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In an article entitled "CIOs need to re-brand themselves as drivers of digital innovation, says EY's David Nichols,"* Brian Taylor (writing at TechRepublic.com) brings out some important points. He begins by saying, "The role of the CIO is starting to look a lot like a business strategist."English: Cover to Capt. Billy's Whiz Bang, Apr...

 

Over the years, as we have worked with an array of small to mid-sized business enterprises in a number of different industries, we have been trying to make the point with our clients that everyone in the business--from the production floor all the way down to the CEO--should be in the role of "business strategist."


Of course, this assumes that the role of the "business strategist" is to find ways to help the company make more money tomorrow than it is making today! When the CIO--or, technology, in general--is involved, we call it "Turning Gee-whiz into R.O.I."

 

Return on investment (R.O.I.) is what most business owners and investors are after, we think.

 

Few enterprises anywhere in the world have been more consistent or more successful at producing profits in good times and not-so-good times than Toyota. They have achieved success that dwarfs the Big Three automakers in the U.S. Since sometime in the 1980s, Toyota's market capitalization has been more than the sum of the market capitalization of the U.S. Big Three combined.

 

Furthermore, for more than three decades, Toyota has produced profits with consistency while the Big Three in the U.S. have had extremely unstable profits and eroding capital over the same period of time.


MAKING EVERYONE A "BUSINESS STRATEGIST"

 

How has Toyota achieved this stability and success?

 

Well, as with most things, there are many factors involved. However, it is clear that Toyota places high value on the input managers and executives received from their production-line workers. Workers are encouraged to innovate and find ways to slash away at any work effort that does not add value to the product being delivered to the customer.

 

Toyota managers and executives firmly believe that no one knows more about the machine--any machine or any system--than the one who "runs" the machine.

 

Workers in the Toyota Production Systems (TPS), whether implemented in Japan or in the U.S. plants, are encouraged to stop production and call for immediate review by managers and team members any time they identify something unusual--not fitting the standard--affecting the flow or work. (It is a fiction that such stoppages halt the work throughout the plant. Typically such stoppages only affect a small portion of the whole plant, unless the stoppage lasts more than a few minutes or, in some cases, up to several hours.)

 

The goal, in the TPS "meeting" that occurs when a worker halts production is not "firefighting" to get things running again--as it is in most U.S. facilities. Instead, the focus is two essential matters: 1) identifying as quickly as possible what went wrong at the 'root' of the problem, and 2) figuring out what steps should be taken to prevent such an occurrence ever again.

 

This calls for the quickly assembled team of managers and production workers to become "business strategists" in the very best sense of the term. They must think, not tactically about how to put the "fire" out, but strategically about what steps should be taken--or, at least, initiated--to assure that quality remains undiminished and the flow of product to their customers is not stopped (or even slowed) by such occurrences.

 

What is the ultimate focus of every worker or manager participating in the team that assembles to see what went wrong?

 

Throughput--the continuous flow of product from raw materials to finished product through many value-added steps with as little waste as possible through non-value-added activity.


THE RESULT

 

What is the result of this for Toyota?

 

Toyota is able to produce a greater variety of products with higher quality and at lower cost than its competitors. It is able to bring new models from the drawing board to production in far shorter time than any of its U.S. or European competitors. And the workers on the line have a better sense of who their customers are and what their customers desire in product and experience of ownership than any of the line workers at the Big Three here in the U.S.

 

This demonstrates clearly, in my mind, how the Toyota Way makes every employee a "business strategist," and how doing so produces better and more consistent products--not just year after year, but decade after decade. Most U.S. companies can only dream of such stability and success.


APPLYING THESE PRINCIPLES

 

We are convinced that, when we help small to mid-sized business enterprises begin to apply these same principles and they also begin to create for themselves a process of ongoing improvement (POOGI), these companies with whom we work will become more stable and more successful.

 

Additionally, if these firms will work extend these practices up and down their supply chains, their supply chains will similarly experience greater stability, lower risk, higher profits and improved ability to bring products to market faster than competing supply chains in their industries.

 

So, don't stop at turning your CIO into a "business strategist." Take steps beginning today to make everyone in your enterprise a "business strategist." Get them all involved in reducing risk, improving throughput, and help your profits increase and stabilize.

 

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We would be delighted to hear your thoughts on this topic. Please leave your comments here, or feel free to contact us directly, if you'd prefer.

 

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* Taylor, Brian. "CIOs Need to Re-brand Themselves as Drivers of Digital Innovation, Says EY's David Nichols." TechRepublic. TechRepublic.com, 15 Apr. 2014. Web. 17 Apr. 2014.

 

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When we meet with executives, business owners and management teams for business consulting /$CHAIN weakest link_C[7].jpgrelated to Lean and Theory of Constraints implementations in order to establish a POOGI (process of on-going improvement), we frequently discover that these folks have been trying for some time to find and apply just the right KPIs to motivate their employees and achieve higher CHAIN weakest link_C.jpgprofits. However, almost as frequently, these managers and executives have discovered that they have, in the long run, been about as ineffective in making progress toward achieving stable and improving profits as “baseball managers trying to coach their team by looking at the scoreboard”—a phrase used by Peter Senge in his foreword to Profit Beyond Measure (H. Thomas Johnson and Anders Bröms).

 

Unfortunate, but true: “Those who manage by results focus on the bottom-line target and consider that achieving financial goals justifies inherently destructive practices,” Johnson and Bröms observe

 

Johnson and Bröms remind us that W. Edwards Demingsaw the same thing when he used to tell managers and executives: “if management set quantitative targets and makes people's jobs depend on meeting them, ‘they will likely meet the targets--even if they have to destroy the enterprise to do it.’”

 

A different path to enduring profitability


Profit Beyond Measurebrings to light a different path: “The alternative to managing by results... requires disciplined practices, sustained attention to how work is done, and nurturing every step of the work at every moment. Managing by means requires all managers in an organization to focus, as does nature, on minute particulars. Such attention to detail involves encouraging employees to cultivate their creative talents so that they may best serve a customer's specific needs. Management behavior manifests the belief... that the means are ends in the making. The job of managers who manage by means is to cultivate and nurture conditions that bond company talents and customer needs in a profitable union, not to drive work with destructive financial targets. Instead of a quest for relentless growth of quantitative targets that burns out companies before their time, managing by means... can enable a company to profit beyond measure for generation after generation.”

 

The authors have studied companies that have demonstrated sustained profitability over an extended period of time—decades, in fact. One of the firms mentioned in their excellent book has sustained a run of more than 65 years of operating without a loss.

 

Interestingly, even though I have been an adherent and practitioner of the Theory of Constraints for many years and have applied the Thinking Processes many times across an array of clients, it was this book, Profit Beyond Measure, that helped me to see just why the Thinking Processes are so powerful an aid to helping companies make more money.

 

On pages 40 and 41, it says:

“Instead of trying to control or regulate financial results by manipulating parts [of the organization] with quantitative measurements or scorecard targets, the task of management in a business organization [or a supply chain, for that matter] should be to nurture relationships and help people master natural-system principles. That nurturing is the essence of genuine learning, and helping people in an organization [or supply chain] discover and implement the principles that govern systems in nature is genuine leadership....

….

The surprising truth… is that changed thinking, not ‘problem-solving,’ answers [the] problems” of systems required to produce both variety and quality at low cost. [Emphasis added.]

“Changed thinking,” they say!

 

Indeed, we have found that the biggest obstacle to helping many companies dramatically improve their performance and profitability is what they think they know. That is, the biggest hurdle is getting them to change their thinkingabout how they organize their work and manage the flow of goods and services from customer-to-cash (and profit).

 

Thinking outside the “box”


Profit Beyond Measurefurther elucidates on this matter saying, “Popular wisdom urges problem solvers to ‘think out of the box’ or to ‘shift paradigms.’ Such phrases express an important truth. How we think does define constraints and boundaries—a ‘box’—that shapes the world we inhabit. To get outside this box requires evaluating the thinking that produced the constraints and boundaries that themselves generated problems. In other words, the solution to the problems often demands that we appraise the thinking that gave birth in the first place to the initial situation from which the problems arise.

 

When applying the Thinking Processes, we don’t even like to call the symptoms the system is displaying “problems,” since “problems” tend to stimulate a “problem-solving” response from managers and executives.

