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Deep dive in a lean digital company #6

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Today I am joining Benoît on a project gemba walk. He is doing two of these every week (each sale in this digital world turns into a project, to design and build the app sold to the customer) and he also attends a kaizen debrief at least once a week. When we enter the open space, the project team is waiting for us. A beamer displays on the screen the virtual project board with milestones and KPIs. With many in the team working remotely due to the pandemic, all the visual management that before Covid was manually updated on walls and paperboards had to be replaced by digital boards, shared by the team members from home.

Matthieu, the technical team leader and architect, is starting to comment the project board but Benoît has another idea on how to start the discussion: “Matthieu, can you show us the product first?”

A true lean question. Many still believe lean is all about honed, standardized processes, with a good dose of control at each key step or milestone. Benoît will later tell me that at first they had tried to solve their quality and delivery issues by focusing on processes but found that centrally-designed one-size-fits-all processes deterred people from thinking. The purpose of a gemba walk focused on a project, from Benoît’s point of view, is not to check whether the board is correctly updated or the milestones met, but whether the product under construction will deliver the value sold to the customer.

It turns out that the product is a mobile marketplace app designed to support on-line bids for an iconic auction house in France. Matthieu shows us a sober mobile app where artefacts on sale are listed together with a picture and description. He surfs the app to show the features already built, such as the details for the upcoming sales (Benoît will ask him to show where he clicks as he wants to understand the navigation on the app from the user point of view). At this stage (end July), the app has not yet been released to production: mock releases are scheduled for the end August (on users’ registration) and user testing is planned for the end of September.

Ghislain, the part-time Project Director, explains the context: “They have a web app that is a bit outdated. New 100% digital auction actors have stepped in over the last 10 years, and their historical competitors – such as Sotheby’s or Christie’s – have already developed on-line bids capability. Our customer needs to catch up, or even gain a competitive edge. Hence the idea of a mobile app (rather than a web page) that would deliver multiple features with a wow effect.”

Benoît challenges the team. “Multiple features and a wow… Are you sure about that?” The project team is present but so is the C-suite of BAM, one of the Theodo spin-offs, in which the gemba is taking place. Guillaume, the head of the Flutter Tribe (Flutter is the technology with which the app is coded), nods: “You mean there is a risk that too many features will never produce a wow factor?” Clothilde, the product owner, confirms that painful slashing on desired features has already taken place: “Each stakeholder on the customer side had a story to tell that seemed to justify a feature.”

Gemba walks are always opportunities to learn on the job, and this is no exception. On-line bids are asynchronous and come in over a pre-defined period of time. Traditional auctions, on the other hand, take place on a specific date and time, when everyone bids simultaneously, either in the auction room or through a remote device. As one of the digital competitors has already announced the release of an on-line bid app, BAM’s customer aims to develop a mobile app that would both cater for 1) remote bidding in a traditional auctions and 2) on-line asynchronous bids.

Clothilde shows the four success key points agreed upon with the customer, which range from increased sales or enhanced registration to bids to the development of mobile bidders and better customer satisfaction so as to boost loyalty. Benoît nods but enquires further: “I see a lot of what I would call outcome KPIs. But how do you measure the factors that will lead to this outcome?”

Clothilde has some answers as she has listed end-user expectations – such as feeling confident in the bid’s process and the auctioneer expertise, easy registration, smooth browsing of the artefacts, and clear signals on who won the bid among others. Some of these can be easily measured (such as the time to control a bidder’s ID), but not all of them – she admits.

WORRYING ABOUT THE TIME-TO-MARKET

During the meeting, Benoît is clearly using the TPS (Toyota Production System) as a framework. He is now back on the schedule: “Can’t we test some transactions before the end of August? We have four weeks ahead of us.” The team looks uncertain and Marek, the CTO, steps in: “We started the build mid-June and the only thing we can test by the end of August is the registration steps. Couldn’t we have done it faster?”

The advantage of using the TPS as a gemba framework is that it naturally leads to the right questions.  Next to, and part of, customer satisfaction is an obsession with the lead-time. Clothilde, as product owner, explains: “We discovered rather late that the bidder ID verification was the pain point of the current web page. It takes up to two days today, resulting in a large number of no-shows at the auction. We launched a benchmark of the market and our customer is now contracting with a new partner that offers an ID control within a few minutes. But the whole process took time.”

Benoît steps in: “How can we learn from that? Do we have a standard that could help us spot this kind of issue sooner?”

Baptiste, BAM’s CEO, and Marek, the CTO, have an idea on what could be improved. “It may be linked to the project staffing. Profiles with the right know-how may come in too late in the project to spot this kind of issue.”

JIDOKA – SPOT ISSUES AND SOLVE THEM

Benoît has a tool in mind that can help detect problems as they occur. “Can we see the weekly customer feedback?” he asks. If you have read the previous article, you will know that every project team sends a weekly questionnaire to their customer to test their satisfaction with velocity and support.

Clothilde and Matthieu display those on the screen. On the last July sprint, the customer has given a 3 mark – below expectation. Matthieu confirms: “One batch of customer tickets in the database was not taken into account in the sprint. Beyond that, I confirm we have a productivity problem, we do not close our tickets fast enough. We are one week late on the first batch of user stories.”

I see no frowning, hear no sighing, and witness no body language indicating unease or exasperation. There is now a long tradition in the Theodo Group of admitting to problems and discussing them openly. “We have opened a problem-solving form on our productivity, but not yet on this undetected batch. We could not have absorbed it anyway,” says Matthieu. The team sets time aside for problem solving twice a week and they show us a number of problem-solving forms on speed or quality. Benoît does not comment the content but has some questions, most of them directly or indirectly aimed at management: “Were you trained on problem solving, Matthieu?” “Is anybody helping you on that?” “Productivity in projects is a known issue, is there a specific know-how here in BAM on this typical issue?” The answers will confirm the need to train on problem solving and better share know-how on standard issues.

Benoît is back on the overall lead-time. “It seems you have a delivery issue. Do you maintain a macro-schedule on your deliverables?” he asks.

Matthieu has developed a schedule on Excel, with the downside that what used to be easy to update manually on a white board turns out to be rather cumbersome now. The late delivery of the first batch is not yet visible on the schedule.

TAKE CARE OF PEOPLE TO BUILD TRUST

Benoît is now concluding the gemba walk. “Really interesting, thank you! I would like you to sit and think for another 5 to 10 minutes on the following two topics: first, is there something that this gemba has revealed and that you would like to dig deeper into? And, secondly, where do you need help? Please send me an email when you’re done.

With that, Benoît leaves with the management team for a thorough debrief. Guillaume, the head of the Flutter Tribe, sums it up: “Very interesting, great discussion on the misconception that piling up features in a single app would lead to a wow effect. I would also point out that we should work on the KPIs to better measure whether the app we deliver effectively matches end-user expectations. We are not at the level on problem detection and resolution. And we have project tool issues.”

Alice, the COO, concurs. “Too much time is spent on admin, not enough on problem solving. We need to help them,” she says.

“We are still far from an MVP (Minimum Viable Product),” says Marek, the CTO. “The core bid feature is still not testable at the end of August, after two months of development. They need help with the tools and training on problem solving.”

Benoît nods. “We were given a huge amount of information, which is great. I was struck by the high level of the team’s commitment and reflection. But you need to help them with their tools. The way I see it, they are both building the house and the scaffolding. We need to focus more on the code, especially because Flutter is a new technology for us,” he comments.

Benoît then shows me the email he has just received from the team, confirming the diagnosis: the team plans to challenge the customer on the release schedule, disconnecting remote live bids from the on-line features, to provide an added value to users earlier. They will also refine their measurement of user satisfaction, but request help on the tools.

The management team leaves, but Benoît and I stay put to continue our discussion.

“We are now 420 people in the group,” Benoît says. “We need to keep in mind what will commit people in a fast-growing company: in other words, what is Total Productive Maintenance for our group? We have to spend time on our basic infrastructure, systems, offices, remote work. These things can’t be taken for granted like we did in the past. This is a way to prevent failures and show respect. Not to mention keeping costs down.”

FORM A STRATEGY FROM THE GEMBA

We have grabbed a copy of the book Learning to Scale and Benoît shows me how he uses the TPS as a framework in his gemba walks. I have highlighted each stage of the discussion above with an image of the TPS house to show what he explains.

Benoît smiles. “I remember a time when I thought TPS was too far away from my digital work to be relevant. What could safety at the workstation mean to us? Or stock? We have learned a lot since then,” he says.

From the first image of the Toyota Production System, in Japanese, to a step-by-step TPS approach explicated in Learning to Scale and experimented with at Theodo, the diagram below illustrates the effort made by the group to learn, try and progressively unveil the Thinking People System – as TPS is often referred to.

I ask Benoît why he puts so much emphasis on gemba walks and genchi genbutsu. “This is sound management. If I stay in my office, the gap between my own vision of the group and reality will increase. I need to come and check regularly where we struggle and where we succeed,” he explains.

