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Product and Process Lean

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Dear Gemba Coach,

Lean product development guys tout the gospel of product focus as core to lean success. No argument from me. But … how, if the customers are famously wrong about what they really want, do we focus on the product and still give them what they really need? It feels like we're running on two different tracks.

Absolutely, Jim Morgan recently authored a great piece on the Lean Post “Your product isn’t everything, it’s the only thing,” and we recently discussed the need to think and talk in terms of a “product centered lean enterprise.” His point is that the organization’s product (however you define that) is what brings the enterprise together and that PURPOSE = PRODUCT, and indeed, I agree: product, people, process. But you raise a very interesting point, and a difficult one.

Nothing comes out of nothing, and everything is the outcome of its growth journey. Indeed, lean came out of the Toyota Production System, which very much came out of the manufacturing shop floor. If my understanding is correct, by the time the various kaizen activities conducted in the Toyota plants came together as the Toyota Production System, the idea was to minimize the lead-time from customer order to delivery to improve quality, productivity, flexibility and working conditions. A multitude of experiments conducted by many people somehow sorted itself out into a few principles, such as just-in-time or jidoka, several tools, such as heijunka, yamazumi, SMED, 4S, and so on, and folder after folder of standards: think we know we have to be careful of if we want to retain the quality, productivity, flexibility and safety results.

And this has succeeded spectacularly. I was recently watching a Toyota assembly line in Japan where operators were moving seamlessly from assembling a small iQ to a large Auris as well as two other models without a break of pace. No process is every perfect and, certainly, the andon chord was still pulled frequently, if you tried hard you could see some muda, and why not have a fifth model assembled on the line, or more options. And, to be fair, the first thing that struck me looking at the pace of work was that even if there was no obvious ergonomic horror, the operators must be exhausted by the end of the day. The second thing that came to my mind was that the competitive advantage from the use of capital I was witnessing, compared to other production sites I know, was astounding.

Not by kaizen Alone

Clearly, such industrial prowess didn’t occur simply through kaizen activity, but by taking into account year after year the countermeasures from kaizen activity in the development of both products and processes. Indeed, for many years, Toyota’s main preoccupation was cars that worked at an affordable price – quality and price, rather than what people commonly think of as design concerns, such as style, options and so on. To this day, Toyota’s first priority is value for money, and, to this day, millions of automobile buyers keep choosing reliability over image. The general assumption is that customers want peace of mind, cars products they don’t have to worry about and that do the job at an affordable price. Gemba lean is a great way to provide this, as quality complaints are fed back straight to the shop floor, kaizened away, and the results are included in the product design through design standards. So, for most lean guys, customer satisfaction is a straightforward (but not easy) question of making the product right according to engineering specifications.

But that is only one half of the story. If you come across the late Eiji Toyoda’s own account of the Toyota journey, Toyota: Fifty Years in Motion, you’ll be surprised to find very few mentions of manufacturing at all. The fabled Toyota Production System isn’t in the book, and kanban gets a few words, mostly as an illustration of Kiichiro’s just-in-time principles in practice. Toyoda’s main concerns over the years were in engineering. First, to make the first Japanese engineered passenger car – not fabricated from U.S. blueprints. Then, to deal with a very competitive Japanese market, such as the long struggle to get to the mandatory emissions level. Finally, the challenge of designing cars for export markets – the first car Toyota tried to sell in the U.S. was laughed out of the market. It’s engine was so small it couldn’t climb the ramps to access freeways.

Hail to the Chief Engineer

Toyota survived and, indeed, thrived in these challenging times by investing on towering technical competence. On the one hand, each new model was the responsibility of a single person, the Chief Engineer, who came up with the overall concept of the car that would please customers: what features to include, which to exclude, what innovation to use, which standards to reproduce. On the other extreme functional specialization ensured that every engineer was a true expert on the part under his charge: deep knowledge on narrow topics. Somehow, the balance between the Chief Engineer vision and the depth of functional knowledge produced cars that both satisfied customers and could be made reliably and relatively cheaply.

kaizen on the shop floor was a direct source of engineering standards all along. Toyota engineers were encouraged to “wash their hands three times a day,” Toyota-ese for spend time on the shop floor and see how their designs really worked in assembly. Uniquely in the business, manufacturing engineering became the dominant function in the company with manufacturing engineers rotating from and to the development centers and the factories, the Gemba where the production system met the development system. For engineers, the problem is not just “making the product right” but also, making the right product, which involves making sensible guesses about what customers value (i.e. are prepared to pay for).

