John Shook's Lean Management Column

Purpose, Process, People

Dr. Womack’s simple construct to analyze companies – Purpose, Process, People – is familiar to you by now. I’ve toyed with it more and more since he first brought it up during informal discussions of the “LEI point of view” and his subsequent introduction of it in his e-letter of June 2006.

I used it in my column to explore the question I often get of “Why didn’t GM learn from NUMMI?” My answer to that question remains that GM actually learned far, far more than most people realize about process but didn’t get very far with the people part. Regarding purpose, I suggested that perhaps Toyota and GM have all along had different purposes and further that perhaps purpose simply isn’t something you just learn.

So, at last month’s Lean Transformation Summit in Atlanta, I decided it would be interesting to introduce a simple model. Everyone knows the TPS house. Well, here is the LEI 3P “balance scale.” Maybe it’s not perfect. The idea I was trying to get across was that the lean enterprise is a socio-technical system. STS theory has been around for a long time and I like to refer to the Toyota Way as a socio-technical system on steroids. You have to work BOTH the social side and the process side to be successful with it. It has to be an integrated, balanced, total system. The thing I like about the idea of depicting the model as a scale is that it emphasizes the fact that the two – process and people – must be in balance. And I must say that I find that companies never get this right. They may err in either direction, on the social side or on the technical side, but they always err to one side to the detriment of the other.

As you can see in the model, I’ve substituted “People” for “social” and “Process” for “technical”. Seems to work.

And it’s the role of management to balance the two. Of course, “management” are people, too, so you could say the model is a little funky in that regard. But, it seems to work for me.

3 P's

So, how does your company look on this scale? In which direction is it tilted?

I ask “which direction is it tilted?” because I’m betting it’s tilted one way or the other.

In my view, when “continuous improvement” started, the initial emphasis was heavy on the social side. Teams, teamwork, empowerment, and all that. Sounded and felt good. But a lot of those companies never DID anything. And companies wondered why they didn’t get results.

Then we had the imbalance in the opposite direction. Companies slammed the tools and processes in place, worker involvement and employee understanding be damned. So, we had andon boards (very expensive andon boards) in place but turned off and kanban posts posted but collecting cobwebs (literally – I’ve seen it, you’ve seen it, too). And companies wondered why they didn’t get the sustained results.

We can identify those trends over time – over the past 20-30 years. But what’s more interesting and disturbing – but a useful insightful – is that even today companies are divided into these two camps: social companies and technical companies.

It’s the balance that makes the difference. The integrated balance. Toyota – when it’s operating like the high-performing Toyota we know so well – gets it right. They manage to do BOTH.

To circle back, it’s management’s role to balance those. But, management – managers – can only accomplish that with success depending on how well they can align them with the company’s basic purpose.

Suppose a company is really only in it for the short haul. Make as much money as we can as quickly as we can. How will the balance look?

So, how does your company look? How’s the balance? Is management working on it? Does the purpose allow it? Does the purpose even encourage it? Does that make a difference? I’m betting it does.

john

John Shook
Senior Advisor, Lean Enterprise Institute, Inc.

And You Forgot About Overproduction

Times of crisis and chaos are when markets realign. Companies will go out of business and market shares will transform much more quickly and radically during a true crisis than is ordinarily possible. This is when lean companies will take advantage of the turbulence to strengthen their position. This is when the truly critical principles of lean thinking come to the fore.

Crisis and basics, basics and overproduction
In the rush to meet the demand of some extraordinary boom periods of the past decade and a half – the dot.com boom, the China phenomenon, the loose credit of the sub prime mortgage debacle – perhaps the most basic principle of lean thinking has been overlooked. As the various forces of the past decade have added capacity around the world, what’s been lost has been attention to the waste of overproduction.

In the excitement of all that rush to add capacity, to keep up with hoped-for demand, to stay ahead, where was consideration of the most basic of TPS principles? Where was overproduction?

Remember when you first heard about overproduction? Surely you didn't get it right away. Did you? After all, "overproduction" is a bit of a funny term. Of course, you don’t want to make more than you need, so what’s the big deal?

Honestly, it took me a long time. I can't remember exactly when the light went on. Perhaps more than a particular "aha" moment, it was a matter of little by little.