 

Instead, we encourage the company’s team to list “UDEs” or “un-desirable effects,” since most firefighting is focused, not on the real “problems” (i.e., the root problems), but on the effects that flow from these roots and that break out as “fires” here and there across the organization.

 

Also, in complete agreement with Theory of Constraints thought, Johnson and Bröms refer to the work of Gregory Bateson, who concludes that quantitative measure cannot determine where a system will fail. The failure is found in qualitative factors in the organizationand these cannot be measured using management KPIs. Here is the excerpt:

Gregory Bateson compared the consequences of imposing quantitative decisions on a qualitative system to placing tension on a chain. Quantitatively increasing the variable called tension predictably causes the chain to break. Where the chain will break, however, cannot be predicted. So it is when we impose quantitative demands on a natural system that operates according to patterned and qualitative relationships [as all human systems do]. In Bateson’s words, “every quantitative change we impose upon the system is in the end putting stress on the qualitative patterns whose breaking strains and whose evolutions and transformations we do not understand.”

 

The Thinking Processes are specifically designed to help managers and executives (and the whole team, really) unlock “tribal knowledge” and come to understand the “patterned and qualitative relationships” that cause the system to deliver—or fail to deliver—according to the customers’ expectations.

 

Well, enough of my rambling. Suffice it to say, I think you’d gain much from reading this book, if you haven’t already.

 

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Let me know your thoughts when you have a chance. You may leave your comments here, or feel free to contact us directly, if that’s your preference. Thanks.

 

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Johnson, H. Thomas, and Anders Bröms. Profit Beyond Measure: Extraordinary Results through Attention to Work and People. New York: Free, 2000. Print.

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W. Edwards Deming

W. Edwards Deming (Photo credit: Wikipedia)

"Big Data" isn't all bad. It is, after all, possible to use big data and business intelligence to spot trends and identify (from history) factors that may not be intuitively apparent—like the fact that customers in Australia buy a lot of product, but always in small quantities—under $2,500 per order.

 

The use of business intelligence and "big data" is virtually always measuring something that is “history” and has stopped "living"--that is, stopped "moving." The data cannot be included for measurement until it is a "fact" and it does not become a fact until it has "come to pass." Even if we measure velocity, we measure it based on facts at a point in time in the past—perhaps only moments in the past, but in the past nonetheless.

 

Furthermore, these data only tell us about the state of things and cannot inform management as the reason for that state. We must always look outside of metrics to discover the reasons for successes or failures. The reasons for the successes and failures are not even found just in the people, but in the interactions between the people involved.

 

As W. Edwards Deming so cogently assessed: the really important numbers to a business are both unknown and unknowable.

 

Therefore, we must come to understand that we are managing a living system—one composed of human beings that carrying out millions of minute interactions moment by moment, day after day, to create success, failure or mediocrity. Attempting to drive those interactions using external metrics ultimately and invariably drives organizations toward mediocrity.

 

H. Thomas Johnson and Anders Bröms, writing in Profit Beyond Measure, say, “Instead of trying to control and regulate financial results by manipulating parts with quantitative measurements or scorecard targets, the task of management in a business organization should be to nurture relationships and to help people master natural-system principles…. [N]urturing is the essence of genuine learning, and helping people in an organization discover and implement the principles that govern systems in mature is genuine leadership.” [Johnson, pp. 40f]

 

Putting ourselves in boxes

 

Chances we have all heard the phrase, “thinking outside the box,” and we have some intuitive sense of what that means—not only generically, but for ourselves or our company, too. However, Johnson and Bröms describe the essence of “the box” more succinctly than I have ever found it elsewhere.

How we think does define constraints and boundaries—a “box”—that shapes the world we inhabit. To get outside this box requires evaluating the thinking that produced the constraints and boundaries that themselves generated the problems. In other words, the solution to the problems often demands that we appraise the thinking that gave birth in the first place to the initial situation from which the problems [now] arise. [Johnson, p. 44]

Moving past “problem solving”

 

What we need is a change in the way we think about our world, our industry, and our business to find new and innovative solutions.

 

We must stop seeing our business enterprises and supply chains as abstractions defined by metrics like profit, return on investment, quantities of goods moved, sales, revenues and costs. Instead, we need to gain a deep grasp of what really constitutes our enterprise, our industry and our supply chain—the minute human interactions that drive inexorably toward success, failure or simply mediocrity.

 

Eliyahu Goldratt has devised a method to do just that—a method that allows managers and executives to stop seeing their businesses solely through the abstraction of numbers, and to begin to see the details exposed in the human interactions that are actually causing their enterprises to succeed or fail—or to be stuck in mediocrity. This method is commonly called the Thinking Processes (Theory of Constraints).

 

Goldratt didn’t see this as a “problem-solving” mechanism. In fact, he urged business leaders and managers to stop calling what they were experiencing “problems,” at all!

 

Why?

 

Because, whenever a manager or executive encounters a “problem,” they feel it is somehow incumbent upon them to “fix” that “problem.” This leads to repeated cycles of fire-fighting, since most of the “problems” being addressed are not “problems” at all. They are, instead, the effects of broken conditions in the underlying system of human interactions. (See: system thinking.)

 

There is no sense in treating only the symptoms if the disease remains in the organization.

“Ignoring the qualitative patterns that characterize the internal operation of all organizations results in irrelevant, even harmful, decisions.” [Johnson, p. 48]

 

Johnson and Bröms highlight the difference between quantitative and qualitative understandings of a system or organization:

Gregory Bateson compared the consequences of imposing quantitative decisions on a qualitative system to placing tension on a chain. Quantitatively increasing the variable called tension predictably causes the chain to break. Where the chain will break [the weakest link], however, cannot be predicted. So it is when we impose quantitative demands on a natural system that operates according to patterned and qualitative relationships. In Bateson’s words, “every quantitative change we impose upon the system is in the end putting stress on the qualitative patterns whose breaking strains and whose evolutions and transformations we do not understand.” [Johnson, pp. 48f]

 

Our consulting practice has discovered that the application of Goldratt’s Thinking Processes in a conscientious program of ongoing improvement and experienced professional guidance helps executives and managers break out of their “box” and gain a clearer understanding of how their organizations work—or fail to work—from a qualitative aspect. Companies who undertake to break the “enormous tyranny of patterns” (as Bateson calls them) almost universally experience newfound success, innovation and vigor in their operations.

 

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We would like to hear about your experiences and thoughts on these matters. Please leave your comment here or contact us directly, if you prefer.

 

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Johnson, H. Thomas, and Anders Bröms. Profit Beyond Measure: Extraordinary Results through Attention to Work and People. New York: Free, 2000. Print.

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In the 1920s (almost 100 years ago), Henry Ford devised a manufacturing system that outperformed every other manufacturing operation of its day. Ford’s plant at River Rouge (near Dearborn, Michigan), along with another plant in Detroit, produced about 15 million Model T automobiles by 1927.

MassProduction wOut Variety ca1920.jpg

 

Amazingly, in 1925, the River Rouge plant produced about one Model T per minute with a total lead time—from steel-making to finished automobile—of about three days and nine hours (33 hours). [1]

 

Granted, Ford was building only one model in only one color, but still this was quite amazing for its day.

 

Two different views of River Rouge’s supply chain

 

In 1929, Kiichiro Toyoda made the family’s first pilgrimage to Ford’s River Rouge plant to learn how to make automobiles. Twenty-one years later, in 1950—just five years after the end of World War II, Kiichiro’s nephew, Eiji Toyoda, made a second three-month visit to River Rouge. At that time, Toyota Motor Company had produce a total of slightly fewer than 2,700 automobiles. By comparison, River Rouge was producing about 7,000 vehicles a day.

 

What Kiichiro and Eiji Toyoda saw at River Rouge would drive their thought-processes as they labored to build what was to become the largest and most profitable automobile manufacturer in the world over the coming five decades.

 

In the meantime, Ford Motor Company and the rest of the U.S. auto industry would take a different approach to manufacturing and supply chain management and find themselves increasingly unable to compete or be profitable.

 

Toyota built its success using inherently simple (see: inherent simplicity) solutions to what appeared to be complex problems. The U.S. automakers, on the other hand, invested millions upon millions of dollars to build “data factories” alongside and within the facilities that manufactured the automobiles and components.

 

By the late 1970s, the simplicity and success of Ford’s River Rouge manufacturing concept had been turned into something like this:

 

MassProduction wVariety by Batches ca1970.jpg

Ensnared by cost-world thinking

 

While Eiji Toyoda put all his resources to work seeking ways to reduce change-over times as variety increased in consumer demand, U.S. automakers were caught in cost-world thinking and sought only to minimize total accumulated change-over time. To do this, they increased batch sizes.

