Latest Presentation – 21st Century Portfolio Management

I recently spoke at the LKCE conference in Vienna on 21st Century Portfolio Management. The talk was recorded and is available here http://vimeo.com/52546904 It’s about an hour long.

I’ve now presented this material in Madrid, Boston, Tokyo, Vienna, Utrecht, and at various clients around Australia – and each time have found that the contents of the talk has generated a good amount of interest.

The feedback I have been getting, in person after each talk, is that there isn’t a lot out there (in books, articles, blog posts, guidance from agile consultancies etc) on Agile at the portfolio level and beyond, and that much of what I talk about is classed as undiscussables in most organisations.

My shorter Boston talk, that was recorded back in May, has generated over 1000 views (the next most watched being Steve Denning, David Anderson and Don Rienertsen with a few hundred each) which kind of backs this interest up.

The good news is that in Australia we are actually doing what I talk about i.e. it’s not just theory. I hope to publish more on that (and the results) in the future.

Deming’s 14 Points

W. Edwards Deming’s 14 points are the basis for transformation of industry. Adoption and action on the 14 points are a signal that the management intend to stay in business. aim to protect investors and jobs. Such a system formed the basis for lessons for top management in Japan in 1950 and in subsequent years.

The 14 points apply anywhere, to small organisations as well as to large ones, to the service industry as well as to manufacturing. They equally apply to any division within a company and to it’s suppliers.

As you read through each of the 14 points below, ask yourself if they still apply today, either within your current organisation, or within organisations you have recently worked for. The answers may be surprising.

1. Constancy of purpose:

Create constancy of purpose toward continual improvement of product and service, with a plan to become competitive and to stay in business.

Management have two concerns. One deals with running the business on a day to day basis. The other deals with the future of the business.

They must have clarity on the questions; what are we doing, and why are we doing it?

The answer to these questions requires knowledge and looking to the future. It is the difference between short term and long term thinking; the tortoise and the hare.

Problems of the future require constancy of purpose, and dedication to improvement.

Create constancy of purpose toward continual improvement of products and service, allocating resources to provide for long range needs, rather than only short term profitability, with the aim to become competitive, stay in business and to provide jobs.

To stay in business requires that leaders spend time on innovation, research and education. They must constantly improve the design of their product and service.

Purpose is an intent, a goal, a vision of some future desired state. To have constancy of purpose then one must first have a purpose.

 

2. The new philosophy:

We are in a new economic age, created in Japan. Management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.

Improvement never stops. The system is capricious, erratic, it will affect people in different ways from one month to another. Which is why you need continuous improvement, it can never finish as change never finishes.

The customer demands and tastes change very fast, and the competition in the market grows at a rapid rate today.

Henry Ward Beecher said “Philosophy of one century is the common sense of the next”; we have to accept new philosophies according to the market trends and technology revolutions.

Learn and adopt the new philosophy, one of cooperation to everyone’s benefit.

Management must awaken to the challenge, learn their responsibilities and take on leadership for change.

We are in a new economic age, created in Japan. We can no longer live with commonly accepted levels of delays, mistakes, defective materials and defective workmanship. We cannot accept today, the levels of error that could be tolerated yesterday. Defective products and services are a cost to the system.

Only management is in a position to do something about the vast majority of errors. Transformation of Western management style is necessary to halt the continued decline of business and industry.

Its management’s task to remove the obstacles that prevent people from doing their jobs correctly.

 

3. Cease dependence on mass inspection:

Eliminate the dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

You can not save money if you are more worried about money, than you are about quality.

Cease dependence on mass inspection to achieve quality. Mass inspection is not reliable. Inspection sound right, but it is wrong.

You can’t inspect quality in, yet we have organisations using ISO and audits as a means to prove quality.

Routine inspection is the same as planning for defects, acknowledging that the process isn’t correct, or that the specifications made no sense in the first place. Inspection is too late as well as ineffective and costly.

Instead require statistical evidence that quality is built in.

Quality doesnt come from inspection, but from improvement of the process. Improve the process so that defects aren’t produced in the first place. This eliminates the need for inspection on a mass basis.

Eliminate the need for mass inspections, as the way of life to achieve quality, by building quality into the product in the first place. Require statistical evidence of quality improvements.

You can not save money if you are more worried about money, than you are about quality.

 

4. End lowest tender contracts:

End the practice of awarding business on the basis of price tag along. Instead, minimise total cost. Move toward a single supplier for any one item, on a long-term relationship of loyalty and trust.

Without adequate measures of quality, business drifts to the lowest bidder, therefore the result is low quality and high cost.

Price has no meaning without measure of the quality purchased.

End the practice of awarding business on a price tag alone. Instead, require meaningful measures of quality along with price.

Reduce the number of suppliers for the same item, by eliminating those that do not qualify with statistical and other evidence of quality.

The aim is for both parties to work together, by minimising variation to increase quality, and to minimise total cost (not merely initial costs) for both parties.

This may be achieved by moving toward a single supplier for any one item, on a long term relationship of loyalty and trust.

It will lead to continuous improvement between both parties and as a result you will get quality supplies at reduced costs. This is why Japanese manufacturers are so closely aligned to their suppliers.

We often spend lots of time and money to find better suppliers and shift rapidly between them for slight monetary gains. Instead of getting vendors to compete on price think long term. Purchasing managers have a new job and must learn it.