The seven wastes and the company that kaizened them
Some years ago I had the pleasure of working and learning with a company that made quick progress immediately upon starting its lean initiative in manufacturing. The leaders learned the various TPS basics, including the seven wastes and all the rest. Well, not “all.” Among the things they learned included the principle of doing more with less. And eliminating waste.

In their early enthusiasm to apply the thinking to everything, they quickly decided that, since less is more, six must be better than seven, and they decided to “kaizen” – to eliminate – one of the seven wastes. Interestingly, of the seven, they chose … overproduction.

In addition to learning that less is better, they also took a close look at the seven wastes and decided that the concept of "overproduction" was covered perfectly well by the waste of "inventory." And, yes, certainly overproduction results in inventory, so if we focus on eliminating inventory we will also eliminate overproduction. Two birds with one stone, so to speak.

I’ve encountered many companies that have added an eighth or even ninth waste (usually something around waste of human potential, sometimes "time" or "environment"), but this was the only time I’ve seen a company specifically decide to reduce the number (though I have seen companies abandon consideration of ALL the wastes). And it’s fascinating that, of all the wastes, they decided on overproduction as the waste to eliminate from their list of wastes.

Rethinking Overproduction
But, you know that overproduction is a waste not just because it creates wasteful inventory. Right? They are actually very different things. Related, of course, but very different. Right?

Here’s a basic idea: The key to building a system that thoroughly eliminates the sources of all waste is to eliminate overproduction.

The processes and practices of lean thinking align around objectives which are designed to prevent overproduction. That’s how a lean company shortens the lead time to provide products and services for customers. Being mindful of avoiding overproduction creates flexibility and generates cash, which in turn provides value for customers and prosperity for companies.

Ohno made the seven wastes famous, of course, but in later days he talked about regretting it. There was never anything magical about the number seven. Rather, the types of wastes are many and no matter how you strive to eliminate them, you will surely be left with traces of those seven. And to thoroughly eliminate those seven, you will surely have to thoroughly change your production system. And the key to building a system to thoroughly eliminate the sources of all waste can be found in the path to eliminate overproduction.

Overproduction never meant just "not making too much" any more than "pull system" meant just "going to get what you need when you want it." Overproduction means aligning supply with demand, to get the "right item in the right amount with the right timing". That means knowing your demand, really, really well. It also means knowing your "supply", your capacity, your capability really, really well. And that's how the JIT tools help you, they help you get to know your real demand and real capability deeply thereby enabling you to work to steadily align them. That’s hard today, with currently installed capacity, and even harder tomorrow, with capacity that’s still under consideration to meet demand that, at the end of the day, will vary.

I'm suggesting that most companies, even "lean" companies, forgot about overproduction over the past few years. Maybe your company is different, but honestly, I never hear anyone talk about overproduction anymore. Or, not until very recently when companies suddenly found themselves with huge capacity and inventory problems.

Not only do people not talk about it anymore, they don’t focus on it anymore when designing their operating systems. Or when they set their operating patterns. Or when they capacitize – when they hire employees and purchase equipment.

Et tu, Toyota?
Even Toyota, you know, seems to have forgotten about overproduction. It's my guess that they are reminding themselves – or were reminded by circumstances (facts, gemba, genchi gembutsu, reality) – in no uncertain terms today. The photos of Toyota vehicles at the docks and reports of growing inventory of completed vehicles tell part of the story. Stories from suppliers of "Big Three style" ordering patterns were even more disturbing to me. The steady replacement of simple old card Kanban with e-Kanban has also makes me very uneasy (maybe I’m just old-fashioned).

What about you? What about your company?
Maybe we can do a little sharing here. There are different ways of raising or re-raising consciousness, ways that should begin on the plant floor ("better to act your way to a new way of thinking…"). But, perhaps the best way we can play our part here in this space is to share experiences. Did your company forget about overproduction? Did it ever focus on overproduction? (I’m saying most didn’t.) Is overproduction understood at your company?

John
John Shook
Senior Advisor, Lean Enterprise Institute, Inc.

Back to Basics at the Lean Transformation Summit

It was good to see the 300 or so of you who attended the 3rd Lean Transformation Summit last week in Atlanta. Conferences can be a good time to learn and network, also to take the pulse of the community.