 

While River Rouge’s success had been driven by Henry Ford’s “assembly line” or one-piece flow, managers and executives at U.S. automakers decided that manufacturing by batch and reducing the number of setups required was the way to save money and make manufacturing with variety efficient.

 

However, because arbitrary or calculated batch sizes are never in sync with actual market demand, U.S. carmakers opted for complex solutions in their attempts to keep actual production from getting too far out of line with actual demand.

 

They decided that they must spend time, energy and money on forecasting systems (to try to project demand into the future) and even more time, energy and money on advertising and sales promotion to try to keep actual demand in balance with actual production.

 

The result was that any savings that may have accrued in the real factory from reduced setups through batching of production was quickly swallowed up—and then some—by the expenses heaped upon the organization for advertising, marketing, schedulers, controllers, expediters, software, hardware, networks and an ever-growing IT staff.

 

The expenses of running the “data factory” consumed all of the savings earned in the real factory.

 

Instead of finding themselves more profitable for having chosen “cost-savings” in the real factory, they found themselves increasingly falling behind in profits and profitability.

 

The effectiveness of “flow”

 

What has become known as “The Toyota Way” is built upon the foundation of leveled production (Heijunka) and Toyota has put its efforts into removing every roadblock to leveled production—especially in reducing changeover times so that tremendous variety can be supported without loss in production.

 

Toyota’s relentless pursuit of waste and its elimination—“waste” being defined as any part of the effort that does not add value from the customers’ perspective—has led to its ability to dramatically slash waste in changeovers. Over several decades, Toyota has been able to cut away at changeover times, reducing many to less than 20 percent of the original changeover times. Some changeovers have been even more drastically reduced. That that formerly took more than a full shift have been reduced to a matter of minutes.

 

In short, Toyota does not rely upon—nor bear the heavy overhead—of the parallel “data factory” to manage their manufacturing operations. Virtually everything that the factory floor needs to know is encoded in the work and work practices themselves.

 

And, to the finance and accounting departments at Toyota, the factory floor is “a black box.” Finance does not set quantitative goals for the factory and production is not measured for “efficiency.”

 

Yet, the proof is in the profits.

 

Market capitalization for Toyota has consistently been equal to or greater than that of the sum of the Big Three automakers in the U.S. for most of the last 35 years.

 

This certainly shows the value of emphasizing “flow” over attempts to artificially affect “costs” in a “numbers game” run by the cost-accounting department.

 

And, as for “the data factory” and its tremendous overhead, I’m beginning to wonder if “Big Data” isn’t just a further excursion down the same costly road.

 

What do you think?

 

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Please leave your comments below or contact us directly with your comments or questions.

 

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[1] Johnson, H. Thomas, and Anders Bröms. Profit Beyond Measure: Extraordinary Results through Attention to Work and People. New York: Free, 2000. Print.

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W. Edwards Deming

W. Edwards Deming (Photo credit: Wikipedia)

I’m not sure why I avoided reading this book for more than a dozen years. Perhaps it was its title that turned me off—thinking it was just too crass. Nevertheless, I am glad I finally found a reason to read Profit Beyond Measure: Extraordinary Results through Attention to Work and People by H. Thomas Johnson and Anders Bröms.

 

Unlike my original conception of the title, this book isn’t about immeasurable profits (although it is certainly about making more and more consistent profits). This book is about how trying to manage a company by looking at “the numbers”—e.g., profits and return on investment—is like “baseball managers trying to coach their teams by looking at the scoreboard.”

 

Indeed, this book is about the tremendous and enduring success of companies like Toyota and Scania, which is achieved not by “management by results,” but by “management by means”—learning to manage a living system made up of real human beings. This book directs us toward “management by attentiveness.”

 

“What firms like Toyota and Scania have learned to do is develop sophisticated [yet, simple] methods of paying close attention in the production and design processes, so that high levels of performance and high rates of learning occur naturally,” says Peter Senge in the book’s foreword.

 

“Management by results creates ‘needs,’ goals we feel we must achieve for our survival or for personal gain. Management by means nurtures aspirations, aims that we pursue because they matter to us. The difference is subtle yet profound…. As poet Robert Frostput it, ‘All great things are done for their own sake,” Senge cogently highlights.

 

So what has management by means done for Toyota and Scania? Toyota is the most profitable automaker in the world today and Scania has produced more than 70 profitable years in succession—regardless of the ups and downs of the world’s economy. While both of these companies have taken significantly different paths to achieve high levels of profits, neither have taken the path of traditional American companies in setting cost or profit objectives and then resorted to driving people to meet those targets.

 

As W. Edwards Deming warned [also quoted in the foreword to the book], “[I]f management sets quantitative targets and makes people’s jobs depend on meeting them, ‘they will likely meet the targets—even if they have to destroy the enterprise to do it.’” We have seen such self-destructive behaviors in U.S. manufacturers over the last several decades, but hardly is it more plainly evident than in our U.S. auto industry.

 

I think you’ll appreciate how Profit Beyond Measure brings humanity and humaneness back to management while also achieving high levels of profitability. I am confident that you will find great personal relief and satisfaction in discovering—or, perhaps, re-discovering—a management philosophy that allows us as executives and managers to really feel that helping our employees and vendors realize their full potential in serving our customers is also the best way to help our companies achieve durable success and ongoing profits.

 

I encourage you to pick up a copy of this book and read it. Let us know what you think after you’ve had a chance to do so.

 

Note particularly chapter one’s “Lessons from the Rouge,” and how U.S. automakers felt compelled to invest huge amounts of capital and overhead into “the information factory” alongside their materials production factory, thus adding layers of complexity to their operations. On the other hand, Toyota sought solutions that were inherently simple, but extremely effective. I think it is likely that you will find parallels in your own company’s experience if I am not mistaken.

 

By the way, I think this book is “the missing link” in my own thinking as to why the Thinking Processes and Theory of Constraints is so powerful. While couched in entirely different language, the Theory of Constraints and its Thinking Processes endeavor to “unlock tribal knowledge,” thus humanizing, comprehending and documenting the real human interactions that occur within an organization, and then, linking those unmasked and very real human interactions to the hindrances that are keeping the organization from producing more and more consistent profits.

 

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Leave your comments here. We are anxious to hear what you have to say. Or, if you prefer, you may contact us directly.

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Project Management main phases

Project Management main phases (Photo credit: Wikipedia)

In a previous article, I discussed how, when it comes to project management—especially the management of multiple projects (i.e., PPM or Project Portfolio Management)—what we don’t know can really hurt us. In this article, I am going to take a somewhat tongue-in-cheek look at some of the answers managers and executives may actually have at the ready when tough questions arise regarding multi-project management.

 

Question: How often are our resources not available when needed for a new assignment?

 

The answer to this one varies. In many organizations, the answer would sound something like this: “When we’re busy, I never have enough resources and the resources I really need for a new assignment won’t be available for days—or even weeks. On the other hand, when things are slow, all my resources are available, but I’m not managing any projects then either.”


Question: How often does it happen that a resource is unavailable for a new assignment at a time when an ongoing project is already behind schedule and in trouble?

 

Unfortunately, in far too many project-driven organizations the answer to this one is the same as the one above: “When we’re busy, there’s always a shortage of resources and we find ourselves scrambling to try to make the best of a bad situation—usually on several projects running late to some extent or another. And, when we’re not busy, it doesn’t really make any difference.”

 

The sad situation is, however, these same managers or executives would add: “We don’t have any statistics or data on how frequently we are seeking a resource assignments on projects running into trouble and no resource is currently available. Of course, one of the reasons we don’t keep those statistics is because it’s hard to keep statistics in the midst of a chaotic situation.”


Question: Today, what percent of our resources are allocated to projects?

 

Well, most of the time, in many project-based enterprises, the answer is “All of them.”

 

However, the truth goes well beyond that. The truth is: “When we’re busy, all of my resources are allocated to several projects at once.”

 

This common practice leads to time-loss due to task-switching, increased errors in execution, and—on top of that—makes it nearly impossible to know the actual status of any single task on any given project.

 

Furthermore, since priorities on tasks assigned to resources might change several times during a week, or even an entirely new task might be assigned to this resource at any time, it becomes impossible for anyone to predict when any given task might actually be completed.


