Tag: Leadership

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The Lean Manager: Part 2 – The Basics

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This is Part 2 of a multi-part review. Part 1 is here.

In my review of Kaizen Express back in May, I took LEI to task for two things – First, I didn’t feel Kaizen Express contributed anything really new to the body of knowledge. I would have been satisfied if it had more clearly explained what had been said before, but it didn’t do that either. Second, and more importantly, I felt that Kaizen Express, and the LEI in general, were propagating the conception that the tools were what defined “lean” and that “the tools” were “the basics.” I disagreed on both points, and still do.

I am now about halfway through The Lean Manager, and I believe this book is addressing those issues – and hopefully challenging some of the thinking within the publishers. In other words, in its content, this book is everything that Kaizen Express isn’t. Get it. Read it. Do what it says, and you will actually be implementing the basics.

What makes this different? Instead of revolving around technical descriptions of the tools, this book clearly shows the proper relationship between the tools and the two most important aspects of what makes the Toyota Production System work:

  • Leaders (and how they lead and what they lead – and it isn’t implementing the tools)
  • People (yes, other books pay lip service by mentioning shop floor engagement, but The Lean Manager is all about shop floor engagement)

The authors start to hammer home the point in Chapter 2, Everybody, Every Day. In one of the many lecturettes they use to convey the key points via their characters, Amy, a corporate consultant, sums it up:

“Everybody, everyday solving problems, that’s the only answer to the Pareto dilemma. You’ve got to visualize two flows in the plant. One: the product flow[. . .].  Two: the problem flow to the person who finally solves the problem. [. . .] you shouldn’t funnel all problems to your key technical people. You should protect them to work on the really difficult issues. What you have to organize is the problem solving in the line!”

And with that, the rest of the story follows – this fictitious plant manager under fire in this fictitious company sets out to do that.

The subsequent chapters (so far – remember, I haven’t finished the book yet) are Go and See, which hammers home the importance of the leaders – all of the leaders being present, not just to witness problems, but to ensure they are being solved by the right people, in the right way. Further, they must break down any barriers which impede that flow. And it’s not just the leaders. Ultimately, the entire shop floor is organized so that everyone is immersed in genchi genbutsu every time a task is carried out or work is performed. This becomes the check in PDCA.

Chapter 3 is titled Managing is Improving and begins the confront the psychological and organizational aspects of the changes that are now coming to a head in the story. This part requires the most creativity on the part of the authors, as it is an entirely human process. Because it is a human process, not a technical one, it is impossible to write a technical manual on how to do it. It requires knowledgeable, dedicated leadership that is humble enough to stake out a position that might be wrong, knowing that doing so improves the chance of learning something.

And that has been the issue in our industry. It is far, far easier to describe the tools in excruciating detail than it is to confront the leadership and organizational change issues. And because the technical descriptions predominate the literature (including, and especially what has come out of LEI for the last 10+ years), it is far easier to believe that “implementing the tools” is something that leaders can delegate to specialized technical staff.

This book, so far, is (rightly) turning that thinking on its ear.

Continued at Part 3.

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The Lean Manager: Part 1 – Customers First

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I just started reading this book, and my initial feeling is that it is a winner. Rather than producing a batch review of the whole thing at the end, I thought I would employ “one chapter flow” and share my impressions with you as they are formed. As I write this, I honestly do not know where it is ultimately going.

I am excited about this book because it is challenging the decades-old paradigm of kaizen events run by specialists (while simultaneously trying to justify the change activity to the people who hired them in the first place). In its place is a leader who knows what he is doing, and appears to be starting to lead by asking tough questions.

Even with that initial endorsement, this book appears to be following the standard formula established by Eli Goldratt in The Goal.

  • Manager finds out factory is being closed. News is devastating to his personal life.
  • The Jonah character emerges and teaches him how to save the operation.
  • He applies what he learns and saves the day.

While there is nothing wrong with this structure, it is wearing a bit thin, at least to me. So I hope that the authors are going to find an interesting twist that surprises me. Still, because this is a novel with a point, vs. an attempt at classic literature, I’m not going to spend much time on the literary style.

