driving competitive advantage - harnessing process excellence
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Harnessing Process Excellence
April 30, 2008
Debra S. Levantrosser
Executive Director, Lean/Business Improvement
DRIVING COMPETITIVE ADVANTAGE
. 2
Objectives• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
. 3
Objectives
• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Explain What an Advanced Lean and Six Sigma Organization Looks Like
. 4
J&J: Diverse and Decentralized
• Most broadly based human health care company• 115,000 employees, $61B revenue, 230+ companies• Medical devices and diagnostics, pharma/biotech, consumer
• Managed for the long term (founded in 1886)• 72 consecutive years of sales increases• 43 consecutive years of dividend increases
• Strong culture of decentralization• Values-based culture (J&J Credo)• Empowered management
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CorporateCenter
J&J Structure
ConsumerComprehensive Care
Surgical Care
Pharm andBiologics
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Evolution of J&J Business Improvement
2008 >
SOQ ProcessExcellence
TQM/Crosby
Va
lue
1980s 1990s 2000s
Tools/ methods• Six Sigma, Lean, DEx
Process focus• Assessment
Measurement• Fact basedLeadership• Involved
PE Leadership/Peters
SOQ/Deming
Measurement• Fact based
Process focus• Assessment
Measurement• Fact based
TQM/Crosby/Ishikawa
Tools/ methods• Six Sigma, Lean, DEx
Process focus• Assessment
Measurement• Fact basedLeadership• Teachers, innovators
?
J&J’s approach to improvement has always evolved and built off of previous learnings and successes.
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Process Excellence Vision
Constantly improving business results using embedded PE principles as a way of running the business
VisionVision
Strategic ObjectivesStrategic Objectives
Deliver ImprovedBusiness Results
Improve Key BusinessProcesses
Develop and Ingrain Improvement Competencies
StructureStructure
1990s: Large corporate group building capabilities in the operating companiesNow: Smaller corporate group providing business solutions
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Objectives
• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results and Success Stories• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
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PE Tools Help Our Businesses to Ingrain the Principles
1. Create and communicate a clear vision and align the organization
2. Understand and focus on the customer
3. Create a process-centered, high performance work environment
4. Manage with facts and data
5. Create a culture of innovation and improvement
6. Relentlessly pursue excellence
Business Management Principles
Internal and External Proven
Practices
Improvement Methodologies
Assessments
Dashboards
PE Capabilities and Tools
Helpenable
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ValuesValues
StrategyStrategy
Evaluation &ImprovementEvaluation &Improvement
RegulatoryComplianceRegulatoryCompliance
Health Care ComplianceHealth Care Compliance
Health,Safety &
Environment
Health,Safety &
Environment
SupplyPlanningSupply
Planning
Supplier Relationship Management
Supplier Relationship Management
ProductionProduction
OrderFulfillment
OrderFulfillment
TechnologyTransfer
TechnologyTransfer
Organization, Workflow, & Job Design
Organization, Workflow, & Job Design
HR PlanningHR Planning
HighPerformance
Culture
HighPerformance
Culture
Strategic Talent
Management
Strategic Talent
Management
BusinessEnabling Services
BusinessEnabling Services
LeadershipResults
ComplianceResults
Org. & PeopleResults
DemandResults
SupplyResults
Prod. Dev.Results
Research Research
PortfolioPlanningPortfolioPlanning
New Product DevelopmentNew Product Development
Licensing &AcquisitionLicensing &Acquisition
ServiceDesignServiceDesign
LeadershipLeadership ProductDevelopment
ProductDevelopment DemandDemand SupplySupply Organization
and PeopleOrganizationand People ComplianceCompliance
1 2 3 4 5 6
MarketInsightsMarket
Insights
Sales & Mktg. Planning
Sales & Mktg. Planning
DemandGeneration
DemandGeneration
New Product IntroductionNew Product Introduction
CustomerSupport Services
CustomerSupport Services
Assessment Criteria
• What are the high level improvements in core and support processes?• How do we compare to appropriate benchmarks ?
