New Horizons for Lean Thinking

I often tell audiences that I collect questions, particularly ones I have to go away and think about. I also tell them I judge the quality of the audience by the quality of the questions they ask! Their questions are invaluable in studying a field where the practice of the pioneers is way ahead of the theory of the teachers.

Over the last month I visited seven large organisations doing very different things across Europe, all actively involved in lean. What struck me was how similar their underlying questions are. In many cases the answers lie in a deeper understanding of Toyota’s management practices, but in others it is up to us to explore where lean thinking principles can lead us. How many of these eight questions resonate with your experience?

1. How to convince top management that “good processes lead to good results’? That the most effective way of closing the critical performance gaps facing an organisation is by addressing the root causes of the broken processes or value streams responsible for delivering them. By building a robust business case to show how compressing the time through these value streams translates directly into better customer fulfillment, higher margins, freed up resources and cash, lower unit costs, less capital expenditure and new business opportunities.

2. How to improve the effectiveness of complex projects while at the same time increasing the productivity of scarce engineering and management resources? From Toyota’s experience we learn that daily visual management of the progress of a project, maybe coordinated through an Oobeya room, enabling teams to respond quickly to any slippage as it happens is a more powerful driver than less frequent gate reviews or any computerised scheduling system. Visual management is as powerful in the executive office as it is in engineering or on the shop floor

3. How to develop a common way of thinking and solving problems across an organisation? Toyota’s A3 reports lay the foundation for evidence based management using the scientific method by providing a common language for prioritising, planning and problem solving at every level of the organisation. It is also the way managers throughout their careers learn to think about problems in the right way, guided by questions in a dialogue with their superiors.

4. How to engage knowledge workers to create responsive and efficient service delivery organisations, in both the private and public sectors? This is about organising the customer interface around a problem solving dialogue and developing the capabilities of those who support them to respond quickly right-first-time to changing needs. It is also opens up new possibilities for managing the customer life cycle and integrating services to help customers solve their problems cost effectively.

5. How to work across departmental and organisational boundaries to free up cash, reduce costs and improve supply chain responsiveness? Someone has to take responsibility for surfacing the consequences of excessive lead times, demand amplification and optimising the pieces rather than the whole. This is the basis for gaining agreement on doing the right things and for sharing the gains and losses along the value stream. The knowledge gained is also invaluable in designing next generation products and the much more compressed value stream to deliver them.

6. How to manage patient journeys to reduce length of stay so hospitals can treat more patients safely with existing resources? This starts with a plan-for-every-patient and the visual management of the flow of patients from admission to discharge in a way that aligns the demand to get out with the demand to get into the hospital. This needs top management focus and a value stream management team to gain agreement from all parties, including support services, on the actions necessary to enable this happen.

7. How can lean help to redesign healthcare systems and the supply chains that support them? First by analysing alternative ways of organising patient journeys, co-management of ongoing conditions and care in the community without replicating the problems encountered in managing traditional district general hospitals. Second by dramatically compressing the lead times and costs in producing and delivering all the products and services through healthcare supply chains to the point of use.

8. How can our experience with lean help to design much more cost effective systems for making new products and delivering new services in the future? Lean opens up new ways of organising and managing the work of product development, supplier coordination, production and ongoing customer support. The challenge is to synchronise them in such a way that avoids the sometimes perverse consequences of today’s planning and costing systems. Eliminating unnecessary time and cost opens up new capabilities to work with customers using the web to solve their problems on a continuing basis much more cost effectively.

Thinking about these questions led me to search for those who can best answer them, not just from theory but from practice. I have invited them to share their answers and discuss their experiences in talks and workshops at our next Lean Summit on 2-3 November 2010 in Kenilworth, near Birmingham in the UK. My hope is that this will inspire all of us to follow their examples and show us the direction our lean journeys should follow. We will post the full Summit programme shortly on our web site. I look forward to seeing you there.

Yours sincerely
Professor Daniel T Jones

How Lean is your Organisation?

We are often asked to evaluate how lean an organisation ¡s. How far it has progressed down its lean journey and what its next steps should be. An obvious place to start is to go and take a walk through its core activities to see what they have actually done. This quickly reveals whether they have been able to go beyond lean tools and point Kaizen to make their value streams flow. Looking at their visual management also reveals whether line managers are actually using this to manage progress, to respond to interruptions and to record persistent problems for root cause analysis later. As you talk to employees you also quickly discover how many lean seeds have been sown and how many lights have gone on in their heads. In other words how many employees have been infected with lean, process thinking and would not want to return to the “bad old days” before lean.

