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The “Lean Plan”

In yesterday’s book review of Switch I alluded to the idea that a “lean implementation plan” is not so much about when and where to deploy the tools as it is a plan to shift the default behavior (‘the “culture”) of the organization.

This doesn’t mean you don’t deploy the tools. Of course you do.

But you have to do more.

The tools deployment has to have a purpose that goes beyond just creating flow.

The purpose is to shape the environment, at a manageable pace, so people have the opportunity to develop and practice the new skills and behaviors that you need.

Since most of us use “kaizen events” in one form or another, let’s take a look at our core intention during that week.

Do you have explicit learning targets as the foundational purpose? Or are your objectives expressed strictly in technical terms?

As you prepare for the event, are you studying, not only the process, but how people interact with that process? Are you grasping the current situation of the culture as well as the process itself?

Are you defining a clear gap between the behaviors you need (the target) and the behaviors you observe?

Are you structuring your week to have daily learning objectives that people have demonstrated, as they try to put the improvements into place?

You can’t complain that “people aren’t supporting the changes” if you haven’t been clear about what “supporting the changes” looks like.

“If the student hasn’t learned, the teacher hasn’t taught.”

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Switch: How To Change Things When Change Is Hard

I have been touting Chip and Dan Heath’s book Switch for some time now, so it I thought I ought to actually write about why.

If you are in the role of a “change agent” this book is your manual.

Up to this point, the bible for “organizational change” has been John P. Kotter’s book Leading Change published by the Harvard Business School.

Based on his article Eight Reasons Why Transformation Efforts Fail, Kotter outlines (not surprisingly) an eight stage process for changing a culture:

  1. Establish a sense of urgency.
  2. Create the guiding coalition.
  3. Developing a vision and strategy.
  4. Communicating the change vision.
  5. Empowering employees for broad based action.
  6. Generating short term wins.
  7. Consolidating gains and producing more change.
  8. Anchoring new approaches in the culture.

I have found it quite valuable in the past to challenge a leadership team to assess their own efforts against these factors, then listen to what the next level down has to say. There is always a large gap – what the leaders THINK they are saying clearly is much more muddled to the listeners.

Chip and Dan Heath take things down another couple of levels. They deal with the psychology – what goes on between our ears, and their process maps very well back to Kotter’s – as a much more explicit “how to.”

The Psychology of Continuous Improvement

What really hooked me into this book, though, was just how well it maps to key characteristics of a Toyota-style management system.

People in companies that are exceptionally successful with continuous improvement have the same baseline thinking patterns as people in every other company out there.

The difference is not about hiring different people, it is about how the work and the environment itself is structured. It is likely that structure wasn’t deliberate, these outlier companies just stumbled into it. But if we look at what makes them different (see “Find the Bright Spots” below), we can see they are better at dealing with the things outlined in this book.

That, to me, is encouraging because it reinforces the idea that true operational excellence is within the reach of anyone who is willing to deal with the real issues.

And – key point here – these changes are within the power of the mid-level change agent to affect. You don’t have to be “top management” or even in charge to have an impact. (You do have to work harder and more explicitly, though.)

We (like to) Think It’s About Logic – But It Isn’t.

In business we operate on the assumption that decisions are based on objective, rational analysis of facts and data. If presented with a compelling case, we say, the logical conclusion should follow.

So our efforts to enact “change” start, first and foremost, with trying to educate so that people will “understand the changes” and the “reasons why.”

If they don’t get it, we think, it is because they don’t understand the goodness, so we need to explain it better.

This thinking drives us to try to construct more compelling models and representations of “the system” in our effort to explain why it is better.

If we address the emotional aspect at all, it is usually with trying to “create a crisis” or a “burning platform” – in other words, using fear as a motivator. Or, even worse (apparently), we try incentives to manipulate behavior.

Switch uses a metaphor of the human psyche that is borrowed from Johnathan Haidt’s work in The Happiness Hypothesis.

Haight constructs a metaphor of our mind as an elephant, representing our emotional responses, and a rider on the elephant, representing the logical and rational side of our mind.