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Sample of a “Benchmark Process”
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Blended Improvement Methods Aligned With Core Processes
Demand generation “toolkit”
Supply chain “toolkit”
NPD “toolkit”
Enabling processes “toolkit”
Six Sigma Lean DEx
Existing alignment
Proposed alignment
• Blended set of tools across the methodologies which are most relevant to a given area (toolkit)• Examples and real life application of tools in process area• E-enable “toolkit”
Tools Tools Tools
This approach addresses a key request from business leaders – make the toolsmore relevant, easier to apply, focused on the business need.
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Improvement Methods and Tools
Lean
• streamline process to improve work flow and deliver customer value faster• eliminate waste—time/resources• 8 principles
DEx
• design/develop new products or processes that consistently meet or exceed customer requirements• DMADV Roadmap: Define, Measure, Analyze, Design, Validate
Objective Sample Tools
• Project Charter, VOC• Process Maps, Pareto• Control Charts• Cause/Effect, Regression• Standardize, Learnings
• Value-Stream Mapping• Standard Work, 5S• Flow Optimization• Line Balancing• Rapid Changeover
• VOC, Change Mgmt• Quality Function Deploymt• Multi-Gen. Plan • Benefit/Risk Analysis• FMEA, Design for X
• reduce process variability • eliminate defects• DMAIC Roadmap: Define, Measure, Analyze, Innovate/Improve, Control
Six Sigma
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Drill Down to Action and OwnershipAt company meetings and in management’s regular dashboard review s, Janssen people drill down to the data behind specific dashboard components to understand why the company is performing as it is, as gauged by leading and lagging indicators. They then specify who will take what actions, when, to keep the company on track to reach or exceed its most important goals.
Drill Down to Action and OwnershipAt company meetings and in management’s regular dashboard review s, Janssen people drill down to the data behind specific dashboard components to understand why the company is performing as it is, as gauged by leading and lagging indicators. They then specify who will take what actions, when, to keep the company on track to reach or exceed its most important goals.
Dashboards and Hoshin Kanri: Drill Down to Action and Ownership
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Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7
Tools-only Approach
Stop & Go Approach
Toyota Culture and Training Approach
Rate at which companies improve through lean journey
Rat
e of
Im
pro
vem
ent
Th
rou
gh L
ean
Initi
ate
Impl
emen
t
Susta
in
Lean Thinking Companies that invest early in Toyota-style culture improve
dramatically in a short time.
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Lean Enterprise Enablers at J&J
Lean Enterprise: R&D, Supply Chain, Sales, Support
Learning
Lean Maturity
Assessment (LMA)
Lean Deployment
Model (LDM)
• Modular-based training, e.g.:
• Lean Culture• Leadership Standard
Work• Lean Health & Safety• J&J’s Lean Model• Lean Accounting• Kaizen
• E-Learning• Internal and External
Benchmarking
• 8 LMA principles which translate into 45 line items
• Leadership• Change Management• Roles, Responsibilities,
and Culture• Goal Alignment• Value• Flow• Pull• Continuous
Improvement
4 phases of lean deployment
• Stability• Flow• Pull• Integration
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This Is What an Advanced LeanSS Organization Looks Like
Fundamental principles of lean can be described as below. They represent the vision (not what “is” or what will be “tomorrow,” but the vision) for the entire enterprise! These apply to R&D, Commercial Ops, Supply Chain, and support functions.
Value
Leadership
Pull
Flow
Roles, Responsibilities, and Culture
Goal Alignment
Continuous Improvement
ChangeManagement
Committed, accountable, teachers, in Gemba 50% of the time, reflection time
Servant-leader mentality, engrained, formal, positive attitude toward change
Teams drive improvement, org design is in value streams, hiring is based on values
Goals exist for every individual, accountability is omni-present, common KPIs visible to all
Internal and external customer needs are well known and processes mapped
Cycle time constantly improves for all processes (physical, virtual, and informational)
Action begins at sign of demand, is leveled, inventories replenished on min/max levels
Results continuously improve, CI culture permeates, innovation encouraged (Kaizen)
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Leadership standard work minimizes disruptions in the workplace during leadership changes while holding the organization’s course.
