Norway is a Lean Leader? Who Knew?

One of the global leaders in getting new products to market quickly is… Norway.

Norway?

Yes, according to a new study by the Center for Global Innovation at the USC Marshall School of Business.

According to Industry Week, the Center found that Japan and Norway both introduce products faster than the United States. I would expect Japan to be in that position, but Norway took me by surprise. What do they make in Norway?

By the way, before anyone starts nitpicking about my headline on this posting, no, the study did not actually talk about lean, just time to market. So yes, maybe my headline is stretching things a bit.

How did the two professors who conducted the study – Gerard Tellis and Deepa Chandrasekaran – come to their conclusions? The Industry Week article says the study is “based on 430 product categories over 50 years in 31 nations.” It doesn’t say exactly how time to market was measured.

That makes me wonder. Fifty years is an awfully long time, and I don’t know how, if at all, the study takes into account improvements that might have occurred during that time in the processes by which products are brought to market.

Also, there is only so far you can go in drawing conclusions about entire countries. Companies, not countries, bring products to market. The findings may lead to some insights about how national cultures affect business cultures and operations, I suppose.

Still, I find this interesting. There was also one other interesting, if not too surprising, finding:

The study also concludes that time-to-takeoff of new products varies greatly between products considered "fun," such as cell phones, with a distinctly shorter takeoff than those products equated with work, including clothes dryers.

What does it all mean?

The report could help companies develop strategies for launching new products. "Managers are facing an intensely competitive market, characterized by increasing globalization, more frequent new product launches, and shorter life cycles," Tellis says. "In such markets, they need to know which nations are most innovative, where to launch new products, and whether to do so with a sprinkler (simultaneous across nations) or waterfall (stagger across nations) strategy."

Perhaps. Any insights that can help a company be more competitive are useful.

And maybe you can find those insights in Norway.

Gasoline Refiners Have Trouble Listening and Thinking

I’m a little mystified by the way gasoline producers approach issues of supply and demand.

A key lean principle is to produce what the customer wants and – ideally – exactly the amount the customer wants. No more, no less.

But production of gasoline seems to be based primarily on the price producers can get, not necessarily on how much the consumer wants. In addition, the decisions some companies are currently making about production don’t seem entirely rational.

A recent posting in the Environmental Capital blog of The Wall Street Journal notes that both oil and gas prices have fallen sharply. But the cost of turning crude oil into gasoline remains high. The result:

Turning crude oil into gasoline is now a money-losing business. A barrel of refined gasoline is worth $2.84 less than a barrel of oil, Reuters reports; earlier this year, gasoline fetched a hefty premium of more than $30 a barrel.

As a result, some refiners, including Sunoco, have cut back production. But not all.

What’s surprising is that U.S. refineries are still producing so much despite the dismal economics. Though U.S. gasoline production slipped last week, refiners still produced more gasoline in mid-October than they did at the same time in 2007, even though demand for gasoline has dropped dramatically in recent months. The outlook for 2009, with a recession looming, isn’t any brighter.

There seems to be a real disconnect between what refiners think should be produced and consumer demand. That shows an absence of lean thinking on the part of the refiners, who should be focusing on what (and how much) the customer wants.

There is also an absence of lean thinking on the part of Keith Johnson, who wrote the blog post. He says:

Given gasoline’s poor returns right now, refiners have a couple of options—and neither one would be good for American drivers recovering from record-high gasoline prices. They can take capacity off-line, as Sunoco is doing, in the hopes that “standing on the hose” will keep gas prices steady. Or they can try to re-jig refinery output to focus on products that offer better returns, such as diesel or jet fuel.

He left out the third, lean option: Improve the processes by which gasoline is produced to lower the cost of those processes, so it is still possible to make a profit (or at least lose less money) selling gasoline at lower prices.

Maybe the recent drop in consumer demand for gasoline will serve as a wake-up call for the refiners. We can hope.