The two main characters (so far) are Andrew Ward, the manager who finds out his plant is being closed, and Phil Jenkinson, the new CEO, with the double role of bringing the bad news (closing the plant) as well as filling the role of the Jonah (or sensei in this case, I suppose).

In the opening chapter, Jenkinson’s style is authoritative, bordering on confrontational. Without knowing the culture of this fictitious company, I can’t say whether his blunt, direct approach is from necessity or because he simply doesn’t have the skills to ask tough questions without pushing people back. I’ll hold judgment on that part. My hope is that the book doesn’t teach this approach as how it has to be done, because in my experience, it doesn’t have to work that way.

The message, though, is crystal clear. The old way isn’t cutting it. Leaders, not staff, are responsible for results (safety, quality, delivery, cost). Leaders are expected to know the hot spots in their operations. Leaders are expected to be involved in the details – not to micro manage, but to develop the capabilities of others. (That last one is a bit of an extrapolation on my part.) “Lean” is not a program, not projects run by a staff of specialists, it is how we will manage the company.

The notable quote from this chapter comes in a shop floor lecture given by Jenkensin and nicely sums up the relationship between process and results.

“Results… are the outcome of a process. What we want are good results from a controlled process because they will be repeatable. Bad results from an uncontrolled process simply mean that we’re not doing our job. Good results from an uncontrolled process…only mean we’re lucky. Today, bad results from a controlled process just says that we’re stupid: We expect different results from doing the same thing over again.”

Based on that, I sketched out this little matrix that captured my response and the key points.

process vs results

But the technical nuances aside, this story is clearly developing into one about leadership. The key issues, so far, are:

  • Safety, quality, delivery, cost, are line leaders’ responsiblity, with assistance from technical staff – who are also experts.
  • Though it is certainly a culture shock, the leader is teaching by asking questions.
  • The various character’s reaction to the confrontive authoritative style is predictable. I am uneasy, at this point, with that approach being held up as an example of the best way to get this done. But it is only Chapter 1.

GO TO PART 2

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leanblog.org: Measuring for Improvement

Mark Grabon’s latest post hits the key difference between metrics that help improvement, vs. management-by-measurement that destroys trust and possibly drives unethical behavior. He quotes a U.K. hospital administrator as saying:

“We’re trying to shift from collecting data for judgment to data for improvement.”

I agree with Mark’s assessment: “Brilliant.”

Metrics are a “Check” in Plan-Do-Check-Act.

The purpose is not to determine if people are “doing their jobs” but to assess if the plan is working as predicted.

“As predicted” means that not only is there an objective, but there are discrete actions which everyone agrees will cause the objective to be reached.

Note the words “everyone agrees.”

For that to happen, not only are objectives handed down, but the plan to reach them is discussed. The boss is keenly interested in exactly how his people plan to accomplish their objectives, and he has bought in after he is satisfied they have done thorough work. Think about that for a second. The boss now has his own “skin in the game” on not only the objective, but the way to get there.

There isn’t any space, at this point, for judging people based solely on hitting the numbers, because the boss has already agreed that the plan should work. The question now comes down to how well the team did putting together a plan and gaining consensus, and how well they executed. If the numbers aren’t hit, everybody has to reflect on why the plan didn’t work, what they didn’t foresee, and what they need to do better next time.

Management-by-measurement, on the other hand, is an abdication of leadership. It becomes an adversiaral rather than collaborative exercise and becomes a contest of politics and blame-shifting. This is why, I think, Deming finds the merit system and individual performance bonuses so destructive.

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Dennis Goethals, Learning and Leading at DesignOnStock Furniture

During my visit to The Netherlands, I had the pleasure to spend a couple of hours with Dennis Goethals, Managing Director and CEO of DesignOnStock, a furniture manufacturer in Tilburg, The Netherlands. What I saw and heard were all of the critical elements I have seen in organizations that pull this off in a spectacular fashion.

It starts, as always, with leadership. DesignOnStock, like every other success story I have experienced, has a leader who dedicated to his personal learning and understanding – at a level way beyond the common, but hollow, statements of “committed.” He is down on his shop floor, exploring the flow, looking for the next problem, and working the organization through a solution.