Continuous Improvement
Daily Management
Performance
Without standardized work, there can be no sustained improvement.
STANDARDWORK
Time
Leadership Standard Work
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Critical Success Factors for Change
87%69%
66%54%
46%36%
34%21%20%
19%17%
16%7%
4%4%3%
0%
Executive sponsorship
Understanding of need for change
Multilevel management support
Consistent communications
Compelling need for change
Adequate resources
Structured approach
Clear channels for feedback
Recognizing employees
Preimplementation training
Training for change team members
Communicating w/affected employees
Offering compensation to employees
Personnel changes
Offering savings to employees
Other
Offering small gifts to employees
Top Five
Source : Best Practices, LLC, 2003Source : Best Practices, LLC, 2003
Executives rank people-related issues as the most important driver of successfully implementing and sustaining change.
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Objectives• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results and Success Stories• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
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Putting It All Together—Improvements That Drive Results
2004 2002 2001
$ Billions
$1.00
$0.50
2003
$0.40
$0.98$1.18 $1.10
$0.25
$0.75
J&J business leaders have been able to leverage PE tools and principles to help enable the achievement of business results.
Financial Impact of Improvement Projects
Source: Financial reporting system; Group PE leaders. Value= Balance Sheet + P&L (after tax rate) impact..
$1.11
2005
Value CreationBalance Sheet• Accts. receivable• Inventory reduction• Capital avoidance
P&L (after tax)• Cost reduction• Cost avoidance• Revenue enhancement
2006
$1.10
Our certification results:4000 Green Belts1200 Black Belts700 Master Black Belts
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• Insufficient capacity to meet
strategic plan needs for NPD
• NPD process has a lot of non-value-
added activity
• Numerous handoffs and rework
• Opportunity existed to improve voice
of customer input into development
process
Rationale
Game Changing Improvements in NPD
Outcome: Dramatically improved NPD productivity and effectiveness
Improvements/Deliverables:• Dramatic process improvements:
- Reduce rework- Eliminate non-value- added steps- Improve customer VOC into process
• 1-yr cycle time eliminated• NPD capacity increased 45%
Outcomes:• 2003: 20 NPD projects with 2 launches• 2004: 29 NPD projects with 7 launches• 5 more launches = $211MM incremental revenue
Medical Device Company
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USUS (35 Days)
ItalyItaly (189 Days)
KoreaKorea (109 Days)
ColumbiaColumbia (83 Days)
Argentina (76 Days)
JapanJapan (75 Days)
UKUK (56 Days)
FranceFrance (61 Days)
MexicoMexico (59 Days)
CaribbeanCaribbean (60 Days) ChinaChina (39 Days)
Results to date:
Cost/Benefit to J&J:
Driving Improved Cash Flow Through Better A/R Processes
- Cross business group effort- 24 projects/participants (13MD&D, 6 Pharm, & 5 Consumer)- Invested $1.3 MM in effort to date- A day of DSO globally in 2003 represents ~ $100MM in cash
- Total DSO Black Belt Wave improvement of 2 days vs goal of 1 day (June 2003 – September 2004)
• MD&D 2.1 day improvement• Pharm 1.3 day improvement• Consumer 4.0 day improvement
- Representing over $150MM in additional cash flow for J&J
Examples of improvements:- Understand root cause of issues- Reduce/eliminate invoice discrepancies with customers- Improve electronic funds transfer timing- Provide electronic invoicing to customers- Improve customer satisfaction with billing
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Lean Culture Change Example: Cordis de Mexico—Shingo Prize Winner 2007
Rewards and Recognitions –•Cell of the Month•Employee Suggestion System•Team Excellence Award
Communication – •Wall of Excellence – shows improvements, major events, recognition and awards, Credo, vision, and mission•Wall of Shame – shows complaints, the top 10 most wanted defects, and negative events• Wall of Metrics, Safety, and Environmental – displays business metrics and state of the company to all associates
Continuously Exercise Improvement – •Enhance new orientation training•Improve training curriculum – training with a purpose•Everyone is in gemba being active
Training – • Developed training modules with a purpose (classroom training and application)
•5S, waste identification, basic continuous improvement tools, mistake-proofing•PDCA and 5 Whys; Policy management strategic deployment
5S System –•59 teams participated in the annual 5S competition• A successful approach is to engage workforce in learning and executing• Leadership participation and involvement
Kaizen Workshops and Circles – •Manufacturing and nonmanufacturing areas involved•Cross-functional teams, Leadership involvement•Results focused on eliminating defects and improving productivity, safety, and environment
Suppliers –•Share lean and Six Sigma knowledge •PE projects •Kaizen workshops
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Objectives
• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results and Success Stories• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
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Innovation Explained
List as many innovative organizations as you can………GO!