Question: Looking forward four to six weeks in the future, will project requirements cause overloading of any of our resources?

 

Once again, if we are talking about the “busy times” in a project-driven organization, the honest answer to this question would generally be, “Of course! When it’s busy, we expect our resources to be overloaded. We just keep piling on the work and making promises, all the while hoping for the best.

 

“Oh, sure; sometimes we can spread out the workload a bit, but once a client signs on the dotted-line, they expect to have their project completed as soon as possible. So, we just have to do what we have to do,” the manager might go on to say.


Question: In the longer-term, what are the workloads and workload trends for our resources?

 

In most of the organizations with which we have experience, the answer to this question is typically drawn entirely from intuition and not from any concrete knowledge of projects in the “pipeline” or the actual correlation of workloads to the calendar and resource availability.

 

Besides, when the general organizational mandate is “just keeping piling on the work while we’ve got it, and hope for the best possible outcome,”—the “make hay while the sun shines” approach—there is really little compelling reason to do much legwork around forecasting workloads, trends and resource availability except in the roughest possible way. On top of that, most project-driven enterprises we have seen have no tools to help them gather this data rapidly for review.

 

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We believe there is a better way

 

We are confident that there is a better way to approach multi-project management. If you have experience—good or bad—with managing multiple projects, tell us what you think works or does not work. We would be delighted to hear.

 

Leave your comment below, or feel free to contact us directly, if that is your preference.

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Agile Project Management

(Photo credit: VFS Digital Design)

In other articles, I have frequently discussed the dangers of what we think we know. There are times that we think we know and understand things about how our business or industry operates, and those things we think we know may be inaccurate and stymie our innovation and stop our efforts at improvement.

 

However, in this article, I want to particularly speak to those businesses that operate in a project context and undertake project management on a routine basis.

 

Organizations that do projects (e.g., IT projects, construction projects, engineering projects, or even engineer-to-order) frequently display very similar behaviors and symptoms. Here are some of them:

  • Priorities change frequently—sometimes, on the worst days, several times a day
  • People get shifted too frequently from one project to another
  • Resources are forced into inefficient multi-tasking mode in an effort to appease multiple (internal or external) customers
  • Projects tend to fall further and further behind schedule with no foreseeable opportunity for recovery

 

These are all symptoms of an organization that simply has too many active projects with no buffers to absorb variability or the negative affects of “Murphy,” when he shows up.

What are some of the things we don’t know that hurt us?


When attempting to manage multiple overlapping projects (i.e., a project management office or project portfolio management):

  1. We frequently lack data to know how to properly stagger projects to avoid overloading critical project resources or skill sets.
  2. Similarly, most have no toolset by which to do what if scenarios with pending (un-released) projects to see what the impacts might be on future resource loading or cash flows.

 

All too frequently, our multi-project management degrades into nothing more than appeasement management. We have fixed rules for setting priorities. Instead, priorities are set by the customers (again, internal or external) who manage to raise the biggest fuss, make the loudest demands, or the strongest threats. In the absence of a clear and consistent set of priorities for managing multiple projects, we actually have no way of clearly knowing the following:

  1. Which of the current set of active tasks are most endangering the projects’ successful and timely completions?
  2. Of those tasks that are ready to be assigned, but not yet assigned to a specific resource, which are most urgent?
  3. And, of those tasks that cannot yet be assigned (because they are contingent on some other task or event), which are most likely to endanger the successful and timely completion of the projects with which they are associated?

Our multi-project management systems aren’t doing the job

 

Because our project management systems (if we have one) are disjointed, disconnected, and frequently just plain hard to use and update, senior managers are unable to ask cogent questions about the status of any given project—let alone the affects of that project on other projects in the portfolio.

 

As a direct result, those responsible for projects often find themselves discovering that a project is in trouble only after it is too late to take any meaningful corrective action.

 

This, of course, triggers yet another round of changing priorities, reassigning resources and forcing the workers into more debilitating rounds of task-switching and wasteful multi-tasking. Focus becomes nearly impossible to achieve at any level.

 

Managers and executives are no longer focused on clear project priorities. Their focus has been shifted almost entirely to appeasement of the customers awaiting their overdue projects and quelling fears—mostly real, some imagined—of cost overruns.

 

And, the folks doing the work: their focus is lost in constant rounds of task-switching and time lost in trying to keep their minds clear as they are required to move from project to project on a not-so-merry-go-round of trying to keep their managers happy by making a little progress on every project and task that has been handed to them.

 

There must be a better way

 

If nothing else—if this is our experience—it should plainly show us that there must be a better way. What we don’t know is hurting us.

 


 

We would like to hear from you on this topic. What is your experience? Please leave your comments here, or feel free to contact us directly, if you’d rather.

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Lora Cecere, founder of Supply Chain Insights LLC, recently published another cogent and valuable report entitled Supply Chain Visibility in Business Networks.

 

English: An illustration of a company's supply...
(Photo credit: Wikipedia)

 

In the way only Lora Cecere can do it, her insights nail the critical issue in a few succinct sentences:

"Companies want to build end-to-end value networks. The supply chain processes are more dependent on trading partners and interactions of the extended supply chain; but, the IT capabilities are largely based on electronic data interchange (EDI) and spreadsheets. It is inadequate. IT spending is focused on Enterprise Resource Planning (ERP) which automates the enterprise, not the network. This is a conundrum for the supply chain leader." [p. 2]


What we say we are building versus what we are actually building

 

While many of the companies with whom we do business say they are building end-to-end supply chain processes, in the final analysis, we generally discover that this is not the case. What they are actually building is mostly internal automation of their own activities around the supply chain.

 

Sure. Many of them recognize the increasing need to extend visibility, integration, collaboration and even automation beyond the four walls of their own enterprise, most of them are still stuck managing most of their supply chain tasks on spreadsheets and limit external integration/automation to whatever EDI capabilities they have added over the last decade or so.

 

I have frequently told companies with whom we consult, "If Microsoft Excel were to stop working tomorrow, the U.S. economy would grind to a halt."

 

Furthermore, Cecere's analysis is correct: "EDI is effective in moving transactional data, [but] it is point-to-point [and lacks] community interaction." Hence, EDI is not an effective tool for really increasing visibility across the extended supply chain in any real sense.


Always seeking, but seldom finding

 

Almost all of the small to mid-sized business enterprises (SMEs) for whom we consult have recognized the need for increased supply chain visibility as being critical to being able to achieve supply chain agility.

 

What they want--indeed, what they need--is an IT infrastructure and architecture that will give them some hope of achieving near real-time supply chain visibility. It would be a huge boon to may of these SMEs to be able to know the true "shelf take-away" of their products from the point-of-sale (whether that's a cash register at some retail establishment, a delivery guy, or some other transaction point).

 

Unfortunately, as Cecere points out clearly in her report, "To close the gap and improve supply chain visibility, there is not a clear path forward."

 

In the Supply Chain Insights study, nearly half (49 percent) of the organizations surveyed made ERP the focus of their IT budgets in 2013. I doubt that this number will shift dramatically in 2014.

 

Most of us who consult with clients on a regular basis and understand their ERP systems well are thoroughly convinced that the supply chain visibility gap will not and cannot be closed through ERP spending alone. Worse! While "B2B efforts are now three decades old;... the primary mechanisms are [still] based on manual efforts. The dependency on spreadsheets is limiting the evolution of supply chain visibility" into something deeper, wider and more robust, Cecere cogently assesses.


Finding a way forward

 

I am confident that there is a way forward. Some of the largest enterprises (e.g., Fortune 1000) have the resources and have begun creating their own infrastructure and mechanisms for end-to-end supply chain visibility. Certainly WalMart's work in this arena stands out as being highly visible.

 

However, for the SMEs with whom we consult on supply chain and business improvement matters, there must be found answers that are both effective and within their reach from both a skills and economic point of view.

 

The steps outlined in the Supply Chain Insights report [p. 12] certainly apply, regardless of the size of the enterprise:

 

  1. Define priorities and align solutions -- Our sense is that as long as "cost-cutting" is focus of SME executives and managers, rather than "increasing Throughput" (and, hence, profits), then all (or most) of the priorities will remain internally focused and the resulting "solutions" will do little to actually increase supply chain visibility, integration or collaboration.

    This, we believe, is a huge mistake. It will be the SMEs with the vision to begin redefining their supply chains from the outside-in that will increase their market share and become dominant in the near future.

