Stop Using Lean to Cut Costs Part 2

As stated in Part 1 of this series, using Lean to cut costs, while popular, actually does not adhere with the original purpose of lean.  As described by  Jim Womack in the 1991 book “The Machine that Changed the World,” lean production described how Toyota produced products with little to no “waste” while simultaneously (and more importantly) bringing value to customers in a way that earned revenue for the company.  Another description from Kevin Meyer, Co-Founder of The Gemba Academy, states that “The goal (of lean) is not to reduce spending – since to do so means sacking valuable people – but to convert people's time and effort from wasteful activities to value adding ones – activities customers will pay for.” 

Previously, an example was given of a manufacturing firm using reduced throughput time to increase revenue.  However, one familiar critique of lean is that it is only valid in manufacturing environments.  This is not actually true, and to demonstrate, consider the following example from a web platform company.

This company was going from onboarding about 50 clients to their web platform in one month to about 350 in the next after they added a new sales channel partner.  The five steps in the onboarding process were largely manual.  When client volume scaled up this much this quickly, the employees got frustrated, felt overworked, unable to keep up, and were not getting their clients onto the platform as quickly as they needed to.
It was unclear, however, where in the Five-Step process were the real pain points.  A current state assessment including data collection and value stream mapping helped define the biggest issues.  This assessment highlighted that there was a big difference in the two training steps, the 2nd step and the 4th step.  In the 2nd step they were training clients on a five-clients to 1-trainer (5:1) ratio.  In the 4th step they were training clients on a 1:1 ratio.  It doesn’t take a rocket scientist to know that if you go from a five-lane highway down to a one-lane highway, things are going to back up.  But it was dramatic what the backlog actual was, since this had never been calculated.

WIP Backlog over 5-Step Onboarding Process

The data showed that there were 630 clients waiting at that fourth step, just waiting to go through that 1:1 training!  It would have taken approximately six years to get through the backlog at the projected pace of incoming clients.  Six years is an awfully long time to wait to be able to earn revenue from your web platform. Amazingly, though once this problem was defined, through discussions and review of the data, everyone became aligned about what to do for execution.

The easiest thing was to just increase the ratio of clients to trainer, 2:1, 3:1, 5:1.  Also to level load all the steps so there were the same number of training slots for each type of training, and cross-train all the Trainers themselves to be able to give both types of training.  They also added online self-scheduling for both initial signup, and when people cancelled at the last minute it was much easier to backfill spots.  After that, things started moving more smoothly and they were able to get through their backlog in just a few months and start earning Revenue.

Both this and the previous example from the manufacturing company followed a straightforward model which can help all companies use Lean to increase revenue.  AJC calls this the “DAER” model.

DAER Model; Copyright Andrea Jones Consulting, LLC 2017

First, Define the problem using data when possible.  Then, Align everyone to that problem and to the plan to execute.  Third, Execute the work – which is often straightforward if you’ve taken time to do the Define and Align steps well.  And finally – remember this is all about earning Revenue for your company. 

If your company is constantly using Lean to cut costs, you might not be all that popular with your employees.  However, if you can message Lean in the way it was originally intended – to increase value to your customers and Revenue for your company, this is a much more compelling purpose around which your employees can rally.

Read this article and more on AJC’s blog, and sign up for our newsletter online at: http://andreajonesconsulting.com/blog.aspx

Stop Using Lean to Cut Costs Part 1

Just last April, CNBC ran the headline that “Coke goes 'lean,' to cut 1,200 jobs as part of $800 million cost-savings plan.”  So many companies use “Lean” to cut costs, that lean has become a “four-letter-word” or “flavor of the month” in many businesses.

Interestingly, when Jim Womack coined the term “lean” in the book “The Machine that Changed the World” in 1991, he was describing how there was little to no “waste” in how Toyota produced products while simultaneously (and more importantly) bringing value to customers in a way that earned revenue for the company. 