You can quickly get the idea here – the rider can influence where the elephant goes, but that’s about it. Unless the elephant feels safe going there, and trusts the rider’s judgment, it ain’t gonna happen.

Following that metaphor, Heath and Heath outline nine actions that shape how groups (and individuals) respond to changes. The book describes them in detail, with stories, examples, and structure.

Online, they have the Switch Workbook which provides a great quick-reference for the book. I highly suggest reading the book rather than trying to use the workbook as a substitute, though. Otherwise you lose a lot of context.

The overview and comments below are organized the way the key points are covered in the workbook.

Direct the Rider

Our metaphorical elephant rider is busy and stresses easily. Given too many choices, the rider becomes paralyzed and takes no action at all.

This is what happens, I think, when we present tons of general, theoretical education and then expect team members to pick up their own initiative and “improve things.”

So it is necessary to provide enough structure to allow people to focus their attention on “how to do it” rather than “what to do.” This means being far more explicit than we typically are. “Vision” is not an ethereal saying on the wall. It is a concrete description of how we want the organization to work.

In this category, Heath & Heath cover three key points that address the logical approach:

1. Find the Bright Spots

Rather than focusing on what isn’t working and trying to fix it, go find examples of where things are working and try to understand why – what makes them different.

Often there are one or two key factors involved and, once understood, they are fairly easy to educate and replicate.

Of course, to understand what makes them different, you must also understand the normal way things are done, and compare that with what you find in the positive outliers.

If I were to use Toyota-style language, I would say “understand the current condition” and use the positive outliers as the basis for a target. Then look, at a detailed level, at what small things make such a big difference. This is a classic “is / is not” analysis, but applied rather than just theoretical.

2. Script the Critical Moves

The most common theme of frustrations I hear from change agents and practitioners has to do with people “not supporting the changes.” But when I question them about what they WANT people to do, I often get a list of abstractions.

To make things even more interesting, many of us (myself included) have been taught to focus on the physical process changes rather than the behaviors required in a continuous improvement culture.

From the Switch Workbook on the Heath Brother’s web site:

Be clear about how how people should act.

This is one of the hardest – and most important – parts of the framework. As a leader, you’re going to be tempted to tell your people things like: “Be more innovative!” “Treat the customer with white-glove service!” “Give better feedback to your people!” But you can’t stop there. Remember the child abuse study [from the book]? Do you think those parents would have changed if the therapists had said, “Be more loving parents!”  Of course not. Look for the behaviors.

Another common source of frustration among practitioners is the comparison with perfection. Now there is nothing wrong with this. It is actually how we should think. But there is a difference between using perfection as your benchmark and expecting it to be achieved in one fell swoop.

By setting a limited theme that you know will advance the process, you help people focus on specific actions – you script what they should be working on, and give them permission to not try to fix everything at once.

One good way to test a theme or critical move is to ask whether or not it is “sticky.”

The other thing that helps, according to the workbook, is keeping the change within the scope of how people think about themselves. It is far easier to reinforce behavior that fits in with an existing self-image than to try to change something so fundamental.

3. Point To The Destination

Do you have a tangible objective that is “met” or “not met?”

What happens in too many “lean implementations” is that the process itself is the objective. “We want to be a lean company.”

So what?

“OK, we want all of our materials on a pull system.”

So? Why?

“We want zero parts shortages.”

Ah! That is something you can rally people around.

At the same time, avoid abstract metric targets. “Gross margin” or “inventory turns” targets might be OK in the board room, but in the real world (which, unfortunately, rarely extends into a board room), you need something tangible that people can see and experience.

Motivate the Elephant

The next three items come under the heading “Motivate the Elephant.” The elephant is the metaphor for our emotional responses to things. As much as the business world likes things to be sterile and logical, people never work that way.

Our logical decisions always follow emotional decisions. If there is a misalignment between the two, we feel great anxiety. Haidt describes “the rider” (our logical mind) as a skilled attorney who can construct a logical, sound rationale for any actions that the elephant takes.

