Forbes’ New Columnist: The Right Stuff?

Michael Marks, currently manager of a private equity fund and former CEO and chairman of Flextronics, has joined Forbes as a columnist writing about global manufacturing, outsourcing and offshoring.

            Marks has extensive manufacturing experience, and in his introductory column, he outlined some of the broad beliefs that will form the foundation for his writing.

            While I am encouraged by several of them, at least one of them surprised me a bit.

            Marks describes himself as an optimist who supports globalization of the U.S. economy and adding an international perspective to boards of directors.

            No argument there. However, I am intrigued by another of his statements.

 

--outsourcing makes companies more efficient and is a requirement to compete effectively

 

            That comment might seem to be at odds with lean principles. Those of us who champion a lean strategy argue that you don’t have to outsource operations to be an effective competitor.

            On the other hand, it depends on what and how you are outsourcing. Simply saying you support outsourcing doesn’t necessarily make you anti-lean

            In addition, Flextronics has received praise for its support of a lean strategy, and Marks has been given much of the credit for that direction.

            The reason I care about what Marks writes is that Forbes is widely read and well-respected. A Forbes columnist can influence what business leaders think.

            I look forward to reading Marks’ future columns. He should have some interesting things to say.

 

Developing a Process for Innovation

Can innovation be formalized into a process?

            Coca-Cola believes the answer to that intriguing question is yes.

            While attending the recent Customer Needs Discovery & Innovation Congress sponsored by the Management Roundtable, I heard a presentation on this topic by Richard Staten, senior manager for innovation business development at Coke. (See, they not only have a process, they have job titles to go with it.)

            Staten laid out, in broad strokes, what Coke is trying to do. (He didn’t provide a lot of detail, apparently because the lawyers at Coke don’t like employees to give away too much.)

            Coke has developed what it calls CIF – the Common Innovation Framework. That framework consists of three parts: Idea generation (“Feed the Pipeline”), pipeline and portfolio management, or PPM (“Manage the Pipeline”), and stages and gates (“Execute the Pipeline”).

            The goal is to build ideas into screened concepts. The steps in the process include:

• Source Concepts and Ideas


• Assess Strategic Fit and Potential Value


• Build Concept Statements


• Screen with Consumers and Shoppers


• Submit “winners” at Stages and Gates

            The screening is an especially important part of the process. Coke uses a variety of methodology to recruit and develop panels, and to obtain input from them. They also use a variety of analytics to evaluate ideas.

            One example Staten cited of a product whose development and marketing were influenced by this process is Diet Coke Plus, a new version of Diet Coke with vitamins and minerals added.

            As I said, his presentation was at a high level, so it was a bit difficult to see exactly how this process works.

            But I thought it was a topic worth discussing here. Product development is just as much a part of business success as actual manufacturing, and having a process to do that is the start of a lean approach.

            One of our more popular books is The Toyota Product Development System, by James Morgan and Jeffrey Liker, which also focuses on this key issue.

            Is innovation the result of process as well as pure creativity? How does your company focus on innovation? Post your comments below.

 

What is your favorite lean book?

Have you read a book about lean that you felt really helped you improve your business? Or one that gave you an understanding of some aspect of lean principles you never had before?

            And why was that book so good?

 

            Here at the Lean Insider blog, we’d like to find out what you believe are the best lean books. Which book (or books) would you recommend to others? Which one had the greatest impact on your lean transformation?

 

            Equally important, why did you find the book so valuable? Was it because it explained lean concepts clearly? Did it provide a step-by-step lean implementation plan? What did it tell you that you didn’t know before?

 

            A blog is a means of sharing insights, and that’s what we’re trying to do. Register (if you haven’t already), log in and post a comment. Your thoughts could be a valuable resource for others trying to decide what to read next.

A Lean Approach Improves a Medical Laboratory

The latest news about lean principles being applied to healthcare comes, appropriately, from the Henry Ford Health System in Detroit.

            In an article being published in the September 2007 issue of the American Journal of Clinical Pathology, researchers describe how they used what they describe as “deep and honest self-analysis and the concerted effort of all workers” to improve operations of the laboratory, which is the 15^th largest lab in the U.S. The institution processes more than 6.5 million specimens annually.

            A news release describing the article reports:

         The new system has resulted in more than 100 improvements, each making a small but effective enhancement to the quality and timeliness of care. For instance, they have implemented the use of bar code-specified work processes to reduce specimen identification and work product defects, and results for routine biopsies have improved from 73 percent being completed in one day to 92 percent being completed in one day.

'The Henry Ford Production System is not just about waste reduction but adopts the best of the Toyota Production System's approach to people,' said co-lead researcher Richard J. Zarbo, MD, DMD. 'To be successful in using manufacturing-based approaches to quality requires nothing less than a complete cultural shift in the American workplace that gives every worker and manager a way to design their work in a blame-free and cooperative environment thereby unleashing their profound creative potential.'