This takes careful thought and preparation, and ultimately is inspired by the goal of earning revenue, not cutting costs.  When lean is done well, some costs may be brought down, but that is not the ultimate purpose. 

One great explanation is by Kevin Meyer, Co-Founder of The Gemba Academy who blogged, “The goal is not to reduce spending – since to do so means sacking valuable people – but to convert people's time and effort from wasteful activities to value adding ones – activities customers will pay for.”  Kevin describes how one method to increase the top line is to have additional capacity with the same cost base; to sell more product with what you have.  This can happen by reducing throughput time.

For example, Company X quoted a 6-week lead time to customers, and was not making this happen.  When asked about their actual average lead times, they did not have data to provide an answer.  Thus, data was collected for 30 products over the course of two and a half months.  It turned out that they had an average of a 7-week lead time, but interestingly, most of the time that each product spent in their production system was in waste.  This is not the waste of scheduling, motion, inspection, rework, or other non-value-add tasks that didn’t change the form, fit, or function of the product.  This was actually just the waste of “wait time.”  As in, 75% of that 7-week average duration, the product sat idle. 

Company X Value Add versus Wait Time

Again, in this chart every time the product was “touched” in some way, even just for scheduling, programming, staging, inspection, or rework, the time was considered “Value Add” and is shown in green bar.  Every time the product sat and did nothing, it is shown in a red bar.  With 75% of the time just WAITING, the company was able to implement a Pull System at the largest green bar – the bottleneck of machining the product.  They ensured that only when a small buffer, called a kanban, produced a “hole” for product staged in front of a particular piece of equipment, that was when upstream work would be done, or “pulled” to the equipment.  In this way, they were able to reduce almost 70% of the time spent on production. 

Production Durations Before and After Lean Process Implementation

Collectively, the shorter throughput time spent in production translated to improved cash flow due to sooner invoicing, improved inventory turns, improved equipment utilization, and overall increased equipment capacity which could then be spent producing more customer-requested products.  The other thing that Company X can do is offer better terms to customers as a competitive advantage, further increasing sales!  

All of these things increased revenue WITHOUT cutting jobs, reducing materials on hand, or even cutting out other traditionally “non-lean” steps like inspection.  Not a lot of “cuts” per se, but definitely a great result!

Many other companies have a similar story, but one critique is that lean can only work well in this way for manufacturing companies.  This, however, is not true.  Next time, I’ll give an example of how considering use of Lean (or Process Improvement) for a web platform company worked in much the same way.

Until then, read this article and more on AJC’s blog, and sign up for our newsletter online at: http://andreajonesconsulting.com/blog.aspx

How to Align Strategy and Execution

Strategy Deployment "X" Matrix Template

In January, AJC published an article on Strategic Planning and provided a helpful tool to be used in the process of determining what needs to be executed your business this year.  Since then, we realize that this tool is most useful when aligned with Long- and Short-Term Strategic Goals, fitting into the process of Strategy Deployment, or “hoshin kanri,” to use the lean vernacular.  Most of these steps can be documented in a simple one-page template called the Strategy Deployment Matrix, or X-Matrix, and the others use AJC’s Prioritization Matrix tool discussed in January, as well as AJC’s Implementation Plan template.

Here is the basic idea, to be done by a Leadership Team:

1.       Set the Goals and Objectives

Companies set long term SMART* goals – typically 3 years out, and align those to 1-year Objectives.  Specifically, articulate what needs to be done in the next 12 months to further the 3-year goals. 

*Specific, Measurable, Achievable, Relevant, Timely – google it!

2.       Prioritize Corresponding Initiatives

After goal setting, prioritize specific projects or “Initiatives” which will accomplish the 1-year Objectives.  These Initiatives are outside the realm of “sustaining” work, and are truly projects or initiating programs that will further the goals.  If the initiative is to institute a program which will become sustaining, there will be a point where the “creation” work is completed, and the program itself will become sustaining. 

