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Establishing and Managinga Culture of Improvement

Valve Manufacturers AssociationWaterloo, IowaApril 2010

Michael Kuta, Partner

4 Armstrong Road 3rd Floor Shelton, CT 06484 Tele: 203.225.0451

Establishing and Managing…


…a Culture of Improvement


A Culture of Improvement is not accidental!!


Sizing up your Elephant


your Elephant

Company [Brand]

Employees [#’s and Mix]

Locations

Multi-National

Organized Labor

Process / Discrete

Charismatic Leader

Evolution / Revolution

New or Renew

Making Money!

Losing Money?

Investment Strategy

Brownfield

Greenfield

Build to Order

Build to Inventory


Leadership and Structure

Plan and Deploy

People and Teams and Experiments

Standard Work

Innovation

How we’ll go about this…


…the end backwards

How can we delight our customers and enhance brand loyality?

How can we keep learning, energize our employees and, be recognized as a top performer?


Standard Work

Do you have standards?

Do you adhere to them?


Nice to have a vision

Complement with a plan

Deployment would be slick

Target: Ideal and Reliable methods

Experiments and Standard Work

…in the beginning


the orangeson the trees…

wagons – good cook


The Perfect Enterprise

Every process is:

completely valuable

fully under control

perfectly capable

always reliable

and available

Every process is connected by:

standard work

seamless communication

waste free flow

continuous learning

No Muda


Industry Week Best Plants

5 year Lean Journey Improvements

Percent reduction in scrap/reworkas a percent of sales… 50%

Percent reduction in customer rejectrate… 68%

Thanks Professor Peter Ward The Ohio State University



Percent reduction in warrantycost as a percent of sales… 40%

Percent reduction in manufacturing processcycle time… 44%





Percent reduction in standardOrder-to-shipment lead time… 46%

Percent improvement in productivityas measured by annual value add per employee… 368%





Percent improvement inproductivity as measured by annual sales per employee… 386%

Percent improvement in productivityas measured by annual sales per square foot… 824%




If it’s that straight forward….

Why isn’t every company already Lean?


three interrelated suggestions

Articulation

Management

Focus

…a bunch of reasons

Thanks to Professor Peter Ward,The Fisher College of Business atThe Ohio State University


Articulation• Operations leaders often can’t seem to tell a convincingstory, as a result their efforts become cost down as opposed to capabilities up

Management• Top leadership is often unwilling to show the patienceto allow Lean to work. Just give me the blue print!

• Go with economic change strategy, not cultural change

• The charismatic leader! Such people often move on?

Focus• Competing programs dilute attention

• The Lean effort is to narrow (imposed boundaries, and; donot include administration/the office)

• Poor Project Management


Implications…

ArticulationManagementFocus

it boils down to leadership


Nobel Prize winning economist’s agree…

“A primary function of a company is reducing or eliminating transaction cost.”

Financial Times May 2005


“There is a direct relationship between the value a person produces and the prosperity of an organization.”

The Wealth of Nations 1776


the money: Return on Assets

net income ÷ total assets

net income = net sales – (cost of goods sold + selling + G&A)

total assets = (cash + receivables + inventories + goodwill+ property, plant, and equipment + furniture+ construction in progress) – depreciation

the target: Numerator Up ÷ Denominator Down


How do Leaders and Managers add value?


Roles and Responsibilities

• Leading the Transition Journey

– Innovate along the journey

– Develop the systemic process

– Focus on people

– Inspire trust

– Long range perspective

– Ask what and why

– Eye on the horizon

– Originate guiding plans

– Challenge

– Be your own person

• Managing the Transition Journey

– Translate and administer

– Maintain course

– Focus on systems/structures

– Rely on collaboration

– Short range view

– Ask how and when

– Eye on the bottom Line

– Link and follow direction

– Get it done

– Be a classic good soldier

Kotter HBS Bennis USC Ward OSU Productivity Inc.


Attila the Hun

Jack Welch

Santa Claus

a common theme?!


You’ve got to want to be in charge

Attila the Hun

• Ruled throughout [today’s] Europe and Asia

• As many as 1,000,000 warriors

o well disciplined

o filled with esprit de corps

• Good planning

• Good execution


No ideas du jour

Jack Welch

• The person in charge

• Big company [GE] with global reach

• Lead, not run

• Act with speed and decisiveness

• Stick with your vision

• E cubed: energy, energize, execute


You deliver all those packages in 1 night!

