Evolving Excellence

So You Want to Buy an American Car?

2009-07-06T01:05:00-07:00

Thanks to Pete over at Shmula for shooting me this tidbit. If you take a look at all cars sold in the U.S. and ranked them by domestic content... parts and final assembly, you might be surprised.

Toyota Camry
Ford F150
Chevrolet Malibu
Honda Odyssey
Chevrolet Silverado
Toyota Siena
Toyota Tundra
GMC Sierra 1500
Ford Taurus
Toyota Venza

So you want to buy American and support American jobs, communities, and tax base... what will you buy to have the largest impact?

5 Questions - Meet John Kim

2009-07-06T00:09:00-07:00

In this edition of 5 Questions we meet John Kim. I've known John for nearly a decade in a variety of roles and consider him one of the most lean-knowledgeable people I've had the pleasure to meet.

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1. Who are you, what organization are you with, and what are your current lean-oriented activities?

I have been a student of Lean since the early 90’s. I have been directly involved with Lean since 1992 (as a Plant/General Manager with The Hon Company and as VP Operations with Jennings Technology (a Danaher Company)). I have been involved in Enterprise Wise Lean Consulting since 1998, as a VP, COO, President and Senior Partner of two consulting companies (Simpler and Lean Horizons). I have since left the consultancy world, and am working an independent schedule focusing my attention in the Healthcare, Oil and Gas and Manufacturing sectors. I continue to speak at Lean Conferences around the world focusing on topics including: Lean “Information Flow”, Getting Started with Lean, and Strategy Deployment. I continue to work on a book focusing on the effective use of Lean in information flows.

2. How, when, and why did you get introduced to lean and what fueled and fuels the passion?

Looking back, I talk about my learning in 3 distinct phases:

Phase I (mid 80’s through early 90’s) is what I call the “days of industrial tourism.” For those that can recall, these were the days of SPC, Cells, Suggestion Programs, SMED, Kanban, self directed work teams … etc. This was the era of American Management taking regular trips to Japan to try and ‘figure out’ what the keys to Japanese Industrial success. As a young (manufacturing) engineer, I was sent to a myriad of ‘workshops’ to learn these concepts and bring them to the plant. I didn’t have a clue what I was looking at, or more importantly why a concept/tool might have been important, but I did learn a lot of ‘stuff’ and had a lot of fun. What’s funny is that in spite of our inability to understand “what, why, or how”, we did implement many “tools” with great enthusiasm. We always got “better,” but we never really understood ‘what good looked like’. I learned two key things from this era: (1) managing “cells*” was a whole lot easier than managing “work centers” and (2) Every tool had potential value, but not every tool was needed in every situation.

Phase II (1992-1998) is what I call “real Learning.” I was fortunate enough to have worked for 2 companies (Hon and Danaher) that both had selected the same group of Japanese consultants to implement “Lean” into “Manufacturing.” During this period, not only did I transition into Operations management, but more importantly I was introduced to TPS (Lean) by Japanese mentors who really knew what TPS was and how TPS should be used. The lessons were painful and grueling, but it was during the 6+ year period that I learned the discipline of the TPS Principles and understood (accepted) that the lean process was incredible at driving metrics such as: Productivity, Capacity, Lead Time, Quality and Safety. The timing for me personally was perfect. It is important to note, that although I transitioned from doing “stuff” to improving “metrics,” I still had a lot to learn about impacting a Business.

Phase III (1998-today) is what I call “Enterprise Learning.” From a developmental perspective: Phase I was about “tools” and “concepts”. Phase II was about improving “metrics.” Phase III was about improving a Business (i.e. the Balance Sheet and Income statement). Late in 1998 is when I got involved in consulting. In those early days, for me, Lean = Lean “Manufacturing.” Running consulting companies forced me to ‘target’ clients applications of Lean to their P&L. No longer could “project” results be summed into bottom line results. It was during this period that I lived by the credo “…if the controller can’t measure it … it doesn’t count.” This simple approach ensured the client selected meaningful Value Streams, and also prevented (didn’t eliminate) much of the “Lean for the sake of Lean” activity.