But this is just the start. The main problems and obstacles in going lean are rarely on the shop floor but usually higher up the organisation in management. The shop floor is indeed a reflection of management. Here you also see whether top management just sees lean as a way of engaging employees in seeing and eliminating waste, by deploying lean tools right across operations. Or whether in fact lean improvement activities are being focused on closing the key performance gaps that are critical to the success of the organisation, by redesigning both the products and the processes that make and deliver them to customers.

Having defined the scope of the organisation’s lean ambitions we now need to look at their approach to change management. In most cases this will be defined by which consulting approach they used to get started. Who they used will be a good indication of where they are likely to get stuck on their lean journey. The 16 week model line approach is unlikely to last long after the consultants have gone as the organisation will not have learnt enough to replicate it elsewhere. The go to Japan trips to get religion and learn how to do Kaizen approach is also likely to run into the sand once the finance director begins to examine the costs. The repeat Kaizen week approach often goes hand in hand with an over reliance on outside experts so that the results are not always connected, sustainable or owned by the organisation.

Organisations have to develop the ability to build their own lean knowledge and examples as well as scouring for lean knowledge from elsewhere. This means getting as many experiments going in different pieces of the organisation as quickly as possible and then cross learning and building upon the lessons learnt. It does not, as we witnessed in one multinational, mean giving a team of high fliers at HQ a year to develop their one best way and to plan its roll out across the world. Lean is not a programme and has to be learnt by doing - and adapting to different circumstances and cultures.

So, realizing the full potential of lean means building a learning organisation on the one hand and a lean management system to drive it forward on the other But again beware, it is not enough for instance for the organisation to be doing policy or strategy deployment or using A3 analysis of its key value streams or teaching employees how to use A3 reports. It is the quality of the analysis, the decisions and the learning that emerge from them that really counts. Let us take each one in turn.

Narrowing down the critical root causes of the broken value streams that fail to deliver the required performance for the organisation is not easy. Deselecting the many other possible improvement activities in order to focus efforts on the vital few that will make the biggest difference to the organisation is even harder But without this a lot of effort is wasted and a lot of potential performance improvement is missed. The point of policy or strategy deployment is to align improvement activities across the organisation to solve the critical business problems facing the organisation.

Making Hospitals Work describes how a top team in a hospital go through such an analysis. In their case discovering that streamlining the flow of emergency patients and reducing length of stay is the way to meet government waiting targets, improve infection rates and free up capacity to do more and more profitable elective operations with the same resources. This is precisely the area most outside consultants are reluctant to tackle.

In exactly the same way we would look for evidence of similar thinking emerging from the policy or strategy deployment process. For example, whether a food processor recognises that making their high volume products every week in line with demand instead of in big batches to forecast every 14 weeks is the key to freeing up the cash by cutting inventories in their pipeline from 100 days to 10 and meeting all orders from retailers on time and in full. Or whether an auto parts maker begins to understand and tackles the excessive costs of its parts that travel tens of thousands of miles across the globe between its plants before finally reaching its customer some 40 weeks later

Optimising the pieces does not add up to optimising the overall flow of work. These examples point to a second key dimension of lean management, whether it takes an end-to-end perspective. Has someone been given the responsibility for gathering the facts and gaining agreement from key parties to improve the key end-to-end value streams? Do the metrics driving behaviour also include the performance of the value stream as a whole and is there a mechanism for surfacing and resolving conflicts between departmental and value stream objectives? Do managers have a way to see how to free up cash, reduce cost and save capital expenditure along the core end-to-end value streams?

Finally is the organisation really building an experience base in problem solving amongst its key employees? Are senior managers teaching their junior colleagues how to think through a dialogue as they build a robust A3 plan to solve a business problem? In a very real sense scientific problem solving is the foundation of lean, evidence based management. Perhaps the biggest disappointment we have come across is where employees and managers can’t clearly define the business problem they are trying to solve using lean. This is why the first question we usually ask is “What is your problem??”

