Evolving Excellence

Myths and Rationalizations

It seems that not a day goes by without some U.S. automaker policy wonk trying to rationalize why Japanese automakers are kicking U.S. automakers to the curb.  Obviously it must be some evil and nefarious external reason, and not simple manufacturing and execution prowess, right?

With a hat tip to one of our favorite blogs, Cafe Hayek, today's installment comes from the Wall Street Journal.  Stephen Collins of the Automotive Trade Policy Council writes a letter trying to explain away GM and Ford's woes on Japan "artificially weakening its currency."  To quote just part of the letter:

Japanese intervention through purchasing massive amounts of dollars and 'jawboning' has pushed down the yen's value. Despite being the second-largest economy in the world, Japan is holding $885 billion in foreign exchange reserves, mostly in dollars. This policy of artificially weakening the yen provides vast export subsidies to Japanese industries and promotes unfair trade practices while protecting its domestic market.

Regular readers of this blog will immediately recognize the fundamental flaw in that argument, particularly with respect to Toyota and the other Japanese automakers.  But first, the following is part of the letter that Donald Boudreaux of Cafe Hayek sent to the Wall Street Journal in response.

To keep the yen undervalued, Japan's government must accumulate massive foreign-exchange holdings.  Acquiring these dollars and other currencies requires the Japanese government to tax its citizens either directly or surreptitiously through inflation.  This policy harms rather than helps the Japanese people - hardly a subsidy "for Japan."

And while some Japanese exporters might benefit from an undervalued yen, so, too, do American consumers.  We get automobiles and other Japanese-made products in exchange for oodles of tiny monochrome pictures of dead American statesmen.  Now that's a subsidy!

What Mr. Boudreaux didn't say, and is the glaring flaw in the supposed argument of Mr. Collins, is what we've been pointing out all along: Toyota and the other Japanese automakers are building U.S. factories as fast as they can.  So much for the U.S. having a fundamental competitive disadvantage.  Last week we discussed an article on Toyota by Charles Fishman in Fast Company, where he put it very eloquently:

Without fanfare, in fact, Toyota is confounding conventional wisdom about U.S. manufacturing. Toyota isn't outsourcing; it's creating jobs in the United States. It isn't having trouble manufacturing complicated products here--it's opening factories as quickly as its systems and quality standards allow. It's offering union wages and good health insurance (to avoid being unionized), and selling the products its American workers make to Americans, profitably and more inexpensively than its U.S. competitors.

It's time for the U.S. automakers, and their apologists, to stop focusing myopically on supposed competitiveness burdens and instead work on removing waste from their internal processes.  Before it is too late.

Blatherings on Success

The December issue of Business 2.0 (not yet available online) has a section titled How to Succeed in 2007, where they asked "25 of the brightest minds in business how they do what they do and how you can cash in on their advice."  These types of articles are found in many rags that need to throw out some big names to increase readership, and in my opinion are usually predominantly shallow un-actionable thought or even pure nonsense.  Jack Welch is commonly-featured, and we've blogged about his blatherings and our friend Mark Graban has convinced many of us that Welch is a turkey.  Maybe that's why he wasn't part of this particular list of the "25 brightest minds."

Most of the 25 "brightest minds" talk about issues relevant only to those who have forgotten the lessons of "Web 1.0" and naively believe that "Web 2.0" companies can somehow successfully warp the fundamental realities of business.  But there are a few nuggets that are worth discussing.

Sergey Brin and Eric Schmidt of Google:

"Simplicity is an important trend we are focused on.  Technology has a way of becoming overly complex.  Success will come from simplicity."

Regular readers will know that this is one of my hot buttons.  One of the very first posts on Evolving Excellence dealt with Excellence Through Simplicity, and we've discussed at length the problems of bowing before the false god of the almighty algorithm, the benefits of a white board over SAP, and design simplicity.  Technology is great... when appropriately evaluated and applied.  But it is very easy to get sucked into a sexy technology and not realize that it is simply automating waste.

Howard Schultz, chairman of Starbucks:

"The most important characteristic of building a world-class brand is trust.  Trust with your people and trust with your customers."

