Evolving Excellence

A Check on My Undesired Investment

By Kevin Meyer

A few months ago I, along with about 200 million others, was forced to invest in a failed company.  Some people still think that failure cannot be allowed even if deserved.  Probably the same people that believe team sports in school create dysfunction and grades and other performance measures are inappropriate and demeaning.  Sorry, time to enter the real world.

If you're naive enough to think you can get something for nothing on a new mortgage, you should fail.  If you're dumb enough to invest in those mortgages without realizing there's no underlying value, you should fail.  If you're ingenious enough, in a mad scientist kind of way, to fashion complex financial instruments out of those packages of worthless mortgages, you should fail.  If you keep producing cars that no one wants, ignoring improvement methods right in front of your noses, and paying people several times the prevailing rate, you should fail.

So out of morbid curiosity, I wonder how my investment is doing.

Two of the biggest car makers in America, Ford Motor Co. and Toyota Motor Co., called a bottom to the long decline in U.S. auto sales. 

Yes, Ford and Toyota reported improved sales last month.  Unfortunately my president... err financial advisor... didn't invest in those companies.  He invested my money in GM.  What happened at GM?  The sales decline accelerated last month.  Great...

Fortunately I decided to hedge my forced investment, and put some equivalent funds in Ford.  How's that investment doing?  Check out the chart on the right.

Not too shabby.  My hedge probably worked and I'm about even.  I wish the other 200 million taxpayers were so lucky. 

But I'm very concerned.  Ford has to compete against a "company" not constrained by real-world economics.  They are backed by an entity that can simply print more money (as long as the Chinese continue to buy the supporting debt...) and change industry policy and regulation as necessary to guarantee an outcome... whether in the public interest or not.

Will Ford be able to pull it off?  I have my hopes, and I'll continue to support them with my capital and perhaps even a purchase. 

 

Update on Lean Manufacturing Company Stocks

For obvious reasons it's been a while since we've updated you on the Superfactory 20... twenty lean manufacturing company stocks that were selected by our readers a couple years ago.  Toward the end of this year we'll update the list itself for 2010.  The following is the performance year-to-date, with the Superfactory Index being the average performance.  You'll notice it is still slightly behind the S&P 500.

Visit leanstocks.com to view this table updated each hour.  And watch for some significant changes to that site as well as leancompanies.com over the upcoming months!

2009 Performance
Name	Price	YTD Performance
HONDA MOTOR CO AD (HMC)	26.30	20.59 %
Intel Corporation (INTC)	16.72	12.06 %
TOYOTA MTR CP ADS (TM)	74.09	11.63 %
DANAHER CP (DHR)	59.62	3.26 %
PENTAIR INC (PNR)	24.85	1.72 %
ILL TOOL WORKS IN (ITW)	36.22	0.58 %
NEWELL RUBBERMAID (NWL)	10.20	-0.87 %
STEELCASE INC (SCS)	5.59	-2.10 %
NIKE INC CL B (NKE)	51.06	-2.78 %
HILLENBRAND INC (HI)	16.92	-3.64 %
S&P 500 INDEX, RTH (^GSPC)	896.42	-3.80 %
TESCO PLC (TSCO.L)	350.50	-4.03 %
SUPERFACTORY INDEX		-4.91 %
DEERE CO (DE)	38.53	-5.82 %
JOHNSON AND JOHNS (JNJ)	55.98	-6.11 %
STANLEY WORKS THE (SWK)	32.44	-6.59 %
PARKER HANNIFIN C (PH)	41.60	-6.81 %
BOEING CO (BA)	40.83	-7.96 %
ABBOTT LABORATORI (ABT)	46.28	-12.17 %
WABTEC CORP (WAB)	32.05	-19.55 %
CATERPILLAR INC (CAT)	31.74	-30.73 %
TEXTRON INC (TXT)	9.33	-38.94 %

The Gift of Complaints

Most people fear receiving complaints about their product or service.  But as Amy at Another Wine Blog suggests, a complaint can be an opportunity.

