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Establishing and Managinga Culture of Improvement
Valve Manufacturers AssociationWaterloo, IowaApril 2010
Michael Kuta, Partner
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Culture of Improvement is not accidental!!
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
your Elephant
Company [Brand]
Employees [#’s and Mix]
Locations
Multi-National
Organized Labor
Process / Discrete
Charismatic Leader
Evolution / Revolution
New or Renew
Making Money!
Losing Money?
Investment Strategy
Brownfield
Greenfield
Build to Order
Build to Inventory
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…the end backwards
How can we delight our customers and enhance brand loyality?
How can we keep learning, energize our employees and, be recognized as a top performer?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work
Do you have standards?
Do you adhere to them?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Nice to have a vision
Complement with a plan
Deployment would be slick
Target: Ideal and Reliable methods
Experiments and Standard Work
…in the beginning
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
the orangeson the trees…
wagons – good cook
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
The Perfect Enterprise
Every process is:
completely valuable
fully under control
perfectly capable
always reliable
and available
Every process is connected by:
standard work
seamless communication
waste free flow
continuous learning
No Muda
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Industry Week Best Plants
5 year Lean Journey Improvements
Percent reduction in scrap/reworkas a percent of sales… 50%
Percent reduction in customer rejectrate… 68%
Thanks Professor Peter Ward The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Industry Week Best Plants
Percent reduction in warrantycost as a percent of sales… 40%
Percent reduction in manufacturing processcycle time… 44%
5 year Lean Journey Improvements
Thanks Professor Peter Ward The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Industry Week Best Plants
Percent reduction in standardOrder-to-shipment lead time… 46%
Percent improvement in productivityas measured by annual value add per employee… 368%
5 year Lean Journey Improvements
Thanks Professor Peter Ward The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Industry Week Best Plants
Percent improvement inproductivity as measured by annual sales per employee… 386%
Percent improvement in productivityas measured by annual sales per square foot… 824%
5 year Lean Journey Improvements
Thanks Professor Peter Ward The Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
If it’s that straight forward….
Why isn’t every company already Lean?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
three interrelated suggestions
Articulation
Management
Focus
…a bunch of reasons
Thanks to Professor Peter Ward,The Fisher College of Business atThe Ohio State University
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Articulation• Operations leaders often can’t seem to tell a convincingstory, as a result their efforts become cost down as opposed to capabilities up
Management• Top leadership is often unwilling to show the patienceto allow Lean to work. Just give me the blue print!
• Go with economic change strategy, not cultural change
• The charismatic leader! Such people often move on?
Focus• Competing programs dilute attention
• The Lean effort is to narrow (imposed boundaries, and; donot include administration/the office)
• Poor Project Management
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Implications…
ArticulationManagementFocus
it boils down to leadership
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Nobel Prize winning economist’s agree…
“A primary function of a company is reducing or eliminating transaction cost.”
Financial Times May 2005
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
“There is a direct relationship between the value a person produces and the prosperity of an organization.”
The Wealth of Nations 1776
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
the money: Return on Assets
net income ÷ total assets
net income = net sales – (cost of goods sold + selling + G&A)
total assets = (cash + receivables + inventories + goodwill+ property, plant, and equipment + furniture+ construction in progress) – depreciation
the target: Numerator Up ÷ Denominator Down
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
How do Leaders and Managers add value?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Roles and Responsibilities
• Leading the Transition Journey
– Innovate along the journey
– Develop the systemic process
– Focus on people
– Inspire trust
– Long range perspective
– Ask what and why
– Eye on the horizon
– Originate guiding plans
– Challenge
– Be your own person
• Managing the Transition Journey
– Translate and administer
– Maintain course
– Focus on systems/structures
– Rely on collaboration
– Short range view
– Ask how and when
– Eye on the bottom Line
– Link and follow direction
– Get it done
– Be a classic good soldier
Kotter HBS Bennis USC Ward OSU Productivity Inc.
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Attila the Hun
Jack Welch
Santa Claus
a common theme?!
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
You’ve got to want to be in charge
Attila the Hun
• Ruled throughout [today’s] Europe and Asia
• As many as 1,000,000 warriors
o well disciplined
o filled with esprit de corps
• Good planning
• Good execution
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
No ideas du jour
Jack Welch
• The person in charge
• Big company [GE] with global reach
• Lead, not run
• Act with speed and decisiveness
• Stick with your vision
• E cubed: energy, energize, execute
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
You deliver all those packages in 1 night!
