fitness for purpose

[email protected] @lkuceo Copyright Lean Kanban Inc.

Presents

PresenterDavid J. Anderson

Ltd WIP SocietyMunich

June 2014Release 1.0

Fitness for Purposematching capability to customer expectations

mailto:[email protected]


Blizzard Skis



Mittersil, Austria

Blizzard Factory



Blizzard is the largest private sector employer in the Pengau Alps region of Salzburgerland,

AustriaMittersil is a factory town with over 400 people relying on the

factory either directly or indirectly for employment



• Innovator• Award winner



In 2007, Blizzard, effectively bankrupt, faced closure from

parent company, Tecnica in ItalyToday Blizzard is the most effective & efficient ski

manufacturer in the world!



What went wrong at Blizzard, a proud & leading brand in alpine

ski equipment?And what enabled a remarkable turnaround, from the brink of

extinction to a return to innovation & profitability?



Orders & Deliveries of Skis

2006 winterskis delivered

to dealers

Timeline for manufacturing, delivery and order placement for ski industry in northern hemisphere prior to 2007

timeNov Dec Jan2006

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2007

Feb Mar Apr

Start manufacturing

2007 skis


to dealers

Start manufacturing

2008 skis

Ordersplaced for 2007 winter



2006 was a warm winter and poor snow conditions badly affected

the ski industry as people stayed home and didn’t buy new

equipment

Blizzard dealers were left holding a lot of 2006 inventory that they

would hold & later discount during the 2007 winter



Effects of climate change in the Alps

Glacier recession is

clearly visible

1912 1933

2003



2007 was also a warm winter as climate change began to seriously

affect the AlpsGun shy from 2 bad winters,

Blizzard dealers delayed commitment on 2008 orders until

May after the ski season had finished



In 2006 business risks appear to be low


to dealers

Changing climate conditions and its affect on ski dealers dramatically shifts the risk profile of ski manufacturing

timeNov Dec Jan2006


Feb Mar Apr

Start manufacturing

2007 skis


to dealers

Start manufacturing

2008 skis




Previously lead time for delivery is 12 months


to dealers

Traditionally manufacturers have had a full year to make the skis for the following winter

timeNov Dec Jan2006


Feb Mar Apr

Start manufacturing

2007 skis


to dealers

Start manufacturing

2008 skis

Ordersplaced for 2007 winter Lead Time

to manufacture2007 deliveries



By 2007 the risk profile has changed dramatically


to dealers

Dealers still holding 2006 & 2007 inventory decide to wait until the end of the 2007 season to place reduced orders for 2008

timeNov Dec Jan2006


Feb Mar Apr

Start manufacturing

2007 skis


to dealers

Start manufacturing

2008 skis


Ordersplaced for2008 winter

Volume is low due to over-stocking of older models

The period of speculative manufacturing grows from 2

months to 6 months

Time period of building to

forecast rather than against

customer orders

Blizzard fail to anticipate falling demand and over-produce 2008

skis. Bankruptcy is a serious possibility!



Tecnica Group & Blizzard managers turn to their business school education and seek to cut

costs by consolidation & centralization

Centralizing all order processing through Tecnica HQ adds 1 month

to order times, increasing speculative build-to-forecast. As a

result costs go up!



Cutting costs will not make Blizzard “fit for purpose” !!!

What is required to be “fit for purpose” in a period of climate

change, is to defer manufacturing until firm orders are placed!

Blizzard need to cut the lead time to build skis!



By 2010 the market has a new equilibrium


to dealers

Traditionally manufacturers have had a full year to make the skis for the following winter

timeNov Dec Jan2010


Feb Mar Apr

Start manufacturing

2011 skis


to dealers

Start manufacturing 2012 skis


Ordersplaced for2012 winter

Volume is low due to over-stocking of older models

Lead Timeto manufacture2011 deliveries

Lead time to manufacture skis to order is now 6 months. No speculative build-to-forecast

To have a viable business Blizzard need a capability to make skis

twice as fast as before!



