Lean Lean Thinking Thinking Saatchi & SaatchiSaatchi & Saatchi

May 14, 2008May 14, 2008

Lean Thinking?Lean Thinking?

3 core elements3 core elements

• ValueValue (becoming customer-centered) (becoming customer-centered)

• FlowFlow (engaging people around lean (engaging people around lean processes)processes)

• MasteryMastery (continuously improving and (continuously improving and innovating – ourselves and our work)innovating – ourselves and our work)

The Subway exampleThe Subway example

• The Subway differenceThe Subway difference• Typical fast food?Typical fast food?

The value stream- 3 key The value stream- 3 key componentscomponents

1.1. Seamless executionSeamless execution– Characterized by the absence of waste Characterized by the absence of waste

2.2. Related activitiesRelated activities– Integrates activities to benefit the customerIntegrates activities to benefit the customer

3.3. Create value for customersCreate value for customers– Activities are aligned to a common purpose – Activities are aligned to a common purpose –

serving customersserving customers

Value Case StudyValue Case Study

• Team ExerciseTeam Exercise

The resultsThe results

Returns over 10 years: Returns over 10 years: • Customer-focusedCustomer-focused 136%136%• Shareholder-focusedShareholder-focused 117%117%• Balancing StakeholdersBalancing Stakeholders 84% 84%

The customer-focused culture The customer-focused culture performed best. Why? performed best. Why?

• Provides a “value” focus – employees Provides a “value” focus – employees know what adds value and what doesn’t know what adds value and what doesn’t (waste)(waste)

• Long-term vs. short-term orientationLong-term vs. short-term orientation• Purpose (serving others) provides a Purpose (serving others) provides a

catalyst for high performance with catalyst for high performance with peoplepeople (more meaningful)(more meaningful)

A customer-centered world. A customer-centered world. Why?Why?

• Capacity exceeds demand in most consumer Capacity exceeds demand in most consumer product areasproduct areas

• Ability to comparison shop enhanced Ability to comparison shop enhanced significantlysignificantly

• Customers are more sophisticated Customers are more sophisticated • Getting used to a higher standard of serviceGetting used to a higher standard of service• More interested in a total solution (lives are More interested in a total solution (lives are

so hectic)so hectic)

Chairman S. Toyoda in ‘92Chairman S. Toyoda in ‘92

““Toyota has always been a company Toyota has always been a company devoted to enhancing the quality of life devoted to enhancing the quality of life

for people around the world by for people around the world by providing useful and appealing providing useful and appealing

products. In the years ahead, we must products. In the years ahead, we must accompany our growth and accompany our growth and

development as a corporate citizen of development as a corporate citizen of the world with unflagging efforts to help the world with unflagging efforts to help resolve the pressing issues of our time”resolve the pressing issues of our time”

A year later . . .A year later . . .

““Growth is good. It’s essential to economic and Growth is good. It’s essential to economic and industrial vitality. But growth without purpose industrial vitality. But growth without purpose

is no good for anyone. Our purpose at is no good for anyone. Our purpose at Toyota is to provide customers with quality Toyota is to provide customers with quality products at affordable prices. This is not products at affordable prices. This is not

altruism. It’s simply a matter of recognizing altruism. It’s simply a matter of recognizing that our own long-term interests coincide with that our own long-term interests coincide with the interests of people and companies in the the interests of people and companies in the

markets we serve.”markets we serve.”

Making the formula work: Making the formula work: ETPVFETPVF

• ““Easy to pull value from”Easy to pull value from”• Acknowledges that customers ruleAcknowledges that customers rule• Way more than an 800 numberWay more than an 800 number• Often requires rethinking the purpose and Often requires rethinking the purpose and

processes of a companyprocesses of a company• Puts people at the center of the stagePuts people at the center of the stage

The opposite of ETPVFThe opposite of ETPVF

• What does that feel like?What does that feel like?• Customers find it difficult to interact with Customers find it difficult to interact with

youyou• It feels like a maze It feels like a maze • Customization and specialized orders are Customization and specialized orders are

almost impossible almost impossible • Lack of flexibility in dealing with any Lack of flexibility in dealing with any

request outside your normal proceduresrequest outside your normal procedures• You don’t feel like you are known or You don’t feel like you are known or

respectedrespected

The responseThe response

• Create a single interface Create a single interface • Makes it easy for customers to pull Makes it easy for customers to pull

value throughvalue through• Build accountability within your Build accountability within your

organization around the things that organization around the things that customers valuecustomers value

Remember, value is not . . .Remember, value is not . . .

