Evolving Excellence

WaPo Deludes The Masses, Again

I lost respect for the "reporting" in The Washington Post long, long ago, but I still peruse it briefly online each morning just to see what the inside-the-beltway nut cases are thinking.  This morning there was an op-ed that was so off-base and so factually incorrect that I had to literally go pound some iron in the gym for an hour in order to cool off.  No wonder the policies of both parties are so bizarre to those of us in the real world; the politicians obviously read the idiotic drivel that is printed in the WaPo.  Apparently I wasn't the only one to notice the flaws... so did a couple economists.

Gilbert Kaplan, a partner at the "international trade practice" of King & Spalding in Washington, penned the op-ed titled "5 Myths About the Death of the American Factory."  Let's start with the original premise of his piece, which even a sixth grader could poke a hole in with a couple seconds of thought.

Sure, U.S. banking is in trouble, but the longer-term and possibly more damaging threat to the nation's prosperity is the decline of the manufacturing sector. Late last year, the number of U.S. manufacturing jobs dropped below 14 million for the first time since 1950.

Should we bother discussing this yet again?  Ok, just in case someone doesn't quite understand, we wrote about this just a couple weeks ago.

America's manufacturing output, as measured by the Federal Reserve, is up seven-fold since 1950, but manufacturing jobs as a share of all jobs have fallen to 10% from 30%.  The problem, if it really is one, is not foreign competition or evil financiers. It is technology and productivity. In the 10 years ending in 2007, durable goods manufacturing productivity averaged an annual growth rate of 4.8%.

Manufacturing output is up, contrary to the incorrect popular wisdom that the flight of manufacturing to China as decreased output.  Last year we even put to bed the myth that the productivity numbers were skewed due to offshored subassemblies that were then returned and finished in U.S. factories.  The problem is that productivity increased faster than output, therefore manufacturing labor requirements decreased thereby leading to lost jobs.  The same thing happened with farming in the last century, only slower.  The speed of the change in manufacturing productivity is what has created the pain as it has been difficult to accommodate the changes to the labor pool.

And we haven't even started with Mr. Kaplan's "myths"... or perhaps we should call them "mythical myths" to be more accurate.  So here we go:

1. It's all about cheap wages. American workers are just paid too much. For most manufacturing sectors, that's just wrong.

Actually it's not necessarily right or wrong, it's just inconsequential.  Companies generally do pay considerably more labor dollars to operate from the U.S., but there's value in those people as well.  And that value is not manifested just in the high tech sector; even in low margin apparel manufacturing there are examples of U.S. companies that can out-compete Asian sweatshops.  If you can do it making t-shirts and underwear, it's almost a no-brainer to do it in the tech sector.  Or it should be.

2. U.S. manufacturers can save themselves by investing in innovation.  Okay, but how much are you going to invest? U.S. private-sector companies can't put as much money into technology and research and development as foreign governments do to build up their sectors. As the chief executive of a technology firm with whom I've worked for many years says, "We're the best company in the world, but we can't compete with foreign governments." Consider Airbus. The European Union has put more than $15 billion into building this aircraft company from the ground up.

And Boeing is eating Airbus for lunch these days.  U.S. companies also have access to U.S. universities, U.S. infrastructure... you get the picture.  Don't peel off one slice of the onion without realizing there are several others.

3. Trade laws and trade agreements level the playing field for U.S. manufacturers.  If only this were so. This should be the main goal of our trade negotiations. The manufacturing sector is hurting more than any other, but we're using our political capital -- in the Doha round, for example, the latest World Trade Organization negotiating round -- to help the service and agricultural sectors. Little is being done for basic manufacturing.

The manufacturing sector is doing just fine, thank you, but although manufacturing output from domestic factories is increasing, it could increase even more if companies would realize the true value of their employees instead of chasing low labor costs overseas.  We do need to be sensitive to those that still lose their jobs, and find ways to use and leverage their knowledge and experience.

4. Good management can make U.S. manufacturers lean enough to fight in the international economy.  I wish it were that easy. Even the best management can't overcome some of the structural disadvantages we face. Take health-care costs. In Europe, these costs are absorbed by the government. In the United States, manufacturers have to pay for them.