In 2010 a Lean initiative was started in the factory. This was followed later with a Kanban

initiative in IT and Quality Assurance

Blizzard becomes the first Lean ski manufacturer in the world!

CIO, Eric-Jan Kaak wins Austrian CIO of the Year 2013

and is promoted within Tecnica Group



Meanwhile, Major Ski Resorts Deploy Snow Cannon to Reduce Risk for Warm Winters



Lesson 1



Blizzard initially made a bad decision because they didn’t

understand the dynamics of their external environment

Once they realized that only manufacturing skis faster &

deferred commitment would make them “fit for purpose” did they

focus improvement efforts where they could be most effective

Ski craftsmen are now “idle” for 6 months per year. They use this

time to improve the factory processes



Understanding“fitness for purpose”



What makes a pizza delivery service“fit for purpose” ?



Meet Neeta - a project manager• Delivery time =

approximately 1 hour• Non-functional quality =

tasty & hot• Functional quality (order accuracy) =

doesn’t matter if small mistakes are made, geeks will eat any flavor of pizza

• Predictability =+/- 30 minutes is acceptable

• Safety =so long as health & safety in food preparation is good, it’s fine



Neeta is also a working mom!

• Delivery time =20 minutes

• Non-functional quality =doesn’t matter too much, it’s pizza!!!

• Functional quality (order accuracy) =it must be cheese pizza! No other flavor is acceptable! (even if you take the pepperoni off)

• Predictability =+/- 5 minutes maximum!!!

• Safety =only mommy worries about that stuff!



Lesson 2



To be “fit for purpose” there is a product component & a

service delivery componentWe need to offer a selection of

different recipes which are tasty & popular. However, we must also

deliver with speed & predictability



Modern creative & knowledge worker businesses often

obsess with product definition & strategy

Operational excellence and service delivery excellence are often overlooked or treated as

inferior management skills



Lesson 3



Neeta has 2 identities –Mother and Project ManagerEach of Neeta’s identities

represents a different market segment for the pizza delivery

service



We need a different set of thresholds for our fitness criteria for each market

segment

Our business needs the ability to “sense” changing customer tastes. As time goes by the

criteria & thresholds for a given market segment may change



Our pizza delivery service can be “fitter for purpose”

by offering different classes of service for each market

segmentBut, do we have the capability to

deliver on customer expectations?



Understanding & improving service delivery capability with Kanban



TestReady

FF

FFF

F F

Commitment Frequency

H

E

C A

I

G

D

Replenishment

Discarded

I

Pull

IdeasDev

Ready

5Ongoing

Development Testing

Done3 35

UATReleaseReady

∞ ∞

The frequency of system replenishment should reflect

arrival rate of new information and the transaction &

coordination costs of holding a meeting

Frequent replenishment & commitment is more

agile.

On-demand commitment is most agile!



TestReady

FF

FFF

F F

Defining Kanban System Lead Time

H

E

C A

I

G

D

Pull

System Lead Time

Discarded

I

IdeasDev

Ready

5Ongoing

Development Testing

Done3 35

UATReleaseReady

∞ ∞

The clock starts ticking when we accept the customers order, not

when it is placed!

Until then customer orders are merely available options

Kanban system lead time ends when the

item reaches

the first ∞ queue



TestReady

FF

FFF

F F

Delivery Frequency

H

E

C A

I

G

D

Delivery

Discarded

I

Pull

The frequency of delivery should reflect the transaction &

coordination costs of deployment plus costs &

tolerance of customer to take delivery

IdeasDev

Ready

5Ongoing

Development Testing

Done3 35

UATReleaseReady

∞ ∞

Frequent delivery is more agile.

On-demand delivery is most agile!



Service Delivery Agility

Service Agility

Commitment frequencyLead TimeDelivery

Frequency Lead T

ime

Short

Long

Deliv

ery

Service Agility

Com

mit

ment

Frequent

Seldom

Frequent

Seldom

MoreAgile

LessAgile

Kanban system dynamics



Guiding Evolutionary Change



Start with what you do now



Fitness criteria are metrics that measure observable external outcomes



Evolutionary change works when fitness is continually evaluated

EvolvingProcess

Rollforward

Rollback

InitialProcess

Future process is emergent

EvaluateFitness

EvaluateFitness

EvaluateFitness

EvaluateFitness

EvaluateFitness



Fitness

Capability fo

r Change

Time

Evolutionary improvement should result in gradually rising fitness for purpose



Which system is fitter?

