Science and Lean Transformation

We have just begun to post the videos of the presentations at our Lean Summit 2012 on our YouTube channel to share them with the wider lean community. The first two videos are of my opening presentation on Science and Lean Transformation and my closing speech summarising the lessons from the Summit. We will post the rest of the plenary talks in the coming weeks.

The opening presentation argues that Toyota’s example creates a new basis for managing by science. Lean has a much sounder empirical foundation and goes considerably beyond Frederick Taylor’s Scientific Management or modern management’s attempts to correlate strategy and leadership with performance. 

What distinguishes lean practice is that it focuses on customer value and not just investor returns, on the horizontal value creation process as well as the vertical deployment of knowledge and the allocation of resources, and on engaging everyone and not just a few experts in solving tomorrow’s problems.

The latter point entails a very different transformation process than the traditional expert-led training and consulting model. Lean is learnt by solving business problems in their specific context, by developing the capabilities of line managers and their teams to unblock the flow of value creation, with leaders giving clear direction and support. The objective is not simply to solve today’s problem but in so doing to develop the capabilities of the team to solve new problems once the teacher has left. 

The underlying purpose of lean is the systematic use of the scientific approach by every employee every day. This is what Toyota means when they say “we make people before we make cars”. This raises new challenges for managers used to hiring experts to solve problems for them and it challenges lean folk who are drawn to “professionalising” and “certifying” their knowledge of lean tools. Lean practice evolves through carrying line responsibility and through coaching and mentoring the capabilities of employees. What is common is the scientific thought process that can bring different perspectives to very specific business situations.

It also raises big challenges for the lean movement. A true scientific approach starts with reflection on what is currently known as the basis for framing the next step of questions about what is not yet known. If we are to deepen our knowledge of lean we need to initiate, mentor and reflect on many experiments to address these questions and learn from the results. Rather than seeking universal laws through correlating the use of tools with business results, where science can help is in understanding the learning-by-doing process which will in turn build the capabilities that lead to superior business results in diverse circumstances. As long as we are interested in framing the next set of questions there will be a healthy future for lean.

Further Lean Summit presentations will focus on lean leadership, Gemba management, the Hoshin strategy deployment process and the practice of learning through Kata. You might also be interested in three books featured in my talk; The Management Myth by Matthew Stewart, which exposes the lack of any empirical evidence behind scientific management, The Halo Effect by Phil Rosenzweig, which demolishes attempts to correlate leadership and strategy with performance and Ignorance by Stuart Firestein, which is a wonderful restatement of the purpose of science. You might also look at my summary of Lean in 10 Slides.

Yours sincerely
Professor Daniel T Jones

PS. We will be discussing all these issues at our Sharing Day in Caridff on 18 April. This is a unique opportunity to share stories of your lean journeys and discuss your next questions and challenges with a distinguished panel of lean experts, including Mark Reich, COO of LEI, and other lean practitioners. I look forward to seeing you there.

New Leadership and a New Mission

After ten years leading LEA (and another ten years leading LERC before that) it is time to pass the baton and redefine our mission. At the LEA Summit in November last year we announced that Dave Brunt would assume responsibility for leading LEA as our new Chief Executive. Daniel Jones will continue to actively support LEA as Chairman and Senior Advisor, but with more time to mentor, reflect and write on the progress of lean and future challenges.

Dave worked very closely with Dan over the last twenty years on all kinds of assignments. Dave organised the last UK Lean Summit and is part of the core team that has been rethinking the mission of the Lean Global Network. His pioneering work mentoring Toyota car dealers in Portugal, Norway, South Africa and elsewhere helped them win the Lean Prize in Norway and is finally being recognised by Toyota itself! He is the author of Creating Lean Dealers and a contributor to Seeing the Whole Value Stream. He has also been coordinating the development of a Lean Leadership Programme for LGN and is one of most experienced coaches in the use of A3 thinking in Europe.

This transition mirrors the change in leadership at the Lean Enterprise Institute in the USA, where John Shook took over from Jim Womack and has since been joined by another seasoned Toyota veteran Mark Reich. LEI’s mission has also changed to engage in experimental projects with pioneering organisations seeking to take lean to new levels. In doing so they are working more closely with the Toyota Production System Support Centre (previously TSSC) and a network of ex-Toyota alumni.

The mission of the Lean Global Network is to take responsibility for advancing lean thinking in order to improve the performance of organisations and raise living standards while minimising resource use and environmental impact, and to provide more fulfilling work and continuing development for employees while enabling consumers to create more value in their lives. This is achieved by developing the capabilities of every employee to use the scientific approach in solving the business problems that will create value for consumers, for the organisation and for society at large. LEA will therefore focus on Learning through co-learning projects with organisations, Educating through mentoring, coaching and training trainers and Sharing through Summits, our Lean Community and publications.