            I don’t usually hear people talk about the “Henry Ford Production System,” but we’ll let that one pass.

            How did the staff achieve the improvements?

         Zarbo and co-author Rita D'Angelo, MS, ASQ CQE, SSBB found most helpful the use of a mounted visual data display poster to enter defects, rate their importance and their root causes. Six Sigma performance metrics were then utilized to make choices to improve quality.

The team redesigned specimen sorting to eliminate redundant steps, standardized tissue size to eliminate cassette opening during processing, and implemented action alerts to flag cases for critical values.

            Sounds like classic applications of lean approaches.

            What is particularly encouraging about this report is that it is being published in a clinical journal, which is read not by manufacturing people who have already heard about lean ad infinitum, but by healthcare professionals who are only beginning to hear about it.

            Good news.

 

Beyond the Theory of Constraints: The Key Issue

            I previously wrote about the new book Beyond the Theory of Constraints: How to Eliminate Variation & Maximize Capacity and how its author, William Levinson, challenges traditional thinking about the theory of constraints. He argues that it is possible to eliminate variation and operate a balanced factory at 100 percent capacity. Eli Goldratt and Jeff Cox, when they first presented the theory of constraints in their book, The Goal, claimed this could not be done.

            Now that the new book is available, I invited Bill Levinson to describe in his own words the key theme of the book. Here are his comments:

 

            When manufacturing professionals think of variation, product characteristics are the first issue that comes to mind. Beyond the Theory of Constraints argues, however, that variation in processing and material transfer times must be taken as seriously as variation in product characteristics.

 

            Variation in product characteristics is a major obstacle to 100 percent quality, and variation in processing and material transfer times prevents achievement of 100 percent throughput. This is not to say that 100 percent equipment utilization, which is often a dysfunctional performance goal, should be the ultimate objective. On the other hand, Henry Ford showed that this utilization is approachable if the variation can be suppressed, and the book covers the methods he used to do this.

 

            Even if the factory does not need to increase its capacity utilization, variation also increases cycle time. On-time delivery is a major competitive advantage, and the ability to make to order instead of to forecast can provide an overwhelming advantage. Its achievement, however, requires sufficiently short lead times between order placement and order fulfillment. Long cycle times work against this consideration while increasing inventory in the bargain.

 

            All variation comes from two sources: assignable or special causes, and random or common causes. Beyond the Theory of Constraints shows that a substantial portion of the variation is not random, and that factories and service organizations can often remove it. The chief obstacle to its removal is often failure to recognize it, because people become used to living with it or working around it. This is one of the book's central themes, and lean manufacturing experts like Henry Ford, Shigeo Shingo, and Taiichi Ohno point out that it applies to all forms of waste. Plant personnel, including frontline workers, can be trained and empowered to recognize the variation, and there are analytical techniques that can force it to become visible.

           

The major factor that prompted me to write the book was the obvious discontinuity between the statement in The Goal – “Why do you think it is that nobody after all this time and effort has ever succeeded in running a balanced plant?” – and Henry Ford's statement, “The idea is that a man must not be hurried in his work—he must have every second necessary but not a single unnecessary second.”

 

Ford succeeded in doing what The Goal says is impossible, and this led me to investigate how he did it: namely, by treating variation in processing and material transfer times as seriously as modern quality practitioners treat variation in product characteristics.

 

             

Is Emergency Room Expansion Really Necessary?

A recent news story about a hospital construction project concerns me, as I fear it may be an example of a healthcare organization that doesn’t get lean – and may have spent a lot of money unnecessarily as a result.

            The story in the Houston Chronicle involves Memorial Hermann Northeast Hospital near Houston and the construction either planned or recently completed there.

            The story describes how the 255-bed hospital, which employs 1,200, is going to be spending almost $9 million to improve or repair the roof, boilers, chillers and other equipment. No problem there.

            The plans announced by new CEO Keith Alexander also include spending as much as $10 million on computer updates. I’m a bit skeptical about that, but it may be perfectly legitimate and justifiable.

            However, the information that really raised my eyebrows was this:

            The hospital recently completed a $2.5 million expansion to the emergency department, which now has 40 treatment bays.

'With these improvements we hope to dramatically reduce the waiting time in emergency care,' he said.

            The article doesn’t say how many treatment bays there were before the expansion, but clearly the number has increased.

            The problem is the mindset that appears to be behind the expansion: If patients spend too much time waiting in the emergency room, it must be because there aren’t enough treatment bays.

            I’m guessing it never occurred to the people in charge at this hospital that capacity has as much to do with flow as with physical facilities. They may have no understanding at all that waiting times can be reduced without any expansion.