So, where “the rider” can be paralyzed by too many options, “the elephant” needs to feel it is safe to go where the rider is trying to take him.

4. Find the Feeling

Taiichi Ohno talked a lot about waste. He described wasteful actions in ways that made it easy to see. His point, I think, was to give his managers a clear picture of just how much opportunity there was, if only they worked to make things flow.

As a sidebar, I don’t believe he made TPS about “eliminating waste” per se. He doesn’t talk about it much once he makes the initial point. Different topic.

The idea of concentrating your effort into a small model area (rather than trying to take everyone along at once) fits into this. It shows people, in a tangible way, what is possible.

The principle of “go and see for yourself” makes the current condition (and the possibilities) real to people in ways that the best PowerPoint presentation never can.

The key is to acknowledge that “rational analysis of facts and data” rarely (if ever) evokes the kinds of things that cause change.

5. Shrink the Change

When I read this chapter, I saw an immediate correlation with the process of rapid coaching cycles and target conditions that Mike Rother describes Toyota Kata. Aside from driving continuous improvement, that process seems to be almost engineered to shift the culture.

This might seem contradictory with “Find the Feeling” but Big Change overwhelms people – it scares the elephant. So while it is important to have a compelling sense of destination, it is equally (if not more) important to have a sense of immediate progress – “we are getting somewhere.”

In the book, the authors give a couple of great examples. In one, they outline an experiment with customer loyalty cards for a car wash. Two groups of customers were given loyalty cards.

One group required 10 stamps to get a free car wash.

The other group required 12 stamps to get a free car wash – but they were given two free stamps to start with.

Thus, each group actually had the same distance to the goal. But the response was significantly higher for the second group. Why? Because they started with a sense of investment. They had runway behind them, which made the distance to close seem shorter.

The two free stamps also gave them a sense that they would be “wasting” or “losing” something of value if they didn’t go ahead and complete the card.

When we look at an area for improvement, do we focus on how bad it is, or do we frame our next steps to honor the work they have already done and work to build on it? We are going to be doing the same work either way, this is a matter of presentation.

At the same time, do we try for the “big leap” and the 80% reduction as the goal, or do we set a series or more modest objectives that anchor a sense of success and moving forward?

Do you structure a big, complex “lean implementation plan” or do you take on one value stream loop at a time?

6. Grow Your People

Humans are incredibly social. We want to feel we are part of a group. We want a group identity that we can share.

Can you cultivate that sense of group identity in a way that aligns people in the direction of the changed behavior? What sense of identity already exists?

At the same time, you can strengthen people’s resolve in the face of obstacles by predicting them.

“When we implement flow, we are going to see a lot of problems come to the surface.” By warning people in advance about what to expect, you can shift the response from being discouraged to accepting the challenge of solving those problems one by one – because those problems tell us “This is working” rather than “it isn’t working.”

If you can challenge people to embrace what Heath and Heath call “the growth mindset” – we are going to build out competency by practice, which means failing and learning sometimes – that helps turn a surprise or disappointing result into a challenge to learn and grow.

Shape the Path

This is, in my opinion, an area where we make the biggest mistakes. A lot of efforts to implement start off with a “lean overview” of some kind – even to the top leaders – and then leaves it up to them to decide how to go about implementing all of this.

But they are still operating in the same environment they always have, and no matter how compelling the vision, there are obstacles in the way. The path is not clear.

The last three actions cover how to structure the process, the environment, even the organization in ways that clear the path you want people to follow.

7. Tweak the Environment

As I was reading these examples, I was getting really excited because it was all familiar. But Switch was adding even more weight behind the things that we do under the name of “kaizen.”

Yes, we are stabilizing and improving the process, but we are also clearing the path toward the behavior we want.

Consider these two examples from the workbook:

Do a “motion study.”