    I also believe that the IT vendors and value-added resellers (VARs) who first create a way for SMEs to readily provide and consume customer-driven data up and down the supply chain, at a price the SMEs can afford, will also become market leaders in their industries.

  2. Get clear on what you are doing today. Document the 'as-is' and the 'to-be' states -- When we work with our new clients' executive and management teams, we find that what they think they know about how their organizations and industries work and reality are sometimes miles apart. Many of them do not have good tools in hand for unlocking "tribal knowledge" and documenting in a simple easy-to-use, easy-to-update form their current reality ('as-is' state) or future reality ('to-be' states). Instead, they rely on business process management (BPM) consultants who leave them with huge binders of written pages that mostly end up gathering dust on their shelves after the many thousands of dollars in checks are written for the cost of preparing these tomes.

    We believe that there is, indeed, a simple and effective way to help organizations understand and agree upon their current reality and the cause-and-effect relationships that drive their current reality.

    Generally, in a single day, we can generate a single-page document that allows managers and executives to see their organization and operations like they have never seen it before--with clarity.

  3. Align IT strategies with future goals -- Cecere is correct in concluding that if IT spending is to be a real investment, instead of just money thrown at problem, then--proceeding from step 2 above--the IT money must be allocated to those few factors that are going to lead to increasing Throughput and profits. Everything else merely adds expense.

Conclusion

 

So, I want to thank you, Lora Cecere, for bringing forth this excellent report on supply chain visibility. We would also like to hear your comments and questions on this important matter.

 

Please leave your comments here, or feel free to contact us directly, if you prefer.

______________________________________

Cecere, Lora. Supply Chain Visibility in Business Networks. Rep. N.p.: Supply Chain Insights LLC, 2014. Print.

 

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Supply chain management 01.jpgI thought it would be interesting to see what topics you have found most interesting in my writings here at the Kinaxis Supply Chain Expert Community and, perhaps, to discuss why certain writings may have piqued your interest. So, here are the top-ranked posts from 2013:

 

  1. Reducing production lead time to improve supply chain performance - An article containing some very practical advice on steps you can take to reduce production lead times
  2. Why you need your own project manager - This post covers a topic important to CEOs, CFOs, CIOs and others managing IT projects with vendors and value-added resellers involved
  3. On demand-driven supply chains - part 1
  4. On demand-driven supply chains - part 2 - These two posts discuss what it really means for a supply chain to become demand-driven (not just call itself 'demand-driven')
  5. CFOs require proof of IT investment ROI - Yes! An article actually suggesting that CFOs should require some hard ROI from monies spent for IT improvement projects

 

Here are the TOP 10 ALL TIME articles I have written here a the Kinaxis Supply Chain Expert Community:

 

  1. Uncertainty: the elephant in the room - part 2 - Supply chain "uncertainty" is a hot topic: two parts of this series are found in the top 10 views
  2. How much money should you commit to an improvement project? - CEOs, CFOs and CIOs would like to have better guidance about how much money should be committed to improvement projects, it appears
  3. Misaimings about metrics - Metrics in many organizations are conflicted and create internal conflicts; this article provides guidance to resolve those conflicts
  4. Simpler is better: Dynamic Buffer Management (DBM) - This article set forth a simple solution to managing inventory levels across your supply chain
  5. On making more money: Metrics not working? Check your complexity - In this article, I address the troublesome matter of how complex and conflicting metrics make it hard for managers and workers to connect day-to-day actions and decisions to corporate goals and improvement
  6. Supply chain agility - Why it's not getting done - Here I take head-on the two key stumbling blocks to the creation and sustaining of supply chain agility; almost everybody knows they need it, but few have achieved or sustained high levels of agility across their supply chains
  7. Business Intelligence, CPM and the middle market - Here is a topic near and dear to the hearts of strategic-thinking CFOs in the middle market: what to do about corporate performance management (CPM) metrics and business intelligence initiatives
  8. The dangerous dichotomy - part 1 - Addressing how companies get caught between cost-cutting and revenue-increasing strategies, frequently finding themselves in oscillation between the two options, but seldom finding a real resolution
  9. Forecasting mistake #1: Forecasting to the wall - Talking about one of the key dangers in forecasting practices
  10. Uncertainty: the elephant in the room - part 1 - Back to supply chain "uncertainty" and technology "improvements"

 

We think you will find going back over some of these very popular posts might help you discover new insights to help you move toward a process of ongoing improvement (POOGI), or at least stimulate some new thinking in your organizations.

 

In any event, we want to take this opportunity to thank you for your continued readership.

 

Please leave comments on any of the posts that you might find interesting, informative, thought-provoking, or even if you disagree. We would like to hear from you.

 

Thank you again for your faithful following of these posts.

This supply and demand model shows how prices ...

This supply and demand model shows how prices vary because of a balance between the availability of a product and the demand for it. The graph shows an increase in demand from D1 to D2 with the resulting increase in price and the amount needed to reach a new balance point on the supply curve (S). (Photo credit: Wikipedia)

It’s a recognized truism that forecasts are always wrong. They are especially wrong when forecasts must be narrowed to a single number to be made useful.

 

A statistical forecast should be stated as a number followed by a plus and minus range. For example, one might say: “This model forecasts demand for next month to be 12,816 units, plus or minus 3,018 units.”

 

That would mean that the statistical model employed can predict with reasonable certainty that demand for next month would fall in the range between 9,798 units and 15,834 units.

 

However, to be useful for planning production or other actions, that range really needs to be narrowed to a single number—how many to make or how many to have on-hand to meet the demand.

 

The problem is that the single number we choose is almost always going to be wrong—we just don’t know by how much it’s going to be wrong.

 

So, let’s take a semi-humorous look at just how wrong various “experts” might be in making forecasts about the future.


“Computers in the future may weigh no more than one-and-a-half tons.” [1]

 

This was a prediction made by Popular Mechanics magazine’s team of expert prognosticators back in 1949. They were right, of course. It is certainly true that computers today “weight no more than one-and-a-half tons.”

 

But being right in this vein is somewhat like forecasting that “sales will be more than 100,000 units” only to discover that sales are more than 10 million units.


“I think there is a world market for maybe five computers.” [2]

 

Here is the wise speaking of founder and then chairman of industry-leading International Business Machines (IBM), Thomas Watson, in 1943. Is it any wonder that they barely made a noticeable dent in the personal computer (PC) market and were dramatically overshadowed by other PC manufacturers like Apple Computer, Dell Computers and dozens of others?


“The concept is interesting and well-formed, but in order to earn better than a ‘C,’ the idea must be feasible.” [3]

 

When Fred Smith presented his paper outlining the concept that was to become “FedEx” to his Yale University professor, this was the professor’s response. This business “expert” apparently forecast that the demand for a reliable overnight delivery service would not support a firm and make it profitable.

 

Wrong! by a wide margin, I should say.


“Who the hell want to hear actors talk?” [4]

 

Harry Warner, one of the Warner Brothers, didn’t think there was a market for “talking pictures.” In 1925, Harry’s brother, Sam, wanted to introduce “talkies,” while Harry opposed this move. The studio had lost nearly $350,000 ($4.6 million in today’s dollars) by February 1926, so Harry relented.

 

Harry’s forecast was off.


“We don’t like their sound, and guitar music is on the way out.” [5]

 

Decca Recording Company’s executives forecast a very limited market for the Beatle’s sound and, apparently, guitar music in general, back in 1962. They missed their big opportunity.


“Heavier-than-air flying machines are impossible.” [6]

 

There is a great danger to innovation any time we come to the conclusion that anything is “impossible.” The brilliant scientist, Lord Kelvin, was beaten by two bicycle guys who changed the world.


“So we went to Atari and said, ‘Hey, we’ve got this amazing thing, even built with some of your parts, and what do you think of funding us? Or, we’ll give it to you. We just want to do it. Pay our salary, we’ll come work for you.’ And they said, ‘No.’ So then, we went to Hewlett-Packard, and they said, ‘Hey, we don’t need you. You haven’t gotten through college yet.’” [7]

 

The short-sighted executives at Atari (whatever happened to Atari?) and Hewlett-Packard (still trying to find itself in some respects) turned down Apple’s visionary thinkers because their “forecasting” and “innovation” engines were missing badly at the time.

 

The point is…

 

The point is this: trying to operate your business or your supply chain based on forecasts is a risky business.