Back to Basics
A major theme of the conference and subject of much discussion was "Back to the Basics," a favorite theme of this Column as well.

If the basics are something to go back to, what does a quick review of lean history tell us? Dr. Womack’s familiar history lesson goes like this:

1935 – 1975 Invention/Innovation
1975 – 1990 Age of Global Discovery
1990 – 2006 Tool Age
2006 – ?? Age of Management

Those beginning and ending years are all approximates, of course. 1935 to 1975 refers to the period Toyota was researching and building cars while concurrently learning and building its operating systems. (And, of course, there is a “prehistoric era” during which many innovations such as those of Henry Ford led up to Toyota’s development of its production and management systems.)

1975 to 1990 refers to the period the world outside Toyota began to discover what the company had been doing, beginning with the first oil shock of 1973 and the initial visits of foreign emissaries to Toyota City in the late 70s and early 80s. 1990 to 2006 refers to the era when everyone, every company was copying Toyota’s tools and techniques, resulting in a fashion boom of "Your Company's Production System".

So now we are – perhaps - entering the "Age of Management." It is certainly clear that that general dialogue and concern in recent years has turned toward more managerial and cultural matters. And there now seems to be widespread acceptance (on the surface anyway) of the wonderfully insightful explanation by Toyota’s Teruyuki Minoura that the T of TPS should refer to "Thinking." It's a "thinking" production system in which all members are fully engaged with their minds as well as their hands. I myself have long pointed out the lack of understanding of those matters as a major problem for many if not most if not all companies. Nowadays, no one even wants to talk about the tools anymore.

Uncommon Sense
But, something is starting to feel a bit out of whack again. So let's go back and examine some basic assumptions.

Common sense (basic assumptions) then. In the tool age, the belief was that if you use these tools, you too can be like Toyota. Buy the shoes and be like Mike.

Common sense (basic assumptions) now. Copying tools is wrong. Focusing on tools is wrong. Copying anything is wrong and you certainly can’t copy management, culture, and thinking. You have to adapt to your own circumstance, solve your own problems, develop your own "culture".

Sounds good, right? But, there could be a problem. Consider this quote:

"Common sense is always wrong."

And consider the source. It was a frequent expression of Taiichi Ohno. Hmm, maybe it"s worth going back and questioning our basic assumptions, even now.

As we turn attention to management, strategy, people, culture, and move from the "tool age" to the "management age," it's possible to forget the genius inside the highly-developed lean "tools." Properly developed and implemented, they embody the thinking and diligent practice that can lead to the deeper learning and change in thinking. Through proper, thoughtful implementation, repeated practice of the lean basics can bring insights.

Even more than the "mechanical" or tangible benefits they bring, they are intended to be learning and improvement structures, designed to make it:

easy to see problems.
easy to improve.
easy to learn from.

Here’s an interesting question: What is calculus? Is it a solution? Or a means to derive solutions?

So here's the thought to challenge our current day lean common sense: we've got the balance wrong again. If we let the pendulum swing too far over in the tool direction during the Tool Age, we may be letting it swing too far in the other direction today.

The Birth of Lean
I had the chance to challenge my own basic thinking in spades recently, by helping with the translation of a new LEI publication, released at the Summit last week, The Birth of Lean. I’m sure many of you are well aware of the work of Takahiro Fujimoto (see especially The Evolution of a Production System at Toyota). Taka teamed with another professor, Koichi Shimokawa, to interview and otherwise put into print the words of six of the most influential people in the development of Toyota’s system in the post-World War II period. Translator Brian Miller (thanks for letting me help, Brian) worked hard to make the words of the old guys really come to life – it's as if they are speaking to you.

The timing is amazing. The words of these key persons in the development of TPS, spoken during an earlier era of crisis for Toyota in Japan's war-torn economy, seem to fit today's economic crisis with little need for updating. Consider these words of Ohno:

"An increase in production volume shouldn’t necessarily mean a decline in unit costs any more than a decline in volume should mean an increase in unit costs. Those sorts of things happen as the result of arranging things poorly." (Birth, p. 53.)

