Excellence Is Not Enough

Hey Detroit!  Are you listening?  Here's how you turn things around when you are in trouble:

Step 1 is to close the excess plants and lay off the extra people.  That's not part of lean, but it is the price to pay for not being lean in the past.

Step 2 is to reorganize the company from the top all the way down through the production folks into teams focused on each value stream

Step 3 is to implement 5S in order to "clear the underbrush out of the way and allows high visibility management"

Step 4 is to scrap the data collection and measurements systems, replacing them with strictly verbal communications at regular team meetings.  As the relevant data needed to manage performance becomes clear, slowly bring up new reporting and metrics.

Step 5 is do some value stream mapping and selectively implement TPM and reduce set up times by 90%

Step 6 is to launch a continuing all out effort to get the people involved in business decisions at all levels, including their participation in redefining the nature of the business from providing hardware to providing solutions.  Bring greater flexibility and customization to the market. Make sure people know that "“Part of their daily business is they are discussing company business, what they did yesterday, what they did right, what they did wrong and what they are going to experiment with today to make that better tomorrow."

Step 7 is to use the millions of dollars in cost reductions, and delivery and quality improvements to begin to grow the business back.  Selectively add people back into the company.

Step 8 is to lay plans in place to go after the materials management and supply chain part of things next year (That's right - go after the suppliers last, not first)

This isn't my idea.  It is the formula followed by Rittal, a German company just outside of Dayton, Ohio that has brought itself back from a coma, if not near death, through a very impressive lean commitment.  It is well worth it to read about them here, here and here.   While other companies carry on about the affect of the economy and external forces on their business, Rittal says, "It's going to be a superb year.  It's nice if the market continues to grow, but we don't care if it does or doesn't."  They are planning to grow by taking over the market through their superior production capabilities, so the size of the market really doesn't matter. 

As their head guy says, "Fortunately for me, 99 percent of all manufacturing companies are not anywhere near where they should be in terms of the way they manufacture and develop strategies."  I can easily picture Toyota saying that to themselves now and then.  It is fortunate for the few lean companies that most of the other guys don't get it.

The best news of all for Rittal is that the boss is probably right when he says, "We have a long way to go," and "We have spent three years turning the company around, but we haven’t tapped into one percent of the human resource. It goes back to that lean thinking — wasted resource, wasted brain capital of our people."  So Rittal is just getting started, and the competition has given them a pretty good head start.

What particularly impressed me is that they approached lean from the opposite direction than that taken by most companies.  They started with their organizational structure and made value streams the formal way they work, instead of the old functional departments the rest of us cannot seem to get past.  They scrapped the data systems, thinking that just talking to each other was better than using bad data.  Most companies are so dependent on computers and reports, instead of visual control and verbal communications, that such a thing would be unimaginable.  Most of us would cling to the old systems with a death grip, even if we knew they were wrong, rather than operate with no computer reports.

They took on 5S and red tagging, but view it as a casual event along the way, calling it "clearing out the underbrush". They deployed the tools of lean where they were appropriate - a value stream map here and a kaizen event there, a little TPM and some set up reductions.  They don't seem to view any of these tools as the 'cornerstone' of anything and they do not seem to have elevated any of the tools into any sort of a big deal.

In total, they are changing their business model and their culture, and letting the application of the lean tools fall out of that new business model wherever and whenever they are appropriate.

"We have a long way to go. Ask 100 people and you get 100 different answers what world class is. My simple answer is that world-class manufacturing is the way Toyota develops and manufactures its products. It’s about lean, it’s about the total elimination of waste, it’s about speed, it’s about best practice, it’s Kaizen."  Can it be stated any better than tha?  What I like best about Rittal is that they seem to view the debates we often hold within the lean community concerning the relative value of different tools and terminology as a colossal waste of time.  Lean is about everything.

Says Rittal's head guy, "Excellent for me is not enough any more. It will only get you through tomorrow. I am looking for an organization that is going to develop into something that’s going to be spoken in the same vain as a company like Toyota.  That is the only way we are going to survive long term."

Comments

[Micheal Gardner]

Great. Good for Rittal. What works for one doesn't always work for everyone. Sometimes a more structured approach is necessary. Although, when I read between the lines, I get the idea that Rittal's top management had a pretty solid plan mapped out to begin with, so maybe things weren't as loosely organized as they seem on the surface. As much as I hate it when people say that the only way to success is to copy the Toyota approach, I also hate it when people "cherry pick" tools out of the box then complain their lean efforts failed. Rittal may be the exception in this, or maybe their approach was more structured than we think.

I am of two minds about measurements. I believe that we should measure a few key things very well and act on the results. I don't like analysis paralysis, piles of reports, twenty-seven different databases, and so on. I have found that good data is important so we act on the right problems. Without data, we get into the mode of working according to opinions rather than facts. Some quick and simple data collection systems in place will tell us where our 80% lie and we can attack those issues.

[Bill Waddell]

Mike,

I'm inclined to think that the amount of structure necessary is in inverse proportion to how well senior management is grounded in the principles. When all of the top people know exactly what they are trying to accomplish, an ad hoc approach might be fine. When senior management is a little shaky on what they are doing and why, they need a pretty well defined roadmap to keep them on the right track.

Kind of the same thing as a grandmother baking an apple pie. She doesn't need to follow a recipe - she knows apple pes so well, she can do it by feel and intuition. I, on the other hand, need a very clear recipe - preferrably one with pictures.

I sense that the boys in charge of Rittal understand lean at a very deep, principled level.

[Jason Yip]

"Step 1 is to close the excess plants and lay off the extra people. That's not part of lean, but it is the price to pay for not being lean in the past."

This I can't agree with. I might even say that there's a reason it's not part of Lean. I follow Goldratt's belief that if people get hurt, the solution is wrong.

http://www.scdigest.com/assets/reps/SCDigest_Goldratt-Interview-Part-1.pdf

[Bill Waddell]

As an old boss of mine used to say, Jason, there are few things in life sadder than to see your beautiful theories murdered by a gang of brutal facts.

Of course you and Goldratt are right - in theory. But the harsh reality is that many of these companies have been so mismanaged for so long, and have become so non-productive and lost so much market share, that they have no choice if they are going to survive at all.

If GM, for instance, does not cut 30,000 or so people as planned, then all 200,000+ will soon be unemployed.

The difference between whether the cuts are right or wrong is not in making them - they are out of options - it is what they do next.

[Jason Yip]

What I'm saying is that the situation has to be seen as like cutting off your own arm to save your life. It deserves more than a "Step 1" bullet point. A bullet point does not communicate that any real attempt was made to find a better solution, or involve in the decision-making (i.e. show respect to) the people who will be affected by the decision.

I'm not so much saying that the conclusion isn't correct, I'm more saying that a "better solution" may just be how one reaches and communicates the conclusion.

[Bill Waddell]

I don't think we disagree on it, Jason. Toyota's commitment to people began witha massive layoff in 1950 that was so painful, the top guy was eased out (Kiichiro Toyoda) and they resolved to adopt a new business model that would never make such a move as that necessary again. I sense that Rittal had a similarly defining moment. I do not, however, for a minute think that GM, Ford or Delphi are having similar thoughts, which puts them in direct violation of Goldratt's admirable preaching.

[TabathaOster]

Awesome blog. Peace out until next time TabathaOster