 

Supply chain agilityand fast, flexible and innovative responses to changes in the market will beat attempts to out-guess the market.

 

The strategic selection and positioning of resources, accompanied by big data, supply chain visibility and becoming customer-driven, are the best ways to secure your company’s future.

 


 

We would like to hear from you. Please leave your comments here, or contact us directly if you prefer.

 


[1] Meigs, James B. "Inside the Future: How PopMech Predicted the Next 110 Years." Popular Mechanics. Popular Mechanics, 10 Dec. 2012. Web. 10 Mar. 2014.

[2] "Thomas J. Watson." Wikipedia. Wikimedia Foundation, n.d. Web. 11 Mar. 2014.

[3] "Fred Smith." Entrepreneur. Entrepreneur (online), 8 Oct. 2008. Web. 09 Mar. 2014.

[4] "Warner Bros." Wikipedia. Wikimedia Foundation, n.d. Web. 11 Mar. 2014.

[5] "The Beatle's Decca Audition." Wikipedia. Wikimedia Foundation, n.d. Web. 11 Mar. 2014.

[6] Weisstein, Eric W. "Kelvin, Lord William Thomson (1824-1907) -- from Eric Weisstein's World of Scientific Biography." Kelvin, Lord William Thomson (1824-1907) -- from Eric Weisstein's World of Scientific Biography. Wolfram Research, n.d. Web. 11 Mar. 2014.

[7] Goldberg, Marty. "The Atari/Apple Connection." The Atari/Apple Connection. Indiana University-Perdue University Indianapolis, n.d. Web. 10 Mar. 2014.

 

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English: Portrait of Eli M. Goldratt

Portrait of Eli M. Goldratt
(Photo credit: Wikipedia)

It seems that there is no end to what dedication to a process of ongoing improvement (POOGI) can bring to firms in terms of increased profits. At least one visionary, Eliyahu Goldratt, believes that virtually any company has the potential of turning its revenue figure of today into its bottom-line profit figure over the course of five years dedicated to unrelenting ongoing improvement.

 

Interestingly, many firms have yet to consider taking Lean or Theory of Constraints or any of the proven methods and cultures for ongoing improvement seriously. They still manage by outdated methods—the way their fathers ran the business—or, perhaps worse, by the latest management “fad” or “flavor of the month.”

 

At the other end of the spectrum are firms that have discovered that nothing in the supply chain is off-limits for consideration in a full-fledged POOGI.

 

In a recent article published by McKinsey, Markus Hammer and his cowriters bring some valuable examples of new applications of the Lean approach to a POOGI to light. We feel these examples are worth repeating here for one purpose—and for one purpose only: to spark the innovative imagination of all executives and managers who read these examples toward inciting fresh innovation in their own organizations and operations.

 

Example 1: A pharmaceutical company

A pharmaceutical company “applied lean manufacturing to a series of processes in its biological reactors, where it grew cell cultures.” The firm applied value-stream mapping along with deep statistical analysis, and then set about problem-solving in sessions involving both “engineers and operators” in order “to identify improvements [possible] in the productivity of the biological resources.”

 

“The company expects the [resulting] improvements to boost yields by over 50 percent—without additional costs,” the McKinsey report says.

 

This is all the more remarkable in light of the fact that the firm was already “well-versed in lean thinking and methods.” The firm had not recognized these opportunities for improvement earlier because the executive and management team had previously assumed “variability in biological materials” as a given that could not be addressed through a process of ongoing improvement.

 

Example 2: A European chemical company

The McKinsey report also relates how “a European chemical company used lean value-stream analysis of raw-material flows in one of its businesses to understand which activities created value and which created waste.” As a result, “the company learned that up to 30 percent of its raw-materials inputs were wasted.” They further discovered that “some plants were far more wasteful than others, despite otherwise appearing” to be quite efficient.

 

After making these discoveries, the firm undertook to “prioritize a range of improvements.” These improvements started with “how it sourced raw materials” and extended all the way to “equipment and process changes in production.”

 

These improvements resulted in net gains of more than 50 million Euros annually.

 

Example 3: A look at energy consumption

Since rising energy costs affecting the entire supply chain, some resource-intensive suppliers are now taking a closer look at energy consumption versus value-added in the supply chain.

 

By combining the value-mapping of Lean with big-data analytics, one firm identified a series of process control improvements that, when taken together with opportunities to reduce thermodynamic energy losses during processing, contribute a net 15 percent savings in annual energy costs. These savings were equivalent to three-fourths of the plants entire fixed labor cost.

 

The enduring value of a process of ongoing improvement

The McKinsey report concludes with this important point:

 

“While… these examples are impressive on their own, perhaps more impressive is the enduring power of lean principles to generate unexpected savings when companies gain greater levels of insight into their operations…. In the years ahead, as emerging-market growth continues to boost demand for resources and to spur commodity-price volatility, more and more companies should have incentives to experience this power for themselves.”

 

Lean, of course, is no the only school or culture for gaining “greater levels of insight” into your operations. Goldratt-inspired Theory of Constraints has also proven to be hugely effective and its Thinking Process tools help unlock “tribal knowledge” like none other of which we are aware.

 

Without exception, however, is the fact that greatest enemy to a process of ongoing improvement is the attitude that “we know”—not being on a constant quest for greater understanding of your own operations, your own supply chain, and what might be done to improve it.

 

Begin your own POOGI now. Tomorrow may be too late.

 


 

We would sincerely like to hear your thoughts on this important matter. Please leave your comments below, or contact us directly, if you prefer.

 


See also: Hammer, Markus, Paul Rutten, and Ken Somers. "Insights & Publications." Bringing Lean Thinking to Energy. McKinsey.com, Feb. 2014. Web. 25 Feb. 2014.

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The Toyota Production System (TPS) -The Pillar...

The Toyota Production System (TPS) -The Pillars of TMHE (Photo credit: Toyota Material Handling EU)

More than 50 years ago, in Nagoya, Japan, Taiichi Ohno and his team at Toyota began quietly perfecting what has come to be called the Toyota Production System (TPS). It has also come to be called Lean production. While it is widely known as a collection of tools including kaizen, kanban, andon and more, the real article—the Toyota Way—is not a set of “tools” at all. It is a deeply held philosophy for doing business that leads to a culture that can—and frequently does—extend beyond the four walls of the firm itself.

 

The genius of TPS—the system that has made a post-WWII, nearly destitute company at worldwide leader in the automotive industry—is that Toyota recognized two key things:

  1. You can’t build a lasting house without a carefully laid foundation; and
  2. A house is for peoplepeople are at the center and heart of the house.

Building on a sound foundation

Lean has certainly been the most far-reaching management concept to be brought forward in the last 50 years. And, at the foundation of the TPS “house” a long-term philosophy that guides each action.

 

It is this underlying philosophy and long-term view provides a sense of purpose that guides and governs short-term decision-making. This keeps the whole organization—the whole system—working and growing toward a common purpose.

 

The company focused first on creating value for its customers will tend to automatically generate value for the society and the economy in general. The value generated for the customer becomes the ultimate measure for every action and function carried out within the company.

 

Trusting the people in the house

Operating within this foundational principle, the people in the Toyota house are then encouraged to be responsible and self-reliant, trusting in their own abilities and insights. This enables workers to contribute to their highest potential—to bring to their work all that they have to offer.

 

This stands in stark contrast to the philosophy that we too frequently hear expressed (or, at least, tacitly acknowledged) by owners, executives and managers in companies to whom we are introduced. Probably the worst case I ever came face-to-face with was when consulting for a young and successful entrepreneur some years ago in El Paso, Texas.

 

On more than one occasion, this young CEO said to me, “Everyone who works for me is an idiot.”

 

After hearing this repeated several times over the course of a few weeks in our meetings together, I finally said, “Well, Danny, I guess that makes you the Chief Idiot, since you are the one who hires these people, pays their wages, and keeps them around.”

 

He looked up at me somewhat dumbfounded—but he got the point: either you trust the people in “the house you’re building,” or you do not. If you genuinely do not trust them, then you ought to get rid of them and get people you and can and do trust.

 

Giving meaning to the work being done

My experience has been that almost all employees want to do a good job for their employers. There are very, very few truly “bad apples” in the crowd. The vast majority recognize that their continued employment at their present job depends upon the company continuing to make money.

 

However, managers and executives frequently send mixed signals in their communications to their employees.

 

Not long ago, an executive management team asked me: “How can we keep employees from taking shortcuts that cause the data in our ERP system from being accurate?”