Santa Claus
• Global Perspective
• Self - Awareness
• Self - Management
• Social - Awareness
• Social - Skill
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Attributes of Good Leaders
Enthusiastically model changeReadiness to build capabilitiesEager to enable peopleAdherence to processClear metrics and targetsAbility to see wastes and zeal to solve problemsCreating a no-risk environmentRelentless focus on CI and experimentationCommunication x10Models organizational innovationWhat’s next… Passion? Discipline?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A little more conversation
Research suggests that good leadersspend an enormous amount of timecommunication downward….
Storing telling
Legacy learning
Tribal knowledge
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Let’s be persuasive!
• Persuasiveness is a key element of leading through influence
• Three aspects of persuasion
1) knowing your audience
2) effective argument
3) being a credible messenger
• To be persuasive, you must be good at all three
chop
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Strategy
Structure
Strength
a systemic approach to governthe way we doing things….
a Lean Management System
LEAN ENTERPRISECustomer Focus
Leadership andStrategic Planning
OrganizationArchitecture
Lean Supply Chain
InformationArchitecture
ImprovementTechnology
ProductionManagement
EquipmentManagement
Product/ProcessEngineering
Corp
ora
te D
iagnosis
LEAN MANAGEMENT SYSTEM
Lean Executive
Lean Leader
Lean Manager
Master Trainer
Value Adder
Lean L
eaders
Busin
ess R
enew
al
ContinuousImprovement
StrategyInnovation
VisionDeployment
Implementationand Adherence
Analysisand Reflection
Trainer
Value Leader
the house of Lean
hercules
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Today’s Basic Themes
Strategic Policy Deployment3 – 5 year plan and renewal
Tactical [General] Policy Deployment6 - 18 month plan and renewal
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Lean Business Case
Consulting Teams will perform a CURSORY DIAGNOSIS
Use a reliable tool to assess an organization’s current state of Lean
Strive for consensus
Reflect on some comparison to your own company
Have dialogue within the small group that willbe open and a sharing of Lean perspectives and perceptions
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
CORNER-STONES
OF GROWTH
KEYS TODEVELOPMENT
1 Customer focus
2 Leadership & strategic planning
3 Organization architecture
4 Lean supply chain
5 Information architecture
6 Improvement technology
7 Production management
8 Equipment management
9 Product/Process engineering
STRUCTURE
STRENGTH
STRATEGY
1plan
2pilot
3deploy
4integrate
5excel
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
5 Levels of Learning
1 2 3 4 5
Planning and
Preparation
System
Initiation
System
Development
System
Excellence
System
Integration
Plan Pilot Deploy ExcelIntegrate
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Lean Business Case
Read (SCAN) the case
Use the Diagnosis Worksheet to establish a 1-5baseline for improvement (current state)
Assess at the plant level
Use whole numbers (2½ = 2)
What is the current state in each of the 9 Keys?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
CORNER-STONES
OF GROWTH
KEYS TODEVELOPMENT
1 Customer focus
2 Leadership & strategic planning
3 Organization architecture
4 Lean supply chain
5 Information architecture
6 Improvement technology
7 Production management
8 Equipment management
9 Product/Process engineering
STRUCTURE
STRENGTH
STRATEGY
1plan
2pilot
3deploy
4integrate
5excel
Current State
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Today’s Basic Themes
Strategic Policy Deployment3 – 5 year plan and renewal
Tactical [General] Policy Deployment6 - 18 month plan and renewal
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Given what we know; what must be the3-5 year key objectives for Global Supply;those burning platforms that will directthe decision on Establishing and Managinga Culture of Improvement?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Today’s Basic Themes