The trouble with the X-Matrix, however, is that there are often too many potential Initiatives which could accomplish the 1-year Objectives aligned with 3-year Goals, and that it stops short of HOW these Initiatives will actually be accomplished.

2.1   Use the Prioritization Matrix

AJC's Prioritization Matrix Tool

This is where AJC’s Prioritization Matrix comes in.  After all, there are many ways to accomplish a goal, but not all can realistically be done given limited resources.  Remember, this is work that is above and beyond “sustaining” activities!  The point here is to ACCOMPLISH these things, not to burn out trying to do too much.  I once saw a company’s list of projects for the year – there were about 50 items in 8-point font printed on an 11x17 piece of paper.  They were 7 months into the year, and when I asked how most of the projects were coming along, they said they were late on every single one of them.  No big surprise there!

*Please read the Strategic Planning article for more details on the methodology using the Prioritization Matrix tool.

Some might think that the Strategic Planning work is now done – now we know what we need to do in order to achieve our short-term objectives which align to our long-term goals.  However, Strategy Deployment takes it two steps further, and AJC takes it another step even after that.

3.       Define Success Metrics

First, we define objective metrics which will indicate success or achievement of each initiative.  In some cases, these may be to meet schedule and budget goals.  Some metrics may be binary, such as to sign a new client over a certain dollar amount.  Some are process indicators, such as throughput time for new product initiation, which theoretically could increase capacity for handling a larger volume of new business and enable increased sales and therefore revenue.  Whatever success looks like for each Initiative, this must be measured such that we can determine if we’ve accomplished our Objectives.

4.       Assign Accountable People

Finally, each Initiative will be assigned a Primary and Secondary accountability lead.  The Primary is the Single-Point-Of-Contact, or SPOC who is ultimately responsible for accomplishing the Initiative successfully.  The Secondary is designated for two reasons: First, they take over Primary responsibilities as backup when the SPOC is traveling, on vacation, or sick.  Second, they act as a sounding board and advisor to the SPOC when determining the best course of action or for decisions which must be made during the course of executing the Initiative.

All too often, things are left undone, or timelines are prolonged simply because no one else is watching.  When Primary and Secondary leads meet regularly, and with the entire team as needed, Initiatives have a funny way of getting done in timely fashion.

5.       Create High Level Implementation Plans

AJC's Implementation Plan Template

The Strategy Deployment Matrix, and the helpful Prioritization Matrix, may now be complete, but AJC finds that this is not always enough to get the Primary and Secondary leads for each Initiative going.  In a Strategic Planning session that I facilitated a few weeks ago, the Leads were very concerned about HOW they should go about accomplishing their Initiatives.  AJC has developed a simple High-Level Implementation Plan template that allows the team to quickly list tasks, owners, notes, durations, and deadlines for each of the major steps involved in accomplishing a task.  While the Implementation Plan may be high level, meaning there will often be several subtasks associated with most line items listed, it is a great place to start. 

For example, if the 3-Year Goal is to get 3 new clients in the Top 10 revenue grossing client list, a 1-year Objective may be to have one client in that list, and 2 in the pipeline.  An Initiative to support that may be to Complete Sales Training for the Outside Sales team.  One task in that Initiative would be to Select Specific Sales Training Program.  That task will require the subtasks of research, comparison, discussion, decisions, logistical considerations, and signing a contract.  However, the high-level task is to decide who to use, and that is what goes into the Implementation Plan.

Get It Done

This process of Strategic Planning is not rocket science, and can be done by individual teams.  However, just like each Initiative needs designated Accountable Person, undertaking this process with your Leadership Team needs its own Primary Lead, and often involves including outside facilitation.

Read this article and more on AJC’s blog, and sign up for our newsletter online at: http://andreajonesconsulting.com/blog.aspx.

