Nov 26, 2008

Schmula interview with Zappos CEO

Pete Abilla, has a good post today on Schmula. It's an opportunity for a Q and A with Tony Hsieh, who has built a culture and a company that wows the customer consistently - It is a shoe paradise. From couture to sturdy walking shoe, it's all there. I don't know how they make money, since you can order an unlimited (as far as I know) number of shoes at one time and then return them all - free. So I posed the question and will see how he answers.

Worth a look.

Nov 19, 2008

Steve Spear's new book - read it!

Chasing the Rabbit: How market leaders outdistance the competition and how great companies can catch up and win

In this book, Steven Spear’s years of observing Toyota* and his studies of other companies, both successes and failures, have led him to distill a set of principles other organizations can use to be more successful. Spear indicates that great leaders seem to practice them instinctively, yet it is not easy for them to articulate exactly what they do. That makes it difficult for the rest of us to understand what makes them good leaders.

Spear says that simply copying what Toyota does, for example, is not going to replicate the thinking behind how Toyota manages its business. Do you have to be steeped in the culture of Toyota, as Spear was, in order to fully absorb the way it does things? That’s an option that few people have.

Spear says that it is possible to discover patterns in Toyota’s practices, to make explicit what is implicit knowledge at Toyota. When Spear and Hajime Ohba, general manager of Toyota’s Supplier Support Center happened to go on some of the same factory tours in Japan in 1995, Spear paid close attention to what Mr. Ohba did. He saw that Mr. Ohba asked the same questions on every tour, and asked them of the people working as often as of the executive guiding the tour. Whenever possible, he asked to start the tour where the end product was being shipped to customers.

What was he looking for? Pathways, connections or handoffs, and what work was being performed. Mr. Ohba was looking at process and how processes combine to form systems. That’s different from saying that the only way to learn how Mr. Ohba looked at a plant is to spend years accompanying him.

As a scientist, he observed what leaders at Toyota and at other organizations did until he could see patterns and derive a theory to explain the phenomena. From that theory, he extracts a view of complex processes and systems and an explanation for why organizations can’t make them work effectively. Then he tells us of four capabilities he found in great leaders and great organizations.

The first thing he establishes in the book is the character of complex systems. Our typical experience is that some group of people will create a system that accomplishes some goal – basically, they will think it up. It’s guaranteed that things will go wrong because no matter how much study these people do, they can’t think of everything. Then they get the blame for producing a flawed process. In turn, they blame sponsors for not including everything in their specifications, or users for not following processes as they envisioned them.

Spear says, face it, there will be unanticipated problems in any system, so have a process for identifying them and responding. In the book, he shows us how Toyota, Alcoa, and the Navy Nuclear Power Propulsion Program approach that reality successfully, and how an unnamed hospital, NASA, and others ignore flaws in their systems with tragic consequences.

His other fundamental observation of most organizations is that they are divided functionally, while processes don’t respect those boundaries. (This isn’t news to lean thinkers, of course.) People in one silo don’t know much about what happens in another or how their action may create problems for them. I spoke to Steve Spear a few weeks ago, and he offered a great illustration. In one hospital he visited, the carpeting in the administrative offices was a different color from that of the clinical departments. If you crossed the boundary, you were well aware that you were in someone else’s territory.

Spear tells readers that if you want to improve processes, you have to fully appreciate that systems are complex and problems are normal. Because they span those functional silos, problems are difficult to solve unless you can bring people from different parts of the organization together and they learn good team problem solving methods.

Actions of separate departments can be integrated, but only if leaders at a level that includes them in their scope of authority don’t sit back and leave problems to someone else. They have to own them and get involved in the problem-solving process.

Four capabilities
Spear tells us that high-velocity companies like Alcoa and Toyota accept that systems are complex so problems are normal, and, because processes cross boundaries, so must problem solving. He says these high-velocity organizations have four capabilities in common, and any organization can develop them through never-ending learning.

In a way, Spear leads the reader in probing deeper levels of each capability by giving them more complex names in successive chapters. After a first encounter with Capability One, in an introductory chapter, where it is described as “Specifying design to capture existing knowledge and build in tests to reveal problems,” it is framed much more simply as Spear begins to develop his theme. The next time the reader finds Capability One, it is called, “Seeing problems as they occur.” In a later chapter, its description has evolved into “Capturing the best collective knowledge, and making problems visible.” When we get to the chapter that focuses solely on Capability One, it has become “System design and operation.”

This name changing has its positive and negative effects. It causes the reader some difficulty in recognizing the principle when it is phrased differently so often. On the other hand, it may develop that ever-deeper thinking needed to understand how organizations like Toyota continue to vault ahead of the competition.

Whatever the effect, there you are. The four capabilities (as described at their simplest in the chapter on Alcoa) are:

C1 – Seeing problems as they occur.
Noticing a problem seems like a given, but not all problems are easily seen. Some have been there so long that they seem like part of standard practice. The key is to look at processes and design them to show problems. From sophisticated instrumentation on complex equipment to mistake-proofing devices in simpler processes, mechanisms are necessary to make problems visible and surface them for attention.