Today many organisations just outsource to the cheapest supplier, and often to multiple suppliers within the same business unit or project.

 

5. Improve every process:

Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

Constantly improve the production and service system to improve quality and productivity, thus decreasing costs.

Accept nothing is ever good enough. Improve constantly and forever every process for planning, production and service.

Improvement isn’t a project with a finite end. Instead, think continuous, never ending improvement.

Institute innovation.
Everyone should search continually for problems in order to improve every activity in the company, to improve quality and productivity and thus to constantly decrease costs.

Finding what’s wrong is not improvement. Plugging leaks is not improvement. Don’t look at outcomes or defects, instead look at what produces the defects.

There should be continual education on waste and continued improvement of quality in every activity, this will yield a continual rise in productivity.

It is management’s job to work continually on the system (for example work design, incoming work, improvement of tools, supervision, training and retraining). There in no stopping point in the process of quality management.

The enterprise system and services must keep growing indefinitely in order to catch up with the competitive market.

 

6. Institute training on the job:

Institute modern methods of training on the job.

Provide learning and development. Institute training on the job, training for new skills.

People learn in different ways. Training must be totally reconstructed.

When training, people need to understand what the job is and why it is being done.

Training must be done on the job, learning by doing; going into the work and experimenting with work methods and new ideas, studying the results, and striving for perfection.

A trained worker has more productivity and quality than an untrained one, so giving training sessions will drastically improve the quality of the person, and also directly helps in better performance with regard to product quality.

Institute modern methods of training on the job for all, including management, to make better use of every employee.

New skills are required to keep up with changes in tools, methods, techniques, product and service design.

 

7. Institute leadership of people:

The aim of management should be to help people to do a better job. Management is in need of overhaul.

Leadership is required not supervision.

Leadership is in need of overhaul, the job of leaders is to help people.

Adopt and institute leadership aimed at helping people to do a better job.

Adopt and institute principles for leadership improvement.

The emphasis of management must be changed from sheer numbers to quality. Improvement of quality will automatically improve productivity.

Management must ensure that investigation and actions are taken on reports of inherited defects, system conditions, poor tools, fuzzy operational definitions, variation and all conditions detrimental to quality. You can’t delegate quality, its a road to failure.

The basic principle is that it’s the managers job to coach their staff and improve the system

  • Firstly, they spend time in the work reinforcing the organisations commitment to its customers and to quality.
  • Secondly, they devote time to ensuring the staff doing the work have everything they need to be able to serve the customer.
  • Thirdly, when they have a decision to make about either of the above they get data to base their decisions on. There is no knee jerk, instead they get knowledge.

 

8. Drive out fear:

Drive out fear so that everyone may work effectively for the company.

Extinguish fear so everyone may work effectively for the organisation.

Build trust. Cooperation and collaboration requires a whole different set of values and relationships than that used in the outdated command and control method.

People are afraid of change, any attempt to make things better will lead to a fear of the unknown.

Many organisations are run by fear; fear of not getting their bonus, being afraid that they can’t meet their annual rating, or fear that they will be low on rating ladders.

To achieve better quality people need to feel secure. We need to eliminate fear so that everyone may work effectively for the company. Fear will disappear as management improves and as employees develop confidence in management.

Driving our fear is part of at least 8 of the 14 points.

 

9. Break down barriers:

Break down barriers between departments. People in research, design, sales, technology and production must work as a team.

Break down barriers and silos between departments. In other words build a system.

Traditionally each silo becomes independent kingdoms, each trying to maximise their own figures.

People in research, design, sales, technology and production must work as a team to be able to foresee any production problems, and potential product or service issues.

Unless staff work jointly in a spirit of co-operation, each area will try to do what is best for itself, rather than whats good for the organisation. It means cooperation not competition, everybody wins if the system wins.

 

10. Eliminate exhortations:

Eliminate the use of slogans and exhortations for the work force asking for zero defects and new levels of productivity.

  • Eliminate work standards (quotas). Substitute leadership.
  • Eliminate management by objective. Substitute leadership.
  • Eliminate management by numbers, numerical goals. Substitute leadership.

Eliminate slogans, warnings and targets for the work force asking for zero defects, doing it right first time and new levels of productivity. Such urging only creates hostile relationships.

Posters ask people to do what they can not do.

Posters and slogans on the wall stating “do it right first time”; who can do it right first time, when the stuff someone has to work on is already wrong?

The causes go beyond the power of the work force, as the majority of low quality and low productivity causes result from the system.

If the system has been built around quality, then it will be done right first time, so the slogan will be meaningless.

Ensure you substitute work standards and quotas with effective leadership and effective methods. Substitute management (by objectives, numbers and numerical goals) with effective leadership.

 

11. Eliminate arbitrary numerical targets:

Eliminate work standards that prescribe quotas for the work force and numerical goals for people in management. The responsibility of managment must be changed from sheer numbers to quality.

Numerical goals accomplish nothing.

Traditionally quantity rules over quality.

The cost of caring more about numbers than you do about quality is enormous, it results in high costs finding and fixing mistakes. That money spent produces nothing.

Focus on quality rather than quantity of product. Remove obstacles depriving workers of their right to take pride in their work. Managers must focus on quality, rather than sheer numbers.

