No one knows the cost of a defective product. Don’t tell me you do. You know the cost of replacing it, but not the cost of a dissatisfied customer. — Edwards Deming

In my last post I asserted that a customer is a person who receives something of value in exchange for something of value. Many with a mass production mentality will find this definition troubling because it doesn’t require that what is exchanged be tangible.

The reason this definition works, though, is that a thing can be valuable while remaining intangible. Intangibles — things like gratitude — can have great value and, in a few cases, can actually be measured.

An important difference between a mass producer and a Lean organization is that people in the Lean organization consciously and constantly seek to add value that is real, but may be intangible, while mass producers don’t bother.

Let me give two examples of how and why intangibles like gratitude must enter into our decision making.

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In my last post I noted that, compared to many other human undertakings, business suffers from a lack of precise definitions, especially the definition of the customer.

As Deming pointed out, understanding the needs and wants of the customers is fundamental to business success. But loose definitions like that of “customer” are disturbingly common in many business environments.

In contrast, people in a Lean environment are expected to question, think about, and precisely evaluate virtually everything. So let’s think some more about the customer.

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Most professions develop peculiar vernaculars which allow practitioners in that profession to communicate precisely and effectively. The same holds true for many other human undertakings outside the professions.

Oddly, except for terms borrowed from accounting and statistics, business is almost devoid of a precise, descriptive, and long-established vernacular. This is probably okay in a mass production environment (in the sense that most things, no matter how dysfunctional, are “okay” in a mass production environment) but in a Lean environment the lack of precision creates a great deal of trouble.

Consider, for example, the definition of the word “customer”.

Most dictionaries define customer something along the lines of “a person who purchases goods or services from another.”

I think most business people would accept this definition as clear and precise. But is it? Is it a useful definition? I think not.

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Recently I was talking with a manager at a job-shop manufacturer who said about his company, “We do Lean.” I inquired about his experience, asking how the company trained employees. “Oh,” he replied. “We don’t want our people to think.”

That gave me such a terrible headache that, in a desperate bid for relief, I made a donation to the United Negro College Fund. A mind, after all, is a terrible thing to waste. That donation brought some relief.

Still, I was at first surprised that anybody would believe such a thing — that a business and its customers would be better served when most employees don’t use their minds. Upon reflection, however, I was surprised only that he admitted it so plainly.

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As a SCORE counselor I see a lot of business plans — some real, many samples from the internet and other sources. Almost all of them begin by asserting “We will do X, Y, and Z.” Almost none begin by asserting “The customer wants us to do A, B, and C.”

When I point this out, people instinctively understand that the one form is better than the other. The one implies a business based on the will of management. The other implies a complete strategy fashioned around the needs of the customer — a Lean strategy.

To some people, saying that Lean is a strategy fashioned around the needs of the customer, well, Them’s fightin’ words.

So let’s have the fight.

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Lean begins with the customer. Quite often Lean transformation efforts stumble or fail because we never seriously consider what the customer wants or, more importantly, what the customer needs.

Oddly enough, I learned this lesson as a young highway department engineer designing a retaining wall for a freeway exit. It’s convoluted, but it’s literally a million-dollar story. Continue reading →

General Motors new CEO, Mary Barra, released to the public a report of a thorough and independent investigation led by Anton Vulakas into how the company managed, or failed to manage, a single small problem in the development of a single car platform. It’s still too early to tell how much this small problem — inadequate force on a detent plunger in the ignition switch — will cost GM, but it will be in the range of a billion dollars.

Business schools will be discussing this investigation for decades. Right now I can find in this report two simple and important lessons for would-be Lean practitioners.  Continue reading →

General Motors has long had a reputation as the antithesis of Toyota, so GM news is sometimes of interest to Lean practitioners. The recently released Valukas report on GM’s ignition switch problems is a case in point.

The GM board brought in a Chicago law firm to perform an independent investigation of how the ignition switch problem developed and to document the actions and reactions, if any, of corporate officers and management. The board further charged the investigators with making recommendations to preclude similar failures in the future. The investigators were lead by former U.S. attorney Anton Valukas, hence its moniker “the Valukas report”.

In addition to its interest to Lean practitioners, the report should also be of interest to anybody who periodically deals with an intransigent private sector bureaucracy and is driven to bang his or her head against the wall out of frustration. For managers in both government and business the report illustrates in horrifying detail how far things can go wrong when we let them. For Lean practitioners it provides a base point for a reality check; reflective people ought to ask themselves if they are confident GM’s problem couldn’t have happened to them.