If you’re trying to make a behavior easier, study it. Watch one person go through the process of making a purchase, filing a complaint, recycling an object, etc. Note where there are bottlenecks and where they get stuck. Then try to rearrange the environment to remove those obstacles. Provide signposts that show people which way to turn (or celebrate the progress they’ve made already). Eliminate steps. Shape the path.

If this doesn’t sound familiar to you as a kaizen practitioner, you need to dig out the basics. This is not only exactly what we should be doing every day, it is exactly what we should be teaching others to do as well.

TPS / “Lean” is a management system that strives to do this every day. The cool thing, in my mind, is that Switch is as much describing what should be our routine as it is describing how to change the routine.

Or try this example:

Can you run the McDonalds playbook?

Think of the way McDonalds designs its environment so that its employees can deliver food with incredible consistency, despite a lack of work experience (or an excess of motivation). They pay obsessive attention to every step of the process. The ketchup dispenser, for instance, isn’t like the one in your fridge. It has a plunger on top that, when pressed, delivers precisely the right amount of ketchup for one burger. That way, if you have to deliver 10 burgers in a minute, you don’t have to think at all. You just press the plunger 10 times. Have you looked at your own operations through that lens? Have you made every step as easy as possible on your employees?

Here is where the nay-sayers tell us “But that work environment gives people no sense of creativity.” Damn right. I don’t want any creativity around the way the product is made. I want to know that my customers are going to get exactly what was specified.

The opportunity for creativity comes from challenging people to create a work environment that makes it easy to consistently deliver the product. And there are endless opportunities to do this. If / when quality is perfect, then work on productivity.

So as we work to “tweak the environment” the real question for a lean practitioner is how to structure things that make and hold space for this creative process of improvement to happen. What blocks the path? Have you carved out that space, or do you expect people to just find a way to do it?

And finally, Heath and Heath challenge us to look at the environment before we start blaming people. Good people working in a bad environment are often painted as flawed in some way. This is called “attribution error” – attributing bad results to the person rather than the process. I have yet to meet anyone (myself included) who was not guilty of this now and then.

The people we call the “anchor draggers” and “cement heads” are making the best decisions they can in good faith, based on the environment and information that surrounds them. We have an opportunity to shape that environment, and thus alter the inputs they deal with.

8. Build Habits

“Behavior” is built up from how people respond to the things around them that trigger those responses. When we talk about “habits” we are really talking about consistent responses or actions.

If we want to change those responses, it is helpful to link the new response to a specific trigger.

Again, looking at a TPS environment, I immediately think “andon.” There is a specific trigger (the light is ON or OFF) and a specific response.

Digging in deeper, and looking at the work Steven Spear did in his original research (which is summarized in Decoding the DNA of the Toyota Production System) we see an environment that is precisely structured to provide explicit triggers for explicit actions.

Further, there are processes to verify that what was expected is what happened, and any deviation triggers another specified response. So I see yet another area where the Toyota management structure is engineered to provide the kind of environment that Switch talks about.

If I am trying to alter behavior, I ask the same questions. Can I set a specific trigger that calls for a specific action that I can check?

Can I take something that people already do and structure the work (“tweak the environment”) so that routine action triggers the new behavior?

Can I structure the work to sequentially cue the next process step as each is accomplished?

9. Rally the Herd

And finally is reinforcing, again, the fact that humans are naturally biased toward wanting to be part of a common social structure.

What is the prevailing social pressure in the organization? Is it counter to what you are trying to do? Are the people who are adopting the new behavior isolated from one another? Are you trying to spread the early adopters too thin, in the hope that they will inoculate the rest of the organization? They will inoculate the organization – by creating powerful antibodies against the change. Small, isolated efforts dissipate your resources to the point where they are ineffective.

What can you do to create a majority from the minority? This is one benefit of the model line. It establishes a concentrated environment where everyone is focused on the same thing, and eliminates (or at least reduces) the social pressure against the new behavior. “We are in this together.”

Now, having a model line does not guarantee that the rest of the organization will spontaneously adopt the new way. Far from it. It takes deliberate action.