Substitute aids and helpful leadership in order to achieve continual improvement of quality and productivity.

A system of continuous improvement yields greater production at lower costs. The focus is not on how many you make, it is on how well you make them.

 

12. Permit pride of workmanship:

Remove barriers that rob workers and people in management of their right to having pride in their work. This means, for example, abolishment of the annual or merit rating and of management by objective.

Remove the obstacles and barriers that deprive workers, and people in management, of their right to take pride and joy in their work. This implies abolition of the annual merit rating (appraisal of performance) and of Management by Objective, all of which creates conflict and competition.

These barriers to pride (a basic human need) among other things, results in low morale and absenteeism.

We need people to have pride in their work, not in their ability to meet ratings.

Again, the responsibility of Team Leaders, Managers, Directors and senior leaders must be changed from sheer numbers to quality.

Fixing points for employees, and ranking them inside the company, infuses competition within that organisation. We want collaboration not competition.

Involve employees, at all levels, in the process of improvement. Supply workers with the proper methods, materials and tools. Managers work on the system that is impeding performance.

 

13. Encourage education:

Institute a vigorous programme of education and self-improvement.

Institute a vigorous program of education and encourage self improvement for everyone.

What an organisation needs is not just good people; it needs people that are improving with education.

Education may not be in a subject that is connected to their work.

Self improvement keeps people’s minds developing. Point 6 is training for the job, point 13 is elevating people’s minds.

Advances in competitive position will have their roots in knowledge. No organisation can survive with just good people, they need people that are improving.

 

14. Top management commitment and action:

Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

Put everybody in the organisation to work to accomplish the change.

Develop a critical mass that will bring about the change; a critical mass including top management.

Create a structure in management who take an active part and who spend time in the work reinforcing the 14 points, and the organisation’s commitment to it’s customers and to quality.

Managers should devote time to ensuring the staff doing the work have everything they need to be able to serve the customer. They use data and real knowledge obtained from the customer’s point of view to make decisions.

Without such a structure no viable long-term benefits will be achieved.

Summary

The 14 points are not a menu you can pick and choose from. Deming intended you use all 14. They are one philosophy.

“The way not to depend on mass inspection (point 3) is to continually improve the process (point 5), to do that you will need quality supplies (point 4), finding a quality supplier takes time (point 1), to do so you will need to adopt the philosophy (point 2)” Lloyd Dobbins

“We want our people to work together, but its hard to do so without point 8, 9, 10, 11 and 12.” Lloyd Dobbins

The 14 points apply anywhere, to small organisations as well as to large ones, to the service industry as well as to manufacturing. They equally apply to any division within a company.

“The 14 points all have one aim, make it possible for people to work with joy and pride” Deming

If you want to learn more about where our current theories of work came from, which led Deming to write the above, then you may wish to read my free ebook entitled Theories of Work: How We Design and Manage Work.

 

Source: CC-M Productions, Inc. 7755 16th Street, NW Washington, DC 20012 ManagementWisdom.com (800) 453-6280wbob@cc-m.com

Source: Vanguard http://www.systemsthinking.co.uk/home.asp

Source: Vanguard Scotland http://www.systemsthinkingmethod.com/

Source: Illustrations by Pat Oliphant http://www.managementwisdom.com/freilofdem14.html

Over 100 Years Later and We Are Still Doing the Same

Through research for my upcoming book and webisode series I have found that some of Fredrick Taylors methods are amazingly similar to those still applied today by some Lean or Six Sigma consultants.

Taylor was one of the earliest advocates of work smarter not harder. He was fixated on efficiency. His methods accomplished this aim by the study of a task and finding the most efficient, least wasteful, method to complete that task.

Taylor was famous for introducing the concept of studying work to seek ways to do it cheaper and faster. Today, Lean and Six Sigma consultants often enter an organisation on the same premise.

 

Taylor & Gantt (of Gantt chart fame who was associated with Taylor for 30 years) studied work with a stopwatch and timed the various activities to determine efficiency data. Today many consultants still time each work activity using a stopwatch.

Taylor & Gantt determined through their time studies how long a job should take, and introduced standardisation and piece-rate pay scales based on the most efficient timings. Today SLAs and monitoring against standard times are often recommended by consultants.

Gantt famously stated “every move a man makes must count”. Today this sounds remarkably similar to the lean waste of “motion”, with consultants studying each move a worker makes to see if any “wasteful motion” can be removed.

I recognise not all Lean and Six Sigma consultants are the same, with some going beyond the tools and not focusing purely on waste removal (e.g. respect the people), but many are repeating methods that were used pre 1900!

Interestingly Shingo cites Taylor as a source for inspiration for baselining along with his time and motion studies, but moved way beyond copying methods used by Taylor, Gantt and Gilbreth.

For those interested in more have a read of Taylor’s The Principles of Scientific Management and Robert Kanigel’s book The One Best Way.

 

To Change Culture, Change the System

In John Seddon’s latest news letter there was a piece called It’s not the people, stupid.

Returning to the problem that managers think they should manage people, a reader sent me this.

A bank is training staff in “The One Best Customer Experience”. The big idea is that the best customer experience engages the 5 senses.