He thinks for a while and then continues: “To set a strategy for the group, I need to define where to go (point B) and how to go there (from A to B). My regular gemba walks help me understand where A is. Without a clear understanding of A, I won’t have a clear path to B.”

“Another reason,” he adds, “is the connection with the teams: during my gemba walks, I highlight the positive points, I spot talents. The time I spend on the gemba and the questions I raise show the importance of the topics we address.” Indeed, what I have witnessed has nothing to do with a traditional audit: during the gemba walk, Benoît challenges the team with questions, but never offers solutions. He tells me that those gemba walks also help the management teams: “We develop a culture of transparency, of no bullshit. It’s a good way to remain on top of the right issues, on what really matters, which can be difficult when there are many possible blind spots.”

FIGHTING OFF BIG-COMPANY DISEASE WHILE SCALING-UP

“The more we grew, the more problems we had, Fabrice and I,” Benoît says. Fabrice Bernhard, you may remember from the previous article, is the co-founder of the group. “We were wondering: is this really what we dreamed of? Is this the price we pay for growth?”

Benoît confirms that Lean Thinking really gave him a method as CEO. It shows him the next step every time there is a problem, helps him and his teams not to feel guilty if any occurs, and provides a purpose and a True North. “With lean, you can do customer satisfaction and teams’ pleasure at work, or customer fulfilment and environment.”

Lean turned out to be the best way to fight off the risk of developing big-company disease. Benoît’s first steps in the job market, he recalls, convinced him that he would never want to work for a large corporation.

He and Fabrice, therefore, developed an innovative way to support the growth of Theodo. Every time they felt they had the right talent and a niche to investigate, they would create a spin-off with a pair of high-potential individuals that would act as CEO and CTO, just like they had done at Theodo. This allows them to offer a large range of products and services. Indeed, red bins on failed bids regularly reveal missing skills – whether in sales or technology – and the spin-offs are an opportunity to develop those.

Benoît deeply believes that an expert company is more visible on the market that a do-it-all group. The latest Theodo spin-off is Hokla, which uses digital expertise to track health treatments (like data mining, treatment effect tracking or chronical diseases).

Spin-offs are also a great way to retain individuals with high potential and offer them an ambitious career path as co-founders of a company. And, of course, managing small, lean, competent and autonomous organizations reduces the risk of developing a central bureaucracy.

Benoît and Fabrice may have found a lean way to growth on different market segments: much like small batches on a production line, small companies have a better chance to flow value faster to the customer.

Words: Catherine Chabiron, lean author and member of Institut Lean France

Prospering, not profiteering

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Success is traditionally measured by profit. It is based on profit that a company’s performance is assessed. It is based on profit that investors pick which horses to back. In time, however, we have also learned that an isolated measure of profit drives leaders to put money before morals, swinging performance down a one-way street. It also makes us vulnerable to inequality, environmental damage, and failures in the economy. It’s a trajectory that is only lucrative for a select few. Decision making in this setting drives shareholder ahead of stakeholder value through cost-down strategies or by raising top-line revenues without much care for how it’s done. 

TARGET MORAL PROFIT

Businesses need to perform financially to reinvest, grow and create stable employment. That’s not the debate. The issue is rather how we achieve profit and what we do to prosper. The Lean Community has for decades challenged traditional thinking, confronting how we think about profit and what the market is willing to bear (figure 1).

Gone are the days of hiking up the price to raise profit. Cutting operations and budgets to the bone won’t get us far either. Instead, we develop through well-focused kaizen, a proven method to bring costs down over time through long-term reform. We raise revenue by designing better products, doing better work, and delighting our customers. The shift from traditional thinking to Lean Thinking is indeed an important one. It influences how we take care of talent, focus change, and generate returns. But it also requires us to rethink how we value and measure success if we are to prosper. Measure more than financial performance and see costs differently (not just what’s in the management accounts, but the hidden, unchecked, out-of-sight costs), then consciously work to close the gaps.

Generating profit to the detriment of the planet is a cost and growing a business in this way is unethical and as offensive as profiteering.

RETHINK SUCCESS

We operate in a global ecosystem and narrowly focusing on in-house success makes us guilty of insular, short-term thinking. Here we venture outside company borders to judge how we truly perform and to make sound judgments.

How we see success influences our decisions. It affects how we produce, consume, and distribute scarce resources to serve customers – all decisions that affect whether we spend or save the limited natural capital available to us. It will move us closer to or further from sustainability.

In figure 2, therefore, we illustrate a healthy balance of decisions to achieve prosperity and improve the condition in which we leave our planet to future generations. Prosperity implies financial stability but profit alone cannot steal the limelight. Removing the shareholder value blinkers helps us to rethink how we measure success, show how we perform across a broader selection of measures, and reframe the problems we spend time on.

ADAPT FOR SUSTAINABILITY

Times are changing fast. There is growing awareness among employees, investors and customers about sustainable performance, compelling organizations to do more than ever before to care for the planet. Indeed, purpose-driven companies are adapting their business models and strategies to suit.

  • Consumer behaviors are constantly shifting. Customers are gravitating to products that represent greener values. Before adding a product to their cart, people increasingly look at what’s in it, how it’s made and whether it’s recyclable. They’re shifting from gas-guzzling, carbon emitting vehicles to better environmental performers that still meet the driver’s quality and emotional requirements. They’re improving how they live and run their homes to consume less. What new customer problems will you solve to stay relevant?
  • Competitiveness is hotter than ever as companies differentiate themselves through sustainable practices and supply chains, nudging others to follow suit. How will you ensure you’re ahead and not behind?
  • Government intervention is increasing through incentives, such as grant funds or penalties and fines. How might you benefit and avoid unnecessary costs? What voluntary changes can you make ahead of legislation changes?
  • Skilled talent chooses to work for responsible employers, especially the up-and-coming generation. What can you do to become an employer of choice?
  • Even C-level execs are compensated for sustainable results and packages are restructured to suit. How will you reward impactful decision making and outcomes?
  • Forward-thinking financial institutions favor sustainable business models giving preference to applicants that pollute less and deliver positive impact. What does your future value proposition look like and what financial instruments will become accessible to you? By how much will it improve company market valuation?

The conversion to the sustainable enterprise is no longer a nice-to-have. It’s an order qualifier, an investor lure, a strategy to woo, focus, nurture and retain talent and a path to secure loan capital. This conversion is how we’ll survive and thrive for generations to come. 

ACCOUNT FOR REALITY, ACT REAL-TIME

In a Financial Times article, Sir Ronald Cohen explains how investors need to know companies’ social and environmental effects5. He asked what we might find if we compared the total environmental cost or the effect of deficient diversity in the workforce across companies and encouraged a race to the top. Cohen writes about the “impact revolution” and how this will help to reimagine capitalism. If governments force companies to publish impact-weighted accounts, this would focus their attention on social and environmental problems. Referring to a published assessment of 3,000 companies, 450 companies created more environmental damage in dollar terms than profit in a single year. That is a very good reason to take this seriously, urging transparency to drive investor and decision making.

How we account for reality drives what we improve. Unless companies make performance transparent and then do something about it, there is little chance we will see the change we need in the time we need it. Our impact on natural resources is just one aspect at a critical point if you refer to figure 3. This is not fear mongering, but current reality in a handful of areas. Brushing true performance and the role we play in it under the carpet supports profiteering.

Disclosure is key to focusing lean strategies and deployment. Because traditional accounting ignores the cost of degradation and profit is a poor indicator of overall performance, we need a holistic measure of prosperity to guide us. The concept is not new and sustainable accounting has been on the cards for a while, albeit lacking global acceptance as a standard. Institutions such as Harvard University initiated an “impact-weighted accounts project” that aims to create corporate accounting statements for financial, social, and environmental performance. This is good progress, but we need to act faster.

Cohen explains that the power of accounting rules must now be applied to ESG (Environmental, Social and Governance) and impact investing. This is a big step in the right direction, but sustainable accounting is a lagging indicator and waiting for the data to present is a loss of critical problem-solving time. Real-time leading indicators are also needed to focus our efforts and drive daily improvement. Our challenge is to translate 3P challenges into tangible problems to solve, to connect sustainable strategy with what we choose to improve on the ground (figure 4).

Accounting for sustainability prompts us to put a number to how well we perform in each of the 3 Ps. Granted, this may vary from company to company, but it leads us towards meaningful change. We get what we value; we account for it through metrics; we drive learning, outcomes, and results.

To discover and unravel your most pressing problems, consider how you might improve accounting for sustainability and install real-time probes where possible:

Across the value chain

  • The environmental impact at each stage, from extraction or purchase to disposal of materials. The impact of these on the global vital signs.
  • The material yield, or how well output is generated from the input material.
  • The measurement and improvement in the 7 green wastes (an adaption from Taiichi Ohno’s seven wastes, including energy, water, materials, garbage, transport, emissions and biodiversity waste).