Yours sincerely
Professor Daniel T Jones

A Remarkable Story

The most surprising and rewarding thing last year was seeing how lean is transforming the patient journeys through what is thought to be the oldest hospital in Europe, founded on the 23rd of June 1288! In the cellar of the Santa Maria Nuova e Bonifazio Hospital in the centre of Florence, Italy they still have the slab where Leonardo de Vinci carried out his secret dissections to understand the workings of the human body. This hospital also published the first manual detailing how hospitals should be designed and managed. La Tavole del Regolamento, published in 1783, was the bible for how hospitals should be run until modern times. Now they are one of the most impressive pioneers of lean healthcare.

Their lean story began six years ago when Luigi Marroni, a senior executive heading Fiat’s global tractor operations, was asked to become the Director of the regional healthcare system in Florence, his home town. From the beginning he told them lean would be part of their journey to modernise these ancient institutions. Six years later a thoroughly modernised interior is taking shape inside these beautifully restored historic buildings and his growing team of lean engineers led by Dr. Maria Teresa Mechi are transforming the way doctors and nurses work within them. They also have four other hospitals and the responsibility for the entire regional public health system, so they will be busy for many years.

What is so refreshingly different about their approach is that they look at the hospital as a whole organisation and understand exactly the importance of using lean to improve the overall performance of the hospital and its bottom line. But they also understand very clearly the importance of looking at the fine grained detail of how doctors, nurses and other hospital staff work together to progress patients through the hospital. And one of the first things they did was to organise and recruit managers (many of them clinicians and senior nurses) to run each of the major patient flows from end-to-end. Of course they did training sessions and workshops — but only in the context of the problems they were trying to solve.

The other important difference is that they scoured the world for lean knowledge and brought this back to develop their own internal lean capabilities, rather than relying on external consultants, which never lasts, to do a lot of the work for them. We met at our first Global Lean Healthcare Summit in 2007 and in subsequent visits discussed their early experiments with value stream organisation and management. But their progress really accelerated when they came to see the lean work done by the old miners’ hospital in Caerphilly in Wales and when they read Making Hospitals Work and attended our two day workshop, which explained the method Caerphilly used. They went straight back to Florence and implemented what they had seen.

They also decided to organise a public conference in Florence in December to raise awareness of lean healthcare across their organisation and across Italy. We brought a team of experts from the UK and were stunned to listen to story after story from doctors and nurses talking about their lean projects in the different hospitals in Florence and in other hospitals in Italy. The seeds of the right way to introduce lean healthcare have been well and truly sown in Italy thanks to their example. We look forward to following and supporting their efforts in the years to come.

I draw three lessons from this example and from other hospitals I visited around the world last year. First new ideas need new leadership. Without Luigi’s vision and his experience of what it takes to make lean really work in other circumstances, none of this would have happened. [n my experience clinicians and nurses have little problem with evidence based lean — indeed they see it as common sense. They often ask why management does not just make it happen!

However at least in the UK they have become used to initiative after initiative being consulted to death, to literally hundreds of new improvement projects being given to already overloaded staff to do in addition to their already overloaded day jobs and to management endlessly distracted by fire-fighting. At the same time managers who learned to play the highly political process of negotiating for the resources from the politicians and who are skilled at administering and policing the spending of these budgets do not have the skills and experience to run a service delivery business that must pay its way. New leadership from outside healthcare and probably outside the public sector is needed to break this impasse.

Second, all improvement work needs to start from a clear and shared analysis of the quality, effectiveness and safety problems which contribute to the cost problems facing each healthcare organisation, as well as an investigation of the root causes. Surprisingly this is not common practice. Ideally we would use evidence based medicine to define best practice interventions to eliminate variation and errors. We would also use evidence based lean management to improve the flow of work to eliminate delays for patients, wasted effort for staff and unnecessary costs for the hospital. But point improvements, whether to address quality problems or to lean parts of the patient journey are almost impossible to sustain in isolation.

Quality and lean are two sides of the same coin. They need to be used in tandem. We would use the scientific method for prioritizing which problems to work on, eliminating the generic root causes of these problems and carefully planning how to implement countermeasures that will stop the problem ever occurring again. We would also use lean principles and tools to link best practice activities into integrated patient journeys from initial consultation to discharge and beyond. We would use visual management to establish stability in the work flow, to see variances and to reveal problems. And we would develop the problem solving skills of staff through learning by doing.