Uh, yes it can.  It all depends whether you spend your time whining and complaining, or focusing inward to figure out how to run your operations more efficiently.  Remember the low margin t-shirt manufacturer I mentioned above?  Perhaps we should call it leadership instead of management.

5. We make high-tech goods here, so we're okay. It's only schlock items that come from abroad.  Really? The truth is, very few high-tech companies are building new plants in the United States.

Give me a break.  Exhibit one: Intel's $3 billion Fab 32, which opened in Chandler, Arizona less than a year ago.

Despite all the bad news, the United States still has a manufacturing sector and still produces about $4.5 trillion worth of goods a year. But we're also consuming fewer and fewer of our own products each year, and factory workers' slice of the pie is getting smaller by the month. If we don't address this problem soon, the last thing we'll be producing in America may be paper.

So should we ratchet back on productivity so it takes more labor to make a product?  How would that affect our global competitiveness?  How would that affect prices to consumers?

Why make anything in this country at all? It'd be easier to disassemble the paper mills, pack the equipment in enormous wooden crates and send it off to China -- probably on the same cargo ships that, in time, will carry massive rolls of paper back to our shores.

Except that it takes a lot of fuel to float those ships across the oceans, and that increase in cost is already causing the outsourcing lemmings to reconsider their decisions to chase cheap labor.  Unfortunately they're in for a bit of a surprise when they realize that many of their competitors stayed in North America and focused inward and improved their overall efficiency.  Interesting competitive dilemma.

Global IQ Quiz - The Answers

Yesterday we asked the questions from the global IQ quiz that appeared in Richard McCormack's newsletter,  Manufacturing & Technology News.  Below are the answers.

Q: Which country is the world’s largest producer of small commercial jets of up to 120 seats?
1. France
2. India
3. Russia
4. Brazil
5. Korea

Brazil’s Embraer jets have revolutionized the small aircraft business with products so successful that they have a $15-billion order backlog to prove it. The company’s success is not just based on low-cost labor: Embraer has
proved ingenious at design, responsive to customers and formidable at competing in international markets. Its most daring initiative was the ERJ145 family of jets, which turned conventional design on its head, by making the top of the plane wider than the bottom — increasing passenger room and comfort. (Answer: 4)

Q: By 2010, India and China together will graduate approximately how many science and engineering students?
1. 250,000
2. 500,000
3. 1.5 million
4. 4 million

Education is the top priority of emerging economies. Taken together, China and India may be graduating 1.5 million science and engineering students (12 times the US output), but studies by human resource groups have shown that three-quarters of these graduated still require extensive in-house training after being hired. As more
product development and research resources shift to China and India, it remains to be seen how ready graduates will be to do the job. (Answer: 3)

Q: Chinese baby goods maker Goodbaby innovates at the rate of one new product development every ____ hours.
1. 12
2. 24
3. 36
4. 48

Since its founding in 1990, Goodbaby has put a premium on innovation and rapid-fire inventing. The company got its start when the founder had so many competing bids to buy his new stroller design that he decided to start a
company and build it himself. Since then, the company has grabbed 80 percent of the Chinese stroller market, as well as a 25 percent share of the U.S. market. Goodbaby spends 4 percent of revenue every year on R&D — well above average for the toy industry. It operates R&D centers in China, Germany, France, the UK, the U.S. and Japan. An estimated 400 million households worldwide use its products. (Answer: 1)

Q: An upstart appliance manufacturer in Asia has designed a clothes washer for the Chinese market that also does what?
1. Removes wrinkles
2. Steams rice
3. Dry cleans silk
4. Washes vegetables
5. Heats the kitchen

Repairmen for China-based appliance maker Haier were getting numerous calls to unclog the drain pipes on customers’ clothes washer. They found that customers were using the machines to wash sweet potatoes. So Haier,
knowing the importance of listening to its customers, customized its washers for that market by adding a “vegetable wash” cycle. (Answer: 4)

Q: India-based Aravind Eye Care is so efficient , it still makes a profit even while:
1. Training most of the country’s eye surgeons at no charge
2. Using high-cost, state-of-the-art operating equipment and the most expensive drugs
3. Providing complimentary meals for all patients and their families
4. Performing three out of five cataract surgeries for free
5. Hiring renowned international medical experts at their US/European salaries

