Five Years into Lean

Five years of lean progress should be rewarded with a vision of how the organisation is going to use the new capabilities of their staff and their value streams to exploit new opportunities that competitors will struggle to follow. By then I would expect top management to be setting the direction for lean, middle management to be focused on streamlining their value streams and the front line to be deeply engaged in problem solving. At this point it should be possible to rebuild the IT architecture of the organisation to mirror and support their lean processes. Then it is time to look ahead.

Five years into their lean journey Tesco had already grown sales through better product availability, saved cash from less inventories, cuts cost from improved store and warehouse productivity and less wastage and saved £400m by postponing their warehouse building programme by four years. They then realised their rapid response supply chains could also supply local convenience stores at almost no additional cost to supplying its supermarkets, opening a whole new retail format now being copied by others. They also realised they could quickly establish national coverage for their home shopping channel tesco.com at little extra cost by picking orders in slack times in hub stores, instead of building dedicated fulfilment centres which its competitors were doing.

While the lean supply chain was the enabler, the vision for new ways of serving customers came from their intense focus and deep understanding of customer needs. In his outstanding new book Management in 10 Words Sir Terry Leahy describes how Tesco pioneered new ways of collecting data and opinions from its customers that drove its strategy. Through Customer Panels and analysing their loyalty card and home shopping order data they understand exactly who their most loyal customers are and what they buy, how their lives are changing and how well Tesco actually serves their needs. This in turn is leading to new innovations like mobile ordering systems in commuter stations, pick-up points and stock-less stores.

Amazon has followed a similar path, building on their web platform and their distribution system also modelled on Toyota's example, to expand well beyond books and consumer goods into industrial supplies. More recently they have been experimenting with pick-up points in cities and building local distribution centres to offer within the day availability to customers. This brings Amazon into direct competition with Tesco as the world of clicks and bricks converge. It will be fascinating to see what emerges from this contest. My guess is that it will be the organisation that best understands how customers' lives and needs are changing and is best able to flawlessly deliver on its promises.

This is just one example of lean capabilities opening new business opportunities in a sector where things move really fast. But even manufacturing businesses with long product cycles the next investment cycle provides the opportunity to radically rethink the design of the product and it's production system in the light of the experience of leaning the current generation. It is also the chance to reconfigure global supply chains to make and deliver products to customers in days rather than many, many months. The same is true for services like banking and insurance, where streamlining back office transactions processes is opening up the possibility of customising bundles of products and services for key customer groups and building a completely new relationship with them.

It goes without saying that all the existing lean activities need to continue and be deepened all the time. However if organisations are not also systematically learning from these to think about their future they are missing what is probably the biggest lean opportunity of all, designing new lean business models that will redefine their industry. The challenge is to think beyond existing assets and channels and the inspiration and direction will be spurred by an intense curiosity about their core customers and how to help them to create greater value in their increasingly busy lives.

Managing Horizontally as well as Vertically

Silos are a symptom of a deeper problem in most organisations. Getting rid of them is not the answer. Traditional management systems organise expert knowledge into vertical functions and departments and use these to allocate resources across the organisation. So does Toyota. However following Toyota’s example, lean organisations also manage the flows of the work (or value streams) that create the value customers are paying for. This is in fact the primary purpose of any organisation, and profits are the result of doing so efficiently and effectively. 

These value streams usually flow horizontally across many departments and even across several organisations. And they are supported by many other activities and support processes that enable this value creating work to flow. But all too often no one sees or is responsible for these end-to-end value streams and the metrics and systems are designed to optimise individual activities rather than the whole. In my view management needs to also learn to see the organisation as a collection of value streams and support processes – think of it as a fishbone diagram overlaid on the traditional organisation chart. The question is how to manage the vertical and the horizontal dimensions of an organisation at the same time. Matrix management is not the answer.

Some organisations have turned their organisation sideways, aligned around their core projects or value streams. However you only have to observe what happens in most construction firms that have been organised this way for years. While their project management is strong their vertical functions are weak and every project starts from scratch with a new team and there is little reflection and learning from project to project. The only way this horizontal structure works is if each function head also leads one of the end-to-end projects, so they can hold each-other hostage to manage the tensions between their vertical authority and horizontal responsibilities.