Impacting Business level performance (Balance Sheet and Income Statement) is the passion for me. No one hires individuals to ‘reduce walking distance’ or ‘5s an office/shop.’ Can you help me with my P&L is the question that executives ask. More importantly is how this Business Level challenge affects how I ‘think’ about Lean Implementation…

3. In your opinion what is the most powerful aspect of lean?

I often get asked “what makes Lean any different that TQM, Quality Circles, Six Sigma .. etc. My answer is two fold. One aspect is that Lean truly has a process for both the Identification (i.e. Lean “tools”) and Elimination (“tools’ and principles) of Waste. However the second is not so obvious. Every improvement ‘program’ (past and present) uses some/all aspects of: Problem Statements, Cross functional Teams, Process/Value stream map, Brianstorming, problem solving … etc. These pieces are not so different. What people don’t realize is that “lean” introduces a critical step that others do not. It is the step of “Understand the Current State “… before we brainstorm, discuss, prioritize and determine solutions. This step (create a common understanding) is imperative to the problem solving, cross functional, team buy in process. In every other “improvement program”, the ‘program’ moves too quickly from “Problem” (blame) to “brainstorming” (what will we do). Using this approach, we quickly apply all kinds of ways to prioritize, weight, factor .. etc the (preconceived) ideas in order to decide ‘what’ we will work on.

The problem is this: When different departments come to a ‘room’ (or join a team) to solve a problem, everyone comes into the room with what they (honestly) believe is the problem (from their point of view). In particularly bad situations, politics, personal opinion, bully behavior or passive aggressive behavior inappropriately affects the direction of a team … Without a process’ which seeks to first create a common understanding of the problem (before asking for ideas/solutions), what have is a group of people ‘doing battle’ over what they believe is the biggest issue. What is powerful about “Lean” is that every use of Lean seeks first to gain this common understanding of the process (via VS Maps, Spaghetti Diagrams, Process Maps, Time Observations, Gemba Walks) and uses data from which to begin any analysis (Takt Time, Bar Charts, Failure (data) analysis…). In taking the first step of Create a common understanding, when it becomes time to discuss ‘where is the impact’… The individuals ‘see’ the problem and the process through a common lens. From this common starting point, the ideas are more focused, the discussion is fact based, the buy in is much stronger, the solutions are not only more poignant, but (more importantly) the buy in is much higher.

4. In your opinion what is the most misunderstood or unrecognized aspect of lean?

A lesson that many learn (the hard way) is that although Lean is about Identifying and Eliminating waste, when an organization is testing the waters with Lean, it is not good enough to simply eliminate wastes. You must learn to use Lean to Identify and eliminate the Right Wastes. That is, those specific wastes that impact the “Business Case” (i.e. metrics) you are trying to improve. If one understands this concept and how it subsequently affects how a team will decide ‘what’ to implement and what to focus on, the wasted energy of so many Lean start ups can be avoided:

When teams start moving off on a Tangent, the question “…is this discussion going to impact our Business Case?” can be asked to refocus a team
When building a VS Map, you can quickly qualify/quantify the scope of the VS Map (i.e. how much detail should we go into?). The result will be VS Maps which have been built with the “right waste” in mind and in turn are much more effective at guiding implementation plans that accomplish the objective
When the “list” of things to do gets too long (they all do), you can also qualify every task through the “Business Case” lens (I.e. “must have” .. and “nice to have”)
When a team begins to ‘force a tool,’ one can ask “…what waste will this tool help us to identify. Is this waste likely to have a significant impact on our Business Case?”

The following steps should be used (considered) whenever choosing to use lean as part of a Project Improvement, Value Stream improvement or Business Unit improvement:

Define your “Business Case.” What is it that you think you want to improve? Be specific.
- What is the metric?
- Define the Metric (numerator and denominator)
- Establish your baseline (gather data)
Deselect and then Select the Value Stream(s) that impact the Metric. In other words, which Value Streams have little/no impact on the metric. Similarly, what VS have significant impact on the metric. If you want a 10% improvement overall, and a particular VS has 50% of the impact in the metric, then a 20% improvement on the target VS (50% contribution) will yield your 10% improvement overall
Once you have selected your target VS, use the Lean process (VSM, Implementation Plan, Introduction of the right tools/techniques) to Identify and eliminate the Right wastes.

If you follow this type of approach,

Your Lean ‘approach’ will become more targeted
The waste you impact will in turn impact the metrics you have been tasked to improve
You will be less likely ‘accept’ a project and expectation that has little chance of success
You will have built in a natural ‘speed bump’ into your process which clearly defines expectations, scopes the task at hand, quantifies “any” waste into “must have” and “nice to have” categories.
You will make much more effective use of you and your organizations resources
You will prevent common mistakes that sound like: “we must VS Map every process,” “It is time to 5s the office,” “what kaizen events will we be doing this month?,” “We must use Visual Management (everywhere),” “Lean won’t work in Product Development…”

5. In your opinion what is the biggest opportunity for lean in today's world? How can that be accomplished?

By far the biggest opportunity lies not with the companies who are doing Lean well, but with those companies who don’t realize they are using lean inappropriately. The operative phrase is “you don’t know what you don’t know.”