Healthcare Association Head Needs to Learn About Lean

The president of the Blue Cross Blue Shield Association seems to understand the need to eliminate waste from healthcare. Unfortunately, he doesn’t have a good handle on what needs to be done.

The New York Times just published an interview with Scott Serota, the association’s president and chief executive. One of the issues he discussed was the need to eliminate waste.

Our goal is that health care costs rise no faster than any other goods and services. The essential fundamental to getting there is improving the underlying system because 30 percent of care rendered today, according to some studies, is unnecessary, redundant and, in some cases, even harmful. We need to get waste out of the system. That means $700 billion in a $2.4 trillion system.

I’m talking about a whole battery of things like duplicative testing such as two M.R.I.s instead of one or hospital-acquired infections.

That certainly sounds like (and is) an opportunity to apply lean principles. Or six sigma. Or other improvement methodologies where it has been proven over many years that they work.

But Serota apparently is not aware of all that:

The cornerstone of how we get at this is creating a comparative effectiveness institute to study what treatments really work best for a given condition — and letting everyone know what works. There is legislation on this pending in Congress.

Just what we need – a new bureaucracy to conduct a study to tell us what we already know.

I also take issue with Serota when he talks about the decision by Medicare and some insurance companies (including some of the blues) to stop paying for treatment of avoidable medical mistakes, known as “never events.”

On the one hand Serota acknowledges the impact these decisions have:

If they are no longer getting reimbursed for those costs, institutions will be very aggressive in eliminating those events.

That’s the point, isn’t it? But then Serota questions the approach:

Not paying for them is the end point… We’re trying to figure out mechanisms to help them improve their performance. Then we’ll tie reimbursement to performance. These events are a huge problem where we haven’t made a lot of progress over the last 10 years. We have to fix it, then adjust the financing.

It sounds like he’s saying we should stop paying for mistakes after we stop making them, or at least after we know how to prevent them. I guess no one ever taught him the value of a “burning platform.”

With any luck, the drive for the “comparative effectiveness institute” Serota mentions will be abandoned amid growing awareness that some healthcare institutions have already found approaches that work, such as lean. However, I’m not too optimistic about that. Drives for new bureaucracies sometimes take on a life of their own, regardless of the facts.

Mistake-Proofing Cell Phones for Drivers

Sometimes the lean tool of mistake-proofing prevents people from doing something stupid. And sometimes people do stupid things while driving.

I wrote recently about how Ford is creating a car key that can be programmed to prevent the car from going above a certain speed. It is being marketed to parents whose children have reached driving age and may be inclined to drive too fast. The key can also prevent the radio from being played too loud and encourage the use of seat belts.

Another stupid thing young people – and old people – do is talk on their cell phones while driving. Many states have passed laws banning the practice unless the phone is hands-free (although studies have shown hands-free phones may not help because the driver is still distracted by the conversation).

But a law is not mistake-proofing. Mistake-proofing is when you make it impossible for a person to make a mistake (i.e., do something stupid).

I would have thought it was impossible to mistake-proof talking on a cell phone while driving. But a CNN article made me realize that I underestimated what technology can do.

Aegis Mobility, a Canadian software company, has developed software called DriveAssistT that will detect whether a cell phone is moving at car speeds. When that happens, the software will alert the cellular network, telling it to hold calls and text messages until the drive is over.

The software doesn't completely block incoming calls. Callers will hear a message saying the person they're calling appears to be driving. They can hit a button to leave an emergency voice mail, which is put through immediately…

Aegis' software will work on phones with Windows Mobile software, popular for "smart" phones, or Symbian software, used in phones from Nokia and Sony Ericsson. It uses the phone's Global Positioning System chip to detect motion, aided by the cell-tower signal. If the phone has a Wi-Fi antenna, that can be used as well, said Dave Hattey, Aegis' CEO.