The results? He can deliver a custom order in 1/10 the time of his competitors. In these hard times, his business is increasing because he can offer quick turn-arounds to his customers who don’t want to keep a lot of inventory in anticipation of sales. They can sell one, order one, and have the replacement in a few days.

Rather than trying to recall the details myself, I asked Dennis to share his story as an interview.

How did you first get into the furniture manufacturing business, and what was your experience there?

Dennis: I studied Economics at Erasmus University in Rotterdam. My father had a small upholstery company. When he got sick, we agreed I would come and we would work together. My experience was that the furniture making industry is very traditional. No real partnership between companies. Very small companies in the whole industry. (the biggest in Holland is 350 people, on average 10-20 people per company). As I am an entrepreneur I thought this is the perfect industry to work in. High prices, some volume and not so much really strong competition. We worked like crazy and in 4 years time we grew from 5 to 25 people and from 300.000 usd to 6.000.000 usd. Sales was not our problem, we had great difficulty organizing our production. So much difficulty that at some stage I decided to sell the company and move the factory to Turkey.

Ed. Note: To fill in a gap in the timeline here, Dennis formed a partnership and opened another factory in Tilburg which was being set up traditionally when he then encountered “lean manufacturing.”

When did you first encounter “lean manufacturing?”
What was your initial reaction?

Dennis: Steven Blom introduced Lean manufacturing to me on 6th of December 2006 at 11.30 in the morning. I thought it was the most brilliant thing I had ever seen in my life! I realized I knew nothing about production, only what I had seen at other companies. And I was amazed not everybody is doing this.

What kind of problems did you have to overcome as you tried to implement flow?
How did you go about solving those problems?

Dennis: We had 2 big problems implementing flow:

First, when you implement flow it becomes very clear what everybody in the production line is doing. We had to replace some operators who didn’t like the idea of the ‘flow’ of their work to be visible. We ended up replacing almost 1/3 of the workforce because they didn’t want to leave the idea of batch production. This was very hard to do, letting people go is always difficult. But for us this was the only way.

And second, when you implement flow you have to make sure that the supply of parts is well organized, otherwise your line is down most of the time. We started to use kanban to order our parts to solve this. In ordering materials for your production line, kanban is the most brilliant thing I have ever seen.

What has this done for your business and your competitiveness up to this point?
How have you been effected by the global economic conditions?

Dennis: It has been an amazing experience. We reduced our lead time from 30 days to 3 days. We reduced inventory 60%. Our product quality has increased, our profit has tripled. We are the only company in the Netherlands who can ship a custom build sofa within the week! Due to the economic crisis a lot of our customers have cash flow issues. We are the only player in the market who can generate cash within 2 weeks. A lot of customers focus on selling designonstock.com products to improve their cash position. We increased turnover by 10% and due to further cost reductions we increased revenue by 60%.

Where do you think you are now on the “lean journey?”
What are your next steps?

Dennis: We have just begun our lean journey. The first thing we did was to implement one piece flow. This was the big breakthrough. Now we are fine tuning the tools you need to do one piece flow. I think we can double the output without increasing our workforce. We will do a lot of work ‘upstream.’ In his visit Mark explained this to me and this has brought a lot of new energy to us. We will try to further reduce inventory, simplify our system and we will have a very big focus on visualization and standardization in the months to come.

Do you have any advice for people who are wondering if this will work for them?

Dennis: I would use the Nike slogan: Just do it! When you first start to hear about lean, WCM (World Class Manufacturing), one piece flow, kanban etc. it all sounds a bit strange. Start with something really small. Like buy your groceries with a kanban system. That is how I learned it. This is a way of thinking, not a system you implement and then go back to business as usual. When you really get this, it will change all!

To conclude I would like to quote Lao Tze: Show me and I will look. Tell me and I will listen. Let me experience and I will learn.

—-

I would like to offer thanks, again, to Dennis for taking his valuable time both to show me around his plant, and to respond with his own words for the story of his experience. What I appreciate most, I think, is that he is not resting on his accomplishments. Rather, he sees what he has done so far only as a foundation.