“Rally the herd” also means that the group that is doing what you want are celebrated as “doing it right.” But you have to do this in a way that doesn’t rub people the wrong way. Believe me, I’ve seen with my own eyes the pushback created when one division of a large company was constantly lauded as the “shining star” to the others.

Nevertheless, you want to highlight the bright spots, and then find specific, small things that have made a difference. GM couldn’t “just be more like Toyota” or “more like NUMMI.” That wasn’t enough. They wanted the results, but apparently never dig in to truly understand the few key things that went deeper than the mechanics.

Conclusions

Practitioners are often expected to “drive the change” into an otherwise passive-aggressive organizational culture. This can be a frustrating experience because lean practitioners are rarely given the tools to affect social conventions.

It is a sad fact that the vast majority of efforts to “implement lean” falter or fail within a few years. The message that I draw from this is “Look at what most people are doing, and do something different.” The mainstream message we have been getting doesn’t work very well, and just “trying harder” is no more effective here than anywhere else.

This book, with some careful study, discussion, and a little collusion, can form a great blueprint for how to actually structure your work to move the cultural change along.

The key is to remember that the “lean implementation plan” is NOT about how to implement takt, flow and pull. It is a plan to shift how people behave and respond to issues every day. The tools are important, but only because they create opportunities for people to learn and demonstrate the new way of daily management.

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Why Don’t They See This Is Better?

“Resistance to change” is a common theme of discussion among practitioners on various online forums, as well as in emails I get from readers.

One thing I see fairly often is that a practitioner will be suggesting a visual control or a specific application of a “lean tool” as a “better way” in the process being examined.

“They can just look it up on the computer,” say those holding on to the status quo, “why do we need to put up a board?”

Why indeed?

So the practitioner tries to make a logical case, and often comes away frustrated. “Leaders aren’t supporting the changes” is a common lament at this point.

But let’s break down the problem and see if there is more we can do.

We are often debating whether or not a particular solution is better than the current way.

But in our “implement the tools” approach, we tend to make “lack of a specific solution” into a problem.

Whoa. Let’s back up a bit and see if we can head this off.

Do you have agreement on a clear target objective, one that all parties can describe? Do you know how the process should be performing?

Note I said “should” not “could.”

“Could” is potential.

“Should” is an unmet expectation. Big psychological difference there.

If everyone agrees that the status quo isn’t getting it done, and also agrees on what they want to achieve instead, then the next question is “OK, what is stopping us from taking the next step?”

This shouldn’t be an abstract exercise. As you watch the people in the process try to reach a higher performance level, look for “What just got in our way?”

You need to help the leaders, and your other constituents see it with their own eyes. Don’t expect them to take your word for it. You wouldn’t take theirs without your own observation.

If everyone can see, for example, that a team member gets too far behind to recover before anyone else notices, or that a machine is experiencing stoppages or excessive changeovers, for example, then you can start discussing solutions.

Perhaps the team leader needs to make quick status checks periodically, in a way that is not intrusive.

What is stopping him?

Well, that’s difficult right now, because everything is buried in the computer, and often updated in batches after the work is done.

Hmmm.. What could we do to make things more visible, in real time? Is there a way we can set up the work area so the team leader (and the worker, and anyone else just happening by) could readily see there is an issue here?

Now, and not before, is the time to start discussing solutions. But you can’t just make the logical argument. You have to get agreement each step of the way.

That might very well take longer than you want it to. People are funny that way.

But the bottom line is this: “Lack of your pet solution,” no matter how many books and name-brand authors refer to it, “is not a problem.”

We create a lot of our own resistance by running into things, and leaving fires behind us.

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Lego Moonshine

In the Production Preparation Process (3P) we use the term “moonshine” to refer to process of rapid prototyping and iteration. The team creates concepts and tries them out quickly and cheaply in order to learn more.

Today we have some really powerful tools available to do this. One of them is Lego Technic. It is versatile and modular, and you can make machines that actually work.

But the spirit of moonshine means you don’t just think up a complete machine and build it.