• . . . the classic, product-centered view . . . the classic, product-centered view of the world of the world

• . . . believes that customers merely . . . believes that customers merely want high quality products at a fair pricewant high quality products at a fair price

• The reality is that customers don’t want The reality is that customers don’t want your products – they want solutionsyour products – they want solutions

How do we understand value from How do we understand value from a customer’s point of view?a customer’s point of view?

• What do customers do with our What do customers do with our products and services after they receive products and services after they receive them from us?them from us?

• What problems are they trying to solve What problems are they trying to solve with our products / services?with our products / services?

• What more can we do to help them What more can we do to help them solve these problems?solve these problems?

Flow-delivering value Flow-delivering value

Value adding activities that are Value adding activities that are integrated into a complete value streamintegrated into a complete value stream

Let it “Flow”. . .Let it “Flow”. . .

• Flow – making everything work without Flow – making everything work without interruptioninterruption

• Flow orFlow or synchronizationsynchronization always produces always produces lower cost, higher quality, higher customer lower cost, higher quality, higher customer satisfactionsatisfaction

• Manufacturing “flow” is well understoodManufacturing “flow” is well understood• Business process “flow” is notBusiness process “flow” is not

The reality: our processes The reality: our processes don’t don’t flowflow??

Waste

Value Added

NotValueAdded

But Unavoidable

Our People Don’t Flow

Why is flow the goal?Why is flow the goal?

• Always produces lower cost, higher Always produces lower cost, higher quality, higher customer satisfactionquality, higher customer satisfaction

FlowFlow

• Capitalizes on the power of process -- Capitalizes on the power of process -- in the form of “value streams”in the form of “value streams”

• Value streamsValue streams: The seamless : The seamless execution of related activities that execution of related activities that create value for customerscreate value for customers

Why do we focus on “value Why do we focus on “value streams”?streams”?

• ““Value streams” allow you to organize Value streams” allow you to organize the business around the customerthe business around the customer

• Traditional organizations also tend to Traditional organizations also tend to structure around “functions” which structure around “functions” which compete with value streams for compete with value streams for attentionattention

• Traditional organizations allow waste to Traditional organizations allow waste to dominate – hides the true valuedominate – hides the true value

Major Sources of WasteMajor Sources of Waste

• Local optimization Local optimization (silos)(silos)• ““Push” activities Push” activities (batching, programs, “one-offs”)(batching, programs, “one-offs”)• Non-Lean actions Non-Lean actions (promotions, price cuts, end-of-(promotions, price cuts, end-of-

month sales push, etc.)month sales push, etc.)• Non-Lean behaviors Non-Lean behaviors (controlling, withholding, (controlling, withholding,

failure to listen, lack of openness)failure to listen, lack of openness)• Un-balanced operations Un-balanced operations (failure to see business (failure to see business

as a systemas a system))

Finally-MasteryFinally-Mastery

• The art of making people matter mostThe art of making people matter most• Develop a culture of continuous Develop a culture of continuous

learninglearning– Provide the skills and supporting culture to Provide the skills and supporting culture to

both continuously innovate and improveboth continuously innovate and improve

• Highlights empowerment, teamwork Highlights empowerment, teamwork and collaboration (and rewards these and collaboration (and rewards these behaviors)behaviors)

Mastery follows Value and FlowMastery follows Value and Flow

• If an organization is successful in If an organization is successful in achieving achieving ValueValue and and FlowFlow, then activities , then activities become more become more transparent transparent

• Enables individuals to more easily focus Enables individuals to more easily focus on improvement and innovation, resulting on improvement and innovation, resulting in the pursuit of in the pursuit of MasteryMastery

Continuous learning -- the “Differentiator” Continuous learning -- the “Differentiator” Behind Toyota’s Manufacturing ExcellenceBehind Toyota’s Manufacturing Excellence

• PlanPlan -- Set goals, create -- Set goals, create

action plansaction plans• DoDo -- Implement -- Implement• CheckCheck -- How is the plan -- How is the plan

going?going?• ActAct -- Act on the -- Act on the

answersanswers

Check

PlanDo

PDCAAct

In reinventing our approach to In reinventing our approach to knowledge work . . .knowledge work . . .