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“Creativity” vs “Opportunity for Error”

One of the things I often hear when we start talking about mistake-proofing and standardizing operations is that we are taking away people’s “creativity.”

“Creativity” in this case is usually the challenge of figuring out how to make a broken process function, or figuring out how to make the product work when, as designed, it doesn’t. “Creativity” means knowing what Julie actually keeps a stash of the parts that are always short, and knowing how to interpret vague, contradictory or obsolete drawings and work instructions. Nobody can look me in the eye and honestly say that a workplace like that is fully respectful of people.

Honestly, the very last thing I want to do is take creativity out of the workplace. But on the other hand, how much creativity is totally wasted on things that should be simple and straightforward?

As long as people’s mental energy must be expended to simply get the process to do something useful, there is none left for them to figure out why is doesn’t work and fix it.

The illusion, I think, is that once things are standardized that there will be nothing left to do.

Nothing could be further from the truth. There is plenty of work to do.

First, “standardizing” is simply setting down what we believe is our best shot at what should work. Once reality sets in, there are nearly always things nobody thought of – opportunities to learn. Capturing those moments is impossible if there is no consistent baseline in the first place.

And, just for the sake of argument, let’s say that the process, as designed, works pretty well. The question must then be asked: “Are we able to provide our customers exactly what they need, exactly when they needed it, on demand, one-by-one, perfect quality, in a perfectly safe environment?” If the answer to that question even includes a hesitation, then it there is work to be done.

Respect your people. Simplify the things that should be simple. Let them focus their creativity on something that matters, not on how to get through the way without screwing up.

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The Purpose of a BHAG

In his book Built to Last, Jim Collins explores the characteristics of companies with sustained performance, and introduced the term “BHAG” for “Big, Hairy, Audacious Goal.” (or something close to that 😉  ).

Last week I had the honor and pleasure to spend a day at the Verbeeten Institute, a radiation oncology clinic in Tilburg, The Netherlands. It was clear they have been working very hard on improvement, built on coaching from Blom Consultancy, who were my hosts there.

Every Tuesday, the medical staff gathers for lunch and host a presentation on a topic of interest. Last week, that was me.

Though I had a fair idea where I wanted to go, I didn’t have a structured, prepared speech. I wanted to get started, and then see where the audience led things.

I started off with a somewhat tailored version of my “Project Apollo story” to emphasize the difference between Kennedy’s BHAG challenge and the higher level objective of “world leader in space exploration.”

Then I asked a question – what would be a BHAG for Verbeeten that they could use to drive themselves toward their goal of “World Class Care.” One of the audience members, from the very back, said “First treatment in one day.”

This was pretty radical. The current process of initial consultation, CT scan, preparing a detailed treatment plan, and getting the patient in for his first treatment can take 20+ days today, though the actual patient involvement in the process is only a few hours, actually less if you start sharpening your value-added pencil.

As we started to get general agreement that this might be a good thing, one of the doctors asked a really interesting question.

Why?

In most cases, there isn’t any compelling clinical reason to try to accelerate this process, and in some cases there are pretty good reasons not to. So Why? was a pretty damned good question to ask – why go to all of the trouble. Why does it matter?

Setting aside, for a minute, the logical arguments of an improved patient experience, let’s explore that a bit.

What it comes down to is, not so much the goal itself, but what you have to do to accomplish it.

It makes the organization push itself through thinking, innovation, and into territory that, as things are right now, is unachievable.

In other words, you have to get really good. You have to become intently focused on everything that is distracting from the core purpose of the organization. You have to excel at execution.

The only way to get there is to learn to define what results you want (a “defect free outcome”), what steps are required to achieve it, carry them out, respond immediately when something unprogrammed or unexpected happens, and seek to understand – at a detail level – what wasn’t understood before.

Napoleon Hill is quoted as saying “A goal is a dream with a deadline.” So long as the goal aligns with a sense of higher purpose, and people can emotionally get behind it, they are a great help in simplifying the message and keeping everyone focused. Deming famously walked about “consistency of purpose.” This is one way to show it.