To engage the customer’s 5 senses staff are told to:

  • Shake the customer’s hand when they come in for an appointment and shake it as they leave (touch)
  • play the bank’s own radio station in the branch (sound)
  • make sure that all branches look exactly the same so the customer knows what to expect (sight)
  • make sure the aroma plug- in is topped up and working (smell)
  • and ask whether the customer drinks tea or coffee and have a cup ready for them when they arrive for an appointment (taste)

You couldn’t make it up.

If only the leaders knew the futility of this; in Deming’s terms it’s working on the 5%.

I wonder how much money they are wasting doing so.

This is unfortunately all too common in our organisations. Leaders believe that to change culture, and improve service, can all be done by training their staff. They think that a breakthrough in knowledge is going to lead to a breakthrough in behaviour.

Another example is when many UK banks sent all front-line staff off to hotels to be “trained”, and then told to go back to their branches and “Love the customers“.

When the staff got back to their branches, and the customer came in with a request or a problem, they thought “Thats great, I can use my new training, they told me I could on the training course”.

BUT they needed the branch manager to give them authority, they needed to work together with their manager on solving problems, they needed their manager to talk to head office etc

What reaction do you think they got from their managers? “No, no, no! You do what I tell you to do” or “I cant change what you want, my hands are tied”.

Now what do you think happened? Morale got worse, not better, service got worse, not better.

Its amazing how much money is spent on these kind of training programmes, think how much it cost that bank to train all of their front-line people.
Yet leaders are happy to do it. Why? Because it sounds plausible.

If a consultant turns up and says, “Would you like your people to learn how to love your customer?” which leader is going to say no?

But as Peter Sholtes says

“Changing the system, will change what people do. Changing what people do, will NOT change the system.”

Deming studied how much variation in performance was down to the worker, or down to the organisational “system”, that people work within.

He (and Juran) found the majority of possibilities for improvement are in the organisational “system” (95%) with the remainder with the worker (5%).

As Deming said

“A bad system, will defeat a good person, every time.”

This is very easy to prove. Deming did so in his famous Red Bead Experiment. You can see a video of the Red Bead Experiment here.

If you want to test this out yourself go to any area that deals directly with customers and listen to customer demands. As customers complain about the organisation’s failure to do something, or do something right, look to see if this is down to the worker talking to the customer, or the cause is elsewhere. The majority will be caused elsewhere.

The workers themselves know this is the case. I once conducted the above mentioned demand experiment in a call center. The agents were surrounded by posters informing them to “Do it right first time” and to “Do your best”. The problem with the latter is that people already are.

When at the call center I spoke to one agent who expressed his frustrations at being unable to fix something that was caused elsewhere in the system:

It’s like hearing a baby crying in a locked room, and I don’t have the key.

In our organisations we spend a lot of our time working on the 5% using training, team building, away days, 1-2-1s, appraisals etc  Doesn’t it make more sense to work on the 95% ?

Even when leaders recognise it’s the system that hinders performance, they still believe that this too can be solved by training. Here is a great story by Russell Ackoff on the dangers of this kind of thinking. You can easily replace the words Systems Thinking with your favourite (or current) change programme e.g. Lean, Six Sigma, Agile, TQM, ISO 9000 etc

A number of years ago when I was working on a project for a major automotive manufacturing company, the Executive Vice President asked me if I would give a two-day course on systems thinking to the company’s top 200 managers and executives. I was delighted.

He said he wanted to restrict classes to 20 so that there would be plenty of discussion.

He had the following plan: four sessions of junior vice presidents, three of intermediate level vice presidents, two of senior vice presidents, and finally one of the executive office. The sessions were to be conduct from the lower level up.

At the end of the first session to junior vice presidents one said, “This stuff is great. I would love to use it but you are talking to the wrong people. I can’t introduce it without the approval of my boss. Are you going to get a chance to present it to him?”

I told I would in one of the later courses. He assured me he would hit his boss for approval as he came out of his session. In each of the first four sessions of junior vice presidents the same issue was raised.

In the first group on the second tier, with intermediate level vice presidents, the same issue was raised. I was told they also wanted to introduce systems thinking but could not do so without their bosses’ approval. Again I told them their bosses would eventually be exposed to the same ideas. In each of the three sessions at this level the same issue was raised.

In the two sessions involving senior vice presidents the same issue was raised. They asked if I would have a chance to present the material to the CEO and his executive committee. I said I would. I could hardly wait to hear what the CEO would say.

At the end of the session which he attended he said, “This stuff is great. I would love to use it. But I can’t do it with the approval and support of my subordinates. Are you going to get a chance to present it to them?”

This was a typical organisation, one in which the main operating principle was “Cover your ass.” Application of this principle produced a management that tried to minimise its responsibility and accountability.

The result was a paralyzed organization, one that almost never initiated change of any kind let alone innovation. It made changes only when a competitor made it necessary for it to do so.

When we have training classes that tell people what to do. That’s not going to do it. Humans will be filtering what is being taught through their belief systems. That’s why most cultural training fails.

Deming learned it’s not a problem of the people it’s a problem of the system that people work within. He found that if you want to change behaviour, then you need to change the system, and change management thinking that creates it. Doing so, culture change is then free.

So what is a better method? Well the starting point is a method that involves the initial ‘un-learning’ of what leaders think they know, to enable them to ‘see’ and reflect on their own system. This can’t be done in an office, or in a training room, it can only be done in the work, where the work occurs.