To work, the software has to be supported by the cellular carrier. Aegis has no deals in place yet, but is in discussions with the big U.S. networks, said Teater, who is a vice president at Aegis. The company hopes to be able to announce early next year that the software is available through a carrier, probably for $10 to $20 per month for a family.

The software can be managed remotely through a Web site. For instance, parents will get alerts if their kids override the motion-sensing feature to indicate that they're riding in car rather than driving. A corporation that buys the software for their employees can do the same.

What will they think of next?

Green Initiatives Present New Challenges

The biggest challenges for companies trying to become green include figuring out how to measure what they do, and integrating lean initiatives with other forms of improvement.

Adam Zak, head of Adam Zak Executive Search, offered those thoughts when I spoke with him recently.

Adam’s experience is in recruiting people to fill lean jobs, not in overseeing environmental initiatives. But he knows a lot about how companies are run – and he sees what is happening today.

“Lean and green are becoming intimately intertwined, although most companies haven’t figured out that by doing lean they are achieving green objectives – because they haven’t figured out how to measure green,” he says. “What people are struggling with is, what do you measure and how do you measure green, and how do you define that?”

Equally important, if not more so, Adam believes, is the way different efforts are disconnected.

He comments, “What I’m seeing, and it’s just the tip of the iceberg, is that people are trying to figure out how to meet what used be variety of objectives. They are telling me they are doing green over here, lean over here, and there is a third silo, product innovation or R&D. They are all using language that is similar and should be connected.”

Growing numbers of companies have a person with the title of CSO – Chief Sustainability Officer. But Adam argues that “We should be creating a new breed of CSO who has his fingers or hands on the levers of the lean activity, the innovation active, and the green activity.”

Do you agree? What is your company’s experience with pursuing green initiatives? Post your comments below.

Lean Jobs: The Market May Be Slowing Down

Because of the financial crisis, there may be fewer lean jobs available in the near future – and the jobs that are available may require a broader range of skills.

Also, anyone considering changing jobs should look carefully before they leap.

Those are the views of Adam Zak, head of Adam Zak Executive Search, a company that specializes in filling lean jobs.

I’ve written in the past about my conversations with Adam, but we hadn’t spoken in some time – not since well before the current crisis.

Right now, Adam says, he has his hands full with plenty of searches. But he sees signs that the overall job market may be slowing down.

“We’re hearing people talking about deferring or delaying,” he said. “There’s just so much uncertainty. People that were planning on hiring in the 4^th quarter for the 1^st quarter – everything’s up in the air across the board. I can’t read the tea leaves yet. I’m getting very mixed signals.”

In addition, he said, more companies are “looking for people who can wear more than one hat. Now they’re saying what they really need is a person to do the operational role and also wear the lean hat. They can’t justify the additional headcount.”

Also, “I don’t have evidence, but I have some stories, that in the $85,000 to $125,000 range, there is going to be a dramatic decrease in the number of people brought on board,” he commented. (Adam’s firm generally handles searches only for positions of $150,000 or higher.)

Adam believes that companies today have a better understanding of lean. “More and more companies are understanding that lean isn’t just about tools. It’s about mindset, about engagement, it’s about business growth. Lean is not about stuff, it’s about truly improving our business. Even at more junior levels, people need to focus not just on ‘what am I doing on the shop floor,’ but ‘how is it affecting our business, our strategy, our customers.’ It’s not about being a technician as much as it once was. It’s about what are we doing through lean to drive our business.”

Every crisis contains some opportunities. For employers, Adam advises, “In times where there is a difficulty in the marketplace, if you in your business can make a projection that says you are going to successful, now is a great time to recruit people from your competitors, who may not be as strong as you. (Candidates) might consider making a switch if you are the stronger player. It’s a great time to build bench strength and recruit stars.”

