same degree. But every company has some processes that are more important than others, and history has shown time and again that improving those can bring big increases in competitive advantage. Yet many companies make major investments to improve the right processes, but fail to realize the benefits.

Why?

From my experience with dozens of companies over the last 30 years, I see three factors that contribute much more than others to the failure of process improvement initiatives. The first is that organizations naturally tend to optimize within functions and departments, rather than across them. The second is that, without information on the impact of their work on company goals, frontline workers can’t properly contribute to improving them.

The third process improvement killer is this: If top managers issue edicts for improving an operation, they can achieve some short-term payback, but they can’t realize the more substantial benefits that workers can generate if they identify changes themselves.

These conditions will fester unless senior management takes three deliberate actions:

[Here’s the first.]

1. Listen to how well your organization meets customer expectations.

Because of the way they are organized, most companies are naturally good at optimizing performance within functions — marketing, sales, and operations, for instance. But substantial process improvement can’t occur unless it cuts across these functions. By focusing on the customer experience and looking for ways to improve it, managers can compel the organization to find problems and solutions which transcend the vertical boundaries.

For example, at amazon.com, the $25 billion online retailer, every new senior executive must spend time in the firm’s fulfillment centers in his first year. And every two years they — including CEO Jeff Bezos — must spend two days in customer service dealing with shoppers’ problems and issues.

To focus on end-to-end customer needs, senior leaders should spend time with customers asking about service to uncover problems and solutions. However, since they usually don’t have much time for process improvement, senior leaders need to identify the company’s four to eight core processes (e.g., order fulfillment, service request resolution, product development) as seen from the customer’s perspective and assign process owners to manage them. Companies such as Shell, Sloan Valve, and Air Products have done so. Overlaying the process dimension on the functional organization creates a matrix that mitigates the dominance of the functional view. Request: How have you gotten your organization to listen for customer problems across functions, define customer-centered process performance measures, and encourage behaviors for process improvement?

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Brad Power (bradfordpower@gmail.com) is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

Tuesday, December 21, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , | Leave a comment

Brad Power on “Four Executive Mindsets That Propel Process Improvement”

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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As I argued in my last post, the biggest challenge to sustaining process improvement in an organization is getting and retaining the attention of top executives. Without it, investments in process redesign, training, and systems changes won’t get funded. Worse, turf issues between departments and functions — critical to cross-functional process improvement — won’t get resolved.

In particular, I’ve found that four traditional mindsets and behaviors get in the way:

Work Harder — the urge to fix service problems by creating workarounds (fire fighting, adding complexity) or placing blame.

Keep Wall Street Happy — an expedient, short-term focus on quarterly (or monthly or weekly) financial results.

Stress Functional Excellence — a narrow, hierarchical tendency to design work from the inside-out by starting with functional or local optimization.

Compete on Bold Moves — focus on blockbuster products, sales innovations, or big deals; in other words, put a premium on heroes and heroics.

But what’s to replace those mindsets? Unless we can clearly articulate what executives should support, we can hardly blame them for not supporting it. Here are four alternatives:

Work Smarter: When we have service and delivery problems, we should work smarter — not necessarily harder — to redesign processes and eliminate problems permanently (often called “root cause problem solving”). When service and delivery problems occur, we should think twice about solving them by heroic efforts, working longer hours, putting more people in the problem area, and working around the problem. And we should also watch out for tendencies to believe that people doing the work are the source of all process problems. Too often we use the “Five Whos,” looking for who caused the problem and blaming them, rather than the “Five Whys,” looking for the systemic source of the problem.

Be a Steward of Operational Capabilities: Senior executives must own the long-term development of organizational capabilities and customers’ experiences, operational strategy, and process innovation (changing how we work). Some managers link process improvement with cost reduction. So when times are good, they aren’t interested in it. When times are bad, they look at quicker fixes such as reducing travel, squeezing suppliers, cutting back on marketing, freezing wages and headcount, or layoffs. Operational capabilities are built over time, and require ongoing commitment. Jack Welch, former CEO of GE, who is regarded as the father of the “shareholder value” movement, has said the obsession with short-term profits and share price gains that has dominated the corporate world for over 20 years was “a dumb idea.”