But instead of just processing the return I started talking to her, asking if there was something else she might need. Turns out she was taking her teenage daughter on a cruise, and she needed lots of things. And to make a long story short, what started as a $20 return, ended up being an $880 sale, and a repeat client. Why? Because I listened to what she was saying, and turned a complaint into an opportunity, a “gift.”

If one person complains, it's likely that several times that number are also experiencing the same problem but choose not to say anything.  And sometimes the solution to the immediate problem is simple, at least in the mind of the customer you are hopefully trying to retain.

For those who did complain, the most important concept in future business from that customer was whether or not she received an apology, a resolution, and a promise it wouldn’t happen again.

This doesn’t just apply to sales, but also how to handle negative product reviews, concerns about value, shipping issues and website glitches. A positive response can bring you a bounty of goodwill and word-of-mouth marketing. A negative response, and you not only lose a customer, but risk that one complaint turning into a viral word-of-mouth marketing “campaign” that only benefits your competitor.

Amy goes on to describe three experiences with three different wineries, and how their response to a problem created a long-term perception.  The moral?

Joe used to work with a woman named Julie who was fabulous at customer service. The running joke was how she felt (and sounded to the other AEs) when she was dealing with complaints; “Why yes, it is all my fault. I’m terribly sorry; how can I fix it?” But customers loved her. She was the positive face of the company. She made things right, and retained the customer. Because she treated every complaint as an opportunity — a gift. Even when she had nothing whatsoever to do with the error in the first place.

Embrace complaints... but do something about them to make the customer happy.

5S: Reality or Lean Illusion

by BILL WADDELL

Probably the worst abuse of lean principles - or the most misused - is 5S.  Take a gander at this from the Wall Street Journal.  According to Ms. Julie Jargon, the value of 5S is time saving - making workers more efficient.  The old school management, and new management trained in old school schools, seems to be unable to see value in anything other than cutting labor costs.  Pursue 5S, says Julie, and the workers will no longer "waste time looking for tools". So to be sure the folks at Kyocera aren't wasting time looking for staplers, they have a guy wasting time inspecting other people's cubicles.  Kyocera took a whopping 2.6% to their bottom line, but the important thing is that their headcount is down and people are using authorized 5S clips to support plants in their cubicles instead of paper clips.

Then there is this guy, after rambling through perhaps the most absurd history of the origins of lean ever put forth, explains "Efforts in 5S almost always improve workplace safety, operator morale, quality, and productivity. It can also be very impressive to visiting customers and prospective clients."

You can find 5S described as "Lean Lite" - accomplished by implementing 5S on a stand alone basis, without any of the other aspects of lean.  It is more commonly described as little more than glorified spring-cleaning dressed in Japanese terms.

In fact, 5S is most importantly the disciplined visual control over each operation within the manufacturing process.  It is the tool that enables you to rest assured that the kanban is working.  It is the physical manifestation of standardized work.  It is the essential support for operator-performed maintenance activities.  It enables everyone on the shop floor to know that the machine set-up/changeover process is operable as designed.  In short, it is the intersection of all of the process optimization and control aspects of lean.

Kevin and I have often written of the widespread tendency to "look lean", rather than "be lean".  Stand-alone 5S in pursuit of saving operator time "lost looking for tools", or impressing "visiting customers and prospective clients" is about the best way to achieve this result.

Neat and organized factory floors are hardly a breakthrough insight of the Toyota folks.  In fact, it is more than a bit ridiculous to spend money on seminars, training or consultants to pursue stand-alone 5S.  If 5S is not going to be integrated with comprehensive process control you are better off saving the cost of the lean training and spending a fraction of it on a handful of brooms and trash cans.