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John Shook: “A Technical Problem or a People Problem?”

John Shook dives into some of the messy issues of true root cause in his most recent post.

We touched on a similar issue here a few months ago. But it is always worth coming back around to people because because in this system (actually in any system) there are always two issues with people.

  1. People are the most fallable part of the process.
  2. The process cannot operate without them.

The reflex is often to go into total denial about #1 and expect people to be vigilant and perfect every time. “Weed out the bad apples, and everything will be fine.” Of course that doesn’t work.

In John Shook’s example, he traced through Ohno’s classic “5 Why” example.

1. Why did the machine stop?
There was an overload and the fuse blew.
2. Why was there an overload?
The bearing was not sufficiently lubricated.
3. Why was it not lubricated sufficiently?
The lubrication pump was not working sufficiently.
4. Why was it not pumping sufficiently?
The shaft of the pump was warn and rattling.
5. Why was the shaft worn out?
There was no strainer attached, and metal scrap got in.

Then Shook asks a really interesting question:

Why was no strainer attached?

Why not indeed? Isn’t that somebody’s job?
And now, as he points out, we have transitioned from “technical” to “people.”

Maybe the standard work for the maintenance worker or machine operator didn’t go far enough. Or maybe the standard work did specify changing the strainer but the worker failed to observe the standard. How was the standard developed, how was it communicated and trained? How easy was it to “forget” to change the strainer?

Coming, as I do, from mostly “brownfield” environments, the existance of standard work in the first place isn’t something that we can take for granted.

Nevertheless, Shook is making a critical point here. It does not matter whether there was no standard work, or whether the standard work broke down for some reason that we do not yet know (another “Why?”). This is still a process problem. We must start with a working assumption that the team member cares, and is doing the very best job possible, given the expectations, the resources, and his understanding at the time.

I am aware of a couple of cases where engineering change implementation pulled up short of actually observing the new installation and looking for unforeseen problems. One of them was quite subtle, and actually took a few weeks to find the basic cause, much less the root cause.

Another resulted in a bolt snapping during final torque. Messy to fix, but better in the factory than in the field.

These are additional cases where technical problems resulted from process breakdown, and in both cases, it was a case of unverified or blindly held assumptions, and not following through with the customer process.

Shook concludes with two really important points, and I can’t agree more. First:

…the work design must also include the “human factors” considerations that make it possible to do the job the right way, and even difficult to do it the wrong way.

I like to say “Make the right way the easy way” if you want things done in a certain manner.

Which brings us to Shook’s final point: You have to look at the total package – the human and the technical as an integrated system. You can’t separate them because. You can’t “take people out of the process.” All you can do is construct the process to give people’s minds the most opportunity to focus on improving the work rather than burdening them with making sure they get it right.

Always work to support people to do the right thing in the right way. If the organization carries a belief that it is necessary to force or “incentivize” people to do the right thing, then there is a people problem, but it isn’t with the workers.

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Jim Collins: How the Mighty Fall – Business Week

I am a big fan of Jim Collins. His book Good to Great outlines attributes that I have seen in every successful organizational transformation.

Now he has a new book out. I haven’t read it yet, so I am not going to offer a review, just tell you about it. But the title and premise is intriguing:
How The Mighty Fall: And Why Some Companies Never Give In

There is a great article and excerpt of the book on Business Week online, including  a video of Jim Collins describing the stages (preceded by a short advertisement).

In short, Collins’ research shows that a great company can fall, and when it happens, there are five stages of decline. According to Collins, Stages One through Three are invisible from outside. The company looks great, but it is rotting from within. It is only at Stage Four that things visibly go south, and they do so very quickly. But there is also good news: The company can recover and return to greatness from any of the stages one through four, but not five.

While this whole story is fascinating, it is the nature of Stage Four that brings things into pretty sharp focus for me.

The stages are:

Stage 1: The Hubris of Success. Things are going great, and the company acquires a sense of entitlement for that success. “We deserve this success because we are so good!” In Collins’ words:

When the rhetoric of success (“We’re successful because we do these specific things”) replaces penetrating understanding and insight (“We’re successful because we understand why we do these specific things and under what conditions they would no longer work”), decline will very likely follow.