Third the end-to-end patient journey, plus the key support processes, must become the focus of attention for management. Because so much of managers’ time is taken up with meetings and fire-fighting not enough of their time is spent on the front line seeing what is really going on (as opposed to what they think should be going on), unblocking decisions and actions that are holding this up and helping staff to resolve their own problems quickly. It can rightly be summed up in the Toyota mantra of “Go and See”, ‘Ask Why” while generating ‘Respect for People” trying to do a good job right first time on time.

Yours sincerely
Professor Daniel T Jones

Value Stream Management

As we emerge from the recession and look ahead old ways of thinking and action will not be enough to meet two big challenges ahead. The first challenge is the growing impact of the web in opening up the possibility of turning customers from strangers to partners. The more customers know about what they could have and the way products and services are produced and delivered the more demanding they are becoming. They recognise they have an increasingly powerful voice! And they expect providers to be able to deliver exactly what they want, when, where and how they want it and to significantly improve the experience of using these products and services while minimising the impact on the environment. In return they may well be willing to share their plans and to respond to suggestions from providers.

In retailing, the advent of home shopping revealed that at that time supply chains could only fulfil exact customer orders about 6O% of the time. While suppliers comfort themselves in thinking their service levels are close to 98% this turns out to be for orders they accepted, not what the retailers asked for! From the retailers perspective the suppliers’ ability to supply what the retailer wanted is often closer to 70%. This hidden gap can only be closed by rapid replenishment supply chains where suppliers make, ship and sell in line with demand within days and not months. A similar performance gap exists in every industry, if we look closely enough.

Second, sustainability and environmental issues challenge us to look end-to-end to find systemic as well as piecemeal solutions. Most supply chains, which are often 200 to 300 days long and involve products travelling thousands of miles before being used, will have to be redesigned on economic grounds quite apart from the need to reduce their carbon footprint. But so far progress in doing so has been disappointing, even though the opportunity for compressing supply chains in almost every sector is huge.

The root causes of this hidden performance gap and these elongated supply chains go right to the heart of modern management — the separation of thinking and doing between experts and workers and the organisation of activities in increasingly strong functions, departments and business units. We are recognising the potential of involving every single employee in continuously improving their own work. We are learning to see all the buffers, inventories, delays and handoffs put in place to insulate activities from the rest of the organisation but we are still reluctant to accept that point optimisation and improvement of our own activities is often at the expense of designing and optimising the end-to-end value creation process. As a result no one can see let alone cost these end-to-end flows, particularly when they share a common pipeline with many other products or services.

In short the biggest obstacle to meeting these new challenges is that functions, departments and business units have become too powerful and act in their own interests. And the countervailing power to articulate the voice of the customer and the voice of the organisation as a whole is too weak. Squeezing budgets to remain price competitive only delivers lasting benefits if we also change the value stream that delivers these products or services. Asking function heads to simplify their planning systems, simplify their product mix, build smaller simpler plants closer to customers and get rid of unnecessary warehousing space is like asking turkeys to vote for Christmas! It just will not happen, even if they are the right things to do for customers and for the organisation as a whole.

But the way forward is not about reducing the power of functions but about rebalancing organisations by introducing value stream analysis and management. The value stream manager and their team are critical to defining the problem or performance gap to be closed, establishing the evidence base across the value stream through stability and visual management, developing the ability to respond quickly to interruptions, gaining agreement from the key players on the right actions to improve the value stream based on the facts, resolving conflicts between departmental and value stream objectives and delivering win-win-win-win results for customers, employees, the organisation and the environment.

Over the last year we have learnt a lot more about the specific ways in which Toyota uses the scientific method to develop the problem solving skills of its employees. We will also learn a great deal more in coming years about how leaders at Toyota really use policy or strategy deployment to prioritize and focus everyone on improving the vital few, right things. But I think the only way we are going to learn how to make value stream management work is by conducting many experiments in different situations. The learning that results will be extremely valuable as we seek to design the management systems that will be necessary to create and sustain new systemic solutions to the challenges we face in the coming years.

I hope you have a very good Christmas and a productive New Year.

