Three Thresholds

Last month I had a very encouraging surprise — lean is spreading like wild fire across the public sector! What began several years ago in healthcare and defence is now beginning to transform many other departments delivering all kinds of services to the public. Some departments are just beginning their lean journey by discovering how lean works in their kinds of processes. Other departments are just moving beyond the stage where they need lots of support from outside consultants. But they all fired up as they recognise that lean is the only way they are going to be able to fulfil the politicians’ desire to deliver enhanced public services with far fewer resources in the years ahead.

However for this to become a reality t outlined three major thresholds they, and any organisation going lean, will have to pass. The first threshold is whether there is real evidence that lean thinking has taken root at the Gemba. By this I mean whether anyone visiting any place of work could see from the visual management boards the current state of the process, the problems being encountered today and what is being done to get back on track and the record of past problems to be prioritized and the subject of root cause analysis later.

Looking at the process itself, have staff actually created standard work for the main process steps and a standard management review cadence? And are local managers really using A3 thinking to help their staff develop their problem solving skills in analysing the root causes of problems and in planning a series of countermeasures to solve them. If these are in place then I have every confidence the process will continue to improve over time.

The second threshold is whether the organisation is able to work across functional and departmental boundaries to see and redesign their core end-to-end processes and to synchronise all their support processes with them. This is proving hard to do as well intentioned initiatives are frustrated by metrics encouraging every department to optimise their own activities, rather than optimise the process as a whole.

Cross departmental projects will Not happen unless a senior person is given the responsibility for the end-to-end processes — a value stream manager. Their job is to engage all the involved departments in agreeing the problem to be solved or the performance gap to be closed and to collectively collect the facts and map the process to establish where it is broken and why. They have to work by gaining agreement based on the facts of the situation rather than controlling the resources themselves.

To do this they also need to report directly to top management in parallel with function and department heads, so that the inevitable conflicts between the departmental targets and the needs of the process can be surfaced and resolved.

The third threshold is the way top management sets priorities for action across the organisation. The traditional bilateral discussion between the strategic needs of the organisation and the allocation of resources to departments to achieve them has to become a trilateral discussion. The first step is to turn high level goals into clear performance gaps that need to be closed.

The second step is understand that closing these performance gaps will not be achieved by simply squeezing budgets and leaving managers to meet their targets as they can. Instead these goals will only be met by using lean methods to redesign the core end-to-end processes and the enabling support processes. The third step is for the value stream managers to build a business case for the resources needed to accomplish this. This in turn provides the basis for a high evel discussion with function heads on how they will allocate their resources.

Yours sincerely
Professor Daniel T Jones

Lean Survival

Nothing will be the same again and no one can really predict what lies in store for us. However two things are clear First the wave of financial speculation that carried all of us along in recent years is now actually destroying real value created in the real economy. Consumers, businesses and governments are paying the price for all these financial games — and there is probably more pain to come. While we in the UK are now adjusting to our over dependence on the City, my hunch is that the rest of Europe will feel the pain later as the collapse in manufacturing exports gathers pace.

Second it is also clear that all of our customers will have significantly less money to spend in the foreseeable future because the tighter availability of credit, falling asset prices on which to borrow, dramatically reduced pension incomes, higher taxes and disappearing returns on savings, which are all forcing consumers still in work to significantly adjust their spending patterns downwards — by maybe as much as 30% for a long time to come. We have already seen the dramatic switch to cheaper products in the grocery market and the slump in the purchase of durable goods and cars, whose replacement can be postponed for a while.

But these reductions in spending will extend across the whole economy, including the public sector, as governments cut public spending as their ability to increase taxes is constrained by weak economies. Already some UK hospitals are facing big holes in this year’s budgets as their customers, the Primary Care Trusts, cannot afford to pay them for all the work they have already done. The next several years could well be worse not better.

The natural responses to this dramatic collapse in demand are aggressive across the board cost cutting programmes, fire sales of excess assets, wage freezes and short time working, switching to cheaper products and deep discounting of surplus products piling up in warehouses and airfields across the country. However necessary these might be these actions are unlikely to be sufficient to survive and prosper in this new environment.