For your people

  • A physically safe (accident-free) environment for employees to work in.
  • A psychologically safe (fearless organization) environment for employees to flourish and solve problems in.
  • The creation of equal opportunities through recruitment, retention, and promotion.
  • Diverse representation and inclusivity in the teams solving the problems.
  • Performance in job retention and job creation.
  • Investment in training and education to develop strong, capable teams.

As a lens on finance and investments

  • Measuring and reporting on environmental costs using impact-weighted line items, illustrating positive and negative impact on stakeholders.
  • The generation of new revenues through sustainable practices.
  • Impact investing and capital investment in projects that meet return on investment as well as impact on sustainability performance.

In our experience companies find it hard to translate targets and measures into hands-on initiatives. We often end up referring to the Sustainable Development Goals or, if you are a lean aficionado, the Toyota Environmental Challenge 2050. It’s worth checking out some of the cases that Toyota presented as examples of work they are doing. But what about outside of Toyota?

In Norway, there are companies moving from intent to action in meaningful ways. A small furniture maker on the south-west coast of Norway established a circular hub where local school children and students are taught how to re-design and sell products made from old and discarded furniture. Addressing both the challenge of quality education as well as responsible production. Another company, on the west coast of the country, has been challenged to halve its climate impact by 2030, but has also decided to develop products that have a net positive impact on the environment. Finally, a large manufacturing company in Stavanger is building on its capabilities to involve the whole organization in continuous improvement of sustainability as part of their Hoshin Kanri process. These examples are encouraging and measurable.

MOVE BEYOND TRADITIONAL MODELS

Business models drive where we place focus and how success is accounted for. Following the Industrial Revolution, the “take-make-waste” business model became the norm bringing with it a general disregard for the pressure we place on the environment and the natural capital and how it’s measured. There is a premium to converting to responsible practices and offerings, but many have continued on a wasteful trajectory because it is cheaper to do so and perhaps in the past no-one was really paying attention.

From the time we extract resources out of the ground and put them back to rest in their processed, used form, we have a responsibility to do better. To waste less, produce efficiently and consume responsibly. To target every stage of the value chain and reduce the drain on natural resources. Lean makes us think about respect for humanity, which ultimately hinges on respect for the planet. Our business models need to reflect this.

It’s time to judge ourselves more harshly when it comes to how well we integrate prosperity into our Lean Thinking. It takes courage to critically evaluate the current business model, how true performance is disclosed, and what tough questions to ask. Resist the urge to do more of the same. Challenge the leadership team to rethink how success is measured. Develop a model to account for prosperity, not just profit.

Building lean into our strategy

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Over recent years, Andrade Gutierrez (AG) – an innovative company known for its state-of-the-art engineering – has experienced solid growth. While positive, this has come with its challenges.

Bringing knowledge to new business areas and to the people involved in the expansion is no easy task. Given the nature of today’s market, the organization needs to change the culture of the front line, engaging them in the company’s lean transformation in pursuit of excellence. Today, AG has a structure that allows it to drive its growth and bring lean to the whole organization – including new business areas.

The journey of Andrade Gutierrez Engenharia towards operational excellence and a lean enterprise began in 2010 with the Arena da Amazônia project, with project leaders realizing the need to improve some specific processes to obtain a better performance. With the help of external coaches, they pursued the objective of reducing waste with an approach oriented towards achieving the desired results on the job.

What the company has achieved in just over 10 years goes far beyond operational benefits. The developing of internal skills was, indeed, an important result in this process of transformation. Today, AG can be considered a lean company, with lean culture and standards fully incorporated into the way the work is done. Through its transformation, Andrade Gutierrez has achieved several results, including:

  • In just one year since the beginning of their effort to bring lean to all areas of the business, productivity gains of 20% on average were observed, together with reductions in lead-times and costs and increases in quality. These results encouraged the company to continue with its improvement efforts.
  • Using a Value Capture Plan, AG has established that millions of reais have been saved over the years as a direct result of the application of Lean Thinking.
  • The motivation, quality of working life and satisfaction of employees all improved thanks to the company’s lean efforts.
  • The management techniques deployed ensure that improvement keeps happening and that processes keep evolving, while sustaining the results achieved thus far.

AG’s lean success is a direct result of the company recognizing there is more to lean than just tools. The organization fully understood the importance of achieving a cultural shift and incorporating Lean Thinking into every aspect of company life. It’s not about “doing lean”; it’s about “being lean”.

THE IMPORTANCE OF LEAN

The cultural change AG achieved made lean second nature in the company, something that is deeply rooted in the work and well-respected across the business. Lean is also seen as an enabler of innovation in the organization, together with its continued investment.

The contribution of lean was even more evident during the Covid-19 pandemic: despite the difficulties all companies have faced, AG has been able to maintain its results. This allowed it to continue seeking improvements in its processes even in times of crisis, because thinking lean made the organization more flexible and better able to adapt in the face of uncertainty.

With more than a decade of experience applying lean construction principles and techniques, today Andrade Gutierrez can proudly say that what it has achieved is the result of the discipline and great effort of its people. Their transformation has not been driven by external coaches, even though their help has been an important element. The company recognizes that its accomplishments are of its own making, which wouldn’t be the case if AG didn’t see lean as its culture.

HOW IT ALL HAPPENED

Following the success of Andrade Gutierrez’s first lean experiment in 2010, other initiatives ensued – all achieving equally impressive results. As its took its first steps towards Lean Thinking, front-line staff received specific training on relevant lean tools.

Over time, as it became clear that more and more projects would be run in a lean way, AG felt the need to internalize the lean philosophy. At that point, there was already a certain degree of awareness that localized applications of lean typically fail to create lasting results. The good practices developed in individual projects were not incorporated into company-wide standards, which meant that each new project had to start from scratch.

It became clear that, for lean to become the reference of all company activities, it would be necessary to develop people’s skills and create a permanent internal structure for the spread of the philosophy.

With trained people and the creation of a dedicated improvement team, the rollout to other areas of the business would be smoother and faster. Only this way could learning become an every-day occurrence in the business and knowledge be transferred effectively across it.

With this in mind, in 2014 AG reached out to Lean Institute Brasil (LIB) to development the core team of individuals who would facilitate the create of this learning system for the dissemination of Lean Thinking, the creation of a critical mass of change agents and the development of an independent, autonomous workforce.

TRAINING THE FIRST GROUP OF FACILITATORS

To support Andrade Gutierrez, LIB created a 10-month program based on cycles of learning and practical applications, that followed a number of fundamental principles:

  • Lean can only be learned by doing and generating results. Therefore, in addition to training, each facilitator-in-training had to apply lean to an open project, with a minimum return commitment.
  • Learning cycles. The program was conceived in four training modules of one week each, interspersed with three on-site real-life projects with a duration of three months each. The projects were gradually more complex, from improvements in a specific service to more systemic interventions with an impact on the overall process.
  • Gemba training. The training modules saw the practical application of lean tools in the field, to prepare the facilitators for the activities they’d be carrying out in their daily lives at work.
  • Solid understanding of lean concepts and tools. The training was complete, including information on the origins of Lean Thinking, its purpose, basic manufacturing concepts and their application in construction. Among the topics discussed were: A3 thinking and problem solving, planning in flow and takt time, Last Planner System, visual management, value stream mapping, waste analysis, basic stability, standardized work, pull system, supply logistics, kaizen, lean engineering, leadership, and lean strategy.
  • Applications beyond production. Implementation were not limited to operations. Lean office ideas applied to construction management processes were applied with great results in terms of indirect cost reduction. Support functions like engineering, procurement, logistics, and maintenance were also involved.
  • Connection to business needs. The projects were selected together with the contract directors of each job, targeting specific objectives, needs and priorities to maximize the impact of the improvement work.
  • Development of the facilitator role. In additional to technical skills, facilitators were taught behavioral skills that would help them influence and guide the teams more effectively.
  • Support through coaching. Each facilitator-in-training received support from a LIB coach who guided them throughout the projects.
  • Continuous assessment and feedback. An ongoing process of evaluation was established, with mentors regularly assessing the facilitators’ technical and behavioral skills and the results they attained, with feedback provided for each module.

The practical applications happened within important projects underway at the time, in six Brazilian states and across Latin America, covering different types of work – from mining to energy, stadiums to highways, subways to city streets.

The approach deployed led to great results, such as an increase in productivity of 30 to 50%, a reduction of months in the duration of projects, and financial gains totaling millions of reais. There were also organizational gains, like the implementation of management routines that led to the stability of the company’s processes and the sustainment of results. Eleven specialists were trained to become key players in the company who played a pivotal role in the spread of lean culture across Andrade Gutierrez.

SUSTAINING AND EXPANDING

A lot has happened since the first lean training AG people received. The continuous improvement department was established, and the trained facilitators took over internal dissemination. Using the LIB training program as a base, new modules for training corporate and construction facilitators were introduced – relying entirely on internal capabilities.

