Category Archives: Best Practice

The Three Stages of Lean Transformation

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As our knowledge and practice of Lean has developed, many of us have come to the conclusion that there is no standardised “one size fits all” roadmap or sequence that details every step of “how to implement Lean” for every organisation. But there are three vital stages that it makes sense to follow. Here they are:

1. Grasp the Current Situation. A full understanding – by all team members – of the current situation, is the essential starting point for any improvement activity. Questions to ask might include: Exactly where are we now? What are we trying to do here? What is our purpose, our mission? How do we add value for our customers? Honestly, how are we performing now? Are our measurement systems capable of telling us? Are we collecting (only) the right information to help us to make decisions and to take action?

2. Achieve Stability. What are the most important processes in your business? How do you develop new products or services? How do you deliver them? How do you plan, execute and measure the vital few? How do you manage your people, from cradle to grave? Are these processes capable, under control and stable? How do you sustain “One Best Way”: do you provide clear instruction, effective training, regular monitoring, wide-spread mistake-proofing?

3. Implement Lean. Only now can you begin to change the way you work, with a real prospect of success and sustained improvement. Once you have stable, repeatable processes you can analyse them and find ways to do them better. With the right tools and support the team can simplify and streamline the processes so that you become more efficient and more productive, and achieve better outcomes.

The detail of how to do it – and the exact tools to use – are gained only through years of experience. If you don’t yet have that experience you’ll need to hire it in, but make sure that you coach your people so that they “learn by doing”. By following this approach, and by rigorously following the PDCA Improvement Cycle (Plan-Do-Check-Act), you can genuinely transform your organisation and make Continuous Improvement a way of life.

The Future’s Bright, The Future’s Lean – Part 2

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Andrew Nicholson
By Andy Nicholson, Managing Director of Nicholson Consultancy

In my previous blog I suggested that many organisations have come to understand that their future success requires the marshalling of Purpose, People and Processes, to deliver value to the organisation, its customers and its stakeholders.

So let’s look at what this actually means in practice:

The purpose of a Lean organisation is to create and deliver real long-term value.

The technical side of this requires a deep understanding of customers and stakeholders and should make clear exactly how, why, when and where value is added.

For the Purpose element to work a common set of values and a vision need to be drawn up that people feel are worthwhile and that they can get behind.

The truly Lean organisation values and develops its people, treats everyone with respect, and demands excellence.

To ensure sustainable continuous improvement requires, what W Edwards Deming, many years ago, described as “Constancy of Purpose” – the discipline of doing the important stuff day after day after day.

When it comes to People, the first and most important step is to get the right people on the bus – people whose values and attitudes fit with those of the organisation.

I’m with the approach of Jack Welch, as CEO of General Electric, on this one – if managers don’t demonstrate those values, they need to be replaced, regardless of how well they “hit the numbers”.

Lean organisations know how to recruit and retain people with the right values, and they are expert at developing each and every employee to their fullest potential.
Such organisations aim to engage people in a greater purpose, they recognise and reward their contribution, and they train and empower them to do the right thing in their own work-flow.

When Henry Ford talked about “the machine that God built” and Jim Womack, Dan Jones, and Dan Roos, wrote “The Machine that Changed the World” they weren’t talking about the motor car itself, they were talking about the process that created the motor car.

From the outset, Ford and Toyota understood that the myriad tasks and activities in a manufacturing plant should work together smoothly and effectively like a well-oiled machine.

Lean organisations are obsessed with their value streams – the essential value-adding tasks by which they create and deliver value.

They actively manage their extended value streams – their supply chains – by partnering and working with their suppliers and customers.

All the time, their people are working to understand “exactly how is value added, how do we cut out the waste, how do we link the pieces together and improve flow?” Put simply, good processes deliver good results.

Last, but not least, pulling all of this together requires the right leadership – leaders who have the right values, who are passionate about Lean and who are in it for the long haul: the sort of people who work very hard to make things very simple.

Lean Start-Ups: are they possible?

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The short answer is “Yes” it is possible to start Lean and stay Lean. Here’s how:

It is important to keep it simple and stay organised. This can be achieved by adopting Lean 5S principles, which is a system to reduce waste and optimise productivity through maintaining an orderly workplace and using visual cues.

This includes making sure anyone can find anything quickly and easily. Keep things simple and visual – can people easily see at a glance what’s OK and what isn’t?

Focus on the following main three business areas:

• Sales – getting the work in / engaging with the customer
• Operations – getting the work done / delivering
• Finance – managing the cash, funding the growth

Employees should be made aware of how they fit into the company structure and what their contribution needs to be to make the business run smoothly, effectively and efficiently.

