Where Do You Want to Go?


"What do I do next?" we often hear. "My company is in a world of hurt, and it really needs to get better. Lean principles make a lot of sense. But what do I do with principles? How do I implement themright nowin my company?"

This reminds us of Alice as she wandered through Wonderland:[1]

[1] Alice's Adventures in Wonderland by Reverend Charles Lutwidge Dodgson under the pseudonym Lewis Carroll, originally published in 1865.

'Would you tell me, please, which way I ought to go from here?'

'That depends a good deal on where you want to get to,' said the Cat.

'I don't much care where' said Alice.

'Then it doesn't matter which way you go,' said the Cat.

so long as I get somewhere' Alice added as an explanation.

'Oh, you're sure to do that,' said the Cat, 'if you only walk long enough.'

In Chapter 7 we recommend that you start a lean initiative by answering two questions:

1.

How do you create value for customers and make a profit?

2.

What, exactly, is your main problem right now?

To this we add two more questions:

3.

What threatens your continued existence in the future?

4.

What do you really believe about people?

A Computer on Wheels

During the late 1970s and early 1980s, Toyota was doing very well. But in 1985, the value of the yen started its steep fall against other currencies, prompting Japanese automakers to move manufacturing abroad to satisfy foreign markets. As a result, Japan found itself with more automotive manufacturing capacity than the domestic market could hope to absorb, which drove prices down and created a severe downward pressure on profits. As the low-cost producers, Honda and Toyota were able to sustain a high level of R&D, but the other Japanese automakers cut back on development, which led to a downward spiral in sales. Eventually the main Japanese automakers, except Honda and Toyota, were purchased by global groupings such as GM, Ford, Daimler-Chrysler, and Renault. Suddenly Honda and Toyota were competing with these global groupings on their home turf.[2]

[2] Information for this section came from Automobiles: Toyota Motor Corporation: Gaining and Sustaining Long-term Advantage Through Information Technology, case prepared for the Columbia Project: Use of Software to Achieve Competitive Advantage, by William V. Rapp Co-Principal Investigator The College of International Relations Ritsumeikan University Kyoto, Japan, April 2000.

At the same time, the Toyota Production System became well known and widely copied. As other automakers became more efficient, Toyota's lead as the world's most efficient auto producer narrowed. Technical advances in vehicle features were rapidly copiedfor example, as the market moved to minivans and SUV's, most auto companies rapidly followed. Furthermore, with the rest of the world comparatively saturated with automobiles, it was clear that the future growth market would move to Asia.

In this atmosphere, Toyota developed a long-range strategy for creating a sustainable competitive advantage. That strategy, best expressed as Smart Design, Smart Production, Smart Car, centered on using information technology to make profit-generating innovations difficult to copy. During the 1990s, Toyota became a very competent information systems company.

Under the Smart Production banner, Toyota replaced the traditional single assembly line with a half dozen short lines separated by buffer stock and synchronized by software, giving it a boost in productivity that is difficult to copy. Smart Design included digitizing A3 production standards and developing a way to simulate manufacturing processes on CAD systems during the design process, greatly speeding up time to market for new cars. The Smart Car initiative prompted major investments in developing internal electronic manufacturing and embedded software capability, enabling Toyota to launch the Prius in Japan in 1999. With drive-by-wire throttle, brake, and shift controls, the surprisingly popular hybrid is truly a computer on wheels.

Toyota's success with information technology comes as something of a surprise, since the company has a reputation for its minimalist approach to IT. While competitors built highly automated plants to reduce the labor content in vehicles, Toyota experimented with automation and didn't find that it would pay off when the total cost was considered. While competitors invested heavily in computerized scheduling systems and cross-docking automation, Toyota felt that people should be at the center of the manufacturing process and that simple manual systems would work better. Toyota management has traditionally resisted using information systems to manage material flow and production scheduling.[3] We find it remarkable that a company that has been so cautious about using information systems would become such a leader in leveraging these systems in its production processes, in its development approach, and in its products.

[3] See The Toyota Way Fieldbook by Jeffrey Liker and David Meier, McGraw Hill, 2006, pp. 208212.

A Long-Term Perspective

Some companies survive for hundreds of yearsbut not very many. In The Living Company, Arie de Geus points out that the average life expectancy of a multinational corporationFortune 500 or equivalentis between 40 and 50 years.[4] People live for an average of 75 years, so they can expect to outlast perhaps three quarters of the companies that existed when they were born. The average life expectancy of well-established companies is an order of magnitude less than the longest-lived companies. No living species has such a wide discrepancy between its average life expectancy and maximum life span.

[4] Arie de Geus, The Living Company: Habits for Survival in a Turbulent Business Environment, Harvard Business School Press, 1997, 2002, p. 1.

Institutions such as churches, armies, and universities live for centuries. Why do large companies die or get acquired so young? More importantly, how can good companies survive more than a couple of generations of management? Just to make it into the list of companies de Geus studied, a company had to be very successful. Not only had the company made it past the startup phase and the growing pains of an expanding company, it had become a large multinational corporation. And then the world changed, and many of these very successful corporations failed to adapt to the new reality.

Organizations that have become successful tend to establish their habits in the days when they are growing rapidly and there is plenty of market demand. But eventually all growth engines run out of fuel, and past success no longer points the way to future growth. At this point, the organizations that have developed the capability to learn and adapt are the ones that survive. De Geus believes it is the ability of managers to envision the future that enables them to adapt to that future before it is too late; but unfortunately, managers often develop "future-blindness," preferring to stay on the course that has led to success in the past.