Strategic Policy Deployment3 – 5 year plan and renewal
Tactical [General] Policy Deployment6 - 18 month plan and renewal
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Given what we know; what must be the6-18 month focus for Global Supply;those key initiatives that will give improvement focus to the burningplatforms?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Strategy to Action
Hoshin Kanri
Policy Management
Vision Management
Policy Deployment
Hoshin Planning
Strategy Deployment
Management by Policy
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A3 document system
• A system of concise and visual, large format reports:
– The complete story of PDCA
– Portable
– Top down
– Bottom up
• Report types:
– A3-I intelligence report
– A3-X X-matrix
– A3-T team charter
– A3-P problem form
– A3-SR status report
– A3-SSR summary report
Line of Sight
Ad
min
istr
ati
on
Pro
cu
rem
en
t
Hu
ma
n R
es
ou
rces
Strategic Team
Tactical Teams
Operational Teams
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Team
Charter
Action TeamsP
lan
t E
ng
ine
eri
ng
Pro
d D
eve
lop
me
nt
Fa
cilit
y #
2
Fa
cilit
y #
1
En
gin
ee
rin
g
Ma
nu
fac
turi
ng
renewal
focus
deployment
projects
j
i
h
g
f
e
d
c
b
a
Leader = CEO
Ob
jec
tive
s
Ta
rge
ts
Launch A
ero
targ
et
pro
duct
by 1
2/0
6
Le
an
Sig
ma
SC
M
Op
era
tio
ns
Sa
les &
Ma
rke
tin
g
HR
CO
O
CF
O
Pro
du
ct
De
ve
lop
me
nt
# 5 4 3 2 1 a a b b b b c d e f g h i j
$
$
$ Team Leader
$ Team Member
$
Primary
Instrumental
Contributory
Desig
n a
nd im
ple
ment
pro
gra
m b
y 1
2/0
6
Improve quality and frequency of external communications
Expand: new/differentiated/select products
Improve quality and frequency of internal communications
Impro
ve P
roduct
off
ering t
wo-f
old
by 6
/08
Expand and enhance lean deployment
Achieve best in class: quality, delivery and lead time
Reduce controllable cost
Achie
ve low
est
in industr
y lead t
ime b
y 6
/08
Reduce r
eceip
t to
FG
invento
ry 5
0%
by 6
/07
Matrix: Executive Team
Upgra
de c
orp
ora
te r
eputa
tion
Expand p
ositio
n a
s s
upplie
r of
choic
e
Be a
low
cost
pro
ducer/
lean e
nte
rprise
Gro
w s
ale
s a
nd incom
e
Main
tain
fin
ancia
l str
ength
and F
lex
Improve energy efficiency
Expand product offering and capacity
Grow the custom products market share
Achieve the design rates of the automated cell
Consulting Fees
Resources and Expense
Training
Fixtures
Other
COSTSBENEFITS
Total net margin up by 10% to 05
Total energy expense down by 25% 05
Customer Satisfaction Rating 100%
Total revenue up by 25% to 05
Controllable cost down 20% to 05
Deplo
y t
o 5
targ
et
locations b
y 6
/06
Show
six
sig
ma im
pro
vem
't t
rend b
y 6
/07
Company: OK Enterprise
Location: San Francisco, CA
Period: 2006 - 2008
Date and Revision #: Jan 06
Initiatives
Impacts
Impro
ve F
TT
30%
by 7
/07
Desig
n a
nd im
ple
ment
5 t
arg
et
pro
gra
m b
y 1
2/0
6
Imple
ment
com
pany w
ide p
roj.m
gm
t.by 5
/06
Reduce C
OG
S b
y $
6 m
illio
n b
y 1
2/0
6
Achie
ve 1
00%
on-t
ime d
eliv
ery
by 1
2/0
7
Incre
ase c
apacity 2
5%
by 6
/08
Impro
ve e
nerg
y c
onsum
ption 2
0%
by 1
2/0
7
What
How MuchBy When
The Return
Who
Correlation
How
P/O matrix P/O matrix
Plant Site Leadership TeamCorporate Leadership Team
Reduce
inventories
Reduce
standard
work-in-process
Target: 50%
Increase
Yield
Target: 50%
Improve Schedule
Adherence
Target: 100%Reduce
changeover
times by 75%
15% increase in net sales
10% increase net margin
50% decrease in time-to-market
Reduce overall lead time 50%
Objective
Impact
Initiative Targets
Initiatives
Impacts
Objectives Targets
Department Teams
Corporate office action teams Operations action teams
Plant site action teams
P/O matrix
Staff Function
Leadership Teams
StrategyDeployment
-Reduce key process lead times-Improve systems capabilities-Insure purchase order accuracy-Build a learning organization-Improve new product TTM
AQC
Yield
Schedule
PO’s
TTM
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
The Employee Community
All organizational members think of themselves as part of an integrated system; a linked chain of decision-making points that continuously delivers value to the customer.