We Don’t Need No Frickin Architects

“We Don’t Need No Frickin Architects”

I’ve lost count the number of times that I have heard this statement (or some kind of derivative) during my career when mixing with Agilistas. The reasoning behind these statements is that architects are either defunct in the agile world, or that they need to roll their sleeves up and relearn to code alongside others in a delivery team. It makes no sense to over-egg the pudding.

I understand the reasoning, but as a Systems Thinker it is my belief that there is a need for architects.

Lets listen to what Dr Russell Ackoff, a Systems Thinking pioneer and organisational theorist, has to say on the subject.

A system has 3 properties:

  1. Each part of the system can affect the behaviour or the properties of the whole. They don’t necessarily do it all the time but they can.
  2. The way each part affects the whole, depends on at least what one other part is doing. The parts aren’t independent, they interact, they are connected. No part of the system has an independent effect.
  3. If you group the parts of a system into sub-groups i.e. sub-systems, they have the same properties the parts do. Every subsystem, or collections of parts, can affect the whole, and none has an interdependent effect.

The performance of a system is never a sum of the performance of its parts taken separately, its the product of its interactions. The performance of a system is based upon how the parts interact and fit, never on how they act separately.

There are many places where improving the performance of the part, will make the performance of the whole worse.

Architects knows this intimately:

  • An Architect draws the house first; the whole, then he adds the rooms; the parts.
  • He only improves a room, in a way that improves the house (the whole).
  • Sometimes a part needs to be made worse to make the whole better. If he can make the room worse, but make the house better, an Architect will do it.
  • The objective is to build the best house, not the best rooms.

If we have a system of improvement that’s directed at improving the parts taken separately, you can be absolutely sure the performance of the whole will not be improved.

The doctrine of the Western world is to think “divide and conquer”, if every separate part of the organisation is managed well, then the whole system will improve. This is absolutely false!

This is completely counter intuitive, we are committed to managing the actions of the parts, not their interactions. Most improvement programmes look to improve the parts separately not the whole. The whole is what should be the focus for continuous improvement.

In the above quote Ackoff is referring to the Organisation as a System, he is not referring to technology based systems. However the same thinking can be applied to technology based systems too.

We are encouraged in Agile to break work down into the smallest possible value adding chunks (often called either Epics, or Stories, or Features, or MMFs, or MVPs etc). Breaking work down makes sense. With the least amount of effort we can not only validate learning (by answering questions and testing hypothesis early, for example whether customers will use or buy our output), but also to minimise risk and possibly realise value earlier.

There are some thought leaders that even say that projects will soon become defunct, to be replaced instead by a constant flow of smaller chunks of work flowing through the delivery pipeline, with projects just becoming containers for these chunks of value adding increments.

As an Agile practitioner this is all good by my book, and makes sense to me.

But the Systems Thinker in me thinks differently. Lets listen again to what Ackoff is saying

“There are many places where improving the performance of the part, will make the performance of the whole worse

and that

“Architects knows this intimately”

So with a constant flow of small chunks of work, who is thinking about the whole? Who is concerned about the interactions between the parts? Who has the end game in mind?

I have spoken before about the difference between efficiency and effectiveness. Where efficiency is doing things right, but effectiveness is doing the right thing. My observation around Agile, Kanban and the like, is its all about efficiency, whereas we want to be more effective. I like the way a colleague of mine once put it

“We run the risk of rowing really fast as a high performing agile team, but in completely the wrong direction”.

As Peter Drucker says

“There is nothing so useless as doing efficiently, that which should not be done at all”.

So, we are at risk of building a whole load of well engineered parts that do nothing as a whole, or could in fact make things worse. Here is Ackoff again

When you try and put the best parts together you think you will get the best whole. This is wrong!

As an example, if you took all of the different cars on the market today, and asked a group of engineers which had the best engine, which had the best transmission, which had the best alternator etc and they took these best parts and tried to put them together, you would not get an automobile; the parts wouldn’t fit, let alone give you the best car in the world. It’s the working together that is the main contribution to systemic thinking.

Our entire culture is built on analytical thinking. The product of analysis is how things work, never why they work the way they do.
Analysis takes you inside the system, and how it works. It provides knowledge but not understanding.

By using a process of analysis you can reveal structure and say how something works, but not why something works in the way that it does.

Analysis has three steps:

  1. You take the thing you want to understand apart.
  2. You explain the behaviour of each part taken separately.
  3. Lastly, you reaggregate your explanation of the parts into an understanding of the whole.

Analysis became the dominant mode of thought in the Western world for hundreds of years. Today we still use analysis and thinking as synonymous terms. This thinking permeates all of our institutions, corporations, etc.

To reiterate, the process of analysis it to separate the whole into parts and study each part individually. Over to Ackoff

You will see this happening at an early age, if you give a child something they have never seen before, for example a puzzle, and they are confronted with a need to understand it, the first thing they will do is take it apart, the second thing they will do is to try to understand each part taken separately, then they will reassemble it to try and get an understanding of the whole.

This explains why inherently we feel that breaking work into parts to put them together again seems like a good thing.

