“Opportunities” vs “Problems”

Over the decades, I have observed that it is quite common for organizational leaders to try to use the word “opportunity” when talking about a problem.

I can understand the desire to do this – we typically think of “problems” as something to do with people.

But I find the emphamistic language… problematic.



Mr. Opportunity


There is a Honda marketing campaign in the USA that features a cartoon character named “Mr. Opportunity.” His tag-line is “I’m Mr. Opportunity, and I’m knocking.” The opportunity is an invitation to take advantage of discounted prices for Honda cars.

Words mean things.

An opportunity is something that I may, or may not, decide to pursue.

But in lean thinking, no problem can go unaddressed.

Rather than a friendly cartoon character knocking on your door, a problem has kicked your door in and is standing in your living room. It must be dealt with, and dealt with quickly.

It has to be contained, pushed back, and finally resolved to keep it from getting back in.

IF the process for doing these things is carried out correctly, there are opportunities for the organization to learn along the way. But in the vast majority of cases, the only way those opportunites get exploited is if the leaders insist on hearing what was learned. So even those “opportunities” shift to imperatives.

Friendly euphemism that soften the urgency do not help us. If we are to have a true problem solving culture, we have to be willing to call things what they actually are.

What is “Leadership Commitment?”

I have seen this topic come up in forums many times, and seen wide ranging responses. If I were to summarize them all, it would be “I’ll know it when I see it.”

A couple of weeks ago I heard a great quote from a co-worker that puts things into perspective.

I’m always ready to learn, although I do not always like being taught.

Winston Churchill

And therein lies the crux of the issue, because at its heart, the Toyota Production System emerges as the leadership applies a specific set of mindsets, practices and skills to every decision, every problem, every opportunity.

Few leaders who have reached senior positions in any company outside of Toyota have acquired those mindsets, practices and skills, and fewer still rigorously apply them. This isn’t anyone’s fault.  They simply came up in a totally different context.

Worse yet, they have been taught that “leadership commitment” means “deciding, budgeting and checking on status.” Thus, many companies have leaders who fully believe they exhibit complete “commitment to lean” when, in reality, it is just another initiative or program – managed like a new product development might be.

The process outlined in Mike Rother’s book, Toyota Kata, is one of learning these skills. And I would contend (as I believe Rother is contending) that unless these skills are being actively and deliberately learned and applied, no mater what else you are doing, it isn’t “lean.” (or, if you want to quibble about the definition of “lean,” it isn’t the Toyota Production System.)

Now we are at a core issue. While it is possible to learn these skills, mindsets and practices on one’s own, it is extraordinarily difficult. That isn’t because there is anything particularly difficult about these practices. But most people, if they truly want to learn something new, have someone to teach them.

If that senior executive wants to improve his golf score, he hires a pro to give him lessons, because it is an individual skill.

The skills we are talking about are also individual skills, further complicated by the fact that they are individual skills for interaction with others.

So what is “leadership commitment?” Is it a commitment to learn these skills?

Actually, I would contend that is not enough. My current working definition is one which overcomes Churchill’s reluctance. It is an acknowledgment that, not only is there something which must be personally learned, but that someone must be found to teach it.

Leadership commitment is demonstrated by the willingness to be taught.

If you think about it, every “business novel” out there follows this same format – a leader is confronted with a problem, realizes he cannot solve it with his current skill set, and another character emerges to teach those skills to him.

What are your thoughts? I am interested less in paragraphs and more in alternative short definitions.

United States Coast Guard

Coast Guard logoTo my readers in United States Coast Guard aviation:

I know you are a small community and the tragic crash of an MH-60 helicopter off the coast of Washington State this week has affected you all. I want to take a moment to publicly express my sympathies to, not only the immediate families, but the extended family, of LT Sean Kruger, AMT1 Adam Hoke and AMT2 Bret Banks, as well as wishing LT Lance Leone a speedy recovery.