5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

Mean 17 days Mean 12 days



Measuring delivery against expectation

5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency

Lead Time Expectation Spread (Days)

5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency



System B is clearly fitter!

System B delivers 5/7 within expectationsSystem A only delivers 3/7 within expectations



5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency


5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency



Lesson 4



5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency


5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency



With coaching & incremental If we don’t know what the customer

values we will struggle to be “fit for purpose”

Fitness for purpose can only be assessed relative to

established customer-valued fitness criteria



Business Risks, Fitness Criteria & Classes of Service should all align



Know why you are using a metric!



5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency


5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency



Lesson 5



5 10 15 20 25 30 40 45 55 65 More02468

101214

System A

Frequency

Lead Time (Days)

-25 -20 -5 0 5 10 20 30 35 40 More0

2

4

6

8

10

12

System A

Frequency


5 10 15 20 25 30 More0

5

10

15

20

25

30

System B

Frequency

Lead Time in Days

-15 -10 -5 0 5 10 15 20 More05

1015202530354045

System B

Frequency



There are only two types of metrics that matter: fitness criteria; and metrics guiding

improvements!

Metrics for improvements should be temporary and

removed when the change is completed unless there is a

risk of regression



Aligning goals with capability



Go on, you can lift it!



Kanban system dynamics

Shelf-life(of business opportunities)

Is your service delivery fit for purpose?

Short(days, weeks,

months)

Medium(months,quarters,1-2 years)

Long(years,

decades)

Lead T

ime

Short

Long

Deliv

ery

Service Delivery Agility

Reple

nis

hm

en

t

Frequent

Seldom

Frequent

Seldom

Pre

dic

tabili

ty

High

Low

Is your service delivery

predictability & agility fit enough for

your business strategy?

If you plan to pursue short shelf-life opportunities, you must measure predictability, lead time, replenishment

& delivery frequency as fitness criteria. Does the capability exist to pursue the chosen strategy

effectively?



Lesson 6



Improve your capabilities before pursuing market

segments or strategies that require levels of service

delivery beyond your reach

With coaching & incremental development a child can grow to

dead lift a large bar bell. Impatience & over-reaching is

likely to end in tears!

With patience, education and a focus on evolutionary

change, your organization can grow its service delivery

capability



Conclusions



1. Understand your external environment before deciding what to change

2. “Fitness for Purpose” has both a product component & a service delivery component

3. Each market segment will have its own fitness criteria and threshold values



4. Fitness for purpose & whether improvement is needed can only be measured relative to customer-oriented fitness criteria

5. Metrics should be fitness criteria or guiding specific improvements in which case their use is temporary until the improvement is completed

6. Improve your capabilities before pursuing market segments or strategies that require service delivery you currently cannot achieve



Thank you!



About

David Anderson is a thought leader in managing effective 21st Century businesses that employ creative people who “think for a living” . He leads a training, consulting, publishing and event planning business dedicated to developing, promoting and implementing new management thinking & methods…He has 30 years experience in the high technology industry starting with computer games in the early 1980’s. He has led software teams delivering superior productivity and quality using innovative agile methods at large companies such as Sprint and Motorola.

David is the pioneer of the Kanban Method an agile and evolutionary approach to change. His latest book, published in June 2012, is, Lessons in Agile Management – On the Road to Kanban.

David is a founder of the Lean Kanban Inc., a business dedicated to assuring quality of training in the Lean Kanban Method for managers of those who must “think for a living.”



I’d like to thank Eric-Jan Kaak and the staff at Blizzard for providing access to produce the story of their Lean transformation.

System maintenance lead time data courtesy of CME Group.

Acknowledgements


fitness for purpose

Leadership & Management