C2 – Swarming and solving problems as they are seen.
No workarounds! Don’t require someone to report a problem to be solved by somebody else at another time. For one thing, critical information is lost quickly—scrap or defective parts thrown away or commingled with others, containers or remnants of materials mistakenly used in the process, lost or discarded. Swarming means that if a process crosses boundaries, problem-solvers from each area have to be ready, able, and willing to get together and share their knowledge to find a solution or countermeasure. The problem is corrected, and prevented from recurring.

C3 – Spreading new knowledge.
A process improvement in one cell or one plant can be implemented in many, if the new knowledge is shared. Does the company have frequent training programs, networking or exchange opportunities, communication among leaders across functional areas? Constant attention to learning and sharing is required. It takes more than building a little-used database of best practices. Communication about them must be active. They should be tested for improvement constantly, and those new methods fed back into the loop.

C4 – Leading by developing Capabilities 1,2 and 3.
This one’s interesting. It doesn’t mean signing off on a training program. It means having leaders at the highest levels understand the work done by the organization in enough detail to communicate with the people doing that work.

Leaders need to be teachers themselves. They need to be coaches. It might be a regular Socratic exchange as Admiral Hyman Rickover was known for, or VPs teaching frontline workers about problem-solving and engaging with them in practicing what they’ve learned. It might be the way Paul O’Neill, as CEO of Alcoa, using a focus on safety to lead to all sorts of improvements. He was known to personally explain to visitors where to find emergency exits and what to do in case of an emergency.

From theory to practice
The test of theory is whether it works consistently when applied to different situations. That’s going on through the Toyota Supplier Network (TSN) and Bluegrass Automobile Manufacturers Association (BAMA). The extended Toyota supply chain is learning about continuous improvement incorporating Spear’s model.

One such company not described in the book is DTE Energy, a gas and electric utility based in Detroit. When I spoke to four senior leaders there in September, they were quick to rattle off the phrase, “C1 to C4.” That “everyone knows what this means” assumption must have come from a constant repetition of those principles among peers and employees. When these leaders had spent a week learning about the four capabilities in classroom and shop floor training at Autoliv in Utah, they were excited enough to drop everything, to get out of their offices and into the field to institute a new approach to solving problems and improving processes. Many, many small incremental gains have been made. Sticking with the principles over the long haul will be the challenge for DTE, but executives are well aware of the risks involved in letting the process fall by the wayside.

Could the book have been improved?
What do I think could have been better in this book? I hate the title--“Chasing the Rabbit: How market leaders outdistance the competition and how great companies can catch up and win.” It doesn’t sound like Steve Spear’s voice as I hear it in the book, and I just get the feeling that some marketing person gave the book a quick look and came up with the title. It’s gimmicky.

I also wish there was an appendix with more details about Spear’s research methods and the data that led to his conclusions. The extensive endnotes are helpful and the list of references is superb. His reading has clearly been comprehensive. (I, for one, can’t wait to read more about Admiral Rickover.) I take it on faith that Spear has done his homework, given his reputation, writing, and his work with the Toyota Supplier Network and Institute for Healthcare improvement.

I agree with Paul O’Neill, former CEO of Alcoa. On the back of the book, he says, in essence, that everyone aged 15 and older should read it and apply the principles everywhere. I’d add that everyone should read it at least twice, and again as their experience with improvement grows.

Serious recognition and practice of the four capabilities have saved lives, money, and all sorts of waste, and there’s a whole lot of improving to be done. Getting a handle on the nature of complex processes and the four capabilities of companies who consistently outperform others should be a priority for all lean champions and practitioners.

My greatest wish is that leaders in President-elect Obama’s administration find the book, invite Steve Spear to advise them, and find a way to deliver on the perennial promise of improving government.

*Spear is known to many students of lean for the insightful Harvard Business Review article he wrote with Kent Bowen, “Decoding the DNA of the Toyota Production System.”

Nov 15, 2008

Dearborn dealer taps belief in Ford

(It's hard to believe it's been so long since I posted - the book about the Danny Boy Marathon is almost done!)

In Dearborn, Village Ford, a local dealership, gave away shares of Ford stock just for taking a test drive in a new 2009 Ford. General Manager Bob Wheat told the local Dearborn paper, the Press & Guide, "Showroom traffic was unbelievable last week. We had a 100 percent increase in visitors from the previous week and we had our best sales week of the month because of it. Customers like the idea of getting Ford stock.

"The best part was to hear how optimistic everyone was about the stock gaining value. Perhaps this is an indication of things to come for Ford, judging by the behavior of the people in Dearborn.

"Last week we had folks driving from 20 miles away for Ford stock," he said.

This week, Village Ford offered 100 shares of stock to everyone who buys or leases a new Ford car or truck through Nov. 19. Wheat said," Our customers asked us to expand the promnotion to give them more stock. They liked the idea of getting something that could grow in value."
Copyright @ 2005-2014 by Karen Wilhelm