Whether it's truly the most important characteristic may be debatable, but it is important.  Lean transformations are hard, counterintuitive, and provide management the opportunity to reap quick rewards at the expense of sustainable success.  Those quick rewards are generally due to headcount reductions driven by initial waste reduction activities.  But those same people will be needed to grow and sustain the business, therefore transformation leaders focused on the long-term will recognize the value of their knowledge and use them to grow.  That creates trust.

Michael Dell, chairman of Dell Computer:

"Today the world has about 1 billion people connected to the internet.  We have almost 6 billion people left.  As our world becomes more connected, the price of being left behind will only grow.  The lessons for entrepreneurs here is that the opportunities for people in all of these countries - driven by improved access to technology - are already transforming their economies.  Consider this the digital opportunity of a lifetime: connecting the next billion users and beyond."

He is talking directly about the opportunity for computer- and internet-related businesses, but there is another lesson: global competition is accelerating with increased access to knowledge.  The percentage of Superfactory visitors from outside of North America is increasing rapidly.  Lean knowledge is being leveraged around the globe.  U.S.-based companies that thought they could simply go overseas to chase low labor costs are finding that their low labor cost competitors are also leveraging lean to reduce internal costs... a double competitive whammy.  Perhaps being lean may soon be a required attribute, not a competitive advantage.

Muhammad Yunus, founder of micro-credit Grameen Bank and 2006 Nobel Peace Prize winner:

"It's not that we lend money to people in small or big amounts; it's that we load in an appropriate amount to their needs.  The size is small because the need is small.  I could complicate things: I could lend a person $1 million, but if that someone can only handle $20, that would be stupid."

We blogged about Yunus several weeks ago after he won the Prize, and described how in several respects it was a victory for lean business.  His comments above reinforce that.  Micro-credit is in effect "lean lending."  Small, the appropriate amount, defined objectives.  Analogous to an "inventory reduction of funds" down to "just what is needed at just the right time."  Successful, just like the same concepts in lean manufacturing.  Contrast that with the desires of many to throw more and more money at overseas aid projects, leading to graft and corruption.

Pamela Thomas-Graham, group president of Liz Claiborne:

"... particularly in times of rapid change, people need to visibly see the urgency and passion of their leader if they're going to fully engage.  Being analytical and strategic is great, but to get a team motivated during the tough times, you also have to show your passion - you have to break a sweat so they understand at an emotional level what's really at stake."

The small number of lean transformations that succeed often do so because of a crisis.  They are facing a new low-cost competitor, a technology disruption, or other event.  There is direct evidence of what is at stake... the potential for the company to go poof.  Companies and organizations that attempt a lean transformation as a long-term strategic goal have a much harder time... the going gets tough and the commitment of leadership becomes critical.  It doesn't take too many false steps or compromises for the organization to begin believing that it is simply another fad du jour.  But even when the company isn't directly at immediate risk, a committed, knowledgeable and visible leader can successfully execute a lean transformation.  How many of you walk the factory floor every day to reinforce your commitment?

Donald Trump, chairman of the Trump Organization:

"Obsess about solutions, not problems.  The image of success is important, but even more important is the ability to focus on solutions instead of problems.  That way you'll never be thinking like a loser, and you probably won't look like one either."

I debated whether to include that one, as I could write for hours on Donald Trump and real leadership vs. made-for-TV leadership, the "success" of someone who has organizations currently in bankruptcy, etc.  But let's focus on his statement.  Yes, there must be a drive toward solutions.  Simply complaining about problems goes no where.  We all know people that like to complain for the sake of complaining.  However simply focusing on solutions can be disastrous if you don't first understand the root cause of the problem.  If you solely "obsess about solutions" you end up creating a patchwork of superficial "band-aid" solutions.  Drive to understand the true root cause of a problem, then focus on the solution... a real solution.

So six of the twenty-five had something somewhat meaningful to say.  Some ideas to think about on a Tuesday morning.

Da Cubs and Da Bears

Last Thursday there was an interesting debate on MSNBC on the future of the Chicago Cubs.  The Cubs are currently owned by The Tribune, a large newspaper publishing company that is trying to figure out its future.  Newspapers have had a very tough time recently with subscriptions falling off a cliff as more and more people shift to alternative new media news sources.  In today's world the newspaper is old news.

The debate centered around the aspect of creating future performance... both for The Tribune and for the Cubs.  The Tribune is considering going private to avoid the quarter-by-quarter short-term mindset of Wall Street.

