A kerfuffle over Coffee

Coffee beansI was having a chat with someone about ‘batching’ the other day, and wanted to point them to a short and simple post I wrote a few years ago that I thought would assist…so I looked for it…and couldn’t find it…and then realised that I’d never published it on this blog…so here it is:


I wrote a post a bit back entitled One at a time please. In it, I attempted to explain (using my washing up at home1) about the problems caused by doing things in batches, and that we should strive to shift our processes towards ‘single piece flow’.

This is such an important point that I thought that I would put forward another, hopefully more obvious, example.

Right, here goes:

What do you see here…

Coffee - both doors closed

…yep, we had two fancy coffee machines in our last works kitchen.

If you were to watch people using them you would note that it is rare that they are both being used…but it does happen…so having 2 machines helps cope with the variation in our demand for a coffee (with spikes in demand unsurprisingly occurring Monday – Friday at around 10:30 and 15:00)

These machines need regular cleaning. I think, from my observations that this is performed weekly.

Cleaning

How about this picture?

Coffee - both doors open

Yep, this is what happened when they were both being cleaned.

We used to have a cleaner that liked to come in at around 10:30 (not such a good time really…but that’s a different story), open up both machines and then proceed to perform his cleaning steps one-by one for both machines. Something like this:

  • Take out both sets of waste drawers, empty them and put them by the sink
  • Take out both drip trays, empty and put them by the sink
  • Open up both coffee hoppers and fill them
  • Open up both creamer hoppers and fill them
  • Open up both sugar hoppers and fill them
  • Clean the pipes and connectors of both machines
  • Wash and dry the waste drawers and drip trays for both machines
  • Put everything back together for both machines
  • Close the front drawers of both machines
  • Wipe the outsides of both machines
  • …and done. Nice job.

This takes some time…and what can’t happen whilst this is being done?

No one can make a coffee! (or hot chocolate or mocha or …..name some other weird drink made from permutations of powder)

What’s the purpose of the machine? To reliably make (good) coffee as and when someone wants one.

A change in cleaner

I noticed one day that we had changed our cleaner. I also noticed this:

Coffee - one open, one closed

Oh yes! She does exactly the same steps as the earlier cleaner…but she does it one machine at a time.

Now, for those die-hard ‘economies of scale’ fans out there:

  1. There is hardly any time difference between the two cleaning approaches; BUT
  1. We can all still make coffee whilst it’s being done!!!

Even better, she concentrates on one machine at a time (in a state of flow), likely making sure that all is okay with it, potentially causing her to think far wider than just repeating a set of standard steps.

So there you go: a short and simple example of the sense in reducing batch sizes as and when we can 🙂

Anyone for a coffee?

Footnotes

1: My earlier post: If this is the first time you’ve read about batches then please do read my earlier post  – it goes into more detail.

There was one among you who, in response to this earlier washing up ‘batch to flow’ post, spent quite some time explaining to me exactly how they emptied their dishwasher, specifying how they had experimented with which items of cutlery were best held between each digits. Nice! You know who you are…Tom 🙂

2: On cleaners: I don’t know why the cleaner changed or why they adopted their different approaches and I make no judgement on either of them. I just really like being able to get a coffee whilst the machines are being cleaned!

3. Simple, and complicated: I know that there are all sorts of batches ‘out there’ (whether temporal or quantity based)…and I know that there are constraints that need to be understood and worked with (you can’t usually just remove, or even reduce, batch sizes – you have to look at the ‘why’)….but the desired target condition of ‘single piece flow’ can be used as a vision to experiment towards, whatever the nature of your batch.

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The River Rouge – a divergent legacy

ford-model-t-1925-6I expect that you’ve heard of the industrialist Henry Ford (1863 – 1947), but what about his massive ‘River Rouge’ car plant?

If you had gone for a ‘factory visit’ in the late 1920s, what would you have noticed?