The best explanation of 5S I have seen is in JIT Is Flow - Practices And Principles of Lean Manufacturingby Hioryuki Hirano.  (No, this is not a plug for one of my books.  My good friend Norman Bodek gave me the honor of translating some of Hirano's Janglish into the King's English, but I have no stake in the book.  Nonetheless, I have used it as the standard manual for just about all of the lean shop floor training I have conducted since I had the privilege of learning Hirano's concepts.  As far as I am concerned, every manufacturing manager should have a copy of it on their desk for reference.)

Hirano explains that, once 5S is in place in conjunction with kanban, TPM, set-up optimization, quality controls and standard work, its most valuable function is to serve as the physical baseline from which continuous improvement can be made.  Without 5S and 3T (The 3T are Target Item, Target Location, Target Quantity - 5S and 3T are worth little without each other.  The 5S controls the place and the 3T control the flow), it can be almost impossible to tell where real problems lie, or if changes resulted in improvement.

Leanies wrestle with the challenge of the fifth S - sustaining.  If you think 5S is essentially a cosmetic issue - a morale-building, customer-impressing way to look lean, it cannot be sustained because those things have little tangible value.  On the other hand, if you really understand that 5S is the heart and soul of your factory's visual control over processes and rate of improvement, the ability to sustain 5S is the best metric of all of your management's commitment to lean. 

Daydreaming Lean

Understanding lean manufacturing is often a difficult undertaking due to how counterintuitive it can be.  How can a process yield more with less?  Move faster, with higher quality, by making one unit at a time instead of in batches?  Sometimes it just doesn't make sense... until you see it in action or the constellation of nuances suddenly becomes clear.  The underpinnings of that "a-ha!" moment are becoming better understood.

It happened to Archimedes in the bath. To Descartes it took place in bed while watching flies on his ceiling. And to Newton it occurred in an orchard, when he saw an apple fall. Each had a moment of insight. To Archimedes came a way to calculate density and volume; to Descartes, the idea of coordinate geometry; and to Newton, the law of universal gravity.

In our fables of science and discovery, the crucial role of insight is a cherished theme. To these epiphanies, we owe the concept of alternating electrical current, the discovery of penicillin, and on a less lofty note, the invention of Post-its, ice-cream cones, and Velcro. The burst of mental clarity can be so powerful that, as legend would have it, Archimedes jumped out of his tub and ran naked through the streets, shouting to his startled neighbors: "Eureka! I've got it."

So what is actually happening?

These sudden insights, they found, are the culmination of an intense and complex series of brain states that require more neural resources than methodical reasoning. People who solve problems through insight generate different patterns of brain waves than those who solve problems analytically.

In fact, our brain may be most actively engaged when our mind is wandering and we've actually lost track of our thoughts, a new brain-scanning study suggests. "Solving a problem with insight is fundamentally different from solving a problem analytically," Dr. Kounios says.

This explains a lot, at least to people at my company.  I have a 40 minute commute along the coast, through avocado orchards, and ending with a nice long winding drive through some vineyards.  Every now and then I try to listen to books on CD but find I don't remember a thing.  My mind is wandering.  And I usually have some hair-brained idea to try by the time I get to the office.

By most measures, we spend about a third of our time daydreaming, yet our brain is unusually active during these seemingly idle moments. Left to its own devices, our brain activates several areas associated with complex problem solving, which researchers had previously assumed were dormant during daydreams. Moreover, it appears to be the only time these areas work in unison.

She suspects that the flypaper of an unfocused mind may trap new ideas and unexpected associations more effectively than methodical reasoning. That may create the mental framework for new ideas.

So besides allowing our team members to daydream, how do we promote a propensity for insight?

Even before we are presented with a problem, our state of mind can affect whether or not we will likely resort to insightful thinking. People in a positive mood were more likely to experience an insight, researchers at Drexel and Northwestern found. "How you are thinking beforehand is going to affect what you do with the problems you get," Dr. Jung-Beeman says.

A positive mood.  Perhaps by treating people right... respect for people.  The second pillar of lean.