At the same time The Tribune is investing heavily in Cubs payroll to get top name players, such as the recent $136 million deal to acquire Alfonso Soriano.  That was the fifth most expensive deal in Major League Baseball history.  The fact that they made this move mystified several analysts as on the surface it looked like a focus on a long term strategy... to finally end the 98 year World Series drought.  The Tribune CEO Dennis FitzSimons calls the Cubs a "programming asset."  Although they claim that the Cubs aren't for sale, that terminology doesn't really sound like a long-term commitment.  In reality they are probably looking at spinning off a higher-value franchise to new owners, without having paid a penny of the new player deals.  

We've written before about the trend of taking public companies private in order to better focus on long-term growth.  Private companies do have substantially more flexibility without the reporting and regulatory hassles, but in return they give up the ability to easily access large pools of capital that can jumpstart growth.  Some public companies with significant clout can truly focus long-term and almost ignore the quarterly Wall Street focus.  Danaher does a good job at it, and an increasing number of companies are telling the Street that they will no longer be providing future earnings guidance.  A long-term perspective is required for a successful lean manufacturing transformation.

To be successful sports teams must focus on the long term.  It takes time to build a cohesive high-quality team.  Time and often substantial investment.  Almost by definition this runs counter to the desires or predelictions of public companies.  Some sports recognize this, and NFL football franchise rules are specifically designed to make public ownership, whether truly by the public or by a publicly-traded company, very difficult.  European soccer is also starting to recognize the problems with having shares of teams traded on large stock exchanges.

Major League Baseball franchise owners still include several publicly-traded companies, from The Tribune to AOL Time Warner and Disney and even Nintendo.  Unless they can successfully battle the traditional short-term focus of their analysts, they will have difficulty building and sustaining long-term team success.

From Russia With Lean

As if Ford and GM didn't have enough problems.  The November 20th issue of Business Week has an article on GAZ, the large Russian auto maker, and specifically how it is enjoying rather spectacular success.  How?

... manufacturing techniques from Toyota Motor Corp. that have tripled assembly-line productivity.  "The factory has changed fundamentally," says depute floor manager Oleg Popov.  "I see a bright future."  At the plant in the city of Nizhny Novgorod, 280 miles east of Moscow, workers in neat blue uniforms proudly show off their Japanese-inspired production methods.  Graphs and electronic displays record the performance of each work team, while photos of the disorganization of a few years ago provide a reminder of how far the factory has come.

Photos of the past are a classic component of an effective 5S program, and tripling productivity is a real result.  Perhaps this will be a case of being lean instead of just looking lean, although the future will provide the real evidence.

GAZ, the Gorky Automotive Plant, has been around for many years.  It cranked out clones of Ford's Model T in 1932 and tanks and trucks during the cold war.  The implosion of the Soviet Union nearly dealt GAZ a death blow, but new foreign-led management brought it back to profitability.  Earnings will jump nearly 30% this year to $450 million on sales of $4.4 billion. 

They are now looking to grow outside of Russia, and are ambitiously targeting exports rising from the current 25% of sales to over 50% of sales by 2013.  To accomplish this they hired Martin Leach, who used to run Ford's European operations.

A big problem has been the design and technology of their vehicles.  If you look at the Volga to the  right, you'll realize why.  However they recently purchased an entire Sebring production line from Chrysler's Sterling Heights, Michigan plant and are in the process of relocating it to Nizhny Novgorod.  GAZ will use that model to replace the Volga and also fuel its expansion overseas.

If they continue to leverage lean better than GM and Ford, we may be witnessing the birth of another automotive powerhouse.

Innovation and Lean Product Development

Every issue of the Wall Street Journal is filled with stories of innovation... primarily companies trying to "innovate" their way out of competitive disadvantage.  Most of the time these companies believe that some remarkable "innovation" will offset their dysfunctional internal cost situation, and perhaps coupled with following the lemmings to the overseas low labor cost nirvana du jour they can finally "compete on an even playing field."  Of course that will never work. 

A company that has high internal cost will never be competitive with a company that has significantly reduced the waste of its internal processes.  It will not be as agile, it will not be able to respond to rapid changes in market conditions or disruptive technologies, and it will be consigned to investing in an endless series of new factories as it chases low labor costs around the globe.  These supposed "competitiveness burdens" are a figment of myopic misfocus, as proven time and time again by companies that compete and succeed in the U.S.... like Toyota, Danaher, Parker-Hannifin, and Texas Nameplate.