Some lean thinkers say all you need to do is to teach everyone to pull and gradually the value stream will emerge and the work will begin to flow. This “build the knowledge from the bottom” approach rightly focuses on developing a lean thinking mind set across the organisation. What it misses is the focus on the business problems and performance gaps the organisation needs lean to help to solve. A good sensei is always conscious of the end-to-end context so they can direct improvement activities to the right place. In my experience a lot of well-intentioned effort and support can be wasted if improvement activities are not focused on solving the root causes of the broken processes behind the business problems facing an organisation. “Top down” needs to mirror “bottom up” and be linked “end-to-end”.

Because value stream thinking has been woven into the mind set at Toyota for many decades it is not so easy to see value stream management in action there. But observe how Toyota establishes a team to design a fundamentally new car such as the Lexus and the Prius, where they are designing a new product and a new production system to make several generations of that product over time. The Chief Engineer for such a project carries enormous responsibility for the success of the product that emerges and the resilience of the production system, but paradoxically they have only a hand-full of staff reporting directly to them.

They have to manage by gaining agreement from function heads on the work that needs to be done and the resources function heads need to contribute to the project. They then have the responsibility for surfacing any conflicts between different metrics and targets and managing the execution of the project. So they have responsibility for the project while the function heads retain the authority over the resources to accomplish it. This is not an easy concept to grasp but becomes clearer when you begin to grapple with it. In fact together the Chief Engineers are effectively the “customers” for the resources from the functions.

Turning a set of separately managed activities into an integrated value stream is just such a project. In my experience value stream management is most effective when there is a win-win for all parties: -

• When the purpose is clear and top management has walked the process end-to-end and understands how unblocking the flow is the most effective way to close critical performance gaps and improve customer service.
• When value stream managers can support line managers in creating stability in their work and can direct improvement projects to unblock critical bottlenecks and address system level causes of instability that have big ripple effects on the rest of the system.
• When everyone in the value stream uses the same fact based, scientific method to understand the situation, diagnose root causes, plan and implement countermeasures and review and capture the learning. Value stream analysis is an ideal context for developing the A3 thinking of middle managers.
• When ativity at every point in the value stream is highly visual and the value stream team uses visual management to analyse, plan and frequently review their progress. The visual context is critical in driving collaborative behaviours.

Perhaps the most significant outcome of value stream management is that it reveals not only how to improve the current value stream but it also reveals the opportunities for designing very different value streams for the future, that are simpler, faster and more effective while using less capital and resources. The experience of leading a value stream makes them an ideal candidate to lead the project to design the value streams of the future.

 

Best wishes

Daniel T Jones

 

Reflections on the progress of Lean

Taking stock after two very busy months in the field, meeting people and talking at events and walking the Gemba through several organisations prompted five common reflections. 

First everyone is now doing lean with their own improvement teams. But my questions is can their management teams focus their lean activities on closing the vital few performance gaps that would make the biggest difference to the organisation’s future?

Second many organisations struggle to focus on the voice of the customer rather than the utilisation of their existing assets. Why not start by understanding the problem key customers are trying to solve and jointly analysing the processes they and you have to go through to do so? 

Third many organisations find it hard to look end-to-end at the horizontal flows of value creating work and to diagnose the systemic causes of waste within them. Why not start by mapping the core high-level value streams, observing the biggest delays and the sources and consequences of variability (which is usually generated by the way the system is run rather than by customers)?

Fourth few organisations have any skills or experience of working cross- functionally. Why not give someone the end-to-end responsibility for gaining agreement on what needs to be done to stabilise and then redesign the core value streams in a visual management context that drives collaborative behaviours?

Fifth central improvement teams struggle to sustain pilot projects and to attract top management attention. Maybe this means changing their role from “running lean” to mentoring and coaching line managers to solve their business problems?

Solving these problems means acting our way into new ways of thinking and takes time. It is also about recognising that the work of managers needs to change as much as the value creating work on the Gemba. Lean may have won the war but there is still a lot more to do to become the new common sense.