In the early 90’s, when I first started learning Lean, I often heard the phrase “after 5 years of doing this lean stuff, you will then be in kindergarten.” I believed this for almost a decade. It was around this time that I began to consider the learning environment that existed in 1992 compared to 2000. In 1992, my employers used consultants where I was ‘not allowed’ to ask questions. There were no good books available to explain ‘how’ to implement lean (there were lots of books that talked about lean “tools.”) The conferences available in 1992 were also either non-existent or early in their infancy. Since 2000, the quantity and quality of books available have increased one hundred fold (I am a believer that good books and bad books offer much learning to the reader). In 1992, we implemented (learned) lean like “chickens with our heads cut off…” Too many companies (and too many consulting companies) continue to engage lean with this model.

By 2002, AME had joined The Shingo Prize in putting all their chips into “Lean.” Today, the number of skilled people with ‘real’ lean implementation experience numbers in the thousands vs the dozens. I no longer believe in the “5 years = Kindergarten” rule. I now ask the question “how good do you have to be at Lean in order to make a significant improvement to key metrics in your business?” The answer is “…not very good…provided you have a focus, a structure and a process for Implementing Lean.”

The danger with Lean is that everyone thinks of Lean too ‘low’ (many refer to this as thinking of Lean as a “tool.”) The real opportunity is to ‘see’ Lean as a mechanism to improve the Balance Sheet and the Income Statement. Interestingly, when thinking about lean at a Business level, most of your Lean activity will reside in your Information Flow Value Streams (Inquiry to Order, Order to Cash, Product Development, New Product Introduction, Product Lifecycle “Value Stream”, Working Capital Management … etc)

Can Lean help use improve Working Capital? Yes, lets choose to use Lean to improve Receivables (Reduce DSO by 15 days = $7.5mm) and Inventory (Reduce Inventory by 40% = additional 3.2 turns = $5.6mm)
How can Lean help us improve Market Share from 22% to 30%? Lets use Lean to improve “speed to market” from 50%. or With our new “Inquiry to Order” capability, we can now access a market segment we couldn’t before. If we can absorb this growth with no additional assets (Equipment and/or inventory) and we can leverage the growth into productivity, we can improve Gross Profit from 32% to 41%

I truly believe you can make significant improvements to your business, in a short period of time, provided (1) you have a structure for engaging Lean: Business Case – Value Stream Selection – Proper use of Lean Process/Tools, (2) you develop a process for executing Lean: Identify and Eliminate the right wastes, (3) you choose to take advantage of the wealth of knowledge available to you today: Conferences, Workshops, Books, Webcasts. The biggest opportunity lies with “raising the bar” amongst three primary groups:

Group I (those that are good at “Lean” today): Raise the bar from using Lean to Improve Value Streams to being able to use lean to improve a Business Unit … Grow (existing) market Share, enter new Markets, Reduce Working Capital, Increase Cash Flow .. etc

Group II (those that think they are good at “Lean”): Raise the bar from Lean being a tactical capability to Lean producing Operational (Office and Shop) Capability. It is operational capabilities that can be used to accomplish Strategic objectives.

Group III (those that know they don’t know lean): Take advantage of the lessons learned in so many industries over the past 20’ish’ years. Skip the missteps of Group II and take on the challenges of Group I. Understanding the challenges will make you realize what’s possible and help you understand how much work there is to do. From a Lean Vision and Business Strategy perspective “Stand Tall” and know “what” you want, establish “how” you will measure progress (success) and decide “how fast” is the appropriate velocity of change for your organization.

A Check on My Undesired Investment

2009-07-05T00:12:00-07:00

By Kevin Meyer

A few months ago I, along with about 200 million others, was forced to invest in a failed company. Some people still think that failure cannot be allowed even if deserved. Probably the same people that believe team sports in school create dysfunction and grades and other performance measures are inappropriate and demeaning. Sorry, time to enter the real world.

If you're naive enough to think you can get something for nothing on a new mortgage, you should fail. If you're dumb enough to invest in those mortgages without realizing there's no underlying value, you should fail. If you're ingenious enough, in a mad scientist kind of way, to fashion complex financial instruments out of those packages of worthless mortgages, you should fail. If you keep producing cars that no one wants, ignoring improvement methods right in front of your noses, and paying people several times the prevailing rate, you should fail.

So out of morbid curiosity, I wonder how my investment is doing.

Two of the biggest car makers in America, Ford Motor Co. and Toyota Motor Co., called a bottom to the long decline in U.S. auto sales.

