Decentralized Social Networking

Diaspora is a free personal web server that implements a distributed social networking service, providing a decentralized alternative to social network services like Facebook.
The project is currently under development by Dan Grippi, Maxwell Salzberg, Raphael Sofaer, and Ilya Zhitomirskiy, students at New York University's Courant Institute of Mathematical Sciences.
They gave themselves 39 days to raise $10,000 and within 12 they met their target.
The group received donations in excess of $200,000 via Kickstarter. A consumer alpha version was released on November 23, 2010.

Bikenomics

by Elly Blue
9 May 2011 11:09 AM

Economics of bicycling.

as bike commute trips continue to rise nationwide, many employers are catching on to the benefits they can gain by actually encouraging employees to bike to work. Some are even shelling out cold, hard cash in an effort to boost their ranks of bike commuters.

A Dutch study last year found that cycle commuters provide their employers with an economic advantage by requiring fewer sick days each year and enjoying better overall health.
Other research has shown that bike commuters are happier and less stressed than those who drive or take transit. At rush hour, your bicycling employees may get to work faster and with fewer unexpected delays.

Perhaps most quantifiably, bike commuting employees don’t require nearly the same amount of investment in parking—even when employers invest in deluxe, secure bike parking facilities.

OHSU, a teaching hospital in a hilly section of Portland hemmed in by narrow roads and expensive real estate, is acutely attuned to all the benefits of a bicycling workforce. They’ve seen bike trips “skyrocket” since they began handing out a $50 cash incentive for every 30 days of bike commuting an employee logs.

Indoor, secure bike parking with lockers, showers, and changing rooms are the traditional hallmark of a bike-friendly workplace. These amenities can be essential for employees in suburban offices who must look professional after commuting long distances in extreme weather. Several companies go a step further, responding to employee demand by providing dry cleaning pickup and dropoff services so that bicycling employees can skip the once-a-week car commute to restock their supply of fresh suits.

Let’s take another look at Netflix. The company has a much-lauded policy of allowing employees to work whatever hours they like and take as many days off as they need, so long as they continue to excel at their job.

Such policies, and the company cultures they create, can be invaluable to workers who want to skip rush hour, take their bikes on less crowded trains, head off on focus-enhancing lunchtime rides, or simply commute fewer days per week.

We’re fortunate that more and more companies are starting to see past the old prejudices against bicycling and notice the bottom line benefits of encouraging employees—all of them—to ride.

FULL ARTICLE CLICK HERE

Human Error & Culture

10 min.
When pilots in the cockpit do not communicate openly and honestly and freely; you have problems.
In cultures where it is difficult for a subordinate to speak openly to a superior, you will have more plane crashes.
In hierarchical cultures (countries such as Asian nations, Korea being the example used here) this has been the case and they have had to come to terms with it to change this in the airline industry.
http://www.youtube.com/watch?v=hBZcMQILVtc&feature=related

Why Canada's housing market is destined to slump

By GEORGE ATHANASSAKOS

Mon, Apr 11, 2011 Page B8

(Original Article here:)

George Athanassakos is a professor of finance and holds the Ben Graham Chair in Value Investing at the Richard Ivey School of Business, University of Western Ontario

The resilience of the Canadian housing market has confounded experts. While other property markets around the world have plunged, real estate prices in this country continue to reach new heights.

If the Canadian housing market does falter, the impact on the economy will be profound. Consumer spending and housing investment will feel the pain, and the Canadian Mortgage and Housing Corp., which provides mortgage loan insurance, will face substantial losses.

Some believe that low interest rates, solid banks, a growing economy, abundant natural resources and a relatively conservative mortgage market (at least compared to the United States) will all continue to support Canadian housing prices. Optimists argue that the run up in Canadian home prices has been based on strong demand from homeowners, while construction in the U.S. ran well ahead of actual demand and was fueled by speculators.

But there's another side to this debate. I believe that Canada's high house prices in relation to incomes, combined with record household debt levels and over investment in residential construction, will spur a severe correction in the real estate market.

Home prices are simply way out of line, especially when viewed in relation to household income. The ratio of house prices to income has historically averaged about 3.5 in Canada. It now stands at about 5.5. It is difficult to see how income growth in the future can bring this ratio close to the historical average within any reasonable period - so it follows that house prices will have to decline.

Signs of stress are already evident, especially when you look at household debt levels. In recent years, the gap between house prices and income has been bridged through borrowing. The average Canadian family debt hit $100,000 in 2010. About 17,400 households are behind in their mortgage payments, an increase of nearly 50 per cent since the start of the last recession.

The current consensus is that Canada's real estate market has achieved a "soft" landing and that prices will flat line but not decline substantially over the next several years. I disagree. The housing market is already in bubble territory. Average house prices have doubled in the last 10 years, while rents have risen by only about 30 per cent. The ratio of house prices to rent is higher in Canada than in any other developed country.

An even more powerful indicator also points to a severe housing correction in Canada. Residential housing investment as a percentage of GDP was 6.48 per cent in 2009, down slightly from 6.76 per cent in 2008, after peaking at 7.13 per cent in 2007. The previous peaks were at 7.26 per cent in 1976 and 7.18 per cent in 1989 - and we know what happened to Canada's housing market in the early 1980s and early 1990s. After residential housing investment as a percentage of GDP peaked in the previous two cycles, the housing market crashed within a few years.

I believe we are running out of time. By way of a comparison, this ratio peaked at about 6.1 per cent in the U.S. in the mid-2000s at the height of its housing bubble, and toward the end of the 1980s in Japan, when that country was nearing the end of its own property boom. Both countries experienced sharp declines in housing prices soon afterward. (The ratio stands at 6.0 per cent in China at the end of 2010 - no wonder there is talk of a housing bubble there.)

Canada is past the point of no return. What has propped up the housing market in Canada and delayed the correction is artificial demand from Asian investors. It is not clear when this demand will dry up, but it eventually will. Once it does, watch out.

The ratio of residential investment to GDP has provided a powerful leading indicator of housing corrections around the world and in Canada in the past. The question is, why would it not work this time around? I'm willing to listen.

More articles by George here:

Consumers take control of brands on social media with ‘mutant ads’

Sites such as YouTube host videos that often reveal public perception — good or bad

By LAURA KANE
Vancouver Sun May 12, 2011

A commercial shows a young woman extolling the rich flavour of Starbucks’ Frappuccino. “I don’t know anybody who doesn’t love a frappuccino on a hot summer day,” she gushes. Then a frown. A frappuccino just costs so darn much. How much? Well, enough to feed a child in a Sudanese refugee camp for a week, she says.

Hit pause.

Why would Starbucks make a commercial emphasizing the view that their costly beverage is an overindulgence?

Short answer: They didn’t. The commercial is a fake, part of a growing trend of “mutant ads,” or mock ads created by consumers and posted on social media channels, according to a recent Simon Fraser University study.

An international group of researchers, including Leyland Pitt and Michael Parent of SFU’s Beedie School of Business, examined four examples of mutant ads posted on YouTube to determine how consumers are transforming brands — whether companies like it or not.

“The consequences, I think, are quite profound,” said Pitt. “Brand managers have lost control of the brand in this environment.”

The study, published in the spring issue of Journal of Advertising, suggests that brand managers will have to pay attention to this new digital wave of advertising and figure out how to respond appropriately.

Negative mock ads like the frappuccino commercial can be potentially very damaging for brands, Pitt said.

“In a way, she’s making fun of us as consumers who are willing to pay these prices, but on the other hand she’s taking a serious dig at Starbucks.”