Moonshine is a progressive process of adding automation step by step. The final characteristics of the equipment emerge from the process rather than everything being designed from the get-go and just built.

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5S in Three Bullets

I was in a conversation today and we ended up boiling 5S down to three key points:

  • You have everything you need.
  • You need everything you have.
  • You can see everything clearly belongs where it is.

Of course at the next level, these statements are the standards you are continuously checking against.

Presumably we have cleared out everything else, leaving only what we thought was needed, and established visual controls to verify we have those things, and only those things, in the work area.

Then, as the work is done, the moment someone discovers something else is needed, THAT is the time to deal with the issue.

– Ask “Is this something we should need in the normal course of the work?”

If so, then you learned something that you didn’t know or didn’t remember when you first organized the area. Add that item, find a place for it, and establish a visual control. Right now.

If not, then “Why did we need it this time?”

What broke the normal pattern of work?

This is where 5S breaks down – when we don’t discriminate between something that is needed in the normal course of work, and something that is needed as an exception.

If we just “get it” and add it to the work area, then we normalize deviance and incrementally erode the process. If we ignore the issue, we add “getting this when it is needed” to the work cycle.

If, on the other hand, we seek to understand what broke the normal pattern and deal with the core issue, we have a shot at real kaizen. (It is perfectly OK to get what you need and keep it around as a temporary countermeasure. Just put it someplace where you will KNOW when you used it.)

The worst thing you can do is allow these small problems to accumulate and try to correct them en-mass as some kind of “corrective action.”

Kanban

Likewise, kanban can be expressed the same way. It is more dynamic, but is really answering the same questions in the context of materials.

 

Standard Work

If you paraphrase these key points to just about any other “tool of lean” then the purpose of surfacing problems and driving solution becomes apparent.

  • You are doing everything that is required.
  • Everything being done is required.
  • Everything being done clearly is part of the sequence.

Take a look at the other classic “tools of lean.” How would they fit into the same pattern?

 

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New Forum Area: Outside the Factory

Zoe owns Grassroots Books in Reno, NV and is exploring how to make these concepts work in a small retail operation. They are just getting started, but are finding lots of opportunities.

When talking to her last night, she mentioned she would like to network with other people who are trying to apply these concepts in non-traditional arenas.

In response, I created a new forum on The Lean Thinker’s Community. It is called “Outside the Factory” and is intended as a gathering place for practitioners and others who want to discuss how to apply TPS in non-manufacturing environments.

I would love to see some synergy develop there, and intend to fully participate as well. Stop in and say “Hello.”

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3P Works

I am in another 3P type of event this week.
One of the cool things is how the act of physical simulation, even a crude one, drives out ideas and insights.

Limitations are challenged, possibilities are expanded.

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Outsourcing Competence

Continuing on a supply-chain theme from Doing Outsourcing Right and Don’t Lose How To Make Things, I found this Reuters article carried on MSNBC interesting.

Surging China costs forces some U.S. manufacturing companies back home

 

Like a lot of popular press articles, the title and even the lead kind of miss the point. They are focusing on simplistic factors such as costs and whether or not the high automation type solutions are going to create more jobs or not.

This isn’t to say that costs aren’t important. Of course they are. And the article correctly points out (as we have said here as well) that many times the full costs of outsourcing are not understood.

As for the automation – though I can’t speak for the solutions cited in the article, what I often see is overboard with high-tech / high-maintenance solutions. That is a subject for another day when we really start digging into “right sized automation” and 3P.

With all of that, what caught my eye was the last three paragraphs, and in my mind, they are the true lead here:

"If you’re going to go into the high-tech electronics business here in the States, most likely a big portion of your high-tech electronic components are going to be sourced from China," said Cort Jacoby, a principal in the supply-chain group at Archstone Consulting, a unit of the Hackett Group Inc . "Then the question becomes, what is the true value-add that’s going to take place in the United States?"

Beyond that, a company that has outsourced most or all of its manufacturing may find that it no longer has a pool of engineers, plant managers or other workers with the experience to resume production.