Aravind keeps its expensive surgical equipment in operation 24 hours a day, significantly reducing its costper-
surgery. It also focuses doctors exclusively on doing surgery and letting nurses handle pre-op and post-op care,
increasing doctors’ productivity. As a result, the company can give away free surgeries to the poor and still earn a
healthy profit. (Answer: 4)

Q: Which company now owns the prestigious Jaguar and Land Rover lines of automobiles?
1. Cerberus Capital, USA
2. Ford Motor, USA
3. Tata Group, India
4. M+M/Renault, France
5. Mitsubishi Motors, Japan

In March, Indian conglomerate Tata Group announced it was acquiring the famous luxury marquees Jaguar and
Land Rover from Ford Motor Company for $2 billion in cash. It was the latest in a string of M&A deals by Tata,
including the acquisition of Anglo-Dutch steel company Corus (for $13 billion), acquisition of Tetley Tea ($432
million), and sale of its interest in beverage maker Giaceau to Coca-Cola for a healthy profit. In businesses as diverse as steel, cars, food and beverage and technology, Tata Group is developing a well-known marquee for its own business: as a global player to be reckoned with. (Answer: 3)

Q: India-based Bajaj Auto is the number-one seller of two-stroke motorbikes in which emerging market
country/countries? Choose all that apply:
1. Sri Lanka
2. Colombia
3. Bangladesh
4. Mexico
5. Peru
6. Egypt

India-based Bajaj is one of the world’s largest makers of small, affordable motorbikes. It saw plenty of opportunity in the low end of the market, where buyers had specific needs and design preferences — but few choices. By 2007, the company had expanded to 50 countries, and its exports grew by 77percent. And the quality is so good that the largest companies like Kawasaki are even importing and selling Bajaj bikes in other markets. Could Bajaj eventually end up competing head-to-head with Harley Davidson, BMW and Honda? (Answer: All)

Q: Choose the correct order below of the total hours worked per year by white-collar workers in the following
countries — from highest to lowest:
1. Poland, United States, Germany
2. United States, Poland, Germany
3. Poland, Germany, United States
4. Germany, Poland, United States

Poles work an average of 1,984 hours per year, compared to 1,777 for Americans and 1,362 for Germans. This fierce work ethic is visible across most fast-growing economies from emerging Europe to emerging Asia. For example, in China, many workers see part-time opportunities — like working as street vendors in the evenings and on days off — not just as a way to add to their incomes, but as a way of gaining valuable business experience should they want to start a company of their own. (Answer: 1)

Q: Johnson Electric, the world’s largest independent maker of micromotors, is based in:
1. Dayton, Ohio
2. Seoul, Korea
3. Mannheim, Germany
4. Hong Kong, China
5. Vancouver, Canada

Johnson Electric started out making small motors for motorized toys, but soon expanded to motors for highmargin
products like household appliances. They next began supplying the German auto industry. Johnson Electric is now the world’s largest supplier of automotive micromotors, with 45,000 employees worldwide. Its earnings quadrupled during the second half of the 1990s as the company recouped its many years of investing in R&D and manufacturing. (Answer: 4)

Q: The largest acquisition by a Latin American company was made in what country:
1. United States
2. Canada
3. Mexico
4. India
5. Brazil

Brazil-based CVRD, a metals and mining concern, is credited with the largest corporate acquisition of any Latin American company. CVRD believes that Western acquisitions are one avenue toward greater global credibility. According to the company’s director of corporate affairs: “Being Brazilian is very complicated. We needed to improve our grade, our rating. The best way to do that was acquiring companies.” So, in 2006, it bought Canadian nickel miner Inco for $19 billion. (Answer: 2)

Q: A typical, 100-person U.S.-based startup will burn through approximately $20 million in its first year. How much does a similar Chinese startup spend?
1. $31 million
2. $20 million
3. $10 million
4. $2.5 million

(Answer: 4)

Global IQ Quiz - The Questions

Our post a couple weeks ago on the Tata Group generated several comments suggesting globalization is pervasive... and still a little unknown.  Coincidentally last week Richard McCormack reprinted a "global IQ quiz" from the Boston Consulting Group in his newsletter, Manufacturing & Technology News.  Regular readers will know the answers to some of the questions, but others may open your eyes a bit.  So with Richard's permission I am posting some of the questions below.  Think about it, and I'll post the answers tomorrow.