Researchers examined not only the ads themselves, but the conversations that arose in the comments section on YouTube.

Pitt noted there was a large group of viewers who defended Starbucks, in addition to those who agreed with the video’s message.

Not all mock ads are negative. The study identified three basic motivations that consumers have for creating and broadcasting ads: intrinsic enjoyment, self-promotion and perception change. A slick ad for the Apple iPhone created by a group of directors called “the Consultants” has caught the attention of more than 100,000 viewers since it was uploaded to YouTube in 2007.

The video shows people in New York praising the phone’s features in different languages.

The trend of mock ads is only one part of the growing social media shift, whereby more control is placed in the hands of consumers to shape a brand’s image, Pitt said.

“The best thing companies can do is try to abdicate control of the brand and allow the conversation to happen.”

One common mistake is that brands use social media the same way they would have used traditional advertising, Pitt said.

“You can’t just rush in and say, ‘What we were going to tell you on television we’re going to tell you on Facebook ...’

“You’ve almost got to be invited to be a part of the conversation.”

lkane@vancouversun.com
From http://www.vancouversun.com/life/Consumers+take+control+brands+social+media+with+mutant/4767854/story.html#ixzz1MLdZwFyP
sample videos here also

Unlimited Vacation

This year, for the first time ever, 1 percent of companies report that they offer unlimited paid leave.
Studies have long shown that — believe it or not — such flexibility actually makes workers more productive and engaged.

The movie subscription service Netflix has had unlimited leave for a decade.
... traditional vacation, in fact the whole 9-to-5 workday, is a "relic of the industrial age." Swasey says Netflix values workers who can manage their own time.

LINK To STORY

Interview preceding AME International Lean Conference, Baltimore, 2010

Leading the Lean Enterprise Transformation

George Koenigsaecker is a principal investor in several Lean enterprises. He is a Board Member of the Shingo Prize, The Association of Manufacturing Excellence, The Thedacare Center for Healthcare Value, Ariens Outdoor Power Equipment, Baird Capital Partners, Simpler Consulting and Watlow Electric Corporation. From 1992-1999, he led the Lean conversion of the HON Company, a $1.5 billion office furniture manufacturer, his efforts led a tripling of volume and culminated in HON Industries being named by IndustryWeek magazine as one of the "World's Best Managed Companies". 

Prior to this, George was with the Danaher Corporation, where he was President of the Jacob's Vehicle Equipment Company (whose Lean conversion is featured in the book, Lean Thinking by Jim Womack and Dan Jones) and Group President of the Tool Group, then the largest business unit of Danaher. He also developed and implemented the "Danaher Business System", a comprehensive Lean enterprise model. He has held senior management positions in Finance, Marketing and Operations with Rockwell International and Deere & Company. He is a graduate of the Harvard Business School.

Interview preceding AME International Lean Conference, Baltimore, 2010

QYou’ve lead lean companies through a lean transformation. You’re currently advising companies. What was one of the most successful lean transformations you’re proud of?

A We established the original form of the Danaher business system, which is modelled on the Toyota business system. I think the encouraging thing is that if you look at public, stock that you could have purchased from 1987 on, when we started the original transformation at Jake Brake, it has been the highest performing public market stock per, articles in the USA Today and so on. So it has been able to take lean lessons and apply them and get financial performance from them. It’s also the expert in the transformation journey. They’ve grown from a few hundred million dollar business to 12-billion dollars and continuing to grow today. And they do it by acquiring companies and transforming them to lean.

QWhat is one element at Danaher that you think was present at the beginning and continues to drive the business?

A One is that Danaher and others that have been successful at the lean journey recognize that you have to change senior leadership behaviour. To do that you’ve got to get your CEO and direct reports to think differently about how they do their work. And companies that are very successful at this, pretty much have a required executive immersion program of some sort.

QWhat would you say to some of the many middle management folks who are quite committed to lean and looking to engage their leadership on the question of lean and back up the work that they’re doing to spread it throughout a company? When do leaders start to really realize the benefits of this model?

A Well, there’s probably three things to think about as a middle manager that’s trying to get this moving.

One of those is to make sure that whatever work you’re doing with lean drives results on a fairly quite basis. Toyota talks about the True North metrics, which are really four things in hierarchy of importance that you should be measuring on whatever work you’re doing. So maybe you’re in charge of a subsection of a value stream and you can start to work there. The four True North areas would be to look for double-digit, which is 10 to 30 percent sort of number, annual improvement in these four metrics. 

One is human development, which might be measured as safety or number of problems solved per person — those kinds of things. The second one is quality, which is both internal quality and external quality. The third one is flow time or lead-time, which is principally looking at all of your customer- or client-facing processes and seeing how responsive they are, as well as, then to make that become responsive, you’ve got to change your internal flows. And then the fourth one is cost or productivity. 

And those are in a hierarchy, but there is an expectation that you should improve each of them at 10 to 30 percent per year — forever is the basic vision. So you pick a spot and you’ve got some area under your responsibility, think about those kinds of metrics for your area, think about improvement events to begin to generate that kind of performance and realize that the tools, properly applied, should always generate, worst case, 120-day payback. This isn’t something that you should look back a year later and say, well, we invested this but it isn’t there yet. You should be able to look at it after a quarter and see that you’re on-path to generating enough improvement through the productivity gains and that sort of thing to pay for the process in total itself. So, have the discipline to generate results. We used to use a phrase — We would buy our freedom — and by that we meant we would generate enough results to get the freedom to continue the process.

Another aspect to think about is that groups of people, and let’s talk about if you’re a middle manager, your leadership team, they will form sort of a normal distribution curve in terms of attitude towards change. And you’re going to have one person that will probably be very willing to try it, you’ll have another person that probably never will try it in your lifetime, and then you’ll have a group of people that sort of run a range in between that. 

So as a middle manager try to identify the individual on the senior management team that is at that sort of far right of the curve. In this case, is most likely to look at something like this and see the good in it, and try to just work with them to get them involved, to get them to get some learning, get them to give you some support. And then if you get to the point where you feel like things are going fairly well there, then try to figure out, if there’s ten people in the top management group, who’s the second most change-oriented person and try to use that first person to help change the second one.

QWhat’s at the heart of True North metrics that makes it successful in terms of measuring and then becoming a catalyst for change?

A One of the fundamental aspects of the power of True North metrics is that what they really measure when you take all four of them is all of the dimensions of improvement that you can measure. If you improve your people’s problem-solving capability, the human development metric. If you improve everything you do, both your work processes and your outcomes. If you improve by shortening the flow times of all of the work you do and improve your responsiveness and improve your productivity and cost, you’ll find that actually any kind of improvement you can think of is going to fall into one of those four categories. 

If you improve in all the dimensions that you can improve, every line item on your income statement and your balance sheet, everything you can measure financially or operationally will move in a good direction. If you have higher quality, you do it with shorter lead-times, you do it with lower costs, you do it with a more involved workforce. In a sense, you keep that moving, no one will ever be able to capture you. And if you go through an income statement, you’ll have higher revenue because you’ll have higher quality and shorter lead-time and faster product development. You’ll have lower cost at production because of productivity gains. So higher revenue, lower costs works good on an income statement. 

You get to the balance sheet and if you’re a manufacturing company, you’ll have lower inventory levels because of flow. You’ll have lower capital equipment because of better utilization through things like TPM and SMIT, and eventually redesigning capital equipment to fit with a lean environment. So on your balance sheet side, you’ll have less of the working capital, you’ll have less of the fixed capital, and often, as you generate more money, you’ll end up with less debt, so you may have less debt on your balance sheet.