However, he urges job-seekers to proceed with caution. ” For people making a job change, I would always suggest, but especially in times like this, that you not jump away from something, but look to be attracted something. Just because your company doesn’t have brightest prospects doesn’t mean its time to bail. You have to look at what a new potential employer can offer you that’s better. Make a move that’s good from a career perspective. Due diligence is just as important, if not more important, in this economic scenario.”

Adam also had some interesting thoughts regarding the growing focus on both lean and green (environmental) issues. I’ll discuss those in my next posting.

Mistakes on Specimen Bottles Prompt a Lean Study

Radio-frequency identification (RFID) tags on specimen bottles can help reduce errors in biopsy analysis, according to a new study by the Mayo Clinic.

That may sound like a fairly narrow, clinical issue, but I suspect it is bigger than that. And the study contains some intriguing suggestions of a lean approach.

The study, reported by The Washington Post, notes that the clinic’s Gastroenterology and Colorectal Surgery outpatient endoscopy unit (how’s that for a name) sends out more than 30,000 specimen bottles a year for pathologic reviews. And that is just one clinic.

How often do errors occur? The article says the study found 765 errors out of 8,231 specimen bottles (that’s 9.3 percent), with the errors consisting primarily of either the wrong patient label or no label being affixed to a specimen bottle.

But the rate dropped to 47 errors out of 8,539 bottles (0.6 percent) after a quality improvement initiative.

And from a lean standpoint, that is the interesting part. Use of technology like RFID tags is not in itself lean. But the decision to recommend the tags stemmed from a focus in the initiative on “correct data creation and transcription point reduction,” according to a news release. That sure sounds like an effort to find and attack the root cause of the problem – which does sound lean.

The Post article doesn’t discuss the consequences of errors on specimen bottles. I imagine these could range from a test having to be re-done to a patient being treated incorrectly.

I have a little concern about the recommendation. I suspect a lot of hospitals will be reluctant to spend money on new technology like RFID. And I can’t help but wonder whether there is a simpler (leaner?) and less costly solution.

However, I’m glad the Mayo Clinic conducted this kind of study, and I hope they do more in the future. I also hope the people there do think in lean ways.

Lean Times Lead to Lean Strategies

When times get tough, the tough turn to lean.

Or so it would seem, according to a survey published by Epicor.

On behalf of the software company, research firm RBInteractive Research Group questioned 274 supply chain and corporate management professionals. The study was conducted over the Internet among subscribers to Modern Materials Handling, Supply Chain Management Review and Logistics Management magazines.

One of the study’s key findings is: “In response to the current economic climate, the top three business philosophies and strategies that manufacturers are adopting are lean production, TQM, and Six Sigma.”

Lean is at the top of list of strategic initiatives cited by the respondents, mentioned by 63 percent of those questioned.

The top items on the list of management philosophies that attracted interest from the respondents are lean (cited by 56 percent), TQM (37 percent), Six Sigma (33 percent), Supply Chain Operations Reference, known as SCOR (31 percent), and theory of constraints (16 percent).

The findings are not surprising, but they leave me with mixed feelings. On the one hand, I am glad that more companies are embracing lean (and other improvement strategies).

On the other hand, it is unfortunate that many companies think of lean as a strategy appropriate primarily for difficult times, and not for ALL times. Similarly, I fear that many of the companies moving towards lean just because times are tough don’t really understand it, and will not have successful lean transformations.

Am I being too pessimistic or cynical? What do you think?

An Open Letter to Senators Obama and McCain

Dear Senator Obama and Senator McCain,

As one of you will be our next President, I wanted to write about the lean principles I discuss in this blog, and how relevant they are to your role as our nation’s next chief executive.

Lean is a business strategy of improving business processes to focus on providing customers with value and eliminating anything in those processes that does not add value – in other words, waste.

Since you both have spoken about eliminating waste in government, I assume this may be of interest. Some small segments of the federal government, particularly in the military, have been involved for at least a few years in applying lean principles to their operations – with positive results. Much more could be accomplished if the president gave his full support to adoption of a lean strategy throughout our federal bureaucracy.