            In fairness, the hospital was also recently recognized as one of the top 100 hospitals in the country that, according to a news release,

 

            …have made the greatest progress in improving hospital-wide performance over five consecutive years (2001-2005). According to the award criteria, the 2006 Thomson 100 Top Hospitals®: Performance Improvement Leaders have set national benchmarks for the rate and consistency of improvement in clinical outcomes, safety, hospital efficiency, financial stability, and growth.

 

            However, that award doesn’t necessarily mean the hospital is a leader in applying lean principles. And if they felt a need to expand facilities to reduce emergency room waiting times, I suspect they aren’t.

            What you don’t know about lean can hurt you. Ignorance is not bliss.

 

The User-Centered Approach at Intel

One key to the success of Intel is that the company works very hard to learn what consumers want in a computer – even though Intel doesn’t make computers.

            That was clear from a presentation I heard at the recent Customer Needs Discovery & Innovation Congress, put together by the Management Roundtable.

            Herman D’Hooge of Intel, who holds the title of Innovation Strategist (Wouldn’t you love having a title like that?) described what he called Intel’s user-centered approach to developing products.

            In broad strokes, D’Hooge talked first about “looking out” toward the user to find needs and problems. The next step is translating the user needs into compelling user experiences. Finally comes “looking in” toward implementation and solving technical problems.

            In concept, being user-focused is a good approach for almost any company. And I was pleased to hear D’Hooge say, “this is as much about process as it is about culture.”

            However, what I found particularly fascinating is that the user, in this case, is not Intel’s customer. Its customers are the computer manufacturers who buy Intel’s silicon chips.

            But as D’Hooge noted, customer needs “actually do place requirements on what goes inside your computer.” Even more striking is the fact that Intel devotes itself to consumer research, rather than leaving it to the manufacturers who design and build the computers.

            This is an important lean issue. Lean is all about providing value to the customer. And even though the user here is not the customer, what the user wants drives development for both Intel and its customer. Therefore, the value sought by the customer – the computer manufacturer – has a lot to do with what constitutes value for the consumer.

            I don’t know whether Intel is actually a lean company, in the sense of being dedicated to the principles and strategies of lean. But if they aren’t, they’ve got a good foundation for becoming one.

            One example D’Hooge described had to do with computers developed for an Internet café in China. Use of computers at such Chinese cafes is different from what happens at American Internet cafes. In China, customers will sit at a computer for hours playing video games, at tables with small, cubicle-like partitions separating individuals.

            Research into the behavior of these individuals led to new features on the computers used there. One was the ability to store music on the machine, so the user could listen while playing. Another was a button that called up a menu on a small, separate screen, to be used for ordering food. This made it possible to place the order without forcing the user to abandon his game.

            (D’Hooge described this example briefly, and it wasn’t clear to me who actually manufactured the computer or exactly what modifications might have been made to Intel chips as a result of the research. However, Intel was clearly involved.)

            Most importantly, Intel understands that this kind of strategy goes to the very core of a company. D’Hooge talked about the need for establishing “a systemic user-centered capability and approach,” which he described as a multi-year process that involves “changing the DNA” of a business.

            It does indeed.

 

Lean IT Gets Some Good Publicity

It’s always nice to read about organizations that reap benefits from adopting lean strategies. I found one recent article especially interesting because its focus was a type of organization that isn’t the typical setting for lean initiatives.

            The article, from CIO magazine, is about the IT department at Acuity Brands. Writer Stephanie Overby explains how Pat Quinn, VP of information systems and technology, overcame cultural resistance to make his department lean.

 

Quinn was charged with providing systems to enable the manufacturing changes. But as he learned more about lean tools and techniques for cutting waste and enabling continuous im­provement, he saw that IT could benefit from them as well. “Eliminating waste doesn’t just apply to scrap metal. It can mean eliminating the waste of intellectual property or human resources or anything else,' he says.

 

            Through a series of kaizen events, the department began putting the concepts into practice.

 

Results have ranged from finally weaning the company off IBM mainframes in use for 20 years to transitioning corporate headquarters (and 175 call center agents and 25 apps) to VoIP in less than two months.

 

            And even though Quinn was a believer in lean, even he was surprised by some results.

 

One lean event revealed that application development could be greatly improved with pair programming—multiple programmers working together on code. 'I thought, there’s no way that's going to work,' says Quinn, a former programmer himself. 'But I was completely wrong.'

 

            I was pleased by the fact that this article was generated by a magazine written not for manufacturers, but for IT professionals. That’s the kind of publicity lean needs.

 

 

A Nightmare of Delays for the Dreamliner

A recent report about work on the new 787 Dreamliner suggests that Boeing, which has long embraced lean strategies, didn’t apply them as well as it could have in planning assembly of the new aircraft.