A Process for Disrupting Your Own Business Model

2017 LGO Alumni Conference

Last week, I attended the Digital Manufacturing Conference for the Massachusetts Institute of Technology Leaders for Global Operations alumni inside Chicago's Digital Manufacturing Design and Innovation Institute (DMDII). One key question that resonated was posed by notable speaker and author Professor Robert Wolcott of Kellogg: "What will happen to my business when people stop buying (whatever it is we are selling)?" How can companies maintain that entrepreneur-like sense of urgency and avoid resting on their laurels? Don’t let what happened to Blockbuster, PanAm, and Kodak, happen to you! Stay ahead of the curve and BE the disruptor to your own industry!

Dr. Wolcott provided advice on how companies can come up with these disruptive ideas, as well as how to select which among them to pursue. The most important foundational aspect, however, is to Open Your Mind to New Ideas, and be sure that everyone participating in this process is also open. There is a 10- step process for evaluating ideas, and considering constraints is part of the process itself (so don't let it stop you before you even begin!). Note that Steps 2-6 can be consolidated in AJC’s Prioritization Matrix, which was emailed to the Newsletter list last January. If you need another copy, let me know! AJC also has an Implementation Plan template as described in Step 10.

This effort is best undertaken with a professional Facilitator, and AJC is available to lead you through the process.

1. Select a subset of employees to generate ideas (and write them down) in multiple ways. Suggestions:
a. Attend an industry conference
b. Speak with customers
c. Research disruptors to your industry ALREADY occurring
d. Buy and use your competitors’ products
e. Talk to users of your competitors’ products
f. Use your own product as though you were a new customer
g. Write down various ideas which have been “kicked around the office” for a while
h. Watch some TED Talks

2. Gather the group together and Define the Selection Criteria
a. 3-5 aspects on which EVERY idea will be evaluated (Potential Revenue, Uniqueness in the Market, Ability to Address Customer Needs, Cost to Pilot, Fit with Brand, “Cool” factor, etc.)
b. Develop an objective numerical scoring system (e.g. 1, 3, 5) with highest number being most desirable

3. Write down all the ideas – Table the “Constraints” at this time!
4. Evaluate each idea against the Criteria, giving a numerical score to each
5. Multiply the numbers by each other
6. Sort Scores Highest to Lowest
7. For Top 10 Ideas: List Constraints (Time, Cost, Internal Know-How, Challenge to Convince Customers, Fear of Failure, Already available from competition, etc.)
8. Discuss Potential Customers: Are there are any customers who “just don’t care” about some of these constraints, ways that you can mitigate these concerns, whether there are clients for whose paint points these ideas would materially improve, or how competition will win if you don’t have this. Write all that down!

9. Pick 1-3 to DO
10. Develop written high level Implementation Plans for the top 1-3, listing owners and metrics and GET TO IT.

Use the Three Lenses to Analyze YOUR Organization

Image courtesy of MIT MBA Program blog

At MIT Sloan, one of the required “Core” courses is (or at least was!) Organizational Processes.  That is where I was first introduced to the framework of the Three Lenses.

The Three Lenses are: Strategic, Political, and Cultural.  They each represent a different approach from which to view an organization.  Each offers a unique perspective from which to assess how an organization behaves internally, and offers clues for leaders interested in effecting Change Management. 

The Strategic Lens

In the Strategic Lens, the viewpoint is one of structure and data.  This is the framework where Organizational Charts, hierarchy, Job Descriptions, and documented and Roles and Responsibilities are valued.  There are structured tasks and processes, and data plays a key role in determining not only desired results and Key Performance Indicators (KPIs), but also is used to drive decision making and new initiatives.  Organizations that value this tendency tend to have documented processes and charts, they collect and review data regularly, and will always discuss what metrics will prove whether a new initiative is successful or not.  Sometimes a young company or start-up will not yet have all of this structure formally in place, but they have articulated that acquiring this structure is something they wish to do, and they are actively working to create processes and establish data-driven decision making.  Questions which will help understand a company from the Strategic Lens are:

1.       Do you have a documented Org Chart, and is it up-to-date?

2.       Do all of your roles have written Job Descriptions that are accurate?

3.       Do most members of your organization know what their Roles and Responsibilities are, as well as those of others? 