Exercise
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Innovation Explained (cont.)
Why isn’t your organization up here?
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Product Innovation at J&J: Tip of the Iceberg
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Innovation at J&J
• Commitment: Innovation SME Team, training, external relationships
• Passion: Intense focus on health care and improving peoples’ lives
• Drive: The Credo per R.W. Johnson• Culture: Decentralization allows it• Follow-through: Process Excellence (lean, six
sigma, design excellence)
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Failure at J&J
“Failure is our most important product.”
- R. W. Johnson Jr., 1954
Part of the J&J Credo:
“We must experiment with new ideas.Research must be carried on, innovative programs developedand mistakes paid for.”
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J&J Sources of Innovative Ideas
“Crowdsourcing” Examples
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J&J Sources of Innovative Ideas (cont.)
“Crowdsourcing” Examples
Once an idea has received enough votes and has passed a threshold score, it is sent on to the relevant department for review. If that department likes the idea, it will put it forward for testing and then into Development. Centovation is a tool designed to help all employees input their ideas and get fast feedback on their ideas. It is also a chance for all employees to participate in Idea Development to find new ways to help Centocor grow faster by rating other people's ideas as well.
Everyone can play a role in generating the ideas that will make this company even more successful! Whether it is rating or submitting ideas - the more people that get involved the more we are likely to get innovative ideas.
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Objectives
• Explain What an Advanced Lean and Six Sigma Organization Looks Like• Share the Strategy and Tools of the Trade• Share the Potential Results and Success Stories• Explain Innovation’s Role• Share Lessons Learned for an Advanced Lean Six Sigma Deployment
. 34
Implementing Process Excellence: Key Considerations/Lessons Learned
• Not a substitute for strategic thinking• Not a replacement for business acumen• Not a replacement for or inhibitor of innovation
What it isn’t
• People become more focused on tools/ methods than the business, “zealots”• Making improvement more complicated than it needs to be, “jargon”• Not reaching all levels of the organization
Watch out for
• Your competition is making dramatic improvements and is improving at a much faster rate than you
What to be afraid of
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JJPE in TransitionFrom… To…
Mission: Identify, enable, and accelerate high-impact business solutions in Product Development, Commercial Operations, and Supply Chain
by collaborating with the businesses to:deliver strategic initiatives, deploy best practices, and
strengthen their improvement capability
• Corp. Program Office – “push”• PE Community
• Cost savings focused • “Operations” mindset• Tool-focused approach• Improvement identification
• Bus. Improvement Services – “pull”• Business Unit Leader
• Top- and bottom-line benefits• Commercial, R&D, Supply Chain• Customized, focused solutions• Deployed best practices
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JJPE/Business Improvement Services
Old Paradigm – Blocking/Tackling New Paradigm – Leading/Coaching
Deploy Best Practices
• Collaborate w/WW Ops, R&D Councils, Regional Councils to
share best practices for key issues
• Scan external environment foridentification of relevant best practices
Foster Global PE Community
• Leverage our investment in the improvement community
Expertise for High Impact Areas
• Rapid Response – implement action plans for strategic initiatives
• Dedicated consulting for strategic initiatives
Talent Development
• Identify/accelerate top PE talent for critical positions
Provide Expertise to High Impact
Areas
DeployBest Practices
Foster Global PE
Community
Develop
Talent
Building Capability
• Broad-based Training
• Curriculum Development/Update