            Boeing has already received its share of criticism on the Dreamliner, particularly from Kevin Meyer at the Evolving Excellence blog. Kevin has pointed out that key sections of the Dreamliner are manufactured in a variety of far-flung locations, then flown long distances to Everett, Washington, for final assembly. That involves a lot of transportation waste that is clearly not lean.

            Now comes a report from the Flightblogger, written by Jon Ostrower, that Boeing has delayed delivery of major structural parts for the second Dreamliner while employees work feverishly to finish the first one.

            Ostrower writes:

 

Put simply, there is a small bottleneck inside of Building 40-26 at the Boeing factory in Everett interfering with deliveries. Two of the four final assembly positions are in use. The first position in the rear of the factory is occupied by the Static Rig (ZY997), the second by Dreamliner One (ZA001).

Dreamliner One continues to undergo extremely extensive structural and systems assembly and is currently jacked up off its landing gear surrounded by scaffolding, making the forward movement to make way for the Static Rig difficult until it returns to pavement…

 

With Dreamliner One in its current position, there is no room in the rear of the factory to begin final assembly of the Fatigue Test Rig or Dreamliner Two. Delivery of Dreamliner Two structures from South Carolina, Kansas, Japan and Italy were all initially planned for an August 18 timeframe.

In addition, Dreamliner One still has yet to have its tail, engines, wing-body fairing, flaps and landing gear doors reinstalled following a comprehensive disassembly which occurred after the July 8th roll-out ceremony.

'Boeing is doing everything they can to finish the job but there are jobs that just cannot be sped up,' said one Boeing employee with knowledge of the program.

Testing on the Static Rig needs to take place three doors down in Building 40-23, which is located between the 747 and 767 final assembly lines. Before the Static Rig can move to Building 40-23, Dreamliner One must be rolled out of the factory. The width of Building 40-26 is only large enough to accommodate one 787 at a time.

 

            I understand that a commercial aircraft is big, and there are limitations to how much work a building can accommodate, even at the massive Everett complex. But still – did no one see this coming? Was there no kaizen activity in planning construction of the Dreamliner that would have avoided this?

            Meanwhile, according to Ostrower,

 

Boeing hopes that by delaying deliveries to Everett, they can allow the 787 subcontractors to more fully complete the assembly of follow-on aircraft fuselage sections.

 

The deferment of assemblies will allow for independent work to be done outside of Puget Sound, enabling the Everett-based final assembly and delivery team to continue its focus on Dreamliner One. Once Dreamliner One has been fully assembled, the follow-on fuselage structures can be joined in less time in hopes of keeping the flight test, certification and delivery on track.

 

            So in other words, they’re asking suppliers to take on more of the work because they can’t get it done in time themselves? Is this any way to run an aircraft manufacturer?

 

            There are certainly people within Boeing who understand lean. I hope they put their skills to use to improve the situation so this doesn’t happen again.

 

Supporting Lean: Medicare Won’t Pay for Medical Mistakes

Medicare will no longer pay for treatment of certain preventable medical mistakes, it was widely reported this week. That’s a good thing for many reasons. One is that Medicare’s previous willingness to pay undermined efforts to apply lean principles to healthcare. More on that in a moment.

            Medicare’s new rule applies to eight conditions, and more are likely to be added to the list. The eight are: objects left in a patient during surgery; blood incompatibility; air embolism; falls; mediastinitis, which is an infection after heart surgery; urinary tract infections from using catheters; pressure ulcers, or bed sores; and vascular infections from using catheters. 
            One story notes that

 

            Last year, Mark McClellan, then director of the Medicare and Medicare programs, said the government could save hundreds of millions of dollars a year if the Medicare program stopped paying for medical errors such as operations on the wrong body part or mismatched blood transfusions.

 

            What does this have to do with lean? A lean strategy focuses on providing value to the customer, and a generally accepted definition of value is that which the customer is willing to pay for. So since Medicare was paying for fixing these errors – rework, you might say – hospitals had no incentive to reduce the number of errors (other than their desire to do the right thing).

            Look at it this way: If you are a manufacturer, and your customer pays for the products you produce, then is willing to pay you again to fix the products if they prove to be defective, would you have any reason to eliminate defects?

            Some of you may be thinking, wait a minute: Isn’t the patient, and not Medicare, the hospital’s customer? That depends on how you look at it. I would argue that, in at least some situations, the customer is the person or organization that provides payment – in this case, Medicare.

            This parallels a statement I heard last week at a conference on customer needs. A speaker from a consumer product manufacturer described a distinction that seems relevant here. The individual who goes into a retail store and buys the product (the end user), he said, is the CONSUMER. But the retail store, which actually pays the manufacturer for a supply of the product, is the manufacturer’s CUSTOMER.

            However you look at it, Medicare’s decision is a powerful additional incentive for hospitals to improve operations. I hope those who promote the concept of lean healthcare will use this new financial reality as a selling point for their efforts.