 

This was one of those cases where valueless complexity was gumming up the works. All too frequently the workers where forced to make a no-win decision: Do I serve the customer’s needs, or do I serve the demands of the ERP system? They were frequently choosing the former over the latter. (An excellent choice, in my opinion.)

 

Here’s what I told the CEO and the executive management team:

“I firmly believe that your employees want to do the right thing. But, right now, the complexity of your systems is forcing them to make a choice. On the one hand, you have made it clear to them that a first priority is to ‘serve the customer’—get the orders out the door. On the other hand, you have made the workers equally aware that you are very displeased when the ERP system’s inventory gets ‘screwed up’ because the data entry isn’t complete or on-time.

 

“Your employees are making, it seems, the very decision that—in your heart of hearts—I think you really want them to make. They are choosing to serve your customers’ interests and taking action to get the products produced and shipped, even if it means working around the ERP system to get it done.

 

“Remove some of the valueless complexity with which you have burdened them and you will give these workers a real sense of meaning in their efforts to serve your customers. Plus, they won’t have to struggle with the ongoing moral dilemma of which of your mandates they should obey day after day.”

If you ask them…

 

Generally, the front-line workers are very much aware of valueless complexity. They may even have tried to speak up when such complexity was foisted upon them.

 

But the edict had come from on-high: “This is how the work must be done from now on.”

 

Toyota has built more than 50 years of success and become a world-class company because they believe that “no one knows more about the machine than the man running the machine.” They have learned to listen to “the people in the house,” and learned, thereby, to constantly cut away at valueless complexity in the process of delivering a winning customer experience.

 

We have learned that unlocking “tribal knowledge—learning once again to listen to all the people in the house you and your management team are building—is the fastest way to begin a successful process of ongoing improvement (POOGI).

 

The same thing applies, by the way, to listening to all of the participants in your supply chain. Listening to your supply chain partners—up and down the supply chain—can bring, not only dramatic improvements in performance, but also dramatic reductions in risk.

 

Think about it. What is your company’s philosophical foundation, and how are you building a house for people on that foundation?

 


 

We would like to hear what you have to say on this important topic. Please leave your comments below, or you may contact us directly, if your prefer.

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Richard Cushing

Monuments to waste

Posted by Richard Cushing Feb 24, 2014
English: Employee at Display at the Toyota Mus...

English: Employee at Display at the Toyota Museum in Nagakute-cho , Aichi-gun, Aichi Pref. Japan demonstrates the development of Toyota brand. By Bertel Schmitt (Photo credit: Wikipedia)

Deryl Sturdevant, writing recently for McKinsey relayed the following story:

“…[T]he manufacturer… had recently put in an andon system, to alert management about problems on the line. Featuring plasma-screen monitors at every workstation, the system had required a considerable development and programming effort to implement. To my mind, it represented a knee-buckling amount of investment compared with systems I’d seen at Toyota, where a new tool might rely on sticky notes and signature cards until its merits were proved.

 

“An executive was explaining to me how successful the implementation had been and how well the company was doing with lean. I had been visiting the plant for a week or so. My back was to the monitor out on the shop floor, and the executive was looking toward it, facing me, when I surprised him by quoting a series of figures from the display.

 

“When he asked how I had done so, I pointed out that the tool was broken; the numbers weren’t updating and hadn’t since Monday. This was no secret to the system’s operators and to the frontline workers. The executive probably hadn’t been visiting with them enough to know what was happening and why.

 

“Quite possibly, the new system receiving such praise was itself a monument to waste.”


Sturdevant, Deryl. "Insights & Publications." (Still) Learning from Toyota. McKinsey.com, Feb. 2014. Web. 20 Feb. 2014.

Making “simple” effective

 

We are big believers in inherent simplicity. That is to say, we believe that the complex the problem appears to be, the simpler the real solution to the problem is likely to be.

 

Even though we are an information technology company, we also help our clients realize effective solutions that do not involve technology at all.

 

In fact, at times, we actually advise against spending on more technology when simpler solutions—not involving computer technologies—may be just as effective for our clients.

 

Two examples come to mind. Both of these examples, however, end up to be negative.

 

First, several years ago, we were involved with an extremely innovative firm that produced products that had little or no competition. That is not to say that the products were easy to sell—the sales cycle could be long and complex, and may involve many different parties.

 

Despite our best advice, this firm decide to spend more than $150,000 building integrations between their CRM system and their ERP system simply so their salespeople would not have to learn to use “two systems.” This $150,000 expenditure brought the firm no competitive advantage and in no way contributed to increased Throughput or profitability.

 

In the end, it was complexity that was costly to build and costly to maintain. The far, far simpler answer would have been to simply use the CRM system for managing the sales process and train the users to employ the ERP system for order management.

 

When all was said and done, many of the executives and managers agreed that our advice at the outset of the project was absolutely correct. The simpler solution to the problem would have been far better.

 

To some degree—through software maintenance costs—this firm is still paying the price today for that decision of nearly a decade ago.

 

The second example that comes immediately to mind is a firm that had originally set out to upgrade its ERP system and eliminate (along the way) many of the modifications and extensions to their ERP software that had contributed to their nicknaming the system after Frankenstein for its monstrous hideousness.

 

For some reason—again driven by the sales department—they felt that there were certain features in their custom order entry system that they just could not live without. As a result, they decided that they would have their in-house development staff build a replacement application that would have all the features they felt they needed.

 

Our advice at the time was, “We think you should try to adapt, as much as possible, to the standard ERP order entry and maintenance process and then, where absolutely necessary, modify the ERP system to adapt to your specific needs.

 

“No, no,” came the answer. “We can’t do that” for any number of reasons—which they listed to their own satisfaction.

 

Later, they came to the conclusion that they didn’t have the resources to really complete this project, so they asked us to undertake the development of their customer order management system. We reluctantly agreed.

 

Then, some many months later—and having spent more than $80,000 on the project—they decided to call it all off.

 

Interestingly, they decided that they could, in fact, live with only a slightly modified version of the ERP’s sales order entry system. This firm is doing just that today.

 

Use sticky-notes where sticky-notes will do

If the “improvement” you and your management team are about to undertake can be accomplished effectively with sticky-notes or something similarly low-tech, then—for goodness sake—do it that way! At the very least, do it the simple way until you can clearly be shown that adding more complexity will provide a hard ROI (return on investment) by either increasing Throughput, reduce inventories or investments that would otherwise be required elsewhere, or hold the line on operating expenses while supporting significant growth.

 

Everything else is likely to turn out to be nothing more than another “monument to waste.” But that won’t keep some senior executives from touting them as “successes.”

 


 

Let us hear your thoughts on this important topic by leaving your comments below. You may also contact us directly, if you prefer.

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English: Mass production of Toyoda automated l...

English: Mass production of Toyoda automated loom. Display the Toyota Museum in Nagakute-cho, Aichi-gun, Aichi Pref. Japan. By Bertel Schmitt (Photo credit: Wikipedia)

McKinsey recently published an article by Deryl Sturdevant, former president and CEO of Canadian Autoparts Toyota (CAPTIN) from 2006 to 2011. The article bore exactly the same title as this article—because, frankly, I couldn’t think of a better title to describe what needs to be said.

 

So very much of what Sturdevant brings to the for in his article bears repeating and even reinforcement.

 

Only the utterly uninformed would disagree with fact that the introduction of the Toyota Production System (TPS) has dramatically changed the face of operations and given fresh insights to executives who are open to learning such things.

 

My own experience is that a great many managers and executives expend no small amount of time, energy and money trying to make improvements and, in the end, frequently reap very little for their investment.

The Goal is Continuous Improvement

Sturdevant follows the Toyoda Way in stating that “the goal is continuous improvement.”

 

As valuable as this statement is, I think there remains some lack of clarity in this statement of “the goal.”

 

I have come to believe that many managers and executives tire of laboring on “continuous improvement” when what may clearly be defined as “improvement” does not lead to any significant contribution where it really matters—on the bottom-line.

 

As a result, we have come to agree wholeheartedly with Eliyahu Goldratt in more narrowly defining “the goal.”

 

If continuous improvement is to lead to real and measurable improvement on the company’s bottom-line, then “the goal” must be redefined as this: The goal is to make more money tomorrow than you are making today.

Wasteful “Improvements”

Is there such a thing as improvements that are “wasted” on an enterprise?