Listen to the “Voice of the Customer”: Defining how we organize our work starts with listening to the customer — not with studying how we are organized today. Delivering the experience our customers want (and even demand) should ultimately guide how we work as a team across functions and departments. Most senior executives believe that work is organized and delivered by functions and departments, and that functional and departmental excellence therefore ensures performance. They don’t reflect on the big picture — that while each function and department may be doing a good job, the overall (cross-functional, “end-to-end”) process may not work well at all; it might even be dysfunctional, so to speak.

View Process Innovation as Strategic: Superior financial performance comes not just from excellent products and services, but also excellent processes. This is especially so when a company isn’t a leader in product innovation. Through the relentless pursuit of improvements in time, cost, quality, service and the removal of waste, process innovation can give us competitive advantage. Some senior managers believe that if they get the right people in a few key roles, process improvement will follow. They believe that their elite professionals (such as doctors in hospitals, traders in trading organizations, and software engineers in software companies) drive the performance of the organization. These senior managers don’t consider that the processes that people work within play a critical role in their potential effectiveness and efficiency.

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Brad Power (bradfordpower@gmail.com) is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

Thursday, October 14, 2010 Posted by | Bob's blog entries | , , , , , , , | Leave a comment

Brad Power suggests, “Keep Your Eye on Process Improvement”

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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In my consulting and research I’ve seen many companies launch process improvement programs such as Total Quality Management, Business Reengineering, Lean, and Six Sigma. Many got significant benefits, including lower costs, faster time-to-market, and better customer experiences. But after one round of improvement, they gave up and let their organization get flabby again. Organizations, like people, need to stay fit and make improvement a habit to be competitive. So why don’t they? Why is sustained process improvement so rare?

Consider the story of Allied Signal. Under Larry Bossidy, Allied Signal was a “poster child” of process improvement success following the “Six Sigma” approach — enjoying consistent growth in earnings and cash flow from 1991 to 1999, highlighted by 31 consecutive quarters of earnings-per-share growth of 13% or more, and tripled operating margins to almost 15 percent. Bossidy wrote a best-selling book, called Execution, about his approach. Yet when Allied Signal merged with Honeywell in 1999 and Bossidy departed in 2000 and was replaced by Mike Bonsignore, they dropped their Six Sigma attention while focusing on a GE-Honeywell deal. According to market analyst Cliff Ransom, “It took about 18 months for a Six Sigma culture to essentially disappear when the wrong successor to Larry Bossidy took the reins.”

Or consider the story of Wiremold, a famous example of a “lean transformation,” profiled in the book Lean Thinking [click here].  From 1990 when new management and Japanese consultants arrived to 1999, Wiremold’s stock rose 32% per year, the first shipment fill rate rose from 60% to 92%, sales per full time employee rose from $92,000 to $241,000, inventory turnover rose from 3.4 to 15.8, and new product development cycle time declined from 2-3 years to 3-12 months. Then in 2000, Wiremold was acquired by Legrand, a French manufacturer of electrical equipment. Legrand was firmly committed to batch production and standard cost accounting, and the lean transformation unwound [click here] in a few years.

As the Allied Signal and Wiremold stories demonstrate, there are significant potential business benefits from adopting a process improvement program, yet despite these apparent benefits, they weren’t enough to build process improvement into Allied Signal’s or Wiremold’s DNA. What are the factors that get in the way of continuous improvement?

In my research, including analysis of more than twenty companies which have launched major process programs, I’ve identified five factors that have gotten in the way of sustained attention to process improvement:

• Competing demands for attention (as with Honeywell’s potential deal with GE)

• Competing mindsets and behaviors (such as work harder vs. work smarter)

• Strategic irrelevance (other more important levers for competitive success)

• Traditional management processes (Legrand’s cost accounting)

• The pain of disruption

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

Brad Power (bradfordpower@gmail.com) is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute [click here].

Wednesday, August 25, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , , | Leave a comment

Q 261: Why is James Womack important?