To understand “why” questions, you need to use a process of synthesis. Synthesis is the opposite process to analysis and consists of three steps:

  1. You take the thing you want to understand as a part of a larger whole.
  2. You explain the behaviour of the containing whole.
  3. Lastly you disaggregate the understanding of the containing whole, by identifying the role or function of the parts.

Synthesis is an another way of thinking, it’s about making sense of the whole, which provides explanations of the behaviour of a system. You take the thing you want to understand and study it as a part of the larger whole.

If you want to understand how something works you use analysis, if you want to understand why it works you use synthesis. To be effective we should be using a combination of both.

The essential property of a system (whole) is that it cannot be divided into independent parts. If you apply analysis to a system, you take it apart and it loses all its essential properties, and so do its parts. This is easily demonstrated by Ackoff:

An example is a car, its a product of its parts. When a car is taken apart the system looses its essential property; moving from A to B. When we take a car apart we have cut its interactions. Not only that, we remove the essential properties of the parts. The motor cannot move from A to B on its own.

Here is another example, you can write, your hand can’t write, its easy to demonstrate by cutting your hand off and asking it to write, it wont do it!

As a sub note, I like the notion of Consumer Driven Contracts as an example of concern regarding interaction between parts:

A consumer-driven contract is a representation of a service provider’s obligations to all its current consumers. Consumer-driven contracts are created when each consumer communicates to the provider its specific expectations. The obligations created on the provider’s side establish a consumer-driven contract. As part of adopting a consumer-driven contract, a provider is free to evolve and innovate its service offering just so long as it continues to satisfy its existing obligations.
Source: http://www.infoq.com/news/2008/07/consumer-driven-contracts

However I do wonder if this is merely concerned on how two parts interact with each other, rather than understanding the whole.

What we do need is architects, but….

What I am not advocating is the style of architect that contemplates their navel for months on end, or sits atop an ivory tower dictating policy, standards, monolithic specifications, and the “one right way” to all. I’m also not suggesting that we introduce inspection regimes, or to build gold plated enterprise solutions that we realise are either out of date by the time they are released, or that more nimble competition have beaten us to it.

What I am suggesting however, is the need for someone who understands the whole, with the ability to use synthesis in addition to analysis. Someone whom is viewed as an additional stakeholder by all of those involved in the creation of the parts.

The modern architect gets visibility of, and has interactions with, the parts, but also has an appreciation of the whole. Agile brings transparency to the development process that can enable an architect to see what’s really going on within the parts, that allows them to react based on their objective of building the best whole, one that meets the customer’s needs.

There is a balance. The objective is to build the best house, not the best rooms.

What Did Deming Really Say?

There is a really great Quality Digest Article by Davis Balestracci entitled “What Did Deming Really Say?”

An extract is below.

The 1980 NBC television show, “If Japan Can, Why Can’t We?” introduced the teachings of W. Edwards Deming to U.S. viewers and caused a quantum leap in awareness of the potential for quality improvement in industry.

Those of you familiar with Deming’s funnel rules (which shows that a process in control delivers the best results if left alone) will smile to realize that his rule No. 4—making, doing, or basing your next iteration based on the previous one—also known as a “random walk,” has been in operation for the last 30 years.

Jeff Liker, professor of industrial and operations engineering at the University of Michigan, beautifully describes the random walks that have taken place within the time spans of Six Sigma and Lean. In a private correspondence with leadership expert Jim Clemmer, Liker writes:

“Originally Six Sigma was derived from Toyota Quality Management (TQM) by Motorola to achieve six sigma levels of quality, and then through Allied Signal and GE it morphed to projects by Black Belts based on statistics to become a cost-reduction program – every project needs a clear ROI. In other words, we denigrated the program from a leadership philosophy to a bunch of one-off projects to cut costs. It was a complete bastardization of the original, and it rarely led to lasting, sustainable change because the leadership and culture were missing.”

“A similar thing happened to Lean when it got reduced to a toolkit (e.g. value-stream mapping, KPI boards, cells, kanban).”

“Lean and Six Sigma in no way reflect the original thinking of excellent Japanese companies or their teachers like Deming.”

Clemmer also cites multiple studies from 1996–2007 concluding that about 18 to 24 months after these various quality systems are launched, 50–70 percent of them fail. Liker concurs and feels that the four key failure factors, in this order, are:

  1. Leadership lacking deep understanding and commitment
  2. Focus on tools and techniques without understanding the underlying cultural transformation required
  3. Superficial program instead of deep development of processes that surface problems solved by thinking people
  4. Isolated process improvements instead of creating integrated systems for exceptional customer value

Virtually everyone agrees that the No. 1 barrier to improvement is still top management’s inability to be visibly committed to quality. Is this the “elephant in the living room” or as Clemmer calls it, “the moose on the table”?

We Are Beyond Your Mindset

Your firms are built on the Taylor model. Even worse so are your heads. With your bosses doing the thinking while workers wield the screwdrivers, you’re convinced deep down that is the right way to run a business. For the essence of management is getting the ideas out of the heads of the bosses and into the heads of labour.

We are beyond your mindset. Business, we know, is now so complex and difficult, the survival of firms so hazardous in an environment increasingly unpredictable, competitive and fraught with danger, that their continued existence depends on the day-to-day mobilisation of every ounce of intelligence.