To my other readers: Last summer I had the privilege to spend a couple of days at the U.S. Coast Guard’s Aviation Logistics Center taking a look at their helicopter overhaul operation. I saw a group of people who are totally dedicated to providing the best service they can to their customers, and by extension, to the rest of us who spend any time on or near the water.

That this incident happened, not searching for a sinking crab boat in the Bering sea, but rather on a nice day during a “routine” ferry flight reminds us all of the dangerous work they do every day.

Find a Coastie and thank him or her for their service.

Get Your Ducks In A Row For Lean Accounting

I have known Russ Field since working with him on a few projects in a large Seattle (now Chicago) based aerospace company. Recently he posted a very (typically Russ) thorough reply on NWLEAN to a question about value stream accounting. I asked him to take the same basic material, clean it up a little, and let me publish it here as a guest post.

Added Feb 21: There are some good comments to this post as well.

Enabling Material-Only Costing in Value Streams

—————– By Russell Field ——————

For some time now, the value stream concept has been a topic of energetic debate. If you choose to implement that approach, you’ll find there is more than one reasonable way to organize them, each with its own requirements for management, measurement and performance assessment.

This discussion centers on the value stream design described in three excellent books:

Aside from my own experiences and observations, these works are the primary references for this article. I recommend them highly for anyone wanting to better understand the concepts and related impacts on the Finance function as a business “leans out”.

NOTE: This article is not an endorsement of this particular value stream form. Rather, it is examination of its enabling and prerequisite conditions.

The really short message, as in so many things, is “Don’t get the cart before the horse!” In this case, if material-only cost accounting procedures (discussed later) are implemented before the factory processes have been realigned and proven, the best which can be expected is a different flavor of misrepresentation.

First, though, some baseline thoughts.


Remember, words have meaning. I’ve seen many discussions derailed because of confusion between these two phrases. The philosophy and practice of “Traditional Standard Costing” is not the same as the “costing of (labor) standards”.

The question is not whether I should know the cost of one widget, or the labor content (time) of that widget, or even the labor contribution ($$) to the cost of that widget; rather, the questions are how I should determine the hourly rate ($$) to apply to the labor content (time), and how I should account for other costs of producing that widget.

BUT – even those questions become academic in a value stream where all products have the same labor content and where all costs are contained within the value stream (more on that later); that’s when we can start talking about the average cost per unit at the value stream level.


As described in AWCO (pg. 36), these are two different concepts.

“Lean Accounting” refers to the use of Lean tools and techniques to make the accounting process more efficient.

“Accounting for Lean” “… represents an accounting process that captures the benefits of a Lean implementation as well as motivates Lean behavior.”


Both PLA (Chapt. 2; pg. 141 et al) and WC (pg. 165 et al) make the point that changes in accounting techniques should be made in conjunction with or immediately following the successful implementation of Lean procedures on the shop floor (we won’t get into Service vs. Production in this article). To change the cost accounting processes BEFORE leaning out Operations merely confuses the situation and causes unnecessary churn.

That said, let’s proceed.

In my opinion, the ability to successfully implement and sustain the accounting techniques described in the books noted earlier is dependent upon getting the process “ducks” into four rows:

  1. Organization by value stream
  2. Elimination of task-level labor tracking
  3. Stabilization of overall value stream-level labor costs
  4. Lowering of inventory levels

Underlying each of these “duck rows” is, of course, a set of enabling conditions.

DUCK ROW #1) Organization by value stream

There’s plenty of material out there on value stream mapping, so for this discussion let’s just say there are some key characteristics:

  1. Similar process flows (or “routings”);
  2. Similar production cycle times (AKA “work content”);
  3. Similar physical size of product;
  4. Ideally, personnel dedicated to the value stream; and
  5. Again ideally, no “monuments” or shared resources (there are, of course, ways of dealing with shared resources and personnel, but I did say “ideally”).