I highly recommend reading the report. (Be warned that the .pdf file is about 325 pages, so it’s a long download. It is, however, double spaced with many footnotes, so it’s a shorter read than it first appears.)

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Five big reasons you need standard work

Mass production operations often have what they call work standards, which are really nothing more than quotas. In many cases, whatever you do to fill that quota is fine, which is why mass production operations can put out such poor quality and be such barbaric places to work.
Lean operations have what sounds like a similar sort of thing: standard work. However, standard work and work standards are very differnt.
The work standards of mass producers are narrowly outcome focused. If upper management dictates that a barrel must be filled with bolts by the end of the shift, that barrel will be filled with bolts, or something roughly resembling bolts, by the end of the shift no matter what it takes.
In contrast, standard work is process focused. When we design and use the right process, there will be no problem producing enough well-made bolts to fill the barrel, if a barrel is even the right way to measure, pack, and/or ship bolts. The right process will produce the right result. Mass producers skip designing and using the process. They fixate on the result, leaving them little ability to actually influence the result. That’s why they so often have long lead times, poor reliability, poor quality, and poor relationships between management and line level employees.
That said, there are five big reasons you must have, and use, standard work in a Lean organization.
1) employees become resistant to change
2) Deming said so
3) statistical control impossible without it
4) Inputs into next process become random
5) it helps identify problem personalities.
Big Reason #1: If you don’t teach new employees the best way to perform a task, they will figure out how to do it on their own. This is just common sense.
The problem is that these new employees, or employees that have transferred from another part of the organization, won’t figure out a way of performing the task that uses the fewest resources. They won’t figure a way that takes the least amount of time. They won’t figure out the way that produces the highest quality. Instead, they will figure out the way that is easiest for them to figure out.
Now, having figured out the way that is easiest to figure out, they will instantly become resistant to change.
In the long run, in a business that does this, virtually every processes in the business will have been designed by people who, through no fault of their own, knew nothing and cared little about the the needs of the customer, the needs of the business, the resources available, or the system generally. This is a recipe for seriously suboptimal performance.
The best way — really the only way — to avoid this problem of suboptimal processes wedded to a resistance to change is to have standard work defined for every task, to train employees in standard work from the very beginning of their employment, and then expect them to use it. Of course, it’s also necessary that they learn that suggestions for better ways to do the job are welcome, and it’s very likely that the standard work will change in the future based on those suggestions, but for now they must master the existing standard work.

Big Reason #2: Edwards Deming said so.
Recall that there are four parts to the Deming cycle that Deming described in his famous 1950 speech in Hakone, Japan: customer survey, design, production, and sales or delivery.
Insert graphic here
The design step in this cycle isn’t merely design of a product or service. Design includes design of the processes used to produce the good or service.
If you doubt that design of the process is important, consider any number of tech companies: Amazon.com, Ebay, and Google, for example. None of these companies actually produce physical products. The only thing they can design is process. Design of a process means, in large part, defining the standard methods by which value is created. Standard work, then, is an integral part of the Deming cycle which essentially defines Lean. No standard work, no Lean.
Big Reason #3: Statistical control is impossible without standard work.
Lean process improvement is often heavily dependent on the use of statistics to measure the state of a process. If you don’t have and use standard work, if every employee is doing their own thing, you don’t have a process to measure. Instead, you have as many processes to measure as their are employees doing their own thing.
If you treat this mass of processes as one process, it’s extremely unlikely you will get good results from any statistical analysis. If you try to make decisions based on such faulty analysis, you will simply compound the problem of not having standard work.
Big Reason #4: It’s the GIGO principle: Garbage In, Garbage Out.
Remember that any organization is a system — a collection of components that interact to produce an outcome. A large portion of the interactions in a system are customer/supplier relationships. When you lack standard work in any one component, that component produces random outputs, which become random inputs for the next component in the system. If this second component of the system is able to correct the random problems supplied by the first, it suggests that the first component could have solved the problem itself. It also suggests that

Each component Random inputs lead to random outputs.

into next process become random

Copyright 2014 by Paul G. Spring. All rights reserved.

Accomplished Lean practitioners will tell you that Lean is ultimately a way of thinking. Training yourself to think in terms of a system makes Lean vastly easier to understand and implement.

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I have often heard it said that Toyota’s methods may be fine for Toyota or for Japanese companies, but they can’t really be made to work in the U.S.A. This is a widespread perception in this country. Widespread and wrong.

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