To achieve this:
• Write down each role and give it a name or a description
• Write down the main purpose of the role and exactly how its provides value to the customer
• Outline “what a good job looks like” – the best way / tricks of the trade, and pitfalls to avoid

Next draw up a grid with the roles along one side and people’s names along the other. For each job show with an R who is Responsible, with a D who Deputises, and with an A who Assists so employees know at a glance what their duties are.

Regular communication is key. For at least one hour each week talk about what’s going well, what’s not going well and what ideas you have to make things better.

By consensus, pick one improvement idea that is easiest to implement, has the highest impact and is affordable. Agree who will make it happen, and when, and get on with it.

Hire slowly, fire quickly. Be clear about values, expectations, Do’s and Don’ts. With new staff, have a one-to-one review for 15 minutes each day, then one hour per week, then one hour per month.

Make a conscious decision to retain or part company at the end of the first day, the first week, the first month. If it isn’t working in the first month, it probably never will. Let people take risks, make mistakes and fail, but expect them to learn and not to repeat their mistakes.

Do the absolute minimum required to add value for the customer – everything else is waste. Keep it simple, keep it electronic, and automate it.

Store data in only one place, share it and organise it so that anyone can easily find what they need.

Seriously consider scalable, cloud-based “pay as you go” systems. Use non-proprietary open systems where you can.

Similarly, do the absolute minimum that you need to do with a new product or process to see if it works. This is what Silicon Valley entrepreneur Eric Ries calls the MVP – the Minimum Viable Prototype.

Experiment quickly, fail early, learn as you go and keep on learning.

The key to Lean is the improvement cycle Plan-Do-Check-Act. In a start-up the most important thing is to get along the learning curve as quickly as you can.

Therefore, you need to cycle through these stages as quickly as you can. You’ll need some sort of plan to start with, but also be prepared to be flexible. This is because the reality is likely to be different from your original plan, so you have to learn as you go.

Have a tight control on costs by keeping fixed overheads to a minimum, outsourcing non-core tasks, “paying as you go” and avoiding long-term tie-ins.

Continually question the reasoning behind any action plan. Always ask yourself ‘does this add value for our customer’, ‘does it make us more profitable’, and ‘does it make things easier for us?’

Manage the cash every day, without fail. This can be easily one by using a simple spreadsheet.

The Lean process is all about keeping it simple, focusing on what matters, learning quickly what works and having the courage to ditch what doesn’t.

Do we all have to fail before we can succeed?

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The value of going Lean is easy to quantify: in forensically examining a firm that is experiencing problems, Lean experts can identify what is going wrong and suggest solutions for the workforce to put in place.

But what if it is a new company, that doesn’t yet need a solution?

At a recent summit from the Lean Enterprise Academy, Lean guru Jim Womack summed it up like this: “Is it possible for an organisation to start up Lean from Day One, or must an organisation grow until it becomes inefficient, and only then learn from its mistakes?”

This challenge helps us re-examine the Lean principles we use every day at Nicholson Consultancy and realise their value as independent tactics that are transferrable to a number of situations.

We might think that the simple answer is to learn from other people’s mistakes, but current thinking is that Lean is situational – we can transfer the skills, but we need to tailor our approach for each organisation and each unique set of circumstances.

The question of where Lean fits into a business strategy mirrors various conversations I’ve had recently with friends and colleagues who are business owners and entrepreneurs.

We’ve all made many mistakes over the years and most of us would like to think that we wouldn’t repeat them. But how do you get it right until you’ve had the experience of trying it and getting it wrong?

The challenge is to create a business that is Right First Time – and having done that to keep it on track so that it never needs major work. Of course, there will always be improvements to be made because the manufacturing landscape changes so often, but an appreciation of Lean strategies can be a solid foundation to build on.

This is an interesting approach that many Lean practitioners and their potential clients will have missed out on. Let’s get the message across that Lean is not only a repair option, it can also be one of the first things on the list when a new business is being planned.

Maybe we don’t have all the answers and maybe we can’t get everything perfectly right from Day One, but surely there’s more than enough experience and accumulated knowledge out there now to at least aim for “More Right than Wrong, Most of the Time!”

Not the snappiest of slogans, but maybe it’s what we should be aiming for.

From BRICs to MINTs – the Second Round of Emerging Market Growth Begins

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The BRIC (Brazil, Russia, India and China) countries have seen significant growth over the last decade since the group of countries were defined as emerging markets in 2001.