Q: Which country is the world’s largest producer of small commercial jets of up to 120 seats?
1. France
2. India
3. Russia
4. Brazil
5. Korea

Q: By 2010, India and China together will graduate approximately how many science and engineering students?
1. 250,000
2. 500,000
3. 1.5 million
4. 4 million

Q: Chinese baby goods maker Goodbaby innovates at the rate of one new product development every ____ hours.
1. 12
2. 24
3. 36
4. 48

Q: An upstart appliance manufacturer in Asia has designed a clothes washer for the Chinese market that also does what?
1. Removes wrinkles
2. Steams rice
3. Dry cleans silk
4. Washes vegetables
5. Heats the kitchen

Q: India-based Aravind Eye Care is so efficient , it still makes a profit even while:
1. Training most of the country’s eye surgeons at no charge
2. Using high-cost, state-of-the-art operating equipment and the most expensive drugs
3. Providing complimentary meals for all patients and their families
4. Performing three out of five cataract surgeries for free
5. Hiring renowned international medical experts at their US/European salaries

Q: Which company now owns the prestigious Jaguar and Land Rover lines of automobiles?
1. Cerberus Capital, USA
2. Ford Motor, USA
3. Tata Group, India
4. M+M/Renault, France
5. Mitsubishi Motors, Japan

Q: India-based Bajaj Auto is the number-one seller of two-stroke motorbikes in which emerging market
country/countries? Choose all that apply:
1. Sri Lanka
2. Colombia
3. Bangladesh
4. Mexico
5. Peru
6. Egypt

Q: Choose the correct order below of the total hours worked per year by white-collar workers in the following
countries — from highest to lowest:
1. Poland, United States, Germany
2. United States, Poland, Germany
3. Poland, Germany, United States
4. Germany, Poland, United States

Q: Johnson Electric, the world’s largest independent maker of micromotors, is based in:
1. Dayton, Ohio
2. Seoul, Korea
3. Mannheim, Germany
4. Hong Kong, China
5. Vancouver, Canada

Q: The largest acquisition by a Latin American company was made in what country:
1. United States
2. Canada
3. Mexico
4. India
5. Brazil

Q: A typical, 100-person U.S.-based startup will burn through approximately $20 million in its first year. How much does a similar Chinese startup spend?
1. $31 million
2. $20 million
3. $10 million
4. $2.5 million

(Answer: 4)

Join Me in Japan!

Are you interested in visiting some of the best factories of the best lean manufacturing companies in the world?  Then join me on the Japan Kaikaku Experience the last week of October, presented by Gemba Research.  Gemba has been doing these trips for several years and has the experience and inside contacts to do it best. 

We build relationships with companies in Japan who we believe are world leaders in kaizen.  These companies have been doing kaizen in some form for between 5 and 50 years.  Each company has an active Suggestion System whereby employees suggest and implement 1 to 3 ideas per month, per person.

Each company faces unique challenges and has adapted Toyota Production System (TPS) principles faithfully but flexibly.  It is a sign of their commitment to Lean thinking that they are willing to show us the best of what they have done, believing that by sharing their knowledge they will themselves be challenged to rise to the next level.

What types of things will we see and learn?

The companies we visit have integrated the management philosophies with day to day execution of improvement activity.  The results that they have generated over the years are dramatic.  As an example, Toku Manufacturing is able to run nearly 300 machines with 35 people, all because of the advanced level of Jidoka (Low Cost Intelligent Automation) that they have achieved.

What companies will we visit?  Some examples:

We typically visit two or more Toyota sites depending on availability and areas of interest of our study mission group.  We visit at least one assembly plant in order to see one-piece flow assembly paced to Takt Time, kanbans, Andon boards, Just in Time delivery of materials, pokayoke, Standard Work, and other TPS principles.  We also visit an engine manufacturing facility to see Jidoka, TPM, Standard Work, and excellent examples of 5S and visual management.