I think this idea of “penetrating understanding and insight” is what characterizes the idealized Toyota Production System. It is also seen in every example that Steven Spear covers in Chasing the Rabbit.

When an organization shifts away from questioning its own success as thoroughly as its failures, and begins to assume that its continued success is simply a matter of continuing to do what they have been doing, the seeds of decline are sown.

This ship is unsinkable.

Stage 2: Undisciplined Pursuit of More.

Companies in Stage 2 stray from the disciplined creativity that led them to greatness in the first place, making undisciplined leaps into areas where they cannot be great or growing faster than they can achieve with excellence—or both.

This one really struck me. Is this the what Toyota went through in the last 5-7 years in their pursuit of #1? Clearly they overreached, even they say so. Even as early as 2003 they were seeing eroding of the TPS discipline in their North American and European plants. They shored that up, and continued their aggressive expansion of production capacity, got into big trucks, and in general seemed to bypass their traditional patient-and-relentless growth strategy.

Other industries suffered this as well. The last few years saw unprecedented (and it turned out, artificially generated) growth in sales across sectors. As one of my friends put it “When times are this good, everybody’s a genius.” Put another way, when there is more demand than supply, even a “supplier of last resort” gets great business, and it is easy to fall into the trap of thinking it is because “our products are great, and customers like us.” It is possible to carry that belief in the face of overwhelming evidence to the contrary – like customers telling you to your face that they bought your stuff because they couldn’t get it from your competitors.

Inventories start to grow, quickly, as nobody wants to miss a sale; factories are expanded, quickly, for the same reason. There is almost a fear of failure here, but it is fear of failure to get more rather than failure to succeed. If success is taken for granted (see Stage One), this one follows pretty directly.

We are going to set an Atlantic crossing speed record.

Here is a question: Who didn’t experience this to some degree over the last 5 years?

Things get interesting next.

Stage 3: Denial of Risk and Peril. There are warning signs of over-reaching, that things are not going to go this way forever. But what struck me more was the cultural aspect: Shutting out the truth.

In Stage 3, leaders discount negative data, amplify positive data, and put a positive spin on ambiguous data. Those in power start to blame external factors for setbacks rather than accept responsibility. The vigorous, fact-based dialogue that characterizes high-performance teams dwindles or disappears altogether.

When leaders start suppressing dissenting views, when they equate disagreement with disrespect or unhealthy conflict, they start insulating themselves in a cocoon of denial.

If the organization is pre-disposed to avoid conflict to begin with, then this stage is really easy to slide into. Vigorous debate is part of sound decision making. When that stops, or is never allowed to surface in the first place, the organization is self-centered and vulnerable.

When leaders start attributing the warning signs to anomalous, one-time, temporary factors – and believing they are exercising that penetrating understanding and insight when, in reality, the “analysis” is no more than the Highest Paid Person’s Opinion they have shifted from rationality to internal belief-based decision making. (also called “wishcraft.”)

Reports of ice ahead.

Stage 4: Grasping for Salvation.

The cumulative peril and/or risks gone bad of Stage 3 assert themselves, throwing the enterprise into a sharp decline visible to all. The critical question is: How does its leadership respond? By lurching for a quick salvation or by getting back to the disciplines that brought about greatness in the first place?

So things have gone to hell in a handcart, and the leadership starts looking around for how to get out of the spin. They have ignored all of the warning signs up to this point, but now they are undeniably in trouble. What to do?

As I said, this is where it gets really interesting from a personal / professional level.

There is no doubt that, at this moment, the proverbial “burning platform” exists. There is clearly a sense of urgency… Pick your clichés from “change management” literature here.

“Hey – I just read this book about lean. Let’s bring in this hot-shot consultant to lean us out.” And so it begins. The Search for the Silver Bullet – the magic that will fix everything. And it doesn’t have to be “lean.” It might be x-Sigma (put your favorite buzzword in place of the ‘x’). Maybe everybody reads The Goal and starts looking for constraints. Or the leaders leap from “program” to “program” looking for the solution. While each “initiative” is kicked off with great deliberate fanfare, in reality the leaders are panicing.