Over the years, and thanks to a recruitment process that follows clear selection criteria, four generations of coaches were developed – with the original group acting as mentors to the new ones and ensuring the practical application of lean concepts remains aligned with business needs. With the support of LIB, the training program was enriched with internal AG examples and a greater emphasis on soft skills and specific technical capabilities.

No matter the circumstances, Lean Thinking has remained a priority for the company. Today, no construction job starts without lean principles and techniques being applied from the planning phase. Additionally, lean has reached all business areas. The ensuing increases in productivity and lead-times have resulted in greater competitiveness and, subsequently, in the company winning more tenders in recent years.

Driven by leadership, Lean Thinking was formally incorporated into the company’s culture and strategy. Several other initiatives were also tied more closely to the lean transformation, creating great synergies (examples include the systematization of the SAGE-AG Excellence System, the Vector AG Open Innovation Program, and the implementation of BIM projects).

The deep understanding of Lean Thinking and the development of internal capabilities were important elements in the sustainment of the great results the company has achieved so far, starting from its increased competitiveness. They represent powerful drivers of stability and continuous evolution for the business.

Words: Deisa Conegundes, Flavio Augusto Picchi and Renato Mariz

This article was originally published on the Lean Institute Brasil website. Find it here.

Lean-powered decision making

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Every day, each of us must make decisions. Countless decisions, in fact – ranging from what we are going to have for breakfast to how we should engage with people around us, from what time we should leave to go to the office to how we are going to spend our free time. Our daily lives are continuously, significantly, and directly influenced by the choices we make, which is why how we make decisions has always been a topic of great interest to neuroscientists, psychologists, sociologists, etc.

In the business world, too, decisions are expected of people at all levels of an organization, and it is the combination of those decisions that determines whether a company is ultimately successful. Do people at the front line flag up problems or do they hide them? Do managers strive to improve the system, or do they blame people instead? Do senior execs think long-term when coming up with their strategy or do they choose to just focus on making money now?

In the lean world, we often say that people should be given the tools and autonomy they need to make decisions and, therefore, solve problems, but I believe the focus of our attention has traditionally been problem-solving to the detriment of decision-making. Yet, without decision-making one can’t be expected to solve problems.

So, why not pay attention to how we make our decisions and see how the lean way of thinking and acting can help us ensure these are the best they can be?

FIVE STAGES OF DECISION-MAKING

As mentioned above, theories on decision-making abound. It is mostly described as the cognitive process resulting in the selection of a course of action among several possible options (could be either rational or irrational). According to Herbert Alexander Simon, decision-making is a reasoning process based on assumptions of values, preferences and beliefs of the decision maker. Every decision-making process produces a final choice, which may or may not prompt action.

If we try to look at this cognitive process from a lean perspective and break it into smaller steps, we can say there are five main stages in the decision-making process:

  • Perception – how good and trained we are to see the reality around us and recognize certain stimuli as problems requiring our attention.
  • Intention – based on what we perceive, how willing and determined we are to act and do something about a problem.
  • Evaluation – how I am going to assess the risk and benefit of acting on a certain problem. Is it worth acting on it at this stage? Do I have what I need to succeed? At this stage, we are trying to weigh up hypotheses.
  • Action – based on our evaluation, we decide to act (or not) and use the tools at our disposal (in the case of lean, things like daily management, huddles, kaizen or hoshin) to bring our vision to fruition.
  • Reflection – how good we are at extrapolating lessons from our experience. Did our intervention pay off? What did we learn from it? What’s the impact it had on the system?

LEAN AND DECISION MAKING

The five elements highlighted above describe how decisions are made, the thought process that causes us to see reality one way or the other, to choose a certain course of action, to draw conclusions from something that happens to us. Because lean is so tightly connected with the way we think, I believe that it can help us to ensure that our decisions are the right ones.

Applied to these five elements, in fact, lean can turn decision-making into a powerful driver of a transformation. Its scientific approach provides us with a structured way to make decisions, even when these happen almost subconsciously (which is why it’s so important to make lean second nature, the way people see the world around them).

Lean tools and principles make the decision-making process as effective as it can be. How?

When it comes to perception, with lean we learn to see. This means developing our ability to see problems, to separate value-added work from waste. Because we get our information directly from the gemba – rather than a report or a presentation – we have a much more accurate understanding of the reality around us, of the problems we experience, on the decisions we are called to make. (This is where it becomes clear that decision-making is a much wider concept than problem-solving – if our perception is off and we focus on the wrong problem, we can be the best problem solvers in the world but that won’t mean much).

As far as intention goes, as lean thinkers we are driven to make daily improvements to provide more value to our customers, serve the best food we can in a restaurant, offer patients the best possible care. This passion for improvement comes from two sources: the motivation I receive and the knowledge I am given. Together, these two elements empower me, give me the will – and the means – to act. This way, each problem I observe becomes a trigger that awakens my intention to “do something about it”.

It is one thing to have the right intention, but what about evaluating the problem and the situation around it to understand whether my intervention has the potential to succeed? It is at this stage that we decide to act or not. After all, tackling a problem when we don’t have the knowledge or the support that we need is wasteful. This makes the evaluation phase critical. Lean can help us assess the situation, by encouraging us to ask questions such as, “Do I have the support I need from leadership?” “Are my people with me?” “Is this the right time to take this on?” “Do I have the tools I need to have an impact on the situation?” “Is it worth focusing on this problem or should it be something else?” Developing our evaluating capabilities is just important as honing our perception and problem-solving skills.

If we do decide to act, lean provides us with a wide array of tools, techniques and behaviors that can help us attack a problem – from its definition all the way to its resolution. The “action” phase is the problem-solving we typically talk about in the lean community. A3 thinking, kaizen, engaging with cross-functional teams, gemba walks, 5 whys – one could say that everything lean teaches us is ultimately meant to make the problem-solving process smoother and more effective.

Finally, we can’t forget the reflection phase. Doing hansei is also a decision. Too many neglect this critical activity, only to find how big a hindrance this is to our ability to transform organizations. Reflecting on the decisions we have made, on the problems we have solved and how we have gone about it, and on the impact that this has had on the overall system means that we will be better equipped to solve future problems of a similar nature. The more problems we solve, and the more we learn from them, the better we will be at solving future problems – it’s the virtuous cycle of lean. Without learning and capturing knowledge, there is only so much progress we can make (not sure if I got the meaning of this final sentence).

TWO EXAMPLES

Let’s try to imagine two real-life scenarios to bring these ideas to life. In both cases, a patient in a hospital is given the wrong medication. Here’s how a non-lean decision-making process and a lean decision-making process would unfold.

In the first case, a middle manager learns about the incident. He is an old-fashioned guy, working in an old-fashioned environment. As he looks at what happened – indeed, giving the wrong medication is a very common occurrence in hospitals – he immediately shrugs the problem off by saying, “We have so many of these. No one ever died. We always find out in time.” This flawed perception of reality (which leads the manager to believe this is not even an issue) results in a complete lack of intention to do anything about it. The evaluation of the problem convinces the manager that the best course of action is to ensure that news of the incidence doesn’t spread. “We will do something about it next time. We have so much to do already,” he thinks. No problem has been tackled, and there is therefore no learning that can be drawn from the experience. Fast forward a few months, another patient is given the wrong medication. This time, however, she develops a rash all over her body and the hospital ends up with a lawsuit on its hands.

In the second case, the manager is a lean thinker. Someone tells her about the medication error, which she immediately sees as a problem that the whole team needs to look into. The manager knows this is common problem in hospitals. She had in fact worried that this might happen while visiting the gemba recently – where she remembers wondering how the pharmacists managed to tell medication apart when so many of them came in such similar containers. Her experience studying the work at the gemba has changed her perception and immediately alerts her that the medication error is a huge problem. As a lean thinker, her first instinct – or intention – is to solve it. For her evaluation, she goes to gemba and talks to as many people as she can, really trying to grasp the situation and understand whether an intervention can have the desired result. Once she determines that this is in fact the case, she decides to act. She forms a small team to analyze the problem in depth and uses A3 thinking to solve the issue once and for all through a simple, but clever system of colored tags and poka-yoke. As the team gathers to reflect on their learning, the success of their kaizen inspires them to share their experience with the rest of the hospital so that other areas can also avoid medication errors. A year later, the hospital records zero instances of medication error for six months in a row (and counting).

WHY NOT SIMPLY PROBLEM SOLVING?

Until now, we have discussed how applying lean to the five dimensions of decision-making makes great sense. But the same positive outcomes can be seen if we look at this the other way around: decision-making gives us a much more complete view of our lean transformations than just problem-solving. It forces us to ask ourselves questions that would otherwise remain unanswered – what problems do we pick? Why? Based on what indicators? Why do I decide to go ahead and tackle this problem?