In other words, this approach emphasizes segregation of product families with high similarity in multiple categories. What does all this buy us?

a) If every product follows the same process flow or path, physical segregation and rearrangement is much simpler. Additionally, there is a high likelihood that each product will use each resource (or resource type), further reducing the need for cost allocation between product lines/families.

b) If each product takes about the same amount of time at each task/resource, then the overall work content of all products is about the same.

c) If product size is similar, that helps keep the number of people needed and the need for additional, product-specific moving/handling equipment to a minimum (and supports similar work content).

d) & e) If people and equipment aren’t shared outside the value stream, then all of their costs can be attributed to the value stream.


  1. The major sources of cost are captive within the value stream, so the need for allocation is minimized if not eliminated.
  2. Every product in the value stream population takes about the same flow time and has about the same total work content (which also minimizes allocation requirements).
  3. Some key sources of variation in that flow time and labor content are sorted out of the value stream by design.

DUCK ROW #2) Elimination of task-level labor tracking

There are two sub-elements here: “Stabilize task cycle times” and “Establish a common wage structure”. In order to reach these goals, we must create certain conditions.

a) Stabilize task cycle times

In order to create an environment in which a given task takes the same amount of time and effort regardless of who executes it, we need:

  1. Stable, high-quality processes (“reasonably under control and low variability”, PLA pg. 140/141 et al); this cuts down on how many times a job needs to be done, and how much input is wasted.
  2. Standard work; standardizing process steps helps assure that the job is done the same way each time.
  3. A cross-trained, multi-skilled workforce; in full implementation, this means that any member of the workforce can step in and execute any task.

b) Common wage structure

Note that a cross-training and multi-skilling not only helps stabilize task times, but also aids breaking down the “craftsman/guild” barriers to a common wage. For that, we need:

  1. A cross-trained, multi-skilled workforce
  2. Simplified processes; among other things, this makes cross-training and multi-skilling considerably easier.


1) I no longer need to track how much time was spent executing an individual task; with high quality, standard work and cross-training, I know how long it takes because I know the plan.

2) I no longer need to track who executed the task in order to determine an appropriate rate (accountability/traceability is another issue), because everyone gets paid pretty much the same (within a job category, at least).

In short, I no longer need to run all over the production floor, tracking activity durations or costs at the task level. In fact, to the degree that the process paths and work content are very similar, I don’t even need to track them at the Item level.

DUCK ROW #3) Stabilization of overall value stream-level labor costs

Once I have eliminated the need for task-level labor tracking, then I need only to stabilize my labor population in order to keep my overall value stream labor costs at a fairly constant level.

The high-quality processes I put in place to stabilize my task cycle times will help by assuring that labor is used only for production (and not rework or re-make), but I also need to level my demand, either artificially within my walls or by working with the customer base toward that end (I may also need to level-sequence my product mix if I still have significant difference in work content between products).

In that way, I always have about the same amount of work to be done, and don’t need to bring people in, pull them back out, put them back in, or shake them all about (do the “Production Hokey Pokey”!).


I have a consistent amount of work to be done in the value stream, so I’m able to maintain a fairly fixed workforce population.

DUCK ROW #4) Lowering inventory levels

Once the inventory turn rate gets down to, or drops below the overall value stream cycle time, product is going out the door very soon after completion. Assuming a FIFO approach, I don’t need to put a lot of effort into tracking my inventory costs because a) they’re per current rates and b) there aren’t many pieces anyway.


I don’t have to keep separate track of what I have invested in each lot, batch or item. Even radical changes in material costs flush through the value stream very quickly.


IF I don’t have to mess with spreading/allocating costs;

AND IF every time I make a given product, it takes the same amount of time;

AND IF all the products I make in my value stream take the same amount of time;

AND IF anyone who makes it gets paid the same wage;

AND IF I don’t have to constantly change the size of my labor population,

THEN I can apply a flat hourly $$ rate – based on total value stream cost – to the product’s work standards (planned work content). In fact, at full maturity I may even be able to simply average my total periodic value stream costs over the number of pieces shipped – AKA “average cost per unit” (PLA pg. 124 et al).