Denso is a leading global supplier of advanced technology, systems and components. Worldwide, the company employs 87,000 people in 31 countries.  They have been a long-term partner of Toyota in developing both automobile technologies as well as Lean systems (namely kanban). Today Denso is continuously improving their operations and you will see excellent examples of kanban, one-piece flow cell, 5S, visual management, Standard Work, Jidoka, and other TPS principles in action.

At Toyota Home, you will see TPS in action in a high mix, low volume environment.  The work content from one unit to the next varies tremendously, yet each unit flows at Takt Time.  The 'show room factory' is an example of good 5S and visual management.  You will get an up-close look at how to make large, complex products flow one at a time.

I've decided to go on this once-in-a-lifetime type of trip and hope you will too.  For more information visit the Japan Kaikaku Experience at Gemba Research.

The Buzzword of Customer

Sometimes our friends across the pond are almost as crazy as we are.

British bureaucrats have been warned: no more synergies, stakeholders or sustainable communities.  The body that represents the country's local authorities has told its members to stop using management buzzwords, saying they confuse people and prevent residents from understanding what local governments do.

What other kinds of words are we talking about?

The Local Government Association, whose members include hundreds of district, town and county councils in England and Wales, on Friday sent out a list of 100 "non-words" that it said officials should avoid if they want to be understood.

The list includes the popular but vague term "empowerment;" "coterminosity," a situation in which two organizations oversee the same geographical area; and "synergies," combinations in which the whole is greater than the sum of its parts.

Officials were told to ditch the term "revenue stream" for income, as well as the imprecise "sustainable communities." The association also said councils should stop referring to local residents as "customers" or "stakeholders."

I, too, dislike terms like "synergy" and I can't claim I've ever used "coterminosity" but I do believe some "buzzwords" are not really buzzwords.  "Customer" for example.

The word "customer" immediately creates a frame of reference and a hierarchy.  Perhaps it's just because I'm steeped in the lean manufacturing world, but the term tells me who defines my ultimate value.  "Resident" doesn't.  Government would be wise to start thinking of residents as customers.

As with most wild ideas, this one is also spinning out of control.

The association sent its letter after reports that one town council had told staff to use the term "thought showers" instead of "brainstorming."

Officials at Tunbridge Wells council in southern England felt brainstorming might offend people with epilepsy, a condition that involves periodic electrical storms inside the brain. However, the National Society for Epilepsy said it had surveyed its members and they did not find the term offensive.

Anyone up for a thought shower?

Small Batch Elderly Care

The idea of one piece flow being more efficient that batch production is one of those counterintuitive concepts that can make lean manufacturing difficult to implement.  Once we see it in action it becomes obvious and many of us then apply it to other parts of our lives... even making cookies.

A similar struggle is emerging with elderly care.

Traditional nursing homes, many of which care for 100 to 200 patients, are predicated on economies of scale -- the larger the home, the cheaper it is to care for each individual resident.

Those of us in the lean world know that "economies of scale" are predominantly figments of traditional accounting, and that improved processes and intangible costs and benefits can render such "economies" irrelevant.

Along comes a guy named Dr. Bill Thomas who holds similar views about traditional nursing homes.

A native of upstate New York, Dr. Thomas headed to Massachusetts to get his degree at Harvard Medical School, then returned to work as a doctor in a local nursing home. He says he was troubled by the experience. "I was distressed by the amount of emotional suffering that people were encountering even when they had good medical care," he says.

Dr. Thomas spent years plumbing the issue, even penning a one-man play about a mythical land where elders were the heart of society. Further inspired by his two young daughters, both severely disabled and cared for at home, Dr. Thomas decided that changing nursing homes from within wouldn't be enough, and sat down "with a clean piece of paper" to re-imagine elder care.

Tall, sporting a beard and a mane of long, curly brown hair, Dr. Thomas showed up at Robert Wood Johnson's [fourth largest philanthropy in the U.S.) bucolic campus in 2001 attired in his usual casual garb -- he says he wasn't about to change his ways and decided he was "going there to rattle the cages."

So what did he propose?

"Our energy needs to be around how to replace nursing homes. Not replace the building but replace the idea that older people can be taken away and put into an institution," Dr. Thomas recalls saying. He described his vision of homelike places where elderly residents could gather, dine together and sit before a blazing fire.