"There was always this notion that if you controlled the design and the brand, you could park your production somewhere else," said GE’s Campbell. "I’m not sure that’s completely true anymore. Because what happens over time is you lose competency."

[Emphasis added]

The key point is that you can always outsource what you do today, but what remains is what are you going to do tomorrow?

Today’s markets and technology change so fast that unless you are SO good at supply chain management, AND retain the knowledge so you know how to manage production – like Apple – you end up outsourcing your entire future for a short-term cost “savings” that might not even show up.

Bottom line: You can’t outsource basic business competence. What are you striving to be best in the world at doing? If you don’t know, you are in trouble.

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Doing Outsourcing Right

In a previous post, “Don’t Lose How To Make Things,” I discussed some of the perils of outsourcing either your production or your production technology.

Yet there are many successful companies that manage to do just that. One of the most successful is Apple.

We all know Apple as a cutting-edge innovator. Their products have created, and destroyed, entire industries and changed social paradigms.

What is behind that cutting-edge innovation, though, is one of the best (if not the best) supply chain management systems on Earth. Lets look at a couple of key characteristics of how they do this, and you can compare them to the more common mindsets about outsourcing.

First, Apple understands intimately how an iPhone works and how to make one. While they may outsource actual production, they do not outsource their core knowledge. They know their product and their process.

But what really got my attention (and inspired me to write this) was a fascinating anonymous response to a question about a logical strategic investment for Apple.

The comment describes how Apple uses their resources and supply chain knowledge to stay on top of the cutting edge and maintain competitive advantage.

When new component technologies (touchscreens, chips, LED displays) first come out, they are very expensive to produce, and building a factory that can produce them in mass quantities is even more expensive. Oftentimes, the upfront capital expenditure can be so huge and the margins are small enough (and shrink over time as the component is rapidly commoditized) that the companies who would build these factories cannot raise sufficient investment capital to cover the costs.

What Apple does is use its cash hoard to pay for the construction cost (or a significant fraction of it) of the factory in exchange for exclusive rights to the output production of the factory for a set period of time (maybe 6 – 36 months), and then for a discounted rate afterwards.

He goes on to describe how Apple first has exclusive access to the latest technology, then as it becomes commoditized, maintains cost advantage as they are searching for the next paradigm shift.

What I think this does is allow Apple to use their supply chain savvy to change things up faster than their competitors can respond.

Apple is not just crushing its rivals through superiority in design, Steve Jobs’s deep experience in hardware mass production (early Apple, NeXT) has been brought to bear in creating an unrivaled exclusive supply chain of advanced technology literally years ahead of anyone else on the planet. If it feels like new Apple products appear futuristic, it is because Apple really is sending back technology from the future.

Here is the bottom line: If you want to outsource, that is actually OK. But only if you are using that as an opportunity to continuously improve your process of supply chain management while striving to become the best in the world.

If it is a short term ROI problem, rather than working hard to develop a key strategic advantage, well, good luck with that.

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Continuously Improving

The term “continuous improvement” has been around a long time. The truth is most companies don’t do continuous improvement at all, rather they schedule improvements in batches and projects.

The effect of batch improvements is that “improvement” is not “business as usual” and people learn what they do every day, not what they do intermittently. That is one reason why it is usually necessary to precede a kaizen event with a training session.

But there is a deeper ramification here that challenges the very goal of the process.

We all assume (myself included up to this point) that the goal is continuous process improvement.

Maybe it is.

But we also say it is about developing people.

Processes come and go with new technology, new products, reorganizations, etc. The people are the only constant.

Let me float this idea out there –

How would your continuous improvement process change if you thought of its  primary objective as continuously improving the capability of your people?

Process improvement would be a vehicle for people development. In effect, your success at process improvement would be an indicator of how well you were developing people.

To paraphrase a common expression, process improvement is the shadow of how well you develop your people.

That would mean if your process of continuous improvement is targeted at anything other than the capability of people, you are trying to move a shadow by pushing on it.

Its about the people.

hmmmm.

Thoughts?