The Model T Production line1

Ford wanted to provide a car that the masses could afford to buy – to ‘democratise the automobile’. Enter the Ford Model T – a car designed to be easy to drive and easy to repair, with standard interchangeable parts.

…but it wasn’t just about the car’s design. It was about the design of how the car was made.

In 1906, Ford’s engineers did something different – they experimented with the physical layout of their manufacturing system. They arranged their manufacturing tools in the sequence of processing steps rather than the normal practise of by machine type. This seems ridiculously obvious now (hindsight is a wonderful thing!), and the result was considerably higher productivity. This innovation created a flow in the order of the work but, at this stage of the Ford story, each work step was still done on stationary tables and stands.

In 1913, they took the next breakthrough step: they experimented with the moving assembly line for a small section of the process and, after some fine-tuning, this increased productivity fourfold…..and so the engineers got to work spreading this method throughout the manufacturing value stream.

Ford was constantly reducing his costs, not by ‘cost-cutting’ but through a fanatical focus on creating flow. This was achieved by a combination of continuous (incremental) and breakthrough (step change) improvements…which enabled Ford to pass on these savings by consistently lowering the price of the Model T…which increased demand…which outstripped supply…which meant that ever further production innovations were required to keep up!

Highland ParkA great deal of the experimentation explained above was carried out at the purpose built Highland Park factory. It was six-stories high, with a railroad track running down a central atrium (pictured) and cranes lifting materials from the rail carriages up to balconies that opened to the appropriate floors on either side.

The basic pieces of the Model T started at the top floor and, through the use of chutes, conveyors and tubes between floors and the force of gravity, they made their way down through the various sub-assembly processes until they reached the ground floor final assembly conveyor….and then the completed car could ‘drive off the line’.

River RougeWhilst Highland Park was an amazing feat of engineering, it had its limitations – such as the central crane-way that was probably a huge bottleneck! Henry Ford went for one more innovative jump – he created an enormous horizontal factory complex called the River Rouge2. The site started with raw iron ore and materials and finished with completed automobiles. It had its own ship docks, power generation plant, blast furnaces and rolling mills – all arranged to achieve flow (I’ve added the basic flow over an aerial picture).

“The River Rouge Plant in 1925 produced about one vehicle per minute in a total lead time of about three days and nine hours from steel making to finished vehicle.” (Source: Henry Ford’s book ‘Today and Tomorrow’)

“…as long as it’s black”

You are probably familiar with the famous Henry Ford quote that ‘you can have any colour you like, as long as it’s black’. Today this sounds quaint, even humorous but there’s a seriously important point within: the manufacturing process was not designed to handle variety.

This hadn’t been a problem – people just wanted to be able to afford a car! – but rising standards of living and the birth of modern marketing gave rise to the ‘sophisticated consumer’. The new problem became offering ever wider variety (e.g. different colours, engine choices, trim levels, add-ons….) whilst retaining low-prices (and therefore mass-production costs).

And so to the crux of this post: Lots of organisations from all around America and the world went to the River Rouge to learn…but what did they see…and, therefore, what did they go away to do?

American Manufacturers post World War II.

So American organisations saw scale at the River Rouge.

Unfortunately, achieving the product variety now demanded by customers meant regularly stopping the production line to change tooling to be able to produce the different variants. Delivering variety was seriously hindering speed.

What to do? Here’s what they came up with:

  • Let’s interrupt the flow and decouple the stages within the production line, allowing the different processes to operate independently, and create buffer stocks between each process;
  • Let’s build each process to the largest scale feasible, and then run large batches per product variant through at the fastest rate possible and thus keep the number of changeovers required down to a minimum.
  • Let’s build warehouses to store all the resultant inventory (Work-in-process and finished goods)

This fundamentally changed production from workers producing for the next process step to workers merely producing for inventory. It became a case of ‘make lots and inspect later’. It was virtually a crime to stop the line3 – a disaster for quality!