4.       Do you keep up-to-date metrics on your business results (sales, financial, etc.), and/or your performance/processes (KPIs)?

5.       How often do you review these metrics, and who reviews them?

6.       Do you document your processes, and are they accurate?

7.       Do you have a Document Management System and/or formal document revision process?

8.       Do you use data to drive decisions, or do you typically collect data when doing something new?

Organizations with leaders and managers who answer yes to most of these questions, or strongly articulate the desire to be able to say yes and demonstrate actual activity toward achieving these states likely value data and structure, and both can be used to influence change in the organization.

The Political Lens

The word “Political” often carries a double meaning in today’s society, but in the context of the three lenses, it refers to the inter-relationships between people in an organization.  Is the organization one where knowing people helps get things done?  Who holds power, and is this due to official titles (aka Strategic Org Charts), or more subtle influence?  In my first real job as a Process Engineer, I remember being trained by the Technicians on the floor.  In an Org Chart, many people did not immediately recognize the power that floor workers hold, but when an engineer wanted test results quickly, it often helped to have friends on the floor.  Questions which will help understand how the Political Lens influences an organizations are:

1.       How does one get promoted at this company?

2.       Who all helps out when big projects need to be done?

3.       Who makes major decisions?

4.       When a crisis hits in a company, who all is involved?  Who completes work and who is informed?

5.       If a new initiative is introduced, who needs to be onboard before it is assured to take hold?

When many different groups or managers must be involved for things to happen, this speaks to a highly relationship-based organization.  Also, if multiple levels of the organization must be on board in order for “big project” work to get done or new initiatives to be truly adopted, this indicates that people at all levels wield power and must be considered when attempting change.

The Cultural Lens

Often the most nebulous concept to articulate in an organization, the Cultural Lens speaks to the very foundation and origination stories of an organization.  As a consultant, it is a constant source of interest and excitement for me to learn about the different cultures of various organizations.  Some are rigid, some are flexible, some light-hearted, some serious.  Regardless of the culture, however, it does seem that one must first learn what the history is within the company, and how to motivate change given that environment.  There is no “right” or “wrong” in terms of culture, there is only “fit.”  Some ways to determine what the culture is, which can then be evaluated against one’s natural style, are to ask the following questions:

1.       What is the origination story of this company?  How did it start?  Are the original founders still daily team players?

2.       What values does this company espouse?   (Ask many people: How well does the company actually follow these?)

3.       Why do people enjoy working here?

4.       What do people feel could be improved here and why?

5.       Do people talk freely about concerns, or are they mostly discussed behind closed doors?

6.       What are some success stories in the company, both with sales and internal operations?

7.       What are some “challenge” stories – things the company had to overcome – and how did that happen?

8.       Do colleagues often spend time together out of work, and if so, what do they do together?

There will of course be many more questions to consider to understand the culture of a company, and possibly it will be hard to learn these without direct experience working in and with the company.  However, this may be the most important of all when considering how to effect change in an organization, and certainly cannot be ignored.

Summary

Although every organization will display some of each tendency, it seems plausible that the Cultural Lens is the one which highlights whether a company is more Strategic or Political when it comes to decision making, and influential tactics will likely diverge from there.  The bottom line is that Strategy-driven companies need and feed off data and structure, but Political-leaning companies will likely base decision more on gut feel and who is behind certain ideas or initiatives.  This is definitely important to understand that before mounting any kind of campaign for change.

DISCLAIMER: This article is entirely based on my own understanding of the Three Lenses from my time at MIT Sloan, and does not necessarily represent exactly what the professors or Institution would state about them. 

Read this article and more on AJC’s blog, and sign up for our newsletter online at: http://andreajonesconsulting.com/blog.aspx

3 Ways Tribal Knowledge Can Cause Trouble

Companies often struggle with the lack of documented processes, commonly referred to as “Tribal Knowledge”.