Santa Claus

• Global Perspective

• Self - Awareness

• Self - Management

• Social - Awareness

• Social - Skill


Attributes of Good Leaders

Enthusiastically model changeReadiness to build capabilitiesEager to enable peopleAdherence to processClear metrics and targetsAbility to see wastes and zeal to solve problemsCreating a no-risk environmentRelentless focus on CI and experimentationCommunication x10Models organizational innovationWhat’s next… Passion? Discipline?


A little more conversation

Research suggests that good leadersspend an enormous amount of timecommunication downward….

Storing telling

Legacy learning

Tribal knowledge


Let’s be persuasive!

• Persuasiveness is a key element of leading through influence

• Three aspects of persuasion

1) knowing your audience

2) effective argument

3) being a credible messenger

• To be persuasive, you must be good at all three

chop



Plan and Deploy


Standard Work

Innovation



stack the deckdeck in our favor


Strategy

Structure

Strength

a systemic approach to governthe way we doing things….

a Lean Management System

LEAN ENTERPRISECustomer Focus

Leadership andStrategic Planning

OrganizationArchitecture

Lean Supply Chain

InformationArchitecture

ImprovementTechnology

ProductionManagement

EquipmentManagement

Product/ProcessEngineering

Corp

ora

te D

iagnosis

LEAN MANAGEMENT SYSTEM

Lean Executive

Lean Leader

Lean Manager

Master Trainer

Value Adder

Lean L

eaders

Busin

ess R

enew

al

ContinuousImprovement

StrategyInnovation

VisionDeployment

Implementationand Adherence

Analysisand Reflection

Trainer

Value Leader

the house of Lean

hercules


Okay…let’s look at aBusiness case

a Plan: what goes up….

• a finger in the wind

• A planned effort with course adjustment


Today’s Basic Themes

Strategic Policy Deployment3 – 5 year plan and renewal

Tactical [General] Policy Deployment6 - 18 month plan and renewal


A Lean Business Case

Consulting Teams will perform a CURSORY DIAGNOSIS

Use a reliable tool to assess an organization’s current state of Lean

Strive for consensus

Reflect on some comparison to your own company

Have dialogue within the small group that willbe open and a sharing of Lean perspectives and perceptions


CORNER-STONES

OF GROWTH

KEYS TODEVELOPMENT

1 Customer focus

2 Leadership & strategic planning

3 Organization architecture

4 Lean supply chain

5 Information architecture

6 Improvement technology

7 Production management

8 Equipment management

9 Product/Process engineering

STRUCTURE

STRENGTH

STRATEGY

1plan

2pilot

3deploy

4integrate

5excel


5 Levels of Learning

1 2 3 4 5

Planning and

Preparation

System

Initiation

System

Development

System

Excellence

System

Integration

Plan Pilot Deploy ExcelIntegrate


A Lean Business Case

Read (SCAN) the case

Use the Diagnosis Worksheet to establish a 1-5baseline for improvement (current state)

Assess at the plant level

Use whole numbers (2½ = 2)

What is the current state in each of the 9 Keys?


CORNER-STONES

OF GROWTH

KEYS TODEVELOPMENT

1 Customer focus

2 Leadership & strategic planning

3 Organization architecture

4 Lean supply chain

5 Information architecture

6 Improvement technology

7 Production management

8 Equipment management

9 Product/Process engineering

STRUCTURE

STRENGTH

STRATEGY

1plan

2pilot

3deploy

4integrate

5excel

Current State


Given what we know; what must be the3-5 year key objectives for Global Supply;those burning platforms that will directthe decision on Establishing and Managinga Culture of Improvement?


Given what we know; what must be the6-18 month focus for Global Supply;those key initiatives that will give improvement focus to the burningplatforms?