QWhat do you think is the future for companies as the challenges in the global marketplace increase? Do we have a choice but to follow True North or lean or the fundamental philosophies that underlie these new management processes?

A Basically, my experience is the first company in an industry that adopts these successfully, which is a small group because most people are unsuccessful, but the first organization that successfully adopted improves fast enough that no one can catch them and eventually becomes the dominant player in their industry.

And so I think if you take a long perspective that’s the likely evolution — that you’ll have to do it because the pressure from someone else that does it, in terms of their competitiveness, will eventually push you to do it. Having said that, there are relatively few organizations that have been focused enough at the senior leadership level to really get it built into the culture so that they keep it moving.

QIt has become certainly easier to make the case for lean. One of my recent interviewees said it’s not a question anymore. What’s next for lean thinking as we look to sustain companies for years on the lean journey and in the face of changing economic circumstances?

A I think the "what’s next?" is always kind of interesting because when I first started this, it was thought to be something that came out of automotive and probably only worked in automotive.

And then we applied it to a much lower unit volume company at Jake Brake, and people thought it wouldn’t work there because the unit volumes were so much less. And then it got applied to things like Pratt & Whitney, which was in the neighbourhood of Jake Brake, applying it to very low unit volume stuff.

Then we started applying it to administrative work and were able to show that, Gee, it works the same on administrative processes as it does on production processes. And then we began to branch out from applying it to manufacturing organizations to applying it to non-manufacturing organizations, for instance healthcare. What we have been able to demonstrate over the last 30 years is that lean is something that works on any kind of work. And it doesn’t matter what your work is, whether it’s education or healthcare or manufacturing or operating an aircraft carrier, lean will work there. You may have to struggle if you’re the first one to ever apply it, to figure out how you actually take these tools and principles and apply them to your work, but it will, in fact, work there. 

So I think at one level, we’ve demonstrated the universal applicability of lean tools and principles to improving any kind of work. So that may be the accomplishment in the last 30 years.

The failure has been that its actual spread at a deep level has been very limited and that we still have to get much more serious, in my view, about senior leadership education and then building cultures that sustain it through generations. 

So, I think the big picture for the future is getting much more definitive about what does it take to build a successful lean culture that can live through, for instance, multiple CEO transitions and continue on the journey. And to get back to the beginning, that is the part that I feel good about. I don’t feel like we had a perfect model of doing this but of the 12 companies and the two manufacturing companies on whose boards I’ve been on, all 14 of those organizations continue on the journey, some as long as 23 years ago. But in the future of lean that is the key — figuring out how to build sustainable cultures so that the improvement pace continues through generations.

QDo you think that lean in healthcare, lean in manufacturing, lean elsewhere is going to start to be the dividing line between those who survive and those who don’t?

A Ultimately, I think it absolutely will. I think we’re still in the phase where leaders that think they want to go on the path haven’t really been given a very good description of what are the key things that have to be done to be successful on the path. 

So, too often it has been treated like a program and hasn’t led to ultimate success. It is a system that takes a lot of hard work because you have to restudy every process, let’s say five times over a ten-year period as you begin to use that as a way to generate results and build the culture. It’s something that requires senior leaders to have the humility to admit they don’t already know everything about this subject and go back and do some personal learning. 

It’s a system that doesn’t allow them to hire someone and delegate it to them because in the end they still won’t know what they’re doing and whether they’re doing the right thing. If you’re going to do something that is fundamentally a significant culture change, that’s going to have to be led by the chief executive officer or it isn’t going to happen. It can’t be led by someone lower level that you delegate it to. So there’s a lot of ground to cover yet, in terms of making this a broad base success.

QAre you looking forward to coming to the AME conference?

A Yes, I always do. It’s always been a place that brings together a lot of people who are thinking about and working hard on improvements. And it’s always the case that you need to separate the wheat from the chaff as they say in agricultural areas. But you always find that there are individuals and organizations that have done very good things and that you can take away true nuggets of improvement ideas. 

And a rule of thumb, you can go to a conference and come away with a couple of things that you can actually apply and make improvements, than you’ve done well at the conference. If it’s more than a couple, then it’s really impressive. The key question is, Are you going to go back and have the discipline to think about, I’ve got this and how am I really going to apply it and make something happen with it? How am I going to change the results of our organization for the better with what I learned at the conference? But the conference always brings enough lean leaders together that there’s plenty to learn and more than enough that you can take home and can apply it between one year and the next.

Perseverance Will Pay Off

Publish date: September 2008
Superfactory
www.superfactory.com
By John M Rubio and
George Koenigsaecker
Leading the Lean Enterprise TransformationLeading the Lean Enterprise Transformation

Companies that have made a real commitment to lean have the tools and systems to survive and prosper in a down economy. Is your organization equipped to respond and take action as soon as your leading indicators start to turn?

Gasoline is over $4 per gallon in many parts of the country. Food costs are higher than they have been since 1990, with more price increases expected through the end of the year. April foreclosures jumped 65% compared to the same month in 2007, a trend that analysts expect to continue for the next several years. It’s obvious now that the United States is in a cyclical downturn that’s being exacerbated by problems in the financial systems and credit markets.

Manufacturing company leaders cannot wait for the economists to officially declare a recession, as defined by two or more consecutive quarters of negative GDP growth. With the exception of Petroleum companies in high-growth global markets and a few other industry sectors no one is going to be able to “wait out” this downturn without any trickle-down effect on their business. Now
is the time for business managers to assess the direction of their lean efforts and respond to recessionary pressures. If they wait until it is painfully obvious that they have to make changes, company performance will inevitably follow the sales line down and struggle throughout the recession.

Watlow Electric Manufacturing Company (St. Louis, www.watlow.com) did not respond quickly enough to the last recession in the beginning of the decade and company leaders learned their lesson. This time around, even though their incoming order rate is only just starting to slow, the company has already taken significant steps to reduce costs, cut lead times and lower inventory
levels. Watlow has been successful at reducing lead times which has significantly impacted their growth cycle and netted new business. Lean is clearly taking on the view as a growth strategy.

Leading Lean Indicators

Toyota’s four “true north” metrics center around
1) human development,
2) quality,
3) lead time and cycle time (delivery), and
4) cost and productivity.

As organizations progress through a lean transformation, in good economic times and more difficult times, they should strive to achieve double-digit improvements (at least 10%) in each of these four dimensions. Managers must also
identify one area for a significantly greater rate of improvement. Which one will depend on the immediate customer needs and the business situation. This breakthrough area will have the most potential to have significant impact on customers and other stakeholders in the near future.

As a word of caution, the key metrics that managers let slide are always the ones that lead to serious problems in a couple of years. Witness the quality problems that manufacturers have had recently with lead paint on toys and food contaminants. Every improvement initiative should at least have safety and quality gains as “tag along” goals, even if the primary focus is on cost and
productivity. The four true north metrics are all related, improving one supports gains in the others.

Following traditional cost-cutting methods, when sales begin to slide most executives will evaluate each line item on the budget and cut those that don’t seem to have an immediate impact on the business. Training programs and continuous improvement efforts are typically the first to go.

It’s not easy for company leaders to see the immediate impact of such cuts on the business. To help bring such factors into account we developed the Simpler Business System, which incorporates Toyota’s true north metrics as well as the pillars of the Toyota Production System (TPS). The model has evolved over the past 20 years based on experiences with successful lean implementations during times of growth and times of market contraction. This enterprise business model consists of three elements: people, process, and purpose (See Figure 1).