Konosuke Matsushita founder of Panasonic, Technics

14 Principles, 5 Principles, 5 Pillars, Which do you use?

I have read various books, articles, blog posts, slide decks, or attended presentations, or have spoken to Lean practitioners who tell me about Lean’s 14 Principles, or Lean’s 5 Principles, or the 5 Pillars of Lean. This can become very confusing and typifies our lack of understanding of the TPS. Which do you use?

Dr Peter Middleton (coauthor of the book Lean Software Strategies) writes

There is no pure lean approach as demonstrated by the different descriptions of lean in the literature, which identifies a range of overlapping lean principles.

For example, Liker [1] has 14 principles, Womack and Jones [2] have five principles,  Shingo [3] also has five but different principles, and Anderson has five pillars [4]

Ohno’s [5] focus was to reduce the time from customer order to product delivery by eliminating waste. Arguably he preached many principles, even though they are not laid out as such.

The complexity of analysing lean is due to the specifics of each lean implementation being context dependent.

When Toyota was setting up a new plant in America, Liker and Hoseus noted that Toyota ‘‘. . .were not interested in teaching us to copy. They were trying to teach us to think and act in the Toyota Way’’ [6, p. xxii].

Therefore, for Toyota, it was more a philosophy of management combined with their experience of what was successful that was important.

Ohno was never keen on codifying method for the above reasons. John Seddon says

Ohno said “Don’t call it anything. If you call it something, managers will expect it to come in a box. He was right.”

Deming reminds us about the hazards of copying in his book Out of the Crisis.

Improvement of quality is a method, transferable to different problems and circumstances. It does not consist of cookbook procedures on file ready for specific application.

It is a hazard to copy. It is necessary to understand the theory of what one wishes to do or make. We are great copiers. The fact is that the Japanese learn the theory of what they wish to make, then improve on it.

This idea of copying reminds me of a great story from Deming, again in his book Out of the Crisis.

The management of a company that makes furniture, doing well, took it into their heads to expand their line into pianos. Why not make pianos? They bought a Steinway piano, took it apart, made or bought parts, and put a piano together exactly like the Steinway, only to discover that they could only get thuds out of their product. So they put the Steinway piano back together with the intention to get their money back on it, only to discover that it too would now only make thuds.

[1] J. K. Liker, The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer. New York: McGraw-Hill, 2004.

[2] J. P. Womack and D. T. Jones, Lean Thinking. London: Touchstone Books, 1997.

[3] S. Shingo, A Study of the Toyota Production System. Portland, Oregon: Productivity Press, 1981.

[4] David J Anderson, Is Kanban Just a Tool? http://agilemanagement.net/index.php/Blog/is_kanban_just_a_tool/

[5] T. Ohno, Toyota Production System: Beyond Large-Scale Production. Portland, Oregon: Productivity Press, 1988.

[6] J. K. Liker and M. Hoseus, Toyota Culture: the Heart and Soul of the Toyota Way. New York: McGraw-Hill, 2008.

Lean is About Eliminating Waste Right?

Waste Elimination

Some people think that waste elimination is what Lean is all about. This is music to managers ears. What manager or leader would not jump at the chance of finding waste in their organisation, having it removed, and reducing costs as a result? As a consequence Lean consultants enter an organisation, waste is found; for example staff are found sat around doing nothing or waiting for something or not “behaving” efficiently, and the waste is removed (often as a consequence FTEs are removed) and success is claimed. But does this lead to being more effective?

This has bothered me for sometime. I have met many Lean consultants who talk only of waste elimination, they know nothing about the need for understanding customer demand and have little appreciation of the differences between being effective vs being efficient. Many have only read books written about the TPS, and have little or no knowledge of Taylor, Ford, Sloan, Deming, Taguchi and Ohno.

Here is what I’m often told by Lean consultants

  • Work = Value Adding Work + Non Value Adding Work (waste)
  • Lead time = Value Adding Time + Non Value Adding Time (waste)
  • Reducing non Value Adding time will increase efficiency

Is this correct? Here is an interesting extract from a recent post by Jim Womack (co-authored the book “The Machine that Changed the World”).

“20 years later, it’s striking to me how much effort we’ve expended on eliminating muda (waste) and how little attention we have given to mura (unevenness) and muri (overburden).”

“In short, unevenness and overburden are now the root causes of waste in many organizations. Even worse they put waste back that managers and operations teams have already eliminated once.”

“I have the following advice for managers — especially senior managers — trying to create lean businesses: Take a careful look at your mura and your muri as you start to tackle your muda.”

A powerful post. Jim is articulating what I have felt uneasy about.

Jeffrey Liker has also recently published an article “Why Lean Programs Fail”

A large survey conducted by Industry Week in 2007 found that only 2 percent of companies that have a lean program achieved their anticipated results. More recently, the Shingo Prize committee, which gives awards for excellence in lean manufacturing, went back to past winners and found that many had not sustained their progress after winning the award. The award criteria were subsequently changed.

Effective vs Efficiency

Dr. Keivan Zokaei from the Lean Enterprise Research Centre (founded by Daniel T Jones who co-authored the book The Machine That Changed the World) has much to say on the subject.

Efficiency thinking is setting the quality level as “good enough” we don’t need to strive for perfection. Effectiveness thinking is thinking about the lifetime of a product (and the effects on the whole organisation “system”) which in the long run will cost less. If we do it right first time (which might be more costly at the outset),  it actually saves our organisation money in the long run). Effectiveness is doing the right thing. Efficiency is doing things right.