If my value stream is fully segregated and mature, this is the closest I need to get to “overhead allocation”. I don’t have to account for variation in order quantity, labor expense or the like because I’ve designed/driven out those variations. I know what the labor content is because of the stable processes and high reliability; there’s no rework to account for because of the high quality; a worker is a worker is a worker from both a skill and pay standpoint, and I’m controlling the number of workers on the payroll (NOTE: Worker interchangeability must not be confused with worker dispensability / replaceability; it can take quite a while to adequately cross-train good personnel).

And the ONLY thing I really need to track is material consumption (you can throw in some consideration for features and characteristics costing if appropriate). Hence the term, “material-only cost system” (WC, pg. 38).

To recap, in order to enable truly simple, material-only costing we need to:

  1. Organize by value stream, driving out key categories of variation;
  2. Work to eliminate the need for task-level tracking of labor input and rates;
  3. Stabilize the overall value stream labor costs; and
  4. Lower inventory levels to less than one value stream cycle (or 5 days as some suggest).

To do all that, the fundamental enablers include:

  1. A value stream organized around product families with high similarity in routings, process time/work content, physical size and the ability to segregate personnel and resources
  2. Stable, reliable processes
  3. Standard work
  4. Cross-trained, multi-skilled workforce
  5. Simplified processes
  6. Stable, level demand

Of course, these enablers presuppose the existence of lower-level enablers (e.g. accurate BOMs and routings, and having appropriate metrics in place).

So what? My whole point is that there’s more to successfully implementing Lean Accounting techniques described in PLA, WC and AWCO than simply ceasing or starting to gather certain data or collect certain costs. If you already have these enablers in place, then you are better positioned to embrace the related accounting practices.

NOW – the BIG question is, “How do we manage our business until we can get these enablers firmly in place?”

I refer you again to the books noted above. All offer some good thoughts on this subject, but I will reiterate the sentiments expressed under the heading of “MATURITY PATH OF ‘ACCOUNTING FOR LEAN'”. Bottom line: “Don’t get the cart before the horse!”

Your current accounting processes are likely adequate for traditional manufacturing environments, especially those which are still largely mass-production oriented (PLA, pg. 4 et al). Both PLA and WC specifically discuss synchronizing the evolution of Lean Production Operations and “accounting for Lean” (and yeah, I capitalized it).

Metrics and Customers

Metrics are a fairly common topic of discussion on the various lean manufacturing forums. One theme that comes up fairly frequently is how to determine “what counts” in this-or-that measurement.

For example, a recent post asked about measuring lead times. The way they were measuring lead time only counted the time from when the order was actually started on the shop floor. But it didn’t include the latent time between the time the customer placed the order and when processing it actually started.

A rule of thumb I like to apply in these cases is “What is the customer’s experience?”

In this case, the customer starts waiting on the order the moment he informs the company he wants something. The customer really doesn’t care whether the order is waiting in order-entry, waiting for the computer to run its batch process, or whether it is stuck in production queues. Time is time from the customer’s viewpoint.

Of course this doesn’t mean I would ignore the internal components of the lead time… but I would include all of them because that is what the customer experiences.

While I am on the topic of metrics, I want to reiterate the importance of also having a specification or standard. It is not enough to simply measure something and graph it. That does nothing but consume people’s time. Each instance must be compared against a specification. “Lead time” doesn’t tell me anything. What I want to know is “Was this order on time?” Yes or no? How late was it? What delayed this one? Why? Then launch into the problem solving process.

Once a standard is being consistently met it is appropriate to then ask whether you want to set the bar higher. But to try to simply measure your way into excellence, without regard for stability and sources of variation, is an exercise in frustration.

As you look at the various things you measure, ask yourself if your metrics are reflecting the experience of the internal or external customer. That can help reduce some of the questions about what is “in” or “out” of the measurement.

October 8: Speaking at Seattle ASQ Meeting

correction: I had typed “October 10” for the date. That was my mistake. It is October 8th.

I will be speaking at the October 8 meeting of the Seattle ASQ on the topic of “The Continuous Improvement Ideal: Principles to Engage Your People.”