Those innovation-focused companies may have even more to worry about.  What if a company has successfully created a significant operational cost and agility advantage by leaning its internal processes... and has also figured out how develop new products and innovations in record time with much lower investment?  A double whammy, and the traditional companies might as well head for the showers.

Ronald Mascitelli of Technology Perspectives has been working in the "lean product development" area for many years.  He's a recognized expert that gave a great workshop at last month's AME conference in Dallas.  In 2004 he published the Lean Design Guidebook, and he has just come out with the Lean Product Development Guidebook. 

This latest book discusses typical project selection, prioritization, and management... but then adds the lean component.  Transitioning from traditional development silos to gates to how continuous flow can be applied to new product development.  Knowledge management, organizational learning, and manufacturability from a lean perspective.  And even more lean... visual project management and the concept of value, value streams, and the intolerance of waste.  Some of those concepts create unique opportunities for product development, and companies that have implemented them have seen 50% reductions in launch schedules and significant increases in gross margins.

The book will be a great addition to the lean body of knowledge, but to really learn the concepts you have a unique opportunity coming up in two weeks.  Mr. Mascitelli will be presenting a two-day workshop in conjunction with the Association for Manufacturing Excellence, in San Antonio from December 4th-5th.  Go to the AME events website to learn more or to register.  I'd encourage you to at least check it out... it could be a few hundred bucks very well spent.  And no, we don't get a kickback!  We just feel it's important.

Or you could spend those two days thinking about how you're going to compete with companies that bring new products to market in half the time it takes you.

The Speed of Chaos

Sometimes we just can't help but be ahead of our time.  Almost six months ago I told you about my experience driving in Italian traffic.  The lack of signs and signals created a "chaos" that in many ways approximated the continuous flow of the lean world, with the same counterintuitive result.  Although single cars appeared to move slower, the fact that they continually moved without signals creating effective batches of traffic meant that the overall flow of traffic actually moved faster. 

There are very few traffic signals in Italy.  Miniature cars rush all over the place intermingling with Vespas, buses and trucks.  This seems like pure mayhem and insanity to visitors from the U.S. with our highly disciplined traffic control... until you start to realize something:

Traffic flows continuously, everywhere. 

So with our "highly disciplined system" we have slugs (batches...) of traffic starting then stopping at the next traffic control, while in Italy it may move a little slower... but it is always moving.  Very rarely did I come to a full stop.  Those of us in the lean manufacturing would should immediately recognize the consequence of continuous versus batch flow... steadier and higher output. 

Ahh... but it can't be as safe, right?  Wrong.  Statistics show that Italy has a motor vehicle accident rate that is about 30% better than the United States. 

A couple days ago (long after we told you about this opportunity...) Der Spiegel had a story on how seven European cities are participating in an experiment to remove all traffic signs.  Not just signs, but parking meters, lights, sidewalks, and even the painted lines on streets.   To quote a few lines from the article:

Drivers [in regulated areas with many signals] find themselves enclosed by a corset of prescriptions, so that they develop a kind of tunnel vision: They're constantly in search of their own advantage, and their good manners go out the window.

The new traffic model's advocates believe the only way out of this vicious circle is to give drivers more liberty and encourage them to take responsibility for themselves. They demand streets like those during the Middle Ages, when horse-drawn chariots, handcarts and people scurried about in a completely unregulated fashion. The new model's proponents envision today's drivers and pedestrians blending into a colorful and peaceful traffic stream.

It may sound like chaos, but it's only the lesson drawn from one of the insights of traffic psychology: Drivers will force the accelerator down ruthlessly only in situations where everything has been fully regulated. Where the situation is unclear, they're forced to drive more carefully and cautiously.

"More than half of our signs have already been scrapped," says Drachten traffic planner Koop Kerkstra. Now traffic is regulated by only two rules: "Yield to the right" and "Get in someone's way and you'll be towed."  Strange as it may seem, the number of accidents has declined dramatically. Experts from Argentina and the United States have visited Drachten. Even London has expressed an interest in this new example of automobile anarchy.

Those of us in the lean world immediately recognize the power of continuous flow at work.  What has been really interesting is how others, in non-traffic and non-manufacturing fields, have also picked up on potential opportunities from this phenomenom. 