In other writings, Ohno said he was trying to create a system to enable "success in a down market," noting that "it's easy to make money when everyone is making money. The key is to be able to make money when times are bad."

Sounds like he was talking about the current situation of too much and wrong capacity everywhere. Sounds like he was talking about today.

More next week,
John

John Shook
Senior Advisor, Lean Enterprise Institute, Inc.

Learning from Managing to Learn

It has been about four months since the release of Managing to Learn, now already in its second printing. I’ve received incredible response from many quarters, some great reviews both on-line and in print, and some thought-provoking questions. Below are two exchanges you might find interesting.

Following are two questions from Dr. Jaap van Ede of www.procesverbeteren.nl, an “independent knowledge platform” in the Netherlands. The exchange was published in conjunction with his scheduled full review of MTL in the Dutch journal In Logistiek.

Dr. van Ede: I think it would have been better if the thoughts of coach Ken Sanderson would have been added to the story of trainee Desi Porter (then the reader does not have to switch between two stories and is still able to see what both persons are thinking).

JS: Certainly, simply stringing the story along sequentially would have been more conventional and is an approach I considered. And throughout the writing process, we were very concerned that the unorthodox two-column format might cause difficulties for some readers. However, testing some “rapid prototypes” of the two-column format showed that readers had less difficulty than we feared. Additionally, since publication, I certainly expected some readers to complain, but to my pleasant surprise the response to the format has been overwhelmingly positive. At any rate, I was aware that the format is highly unconventional and, of course, anything unconventional is also risky.

I became convinced that the risk was worth the potential reward after showing early drafts to test readers where I found that the format beautifully captured the tension of real-life dialogues that occur every day in business. Life, business problems, and people do not always come at us sequentially. There are always competing priorities, different organizations making different demands, two people trying to talk to you at the same time, fighting for your attention. Faced with those situations daily, we have to decide. Similarly, the MTL two-column format (which, by the way, we think is a unique innovation) asks the reader to make decisions, and provides flexibility to be read in different ways.

Dr. van Ede: Desi Porter seems to be the ideal A3-student. What can a sensei do if he is less lucky? It would have been nice if the book had also addressed this issue.

JS: This is an interesting observation, and this is the first time to receive this question. I am frequently asked the exact opposite: where can I find a Sanderson?!

In fact, I think that this is indeed the bigger problem, the lack of good “sensei” or mentors. As for the observation that Desi is an ideal student, yes, this may be true. But, my own experience is that young professionals such as Desi Porter will indeed respond if we – as the more experienced senior manager/mentor – reach out and try to provide opportunities for them to learn and grow. Yes, there is that small minority of individuals who will not respond. But, if we assume first that it is our role to mentor, I think we will have little difficulty in finding less experienced “Desis’” who will readily join us in embarking on a lean learning journey.

John
John Shook
Senior Advisor, Lean Enterprise Institute

Next are two more comment/questions from an engineer who asked to be identified only as a lean and six-sigma practitioner at a large aerospace manufacturer:

Engineer: Thank you for writing the book Managing to Learn. I read it between Christmas and New Year's Day, and it was fantastic! Before the Christmas break, I had been planning to try to improve our procurement system at work, using value stream mapping as the primary tool. But as I read, I kept thinking that the A3 will be a better tool for managing the improvement. A value-stream map will probably be useful, but it will only be a part of the effort. The book also helped me to realize some deficiencies in our value-stream mapping process (primarily that follow through and on-going improvement are weak).

To the best of my knowledge, no one has used the A3 in the past where I work, but there are a couple others that will probably be willing to act as my mentor, or we may be able to use a consultant.

I would like to offer two struggles I had with the book, in hopes that if others have the same struggles, they might be improved with the next version. The first is with the set-based approach. It seems as though it would typically take some considerable time to test all the counter-measures that Porter proposed on page 79 of the book. I see that there was about a month and a half between the A3 on pages 84-85 and the one on pages 98-99. I expect that during this time, Porter was conducting trials, collecting and evaluating data, and then down-selecting the countermeasures to implement across the company. But I'm not sure I have that exactly right. The A3 on pages 84-85 already has evaluations of each of the countermeasures. Were the trials already done, or is the evaluation based on the expected results? The question is more or less rhetorical for the example of the book. The real question is what I should do for my future A3s. I expect that when I first propose countermeasures, I will also include a test and evaluation plan. Then when I move forward the analysis section will tell what did and didn't work, and the plan will show the countermeasures that are selected to move forward. If I'm missing something here, I hope you can let me know. Otherwise, there is no need to get back to me on that topic.