The business problem that needs to be solved right now is how your organisation can learn to deliver roughly the same functionality to customers and still make a reasonable margin while selling your products and services for say 30% lower prices. And to learn how to make these adjustments in a matter of months and not years. I doubt any of us can wait for the purchasing power of consumers to return to previous levels — we now have to prepare for this new equilibrium between costs and purchasing power In lean speak this means adjusting to a new target price in the market.

On the other hand this is a once in a lifetime moment to redefine the basis of your business model and the social bargain with your employees to create the foundations for growing sales from this new baseline and hence sustainable jobs for the future. What is different about this recession is that most of us are much more financially literate than in the past, often owning our own houses and managing our own loans, mortgages, pensions etc. And we are all learning a lot more about the realities of business and finance as this crisis unfolds. This may make it easier to face the tough choices in an open and honest dialogue with your employees.

The only way I know to make an adjustment of this scale is using lean. Not as a generalised cost cutting tool but as the basis for fundamentally redesigning your end-to-end supply chains to meet this new maybe 30% lower target price for your products or services. If every grocery product was made, shipped and sold within a week as Tesco’s best supply chains do today the savings would easily meet this target. If every auto supplier’s supply chains moved from raw material to assembled product within a month instead of anything up to a year this would go a long way towards meeting this target. If hospitals could flow twice as many patients through their existing facilities as we know is possible this would meet this target. Similar improvements are possible in every sector of the economy if management could only see how to do it.

Moreover looking at the real end-to-end opportunities also reveals a lot of additional possibilities for doing more with your existing employees rather than firing them. Lean supply chains work because activities are closely synchronised with each other and are closely aligned with customer demand. Which may make in-sourcing the right strategy for the future, rather than outsourcing and extended global supply chains.

Yours sincerely
Professor Daniel T Jones

The Three Ps of Lean Action

Although purpose, process and people are the best way to summarise the core concepts of lean, the keys to effective lean actions are solving the right problems through reconfiguring the right processes by getting agreement and implementing the right plans. If any of these elements are missing then these actions are unlikely to be successful. Learning how to do all these three things well are the core competencies for an effective lean leader. Many managers get stuck on the first — defining the right problems to tackle.

We are I think beyond the wide and shallow deployment of lean tools, or Six Sigma tools for that matter, across the organisation. This is unlikely to be sustained or to deliver the ability to steal a march on your competitors through superior performance. This is putting the cart before the horse. The involvement of everyone in the organisation in continuous improvement activities only really comes into its own after the key value creating and support activities have been integrated into end-to-end processes, not before. Toyota never uses lean or quality tools across the board, only to solve specific operational problems disrupting specific processes from delivering the necessary business results.

A good place to begin framing the business problems to be solved, or performance gaps to be closed, is by asking senior managers what keeps them awake at night. This is just the start of a process of digging down to the underlying causes to be tackled. The common denominator behind budget deficits, missed access targets and recurring infections is patients waiting too long for treatment, staying unnecessarily long when they get to hospital and having to come back more often than they need to. Reducing length of stay is a key underlying problem to be tackled in most hospitals.

Waking up to the fact that your suppliers are bleeding because they are now sitting on mountains of unwanted parts as the market for your products crashes, brings home the folly of turning a blind eye to the fact that the lead times through your supply chains are typically 200 days or more. This is a great opportunity to rethink and to compress your supply chains so they can produce in line with demand with maybe a 20 day lead time. The business problems are different and will change over time but invariably a lean perspective leads to compressing time and hence ensuring that every step is performed right first time on time.

If you are to engage your employees in your lean journey then you also need to listen to their perceptions of the things that frustrate them most in trying to do their work. Often these are incredibly broken internal support processes like getting a change made to the IT system, hiring the right people, getting invoices paid etc. Tackling the most important of these will not only have a positive effect right across the organisation but will also signal that senior management is serious about its commitment to using lean to do the right things.

These business problems are only going to be solved by redesigning the processes that deliver them, which means their scope must ultimately be end-to-end from the initial trigger for action through to the end customer, whether this is an internal customer or the final consumer. Successful process design involves understanding the nature of the demand, seeing which products or tasks to focus on, mapping the process and selecting the right improvement actions to take with that type of process. There are now plenty of examples of every kind of lean process, from call centres through transactions processing, healthcare, process industries and machining and assembly.