Looking at the five key elements of decision-making might just make us better at lean, because it can add a new dimension to our discussions and give us a new way to look at the challenges before us. To those of you who are on a lean journey and feel sometimes stuck, this perspective can help you see things in a different way, find new doors to unlock. Decision-making lies behind all the dimensions of a lean transformation, which is why it is so important we look at it and better connect it to our lean transformation efforts.

As we study lean transformations, our focus until now has been almost exclusively on problem solving. While this is of course fundamental (it lies at the heart of lean), problem-solving without solid decision-making goes nowhere. I think we are missing an opportunity by ignoring the role of decision-making in our lean journeys. If we believe that decision-making constantly comes into play in our daily lives, why are we not discussing it more? Why don’t we treat it as the transformation driver it is?

Andon squares – 5S in the office

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I employed an accountant many years ago to head up the debt collection department in the company I was managing. On paper, she had all the skills and experience required for the role, and she presented herself well at the interview.

As she settled into her position, I was very impressed with her tidiness. Her desk was clean and uncluttered, and she was punctual, pleasant and helpful. (I must confess that I often wished that the person in charge of creditors was as tidy and organized.)

At the beginning of the third month, I started to see that we were not collecting the debts as well as we used to. I had a meeting with her to discuss the issue, and the excuses she gave sounded reasonable. As time went on, I realized that we had a problem. Before one of our scheduled meetings, a letter of resignation came onto my desk. She left the business the following day.

As we tried to catch up on her work, we realized we were in for an unpleasant surprise. She hadn’t done filing or responded to queries in three months. She had just neatly packed away all the paperwork in the bottom drawer of a filing cabinet. So much for a neat and tidy desk! It took a lot of time and effort to catch up.

Now, when I walk through an organization and see that everything is neat and tidy, I ask myself it’s real or just an illusion of efficiency. Without seeing private draws and storage rooms, it is impossible to tell.

During our lean transformation, a similar problem cropped up with the usage of plastic stacked filing trays. Staff members were hiding problems in them – not to purposely deceive but to handle later, when they had time. We all know how much the procrastination monster loves this sort of thinking and how happy it is to help us dig ourselves into a deeper hole.

When looking at a job being done in a factory, on a vehicle or any other physical item, it is relatively easy to see and observe the work. It is much more challenging with paperwork, however, as it is easy to pack a great deal of work in a stacked tray without anybody noticing.

Invoices, queries, estimate requests, and payment advice documentation can just be left in a neatly stacked pile until someone needs the document, which typically instigates a great deal of searching.

During the lean transformation in the administration department of our Service Centre, we had to make the work visible, to see if we were ahead or behind. Failing to do so would have made it impossible to develop flow or identify bottlenecks.

The very design of a stacked tray encourages the piling up of work: it contains a neat space that creates the illusion of efficiency. To move away from this, we had to work on something a little less comfortable.

To understand the process, I sat with a service advisor who had difficulty staying on top of his paperwork. I went through the paperwork with him at his desk. As I asked questions, I recognized that there were only two responses to the documentation on his desk. One is that nothing prevented him from completing the task, and the other was that a senior supervisor had to assist with information or approval.

We cleared all the work off his desk, removed the stacked holders, and using duct tape we taped two squares onto his desktop – a red one and a yellow one. The yellow represented “nothing stopping the work to be done”, while the red signaled a “hindrance to completion of the work”. Yes, I could have used trays, but I wanted to make it uncomfortable and easy to see a pile-up of papers.

The red square Andon response signaled the supervisor that this was a problem requiring assistance: they had to help the service advisor turn red to yellow to complete the task.

We then did this in the entire office, for every desk, and all filing was done centrally into visual holders so that everyone could have access and understand the progress of the work.

It became the service advisor’s task to sort the documents into the two squares. It became the supervisor’s task (now called Andon response) to constantly check the red squares and assist the service advisor in turning red to yellow.

Initially, the supervisors were not too happy with the changes, as it put some pressure on them to work through the red squares. After dealing with the initial backlog of problems, however, they realized that:

  • They could see if their service advisors struggled to keep up or were overburdened with work that day.
  • They had fewer confrontations with unhappy customers.
  • Problems were solved before they became an emergency.
  • It was easier to locate documents.
  • They had better days at work.

The service advisors started to understand that:

  • They had more time to assist the customer.
  • It was easier to focus on the work to be done.
  • They made fewer mistakes.
  • They went home on time with the day’s work done, giving them peace of mind.
  • They also had better days at work.

During the first three months of implementation, I spent a lot of time in this space. I was constantly observing the condition of the squares, especially the squares that belonged to the service advisors, to see how we could help them with their work and the problems that were constantly reaching their desks.

It was not only the Service Centre that gained from this change. As a leader, whenever I walked through this space, I could see how their day was progressing and what was causing problems.

We often think that 5S is all about factories and workshops, but this is an example of 5S in an office, applied to administrative work. Having 5S in this space created a visual management tool that allowed us to see much more than just “clean and tidy”: it allowed us to see the work and how it progressed.

5S supported us in the development of the single-lane flow of documentation within the Service Centre, speeding up the time it took to get the vehicle back to the customer, helping us align to the words at the top of our house. Fixed right, first time, on time.

The development of flow took time and effort, but – looking back – it’s clear to me that it would not have been accomplished without the Andon squares.

Words: Sharon Visser, CEO, Lean Institute Botswana

Lean leadership and Industry 4.0

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By generating value for customers while reducing waste, Lean Thinking can help organizations to dramatically improve their competitiveness. Over the past three decades, the adoption of lean principles and techniques has spread to every industry. Essential to the success of these lean transformations is, as we now know, a deep commitment of the leadership team, which means that the development of lean leadership – and the behaviors, skills and capabilities it calls for – becomes pivotal. 

In recent years, manufacturing companies have had to deal with increasing complexity and customer requirements. Increased international competition and market volatility, coupled with customers expecting every more highly customized products, present huge challenges to these organizations – in terms of costs, flexibility, adaptability, stability and sustainability.

In a bid to meet these challenges headfirst, a team of leading thinkers tasked with developing a high-tech strategy for the German government came up with the concept of Fourth Industrial Revolution – or Industry 4.0. In 2018, Schwab defined Industry 4.0 as a set of ongoing and impending transformations in the systems that surround us.

Industry 4.0 is a new chapter in human development – on par with the first, second, and third industrial revolutions – once again driven by the increasing availability and interaction of a set of unique technologies. Industry is facing an era of significant transformations and leaders will need to develop a very specific stance and develop specific skills if they are to facilitate innovation and let it take the lead.

The integration of lean manufacturing and Industry 4.0 has been a recent topic of discussion among scholars and practitioners of both approaches. A number of studies have showed the synergy between lean tools and Industry 4.0 technologies and claim that lean leads to stable processes in which automation and digitalization can be successfully implemented. They also shed a light on the effects of Industry 4.0 technologies on lean practices and sustainable organizational performance. In this context, Lean Thinking has been seen as a facilitator for Industry 4.0.

Based on this analysis, it was concluded that smart factories encourage the promotion of lean principles and that, in turn, lean is a foundation on which to build a system that allows us to implement the changes made necessary by the coming of the Fourth Industrial Revolution.

A study developed by Bianco et al this year focuses on 18 lean leadership competencies and six Industry 4.0 leadership competencies. Its results show a clear relationship between the two sets of leadership competencies. The analysis used interpretive structural modelling (ISM) and the MICMAC approach (Matrix Cross-Reference Multiplication Applied to a Classification) to investigate the driving power and dependences of lean and Industry 4.0 leadership competencies. A structural model was elaborated, showing the hierarchy among the investigated competencies, indicating the ones that should be prioritized.

This structural model was developed based on the opinion and validation of 23 experts in both lean manufacturing and Industry 4.0. The main conclusion of the study is that lean leadership competencies can sustain the competencies that should be developed in leading engaged in Industry 4.0. Additionally, a strong synergy among the competencies from both approaches was observed. The results obtained in this study may inform the development of new leaders who will be called to work in an Industry 4.0 environment and will help them to integrate Industry 4.0 practices with Lean Thinking.

As seen in the graph, lean leadership competencies support leaders in Industry 4.0 – they occupy the lower part of the diagram. What does this mean? That before considering a transformation of the production system using emerging technologies, leaders must develop 10 lean competencies that will support this change. (In the model, they are those contained in levels I, II, and III).

The fact itself that the LC12 competency (always being present at the shop floor) is the base for all other Industry 4.0 leadership competencies corroborates what the available lean literature tells us about the need of leaders to be present at the gemba to acquire direct, in-depth knowledge of the process. With the arrival of Industry 4.0, leaders in production have experienced an increased complexity in the manufacturing process, which calls for an overhaul and improvement of the whole system. Without a deep understanding of the process and its interdependencies – which you can only really get at the gemba – change is not possible.

Level III of the diagram presents a series of lean leadership competencies that are preconditions for the development of the competency to be developed by the Industry 4.0 leader (IC6). Leaders must develop the knowledge and skills set of employees, thus contributing to the creation of a culture of experimentation and learning from which fear has been eliminated and new endeavors can be pursued with confidence.