Strategy to Action

Hoshin Kanri

Policy Management

Vision Management

Policy Deployment

Hoshin Planning

Strategy Deployment

Management by Policy


The Practice of Hoshin Kanri


A3 document system

• A system of concise and visual, large format reports:

– The complete story of PDCA

– Portable

– Top down

– Bottom up

• Report types:

– A3-I intelligence report

– A3-X X-matrix

– A3-T team charter

– A3-P problem form

– A3-SR status report

– A3-SSR summary report

Line of Sight

Ad

min

istr

ati

on

Pro

cu

rem

en

t

Hu

ma

n R

es

ou

rces

Strategic Team

Tactical Teams

Operational Teams

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Team

Charter

Action TeamsP

lan

t E

ng

ine

eri

ng

Pro

d D

eve

lop

me

nt

Fa

cilit

y #

2

Fa

cilit

y #

1

En

gin

ee

rin

g

Ma

nu

fac

turi

ng

renewal

focus

deployment

projects

j

i

h

g

f

e

d

c

b

a

Leader = CEO

Ob

jec

tive

s

Ta

rge

ts

Launch A

ero

targ

et

pro

duct

by 1

2/0

6

Le

an

Sig

ma

SC

M

Op

era

tio

ns

Sa

les &

Ma

rke

tin

g

HR

CO

O

CF

O

Pro

du

ct

De

ve

lop

me

nt

# 5 4 3 2 1 a a b b b b c d e f g h i j

$

$

$ Team Leader

$ Team Member

$

Primary

Instrumental

Contributory

Desig

n a

nd im

ple

ment

pro

gra

m b

y 1

2/0

6

Improve quality and frequency of external communications

Expand: new/differentiated/select products

Improve quality and frequency of internal communications

Impro

ve P

roduct

off

ering t

wo-f

old

by 6

/08

Expand and enhance lean deployment

Achieve best in class: quality, delivery and lead time

Reduce controllable cost

Achie

ve low

est

in industr

y lead t

ime b

y 6

/08

Reduce r

eceip

t to

FG

invento

ry 5

0%

by 6

/07

Matrix: Executive Team

Upgra

de c

orp

ora

te r

eputa

tion

Expand p

ositio

n a

s s

upplie

r of

choic

e

Be a

low

cost

pro

ducer/

lean e

nte

rprise

Gro

w s

ale

s a

nd incom

e

Main

tain

fin

ancia

l str

ength

and F

lex

Improve energy efficiency

Expand product offering and capacity

Grow the custom products market share

Achieve the design rates of the automated cell

Consulting Fees

Resources and Expense

Training

Fixtures

Other

COSTSBENEFITS

Total net margin up by 10% to 05

Total energy expense down by 25% 05

Customer Satisfaction Rating 100%

Total revenue up by 25% to 05

Controllable cost down 20% to 05

Deplo

y t

o 5

targ

et

locations b

y 6

/06

Show

six

sig

ma im

pro

vem

't t

rend b

y 6

/07

Company: OK Enterprise

Location: San Francisco, CA

Period: 2006 - 2008

Date and Revision #: Jan 06

Initiatives

Impacts

Impro

ve F

TT

30%

by 7

/07

Desig

n a

nd im

ple

ment

5 t

arg

et

pro

gra

m b

y 1

2/0

6

Imple

ment

com

pany w

ide p

roj.m

gm

t.by 5

/06

Reduce C

OG

S b

y $

6 m

illio

n b

y 1

2/0

6

Achie

ve 1

00%

on-t

ime d

eliv

ery

by 1

2/0

7

Incre

ase c

apacity 2

5%

by 6

/08

Impro

ve e

nerg

y c

onsum

ption 2

0%

by 1

2/0

7

What

How MuchBy When

The Return

Who

Correlation

How

P/O matrix P/O matrix

Plant Site Leadership TeamCorporate Leadership Team

Reduce

inventories

Reduce

standard

work-in-process

Target: 50%

Increase

Yield

Target: 50%

Improve Schedule

Adherence

Target: 100%Reduce

changeover

times by 75%

15% increase in net sales

10% increase net margin

50% decrease in time-to-market

Reduce overall lead time 50%

Objective

Impact

Initiative Targets

Initiatives

Impacts

Objectives Targets

Department Teams

Corporate office action teams Operations action teams

Plant site action teams

P/O matrix

Staff Function

Leadership Teams

StrategyDeployment

-Reduce key process lead times-Improve systems capabilities-Insure purchase order accuracy-Build a learning organization-Improve new product TTM

AQC

Yield

Schedule

PO’s

TTM



Plan and Deploy


Standard Work

Innovation



The Employee Community

All organizational members think of themselves as part of an integrated system; a linked chain of decision-making points that continuously delivers value to the customer.