As indicated in the figure below, in best practice and recession-proof companies’ people are personally involved and dedicated to specific value streams. They have been properly oriented
and trained, and are continuously informed of changes in the organization and the market. Most employees want to make a personal contribution to the success of the organization. By giving them the time and resources to participate in continuous improvement activities, for example, managers are demonstrating their respect for their knowledge and giving them the tools they need to reduce waste and variability that most company leaders never see.

If they truly regard employees as their most valuable asset, then leaders must invest as much in employee development as they do in any hard assets. Such investments typically deliver a 10:1 return or better, which is far above other investments. This is as true in boom times as it is during
a recession. The key to successfully investing in people is that such investments should always link back to the strategic purposes of the organization. Strategy and policy deployment processes can provide a clear connection for employee development activities to the company goals.

Integrate continuous improvement tools and employee development to provide a clear line of sight to the organization’s core strategy.

Quality is improved by solving many small problems that build on one another over time.

Organizations should not focus on any one quality improvement tool but on the appropriate tools for each specific problem. Too many company managers embrace popular programs, like Six Sigma, ignoring waste reduction and other variability reduction methods that can also provide huge improvements. Within a targeted area, a blended application of tools will have a much greater impact than focusing on a few select projects.

During most engagements we look for 15-25 safety and quality improvements during a week-long Kaizen or rapid improvement event. These may be relatively small improvements, but they keep everyone focused on the true north metrics while we target breakthrough gains in other areas.
Such improvements typically impact values streams vertically and horizontally, leading to financial improvements along multiple dimensions.

Unfortunately, quality gains can take a long time for customers to notice, and even longer for customers to believe that they will be sustained. In fact, it might take up to three or four years for
a company to reap the full market benefit of any quality gains. Even though managers cannot count on such improvements to pull them through a recession they still need to keep grinding them out.

The Biggest Bang for Customers

While it takes some time for customers to recognize quality improvements, they will notice reductions in lead times and delivery times very quickly. If an organization consistently cuts its
lead time relative to the competition by 75%, it has the potential to grow at three to four times the industry growth rate. That is, if the industry or sector usually grows 3% per year, the company could grow 6-12% per year if it can reduce lead times and hold them consistently.

Kolbe and Kolbe Millwork Company, Inc. (Wausau, Wis.) has achieved record sales in the midst of a construction downturn. Its high-end wood and vinyl windows and doors have found a recession-proof niche bolstered by their embrace of a lean business system.

In 2005 Kolbe and Kolbe managers began incorporating lean into its manufacturing operations, hiring Simpler North America to help them implement a companywide continuous improvement program that would remove waste and variability from their production processes, and replaces it with value-added activity. After two and a half years the company is starting to reap the benefits
of increased productivity and shorter lead times leading to their increased sales. In 2006 Kolbe and Kolbe reported record sales and is on pace to set another record this year.

In a recession, not all companies with superior lead times will increase sales like Kolbe and Kolbe, but they will have a slower sales decline than competitors. One effective strategy is to
target administrative lead times, such as quote cycles and order entry cycle times. Most
organizations can reduce lead times faster in these areas than in production, which can have a
big impact on getting and keeping customers.

Unfortunately, many organizations that manage to reduce cycle times fail to establish the
organizational practices that will allow their customers to enjoy the benefits, and thus miss out on
the potential sales benefits. To hold onto such gains managers have to change work policies.

Following the administrative example above, they may need to require that all quotes are
completed each and every day, which means that people will have to be more flexible and willing
to work overtime if there is a surge in quote requests or orders. Supervisors will also need to
understand that shorter lead times will bring in enough additional business that will more than
cover the overtime costs that may be incurred in order to maintain short lead times. Such an
approach requires a change in mindset for most organizations, but a recession creates an
excellent “burning platform” for creating a sense of urgency and instituting such changes.

In a down market, cash flow becomes very important. This is especially true in the current
recession, which is being exacerbated by credit contraction and tighter lending standards across
all areas of the economy. Inventory can lock up significant amounts of working capital. Improving
material flow and reducing lead times will free up cash by reducing inventory levels. Lower costs
will also improve cash flow by improving margins.

While many manufacturers have some opportunity to reduce scrap or other forms of waste, for
most the most significant controllable cost is labor. In a typical manufacturing firm the material
costs are set by the market and are not that different from one firm to the next. But people costs
can vary based on location as well as differences in productivity, processes and strategy. Some
industries, like health care, really only have one cost--people--all other costs are insignificant by
comparison.

The number of people that it takes to get the job done determines a host of other costs, such as
the number of office cubicles, desks, and computers, as well as the IT staff required to support
those computers. Think about how many parking spaces are required for each employee and the
cost of office space for each employee. During a recession company leaders should be thinking
about how to maximize every investment in space in terms of revenue per square foot.

Many managers talk about productivity, but few measure it, and even fewer are actually able to
improve it at a significant rate. Despite claims that it’s impossible to measure in product
development or sales, these areas are often ripe for productivity improvements. They are also
very often the source of many out-of-control costs. Focusing on such costs should not undermine
human development initiatives. Linking people to specific processes, whatever they may be, as
well as the mission, vision, and purpose of the organization, lies at the heart of the business
system.

One effective approach is to track individual productivity measures based on the total cost of
each employee. Everyone has a personal target of two times their annual employment costs as a
target for process improvements within their value stream. Such a metric forces people at all
levels and in all value streams to participate in the organization’s lean efforts and work to improve
productivity. World-class companies, which rarely layoff people, typically have 100% of
employees engaged in some form of productivity measure.

As a general precaution, it’s almost always the right thing to do for an organization to freeze any
new hiring at the first sign of a recession. If sales fall faster than the rate of attrition can absorb,
requiring some layoffs, it is better to take a large cutback early, and then use lean strategies to
handle the workload. This might mean making a reduction that initially requires some overtime
from the remaining employees, which will be reduced or eliminated in subsequent quarters as
sales decline. These are the tough decisions that most managers don’t want to make, but lean
leaders should constantly be developing appropriate response plans to changes in market
conditions.

The Purposeful Plan
If the company hasn’t done so already, it’s not too late to pull together the management team and
discuss the implications of slower sales and the areas that need to be focused on in order to
minimize any negative impact. This may mean attacking value streams that require a lot of people
because of the potential margin and productivity gains. During down cycles, we find that most
manufacturing companies focus on the delivery value stream or the conversion of raw materials
into finished goods. To drive revenue they invest time and resources to improve those value
streams that have the most potential for growth as a result shortened lead times. Even if such
operational and sales gains can be realized, if the recession is long and deep, further cost
reductions may be required.

Of course growing productivity should be at the top of the management team’s agenda well
before key market indicators signal that it’s time to act. The current recession will require
changes whether we want to make them or not. The strongest companies will make those
changes that effect all three elements of the lean business model, leading down the path of
continuous improvement.

Sustaining Lean

Publisher: Manufacturing Engineering
May 2007 Vol. 138 No. 5

Nothing can replace the direct involvement of leaders
Leading the Lean Enterprise TransformationGeorge Koenigsaeker, Leading the Lean Enterprise Transformation

Many of those on the lean journey often ask the question: "How do we sustain our lean effort? What will it take to truly continue on the path?" While there are probably a number of answers to this question, I would like to suggest a few derived from my own experiences.

First, what is the predominant culture of most firms today?  
                           