This finding tells us that before revolutionizing the organization with the adoption of new technologies, leaders must ensure experimentation permeate the daily life of the business and shape its culture. Taking risks to learn rather than obsessing with perfection. As an essential competency of a lean leader, this competency tackles the all-important challenge of encouraging employees to solve problems without direct supervision (LC13). This skill is critical for those who will be working in a technological environment.

In the model, competency IC6 is the base of the fifth level in the structural model. Promoting and spreading the experimentation and risk-taking culture (IC6) will prepare people for their interaction with new technologies (IC4), which in turn will give them autonomy and empowerment (IC5). These competencies are focused on employee development and preparedness in continuously changing environments, contributing to more sustainable innovation in the long term. Which is of course key in Industry 4.0. Training and continuous professional development are, therefore, crucial to the success of a digital transformation in its early stages. Industry 4.0 requires the workforce to possess a high degree of knowledge and dexterity.

Although the competencies of lean leaders represent the basis for the development of the Industry 4.0 leadership competencies, in the structural model we also found that the opposite is true. Indeed, some Industry 4.0 leadership competencies can significantly influence a lean transformation. Lean leaders stimulate employees to solve problems autonomously. As they start learning from their mistakes and seek different solutions on their own, they become more empowered and willing to try things out.

Some lean leadership skills are positioned high up in the model, at Level V (specifically, LC6, LC7, LC8 and LC17). They are connected to the need of keeping employees – and, indeed, the whole organization – motivated and fluent in lean principles, always aiming for continuous individual development and eliminating barriers to change as they appear. These competencies embody the importance of understanding that lean is a continuous improvement effort and not just a few projects with a beginning and an end. And aren’t we used in the Lean Community and literature to say that lean is a never-ending journey?

These four skills play an important role in shaping the future steps of a lean journey and expanding its reach the whole organization and supply chain (LC18 and LC9, shown on level VI in the model). Interestingly, LC6, LC7, LC8 and LC17 are also crucial to Industry 4.0 competencies shown at levels VI and VII (skills here have a high dependence power).

The model says it clearly: mature leaders are well versed in lean principles. Moreover, they must be prepared to assume the responsibility of impacting the organization and society with the emerging technologies they deploy. The Industry 4.0 competencies at level VI – IC2 and IC3 – speak to the need of implementing technology only when it brings advantages to the production process. One role of a leader is to design systems that leverage new technologies to give people freedom and control of their own lives. The IC2 competency (be analytic when allowing the implementation of advanced technologies) is particularly critical.

The last level of the structural model (VII) is composed of only one competency from Industry 4.0: implement technologies to promote the organization’s business model (IC1). This shows that the implementation of Industry 4.0 technologies requires the business to be prepared and employees to support change.

TO CONCLUDE

This model makes it clear that the competencies typical of a lean leader will sustain Industry 4.0 practices and facilitate innovation.

There is no doubt that Industry 4.0 will bring dramatic changes to the production systems around the world, impacting leaders, employees, whole business, even society. This study suggests that leaders must develop specific competencies to really tap into the potential of new technologies and make the lives of employees easier. We hope that leaders will find this structural model of help as they try to adopt strategies and practices related to Industry 4.0. A leader called to act in a tech-heavy environment must develop a specific set of competencies to fully prepare for the Fourth Industrial Revolution: our model highlights the importance of lean skills in this all-important process. Without lean, the promise of Industry 4.0 won’t be entirely fulfilled.

The way to radical lean

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FEATURE – Reflecting on Nomura-san’s recently published book on radical quality improvement, the author encourages us to embrace the spirit of “Dantotsu” to meet the challenges we face as a society.

Words: Michael Ballé, lean author, executive coach and co-founder of Institut Lean France

Over the years, I have heard many great stories on Nomura-sensei from my friends at Toyota’s South African plant and from TIE’s forklift plant here in France. Reading his book is a real delight – if somewhat wistful.

I remember when we did all this stuff, with my father Freddy, in automotive plants across Europe at the turn of the century. And then, some time after the Lehman Brothers crisis – right about when Nomura-san started his Dantotsu initiative with Toyota’s forklift operations – we somehow stopped.

We didn’t stop lean, mind you. Companies new to Lean Thinking, whether in construction, car refurbishment, hospitals or digital start-ups, all had spectacular successes with the same fundamental principles of putting customers first, reducing lead-time and reacting right away to quality issues in order to train people to be better at their job. The leaning of companies continued: progressively, we had the ear of CEOs and were able to explore what lean meant as a full company strategy, as pioneers like my father or Art Byrne had experienced it.

What we stopped doing is the rigorous, detailed work of collecting quality and lead-time data, standardized work training, and so on. For many years, the name of the game in car plants was tracking complaints, then defects found at final inspection, then at the end of the line, then at the workstation – gradually moving the curve backwards towards self-inspection, thus reducing the lead-time between defect occurrence and detection. We opened up machines to find ways to self-inspect the process. We drove rigorous and detailed technical analyses of where defects came from. We used Production Analysis Boards systematically to engage operators in rigorous analysis of missing production. Before starting production, all 4Ms (man, machines, materials, methods) aspects of a line were checked by team leaders and conditions corrected by supervisors whenever something went amiss.

The same detailed work was conducted on flows, with laborious Materials and Information Flow Analyses (forget VSMs – MIFA is the real deal) and tracking kanban cards one by one (before the use of bar codes was generalized) to understand exactly what happened in the flow and where the backflows were.

And the results were as described in Nomura’s book – steady, but uneven. With breakthroughs and backslides (new model, summer workers, change of local manager). And, what is less discussed in the book, behind each improvement of the results, the human stories of hours of discussion, investigation, sometimes argument (“We’ve progressed so much. Why do you want us to do it again?”).

I can’t help but wonder – we know we should be doing this (indeed, in my case, I’ve been privileged to be taught this firsthand), so why aren’t we?

Maybe it’s just me. Did I go soft? At some point I got tired of the arguments, the pushing and pulling, the cajoling (sometimes, the threatening) to get reluctant managers to stop playing the system against the system and actually do the work: inspect all parts, in their real conditions on the shop floor with the operators. Or more generally to simply actually care.

It also seems the lean movement as a whole lost some of this oomph as it veered towards coaching (to what?) or admin processes (to what end?) and progressively minimized the importance of looking for muda and how to eradicated it. Few lean efforts I now visit are serious about reducing lead-times by installing pull and creating flow, or radically reducing defects and not-right first time.

What troubles me most is that whereas the financial crisis of 2008/2009 should have been a turning point in our understanding of the catastrophic impact of financial management on industrial companies, it seems that the opposite has happened. Financial management is now the firmly established norm. Value is harvested on the stock market (or at the resale of unlisted companies) and created through expectations management rather than performance improvement. It’s all about what story the analysts want to hear, how the market will take this or that move, never about competition and advantage building.

Our real problems, however, are only beginning. You can deny gravity all you want, but gravity doesn’t care – it’s still there. Global issues such as climate change and pandemics will continue to disrupt supply chains and require deep technological solutions if we want to retain our way of life.

Dantotsu is the way – not only to achieve results but to learn more deeply about the reality of our delivery and production processes. Dantotsu is absolutely necessary to train the next generation of engineers who know about real processes, not just moving digital levers on a smart tablet. Dantotsu is about getting your hands dirty, gathering the data and learning to speak its language – recognizing what one scatter dot says versus another.

“Lord, we know what we are, but not what we may be,” says Ophelia, distraught in Hamlet. We’ll never know quite what Shakespeare had in mind when he wrote the line, but to me, it strikes a very deep chord. We also know what we were. I have been deeply affected by Sadao Nomura’s book on Dantotsu because it speaks so directly to what we are, as opposed to what we were, and what we may be if we only have the will and grit to own our own thinking processes and polish our methods.

Don’t miss out on this book. Take it one step at a time and really read it. Compare your current practice with what he suggests. Ask yourself what you could be doing better if you tried. We are incredibly fortunate to read his published briefings and share his thinking. Whatever mess your company is currently in, there’s a blueprint for getting out of it. It’s the way of Dantotsu radical quality improvement.

The legacy of LEANardo da Vinci

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The world doesn’t need any more evidence of the greatness and genius of Leonardo da Vinci. From his artistic prowess to his discoveries and inventions in fields as diverse as aerodynamics and anatomy, there is no doubt Leonardo gave an immense contribution to the advancement of science and human knowledge.

Yet, there is an element of his contribution that has so far been overlooked – the lean-like nature of his way of thinking. Indeed, the more I leaned about Lean Thinking, the closer a connection I found with Leonardo. This has pushed me to deepen the possible connections and relations between lean and Leonardo.

Inspired by John Shook’s work, I find it natural to look at Lean Thinking from different perspectives. My aim is to explore and potentially highlight how different developments in science, culture, history, economics, or the arts might influence – directly or indirectly – our understanding and shaping of Lean Thinking. So, could Leonardo’s method and way of thinking have contributed to lean as we know and see it today?