Many of us have said, or heard others say, something like: “We have a ton of tribal knowledge; nothing is written down, and it seems that everyone does things differently.” Typically, company leaders feel that having too much “Tribal Knowledge” is a risk, and here is why: Win the Lottery (Hit by a Bus):  If the only person who really knows how to do something in your organization wins the lottery and abruptly quits (or “gets hit by a bus,” but I prefer not to use that one), no one else knows how to do whatever it is s/he was doing! Everyone Does It Differently:  When multiple members of a group or department all do things according to their own “tribal knowledge” methodology, the results can be as varied as the number of people in the group.  This may mean unpredictability in staffing for certain tasks, difficulty with information sharing and even problems in customer service. Hard to Scale Up: Young companies often tolerate tribal knowledge until they grow to the point that they must staff up to support the new pace of business.  When nothing is written down, steps may be missed and new hires become overwhelmed/unable to perform duties because the big picture is not clear.  If these concerns resonate with you, it might be time to document your Tribal Knowledge!  Getting started can be simple when broken down into manageable steps.  The next AJC Newsletter will list out these steps and provide a helpful template which can house your company’s first-ever attempt at documenting Tribal Knowledge. Sign up for AJC's Monthly Newsletter here!

Project Managers Don’t Need Their Hands Held

Project Managers, at least good ones, don't need their hands held.

Literal holding of the hands

Imagine this: You are an Engineering Project Manager tasked with creating a training for an outside vendor assessment program at your company.  The company has significant operating procedures around this area, complete with checklists and general guidelines and definitions.  The experts on how the assessments work now are the current senior engineering staff and their management at company headquarters.  The customers of the training are the new engineering staff at headquarters and other locations.  You need to get the training ready in three months to enable onboarding of several new engineers next quarter.

Which approach would be more appealing to your manager?
A) Asking for specific direction for each step: schedule, content, format, assessments, ongoing training
OR
B) Developing 2-3 options for each step and reviewing them at pre-agreed-upon milestones throughout the project

Now ask yourself:
Which of these aforementioned options sounds more palatable to you as the Project Manager?

In both cases, the answer should be B).  Develop the options and review at pre-agreed-upon milestones; competent Project Managers do not need to have their hands held.  Furthermore, it is frustrating to a PM's manager to have to hand hold; that merely uses the time of both people equally, and half as much work gets done.

Once I worked with a fellow consultant for a client where both of us were acting in the Project Management role.  He consistently would ask our mutual manager for advice or help - thinking that he was getting the customer's complete buy-in and therefore assuring full alignment on his project.  However, our manager confided in me that she was feeling inundated by his daily questioning and wished he could just take the ball and run with it - stop asking her questions as she was super busy herself!  She actually asked me if I would (discreetly) speak with him about it.

To be fair, this person was relatively new in his career, and really wanted to make a good impression.  He honestly had no idea that it was annoying to our manager for him to constantly be asking her questions.  I suggested to him that often the reason clients hire consultants is so that they can outsource the entire project and solution and NOT have to intimately deal with it.  We discussed the ideas presented here; of developing a plan and schedule, getting alignment to that, and then meeting to review and approve milestones with some options presented for feedback at each step. 

It was a great conversation, and this person immediately implemented my advice much to our manager's relief.

Sometimes, however, the issue is not with the Project Manager, but the PM's manager or trainer.  This person also needs to let go and allow the PM to do his or her job, even if there is some risk of making a mistake.  You train the best you can, and put in controls (second level reviews, team approvals, etc.) at high-risk or critical points of your process or project, but until managers really step away and allow PMs to run projects independently, they won't know whether the PM is competent or not.  In addition, constant micromanagement undermines the PM's self-

confidence, and erodes the possibility of coming up with an even better method which can be implemented across the board to improve everyone's performance of similar projects. 

Bottom line: Hand holding Project Managers is not good for either PMs or their managers, and can stymie continuous improvement and productivity.  Just let go.