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

Realizing the potential of Lean

We can now demonstrate that lean is the most promising way for hospitals to meet growing demand while budgets are being squeezed. For the first time Making Hospitals Work shows hospital leaders how to realize the full potential of lean. It provides a road map to link all improvement actions along the core patient journeys through every hospital — for the emergency medical and elective surgical patient — and to synchronise all the support activities such as imaging, pathology and pharmacy. It also provides clear evidence that this can over time simultaneously: -

• Ensure every patient gets seen in A&E within 4 hours.
• Treat patients referred for elective treatment within 8 days or at the time of their choosing, instead of waiting 18 weeks or longer.
• Improve the patient experience by eliminating unnecessary waiting time in hospital — reducing average medical length of stay by half and hence exposure to hospital acquired infections.
• Free up the time hospital staff spend fire-fighting and chasing things so they can spend more time caring for patients.
• Free up capacity (beds and staff) to treat twice as many elective patients with the same resources.
• While cutting the overtime and agency budget and saving capital expenditure and space.

No hospital has yet put all of these pieces of the system together, although many hospitals have begun by engaging staff in improving their own areas of work. Making Hospitals Work provides the agenda for the next phase — in which hospitalmanagement can see the scale of the opportunities and focus these activities toimprove the performance of the hospital as a whole.

The core method in Making Hospitals Work is the same scientific method applied to management problems that clinidans use to diagnose and treat medical problems. Think of it as evidence based management to complement evidence based medicine.

Making Hospitals Work is a call to action — to show every hospital how they can find their own path to achieve these results. Bring your team to the Lean Healthcare Transformation Summit on 10 July at the QEII Conference Centre in London to hear from the team that pioneered this approach and give your staff a copy of this book to develop your action plan to meet the difficult challenges ahead. Full details can be found at www.leanuk.org.

Yours sincerely

Professor Daniel T Jones

Lean Summer Reading

In the last year or two we have learnt more and more about what makes Toyota’s lean management system so successful. The emerging literature grows by the day and it is hard to keep up with it all. Someone asked me the other day what are the best books to read on lean management this summer. This is my list.

Thankfully many years ago Koichi Shimokawa and Takahiro Fujimoto, two leading Japanese academic experts on lean, conducted a series of unique interviews with Taiichi Ohno and his colleagues about the original experiments that led to the Toyota Production System. They are finally available in English in The Birth of Lean. Toshiro Norusawa and John Shook have collected some of the original training material used by Toyota in the original Japanese and English translation in Kaizen Express. It would be very good to compare this with the lean training material being used in your organisation.

Jeff Liker has done us all a great service by writing down the current Toyota management practice in his most recent book, Toyota Culture. And Satoshi Hino, a very astute Toyota watcher who worked for many years at Mazda, gives a really interesting view of what lies Inside the Mind of Toyota. Particularly fascinating are his observations on how Toyota brought together the lean knowledge developed by Ohno and others and the knowledge about quality they learnt from Deming. Toyota’s synthesis of the two still makes them the reference model for both lean and quality.

Learning about Toyota is one thing — working out what it all means for our own management systems is another. When John Shook worked for Toyota he discovered that Ohno based his training material on the Training Within Industry material developed for the US government during World War lito teach newcomers, often women, to replace factory workers who had gone off to fight. Jeff Liker tells the story on Toyota Talent, but it is really worth reading the original material. This is now available in Donald A Dinero, Training within Industry, and the accompanying TWI Workbook by Patrick Graupp and Robert] Wrona. Ohno saw how this combination of learning and doing in bite sized chunks was the most effective way for people to learn how to do lean. Ironically most US firms ignored this material after the war, which lay hidden for many years.

Probably the most insightful building block of lean management is the use of the A3 process to teach managers how to think about the right things in the right way. Durwood Sobek and Art Smalley’s describe this tool in detail in Understanding A3 Thinking. While John Shook’s Managing to Learn walks through the use of this process from both the teacher and the pupils’ perspective. As you read this tale you begin to understand how powerful and transformative this tool is for changing the way we manage. This tool is taught to every manager joining Toyota and forms the framework for every planning and problem solving activity.