Of course, once the main process steps were decoupled, their co-location didn’t matter so much. So rather than having a number of end-to-end manufacturing sites across America, the ‘logic’ could extend to…

  • Let’s centralise process steps into ‘centres of excellence’ so that we can increase scale even further! We might end up with, say, a massive steel works in one city, huge sub-assemblies in another city and a mega final assembly yet somewhere else.

…and the above ‘solution’ to variety introduced massive wastes in the forms of transportation across sites; inventory and its motion as it is constantly transferred in and out of the warehouse; over-production and obsolescence; defects through poor quality and rework…and on and on and on.

You could conclude that they ‘unlearned’ (even destroyed) what Henry Ford had achieved before variety had been introduced.

The above led American manufacturers to the hell of:

  • centralised planning, culminating in mega algorithms calculated by Manufacturing Resource Planning (MRP ii) computer applications, producing theoretical answers far from reality; and
  • ‘management by results’ using managerial accounting data (unit costs, rates of return, targets, budgets,…) to command and control the work.

This approach, even though it was hugely wasteful, proved profitable until the 1970s…until domestic demand became satiated and globalisation opened up the market to other manufacturers. Things suddenly became rather competitive….

Over in Japan

The Japanese, and Toyota in particular, saw flow at the River Rouge.

Taiichi Ohno (Toyota) realised that flow was the important bit: “ [they] observed that Ford’s plant conserved resources, by having processes linked in a continuous chain and by running slowly enough so that people could stop and fix errors when they occurred.”  (Johnson4)

Japan, unlike America, did not have the luxury of abundant resources after World War II. They couldn’t afford to create huge factories or tie up money in inventory…so they had to find a different way – to do a lot with a little.

Taiichi Ohno came to the conclusion that variety and flow had to go together i.e. “a system where material and work flowed continuously, one order at a time” (Johnson).

This created some clear challenges to work on:

  • rather than simply accepting that machine changeovers took time, Ohno set his workers the challenge of continuously reducing set up and change-over times; and
  • rather than running high-volume batches per variant, Ohno empowered each worker to design and control the steps they performed so that they could perform different steps on each unit that passed through them

In short, he set his people a huge visionary challenge, of working together as a system to think about the incremental, and sometimes giant, steps they could take to handle variety ‘in the line’.

Rather than centralised planning with standardised work dictated to them, the workers were empowered, and encouraged, to think for themselves, to deal with what was in front of them, to experiment and to innovate….and to share what they had learned.

And, wow, they came up with some fabulous techniques such as ‘Single-Minute Exchange of Dies’ (SMED), ‘pull’ using kanban, product supermarkets, ‘stop the line’ using andon cords, visual management, machine ‘right sizing’…and on and on.

I could write about each of these…but I’m not going to (at least not now). The point is not the brilliant innovations themselves. It is the clear and permanent challenges that were set and the constant progress towards them.

You may copy ALL of Toyota’s techniques but they (and other like-minded organisations) will still leave you far behind. Why? Because, whilst you are attempting to copy them they are racing yet further ahead. Indeed, what you copy (even if you ‘get’ the why) may be an out-dated technique before you go live! (This is to compare a static vs. dynamic environment)

What about service?

The Western (?) ‘solution’ for service organisations has, sadly, been virtually the same – scale: to standardise, specialise, centralise and ‘crank up the volume’.

Yet the challenge of handling customer variety is so much bigger: variety for service organisations is virtually infinite – it’s different per customer and, even for a given customer, it differs as their circumstances change.

So should we just pick up the ‘Toyota tool kit’ and get implementing? No. The techniques to meet the challenge will differ. Service is NOT manufacturing.

But can we learn from Toyota? Most certainly – but this must be at the deepest ‘beliefs and behaviours’ level.

The core message from the above is that service organisations should design their system such that the front line are allowed, and enabled, to absorb variety in customer demand.