The Sharing Day in Cardiff on April 18 is the first new initiative by LEA to create a community of advanced lean practitioners in the UK. It will be a unique opportunity to share experiences of what works and what does not in deploying lean and to get feedback on burning questions on the next steps with lean from very experienced practitioners including Mark Reich from LEI (ex-Toyota USA) and Kevin Robinson and Mark Davies from the Toyota Lean Management Centre in UK. Dave is organising this event in collaboration with Dr Nick Rich, who is leading the new Centre for Lean Enterprise Applications and Research (CLEAR) at Cardiff Metropolitan University. We look forward to a very productive and inspiring day and hope you will join us.

Dave Brunt, Chief Executive and Daniel Jones, Chairman

Lean Enterprise Academy

P.S. Full details of the event and guidelines for submitting your story and questions are on www.leanuk.org. Please bring this to the attention of your colleagues.

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?

 

 

Closing the Healthcare Performance Gap

Around the world healthcare organisations are being challenged to do more with less resources. In the UK the NHS is trying to find £20 billion in efficiency savings. Can this be done without reducing services to patients? After carrying out experiments in numerous hospitals in several different countries we can now see how lean can help to close this performance gap in healthcare, as lean has done in many other sectors. 

There are two approaches to lean - the bottom-up involvement of front line staff in continuous improvement activity and the top-down use of lean to close critical performance gaps. The weakness of the bottom-up approach is that the many islands of improvement are never joined up to deliver hospital-wide gains. The weakness of the top-down approach is that it fails to address the end-to-end patient journey or to reach down to the front line. 

Combining the two approaches is a winning combination for all parties - less hassle and unnecessary waiting for patients, more time for staff to spend caring for patients and freed-up resources for management to use to meet the challenges facing the organisation - to for instance reduce waiting times, to take on additional elective work or to close excess capacity safely. One of the best examples can be found at the HSJ’s Best Acute Trust of 2010, Calderdale and Huddersfield NHS Foundation Trust, which has reduced medical length of stay by 30% to one of the shortest in the NHS, while also closing two wards last winter. Other hospital pioneers around the world are now following their example.

The first step is to recognise that patient demand (both for admission and discharge) is in fact very predictable, even for emergency patients. Our research shows that much of the apparent variability, including the so-called "winter pressures", is caused by the way internal and external resources are scheduled and compounded by the close proximity to the financial year end, not by patients or the seasons. The second step is to follow the elective and emergency patient journeys all the way to discharge. Typically over 25% of medical patients are medically fit for discharge but continue to block beds for several days. Unlocking this entails re-thinking the way that the work on the wards is planned, the timely delivery of the support services patients need to be able to leave and working with outside agencies to prepare nursing home beds, care in the community or financial support ahead of time. 

The essential building block to manage these patient journeys is a Visual Hospital board where the status of every bed in the hospital is updated every two hours. This makes the "demand to get out" visible, triggers the necessary discharge actions and signals the need to match capacity with changes in demand. The second building block is for the core medical staff to develop and make visible a plan for every patient, detailing what is expected to happen and when during their stay all the way to discharge and that is updated daily. Synchronising these plans makes the work to be done and whether it has been completed clear and visible to all staff. Finally someone has to be given the responsibility for managing the patient journeys across many departments from admission to discharge. Their job is to see that today's work is being done as planned, to unblock disruptions and to gain agreement from all concerned on what needs to be done to improve these patient journeys. Without these foundations, hospital performance is unlikely to improve.   

Putting these building blocks in place, focusing improvement activities and turning freed-up capacity into bottom-line savings is the responsibility of top management. But in our experience NHS managers are locked in a viscous circle that distracts them from doing so. They are continually responding to new policy initiatives from central government, which can translate into over 500 live projects chasing 350 or more targets in a typical organisation The endless rounds of meetings to prepare these project plans, review them and then explain why, on top of an already overloaded day job, they were not completed eats up all their time. We call this the "Bermuda Triangle" of management in the NHS. This makes it impossible to support managers improving patient journeys or to focus efforts on the vital few actions that will make the biggest difference to the performance of the organisation. As long as this viscous circle continues, managers will struggle to realise any efficiency savings. 

This viscous circle also explains why so many well intentioned initiatives to reform the NHS from the centre have run into the sand and failed to deliver performance improvements. Although these initiatives are often hijacked by vested interests, the core problem is that there is no effective mechanism for translating them into action. This is often made worse by periodic structural reorganisations that further distract managers and their staff to worry about their job security rather than improve hospital performance. 

A period of stability in which hospitals and commissioning bodies can work together to align demand and capacity with the available resources and remove sources of unnecessary variability in the healthcare system is the key to escaping this viscous circle. Foundation Trust status is improving hospitals' ability to manage their own finances, but the next step is to create the operational management to improve patient journeys and reduce unnecessary length of stay. Once hospital management begins to see that this is delivering results they will have the confidence to deselect the many other projects that consume valuable resources but do not contribute to improving healthcare
performance. 

Join us to hear this story first hand at our Lean Summit 2011

Yours sincerely
Professor Daniel T Jones