From the ASQ event page:

You may have heard of Toyota’s principle of stopping the line when an anomaly occurs, and you know that an engaged workforce is an asset to any organization. During Mark’s presentation, “The Continuous Improvement Ideal” on October 8th, you will take a deep dive into how these two seemingly separate concepts are actually intertwined and can drive day-to-day continuous improvement. This process of continuous incremental improvement engages people in ways that are more powerful than chartered process-improvement projects. You will come away with the common denominators that make these concepts universal in manufacturing and in service environments.

If you would like to attend, you can register here. The event is open to all.


  • 5:45 – Dinner and networking
  • 6:45 – Section Announcements
  • 7:00 – Speaker Presentation


Coast Bellevue Hotel
625 116th Avenue Northeast
Bellevue, WA 98004
View Map

Public thanks to my long-time friend Mike Bresko of General Physics, and Program Chair for the Seattle ASQ for this opportunity.

NUMMI (again)

Toyota to end Calif. joint venture with GM – Yahoo! News.

The joint venture was developed to have American workers learn Toyota’s production methods, which were much leaner and more efficient. [emphasis added]

Maybe that was GM’s intention – to “fix” the workforce. This fits in with the judgment I developed about GM’s leadership over the last decade, and especially the last year – that they see their problems as something other than them.

Toyota’s intention in the plant was to determine the best way to teach Toyota’s methods to the leadership. The test is to see how well the leadership teaches the line workers. To that end, Toyota pretty much succeeded. They learned how to open a plant outside of Japan.

Who didn’t learn as much as this opportunity presented them?

Aside from GM’s top leadership (a topic which has been pretty well dissected here and elsewhere on the web and in print), I think the other big missed opportunity here was for the UAW.  What if their stewards and business managers were experts in coaching and continuous improvement? Think about the possibilities for them.

What Is The Customer Really Buying?

Background: Frank’s still-under-warranty freezer stopped working. The service tech decided it would be repaired, ordered a new compressor and said “See you when the part gets here next week.” Frank and his wife, about to lose a freezer full of food, are not happy with the with this level of service, call “Customer Care” and are basically told that the repair will run its course.

The question posed at the end of follow-up #1 was:

“What, exactly, did the customer want here?”

I asked that question because occasionally it is good to think about not only the product we make or service we deliver, but to reflect a bit on exactly what value the customer receives from that product or service. Sometimes we confuse the technology we apply to get something done with what we are really trying to do.

Let’s look at Frank’s case. If, instead of Bellevue, Washington in July the freezer had broken down in Grand Rapids, Minnesota last December, this would not have been an issue at all. Take the food out of the freezer and set it on the porch where it was actually colder than in the freezer.

What the customer is buying is not a freezer, but an environment that keeps food from spoiling. Any environment that accomplishes that purpose will work. With our current technology, freezing the food by placing it in an insulated box with a vapor-compression heat pump attached is the best way to do that. But it isn’t the only way.

What upset Frank, and his wife, was not so much that it would take a week to fix the freezer, but that their food would spoil in the meantime. Any solution that solved that problem would have worked for them.

What, exactly, does the customer find valuable?

You press the button, We do the rest.

Sometimes the product or service simply helps the customer create, or recreate, an emotion. George Eastman “got that” and grew an empire from that idea by making photography simple enough for anyone to do. Prior to that, amateur photographers had to mess with mixing their own chemicals, glass plates, their own processing, and persevering to actually get a photograph. The value came from the technical accomplishment as much as the image itself. But that didn’t work for families that just wanted to remember an occasion, and share it with their friends. Kodak changed all of that forever. But their way wasn’t the only way, and a few years ago, a better way emerged. It wasn’t about the technology, it was about sharing the memories.

I have spent a lot of time in the construction equipment business. I recall a senior manager making a pretty insightful comment. “The only part of the crane that the customer cares about is the hook. Everything else just makes it work.”