They fail to see that leaders atop companies in the late stages of decline need to get back to a calm, clear-headed, and focused approach. If you want to reverse decline, be rigorous about what not to do.

Here is my take on this. These leaders who leap from “solution” to “solution” are still in hubris and denial. They are still looking outside of themselves for the problem, and the solution.

My last post, How the Sensei Teaches, describes leaders who teach by being students. This requires humility, something totally incompatible with hubris. If they want to bring in that hot-shot consultant, they need to tell her “We really need help up here, please teach us” rather than “Go teach our people how to be lean.” They need that consultant to be a true sensei, not just a technician.

Oh – what is Stage Five? Collins calls it Capitulation to Irrelevance or Death.

My words are “The boat sinks.”

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Russia’s Factories Gear Up for Efficiency

This article in Business Week offers a glimpse into some of the opportunities, and challenges, facing Russian industry, both in dealing with the global recession, and their tremendous work to get out from under the legacy of a state run economy.

Two things really jump out at me. First, this particular CEO (other than the fact that he is 26 years old(!) is taking a proactive approach to the recession. He is taking responsibility for dealing with the problems, not simply playing victim and blaming the economy.

…Andrey Gartung, the 26-year-old CEO, believes the global economic crisis offers an opportunity to boost productivity. This year he is adding new product lines, ordering every department to trim costs by 15%, and asking workers to ferret out waste wherever they find it—with prizes of up to $300 for the best ideas. “The companies that will survive are the ones that are efficient,” Gartung says.

With that kind of attitude, I think Mr. Gartung will go far.

But the thing that really jumped out was the incredible magnitude of the opportunity.

Despite Russia’s 7%-plus economic growth recently, much of its industry is little changed from Soviet times. Factory productivity is just 16% of the U.S. level, according to Strategy Partners, a Moscow management consultancy.

That means, friends, that they have an 84% upside. If they can harness that, think about what it means in terms of competition.

Russia, of course, is not without its problems – political, social, economic. The little tidbit that the CEO of this factory is the owner’s son comes out about 2/3 of the way down, as does the fact that the owner is a member of the Russian Parliament. Though I am sure that Mr. Gartung is sharp and competent, in general, this kind of thinking is not going to help Russian industry as a whole.

But rather than focus on them, take a look in the mirror. What is your productivity upside? What is your attitude about these economic times? Do you honestly believe your operation is as good as it can get? Or are you satisfied with 15 or 20% of what it could be?

Consider Toyota’s response to their first quarterly loss in decades – essentially saying treating the loss as evidence of a problem.

Remember that old definition of insanity: “Continuously doing the same thing, and expecting a different outcome.” If you don’t like the results you are getting, then dig in and try something else.

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Amazon.com Gets It

Not many people know that Amazon.com is one of the “places to see” if you are looking for companies practicing the TPS. The fact that their sales and profits are hitting records as most others are scratching and clawing to stay in business is telling.

This recent post by Kevin Kelleher on Gigacom really sums the whole thing up with one sentence quoted from Jeff Bezos’ letter to shareholders:

At a fulfillment center recently, one of our Kaizen experts asked me, “I’m in favor of a clean fulfillment center, but why are you cleaning? Why don’t you eliminate the source of dirt?” I felt like the Karate Kid.

If you have to keep cleaning up a mess, find out where the dirt is coming from.

But the philosophy goes deeper.

If an assembly Team Member is continuously spending time cleaning up threaded holes, go find out how the debris is getting in there (or find a way to keep it out). Go and see.

If you keep losing market share, find out why customers prefer your competitors products. (And don’t sit around a mahogany table talking about it, GO AND SEE.)

Other posts on the same site relate to eBay’s troubles trying to compete with Amazon. The difference, I think, is summed up in a quote from an Amazon executive related to me by someone who was a fly on the wall in one of their meetings:

“At an eBay sellers meeting last quarter, my counterpart was booed off the stage. That is not going to happen here.”

Kaizen is less about the tools than it is an obsessive curiousity about what the next problem is between you and perfection.