One of the biggest challenges at the top of any organisation is to prioritise the vital few things the organisation needs to focus on and then to engage in a dialogue down the organisation to translate these plans into actions. Two excellent books describe how you can use policy or strategy deployment in your organisation are Thomas L Jackson’s Hoshin Kanri for the Lean Enterprise and Pascal Dennis’s Getting the Right Things Done.

If all this is a bit heavy going and your team learns best from telling stories then I still think The Gold Mine is the best lean novel around. Michael Salle’s sequel called The Lean Manager ought to be on everybody’s reading list this summer. Give it to your team to read on holiday and then use it for your study group when you get back.

Finally healthcare is one of the most active areas of lean at the moment. Follow the early steps of one of the pioneering lean hospitals in David Fillingham’s Lean
Healthcare and follow how a top management team transforms their hospital in our own new lean workbook by Marc Baker and Ian Taylor called Making Hospitals Work. That should keep you busy for a while. Happy reading.

Yours sincerely
Professor Daniel TJones

Making Hospitals Work

Two years ago we organised the first Global Lean Healthcare Summit in Stratford. This was both an inspiring and sobering event. We all glimpsed the huge potential of lean to improve the working of healthcare and also began to realise how much hard work it would take to make this a reality.

For our part we quickly concluded we would have to roll up our sleeves and conduct our own experiments to learn what it would take to create a truly lean hospital. Two years later after deep involvement in two hospital transformation projects in the UK we have produced our own progress report in the form of a new lean workbook called Making Hospitals Work: How to improve patient care while saving everyone’s time and hospitals’ resources. We hope this will set the scene for the next phase of the lean healthcare journey.

Experience in other sectors tells us that the power of engaging staff in rapid improvement events has to be seen within the context of the end-to-end patient journey through the hospital and beyond, and by looking at the work done by the many shared resources used by each clinical pathway. Our action research led us to focus on two important value streams followed by patients admitted to most general hospitals, the emergency medical and elective surgical value streams from admission to discharge, plus the key enabling support activities.

It also became clear that an end-to-end perspective has to be led from the top, in a way that complements and focuses bottom-up improvement activities. This workbook outlines the A3 method our fictional top management team uses to define the core problems facing the hospital, to learn to see these value streams and analyse where and why they are broken, to come up with the possible countermeasures and create an overall action plan for realizing a future state for these value streams. It also introduces the role of the value stream manager in gaining agreement from each of the departments on the right actions to take.

The A3 planning process used in the workbook follows Deming’s ‘Plan, Do, Check, Adjust’ cycle that is used by Toyota for planning and problem solving at every level in the organisation. This is the same scientific method applied to management problems that doctors use to diagnose and treat medical problems. Think of it as evidence based management to complement evidence based medicine.

This book draws on practice rather than theory. We have tried and tested all the building blocks described in this workbook ¡n isolation and in combination and we know they all work. It also describes how lean tools have to be modified for a situation where the patient is at the same time the ‘product’ being diagnosed and treated and the customer experiencing the process.

Over time it is quite possible to eliminate unnecessary waiting time for patients, remove the overburden on clinical staff so they can spend more time caring for patients, while freeing up the capacity to treat more patients by significantly reducing length of stay. It confirms that lean is the most promising way for healthcare systems to meet growing demand without escalating costs.

John Toussaint from Thedacare described the book as ‘entertaining, sobering and inspiring” while Jack Billi from the University of Michigan and David Fillingham from Bolton said ¡t is a “must read for healthcare leaders”. We will bring together the team to launch this new workbook at the one day Lean Healthcare Transformation Summit on 10 July at the QEII Conference Centre in central London. Please take a look at the Summit agenda and details of the contents of the book on our web site at www.leanuk.org (or ring LEA at +44 1600 890590) and bring it to the attention of your colleagues and senior management team. I hope you enjoy the book and can join us at the Summit.
 

Yours sincerely
Professor Daniel T Jones