Brazil is currently experiencing significant growth in its manufacturing industry thanks in part to high import taxation laws imposed by the government.  These laws were introduced to try and encourage companies to manufacture goods in Brazil rather than import them into the country.  The government policy of high import taxes has worked, especially as far as the automotive industry is concerned and the high tech industry is growing quickly as well.  In fact I would argue that next to China, Brazil is seeing more inward investment, from a manufacturing investment point of view, than many other countries at the moment.  Whether it is to take advantage of a growing economy or leverage the country as a stepping stone into the North American market, you cannot deny that Brazil is on a roll at the moment.

Russia has also seen significant growth over the past decade, thanks in part to a reduction in government imposed restrictions and red tape. Traditionally many companies have chosen markets other than Russia to invest in but those that have taken the plunge and invested in Russia have seen huge growth in their own market share.  The automotive industry is a prime example, many Russian car plants look as though they have just come out of the stone age due to tight government control and lack of investment, but St Petersburg Port has become an unlikely investment hub for the global automotive industry.  Renault-Nissan made a significant investment in the government controlled automotive manufacturer Avtovaz, which has resulted in the alliance controlling a significant market share. Like a Phoenix, the whole automotive industry in Russia is now rising from the ashes and it is just a matter of time before millions of consumers start to spend their money on new cars.

Moving across to India, the country is still seeing significant growth in its economy, thanks in part to a decade of setting up one of the world’s largest markets for outsourcing companies to invest in and it has become the offshoring destination of choice for many companies around the world. Consumer wealth in India is growing significantly and many consumers are making the switch from two and three wheeled vehicles to cars. India’s manufacturing industry has grown around its ability to produce high quality goods from a relatively low cost but highly skilled workforce. Most goods manufactured in India are for export but increased consumer wealth is likely to slow down the rate of export as manufactured goods are sold into the domestic market instead.  So some interesting dynamics at play here which has helped companies such as Tata invest in overseas luxury brands such as Jaguar Land Rover (JLR).  In fact in 2013 JLR sold more cars than any previous year thanks in part to the significant investment from Tata who has a strong belief in the future of the luxury brand.

Ten years on and China is still referred as an emerging market by some analysts but out of the four countries China has seen the largest growth in its economy when compared to the other three countries. As consumer wealth has grown in the country, so has the consumer desire for luxury goods such as cars.  In fact China is the largest car market in the world and it continues to grow. Strict government laws, namely establishing  joint manufacturing ventures, around how western companies can establish a presence in the country, has helped its own domestic manufacturing industry to flourish. However times are changing in China as the government tries desperately to spread the wealth across the country rather than have it all focused along the East Coast.  Large tax based incentives are now seeing more western investment in central and western China and this trend is likely to grow over the next ten years.  Today, companies are finding they have a choice, either to put up with the increasing wage rises in Eastern China or move their operations to lower cost regions of the country.  In some cases companies, even Chinese ones, are looking at other emerging markets around the world to invest in.

Increased wage costs, labour strikes and a desire to exploit other growing markets has led to the emergence of a new wave of emerging economies, thirteen years after the BRICs were defined. Hold on tight, the second wave of emerging markets is vying for inward investment, say hello to the MINT countries!  This new acronym refers to Mexico, Indonesia, Nigeria and Turkey and was coined by Jim O’Neill, the former chief economist and head of asset management at Goldman Sachs.  Interestingly Jim was also credited with introducing the BRIC term back in 2001, so you could say he has expertise in identifying key growth economies around the world.  So let me now explore why these countries are likely to take over from the BRICs as the economic growth engine of the world.

One of the common things that three of the MINT countries share is that they all have geographical positions that should be an advantage as patterns of world trade change.  For example, Mexico is next door to the US and also Latin America. Indonesia is in the heart of South East Asia but also has strong connections with China.  The BRIC countries have certainly helped boost the profits of many logistics providers around the World as they ship manufactured goods from China and India to all corners of the world.  Given that the MINT countries are geographically better positioned next to key economies then I would expect the dynamics of the logistics industry to change given the shorter distances that goods will have to be shipped to reach their point of distribution or sale. As for Turkey it can be regarded as being in both the West and East however Nigeria is the odd one out here as it is located in a part fo the World that has traditionally seen little development, at least by Western standards but it could be a key country once other countries stop fighting with each other and trade finally opens up across the Continent.  Given that Nigeria has been included in the MINT definition it could lead to the country being accepted as a member of the G20 as the other three countries are already members.