None of this will happen unless someone, a value stream manager, is given the responsibility for gaining agreement from all the players on an action plan to close the performance gap. This means addressing and resolving conflicts between departmental goals and the needs of the process and using visual project management to carry out the plan. But above all it is about using this opportunity to deepen the diagnostic and problem solving skills of staff at every level by involving them in creating, implementing and reflecting on this A3 plan to improve this process to solve the business problem at hand.

Yours sincerely
Professor Daniel TJones

Leaning Your Boss

What do top managers need to learn to be able to lead a lean transformation? I get asked this question frequently. The answer is the same at every level of management. It boils down to three key things — learning to see the end-to-end processes or value streams they lead or contribute to, learning to prioritize and focus lean improvement efforts to generate real bottom line results and learning how people actually develop the problem solving skills necessary to sustain lean improvements over time. In each case understanding the true significance of these new skills only comes through experiencing them in practice.

One of the most immediate ways to teach senior managers how to really see a process is to take them for a walk with an experienced Sensei, starting with the end customer and walking back up the value stream as far as you can go. As they follow a product, a patient or a transaction all the way back upstream they will be shocked how many steps there are, how much rework goes on, how excessively long it takes and how unclear it is to everyone just what they should be doing next. This should be the trigger for a more detailed value stream mapping and data gathering exercise using the methodology outlined in Learning to See to flush out what is really going on.

But this is just the start. Back in the conference room after the walk ask the managers to describe what they saw during the walk and then compare this with what the Sensei saw. The managers will quickly realise they have only been looking at obvious symptoms of waste, such as piles of inventories, while the Sensei has been looking for the root causes of the instability and overburden causing all the waste in the value stream and the relatively poor performance at the end of it. Indeed managers are often shocked not just how oblivious they were of the process but also how blind they were to the causes of the way the process actually operates.

While this wake-up call is still fresh in their minds ask the Sensei to take them on a second walk to really learn to see what to look for in diagnosing what is wrong with today’s process and to see what the next steps should be. Do this on a regular basis along different value streams and at the same time the Sensei can introduce them to all the theory and tools step by step as they become relevant to the actions that need to be taken.

Once senior managers begin to see for instance how much cash could be freed up by streamlining core processes the next step is to work out how to go about releasing it. What actions in what value streams would release the most cash, if that is the key business objective? A second “walk” led by a Sensei would introduce Toyota’s policy or strategy deployment process, described in Ge fling the Right things Done. Step by step they will learn how to agree to only focus on a vital few business objectives or performance gaps that need to be closed and to deselect everything that does not contribute to closing these gaps (which is perhaps the hardest thing to do). They will learn how to conduct a dialogue with each layer of management right down the organisation to develop plans for the actions that will close these gaps. And they will monitor and adjust these plans as events unfold. In the process they will come to learn that good results come from good processes, not from issuing targets without an agreed method for achieving them.

Creating lean value streams involves progressively removing all the buffers that previously insulated every activity from any failures elsewhere. Although the performance of the process improves dramatically, so does its vulnerability to any kind of disturbance. Even in Toyota they assume that their lean processes will be continually subject to interruptions. So the key to sustaining these lean processes is the ability of the people running the process to respond quickly to interruptions as they happen and to track and eliminate the root causes of persistent problems. In other words developing the problem solving skills of employees at every level is at least as important as redesigning the value stream itself. This is why Toyota spends so much time training all their staff to think about planning actions and problem solving in a common way, using the A3 thinking process described in Managing to Learn.

So in Learning to See, Getting the Right things Done and Managing to Learn you have the basis for developing the initial insights top managers need to begin their own lean journeys.

Yours sincerely

Professor Daniel T Jones

A Recession Action Plan

A recession is a good time for lean. Organisations can either postpone lean and resort to traditional cost cutting, or they can accelerate and redouble their progress with lean. I doubt the former will last the course. But the latter stand a good chance of surviving and laying the foundations for future prosperity as they turn the tables on their competitors. There is no time to lose and no more time for excuses! So how should we make best use of this important moment? Here is my five point action plan for turning this recession to your advantage.