Yours sincerely

Professor Daniel T Jones

Learning to Work Together

On our trip to Japan to launch The Machine that Changed the World in 1990, the Chairman of Toyota, Dr Soichiro Toyoda, told me “The only competitors we really fear are the Germans, if they ever learn to work together”. I have used this quote many times since then to provoke and challenge German audiences. But I am coming to think this is a more profound comment about all of us that throws light on a fundamental threshold with lean practice that we ignore at our peril.

Indeed I think it is not an exaggeration to think that those who master the art of getting people from different perspectives to really work together to significantly improve performance or to solve a clearly defined problem will be the winners in the next decade. Turning a blind eye to these opportunities is not just because of the growing individualisation of our society but also because our modern management systems measure and incentivise departmental or business unit performance, on the false assumption that keeping every asset busy adds up to the optimum performance of the whole.

Time and again lean thinkers can demonstrate this falls way short of what is possible. I was reminded about this the other day when talking to a meeting of plant managers from a global multinational. Although they are making good progress with lean inside their plants, for instance reducing throughput time from 30 days to 4 days, they readily admitted that their supply chains were still between 200 and 300 days long. But that was the responsibility of another department!

It did not take long to demonstrate how it would be possible to reduce this 200-300 days for most of their products to 20-30 days, saving enormous amounts of cash tied up in inventories, plus the extra cost of managing them and the armies of planners correcting forecasts etc., quite apart from the capital saved in not having to build more capacity. I am also sure they could increase sales by responding to every customer on-time every-time with no invoice errors. We will see whether their top management has the vision to give the responsibility for achieving this to a value stream manager leading a cross-departmental team, and stand willing to resolve the inevitable conflicts between departmental objectives and the needs of the supply chain.

This is in principle no different from our current experiment making a value stream manager responsible for the door to door flow of emergency patients through a hospital. Yes it challenges existing management structures and behaviours. However in this case department heads and senior clinicians are becoming more convinced that this is the only way to link up lean improvement activities across the hospital to achieve their performance targets.

But beyond the discharge lounge of the hospital lies another challenge. Many patients need packages of care to be in place before they can be discharged. Yet this involves several different government organisations, who inevitably have their own interests and procedures. Getting these aligned is a major distraction for discharge nurses and a major reason for patients having to stay in hospital longer than necessary.

Many years ago there was a movement for “joined up government” that seems to have run into the sand. Yet I recently heard a great story from a group of local government agencies and departments who had linked up to address the growing problem of the long term unemployed in their area. With top management support they brought together a cross agency team which started by collectively defining the specific problem to be solved for this group, then looked at all the steps of the process of getting them the support they needed, and then how this would change the way they needed to work together across their organisations to deliver this.

In all kinds of situations lean can help cross departmental or cross organisational teams to define the shared problem or performance gap to be closed, it can help them to design the right processes to solve or close it and can help them focus the work of everyone involved most effectively using lean visual project management. This is the only way to break through the constraints of our current management systems and organisational boundaries and realize the full potential of lean.

Yours sincerely
Professor Daniel T Jones

The Lean Manager

Where can you experience what it feels like to be a lean manager and where can you learn about the personal and organisational changes involved in leading a lean transformation? Listening to the stories of pioneers can be inspiring and visiting lean examples can open your eyes. But for most ordinary folks that is rarely enough. Some of the toughest lessons are learnt from things that did not work.

We are all familiar with the lean tools and analysing and mapping value streams. More and more organisations are recognising that the crucial missing element that makes lean really successful is management. If managers don’t recognise the need to change the way they work and the way they lead then lean is doomed to fail. So the question is of utmost importance.

The answer is to be found in the most unlikely place! Over the summer I read several novels. But the one that stood out head and shoulders for me was The Lean Manager by Michael and Freddy Ballé. J read it from cover to cover, even getting up in the middle of the night to read it! Despite the fact that I had read some of the earlier drafts!

It tells a compelling story that I am sure every plant manager will relate to. A new lean CEO arrives and threatens to close the plant for very good reasons — costs are too high and they let their customers down on a regular basis. But the plant manager rises to the challenge and gradually, step by step wins the respect and support of the CEO to turn the plant round. But he has to learn to do it himself.

The novel is a great device and worth reading for the story alone. However what makes this truly powerful and will make you read it again and again is the wisdom and experience that lies behind it. Scattered throughout are nuggets and really useful checklists that summarise the different aspects of lean management.