Team building, not Building teams

Participation and Consultation


Most organizations were not born,they just grow’d….

Albert Cherns

An organizational perspective

Special Purpose Teams

Task Teams

Market / ProductSegment Teams

Area Work Groups

Process Owner Teams

Classic hp workplace


Experimenting = no blame

• CEDAC

• PDCA

• DMAIC

• FMEA

Fact Idea Analysis

CATEGORY

Target: < 50%

Opportunity

Must have reliablescientific methods that get to root cause


All lean methods and tools are scientific and reliable, based upon

the principles of system, feedback, and local control

Experimenters Toolkit not all inclusive

• 5S [6S]

• Value Stream Management

• Visual Display & Control

• Quick Changeover

• TPM

• Mistake Proofing

• Cell Design

• Process Flow

• Kanban

• Lean Administration

• Lean Accounting

• Product/Process Engineering

• SCM and Lean Logistics

• Problem Solving and Cause & Effect Relationships

• Standard Work

• Project Management



Plan and Deploy


Standard Work

Innovation



Standard Work

Do you have standards?

Do you adhere to them?


Standard Work

• Standardization of policy, sequence, timing, flows, method, skills, learning and outcomes for all we do

• Rules defining standards for how work is to be performed

• Improvement in the workplace begins with adherence to standard

• A standard is the documented

expression of the best method

known at a given point in time;

it enforces that method until

a better one comes along….


Standard Work: a process of discovery

How do you do this work?

How do you know that you are doing this work correctly?

How do you know that the outcome is free of defects?

What do you do if you have a problem?


A Central Principle

One generations tacit knowledgebecomes genes passed onto succeeding generations….

Inside the mind of ToyotaSatoshi Nino 2006


Systems and Feedback

Think of sonar and radar….

channel

signal

Information Processor Information Processor


Leadership Standard Work

• A structure and routine set at each level of the hierarchy

• Walking the talk from the bottom-up

• Routines can be daily, weekly, monthly, as needed

• Provides a clear and unambiguous statement of expectations

• Consider things like:

o meetings with standard agendas start/end on-time

o all visuals/dashboards are up-to-date and viewed

o gemba walk with checklist each day

o gemba walk action items with do-it-now urgengy

o uncompromising discipline to the 5S process

o stand-up meetings stay focused on the purpose

o show evidence of a no-blame environment

o name some more….


Standard Work

A standard is the documented expression of the best method known at a given point in time; it enforces that method until a better one comes along….



Plan and Deploy


Standard Work

Innovation



Most business strategies…

• Competing in the existing market space

• Following widely accepted rules of competition

• Focus on beating the competition

• Exploiting existing demand

• Mobilizing all resources around pursuing the above


Customers and Innovation

“If I would have asked customers what they wanted, they would have told mea faster horse”.

Henry Ford


Leadership and Innovation

Our research points-to 70 percent of the senior executives surveyed say that innovation will be at least one of the top three drivers of growth for their companies in the next three to five years….

Innovation is the most important way for companies to accelerate the pace of change in today’s global business environment. Beyond products to pioneer innovations in business processes, distribution, value chains, business models, and even the functions of management.

Source: Productivity Inc. Research – McKinsey Research

• Deep – how deeply are we questioning our ways of operating?

• Do we operate from our interpretation of the past, or our anticipation of the future?

• Are our assumptions today valid into the future?

• Long – how far into the future are we looking? Do we understand the shape of alternative futures for our organization?


The choice is up to you….



…the end backwards

We delight our customers and grow brand loyalty!

We keep learning, energizing our employees and, we are known as a top performer!


…a Culture of Improvement nine lessons from good companies

1) Establish a sense of urgency

2) Form a powerful guiding coalition

3) Create a Vision

4) Communicate that Vision

5) Empower others to act on the Vision

6) Plan for and create short-term wins

7) Experiment and keep the momentum

8) Use Innovation as the big cannon

9) Institutionalize the new approaches

Kotter HBS; Productivity Inc. research


key issues?

the obstacles?

the barriers?

the next steps?

Now What…



Plan and Deploy


Standard Work

Innovation



Valve Manufacturers AssociationWaterloo, IowaApril 2010

Michael Kuta, Partner


the orangeson the trees…

establishing and managing a culture of improvementc.ymcdn.com/sites/ and managing a culture of...

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