I would say that it's "firefighting." We focus on delivering today's product or service, and we rush to do so. One consequence of this emphasis today is that we do not step back to take the time to "ask why five times," as Toyota would do.                                                                                                               
So we keep working really, really hard, but our system does not get any better, because we just jump on the first solution for problems—elimination of the surface cause—as they crop up during the day. The net of all this is that we have gradually built up a system under which we run our businesses, but we do not look at improving the system on a regular basis.
And what is the culture we need to develop to survive and thrive for the long term?                                                                                                       What we need to build is a learning culture—and I maintain that the best model of that is the culture of Toyota. What's so unique about Toyota's approach to work is that they have organized themselves to be constantly reviewing all their processes (the steps by which their work is done), and improving them.


So the key to sustaining lean is building a culture that practices process improvement as part of daily life.                                                                         
How long will this take? Would it be reasonable to assume that it might take a generation of management to establish a totally different culture? After all, changing from a fire-fighting culture to a process-improvement culture requires embracing an "opposite" approach, and "opposites" are very hard for adults to learn. 
While I can't really know which practices have been most important in establishing this learning culture, the thing I am most proud of is that, over 20 years, I led 11 corporations, as either President or Group President, on the lean journey. And today all 11 of them continue to practice lean-process improvement. They have managed to do this through several generations of leadership change.

A few thoughts about what has helped these firms sustain a lean culture: Toyota believes that you drive improvement of every line item in an income statement and balance sheet by simultaneously improving the four True North dimensions of improvement—at annual rates of 10–30%. The True North metrics include: 

Member Development (processes are improved by people who learn how to study and improve their work);
Quality;
Lead Time; and
Cost/Productivity. 

If you want to advance these four dimensions of improvement, you will need to study your work—your processes—throughout the enterprise. That means studying both office/transactional/administrative processes and manufacturing processes—at a pace that will generate the desired pace of improvement.

After all, you would expect the pace of improvement to be proportional to the number of processes that you improve. And the double-digit results that a company like Toyota would expect each year require a lot more process improvement activity than most persons would imagine. A firm of 10,000 people might require week-long kaizen events devoted to studying the work of the firm, at a pace of 1000 team-weeks per year.

Don't panic just yet. You see the point; driving fundamental improvement is a lot of work. Firms that have achieved this level of process improvement have built up to this pace over a period of 3–4 years. They have come to realize that a significant pace of improvement is driven by a significant pace of process study—so they see this work as a productive, valuable investment. The good news is that well-run process improvement typically has a payback on all the costs involved of 90–120 days from the productivity gains alone, not counting inventory cash, improved customer quality and lead times, and other metrics.

It turns out that you drive most lean results from organized kaizen events that are driven by an enterprise value stream analysis and improvement plan. It also turns out that lean is learned from personal participation in these hands-on improvement events. You don't really learn much about lean from books. It's the struggle of applying new tools, new principles, and new practices to a "chunk" of your existing work—expecting major improvements to be implemented within a week—that drives individual learning curves and begins to build a new culture.  

So these kaizen events really do three things at the same time. They actually redesign processes and delivery results, but they also are the key way anyone learns to understand the practice of lean, and they accumulate into building a new culture—a learning culture.

Let's think about leadership a bit here. When an organization starts the lean journey, the odds are that almost no one will have deep knowledge of the way ahead, and almost certainly senior leadership will not know what is involved. In some respects, the first step is for leaders to learn how to see waste in their organizations. Toyota believes that the principal form of motivation for improvement is derived from learning to appreciate how much waste exists around you in all the work you and your organization do every day. A lean core-concept is the idea that only a few steps in each process truly transform material (or information, in the case of administrative work). These are the few value adding steps.                     




Our processes are full of other steps—other work—that does not transform the material or information. In lean terms, that work is categorized as non-value-added.

Most of us are surrounded by the work we and others in our organizations do—but we see it all equally; it is all just work. One of the key outcomes of participation in kaizen events, especially for leaders, is to begin to see how much non-value-added work exists in our processes, and also to understand that we can remove a large portion of it—within a week.

A Wisconsin healthcare group, Thedacare, has studied member survey data very carefully, and correlated scores with the number of event experiences that each person has accumulated. What the data show is that it takes two weeks of kaizen-event experience before the needle moves in terms of positive member survey scores—and that it keeps moving right through about eight events per person. This result is a good measure of the culture change that takes place. So it appears that an ideal approach would be to eventually get all leadership (and the whole organization) to gain eight weeks of kaizen-event participation. In practical terms, it takes years to get to this level, even if you are on a fast pace of improvement. But you need to get on the path.

A pair of examples may help you appreciate what's involved. Led by its CEO Stan Askren, HNI Corp. (Muscatine, IA), the big office furniture group, requires any new manager in the firm to get four full week-long kaizen event experiences in their first year of employment, generally in the first few months. And for every year after that, they must get two more week-long improvement experiences. One lesson learned was that most leaders know how to talk-the-talk and sound like they are "doing lean," but real results are only achieved by those executives who get real experience.
Danaher Corp. (Washington, DC), which is led by CEO Larry Culp, has a Lean Immersion course, where senior leaders spend 90 days doing nothing but lean-improvement work. 
Danaher grows by about 20% per year from organic growth, but also benefits from a steady flow of new acquisitions paid for by the cash flow generated by lean efforts at the current organization. In fact, since the beginning of their lean work at Jacobs Vehicle Systems Inc. (Jake Brake) in 1987, the financial performance of Danaher exceeds that of Berkshire Hathaway, the organization run by the famous investor, Warren Buffet. In North America, Toyota conducted a hansei—a deep reflection—on the depth of understanding of the Toyota Way at the company. They concluded that the organization also needed to require leaders to get regular kaizen-event (jishukin in Toyota talk) experience on an ongoing basis.

You've probably realized that a very big part of sustaining lean is establishing a practice of leadership participation on kaizen events on a regular basis—forever. Every time a leader is on a team, it reinforces for that person the reality that there is still a lot of waste in the work being done, and also reinforces the fact that you can remove a lot of this waste in as little as a week. The motivation to improve that this awareness gives to leaders is essential to sustaining lean.

There's a direct link between achieving double-digit annual rates of improvement on the True North metrics (which will in turn drive all line items of the income statement and balance sheet in the right direction), and a strong pace of studying and improving processes. One of the issues for leadership is that it is hard—perhaps impossible—to really define what the organization will look like after another year of lean transformation. Frankly, you've never been there. One lesson learned, for me, has been that tasking yourself to hit your True North metric performance, year after year after year, is a significant part of finding your way on the transformation path. If you start to fall behind in one of the True North metrics areas, it's time for a "hansei" that can lead to corrective action.

This action, in turn, is usually some combination of increased kaizen-event activity directed at that performance dimension, and some addition of lean tools—or increased use of lean tools—across the full organization. So the focus on gaining True North performance each year also pulls the improvement activity needed to get there.

A rule of thumb that I use is that you will be substantially lean when you have studied every process from beginning to end, at least five times. Typically, you can remove about half of the waste in a process every time you study it, but it is impossible to see all the waste in the process at any given point in time. If you think about going through every process in your firm at least five times, you begin to understand several things: that this will perhaps take a decade to do; that you will get better at every step along the way; and that you will need to organize to support this effort over a long period of time.

The real reason to consider five passes through every process is that, as an organization, after you have done this work, you will realize that there is, in fact, no end to improvement. And you'll know that you want to continue this journey forever. It seems to me that we really do not understand the phrase "continuous improvement." We think "improvement," and we imagine it to be a one-time step. But the idea that continuous improvement could actually be continuous is not something we truly believe. After five or so passes through every process, however, you will have built a new culture that believes in continuous improvement. And once you've established this new culture, sustaining lean will be second nature.