Yes, Ford and Toyota reported improved sales last month. Unfortunately my president... err financial advisor... didn't invest in those companies. He invested my money in GM. What happened at GM? The sales decline accelerated last month. Great...

Fortunately I decided to hedge my forced investment, and put some equivalent funds in Ford. How's that investment doing? Check out the chart on the right.

Not too shabby. My hedge probably worked and I'm about even. I wish the other 200 million taxpayers were so lucky.

But I'm very concerned. Ford has to compete against a "company" not constrained by real-world economics. They are backed by an entity that can simply print more money (as long as the Chinese continue to buy the supporting debt...) and change industry policy and regulation as necessary to guarantee an outcome... whether in the public interest or not.

Will Ford be able to pull it off? I have my hopes, and I'll continue to support them with my capital and perhaps even a purchase.

Update on Lean Manufacturing Company Stocks

2009-07-04T00:08:00-07:00

For obvious reasons it's been a while since we've updated you on the Superfactory 20... twenty lean manufacturing company stocks that were selected by our readers a couple years ago. Toward the end of this year we'll update the list itself for 2010. The following is the performance year-to-date, with the Superfactory Index being the average performance. You'll notice it is still slightly behind the S&P 500.

Visit leanstocks.com to view this table updated each hour. And watch for some significant changes to that site as well as leancompanies.com over the upcoming months!

2009 Performance
Name	Price	YTD Performance
HONDA MOTOR CO AD (HMC)	26.30	20.59 %
Intel Corporation (INTC)	16.72	12.06 %
TOYOTA MTR CP ADS (TM)	74.09	11.63 %
DANAHER CP (DHR)	59.62	3.26 %
PENTAIR INC (PNR)	24.85	1.72 %
ILL TOOL WORKS IN (ITW)	36.22	0.58 %
NEWELL RUBBERMAID (NWL)	10.20	-0.87 %
STEELCASE INC (SCS)	5.59	-2.10 %
NIKE INC CL B (NKE)	51.06	-2.78 %
HILLENBRAND INC (HI)	16.92	-3.64 %
S&P 500 INDEX, RTH (^GSPC)	896.42	-3.80 %
TESCO PLC (TSCO.L)	350.50	-4.03 %
SUPERFACTORY INDEX		-4.91 %
DEERE CO (DE)	38.53	-5.82 %
JOHNSON AND JOHNS (JNJ)	55.98	-6.11 %
STANLEY WORKS THE (SWK)	32.44	-6.59 %
PARKER HANNIFIN C (PH)	41.60	-6.81 %
BOEING CO (BA)	40.83	-7.96 %
ABBOTT LABORATORI (ABT)	46.28	-12.17 %
WABTEC CORP (WAB)	32.05	-19.55 %
CATERPILLAR INC (CAT)	31.74	-30.73 %
TEXTRON INC (TXT)	9.33	-38.94 %

The Gift of Complaints

2009-07-02T00:18:00-07:00

Most people fear receiving complaints about their product or service. But as Amy at Another Wine Blog suggests, a complaint can be an opportunity.

But instead of just processing the return I started talking to her, asking if there was something else she might need. Turns out she was taking her teenage daughter on a cruise, and she needed lots of things. And to make a long story short, what started as a $20 return, ended up being an $880 sale, and a repeat client. Why? Because I listened to what she was saying, and turned a complaint into an opportunity, a “gift.”

If one person complains, it's likely that several times that number are also experiencing the same problem but choose not to say anything. And sometimes the solution to the immediate problem is simple, at least in the mind of the customer you are hopefully trying to retain.

For those who did complain, the most important concept in future business from that customer was whether or not she received an apology, a resolution, and a promise it wouldn’t happen again.

This doesn’t just apply to sales, but also how to handle negative product reviews, concerns about value, shipping issues and website glitches. A positive response can bring you a bounty of goodwill and word-of-mouth marketing. A negative response, and you not only lose a customer, but risk that one complaint turning into a viral word-of-mouth marketing “campaign” that only benefits your competitor.

Amy goes on to describe three experiences with three different wineries, and how their response to a problem created a long-term perception. The moral?

Joe used to work with a woman named Julie who was fabulous at customer service. The running joke was how she felt (and sounded to the other AEs) when she was dealing with complaints; “Why yes, it is all my fault. I’m terribly sorry; how can I fix it?” But customers loved her. She was the positive face of the company. She made things right, and retained the customer. Because she treated every complaint as an opportunity — a gift. Even when she had nothing whatsoever to do with the error in the first place.

Embrace complaints... but do something about them to make the customer happy.