The second struggle I had was with relating the PDCA cycle to the A3 process. It seemed to me that the A3 used more of an IIIPTPIF (investigate, investigate, investigate, plan, test, plan, implement, follow-through) cycle. I did get parts of the connection between the A3 and PDCA, but mostly it seemed like a stretch to make PDCA fit within the A3. Maybe I'm just not seeing the forest for the trees here, but to see the PDCA cycle seemed more of a distraction to me than a driving force.”

JS: Thank you for your excellent observations and questions! Thank you for reading Managing to Learn so closely. Below are responses to the two issues you raise.

Regarding the first issue of how Desi worked through his set-based countermeasures, you observations are correct. There is an assumption that Porter was indeed “conducting trials, collecting and evaluating data, and then down-selecting the countermeasures” and you are correct that I do not show that process in the book as clearly as I might. This was partly a simply decision based on the fear that going too far down that path might fatigue and even lose the reader. I think your suggestion to show more of this process would indeed make MTL a stronger problem-solving book. I do not plan at this time, however, to add more detail there in later versions. But, on the other hand, a sequel is always a possibility!

Your second observation is fascinating, that Porter’s “scientific process” was more “IIIPTPIF (investigate, investigate, investigate, plan, test, plan, implement, follow-through) cycle” than PDCA and that “mostly it seemed like a stretch to make PDCA fit within the A3 …”

Let’s see, first let me say that I think you are correct that IIPTPIF probably captures more closely than a precise interpretation of “PDCA” the steps taken by Porter. However, my view is not that it is a stretch to make PDCA fit within the A3, rather than they fit together naturally.

My view of PDCA is that it is not its precision that gives it its power. I remember just a few months after leaving Toyota being asked by a client in my first regular consulting job, “So, where are we now in the P-D-C-A cycle? Are we in the P or the D or the C or the A?” I was dumbstruck. I looked at him, realized he was quite serious, and paused for just a moment to collect my thoughts. Similarly, I am often asked to compare PDCA with DMAIC, 8D, and other “problem-solving” methodologies. Let me try to explain how I look at it.

I recall an insightful discussion of the matter from a different angle many years ago with my boss at the Toyota Technical Center USA, Mike Masaki. Mr. Masaki was an engineer’s engineer and head of body engineering for Toyota, a very central engineering function within the company’s product development process.

In the late 1980s, he learned about the famous Taguchi Methods (Toyota didn’t use them or even know about them), ordered a full set of Taguchi Methods materials and assigned a young engineer to do a thorough study of the materials and the method. The results of the study were that while the Toyota engineers agreed that the Taguchi Methods contained many good tools (many of which Toyota did in fact use, under other names), everyone agreed that what they liked about Deming’s PDCA was the spirit of PDCA. They saw PDCA as a simple, elegant expression of the scientific method. Simple, and also flexible. You could say that there is a certain lack of “rigor” within P-D-C-A per se, or a flexibility. Inside “P” is the “Investigate” activity you mention. Within Toyota’s PDCA, that Investigate activity will continue as long as necessary, three IIIs as you express it, or 10.

There is, in fact, a mini PDCA cycle occurring inside each of the bigger PDCA activities. So, actually, you are working within all aspects of the PDCA cycle, all the time. (More specifically, I should add, whereas you preceded “Plan” with three rounds of “Investigate”, Toyota often explains that before you can “Plan” you have to “grasp the situation” and often describes the process as “CA-PDCA” – the hair-splitting can get pretty deep!)

Similarly with the A3. While I introduce a template with a set number of boxes in MTL, at Toyota an A3 would sometimes have four or five boxes, other times as many as eight or more. It was a flexible tool, embodying the PDCA method, but using it whatever way would best tell the story of the situation or solve the problem at hand.

More than answers, consider those some thoughts inspired by your excellent question. Thanks and best of luck at your company!

John
John Shook
Senior Advisor, Lean Enterprise Institute