Strategy Deployment: Linking Lean to Business Strategy

Leading the Lean Enterprise Transformation  George Koenigsaecker, Leading the Lean Enterprise Transformation
 Published in Manufacturing Engineering    March 2006 Vol. 136 No. 3

The first in a series of six articles on Lean Tools examines the relationship between Strategy Deployment and Lean Manufacturing 

George Koenigsaecker


Strategy Deployment is a process that ties senior leadership into enterprise-wide business-improvement practices. Strategy Deployment originated with “Hoshin Kanri” which was a core part of the leadership-control practices of TQM (Total Quality Management). The name Hoshin Kanri is variously translated as Hoshin Planning/Policy Deployment/Management-by-Policy. At its core it is an annual planning process that develops enterprise-improvement plans, and then includes a monthly review process.
 
In the late 1980s, when I first learned about Hoshin Kanri, I thought it should be broadened from just planning and controlling the quality improvement process, to focusing on doing that for all dimensions of improvement—what Toyota refers to as their “True North” metrics.
Over the ensuing years, Hoshin Kanri has evolved further to become the most important linkage between improvement philosophies/practices and the enterprise business strategy. 
There is a great deal of discussion of what to measure/how to measure (we all know our accounting systems are not very helpful—and even misleading—when it comes to cost management, for instance). Some of this effort has led to the balanced scorecard approach. During my career, I was often working in a corporate system that seemed to measure so many things that it tended to ensure you did not go backwards. But it also tended to make it difficult to go forwards. These complex measurement approaches consumed a tremendous amount of management time and focus (preparing for monthly operations reviews/conducting reviews, etc.), but resulted in a kind of measurement gridlock, where you were concerned that focusing on one measurement would lead to the deterioration of some other measurement. This consumed lots of time but resulted in little to no actual improvement.
Toyota has demonstrated an exceptional ability to differentiate between the forest and the trees, and the company’s approach to measurement is typical and innovative. Other than measures relating to totally new products or services, Toyota’s True North metrics cover all aspects of improvement—and impact all the key lines on income statements and balance sheets—while focusing on only four key metric areas.
The four key areas are: Human Development, Quality, Cycle Time, and Cost/Productivity.                                                                                                         
Human Development (HD) is encompassed in the Toyota phrase “we build people, before we build cars.”
The foundation for success is the skill and motivation of the human resources of any organization. In a manufacturing operation, the HD measurements might include safety performance. For any organization on a lean path, HD measurements would include measuring the breadth and depth of week-long Jishukin improvement events (also called kaizen events).                                                                                                                       
The Quality metric is driven by customer-based measures—customer quality issues and customer-loyalty measures.                                                  
                                               
The Cycle-Time metric is built around how long it takes to provide enterprise-wide capability to customers—end-to-end cycle-time improvement.                                      
And the Cost metric is primarily focused on Productivity improvement. The assumption about cost is that the organization should first be focused on improving its own value-added cost (total cost less outside purchased material), over 90% of which is driven by how many people it takes to deliver value to customers.
Within the four True North metric areas, Toyota typically has a hierarchy—HD is first, Quality next, Delivery/Cycle Times after that, and Cost/Productivity, last. On any given decision, a manager knows that he will give up his cost performance to sustain HD, Quality, and Delivery performance. If he still is unable to meet his metric goals, he would sacrifice Cost and Delivery to sustain HD and Quality. On the other hand, Toyota would expect countermeasures to be taken so that, over a year’s time, all four metric areas would show double-digit improvement rates (typically 10–30% every year).
A lean firm generates a different set of capital costs than a firm that is not lean. 
Now consider the income-statement impact of a lean transformation. The top line of the income statement—sales growth—is driven upward by improvement in quality and responsiveness (including new-product development times). Studies by George Stalk and Thomas Hout (Competing Against Time, published by the Free Press) have shown that for most businesses, if you can consistently reduce your customer lead time by ¾ (75%), you will grow at 2–4× your industry growth rate. This is a blind spot for most management teams. I assume that it’s due to the belief that they cannot fundamentally improve their responsiveness. But the net outcome is that management focuses on the inventory reductions that result from flow, while missing the really big impact that comes from growing at 2–4 times your normal growth rate.
During the 1990s, the HON Company (Muscatine, IA) grew its office furniture business at an average 15% per year rate—2–4 times the industry’s annual growth rates—almost entirely by shortening its lead times to 1/5 the industry norm. The PIMS database (Buzzell and Gale, The PIMS Principles, published by the Free Press) demonstrates that, regardless of market share levels, any firm that has sustained higher relative quality levels (quality compared to competition as reported by customers) has higher ROI performance.
For high-market-share firms, with quality performance in the top third of their market, ROI is 80% higher than that of firms in the lower third of quality performance. In lower-market-share firms the contrast is even more dramatic—the top third firms exhibit an ROI three times that of firms in the lower third of quality performance. Quality is a second area where management often really does not seem to understand the financial driver that they can build from a consistent focus on product and service quality (speaking of blind spots, what is your assessment of airline service quality performance?)
Moving down the income statement, you see gains in cost of goods sold due to productivity gains. You also see gains in S, G, and A (selling, general, and administrative) costs due to productivity gains. Another management blind spot is the fact that 90% of S, G, and A costs are driven by the number of people that it takes to deliver the corporate value streams—and that enterprise lean transformations also drive waste reduction in the S, G and A levels.
As you move further down the income statement, you get to costs to finance a business. A lean firm generates a different set of capital costs than a firm that has not undergone a lean transformation. Lean typically reduces inventory levels dramatically. This reduction frees up cash to pay down debt, which reduces the financing cost on the income statement. Also, lean typically gets more output from the fixed investment base—it frees up lots of floor space, and also gets more out of the company’s investment in equipment. Thus it allows rapid growth from improvements in quality and delivery performance to happen without the traditional level of incremental capital per dollar of new sales—again reducing financing costs.
What all this yields is the potential, through focus on the four True North metrics, to drive a major shift in the financial structure and performance of a business. Toyota is a good example—it has over $30 billion in cash, it is growing market share every year, and its market capitalization (total value of the firm based on stock price, etc.) is greater than that of the next seven largest car companies combined!
The best way to start a lean transformation journey is to conduct an Enterprise Value Stream Assessment (EVSA) with senior leadership. This is the 50,000-foot-level of value stream analysis. It looks at the total enterprise from a customer view, and begins to focus on improvement opportunities. In the course of the analysis, the True North metrics are identified in the total enterprise value stream, and issues that involve human development, quality performance, lead times/response times, and costs are identified.
At this level, the linkage between the lean transformation effort and corporate strategy begins to form. A rule of thumb with lean transformation is that the first complete improvement pass of a value stream will reduce total lead times by about one-half. And future complete improvement passes through the value stream will reduce the remaining lead time by half. Thus two thoroughly done, complete lean-improvement efforts will hit the 75% reduction that typically builds competitive advantage. At this point, the math of what the lean transformation can do for increased sales, reduced obsolescence, and reduced facility footprint will begin to show the strategic impact that such improvement will have.
Another rule of experience with the True North metrics is that you get the most gains by improving them simultaneously. And alternatively, if you do not include one or more of them, this omission will come back to cause you significant issues in a year or two. So a lean transformation should include improvement targets for HD (say a 20% reduction in accident rates), Quality (say a 20% reduction in customer complaint rates), Delivery (if this is the breakthrough target for the firm, an annual 50% reduction target), and Cost/Productivity (say a 10% enterprise productivity gain). This is the point where Strategy Deployment comes into play.
The Strategy Deployment process is led by senior leadership and has two basic components. The first is an annual planning process. The annual planning process would outline what value streams would need to be improved during the next 12 months, what pace of improvement effort would be required to get the work done, and what human-resources support would be appropriate to achieve this objective. This is what the originators called a “catch ball” process, where the goals are “deployed down” from corporate strategy, and the actual work plans to achieve them are developed at the level of the value-adding work. Then there is some adjusting to ensure that the plan is achievable with the resources committed. The annual plan would also include evaluation of the lean maturity of the organization, and evaluation of the tasks that must be completed to take this stage of maturation to the next level as part of the longer-term transformation process.
The second component is a monthly Strategy Deployment meeting. In most firms, we spend a lot of time at monthly review meetings that, when you step away from them, are really meetings focused mostly on ensuring that we do not lose ground, and that we maintain business performance at current levels. The Strategy Deployment meeting is intended to have its focus on improvement. Meeting time is spent reviewing progress against the overall improvement plans.
Did we achieve the monthly increment of improvement on each of the True North metrics, if not, what is our corrective action? If we did achieve our goal, what did we learn that we can share with the rest of the organization to accelerate the learning curve on lean improvement? Then the second task is to look at the current month. Based upon the improvement efforts on-going this month, do we expect to achieve each of our improvement targets? If not, what must we do to do so? Although this does not sound like breakthrough stuff—it actually is. The meeting brings all leadership together to focus on improvement, pulling time away from “maintenance” and putting that leadership time into “improvement” and “learning” that will build the firm’s future.
There is a tremendous discipline that comes from setting improvement targets on the four True North metrics, and striving to meet them every month. The knowledge that improvement is expected pushes everyone to seek ways to increase focus on improvement tasks, increase use of new lean tools to get to the next level of performance, and share learning about what is working and what is not. One of the most difficult aspects of a lean transformation for leadership is that, at any point in time, it is impossible to paint an accurate picture of what the organization will look like in a year with another year of lean learning and lean improvement under its belt. (After all, no one in the organization has been “there” before—you must create your own future state). 
One of the things that helps leadership achieve the future state is the push provided by the challenge of meeting the annual improvement goals.
If all of this sounds like a lot of work—it is! But it will also typically drive a firm to the top of its industry in a few years. The payback is well worth the work.