If you run a service organisation and you have set up:

  • a front office ‘order taking’ function to categorise demand (which can only be based on the limited information available to them), and break it down into standard ‘work objects’ from an allowable catalogue of variants;
  • a ‘workforce management’ function to: prioritise and allocate (i.e. push) these work objects into ‘work queues’, usually by temporal batches (e.g. by day/ shift or weekly);
  • multiple specialised back office silos to churn through their allocated work, ‘motivated’ by activity targets (and incentives) regarding volumes of work performed; and, as a result
  • a complete confusion as to who is taking responsibility for resolving the customer need

…then you have seen scale, through commanding and controlling the work, as the ‘solution’.

If, however, you are on a journey towards:

  • equipping the people at the point of contact with the necessary expertise and freedom to respond to what most customers will predictably want (i.e. the bulk of demand); and
  • where more unusual demand hits the system, allowing and enabling these same ‘front of service’ people to ‘pull’ expertise to assist, yet retaining ownership of the service provision (thereby speeding up their rate of learning and widening their skills and knowledge)

…then you are on a similar track to Ohno: Pursuing flow for each unique customer demand, through revealing and harvesting the passion and pride within your workers.

Footnotes:

1. Sources: Much of the above comes from early chapters within three books:

  • ‘Relevance Regained’ by H. Thomas Johnson
  • ‘Profit Beyond Measure’ by H. Thomas Johnson
  • ‘Toyota Kata’ by Mike Rother

Other details (including pictures) come from searching around the ‘interweb’ thing.

…and of course the service ending is inspired by the work of John Seddon.

2. Historical point of detail: “The River Rouge was built to produce Model T Fords for decades to come, [but] by the time it was capable of full production later in the [1920s], a factory a tenth its size could have handled the demand for Model Ts.” (Wiley)

i.e. Henry Ford had built this huge production machine but his product had gone out of fashion because its competitor, General Motors, was providing the variety that customers now wanted, albeit using scale to do so. Ford was now in a dash to recover.

3. ‘Stop the line’ crime: Workers knew that managers wanted them to make as many as possible, with no ‘down time’. I understand that this is where the phrase to ‘throw a spanner in the works’ comes from…which refers to a disgruntled worker ‘accidentally’ dropping a tool into the assembly line mechanism so that the line stopped and they all got a break whilst the cause was found and rectified.

4. A fresh giant: Johnson is a giant for me, and I’ve been meaning to add his ‘giant bio’ to this blog for ages now…I have finally done so 🙂

Yellow polka-dot belts

Yellow polka dot beltThis is a short and simple post that merely shares a most excellent quote that I have on my wall – it says so much to me:

“To break down silos and look at work cross-functionally, an organization has to confront how it approaches incentives, bonuses, performance reviews, and the like.

Without a senior leader in place who understands the nature of flow and likely has experienced the benefits of holistic work systems, middle managers’ hands are tied.

Without a clear vision from the top, the most motivated middle manager who “gets it” can do very little to experiment with cells.

So here we are again – back to leadership. Instead of junior-level people getting black belts, green belts, and yellow polka-dot belts, leaders have to learn about these principles. We have a long way to go.” (Karen Martin)

 

False Economies

chasing moneySo I expect we have all heard the phrase ‘Economies of Scale’ and have a view on what is meant.

The phrase is probably covered within the first pages of ‘Economics 101’ and every ‘Beginner’s book of management’. I think the idea has even leaked out of these domains and is used in every-day parlance. It is seen merely as ‘common sense’*.

(* please read and reflect upon a hugely important quote on ‘common sense’ when you get to the end of this post)

So what is the thinking behind ‘Economies of Scale’?

Let’s start at the beginning: Why is it said that we benefit from ‘economies’ as an organisation grows larger?

The idea in a nutshell: To run a business you need resources. As you grow, you don’t necessarily need a linear increase in those resources.