• Maintain Certification Standards
• Business Assessments
• Leadership Orientation
• Tool Deployment
BuildingCapability
Talent Mgmt
BusinessSupport
WHQ Support
Global PE
Council
(Blocking &Tackling)
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Mission Improve business results, improve processes that drive the results,
ingrain the business management principles
• Identify targeted businesses and help BU leader build capability
• 40% at “fully capable” for self-improvement
• Sustain the value of assessment• 90% business leaders at
Top 2 Box• % coverage plan attained
• Improve PE talent mgmt process• 80% PEL competent• 80% ready now for
replacement of critical positions
• Evaluate business solutions consulting capability
• % plan attained
Build Improvement Competencies
PE Objectives – Strategic Areas of Focus PE Objectives – Strategic Areas of Focus
• Conduct systematic reviews of key business process capability - NPD, Supply Chain, Demand Gen
• Processes reviewed using appropriate dashboard?
• Opportunities identified?• Action plan in place?
• Target specific process improvement opportunities for key businesses
• 50% of targeted companies at benchmark levels (> 70%)
Continue to Strengthen Key
Business Processes
Target Top Business Growth Opportunities
• Identify and execute projects in GOC Growth & Leadership agenda
• Measured progress of projects by GPEL
• $ Impact of projects• Accelerate leveraging of “best”
practices in key growth areas• Link best practices with
Business Assmt feedback – VOC rating
• Deploy Mktg/Sales Diag. Tool – VOC rating
• Conduct initiatives/events focused on key GOC priorities
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Link the Change to the Current
We believe our first responsibility is to the doctors, nurses and patients,to mothers and fathers and all others who use our products and services.
In meeting their needs everything we do must be of high quality.We must constantly strive to reduce our costs
in order to maintain reasonable prices.Customers' orders must be serviced promptly and accurately.
Our suppliers and distributors must have an opportunityto make a fair profit.
We are responsible to our employees,the men and women who work with us throughout the world.
Everyone must be considered as an individual.We must respect their dignity and recognize their merit.
They must have a sense of security in their jobs.Compensation must be fair and adequate,
and working conditions clean, orderly and safe.We must be mindful of ways to help our employees fulfill
their family responsibilities.Employees must feel free to make suggestions and complaints.There must be equal opportunity for employment, development
and advancement for those qualified.We must provide competent management,and their actions must be just and ethical.
We are responsible to the communities in which we live and workand to the world community as well.
We must be good citizens – support good works and charitiesand bear our fair share of taxes.
We must encourage civic improvements and better health and education.We must maintain in good order
the property we are privileged to use,protecting the environment and natural resources.
Our final responsibility is to our stockholders.Business must make a sound profit.
We must experiment with new ideas.Research must be carried on, innovative programs developed
and mistakes paid for.New equipment must be purchased, new facilities provided
and new products launched.Reserves must be created to provide for adverse times.
When we operate according to these principles,the stockholders should realize a fair return.
Puts customers
first
Highly values
employees
Focuses on continuous
improvement in our
communities
Measures business results
Supports continual learning
Focuses on continuous
improvement and supplier integration
Supports innovatio
n
Lean Enterprise: R&D, Supply Chain, Sales, Support
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Thank You!
Danke (German)
Gracias (Spanish)
Spasibo (Russian)
Obrigado (Portuguese)
Terima Kasih (Malay)
Merci (French)
Tak (Danish)
Grazie (Italian)
Do Jeh (Cantonese)
Arigato (Japanese)
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