Team building, not Building teams
Participation and Consultation
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Most organizations were not born,they just grow’d….
Albert Cherns
An organizational perspective
Special Purpose Teams
Task Teams
Market / ProductSegment Teams
Area Work Groups
Process Owner Teams
Classic hp workplace
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Experimenting = no blame
• CEDAC
• PDCA
• DMAIC
• FMEA
Fact Idea Analysis
CATEGORY
Target: < 50%
Opportunity
Must have reliablescientific methods that get to root cause
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
All lean methods and tools are scientific and reliable, based upon
the principles of system, feedback, and local control
Experimenters Toolkit not all inclusive
• 5S [6S]
• Value Stream Management
• Visual Display & Control
• Quick Changeover
• TPM
• Mistake Proofing
• Cell Design
• Process Flow
• Kanban
• Lean Administration
• Lean Accounting
• Product/Process Engineering
• SCM and Lean Logistics
• Problem Solving and Cause & Effect Relationships
• Standard Work
• Project Management
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work
Do you have standards?
Do you adhere to them?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work
• Standardization of policy, sequence, timing, flows, method, skills, learning and outcomes for all we do
• Rules defining standards for how work is to be performed
• Improvement in the workplace begins with adherence to standard
• A standard is the documented
expression of the best method
known at a given point in time;
it enforces that method until
a better one comes along….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work: a process of discovery
How do you do this work?
How do you know that you are doing this work correctly?
How do you know that the outcome is free of defects?
What do you do if you have a problem?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
A Central Principle
One generations tacit knowledgebecomes genes passed onto succeeding generations….
Inside the mind of ToyotaSatoshi Nino 2006
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Systems and Feedback
Think of sonar and radar….
channel
signal
Information Processor Information Processor
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership Standard Work
• A structure and routine set at each level of the hierarchy
• Walking the talk from the bottom-up
• Routines can be daily, weekly, monthly, as needed
• Provides a clear and unambiguous statement of expectations
• Consider things like:
o meetings with standard agendas start/end on-time
o all visuals/dashboards are up-to-date and viewed
o gemba walk with checklist each day
o gemba walk action items with do-it-now urgengy
o uncompromising discipline to the 5S process
o stand-up meetings stay focused on the purpose
o show evidence of a no-blame environment
o name some more….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Standard Work
A standard is the documented expression of the best method known at a given point in time; it enforces that method until a better one comes along….
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Most business strategies…
• Competing in the existing market space
• Following widely accepted rules of competition
• Focus on beating the competition
• Exploiting existing demand
• Mobilizing all resources around pursuing the above
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Customers and Innovation
“If I would have asked customers what they wanted, they would have told mea faster horse”.
Henry Ford
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Innovation
Our research points-to 70 percent of the senior executives surveyed say that innovation will be at least one of the top three drivers of growth for their companies in the next three to five years….
Innovation is the most important way for companies to accelerate the pace of change in today’s global business environment. Beyond products to pioneer innovations in business processes, distribution, value chains, business models, and even the functions of management.
Source: Productivity Inc. Research – McKinsey Research
• Deep – how deeply are we questioning our ways of operating?
• Do we operate from our interpretation of the past, or our anticipation of the future?
• Are our assumptions today valid into the future?
• Long – how far into the future are we looking? Do we understand the shape of alternative futures for our organization?
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
The choice is up to you….
Establishing and Managinga Culture of Improvement
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…the end backwards
We delight our customers and grow brand loyalty!
We keep learning, energizing our employees and, we are known as a top performer!
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
…a Culture of Improvement nine lessons from good companies
1) Establish a sense of urgency
2) Form a powerful guiding coalition
3) Create a Vision
4) Communicate that Vision
5) Empower others to act on the Vision
6) Plan for and create short-term wins
7) Experiment and keep the momentum
8) Use Innovation as the big cannon
9) Institutionalize the new approaches
Kotter HBS; Productivity Inc. research
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
key issues?
the obstacles?
the barriers?
the next steps?
Now What…
4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451
Leadership and Structure
Plan and Deploy
People and Teams and Experiments
Standard Work
Innovation
How we’ll go about this…
Establishing and Managinga Culture of Improvement
Valve Manufacturers AssociationWaterloo, IowaApril 2010
Michael Kuta, Partner