Though she was taken aback by Dr. Thomas's attire, [Jane Isaacs Lowe, who oversees the foundation's "Vulnerable Populations" portfolio] says she grew fascinated by his idea of a place where seniors could flourish and grow, yet still receive the same high level of skilled nursing care that nursing homes offer.

Dr. Thomas sold them on the concept.

Now the country's fourth-largest philanthropy is throwing its considerable weight behind the 48-year-old physician's vision of "Green Houses," an eight-year-old movement to replace large nursing homes with small, homelike facilities for 10 to 12 residents. The foundation is hoping that through its support, Green Houses will soon be erected in all 50 states, up from the 41 Green Houses now in 10 states.

It won't be easy, yet another example of the unintended consequences of excessive regulation.

One big source of resistance is the dizzying array of federal and state regulations. There are "life safety" rules intended to keep residents safe and prevent them from dying in fires and other disasters; "physical plant" standards that deal with building codes; health-care rules that guarantee a modicum of privacy -- requiring, for example, a curtain between beds. Infection-control regulations are meant to stop transmission of disease, while quality-of-life codes try to ensure residents receive adequate recreation and activities. Some nursing-home executives argue such rules can make it difficult, if not impossible, to create the homelike environment that is a Green House's hallmark.

But the largest barrier is... you guessed it... the perception that large batches are more efficient.

Perhaps the most significant hurdle to Green Houses is the perception that they are too expensive. "The biggest criticism I hear is, 'How do you make it work financially?'" says Mr. Minnix, whose association represents not-for-profit nursing homes as well as assisted-living and retirement communities.

Michael Martin, vice president of Riverside Health System, which owns several traditional nursing homes as well as assisted living and other forms of elder care, says he was hoping to build some Green Houses and move 120 patients out of the traditional nursing-home beds his not-for-profit operates in Newport News, Va. But after intensive study, Mr. Martin says he concluded that Green Houses simply couldn't work financially. Green Houses "will absolutely provide a quality of life unsurpassed," Mr. Martin says, but "they don't work financially without subsidy."

We'll put Mr. Martin in the same category as manufacturers who believe they much chase low labor costs overseas in order to be competitive.  In the same vein, we'll add the following to the same category of manufacturers as American Apparel and others that know they can be globally competitive from U.S.-based factories by focusing on removing internal waste, tangible and intangible.

Others disagree. Robert Jenkens, who is spearheading the Green House project at NCB Capital for Robert Wood Johnson, says that some not-for-profits and at least one for-profit believe the model to be financially viable. St. John's Lutheran Ministries in Billings, Mont., operates both a nursing home and some Green Houses. In an internal review, officials found that it cost $192 a day to care for a resident in the traditional nursing home versus $150 a day in their Green Houses.

While building costs were high, Vice President David Trost says the Green House model also has cost savings. "We no longer have to take a resident 200 feet to the dining room -- we only have to take them 20 feet, and that is significant," he says.

Robert Wood Johnson executives say financial sustainability is a question they're scrutinizing intently. Based on this "first round" of Green Houses, they believe that it is financially doable, but they are rigorously testing the model and developing software that should help providers determine whether they can handle Green Houses financially.

The ability to see the value in 20 feet versus 200 feet is what makes the concept work, and thereby create significant value for the final consumer.  We could even call it cellular elderly care. 

Saving By Just Asking

Who says people are just a pair of hands that cost a certain number of bucks per hour?  There's a reason why the lean world considers people to be an asset, and why we often rant about companies that forget about the value of people's creativity, knowledge, experience, and ideas.

Stanford Hospital understands that value, to the tune of $14 million in savings so far.  Just by asking their employees.

Stanford Hospital & Clinics administrators didn’t wait for proposals on how to remove six cents from every non-labor operating cost dollar. They just did it – over $14 million – and left the particulars of how to save that amount to be determined. Less than a year later, after a brick-by-brick evaluation of 20,000 different items bought from 6,000 vendors and dozens of standard operating procedures, the Hospital’s expense ledgers have exceeded that daunting and ambitious target.

Not too shabby.  They are looking directly at value.