This view of future-blindness is seconded by Clayton Christensen[5] who shows that companies that move up-market to maintain margins, leaving the less profitable down-market to their competitors, are frequently overtaken by disruptive technologies. These companies serve their current customers so well that they have little incentive to imagine a future filled with risk and low margins. We see disruptive technologies in the computer industry all the time, as smaller, faster, less power-consuming hardware replaces bigger, more profitable equipment. In software, we see inexpensive software packages replacing offerings with large per-seat fees and self-service software replacing consultant-intensive businesses. In an industry that moves as fast as ours, envisioning and being prepared to adapt to the future is a survival issue.

[5] See Clayton Christensen, The Innovator's Dilemma, Harvard Business School Press, 1997; Harper Business, 2000, and Clayton Christensen and Michael Raynor, The Innovator's Solution, Harvard Business School Press, 2003.

Toyota has a tremendous ability to learn and think in an evolutionary manner. Sakichi Toyoda counseled his son Kiichiro and nephew Eiji, "Stay ahead of the times." In 1934 the Toyoda company added car manufacturing to loom manufacturing, even though it would take two decades for the automobiles to start paying their way. In 1958, with sales of cars at barely more than 2,000 per month, Toyota built a new factory with a capacity of 10,000 cars per month to the astonishment of both its dealers and competitors.[6] But the factory positioned the company to lead the market as the Japanese economy expanded in the 1960s. In 1984 Toyota opened the New United Motor Manufacturing Incorporated (NUMMI) plant in Fremont California, positioning it to manufacture in the United States a year before the precipitous drop of the yen against the dollar. Toyota's Smart strategy was initiated with the purchase of an electronics plant in 1989, well before overcapacity began to plague the Japanese market. In 1995 Toyota purchased a controlling interest in Daihatsu to strengthen its position in the Asian market. Today Toyota is focusing on environmentally sensitive cars and intelligent traffic systems as key avenues for future growth.[7]

[6] Eiji Toyoda, Toyota: Fifty Years in Motion, Kodansha, 1987. First published in Japanese in 1985.

[7] See Automobiles: Toyota Motor Corporation: Gaining and Sustaining Long-Term Advantage Through Information Technology, case prepared for the Columbia Project: Use of Software to Achieve Competitive Advantage, by William V. Rapp Co-Principal Investigator The College of International Relations Ritsumeikan University Kyoto, Japan, April 2000.

An organization that expects to survive over the long term must consistently develop an insightful view of the future and base decisions on this long-range vision.

Centered on People

Scientists will tell you that the first step in effective problem solving is to place the problem within a conceptual framework that reflects a sound understanding of how things actually work. For example, Frederick Winslow Taylor based his work on an incorrect understanding of the nature of workershe started with the premise that front-line workers are inherently lazy and basically interchangeable. Management practices based on this attitude toward people are incapable of leveraging the intelligence of "ordinary" workers. When an organization with a culture based in mass production thinking attempts a lean initiative, the results will probably be mediocre.

There are two conceptual frameworks concerning the use of technology in the workplace. The first framework suggests that we should automate existing jobs to reduce the need for people or the skill level needed to perform the job. The second framework encourages us to use technology to enhance the capability of workers.[8] As we have seen, Toyota operates in the second framework. But what's wrong with the first? Automating routine tasks sounds like a good idea. In fact, as we noted in Chapter 8, automating repetitive tasks in the build and deployment process eliminates variation and gives us reliably consistent results.

[8] Ibid., and see also Larry W. Hunter and John J. Lafkas, "Opening the Box: Information Technology, Work Practices, and Wages," Working Paper 98-02-C, Wharton, Financial Institutions Center, June 1999.

However, removing people from a processor expecting people to perform a process by rotemeans that the process no longer has the capacity to change, to adapt, or to discover. For example, drug companies have spent billions automating the routine side of drug research. They have replaced lab technicians with robots, making it possible to test far more drug compounds than they could possibly have done before. This was supposed to lead to a lot more blockbuster drugsbut results have been disappointing. The reason, many speculate, is that by "deskilling" the job of drug experimentation and removing the human element, companies made implicit assumptions about what spaces should be explored and lost the human capacity to notice unexpected results and try out new experimental spaces.[9]

[9] From "Supporting Cheap and Rapid Iteration (with a Human Touch)" by Robert D. Austin, Cutter Consortium Business-IT Strategies Advisory Service, April 19, 2006.

The difference between testing automation in drug industries and testing automation in software development is this: The drug testing automation "deskilled" testers (replaced them with robots), while effective automation of software testing "upskills" testers. That is, it automates the routine, repetitive testing in order to free testers up to focus on mistake-proofing the development process, making sure users find the software easy to use, doing exploratory testing, and property testing. In a nutshell, deskilling workers creates interchangeable people while upskilling workers creates thinking people.

The question to resolve before you embark on a lean initiative is this: What do you really believe about people? Consider your attitude toward process. Do you think that a well-documented process that everyone follows without question is the path to excellence? Or do you think that the reason to standardize a process is so that people doing the work have something solid to question and change? Lean principles are solidly based on the second viewpoint.

Consider your attitude toward schedules. Does it make you nervous when someone suggests that the development team should decide what can be done within a timeframe and tell managers, rather than the other way around? Or your attitude toward work assignments. Does it seem unnatural for people to figure out for themselves what to do next rather than being told?

In order for lean to work, your conceptual framework about people has to contain the fundamental belief that the people doing the work know how to do it best. You have to be nervous about automation that would eliminate people from the process or reduce the skill levels needed to do a job. You have to think it strange that many levels of authorizationor even one level of authorizationare required for decisions made on the front line. You have to really believe there is no better way to tackle problems than to give the people doing the work the training, the tools, the charter, and the support to solve their own problems and improve their own processes.




Implementing Lean Software Development. From Concept to Cash
Implementing Lean Software Development: From Concept to Cash
ISBN: 0321437381
EAN: 2147483647
Year: 2006
Pages: 89

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