According to John Shook and his double funnels, Lean Thinking is a consistent mix of ingredients that incubated at Toyota over the course of 30 years and were released to the outside world through a diffusion/dilution process that leads to applicative gaps of lean implementations worldwide. In this sense, could Leonardo da Vinci help us to bridge such gaps?

ANALOGIES ABOUND

In order to answer this question, I drew a comparison between the five Lean Principles, as described by Jim Womack and Dan Jones, and the seven Da Vincian principles popularized by Gelb and illustrated in the book How to Think like Leonardo da Vinci: Seven Steps to Genius Every Day.

The Da Vincian principles have been presented by Gelb as the conceptualization of Leonardo’s methodology and thinking. Here they are:

  1. Curiosity – Leonardo had a curious attitude towards life and research, a great appetite for continuous learning, and desire to know more about the world around him, its dynamics, and processes. These are the elements behind the depth of his studies and the range of topics he focused on.
  2. Demonstration – Leonardo had a natural inclination for testing knowledge through experience and commitment, and a willingness to learn from mistakes. This is one of the reasons he was so ahead of time: he used experience to challenge the status quo and established knowledge. His learning process was based on experimentation and new knowledge was created one mistake at a time.
  3. Sensation – Leonardo paid great attention to how the five senses helped him to experience the world. By improving his senses, he meant to improve his mind and experiences accordingly.
  4. Sfumato, or blurriness – Leonardo was willing to embrace ambiguity and paradoxes. In fact, these were common traits in his search for the truth: as he learned more about things, he was dragged deeper into ambiguity and towards the unknown.
  5. Art and science – Leonardo’s uniqueness partly stems from the balance he continuously tried to strive between art and science, logic and imagination. This is why Gelb called him “the supreme whole-brain thinker”, someone who was able to see the world in all its facets, find unexpected connections between them and understand its intrinsic dynamics.
  6. Corporality – Leonardo was attracted to grace, beauty, and balance (which is reflected in his obsession for the human body and his interest in anatomy).
  7. Connection – Leonardo was aware of the interconnections that exist among all things and phenomena. He found in them a way to create new knowledge out of their interactions. Gelb says that “one secret of Leonardo’s unparalleled creativity is his lifelong practice of combining and connecting disparate elements to form new patterns”.

In the light of all this, I find it impossible not to notice a number of analogies between Leonardo’s thinking and lean. First of all, in both cases there is a strong focus on the customer, who defines value according to his perspective. Much like for a lean organization providing value to customers is the main goal, so Leonardo felt the urgency to satisfy his “customers” – usually important patrons of major cities – to keep benefiting of their protection and sponsorship. Even when he didn’t really believe in what they asked him to do and he’d rather work on other, more fulfilling projects.

Another analogy with lean can be found in Leonardo’s tendency to make sketches of his concepts and ideas. These sketches don’t have to be intended just as ways to visualize the concept and to improve it, but also to test it and investigate different alternatives in terms of mechanics, connections, or materials. This approach is akin to the lean concept of Kaizen and, as suggested by Tarelko in Leonardo da Vinci: Precursor of Engineering Design, could be interpreted as a propensity for Rapid Prototyping, a common procedure in lean product development. This means the testing of his concepts was diluted throughout the design: testing and designing happened in parallel and their results influenced each other. It’s a simplified version of Set-Based Concurrent Engineering.

Finally, Leonardo constantly wrote notes on the side of the page. These could be reminders of how to develop a physical prototype, details that shouldn’t be forgotten, or insights for other important work. Essentially, this is what in Lean Thinking and Practice is now called Job Instructions and standardization – guidelines that are to be followed by whoever oversees a job once they are properly trained for it. In the same way, Leonardo described the procedure step by step, for the sake of clarity and simplicity.

As I mentioned when I described the seven Da Vincian principles, Leonardo’s projects were driven by experience, without relying much on theory. His invaluable life experience allowed his to even develop his own encyclopedia! He learned by doing, making mistakes, and understanding what didn’t work in each experiment and why. Doesn’t this sound very lean to you?

BRIDGING THE GAPS OF LEAN IMPLEMENTATIONS?  

What surprises me the most about Leonardo’s method is related to his learning process. As previously said, he was eager to learn, regardless of the topic. Indeed, Leonardo’s learning process embraced different fields and disciplines. Similarly, Set-Based Concurrent Engineering promotes the development of “multidisciplinarity” in project teams instead of silo thinking, as a way to leverage synergies among different areas and functions.

As ever, Leonardo was one step ahead. He could find correlations among seemingly unrelated topics and exploit them to create new knowledge in different fields. In other words, interdisciplinarity is one of the major tools that Leonardo left us and that I think should be actively incorporated into modern lean practices. This would especially help us to address the gaps that exist in lean competencies management and development.

For this purpose, I developed a conceptual model – the Comb Model – that can be used to map and evaluate the available skills with the aim of integrating interdisciplinarity in the management and development of competencies within a company and boosting collaboration. As a matter of fact, four algorithms have been developed to efficiently assign the right resources to a project given its specific requirements and the available competencies. In a lean organization, this is turn into a powerful driven of synergies and mutual learning.

TO CONCLUDE

Leonardo da Vinci (or should I say LEANardo?) gave a very relevant, although indirect and unconscious contribution to Lean Thinking. His ideas have greatly influenced scientific thinking and, to this day, inspire us to experiment, embrace uncertainty and problems, and make unexpected connections between elements of the reality around us that we consider unrelated. So aligned with lean is his way of thinking that I wouldn’t be surprised if one day, during a visit at a Toyota plant, I saw a banner hanging from the ceiling saying: “Leonardo was here”.

A chat with Nomura-san

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INTERVIEW – Following his 10 years at Toyota Industries Corporation (TICO) teaching his Dantotsu method for radical quality improvement, Sadao Nomura spoke to Japanese magazine Kojo Kanri (Factory Management).

Interviewee: Sadao Nomura

Interviewer: Toshiko Narusawa

Toshiko Narusawa: Ten years ago, you were tasked with implementing Dantotsu Quality Activities at TICO. How did that come about and what was the reason?

Sadao Nomura: I became an advisor to TICO at the request of Vice President Tatsuro Matsuura, in July 2006. With the idea of acquiring a Swedish company and with industrial vehicle manufacturing operations in Italy, France and the United States, TICO wanted its six businesses and their suppliers to be able to improve their quality. I was being asked to take on a big role, and I think that was because of my previous experience working for Toyota Motor Corporation both in Japan and overseas.

TN: Can you tell us about your experience at Toyota? You have held several roles there, ranging from sales to a senior role at the Motomachi Plant and an assignment in Indonesia.

SN: At that time, Toyota was focusing on knockdown assembly abroad, which – due to the rapid growth – Toyota workers could not support. I spent six years at Toyota Astra Motors in Indonesia together with Mr Matsuura, with whom I shared quite a bit of pain. After that, I was a second-level section chief for the body department at the Motomachi Plant for four years. There, we made a number of key quality and performance improvements that led to best-ever new vehicle launch performance with full-scale production volume stability attained in the first month of production for Toyota’s best-selling 6th generation Mark II mid-size passenger car (we had a takt time of 54 seconds at an early stage). At the time, competition was fierce and expectations from dealers were extremely high. I am glad I was able to contribute to the increase in sales we experienced.

TN: Did that approach to production preparation lead to Toyota’s current method?

SN: Even though what we did at the time was quite rudimentary, it is true that until then it could take over a year for production to stabilize. We did it in one month. Critically, we created a preparation manual that highlights all the problems that can be encountered in the process and the countermeasures that were previously implemented in past new vehicle launches. Of course, the company’s approach to production preparation is much more advanced now.

TN: What about your experience in Australia and South Africa?

SN: In Australia, which was an acquisition for Toyota, I was asked to lead the production ramp-up for the new Corolla. It was a difficult environment with old equipment and employees who felt disenfranchised, but we were still able to reduce quality defects by 90%. I think Toyota Industries had a clear expectation in terms of changing the mindset and behaviors of the employees there.

Four years after returning to Japan as the general manager of the body department at Motomachi, I was sent to South Africa. Here, even in a country with a culture completely different to Japan, I gained very valuable experience strengthening the conviction that quality will improve if the basics are covered and the employees are motivated.

One of the challenges I faced was the limited impact I could have as an advisor. I had no direct authority on employees at any of the companies that I supported.

TN: That sounds important. Tell us more, please.

SN: Before the Dantotsu initiative, I visited each factory once every few months for a year, pointing out problems and leaving some homework for people to do. However, each time I went back, they hadn’t done it. Determined, I left homework again. On my third visit, it was almost the same as last time. So, I asked top management to make it a top-down company-wide requirement. I’m grateful they followed my advice. That’s how Dantotsu began.