[Director of Materials Management Rex] Fieck is talking about a change to an evidence-based management system – an approach that begins by challenging the status quo and ends with fact-driven decisions. The Hospital’s protocols are now based on a hybrid methodology Fieck jokingly says he stole from proven working solutions elsewhere. Fieck’s hybrid has already attracted inquiries from two major medical facilities on the East Coast and he has been asked to present the Hospital’s strategies at a meeting this summer of a major industry association.

“This is not a one-time project,” said Jerry Maki, Vice President for Clinical Services and head of the Value Analysis Steering Committee. “Our value analysis approach is the new way the Hospital will continue to secure appropriate products and services at the best price. Involvement of end-users and physician leaders – especially the department chairs – has been a key to our success.”

But reaching out to the overall employee base is the real key.

What Maki is describing is complete outreach – structured around departmental coordinators and more than 100 people dubbed “champions” who agree to take on particular projects. Through them and widespread internal publicity, all employees are being asked for ideas – and hundreds have come back for consideration, including one that suggested the Hospital stop buying 11 ounce cans of shaving cream for patient use and instead buy 1.5 ounce cans. Patients rarely finished the large cans. That thoughtfully-observed phenomenon, a tiny detail that adds up in a hospital that treats thousands of patients each year, is something that wouldn’t have been noticed by a manager.

A couple other examples?

People working at the Hospital’s Hoover Pavilion saw that the trash dumpsters there weren’t full when emptied three times a week. The Hospital reduced the frequency to twice a week and brought in smaller dumpsters. Fewer pick-ups and always-full dumpsters meant a cost saving of $87,000. Another small item multiplied large for savings: One person in each Hospital department has been assigned the job of checking for unused phone lines and pagers. So far, enough of those have been found to add up to a savings of over $100,000.

$14 million bucks, quick and simple just by asking.  Manufacturers can do the same, and I it's a whole lot easier than setting up an overseas factory, investing in increased in-transit inventory, firing people and then rehiring and retraining new ones, and managing a more complex supply chain.

Adventures in Electronic Healthcare

I've had to spend much of the last couple weeks up at Stanford Hospital to help with a family medical issue, which has given me the opportunity to observe the current state of health care in action.  Stanford isn't just any hospital; it consistently ranks around the top in virtually every form of medicine, so we consider ourselves lucky to have access to that level of care.  I used to live about a mile from Palo Alto so it has also been interesting seeing how the area has changed over the past decade or more.

Although it was a planned visit, we still had to check in via the emergency room, which was standard procedure for a quick overall medical checkup.  The entire paperwork process took all of two minutes... a quick swipe of the insurance card and a verification of current information.  The process was undoubtedly efficient... so efficient that when I returned home briefly a couple days later I already had the first bill waiting for me!  The rest of the admitting process was just as efficient.

However I was soon rather amazed at the manual processes for taking regular vitals... blood pressure, pulse, etc.  A nurse would come in wheeling the equipment, take the readings, then scribble them on a scrap of paper that she'd then jam back in her pocket.  I'm not kidding... a real, live scrap of paper.  Even a soiled napkin in one case.  Apparently she'd then go back and transcribe her "notes" into the electronic record-keeping system that Stanford uses.  And we wonder why errors create big problems in hospitals?

Later that first week I saw a display in the lobby announcing their "e-health record" initiative, which included mobile stations for taking vitals that were linked via wireless network directly into the records system.  I saw it in action a day or so later... two nurses wheeled a computer contraption into the room.  With one nurse trying to explain (errr.... "train") the other, they tried to take basic vitals.  The screen was obviously not very intuitive or the training was imperfect as there was considerable frustration.  One vital did swoop straight from measuring device into the records system, but then they gave up on the blood pressure and wheeled their old unit back in.  And scribbled the results on a scrap of paper.

There was obviously a lack of training, and perhaps a lack of intuitive interface design.  But the visual guy in me started to wonder about the seamless transfer of data from the measuring device into the mobile station and then to the records system... with no human intervention.  The old process, while obviously prone to error, required the nurse to perform at least a cursory data review as he or she transcribed the data onto the napkin and then again into the system.  An outlier could be immediately recognized as either bad data or something that should be dealt with quickly.  Presumably an algorithm could also be trained to identify such outliers, but could it make a quick qualitative judgment call?