Small_7p641554Womack is the founder and chairman of the Lean Enterprise Institute, a nonprofit education, publishing, conference, and research organization chartered in August, 1997, to advance a set of ideas known as lean production and lean thinking, based on the Toyota Production System and now being extended to an entire Lean Business System. The intellectual basis for the Cambridge, MA-based Institute is described in a series of books and articles co-authored by Womack and Daniel Jones over the past 20 years. The most widely known books are: The Machine That Changed the World, Lean Thinking, Seeing The Whole: mapping the extended value stream, and Lean Solutions. The Institute conducts research activities in a wide range of industries to create a tool kit of methods for implementing lean thinking and the necessary leadership behaviors. The Institute also sponsors educational meetings, workshops, senior management seminars, and conferences through the year and helps people to apply lean thinking in manufacturing and entirely new applications such as healthcare, retail, air travel, and distribution.

Womack received a B.A. in political science from the University of Chicago in 1970, a master’s degree in transportation systems from Harvard University in 1975, and a Ph.D. in political science from MIT in 1982 (for a dissertation on comparative industrial policy in the U.S., Germany, and Japan). During the period 1975-1991, he was a full-time research scientist at MIT directing a series of comparative studies of world manufacturing practices.

The five-step thought process for guiding the implementation of lean techniques is easy to remember, but not always easy to achieve:

1. Specify value from the standpoint of the end customer by product family.

2. Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value.

3. Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer.

4. As flow is introduced, let customers pull value from the next upstream activity.

5. As value is specified, value streams are identified, wasted steps are removed, and flow and pull are introduced, begin the process again and continue it until a state of perfection is reached in which perfect value is created with no waste.

I urge you to check out http://www.lean.org/ at which you can obtain a free LEI membership and access to a wealth of resources.

Thursday, September 24, 2009 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , | 1 Comment

Q #100: What is “lean thinking”?

In this series, Bob Morris poses a key question and then responds to it with material from one or more of the business books he has reviewed for Amazon and Borders.

John Krafcik coined the term more than 20 years ago, based on his experiences as a quality engineer in the Toyota-GM NUMMI joint venture in California. His research led to the international best-seller, The Machine That Changed the World (1990), co-authored by James Womack, Daniel Jones, and Daniel Roos.

According to Womack and Jones, lean thinking is based on these five principles:

1. “The critical starting point for lean thinking is value. Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific product (a good or a service, and often both at once), which meets the customer’s needs at a specific price at a specific time.”

2. “Identifying the entire value stream for each product is the next step in lean thinking, a step which firms have rarely attempted but which almost always exposes enormous, indeed staggering, amounts of waste.

“The value stream is the set of all the specific actions required to bring a specific product through the critical management tasks of any business: the problem-solving task running from concept through detailed design and engineering to production launch, the information management task running from order-taking through detailed scheduling to delivery, and the physical transformation task proceeding from raw materials to a finished product in the hands of the customer.”

3. “Only after specifying value and mapping the stream can lean thinkers implement the third principle of making the remaining, value-creating steps flow. Such a shift often requires a fundamental shift in thinking for everyone involved, as functions and departments that once served as the categories for organizing work must give way to specific products; and a ‘batch and queue’ production mentality must get used to small lots produced in continuous flow. Interesting, ‘flow’ production was an even more valuable innovation of Henry Ford’s than his better-known “mass” production model.”

4. “As a result of the first three principles, lean enterprises can now make a revolutionary shift: instead of scheduling production to operate by a sales forecast, they can now simply make what the customer tells them to make. As Womack and Jones state, “You can let the customer pull the product from you as needed rather than pushing products, often unwanted, onto the customer.” In other words, no one upstream function or department should produce a good or service until the customer downstream asks for it.”

5. “After having implemented the prior lean principles, it ‘dawns on those involved that there is no end to the process of reducing effort, time, space, cost, and mistakes while offering a product which is ever more nearly what the customer actually wants,’ write Womack and Jones. ‘Suddenly perfection, the fifth and final principle, doesn’t seem like a crazy idea.’”

Here is a link to the Lean Enterprise Institute:

http://www.lean.org/

I highly recommend Lean Thinking: Banish Waste and Create Wealth in Your Corporation (Revised and Updated Edition) co-authored by Womack and Jones as well Eliyahu Goldratt’s The Goal: A Process of Ongoing Improvement, and Michael George’s Lean Six Sigma for Service: How to Use Lean Speed and Six Sigma Quality to Improve Services and Transactions.

Comments, questions, requests, or suggestions? Please share them. They will be most welcome and I thank you for them. Best regards, Bob

Tuesday, May 19, 2009 Posted by | Bob's blog entries | , , , , , , , , , , , , | Leave a comment

   

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