Yours sincerely

Professor Daniel T Jones

PS. You can view my latest attempt to condense lean into 10 slides at the French Lean Summit at www.leanuk.org . There you can also find a link to more video talks from the 2009 Lean Healthcare Summit on our YouTube channel. This is proving to be a valuable source for students to access lean knowledge, attracting 10,000 hits and counting.

PPS. The next UK Lean Summit will be held on 26-28 November 2012 at the Chesford Grange Hotel near Kenilworth, please reserve this date in your diaries, full details will be available shortly.

Assessing Lean Executives

Lean adds new perspectives to the traditional ways of assessing executive performance, namely Results and People skills, and adds a third process or value stream dimension. These mirror the purpose (results), process (means), people (learning) framework of a lean management system. The lean logic behind this is that you need knowledgeable people running tightly integrated end-to-end value streams and projects to deliver results that will be sustained. In other words, good people running a good process generate good results. This also provides the right basis for redesigning these products, value streams and business models to meet changing circumstances.

A lean assessment starts by gathering the facts by “going to see” the work executives are responsible for – by walking their processes with them, examining the way visual management is being used to run these processes and looking at the quality of the project A3s being undertaken. It also involves gathering the perspectives of everyone involved, including internal and external customers, followed by a dialogue with the responsible executive. This helps to answer the questions whether the management system is in place to deliver the results the organisation needs to achieve, whether management time is being used effectively and whether learning is being captured and shared. It also tells you a great deal about the way executives think, lead and learn.

The lean perspectives on assessing executive performance can be summarised in nine sets of questions: -

Which Results?

• Can everyone in the organisation relate their actions to the vital few performance gaps that would make the biggest difference to the organisation and its customers? How many projects are underway, are they properly resourced, what progress is being made against plan and have less important activities been deselected?
• Do managers regularly walk and analyse the core end-to-end value streams in order to focus improvement activities on the underlying causes of these performance gaps, rather than the symptoms, such as waiting and waste? 
• Are managers taking the necessary actions to use the freed up capacity, cash, capital expenditure, better customer satisfaction and faster time to market to generate additional sales and bottom line results?

What management processes?

• Is there a standard process for managers to visit their value streams on a regular basis to audit the visual management of plan versus actual, to review improvement activities and to unblock issues quickly in order to create process stability and drive the right improvement activities?
• Are value stream leaders responsible for the core end-to-end value streams that cross departments and for gaining agreement from everyone involved on the right actions and the resources required, and for reviewing progress and delivering the results? Is visual management being used to resolve potential conflicts and drive collaborative behaviours?
• Is management effectiveness improving? Are focusing on the vital few and deselecting projects, frequent stand-up project reviews and more stable value streams freeing up management time from meetings, firefighting and communication in order to spend more time on developing employees, improvement and innovation?

 

How much Learning?

• Is the practice of using A3s for making proposals, solving problems and making plans widespread? What is the quality of the thought processes and dialogues revealed by the portfolio of A3s being carried out and being supervised by the executive and their reports?
• Are learning and "ah ha" insights being captured at the end of every visual management meeting, problem solving and project review? Are these being systematically stored on an intranet so they can be shared by subsequent problem solving activities and projects?
• Are executives managing by "going to see" the facts, being knowledgeable by "asking why" and "respecting people" by enabling them to do their work? Are they leading by mentoring subordinates, setting clear directions and asking questions, rather than by telling people what to do?

This is truly a daunting set of tasks that demand a lot of new skills from executives and that challenge many of their mental models. They are learnt by doing and carrying out experiments, rather than in the classroom. In my experience executives struggle most with clearly defining the business problems to be solved, seeing whole value streams from end to end, separating the responsibility for managing these end-to-end value streams (the horizontal value creation processes) from the authority over the resources (the vertical dimension of management), and leading by asking questions rather than being expected to know all the answers.

Yours sincerely

Professor Daniel T Jones

 

P.S. Have you looked at our new web site yet with links to all the presentations from the UK Lean Summit on YouTube – www.leanuk.org?