This book is the first really comprehensive distillation of the transformation methods developed over the years by Taiichi Ohno’s own department at Toyota, which became the Operations Management Consulting Division, the guardians of the most advanced lean knowledge in the organisation. Freddy Balle, the father of lean at Valeo and several other French auto suppliers, is a lifelong disciple of OMCD and he and his son and author Michael have been reflecting on what they learnt from OMCD in helping many organisations since Freddy retired.

John Shook in a recent blog reflected that probably the most significant breakthrough that Toyota has made is in reversing Frederic Taylor’s separation of thinking and doing. Instead of giving experts at HQ the responsibility for developing and rolling out ever more complicated systems to manage greater complexity they recognised that the real prize lay in engaging everyone in the organisation in improving the processes in which they worked. Toyota calls this “developing people before making products” and “respect for people”. In other words turning every employee into a scientist, using the scientific method to analyse and improve their own work and how they work with their upstream and downstream colleagues.

A process or value stream that is tightly synchronised so that vaiue is createci with minimum delay and waste actually makes all the interruptions visible. It can only work ¡f the staff running the process have the ability to see what is happening so they can respond to it immediately and then over time improve the process by tracking the root causes of persistent interruptions. This in turn changes the role of management from fire-fighting to mentoring the skills of their subordinates and guiding them to think about the right things in the right way. This is the beginning of a very different form of management.

What The Lean Manager does so well is to illustrate why each of the old mental models about the way we manage that we all have in our heads do not work, including telling people what to do. It traces the step by step realisation that lean managers learn by acting their way into a new way of thinking. The lessons are tough but the results are very rewarding. This landmark book will I am sure become a valued guide for every lean manager.

Yours sincerely
Professor Daniel T Jones

Doing the Wrong Things

I used to think that physical assets — product designs, facilities and equipment, IT systems, supply chains and distribution channels — are the biggest constraints to progress with Lean. But not so. In truth the biggest constraints in most businesses are the mental models and decision making structures governing the behaviour of managers.

This is illustrated in their reactions to this recession. No question that cost cutting is a necessary response to the severity of this recession. But beyond that .... what? What I see happening is managers spending more and more of their time fire-fighting and taking knee jerk strategic decisions, like moving production to a low cost location. We now know this is likely to make things worse and not better. Why consolidate production of even more products in one more complicated plant and add expensive warehousing steps and inventories, instead of producing a realistic number of products in simpler plants close to customers in line with demand? So it goes — in short I continue to see many organisations continuing to do the wrong things.

Which results ¡n a growing inability of senior managers to really define the business problems facing the organisation — there are so many problems and everything is getting so bewilderingly complicated! This makes it even more difficult to correctly focus Lean value stream improvement activities on doing the right things in the right sequence to solve these problems. As a result there is a growing gulf between what managers do and the value stream improvements that would really make a difference to the business.

I walked through a plant recently and saw that it is now producing ten times the number of marginally different products to ten years ago. The true capacity of this shared production system is unclear — no one knows what it really costs to add a new product to the mix — and no one knows the amount of cash tied up in inventories, backorders, write-offs etc. that are a reflection of the way this shared production and distribution system is run.

During this walk I also notice only a hand full of people actually making things on the shop floor — and yet the canteen is full at lunchtime with all sorts of support staff! What do they really do? Manage and feed the IT systems they rely on to cope with this complexity! The predictable result is that they are constantly revising and changing every plan all the time instead of letting inventories absorb the volatility of the market, at least for the core products. Which in turn guarantees that everyone will spend most of their time fire-fighting to meet these new plans. I could go on with example after example in both manufacturing and services. I am sure you have your own.

This leads me to conclude that there is still work to be done to articulate the business case for a value stream redesign in terms of increased customer satisfaction, less complexity, lower costs, cash savings from lower inventories and often biggest of all the capital saved from not building that new plant or warehouse.

Turning these into money saved is one thing, but the most powerfui reinforcement of this message is when the key department heads take a guided walk together through the whole process to see the potential for themselves. Seeing the true potential and turning this into money is the first step towards seeing and doing the right things on the right processes to achieve the relay big gains that will underpin the survival and growth of the organisation.

Yours sincerely
Professor Daniel T Jones