Jeff Nolan at Venture Chronicles wonders if it is possible to increase computer and network security through "increased danger."  In effect, vigilance increases if the potential danger is increased.  One respondent to his post calls it "security through increased accountability."  Mike at TechDirt has a similar computer viewpoint.

A Cato Institute blog notes the following statement in the original article:

"The many rules strip us of the most important thing: the ability to be considerate. We're losing our capacity for socially responsible behavior," says Dutch traffic guru Hans Monderman, one of the project's co-founders. "The greater the number of prescriptions, the more people's sense of personal responsibility dwindles."

And then makes a nice libertarian-oriented argument against excessive (or practically any) regulation... which I happen to agree with.   For the most (but not all) part, regulations are like squeezing a balloon.  Constrain it in one place and it will bulge out someplace else... usually where you least expect it. 

Stick with Evolving Excellence to stay ahead of the curve on emerging "lean" traffic theory!

Keeping It Simple

Many of you that get the Sunday paper may have seen John Maeda's article on How To Keep It Simple in the last Parade magazine insert.  Mr. Maeda is a computer science professor at MIT and the author of The Laws of Simplicity.  Although the book didn't get the greatest of reviews, I do enjoy the thoughts on simplicity that he writes about on his blog.

"Excellence through simplicity" has long been a driving concept for me, and is also rather fundamental to lean manufacturing.  In fact, one of the very first posts on the Evolving Excellence blog way back in 2004 discussed the power of simplicity. 

Maeda's article in Parade obviously deals more with the common consumer side of simplicity, but there are some lessons that can be applied to complex enterprise and manufacturing situations.  Some dot points from the article:

• Administer the single breath test.  If the sales clerk can't explain how to use a gadget in a single breath, it's probably too complicated.

A single breath is probably an extreme for complex manufacturing equipment, but still a good concept.  If it takes several days of meetings to learn if a new piece of automation equipment is really the right answer, then perhaps some red flags should be raised.  Imagine an ERP sales guy trying to explain SAP in a single breath... actually we once wrote about the the complexity of SAP!

• Buy only what you need.  Think about what features you need before you go to the store, then ask for the model that does everything on your list - and nothing more.

Two good points here.  First, reduce assets and inventory to just what is needed immediately to reduce the waste of storage, obsolescene, expiration, and outright loss.  Second, size the equipment and scope the features to just what is needed for the problem at hand.  Multiple, flexible smaller machines work better than one monolithic monument.

• Look for great design.  Any piece of technology is bound to give you headaches from time to time, so pick the one that looks the nicest.

Simple is not necessarily cheap, and similarly there is a lot of value in simplicity.  It's like getting into a Lexus after sitting in a Chevy.  The first thing that hits you is that there seem to be fewer knobs, buttons, and gizmos... until you realize that there's tremendously more capability controlled by extremely well-engineered human-use design.  And you soon also realize that every bit of that additional capability is truly useful, as opposed to being frivolous gee-whiz or showy.

• Count your steps.  When shopping, count the number of steps required on each device to get to your goal.  If taking a photo takes three presses of a button on one camera and seven on another, your choice is clear.

Value stream analysis, pure and simple.

Some simple lessons to keep it simple... and create excellence.

The Lean MBA

Last week we discussed how Forbes in one article asked a question on why GM and Ford aren't competitive and then answered it in a separate article describing how MBA hiring trends are a great predictor of industry failure... with both articles on the same page.  We proceeded to give MBA's some well-deserved grief, as we've done in the past.

This prompted our friend Bob Emiliani to write us with some additional comments.  He is the author of Shingo Prize winning Better Thinking, Better Results and president of The Center for Lean Business Management.  Over the last few years he has studied MBA programs and education in general and has written several articles that recommend improvements... many based on lean enterprise concepts.

In 2004 he published Is Management Eduction Beneficial to Society? where he begins to look at waste in graduate management education.  He suggests three improvements: create guiding principles, introduce the concept of waste, and root cause analysis.  Later that year he expanded on that analysis with Improving Business School Courses by Applying Lean Principles and Practices.  In this article he again tackles waste, but also explores unevenness, unreasonableness and suggests improvements that include the lean principles of respect for people, continuous improvement, 5S, just-in-time, load smoothing, standard work, visual controls, voice of the customer, and more root cause analysis.