TN: It is critical for top management to convey the message that improvement should be taken seriously. I think another problem you faced when trying to tap into everyone’s potential was that people were working in silos and not collaborating enough. I know that one of the key reasons for the success of the Dantotsu initiative was the introduction of the eight steps. And, of course, there were the legendary “Nomura memos”.

SN: If you want people to do what you teach, you have to make sure that you are communicating effectively. So, for each new issue we tackled, I took detailed notes of the countermeasures we devised and handed them to the teams. There were around 300 memos over the years, all handwritten (mostly at night).

TN: I was surprised to see the handwriting was also a main feature at the Takahama factory.

SN: I believe that when you write by hand you convey your thinking much more effectively. Numbers and graphs that are hidden in a computer don’t communicate the same sense of urgency and don’t create remorse or the sense of discovery you need in order to get people engaged.

TN: What can you tell us about the 8 Steps and the critical role of the team leader in implementing them, as the person closest to the front-line work? 

SN: I have standardized the process and “codified” it in the 8 Steps based on my experience across different countries and businesses. If you ask people to simply execute your order, you will be perceived as “pushing”. In reality, the 8 Steps make so much sense and are so rational that you don’t really need to convince anyone. When people try them, they immediately see the impact and are bought in. Executives are naturally interested in them, too, and their praise for the approach goes a long way motivating people.

The 8 Steps – as well as our Weak Point Management – are based on the idea of making our relentless quality improvement work commonplace and persevere in our tackling of every defect. This is how a company can push the number of defects to nearly zero.

Reinventing reimbursement

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Reimbursements represent a key process for SulAmérica, not least because it is one of the few opportunities that we have to interact with our customers directly. Over the years, our department has undergone a huge cultural shift, which has completely changed the way we think about our customers and the service we provide to them.

Today, thanks to our efforts to embrace Lean Thinking and digitalize our process, we have greatly improved the customer experience, as we deal with an unprecedented volume of requests.

To understand where we are, however, it is important to explain where we came from. In this article, we would like to provide a timeline of our lean journey. We hope this can inspire others to take the lean leap, too!

Until 2009, we only worked with paper. We had boxes full of reimbursement requests all around our offices. We took our first steps towards digitalizing our work between 2010 and 2015, but the only difference with the previous system was that, instead of coming to us, the documentation was sent to an external provider. They digitalized it for us and sent it over.

In 2015, we initiated the second phase of our digital transformation, becoming the first insurance company in Brazil to receive reimbursement requests digitally. In doing so, we disrupted the market and gained a great competitive advantage. At the same time, however, we realized that we needed more than just technology to succeed; we also needed to engage our people and improve our processes. That is when lean came into the picture.

2015 – THE FIRST LEAN STEPS

From the very beginning, our department could count on the support of SulAmérica’s continuous improvement team. In 2015, they began to train us in the lean fundamentals. They taught us value stream mapping, so that we could finally see all the weak points in our process. We found that things didn’t exactly work smoothly all the time: clients expected a reimbursement in 14 days; instead, those who we not entitled to it were often given the bad news some 40 days after their request.

So, even though top management wanted us to rethink and digitalize the whole process right away, we decided it would be better to first focus on those reimbursement requests we rejected. This first step was enough to cause a first cultural shift in our department, convincing us that we had to rethink the idea of value for customers and how we provided it (that is when we worked on our strategic A3 on the reimbursement process, together with Lean Institute Brazil). We realized that value really meant paying customers back as quickly as possible. We also realized that if the request could not be reimbursed, we had to communicate the refusal as soon (and as clearly) as possible to our clients.

Redefining value is no easy task, and we still remember how much we struggled during those initial eight meetings (of eight hours each). We understood how important it was to just sit down and look at a problem in depth, but it was still new for us. We were not used to measuring and analyzing root causes. Luckily, the value of having a systematic and structured approach to problem solving quickly became clear to us.

Another pivotal moment in those first few months of our lean journey was a workshop with Kim Barnas, at the Lean Summit Brazil. She showed us examples of daily management and of standardized work. We left the workshop so excited that the following day we were ready to try it all out by ourselves. When, soon thereafter, we trialed the new system, the benefits were immediate. Leaders in the department, who were used to firefight on a daily basis, found their inbox empty by the end of the day and could therefore focus on what really matters – coaching team members and creating value for customers.

In many ways, we in the Reimbursements Department were lean pioneers within SulAmérica. We had one of the first daily management systems implemented in the company and our standardized work was very advanced. Our goal was to change people’s minds and help them to understand that the customer had to be our focus. What we were striving for was the “best reimbursement in Brazil”. Customer satisfaction became one of our key indicators (in the form of NPS) and we changed the way we looked at problems – no longer as something to avoid, but as opportunities to do things better.

In January 2016, we turned down 7.6% of the requests we received; in March 2017, it was 4.7%. Within the same period, our lead-time to issue rejections also went down, from 18 to 45 days to 2 to 8 days.

2017 – OUR LEAN EVOLUTION

In 2017, we consolidated our understanding of Lean Thinking, as we focused on improving communication with our customers and rethought the way reimbursement requests came to us. It was also the year we kickstarted our digital reimbursement process, which turned out to be a disruptive model in the industry.

To give our customers a better understanding of the reimbursement process, we created a dedicated landing page in SulAmérica’s website that explained each step in detail.

We then worked on an A3 that was meant to overhaul another troublesome process by better leveraging the collaboration between our department and the Medical Area. We had found that many clients got in touch with us only to know the amount of money they could be reimbursed in the event of undergoing a certain procedure, so that they could decide whether it was worth pursuing it. It typically took us a long time to answer those questions, because we had to involve physicians (they were the ones whose approval we needed) in the decision-making process. When we realized that this was a mindset problem (we were looking at the situation from a perspective that was completely different from that of our customers), we decided to act. The solution was much simpler than what we thought: we simply had to give clients a figure!

2017 was a fundamental year in our lean transformation. We reviewed our entire business model by initiating our digital process (22% of the requests were digital in 2017; 100% in 2018). In the meantime, Customer Service saw a 34% drop in the number of calls regarding reimbursements, as the landing page clearly started to bear fruit. Finally, we began to issue reimbursement estimates much faster than before (it took us seven days in July 2017 and only three days in March 2018). In 2017, we also won the CNSeg award for process innovation in our reimbursement process. We think that lean contributed greatly to this achievement.

2018/2019 – THE LEARNING CURVE GETS STEEPER

In 2018, people really embraced lean in their day-to-day work and the process was well-structured. Every day, come rain or shine, would start with our meeting by the visual boards, so that we could have a clear idea of where we were with our work and whether we were providing value to our customers. Everybody relied on those boards and those KPIs.

When we started our digitalization, it was for small amounts of documents and just for doctor’s appointments. In 2019, we changed provider because we wanted to enhance the quality of our systems. During the transition, there was also a clear impact on our performance: not only did we have to deal with the steep learning curve each new player faces when they join the game, but we were also expanding the scope of our digitalization efforts. Suddenly, we had much bigger volumes coming to us much faster, and for a while we struggled again. Even the smallest hiccup could generate big problems elsewhere in the process and create a bottleneck.

In response, our team had to learn to control a wider array of KPIs, which in turn consolidated the role of visual boards as our go-to system to manage the daily work. They also created their own quality indicators, in the hope to improve our NPS, and implemented new standards to support the work.

Throughout 2019, we widened and consolidated the roll-out of our digital process across the entire service value chain. We gradually overcame those initial challenges, but it was clear that there was still a gap in the performance of the external provider.

2020 – SUPPLIER SUPPORT AND PEOPLE DEVELOPMENT

To help the provider catch up, we provided them with our internal knowledge, inviting them to join our gemba walks and to attend our Quality Forums so that they could see the main problems they caused us.

But the real game-changer, which allowed us to dramatically improve our productivity as a team, was multiskilling our people. Until then, everyone used to work in their silo, unaware of the work going on in other parts of the process and of how their actions impacted it. So, in early 2020 we started this effort with only 33% of our team considered to be “multiskilled”. The year was full of challenges, as the pandemic forced our entire team to start working remotely. Throughout it, Lean Thinking was there to support our efforts to develop people and, by the end of 2020, nearly 90% of our team was multiskilled. What we see in their eyes now is the great satisfaction of knowing they are learning new things all the time and tapping into their full potential. That’s what lean is about!

When Covid-19 came, our department had already mastered the use of digital tools to process reimbursements. As the industry was scrambling to find solutions to the new problems, we continued to develop our people and to do our work. This gave us great competitive advantage.

This year, we are seeing a large increase in demand, which is challenging us to push towards automation and AI on one hand and to further review our purpose and internal processes on the other. We are looking at the Lean Transformation Framework and assessing where we are in each of the dimensions – an exercise that is proving remarkably helpful as we try to identify the gaps we need to fill if we are to continue to succeed in the future. Whatever challenge may come next, we know that lean can help us to tackle it. Knowing this helps us look to the future with confidence.