Leadership and the Lean Transformation

Published in Manufacturing Engineering
November 2005 Vol. 135 No. 5

It's the most important job facing today's managers

 Leading the Lean Enterprise TransformationGeorge Koenigsaecker, Leading the Lean Enterprise Transformation

As most of you know, there's a lot of "lean talk" out there, but you may get the feeling that there's a lot more talk than action. Well, some time ago the Association for Manufacturing Excellence (AME; Arlington Heights, IL) surveyed senior leaders in North American manufacturing companies. Their results tend to reinforce the impression that many manufacturing managers are all hat and no cattle when it comes to lean.

Of the respondents, 41% said they did not really know what lean was--not too surprising. The second largest category, at 34%, indicated that they were familiar with the idea of lean, but did not know how to go about achieving it. The third category, 22% of respondents, indicated that their firm was on the lean path--but that they were not getting the results expected, and were unsure if they were doing the things necessary to succeed. And the last category, 3% of the group, indicated that they were on the lean enterprise transformation journey, and were achieving great results.

I've been on the Board of the Shingo Prize for Excellence in Manufacturing since its founding. This position allows me to review applications and do site visits to firms that believe they may be "best in class." Twenty years of such visits, and a good deal of lean benchmarking, have convinced me that the AME survey is roughly correct. Very few companies have figured out how to achieve a lean transformation.
The Toyota Group Companies in North America recently conducted a "hansei" (deep reflection) that looked at their own TPS (Toyota Production System; lean) level, and also at what was being achieved in organizations outside the Toyota Group. The conclusion reached about their own organizations was that they were not at the level of TPS culture they thought appropriate--after 20 years of effort in North America! Their conclusions also noted that the most common roadblock to application of TPS in North America--inside Toyota Group Companies and outside--was lack of senior-leadership involvement.

One of the common failures of leadership in the lean transformation is a lack of understanding of what's really achievable with lean.                                                      
When I first did benchmarking in TPS organizations in Japan in the late 1970s and early 1980s, I found that our expectations of how much we could improve were usually off by an order of magnitude! We thought a transformation could generate enterprise productivity gains of, say, 40%. But we found firms that had lower unit volume than ours--in similar products--that were running at 400 - 500% of the output per person at benchmark US operations. More important, these productivity gaps existed on a total enterprise level. They showed up in purchasing, finance, customer service, distribution, production control, and sales and marketing.

It's much easier to believe that big productivity/quality/lead-time gains can come if you start with a personal picture of how much waste exists in your work processes. Thus a first step for senior leadership is to participate in a Value Stream Analysis (VSA), an effort that usually requires a multiday commitment. When you build a value stream map and analyze the data, you always find that the time when nothing is happening to the product (or, in the case of administrative processes, to the data) is in the high 90% range. Often the value-adding time is less than 1% of the time the material or data/information spends in your organization.

This is often the first time senior leaders realize how much waste is built into the way work is organized today. In addition to productivity gains, typical gains achieved in the 3% of firms with successful lean transformations noted in the survey above would include:

  • A reduction in lead times of 95%,
  • A reduction in accident rates of 95%,
  • A reduction in customer complaint/reject rates of 95%, and
  • A reduction in floor space of 80+%.

It's true that you will begin to see improvements quickly when you initiate the lean transformation (typically there's a 90-day payback on your full investment in transformation efforts), but the real power of lean emerges from the decade-long effort needed to build a true lean-learning culture.

On the balance sheet, a lean company has much higher inventory turnover, often lower receivables, and better fixed-capital efficiency. Capital efficiency rises because early lean work tends to double output per capital dollar by using equipment better, and advanced lean work redesigns processes so that they fit lean requirements. All of which begs the question: Why are there not more lean successes?

There are a couple of ways to answer this question. The first deals with the fact that key principles of lean are very simple to understand, but very difficult to integrate into daily managerial behavior. My Toyota sensei used to tell me: "I can show you how to do this--but you can't do it." He was saying that I could get the idea intellectually, but to actually do it I would have to do a number of key things opposite to the way I had done them for years. My instinct, my "gut feel," would make it very hard for me to do the lean thing.

For instance, the idea of one-piece flow sounds straightforward. But do you have any administrative processes that actually operate in a one-piece-flow fashion? It's easy to say "continuous improvement," but we think of making a step improvement--we don't actually believe that improvement can be continuous. We don't actually believe that the whole point of a lean transformation should be to build a lean-learning culture, where continuous improvement is what we expect every day--forever.

A second reason for the relative lack of true lean successes is that there are very few real sensei (master teachers) out there. I was fortunate to have a retired Toyota sensei who had been part of Taiichi Ohno's Autonomous Study Group (the folks who designed the TPS/lean system), as my sensei for 15 years. But most of my leadership lessons came from attempting to start lean transformations as a company president or a group president for 11 different corporations during those 15 years.