However, that is not my main reason for writing. Rather, I wish to focus on some of the fundamental principles of lean, which I believe are particularly relevant to the U.S. government today.

When a lean organization strives to provide value, that means value as defined by the customer. To achieve that, an organization must be constantly listening to its customers – or in the case of government, to its citizens.

An integral part of this concept is the fundamental – and critical – lean concept of respect for people. From a business standpoint, that means respect for employees, customers and suppliers. Customers and suppliers are to be treated as business partners, not adversaries, and employees are to be respected as thinking individuals who can contribute to success, not as cogs in a machine.

Listening to citizens and treating them with respect is something that, for too long, our federal government has done poorly, if at all. Too many of our politicians have been focused on partisan battles, promoting their own agendas and providing favors to special interests. They are isolated, communicating only with those who share their views, ignoring or fighting those who don’t. They often devote their time to criticizing and attacking others, and trying to make themselves look good, rather than listening and working toward constructive solutions. The voice of the citizen can barely be heard over the constant bickering. And the services provided to citizens often fall short because government did not understand what was needed or how it should be provided.

I urge you, as our next president, to make listening to citizens – actively, by constantly soliciting their views – a core principle of your administration. I am sure the mechanisms already exist to achieve this, but too often those mechanisms are ignored, or are set up in such cumbersome ways they are nearly useless. That needs to be fixed.

Our government has been substantially out of touch with its citizens for quite a while. It is time to remind ourselves that government exists to serve the people, and that it can only do so by hearing what they have to say.

A Passionate Doctor Cries Out for Change

For those promoting change, few if any attributes are more valuable than passion. In a lean transformation, for example, a change agent who is passionate about what lean can accomplish can inspire and motivate others.

Dr. Thomas F. Lansdale III, a Cleveland doctor with fierce passion for his profession, has caused a bit of a stir with an article in the Cleveland Clinic Journal of Medicine. Lansdale, currently in private practice and also an assistant professor at Johns Hopkins, spent more than 20 years working at three hospitals, including serving as chairman of a department.

Lansdale, as far as I know, is not a lean guy. But in the article, he laments the ways he believes hospitals have changed over the years and makes a strong case for the kinds of changes being sought by those applying lean to healthcare.

Somewhere along the way, I became increasingly aware that teaching clinical medicine to students, interns, and residents was getting harder and harder. The patients were sicker and stayed only 3.2 days in the hospital. What we were teaching wasn’t how to diagnose and treat diseases, but how to manage only their most serious complications—the respiratory distress from pneumonia, the ketosis of uncontrolled diabetes, the septic shock from infections. The wards became intensive care units, and the critical care units the province of “intensivists” who were more adept than we were at taming all the machinery and technology…

Worse, though, was the ebbing of the lifeblood of the hospital. Now the medical center, riddled with “centers of excellence” instead of departments, answered only to administrators who cared nothing about medical education, except for the Medicare dollars they would lose if they cut the training programs. They spent enormous amounts of money marketing the centers of excellence, and they cut everything else to manipulate the bottom line.

We remain absurdly complacent about rising iatrogenic infection rates, knowing all too well that we are allowing immunocompromised patients to die unnecessarily in our intensive care units. There are alcohol-based hand-washing gels everywhere, but no police or policy with teeth in it to enforce handwashing. We lurch toward physician computer order entry, clinging to the false belief that software programs will prevent adverse drug reactions and delivery of the wrong dangerous drug to the wrong patient.

We understaff our pharmacies so that they can’t get the medications to the patients on time or alert us to our own prescribing errors. We burn out our nurses despite years of loyal service. And worst of all, we capitulate to the for-profit insurance industry that informs us they won’t pay for day 4 of Mr. Jones’ hospitalization because he has failed to meet some arbitrary criteria in their manual.

That’s the kind of passion we need in the lean movement. Does anyone have an opening for Dr. Lansdale?