Economically three MINT countries, Mexico, Indonesia and Nigeria are commodity producers and only Turkey isn’t.  This contrasts with the BRICs where two, Brazil and Russia are commodity producers and the other two countries aren’t.  In terms of wealth, Mexico and Turkey are at about the same level $10,000 per head, this compares with $3,500 per head in Indonesia and $1,500 per head in Nigeria which is roughly the same as India.  They are slightly behind Russia at $14,000 per head and Brazil on $11,300 but still a bit ahead of China on $6,000.  As part of the research for this blog I found a great set of infographics which dives deeper into each of the MINT countries, click here for the article.

From an infrastructure point of view, these countries have some significant catching up to do, especially in Indonesia and Nigeria. Jim O’Neill recently completed a trip to each of the MINT countries on behalf of the BBC and he found out some amazing facts.  One of the most interesting was that about 170million people in Nigeria share the same amount of power that is used by about 1.5million people in the UK.  Almost every business has to generate its own power.  So this begs the question, how has Nigeria grown at a rate of 7% with literally zero power!  If Nigeria is able to sort out its utilities infrastructure then it is estimated that Nigeria could grow at 10-12% per year and become a key economic hub for the African continent.

Indonesia faces both political and infrastructure challenges and Turkey has its politics and a desire to do things the Western way which when combined with the Muslim faith in the country is certainly a challenge but they are determined to see their economies grow over the next decade. It is no surprise that Turkish Airlines is currently the fastest growing airline in the world.

From a manufacturing point of view, Mexico is grabbing most of the MINT related headlines in terms of levels of manufacturing inward investment.  Over the past two years it has established itself as a key automotive manufacturing hub, thanks in part to its relative proximity to the huge North American market and significantly reduced labour rates. Nissan, Daimler and VW have all announced multi-billion dollar investments in new production plants in the country.  Indonesia is seeing significant investment from both Western and Chinese companies looking to get out of the increasingly more expensive Chinese labour market.  Just as Mexico stands to become a leading automotive hub, then it is possible that Indonesia could become a leading high-tech investment hub over the next decade. High Tech goods have been manufactured in Indonesia for many years but I would expect exponential growth to now continue given that the country has now been identified as a significant growth economy.

From a B2B perspective it has been interesting to watch how technology has been adopted across the BRIC countries in recent years as it provides clues on B2B adoption levels across the MINT countries.  Out of all the BRIC countries and from a communications point of view, China has placed a lot of emphasis on improving its legacy telecommunications and network infrastructure.  It has also been keen to develop its own XML based message standards due to the increasing importance placed on internet based trade around the world.  However what has actually happened over time is that Western companies entering the Chinese market have brought in their Western ways of working and this includes their best practices for deploying B2B, ERP and other IT infrastructures that are key to operating a business today.  Also, China has huge global expansion plans and if they are to establish further operations in North America and Europe they will have to adopt Western B2B message and communications standards such as EDIFACT and AS2.  For this reason I believe that EDI messaging is here to stay and in fact the growing success of the emerging markets and their global expansion plans could lead to a growth in EDI traffic around the world.  Who thought that would happen back in 2000 when XML was touted as the replacement for EDI messaging!

Since the BRICs were identified as growth economies in 2001, technology has moved on very quickly and I think we will see the MINT countries move straight to new telecommunications infrastructures such as mobile networks.  After all reliable, fixed line internet connectivity is not widely available in many of the MINT countries.  Given that it is far quicker to install a mobile network when compared to a fixed line telecommunications infrastructure then I would expect mobile commerce or M-Commerce to grow faster in the MINT countries than the BRIC countries over the next few years. Here is a great SlideShare presentation that I found highlighting how a local telco provider, Vodacom, plans to support the mobile communications market in Nigeria, click here for more information. China will probably be implementing more mobile networks across the Western parts of its country but collectively I think mobile network adoption will be faster across the MINTs.

If companies are able to get access to reliable mobile and utilities infrastructures then we will see levels of B2B adoption increase quickly as the MINTs look to utilise more cloud based B2B integration services.  Given the relatively low IT skills that exist in some MINT countries, a cloud based approach to rolling out B2B infrastructures will help these countries grow their economies far more quickly than the BRICs were able to achieve in their early days on the world stage.

International expansion is an area that I have covered in numerous blog posts over the past few years, but this particular one encapsulates most of the areas that companies have to be aware of when entering a new market for the first time.  I have discussed Mexico extensively in an earlier blog post and future blog posts I will cover the other three MINT countries in more detail. So in summary, an interesting time for Western companies, should they invest in BRICs or MINTs ? As I have a sweet tooth I think I know where my money would go!