Here's one of those leadership lessons: Lean tools take a long time to learn at a fundamental level. We think of going to class to learn; Toyota thinks of organized experiments in the workplace as how one learns. The basic learning element for TPS is the week-long Jishukin or Voluntary Study event--what we usually call a kaizen event or rapid continuous improvement (RCI) event. (Of course, the "voluntary" part often is a misnomer.) It's only from participation in these week-long improvement teams that a manager or manufacturing engineer can learn how to apply lean tools and concepts. And it's only from a great deal of this kind of experience that you actually come to believe the core principles of TPS.

Based upon personal experience, I don't expect someone to be a good sensei at the tools-level of knowledge without at least 100 of these experiences under his/her belt--ideally with many of them in administrative or product-development processes, as well as production processes. As students of lean, we always want to short-cut this experience, and doing so never works. Because, at any point on the journey, "we don't know what we don't know." We won't come to learn something--to believe something--until we get there through personal experience.

As part of the North American Toyota Group Companies' hansei noted above, organizations like the GM-Toyota joint venture NUMMI (see "Lean at NUMMI," Manufacturing Engineering, September 2005) reinstated the requirement for all managers to get personal experience each year as members of week-long improvement teams. Some very deep thinking and observation went into the format of what Toyota old-timers call the "5 Days and 1 Night" kaizen/RCI event format. This approach is still the primary lean learning method. If your real goal is to build a long-term learning culture, you should keep in mind the learning value of every Jishukin/RCI event for the members of your organization. It's the growing hidden asset on your balance sheet.

A third way to answer the question of "why is there not more lean success?" comes down to leadership. In business schools and other places we are really trained to manage, rather than to lead. We are taught, for instance, that delegation is a skill you must use as a successful manager. And this statement is true in many ways--you can't do everything and expect to manage a large organization.

But it can be false in the lean setting--if you are undertaking something that involves new levels of learning, and no one in your organization has ever been there before.
 
As a senior leader, you need to get some "learning," or you won't have the minimal knowledge necessary to manage the lean transformation. In addition, something that is transformational by definition involves a lot of change management. You cannot delegate change management to someone who has not been there before, is lower in the hierarchy, and has less of the clout needed to manage the politics of change. Given the magnitude of change, the team wants to know that the leader is also going there.

A true lean enterprise transformation has learning and change taking place in four different areas--somewhat overlapping, but also somewhat chronological.

The 1st  step in lean is usually Jishukin/RCI activity in your own workplace, starting to learn some of the basic lean tools and struggling to apply new lean principles at the same time, under the tutelage of a sensei.

A 2nd  level of lean learning is to learn leadership or management practices that support the process. These include learning how to handle new management tasks such as: organizing significant internal member redeployment as your productivity grows, how to get disciplined followup to Jishukin events so that the results stick, and a host of other issues that come up with the process. This is where a sensei who has actually led a brownfield lean transformation as a business unit general manager becomes an important addition to your team.

A 3rd  level of learning, which typically takes about a half-dozen years of personal experience with implementation, is to actually come to believe the key principles of lean. Because these principles are deceptively easy to understand--but are also just the opposite of what we usually do--it takes a lot of personal experience to create the new gut feel that says these principles are the only way to organize work.

The 4th  level of lean learning--the one that takes the longest, is hardest to do, and is most essential to building a true lean-learning organization--involves key changes in leadership behavior. Again, they are deceptively simple to talk about, but extremely difficult to adopt, because they are the opposite of what we all believe is the right way to manage.

Let me try to give a couple of examples:  




Many of us know of Taiichi Ohno's mantra to "ask why five times." It's deceptively simple. If you go to the work team, take any problem that has occurred, and diligently ask why five times--to seek out the root cause--two things happen:

  • The solution tends to be obvious, once the real root cause is discovered, and
  • The solution will resolve that problem so that it's a permanent improvement, and you will not have to address it again--tomorrow, next week, next month.

I have tried to get large organizations to use this lean tool as the first step when any problem occurs. The very best level of conformity I ever achieved was probably only 10%. It's the most efficient problem-solving tool that exists. But to use it we must build a new culture that values root-cause solutions, and that builds new behaviors through repetition.

How about redeployment? When you grow productivity very rapidly, you move individuals to new work to use the time you've freed up. We have all been trained to believe that if we have kaizened our work, and our six-person team can do the work with five people, we will now improve our team-by getting rid of the lowest performer. We've all done it, and thought we were doing the right thing.

Toyota would have you do just the opposite. Whenever you improve processes so that you can free up a person, you always free up the best, most flexible person to the rest of the organization. There are many reasons why this is better: the low performer is going to go through a nightmare on a personal level when redeployed. Their fellow team members, who knew the person dismissed was a low performer but who worked with him/her for the last 10 years, will be depressed about what will happen to that person. And if you build a pool of low performers, what are you going to do with them?

Or, you can always redeploy the best person. This person is much more likely to see redeployment as a chance to try something new and get some variety in their work. This person will be pulled by managers from other areas who want him/her on their team. That seems straightforward. But how long will it take before every supervisor and manager--always--gives up their best person to the rest of the firm anytime they can free up a team member?
You can begin to understand why leadership behavior development takes consistent focus and time.

What should senior leadership do to create lean success?

  • Push up your personal learning curve. Invest time in visiting a benchmark organization, read a few key books, and then start to get your own kaizen event experiences.
  • Do the normal change management stuff. The model developed by Harvard's John Kotter, including building the rationale for the need to change, dramatically increasing the amount of communication, etc., is a good one.
  • Find a master teacher who has the necessary decade or more of personal experience with the tools, practices, principles, and leadership behaviours that can guide you and your team.
  • Develop a strategy-deployment plan. This is a lean tool that organizes your efforts, and gives leadership a venue and format for regular reviews of the continuous-improvement process.
  • Start the process. Be on the first VSA team. This VSA will give you a guide for the initial lean work to be done in your first chosen value stream (typically a product family). More important, it will be your first experience of walking the value stream. You will develop a personal understanding of how much waste exists, and an idea of how much you might remove on the first improvement pass.

Shortly thereafter, go on a full-time, week-long kaizen event. This kaizen will show you--at a smaller, more micro level--specific waste in a process. You will be amazed at what you learn, and amazed at how much waste can be removed in a single week. 

You will discover how excited your team members are when they can improve their own workplace and, probably shortly thereafter, at how much new work is needed to make the gains stay in place and avoid drifting back to the old methods. This last step is not optional. There are no successful instances of true, sustained, enterprise transformation where the CEO-level did not get personal experience on teams. None! It is that important. You cannot skip this step. It's perhaps the core leadership practice that determines success or failure in the lean transformation.

Finally, you must address resistance. There are always late adopters who will resist anything new. They cannot be left alone. If you leave them alone, they will become a cancer and, like any cancer, they will metastasize throughout the organization unless they are eradicated. Dealing with them can be tough stuff, and if the process of addressing resistance is not understood and led from the top, it won't get done. And neither will the lean transformation.

For those of you who are not CEOs, and are now thoroughly depressed about your organizations' lean prospects, there are a couple of things worth focusing on. Toyota has always taught the idea of building a "model line" as the first step to any transformation. The model line is an area where you put lean ideas to work and show that lean can be successful. It can be your own area. And if you take a "first pass" through the area with lean tools, don't stop. Take a second pass through every process and work step, and then a third pass, etc. The goal is to create an area that performs to such a high standard that it creates pull from other areas that wish to apply the process. 
Also, for each Jishukin that you organize, try to persuade a senior leader who seems interested in lean to join the team. That leader's personal experiences will eventually convert him/her to the lean way of thinking. Meanwhile, your personal lean learning curve will be growing continually.