 

In our view, the answer is a resounding, “Yes!”

 

Some 30 years ago, I recall reading in a business publication how one of the “Big Three” automakers in the U.S. had invested some several millions of dollars “improving” its accounts payable department. This led to significant “improvements” in the speed and accuracy with which the firm was able to process vouchers and get payments into the hands of their vendors.

 

Meanwhile, this same automaker continued to report losses in the hundreds of millions—perhaps, billions (but I don’t recall the details now)—on it’s bottom-line.

 

In light of its continuing and mounting losses (ultimately, even the federal government was invited to intervene), is it fair to count the expenditure of these millions on accounts payable as “improvement”?

 

It seems clear to us that far more significant improvements leading to actual “profits” were what the company really needed before counting minute gains in “efficiency” as real “improvement.”

 

In this case, we assert, that this “improvement” effort was a very real “waste” of time, energy and money.

What Keeps Companies from Making Real Improvements?

The Toyota Way has produced real bottom-line improvements for the company worldwide on the basis of two essential “pillars”—(1) kaizen, the philosophy of continuous improvement) and (2) respect and empowerment of people, especially those actually doing the work on the line.

 

In his article, Sturdevant asserts—and we agree—that one of the largest barriers to “continuous improvement” is complacency.

 

If a company has, at some time in the past, undertaken an effort that led to significant “improvement,” managers and executives frequently spend months—or, sometimes, years—congratulating themselves on their success. Whenever you meet them, they point backwards to what they have done in the past for improvement.

 

The problem is that these managers and executives become self-satisfied—complacent—at the results achieved in the past. They stop looking forward to what improvement could look like if “continuous improvement” were really a part of their firm’s culture.

 

This would never occur in an business culture truly focused on “continuous improvement.” Sturdevant tells us:

“…[I]n Toyota’s culture… as soon as you start making a lot of progress toward a goal, the goal is changed and the carrot is moved. It’s a deep part of the culture to create new challenges constantly and not to rest when you meet old ones. Only through honest self-reflection can senior executives learn to focus on the things that need improvement, learn how to close the gaps, and get to where they need to be as leaders.”

Too Many Conversations Like This

Reading Sturdevant’s cogent article reminded me of a conversation I had recently with CEO of firm that has national reach, is a leader in its industry, and has demonstrated remarkable leadership in several ways.

 

Some months ago, we had worked with this firm, helping them get a start on a POOGI—a Process of Ongoing Improvement). The CEO contacted me to thank us for helping them make significant improvements.

“I feel we gained a lot from having you on site and were able to streamline work flow to our benefit at Christmas and since then.”

To be fair, this CEO recognized that the firm still has “more improvement opportunities” ahead of them. Nevertheless, I got the distinct impression of the presence of at least a temporary complacency—a self-satisfied looking backward. What was absent in the brief conversation was any forward-looking drive for ongoing improvement.

 

Once again, the good had become the enemy of the best: the “good” being some improvement; whereas, the “best” being a process of continuous improvement.

 


 

Let us hear your comments on this topic by leaving them below, or you may contact us directly.

 

We look forward to hearing from you soon.

 


See Sturdevant, Deryl. "Insights & Publications." (Still) Learning from Toyota. McKinsey.com, Feb. 2014. Web. 20 Feb. 2014.

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Why are some companies so effective at achieving market domination—even if just a segment of the market—while other companies remain only “also-ran’s” or even fail to achieve any significant level of success at all?

 

What are some of the critical differences between market leaders and the other companies—or supply chains—against which they compete?

 

Our experience in working with a variety of small to mid-sized business enterprises and their supply chain participants has led us to the conclusion that the difference may be found in two different areas:

  1. The effectiveness of the organization’s decision-making process and its faithfulness in executing on decisions
  2. How integrated and involved the whole organization is in achieving its goals
  3. While these areas are distinct, they are not wholly independent of one another, as we will try to show.

Effectiveness in decision-making

 

Executives and managers make decisions all the time in all kinds of organizations. Unfortunately, for most businesses, the effectiveness of management’s decision-making is about the same as a good major league batter. They might get a real “hit” about one out of three times at the decision-making “plate.”

 

If they’re lucky, the management team is batting about 300 (300 hits for a thousand at-bats). The other two “at-bats” produced no positive results. Hopefully, the other “at-bats” didn’t result in any negatives—like hitting into a double-play.

 

We don’t believe that leading companies just have “better luck.”

 

More effective decision-making comes from understanding better the cause-and-effect in your customer-to-cash streams.

 

Like a river flowing over and around many rocks and boulders, the stream flows. But even more water could flow with less turbulence if you just knew where the rocks were and how to get them out of the stream.

 

Interestingly, we have discovered that, in a great many cases, the firm’s employees know where the turbulence-creating rocks and boulders are in the customer-to-cash stream. And, in fact, they frequently have a pretty good idea about how these flow-disrupting boulders can be removed from the stream.

 

Unfortunately, managers and executives are all too often unwilling to hear what the first-line workers have to say—or listen to what they have to say with a jaundiced ear, thinking that the workers’ only interest is to make their own tasks easier or less stressful.

 

Managers and executives often do not take time to consider whether the net result of the workers’ suggestions may also mean increased Throughput in the customer-to-cash stream.

 

We help increase the effectiveness of our clients’ decision-making process by bringing them tools to help unlock what their employees already know about what how their customer-to-cash stream (and, supply chain) actually works—or fails to work.

 

In working with clients, we apply the Thinking Processes to help unlock what we call “tribal knowledge.” When we do this, the effectiveness of decision-making automatically increases.

 

Where managers and executives used to “bat” 300, or so, decision-making effectiveness can be increased with little or no effort to 90 percent or higher.

 

Virtually every decision can become effective when the true cause-and-effect is more fully understood.

 

Effectiveness in execution

 

As a side-effect of a decision-making process that stems from clarity of objectives and keen insight into the actual causes and effects at work in the organization and the industry in which it operates, the effectiveness of execution on the decisions also increases dramatically.

 

Part of the increase in effectiveness in execution is the natural outflow of the whole team having “invented the solution” to their problem from scratch. They are confident that the action they are about to take will be effective in achieving its desired end because they were involved from end-to-end in the diagnosis of the cause-and-effect and the creation of the present improvement remedy.

 

No one sabotages or undermines their own invention. No one hates or fears change when they are convinced by their own reasoning that the change is beneficial for them.

 

Management didn’t hand down the latest edict on how things will change, or pass along the latest fad as “the next thing we’re going to try.” Instead, the whole organization was involved in uncovering the reality of their present situation (see: Current Reality Tree) and in planning the best remedies for their situation.

 

This approach has an immediate effect on the enthusiasm and faithfulness with which proposed changes are undertaken. The result: effectiveness in execution.

 

Involvement and integration

 

As you have probably already detected, we have not even gotten to the topic of “involvement and integration” and, yet, it is already covered.

 

If the amazing success of the Toyota Production System has taught us nothing else, it should be abundantly clear that everyone must be involved in creating success. Everyone from the production floor “down to” (as Toyota’s executives would put it) the CEO should be fully involved and integrated into the process of ongoing improvement (POOGI).

 

We are finding more and more as we work with our clients that it is now supply chains that compete with other supply chains. It is no longer company against company at the core of competition and gaining of market share.

 

Therefore, we encourage our clients to extend involvement and integration well beyond the four walls of their own firms. Trading partners—both customers and suppliers—should be integrated and involved in creating solutions. This is part of what we call the New ERP—Extended Readiness for Profit.

 

Summary

 

In summary, our work with hundreds of small to mid-sized business enterprise (SMBs/SMEs) has show us that market dominance comes from effective decision-making and effective execution on those decisions. And, that effective decision-making, in turn, stems from clarity derived from understanding the reality of cause-and-effect relationships in your custom-to-cash streams.

 

Once this clarity is gained (and maintained):

  • Decisions can be made on well-defined (measurable) objectives
  • Decisions can be proactive, rather than reactive
  • Decisions can drive clearly-defined actions, because there is a clear understanding of the connection between tactical (or strategic) goals and operational actions

Furthermore, we have concluded that involvement and integration of the whole organization viewed as a single operating “system” is essential for market-dominating success. This includes extending involvement and integration across the supply chain—not just keeping it within the four walls of your company. This is the New ERP!

 


 

We would very much like to hear your views on this topic. Please leave your comments here (below) or contact us directly, if you prefer.

 


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