• . . . . . . we created we created PDL PDL

(Plan-Do-Learn)(Plan-Do-Learn)

Learn Plan

Do

PDL

Plan-Do-Learn helps us to Plan-Do-Learn helps us to applyapply..

• The principles of Value, The principles of Value,

Flow, and MasteryFlow, and Mastery• To our biggest challengesTo our biggest challenges• Utilizing a continuous Utilizing a continuous

learning cyclelearning cycle• In a people-centered wayIn a people-centered way

Learn Plan

Do

PDL

Introduction to PDLIntroduction to PDL

• Team “Card Sort” ExercisesTeam “Card Sort” Exercises

The Six Steps of PDLThe Six Steps of PDL

• Grasp the situationGrasp the situation• Select the best alternativeSelect the best alternative• Build the planBuild the plan• Implement, monitor, and adjustImplement, monitor, and adjust• Measure and analyzeMeasure and analyze• Learn and continue the next cycleLearn and continue the next cycle

<-----Plan

<-----Do

<-----Learn

Grasp the situationGrasp the situation“Working at the top of the funnel”“Working at the top of the funnel”

What What appears appears to be the to be the problemproblemIs not!Is not!

What What appears appears to be the to be the solutionsolutionIs not!Is not!

Where do you start?Where do you start?

= one idea

How do you generate new thinking?How do you generate new thinking?

Define Current and Desired States

5 Why’s

Genchi Genbutsu

New Idea Generation Techniques

Benchmarking

What type of values required to make What type of values required to make

this work?this work?

• Participatory ValuesParticipatory Values• Opportunities to participateOpportunities to participate• Opportunities to fully understand the problemOpportunities to fully understand the problem• Opportunities to contribute to the solutionOpportunities to contribute to the solution

• BenefitsBenefits• Mutual understandingMutual understanding• Shared responsibilityShared responsibility• Team capabilitiesTeam capabilities

Best represented in a hierarchyBest represented in a hierarchy

• Solution buildingSolution building

• Problem-SolvingProblem-Solving

• ParticipatingParticipating

How do you select the best alternative?How do you select the best alternative?

Work toward ideal stateWork toward ideal state

Don’t have to agree to understand -- dialogueDon’t have to agree to understand -- dialogue

Build shared context -- meaningBuild shared context -- meaning

Build the PlanBuild the Plan

• Value-added goals & meaureables defined

• Project scope defined• Plan fully developed (resources,

schedules, accountabilities & supporting work plans)

Implement, Monitor, and AdjustImplement, Monitor, and Adjust

• The plan is implemented• Adjustments made on an on-going basis• Characterized by a bias toward action

and flexibility in responding to necessary changes

Measure and AnalyzeMeasure and Analyze

• Collect data identified by measures developed in the plan

• Analyze key findings

Learn and Continue the CycleLearn and Continue the Cycle

• Learn from results and adjust the plan• Characterized by a willingness to learn

deeply

Practical Take AwaysPractical Take Aways

• Relentlessly focus on the customer, Relentlessly focus on the customer,

TMS, Divisions, Dealers, ownersTMS, Divisions, Dealers, owners– Genchi Genbutsu Genchi Genbutsu

• Understand Value from the customer’s Understand Value from the customer’s perspectiveperspective

• Focus on the root cause, or larger pictureFocus on the root cause, or larger picture– Not just what Toyota is asking us to do but also Not just what Toyota is asking us to do but also

what opportunity/problem is Toyota trying to what opportunity/problem is Toyota trying to addressaddress

Practical Take AwaysPractical Take Aways

• Build descipline into the process - Use PDLBuild descipline into the process - Use PDL– Value added goals and measuresValue added goals and measures– Fully developed plans (resources, schedule, Fully developed plans (resources, schedule,

accountabilities)accountabilities)– Learn (adjust as required, build on knowledge)Learn (adjust as required, build on knowledge)

Lean Thinking

EndEnd