Many “Lean” organisations could be doing the wrong things righter. Making things efficient that shouldn’t be done in the first place. Doing a lot of efficient things but not effective things. This is what Toyota turned on its head, following the work of Taguchi. Let’s do the right thing first, THEN we will make it efficient.

TPS is about being more effective. Focusing on quality first. This is where Toyota fell down recently. Volume (being number 1 by volume) became the goal. It used to be Safety, Quality, Volume. Toyoda has now returned the priorities back to the original order. [side note: NASA has recently released its highly anticipated report about the Sudden Unintended Acceleration (SUA) charge in Toyota vehicles. The verdict was that Toyota's electronic throttle control system is fully exonerated. The ten-month study by 30 NASA engineers found "no evidence that a malfunction in electronics caused large unintended accelerations"]

Variation in Demand

With the focus on waste removal we are not looking at variation in demand. There are times in the process when sometimes demand increases capacity and other times it doesn’t. The problem with focusing only on waste removal, and not understanding demand, is that after waste removal, when a high level of demand comes in, the organisation cant cope, we clog up the flow, we introduce waste that we tried to remove in the first place!

Toyota bizarrely built in up to 50% extra capacity into their system. They called it 8-4-8-4 (8 hours of work, 4 hours to do other things). 50% waste built into the system! If a Lean consultant, who didn’t understand variation of demand, went into that organisation they would remove that “waste” and claim it as a success The result? Toyota wouldn’t be anywhere near as successful as they are now.

Rather than utilising capacity it is better to be responsive, to be able to respond when demand arises; keeping spare capacity.

What would your boss say if you asked to have 20% spare capacity for times when demand might exceed your capacity? In the West its all too predictable what the response would be.

But, It’s what Ohno told us to do

Is it? What’s confusing is that Ohno did talk about Muda (waste); idle machines and idle people, which all looks like waste on the surface. But he also talked about having machines (and people) available when demand comes along, he talked about resourcing to the upper level (we are guaranteed to have someone/machine available when the work comes), which means that at times they would have to be idle.

Muri, Mura, Muda

Ohno talked about Muri (overburdening of people and equipment) being a root cause of waste. He talked about Mura (unevenness in operations) and the need for understanding fluctuations in demand, that variation needs to be understood well within the system. Ohno explained this is why Toyota went out to the dealerships to study that demand, with the aim of producing cars at the rate of customer demand.

Capacity

Dr. Keivan Zokaei informs us that this is what Ohno really said, and he states that this isn’t in most Lean books or in Six Sigma training

Capacity – Load = Gap

  • Capacity = work + waste
  • Load = value demand + failure demand
  • Variation is the key, especially as utilisation approaches 80%
  • Work: not faster, but taking time to do good, error free, work that satisfies customers
  • Understand variability (Mura) in capability
  • Is there sufficient system capacity to handle the load?
  • Waste: not all waste elimination adds to capacity
  • Gain intimate knowledge about your demand, smooth and get rid of unevenness (Mura)

This is counter intuitive, most managers want to sweat their assets, they want them to work 100%

They think we have x number of people, and they can do y number of jobs in a day, so that means they can get z amount of work done.

So, if they are thinking 100% what happens if your utilisation of your capacity, or capability, exceeds 80% ? You get a traffic jam effect. You have no buffer for any variation. When something comes through the system, everything just gets clogged up and stuck, and nothing moves effectively. Queues start happening, or you start multitasking without getting anything done. Cycle time goes shooting up. Even 80% is high, If you target anywhere around 80% of your capacity the chances are that things just fall apart. We know this scientifically, mathematically we can prove this, yet mangers ignore it.

If you work faster you are going to reduce quality. Instead we want to produce error free work, doing things right first time. This might prove more costly up front but saves us costs in the long run. This is exactly what Taguchi taught (the nominal value curve), what he won the Deming prize for, and what turned Toyota on its head where they redefined their definition of quality.

We want to avoid what Deming called making toast the American way

You Burn it and I’ll Scrape.

We need to understand variability or Mura. We need to understand the relationship between capacity and demand, by  studying demand being placed upon us and the variation in cycle times. We need to work on unevenness by going into the work (the shop floor) and experimenting.

Ohno taught rather than utilising capacity its better to be responsive, to be able to respond when demand arises; keeping spare capacity. [side note: Interestingly Ohno fought battles in Toyota to adopt this and first had to try it in Brazil to prove it worked, to then return to Japan.]

Ohno vs Efficiency Thinking

Efficiency Thinking: Traditional

  • Input / output. At a given input level (given capacity) maximise utilisation to increase output.

Effectiveness Thinking: TPS

  • Focus on delivering fast, responsive flow of service which will in turn reduce your Work In Progress (WIP) and improve profitability
  • Focus on “right first time”
  • You have to have “spare” capacity

What is the Real TPS (Lean)?

This is how Dr. Keivan Zokaei sums it up

  • Effectiveness thinking as apposed to efficiency thinking
  • Quality and safety first
  • Continuous improvement is a virtue in itself
  • Changing people’s thinking through doing if you want improvement

The Core of Lean is NOT about reducing waste, its about increasing capacity.