First correctly define the business problems you are trying to solve right at the top. In this case business problems are about closing performance gaps in order to survive and to take market share from competitors in challenging times. These gaps are now almost certainly bigger than they were. I recently asked the CEO of a large multinational why he wanted his company to go lean. He gave me a very general answer about rising input prices and squeezing margins. However the potential of lean is best understood in relation to specific value streams. 

So what are your main value streams creating value for customers and what are the key support value streams that enable them to flow? From examples elsewhere what is the potential for significantly improving their performance – getting new products to market in half the time, producing 30% more with existing equipment and no additional capital, meeting every delivery on-time and in full and with no invoice errors, responding to customer problems in hours rather than weeks, reducing length of stay in a hospital by half, compressing the supply chain from 200 days to 20, eliminating 80% of errors and effort to process approvals or payments in the back office, getting changes to the IT system in days rather than many months etc.? What improvements in which of your value streams with which customers and suppliers will make the biggest contribution to closing your performance gaps? What are your vital few projects – you cannot do everything?

Second give strong value stream managers end-to-end responsibility for each of these value stream projects. Their role is to gain agreement on the right things to do for their value streams from all the functions and departments involved who retain the authority over their resources). They also co-ordinate the implementation using all the lean visual project management tools and surface conflicts between functional and value stream objectives.

Third establish a Lean Council (like Toyota’s Quality and Cost Councils) of key function heads and value stream project leaders to initiate all cross functional projects, co-ordinate them, review progress and resolve conflicting agendas. They should also have responsibility for developing the lean experts to support these value stream projects and for spreading lean knowledge through networks of peers, workshops and an intranet data base of projects. 

Fourth prepare for the future now by getting a high potential group to think outside the box and make the currently impossible possible using lean. This means thinking back from the customer’s use of the product or service and exploring alternative routes to market. It also means challenging the design of the product or service, the right-sized tooling to make it, the right IT systems to run it in the right location with a co-located supply base. 

Fifth use these value stream projects to teach everyone how to see the right things to do using A3 planning. This is also a great opportunity to teach line managers how to use visual management to track progress in real time and to respond quickly to problems. It is also a great opportunity for line managers to develop the capabilities of their staff to diagnose and solve problems – by using A3 thinking. This means asking the right questions to help them learn rather than telling them what to do!

None of these steps are easy but they are all focused on solving the most important problems facing the business while developing the capabilities to sustain and significantly improve this performance into the future. This path will also begin to make sense of some of the apparent paradoxes of the lean management system pioneered by Toyota. 

Yours sincerely
Professor Daniel T Jones

Lean Action Research

Last month I concluded that simply overlaying lean tools and rapid improvement events on an existing management system using traditional change management techniques is unlikely to be sustainable. Indeed if we go no further than this there is a real danger that lean could well become another wave or programme of the moment that would inevitably subside like so many other waves. Consultants would inevitably look elsewhere for the next thing to sell their clients. Meanwhile the gap between Toyota and the rest would continue to grow and we would have missed a huge opportunity. 

I get asked to look at lean transformations in all kinds of sectors. And I come to the same conclusion every time – the crucial missing element that determines the likely success or failure is management and leadership. Tools and engaging employees in seeking out waste is not enough. Over the years we have spent a lot of time learning how to use the right lean principles in the right sequence to redesign value streams in all kinds of situations – from discrete assembly to process industries and from transactions processing to call centres and from grocery distribution to flows of patients through hospitals. Finally we are beginning to see lean breaking out of operations to true end-to-end value stream redesign. This is very powerful but even this is not enough. It is certainly necessary but it is not sufficient. 

So our challenge is how to describe and create a lean management system that goes beyond what we might call traditional modern management. We have all learnt a great deal from reading about and hearing first hand experiences of how Toyota’s management system actually works. This must be the starting point and the continuing reference point for such a journey – but there is still a lot of work to do before we have a functional equivalent and a lean transition path that will create the management behaviour and leadership roles that go with lean. We know this knowledge cannot be generated in a classroom or by desk research. It is also difficult to do through traditional consulting. The only  way I know to do this is by engaging in real experiments in real situations and systematically reflecting on what works and what does not. Jim Womack and I were fortunate in being able to observe experiments by others in writing Lean Thinking.  Now it is time to get involved in what I call lean action research. 