Most construction equipment is actually is capital equipment for the customer’s business. The owner-operator of an excavator is selling a service: The customer has dirt where he wants a hole. The excavator is a tool that can fix that problem. The owner-operator needs to be able to deliver the service at a price his customer is willing to pay and still be able to make a profit. That fact, in turn, sets the prices for the equipment.

But it is important for the seller of that equipment to remember that, to his customer, it isn’t an excavator so much as a business. The seller that thinks “How can I help my customer provide better service to his customers?” rather than “I sell decent hardware at a fair price” has an opportunity to think of things beyond the hardware itself.

Look at your own operation. What value do you provide to your customers? Not just the product itself. What is the problem the customer can solve, or what is the source of pleasure he gains from your product or service? How would (or could) the customer solve the same problem, or gain the same benefit, without your product or service?

What is your customer really buying?   What business are you really in?

10 Days in The Netherlands

Over the weekend I returned from a 10 day visit to The Netherlands as a guest of Blom Consultancy.

I am still compiling my experiences, and will be sharing them with you as I do so. (You already have one of them in the previous post.)

However the purpose of this post is specifically to give a big “Dank je wel” to the people at Blom and several of their clients who made my stay something I will never forget.

A special thanks goes to Corrie and Margareth for making this trip happen, and to Corrie, Margareth and Anton for hosting me in your homes and allowing me to get to know you and your families that much better.

GM’s Singularity

I am going to break my self-imposed rule against further comment on the automotive industry in general, even though it is more commentary about current events than it has to do with the Toyota Production System.

In physics, a black hole is a singularity – a point where time and space are collapsed to a zero-dimensional point. Any singularity in space has, at some distance, an “event horizon.” This is a point of no return. Once anything crosses the event horizon, it cannot escape. Not even light. Everything will end up being sucked into the singularity… eventually. Thus, no information about what is inside the event horizon can ever be known outside it. Because of this information blackout, the term “singularity” has a meaning in general language to define a point in time through which the past cannot be extrapolated to a prediction of the future. Such is Monday, June 1, 2009 for General Motors.

I don’t think there was any doubt to anyone some months ago (except, perhaps, Rick Wagoner and the board of directors) that Monday’s events were inevitable – the “event horizon” had been crossed.

The question is: When was the point when there is nothing they could have done?

I am asking because I look at Jim Collins’ model of collapse, and it is clear to me that GM followed the model, but it took decades, not just a few years.

This article in Business Week Online, How Rick Wagoner Lost GM is pretty damming of several CEOs, back to Roger Smith, and perhaps further. But Rick Wagoner is particularly called out. In the end:

Wagoner continually went before the American public and Congress unprepared and angry, demanding taxpayer support without ever being able to articulate why he wanted $25 billion, how the company would use the money, and what GM’s vision was for a future viable enterprise.

But the last few months’ theatrics aside, up to what point could they have pulled it out?

While our “lean” community has been busy comparing GM to Toyota, I want to suggest a different, more comparable, model: Ford.

Both companies dealt with exactly the same political landscape, the same union issues, the same cost structures. Their range of products was comparable, and by and large, over the years, they made many of the same mistakes.

But right now, Ford continues. Sure, they are hurting, but they don’t seem to be mortally wounded.  When did Ford say “Hey! This isn’t working anymore” or more precisely “Hey! If this continues, we are going to be out of business!” In other words, when did Ford get off the Denial track? And more importantly, are they beginning to develop a fact-based learning culture? It’s too early to tell, to be sure, how all of this is going to play out.

However, I predict that it will be no easier for Barak Obama to get-in-get-it-done-and-get-out of GM than it was for George W. Bush to do so in Iraq. Both jumped based on rationalized emotional justifications, with inadequate resources and no clear exit strategy . (And there, to be sure, the parallels end.)

The political quagmire is only just beginning. Whether anyone likes it or not, because “the people” are majority shareholders, the U.S. Congress is the de-facto board of directors. No matter what the President wishes about maintaining “hands off” management, that isn’t going to happen once the corporate constituents realize they can use all of their lobbying tools to influence corporate decisions. I hope I’m wrong about all of that.