In 2005 he published Using Kaizen to Improve Graduate Business School Degree Programs, and then this year he published Improving Management Education.  The full text of that article is here.  In it he proposes a radical restructuring of MBA programs around eleven "integrated areas of improvement" to simplify, provide focus, improve relevancy, and impart needed thematic consistency.  These improvements are:

1. Corporate purpose.  "Academics and senior managers who faithfully insist the purpose of a corporation is to maximize shareholder value should recognize that this can be realized in more than one way. There is the literal way, i.e. purely financial or the non-literal way, i.e. financial plus many other important factors such as market share, quality, service, innovation, etc. Both interpretations are valid with regards to the fulfilment of legal responsibilities by corporate directors. However, only the latter is sensible in practice, ethical, and morally defensible."
2. Business Principles.  "Faculty should adopt a balanced “human-economic” approach to business using general principles that are best articulated by the Caux Round Table Principles for Business. [This] would send many unmistakable messages to students, including the existence of stakeholders, the inappropriateness of making destructive tradeoffs between key stakeholders  and the purpose of business beyond creating shareholder value."
3. Problem Recongnition.  "Students should be taught how to recognize a problem, how to formally identify the root cause of a problem, and how to identify and implement practical countermeasures to prevent recurrence."   
4. Root Cause Analysis and Countermeasures.  "Understanding the root cause of problems is a very good first step, but an equally important task is to identify practical countermeasures to prevent recurrence. I find that students (and managers) are capable of identifying theoretical or high-level countermeasures, but not good at identifying specific, practical countermeasures to implement at the exact point in the process where the error occurred."
5. Organizational Politics and Blame.  "Business leaders that establish and adhere to a 'no-blame' policy will encourage the detection, elimination, and prevention of errors and at the same time dampen or eliminate destructive blame and organizational politics."
6. Results-Only Focus Versus Process and Results. "Understanding business processes in detail results in less variation in product or service quality, lower costs, and shorter lead-times. Ad hoc problem solving focused on symptoms rather than root causes drains resources from organizations and slowly erodes their competitiveness. A countermeasure would be to teach students – in every course – the importance of understanding all business activities as processes, and how to utilize systematic approaches for process improvement that yield tangible results. If this is not done, many students will leave school thinking activities in operations consists of processes, while those in marketing, finance, or human resources do not." 
7. Value-Added and Waste.  "Invariably faculty, like any other person who is not aware of what waste is, will think that there is no waste in the business processes that encompass their knowledge area. Nor will they think there is waste in the design and delivery of the courses they teach or perhaps even within their own University’s operations.  Evidence of such thinking can be found in the very common desire among faculty to add more material to a course, rather than eliminate material, or say: 'Everything I do adds value.' Of course they are mistaken on both counts, but therein lay dozens of opportunities to improve courses in ways that are more relevant to future management practitioners."
8. Time-Based Competition.  "The best time-based competitors know they must strive to achieve balance among mostly shared but sometimes competing stakeholder interests. While counterintuitive, organizations that do this well enjoy consistently superior long-term financial and non-financial performance. Unfortunately, faculty often treat the best time-based competitors as business oddballs whose success is largely attributable to expensive computer systems, charismatic CEOs, or a unique corporate culture. Instead, the proper focus should be on why process knowledge is important and the specific details of how people go about systematically improving processes and achieving desired results."
9. Performance Metrics.  "Top managers who scrutinize their metrics to ensure they do not focus employee’s activities on creating or managing waste, and also bring to life corporate purpose and business principles, are better able to balance quantitative and non-quantitative data. This leads to better business decisions because managers will avoid falling prey to the most common decision-making traps."
10. Total Cost and Outsourcing.  "In the context of industrial procurement, the term 'total cost of ownership' is used to describe all costs that are incurred, in addition to the initial purchase order price, such as: inspection, support personnel, warehousing, service, logistics, repair, maintenance, litigation, etc. Unfortunately, most senior managers do not understand or seek the 'total cost' of various business transactions such as the goods and services their company purchases – just purchase price. This leads to an incomplete or inaccurate understanding of current and future costs. Managers commonly use purchasing tools such as economic order quantities and online reverse auctions, as well as price-based metrics such as purchase price variance (PPV). While savings may be achieved on a unit cost basis, they often lead to higher costs on a total cost basis."
11. Respect for People.  "While the words “respect for people” sound simple and all managers will say they are totally committed to it, 'respect for people' is, in fact, very challenging to fully comprehend and put into daily practice.  This is particularly true with regards to long-established business practices such as corporate policies, financial analyses, business performance metrics, and software systems, because there are facets hidden within these that are at odds with 'respect for people.'"