Lean action research goes beyond traditional consulting in its intent, its execution and in the reflections on its results. The clear intent of lean action research is to generate knowledge that can be acted upon by others. We can draw on Toyota’s example for our questions and hypotheses but the problem to be solved is how to make them operational in other organisations. This is very different objective to selling a repeat product to many clients to make as much money as possible. Yes it is more risky and top management has to sanction the experiments and be willing to learn from the results of both successes and failures. But if the joint intent is clear from the outset it can be a very powerful win-win for both parties. 

To generate real knowledge about what not only creates progress with lean but what sustains and builds on it over time the execution phase is also very different. Right from defining the business problem to be solved and scoping the experiment it has to be based on a mentoring and do-it-yourself approach rather than an expert led roll out. 

The final step is to reflect on the results and to write up the lessons from several similar experiments in order to make them public so others can act on the results themselves. Of course the host organisation for this lean action learning is interested in stealing a march on its competitors. What distinguishes the winners and losers is not the knowledge itself but the ability to act on it over time. Consultants will no doubt play an important role in disseminating these results but only if we are able to create self sustaining exemplar organisations to act as role models for others to follow. 

Yours sincerely
Professor Daniel T Jones

Changing Gear with Lean

I am convinced that it is a mistake to roll lean out across an organisation using traditional change management techniques. They may work for a while – but beyond a certain point they can become a hindrance to further progress. Just as we have to rethink the design of key processes and the role and behaviour of lean managers, so we also have to rethink the change management process to deliver lasting results with lean. 

This can be seen most clearly in the most active sectors embracing lean in the UK today – consumer goods, all kinds of service providers (financial, utilities, telecoms, IT etc) and the public sector including healthcare. All of these are well into the first phase of lean and face a big challenge if lean is to really make a lasting impact. 

The characteristics of the traditional change model are very familiar. Many of you will have used them to deploy Six Sigma through your organisations. Top management is convinced that the deployment of a set of new tools may improve the performance of their business. They hire outside experts and train an internal staff group to fan out across the organisation to identify and run as many projects as possible using one best way and probably with lean using week long rapid improvement events or Kaizen blitzes. The early results generate lots of good stories, and employees become truly engaged and enthusiastic as they identify and eliminate low hanging fruit in their areas. This builds credibility for the methods and techniques. All well and good.

But the flip side is not so rosy. Improvements are not so easy to sustain once these experts leave on another assignment, as they inevitably will. With only loose direction from top management it is difficult to trace the results from these islands of improvement to the bottom line or to better customer service. And no one really checks to evaluate the true success of these rapid improvement events. We recently did an assessment of a hospital that had done 93 Kaizen events. The success rate was less than 20% and none of these had impacted the core A&E process that really kept the CEO awake at night! No wonder they were looking for a change of direction. 

The next phase of lean starts with top management learning to see the vital few actions, on the right products and service lines and with the right customers that would have the biggest impact on the performance of the organisation. In the hospital getting the chaotic flow of patients through A&E under control is the key to establishing stability and a common rhythm across the rest of the hospital. From then on all improvement activities should be resolutely focused on just these vital few projects. 

These projects must also be end-to-end and maybe even involve key customers and be focused around a clear business problem or opportunity. This could be selling more product by marketing, planning, production and logistics working together to improve on-time delivery by producing and shipping more frequently in line with demand. 

Absolutely critical to the success of these projects is a cadre of lean value stream and line managers with the right skills to build agreement between all the involved parties on the right course of action and then to see it through. Because lean removes all the buffers between steps these lean project and line managers need to also spend a lot of their time  developing and focusing the A3 thinking and problem solving skills of employees running the process.

The core of a lean transformation model is the use of the scientific method to define key business objectives and to develop the planning and problem solving knowledge of employees. However unfamiliar the language it is right to think of lean as a series of controlled experiments. For any experiment you need to clearly define the (in this case business) problem you are seeking to solve, with a clear way of measuring success or failure. As well as identifying the root causes a good experiment will not just pursue one possible countermeasure but several. And most important of all you spend time reviewing, writing up and reflecting on the lessons learnt, successful or not. If we are honest none of these are common practice in business. 

Yours sincerely
Professor Daniel T Jones