What is more important... reducing errors from transcription, or missing an opportunity to react to data?  Or can both be resolved?

This is similar to what happened when calculators became cheap and readily available: students lost the sense of what a "good" result looks like.  Another similar situation exists in manufacturing.  How many companies trust the electronic MRP system and lose the gut knowledge of what real demand should look like?  How many let the system calculate standards and even prices, without a gut feel, driven by experience, for knowing if the results are correct?

Fellow blogger Mark Graban writes quite a bit on the subject of lean healthcare, so you might want to check out his blog for more on the subject.

Letting Hype Confuse Intelligence

Global warming... boy are we hearing a lot about that these days.  After dire predictions that last year would be the warmest on record as that was what was required to make the models work, 2007 turned out to be the coldest in over a decade.  But Jupiter did have yet another record warm year, a trend that follows the Earth model in near-perfect unison.  Is it cosmic or is it human-caused?  I wonder... I guess I'm just always a skeptic, especially when geologic time is involved.

But that's just the prologue to this post.  An interesting confluence of thought has happened in Copenhagen over the past few months.

Even as the U.S. Senate debates a vast new tax and spend regime in the name of fighting climate change, a more instructive argument was taking place in Copenhagen, Denmark. Some of the world's leading economists met last week to decide how to do the most good in a world of finite resources.

The question addressed by the Copenhagen Consensus Center is what investments would do the most good for the most people. The center's blue-ribbon panel of economists, including five Nobel laureates, weighed more than 40 proposals to improve the world by spending a total of $75 billion over the next four years.

The result?

What would do the most good most economically? Supplements of vitamin A and zinc for malnourished children.

Number two? A successful outcome to the Doha Round of global free-trade talks. (Someone please tell Barack Obama.)

Global warming mitigation? It ranked 30th, or last, right behind global warming mitigation research and development. (Someone please tell John McCain.)

Vitamin supplements?

Providing vitamin A and zinc would help some 112 million children in sub-Saharan Africa and South Asia for merely $60 million a year. The minerals would help prevent blindness and stunted growth – increasing lifetime productivity by an estimated $1 billion.

The fact the free trade was number two is important.

"It's true that trade doesn't immediately save lives," explains Bjorn Lomborg, the political scientist who heads the Copenhagen Consensus Center. "But it's proven that when people have more money" – as tends to be the case when trade barriers fall – "they improve their health, their education and so on." The resulting prosperity reduces such problems as malnutrition and disease, while improving education. All three of those ranked high on the priority list.

The benefits of freer trade were estimated in a paper presented by Professors Kym Anderson and Alan Winters. They found that a successful Doha Round could generate up to $113 trillion in new wealth during the 21st century, at a cost of $420 billion or less from inefficient industries going bust. If you like ratios, that's a return of $269 for every $1 of cost. A less conservative projection puts the gains three times higher. More than 80% of this global windfall would go to the world's poorest countries.

Of course that doesn't mean that global warming isn't a problem. Perhaps.  And it definitely doesn't mean we should ignore that fact that humans pollute and regardless of whether that contributes to global warming we should still work to minimize it.  We should.  But let's go about using our limited resources in the most effective way.

Questions of Leadership

Sometimes you just have to roll your eyes in wonder. 

The General Assembly of the United Nations voted this week to elect Miguel d'Escoto Brockmann as its new president. Readers with a long memory will recall Father D'Escoto (he's a Catholic priest) as Nicaragua's foreign minister during the Sandinista regime of the 1980s. He's also the winner of the 1985 Lenin Prize. Only at the U.N. does that count as a recommendation.

Speaking after his election, Father d'Escoto called for greater "democracy" at the U.N. – an odd remark coming from a former servant of a communist dictatorship.

Hey, let's make it a two-fer!

The U.N. also voted to name the government of Burma – which otherwise has been busy preventing humanitarian assistance from reaching hundreds of thousands of its own needy victims of last month's devastating cyclone – as one of the Assembly's vice presidents. Only at the U.N. is this not considered an embarrassment.

And some people still wonder why confidence in the UN by the U.S. public is at an all-time low.  Perhaps the UN needs a pre-employment test like many companies have, except that a couple other questions would be added.