Traditional MBA programs, especially those from the supposedly "best schools" such as Wharton, have a rather astounding record of failure.  They should take a hard look at Emiliani's recommendations.

Peanut Butter and Lean at Yahoo

Yahoo has always been one of the stars of the internet world, and one of the few that survived the "great reconciliation of 2001" when illusions of "new economy" financial metrics finally met the real world.  It's interesting that "web 2.0" companies are once again attempting to redefine the real world, but I'm confident there will be a similar outcome.

After growing like gangbusters, Yahoo has been faltering recently, and falling behind the likes of Google, AOL Time Warner, Fox's MySpace, and even Microsoft.  Search revenue is lagging, technology has become sub-par, and hence their share price has fallen 31% this year compared to an increase of 20% for Google.  This problem hasn't gone unnoticed by a couple of Yahoo executives.

Today's Wall Street Journal tells us about Brad Garlinghouse, a ballsy Yahoo senior vice president, who wrote a four-page "Peanut Butter Manifesto" last month that is being circulated internally... and now externally.  If you have a subscription to the WSJ you can read the full text here.  The name was coined as a result of Garlinghouse's argument:

Yahoo is spreading its resources like peanut butter on bread, thinly and evenly across all its activities.  Thus we focus on nothing in particular.  The company needs to pick specific areas to focus on and make bigger bets on them while dropping nonessential activities.

That probably sounds like a lot of companies or organizations you know of.  It's highly likely that you're working in one now.  Mr. Garlinghouse hinted at some lean knowledge when suggesting potential solutions.  For example, with the fundamental "vision thing":

There is an absence of focused, cohesive vision for Yahoo, which means it wants to do everything and be everything - to everyone.  The result is a company that is reactive and scared to be left out.  We've got to get back to basics and zero in on a few key priorities.

Perhaps it's time for a dose of hoshin kanri.  Or how about his thoughts on the organizational structure itself:

There's currently a matrix corporate structure where responsibility is spread among multiple executives - in engineering, product, marketing and corporate strategy.  Garlinghouse suggests creating manager positions with responsibility for all aspects of a particular business, from marketing to engineering and business development and including its bottom-line results. 

In other words, value stream management.  The good news is that it sounds like other Yahoo executives are being receptive, and are taking the recommendations seriously.  Now we'll see if any have the leadership guts to actually take action.

Stop eating peanut butter.

Good advice for pretty much any organization.

A Presumption of Imperfection

Charles Fishman has an article in the upcoming December/January issue of Fast Company, this one titled No Satisfaction. In it he dives into Toyota's Georgetown, Kentucky plant and shows why they are successful... and why the U.S. big three still just don't get it. 

At Toyota there is a presumption of imperfection.

No one at Toyota Georgetown can talk about his work without explaining how it has just changed, or is about to change.

We've blogged quite a bit about how some organizations and companies complain about "competitiveness burdens" and feel they simply cannot compete... when they should really be looking at their own internal waste.  Fishman makes this point perfectly:

Without fanfare, in fact, Toyota is confounding conventional wisdom about U.S. manufacturing. Toyota isn't outsourcing; it's creating jobs in the United States. It isn't having trouble manufacturing complicated products here--it's opening factories as quickly as its systems and quality standards allow. It's offering union wages and good health insurance (to avoid being unionized), and selling the products its American workers make to Americans, profitably and more inexpensively than its U.S. competitors.

Simply working at Toyota transforms even your home life.  Consider Howard Artrip...

The way he does his work is so compelling it has become part of his personal life. "When I'm mowing the grass, I'm thinking about the best way to do it. I'm trying different turns to see if I can do it faster," he says. He has analyzed his morning routine. "I do the same standardized work in the shower every morning. I have to get here at 6 a.m., and I know it takes 19 minutes, including walking into the plant." He smiles. "I've maximized my sleep time."

Many of us in the lean world know exactly what he means... often to the amusement of our spouses.  It's an incessant desire to improve the process... not just innovate the product.