Henry Ford once quipped that if he’d listened to his customers, they’d have asked him for a faster horse. Customers are notoriously unreliable when it comes to what they’d like or not like. Which is why customer satisfaction is a deep topic of study in lean. Although they have vague notions of what would satisfy them (and even vaguer ideas of what they’re ready to pay for), customers tend to exhibit stable preferences by segment. And the one preference Toyota has systematically banked on is peace of mind.

In the lean way to develop a new product, it’s the Chief Engineer’s job to get a hands-on understanding of what customers in the target segment will prefer. For instance, Mike Sweers, the chief engineer of the latest Tundra truck defines his job as: “First, we want to keep our reputation for quality, reliability, and durability for building that indestructible truck and making it fit American tastes and the American market. I'm just one customer, so I listen to the voices of all the customers, but that experience is the reason for bringing on an American chief engineer. And because I grew up with trucks and have always had trucks, I have a certain passion around making a truck that I'm proud to drive.”

 In designing the truck, the chief engineer chooses what to change to make it appeal more to customers (according to how he understands it), and as importantly, what not to change. In the Tundra case, the CE chose to stay with the existing powertrain which he considers the most competitive on the market, but made the truck slightly smaller to give it the best approach angle. Bumpers have been changed from a one-piece exterior assembly module to three pieces for easier and cheaper change in case of an accident, and so forth. In the end it’s an engineering gamble on value.

To answer your question, we are running on parallel tracks that must be reconciled, which is the hallmark of lean’s approach to product development:

  1. Understanding what customers prefer, not what they say they want – these are two very different things. The lean approach to customer satisfaction is an exploration of value: what do customers value in all products on the market, and how do we offer them best in class so that they prefer our product. It’s very different from the traditional approach of promising to customers what they say they want (In the truck case, always bigger and more powerful) and then under-delivering on many features of the truck in use. This mindset is reflected by Sweers following comment: “Our leadership in trucks is what we call "overbuilt," building indestructible trucks and giving our customers more than they expect. There's a lot of noise about what competitors' trucks can do, and the reality of what they actually do. My friends in Dearborn like to advertise their fuel economy, but they went from first in J.D. Power fuel economy satisfaction to last this year. Because they're advertising highway instead of combined fuel economy, their customers aren't achieving what they were promised. EcoBoost is being touted as a high-tech engine, but it really doesn't offer anything more than my current V-8 does. Consumer Reports says EcoBoost gets 15 miles per gallon, Ford's 5.0-liter gets 15, and my Tundra 5.7-liter gets 15.” History will say whether he’s making the right or wrong gamble, but the worldview is very clear and specific to lean engineering.
  2. Use engineering standards as much as one can: any new product is not built in isolation. It is the heir of driving experience of thousands of drivers. It has to be manufactured on a specific line, with other products. Lean in the factory is a machine to surface problems and come up with countermeasures. Many of these countermeasures will enrich an already immense library of standards. Creativity, in the lean environment is not free because standards must be respected. As a result, engineers need a clear idea of what is fixed and what is flexible. Customers’ expressed wishes are never taken at face value because they can easily conflict with existing standards. For instance, the decision to break the bumper in three assembly pieces probably required intense discussions with manufacturing engineering to prove that increasing work content (assembling three parts instead of one) was worth it in terms of customer preferences for ease of bumper change.
  3. Frequent product releases. Lean engineering is by nature rather conservative because of its bias towards upholding standards (which doesn’t stop from true innovation, such as the hybrid engine). On the other hand, customers tastes evolve quickly and we need to follow our customers. This apparent contradiction is resolved by a frequent product release in which only a few changes are made, as opposed to the traditional approach that tries to always come up with the all-new revolutionary product that will take the entire market. Frequent product release is made possible by the relentless drive for flexibility in the manufacturing process. New products can be built on existing assembly lines, rather than requiring the construction of a new plant. New features can be assembled with existing equipment because operators are constantly trained to handle change. In fact, customer tastes are followed more finely, because lean engineers aim to please the average customer, not the early bird outlier – that is where the core of the market is.

In the end, it’s about understanding customer preferences. I was on the Gemba with a firm that produces kid playground games (swings, slides, etc.). We were comparing the designs of this company with what the leader in the market, a Danish firm, offers. I learned that an important part of designing a playground attraction is the fantasy-like aspect of the object: children must feel they’re in a car, horse, etc., no matter how abstracted the design it has to click for them. As we compared various games, we realized we didn’t have a clear model of how to abstract features from a real object to come up with a working design. We also ruefully concluded that the market maker designs were probably better at it. This is the problem, in a nutshell: how do we understand the product feature well enough, and what customers prefer about it so that we offer something that they like better than what competitors offer? – even thought they often can’t verbalize it. Customer satisfaction depends on how well you grasp the science of value.

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