Basic example: A 1-man business premises needs a toilet (if he needs to go, well he needs to go). But when the next person joins the growing company he doesn’t get his own personal toilet written into his ‘remuneration package’. No, he has to share the existing toilet with his fellow employee. You can see this logic for lots of different things (one building, one IT system, one HR manager….), but I reckon a toilet is about as basic as it gets.

The theory goes that as the volume of output goes up* then unit costs come down (where unit cost = total cost/ units of output).

(* I’m writing generally now…I’ve moved on from toilet humour 🙂 )

It should be noted that the classical economists that came up with the theory did accept the idea of ‘diseconomies of scale’: that of costs rising as growing organisations become more complex, more bureaucratic…basically harder to manage.

You’ll likely see all this expressed in economics text books with a very simple diagram (below) and, voila, it is surely so!

economies of scale

Getting into more specifics about the phenomenon, three distinct reasons are given for those scale economies:

  • Indivisibility: Some resources aren’t divisible – you can’t (easily) have half a toilet, a quarter of a receptionist, 1/8th of a manager and so on.
  • Specialisation along with Standardisation: this reason goes way back to the writings of Adam Smith and his famous book called ‘The Wealth of Nations’ (1776). In it, he used the example of a pin factory to explain the concept of ‘the division of labour’. He explained that one person performing all the steps necessary to making a pin could perhaps make only 20 pins a day but if the pin-making process were broken up into a series of limited and standardised operations, with separate people performing them in a joined-up line, productivity could rise to thousands of pins per day per worker.
  • Machinery: Investing in ever larger machines mean that they can turn out more and at a faster rate…and our beloved unit costs come down. In service organisations the equivalent could be a ‘bigger, better’ telephone system, IT system,…etc.

Sounds like a water tight case to me – ‘Economies of scale’ proven, case dismissed!

Not so fast…a few dissenting voices:

“All the above seems to be about managing our costs? We are concerned about where this might lead – shouldn’t we be first and foremost focused on delivering value to our customers?”

“We’ve got really low unit costs at lots of our activities…and we keep on making ‘economies of scale’ changes to get them even lower…but this doesn’t seem to be reducing our total costs (they remain annoyingly high)…are we missing something?”

“Gosh, that ‘economies of scale’ average cost curve looks so simple…so all we need to know is when we are at the optimum size (Q) and stop growing. Easy! Can someone tell us when we reach that point? How about a nice warning signal when we are getting close? What do you mean it’s just ‘theoretical’ and no-one actually knows?!”

“I’ve heard that ‘behavioural economics’ is debunking a central assumption within Adam Smith’s classical economic ideas. Apparently we are all human beings (with our own unique purposes), not rational robots!” (Nice link: Who cooked Adam Smith’s dinner?)

“We don’t make pins. We are a service organisation. We have much variety in demand and our customers are ‘co-producers’ within our process…specialisation and standardisation can do much harm to them, and therefore us!”

Meanwhile, on another planet…

Taiichi Ohno developed the Toyota Production System (TPS). In so doing, he used totally different thinking, with profound results.

(Note: Historians have identified a core reason for this difference in thinking as the heavily resource-constrained context that Japan found itself in after the 2nd world war. This was in complete contrast to 1950s America that had an abundance of resources and booming customer demand. In short, Ohno had to think differently to succeed.)

The big difference – Flow, not scale, as the objective: Ohno concentrated on total cost, not unit costs. He realised that, first and foremost, what matters is how smoothly and economically a unit of demand is satisfied, from initial need through to its completion (in the eyes of the customer).

The flow is everything that happens between these points and, as well as all the value-adding steps, this includes:

  • all the time that nothing is happening (a huge proportion of a traditional process)
  • all the steps that occur but shouldn’t really need to (i.e. they are non-value adding);
  • all the repeat and/or additional steps needed because something wasn’t done right; and (the worst of all)
  • everything needed to be done when the customer returns with the good or service as not being acceptable (where this could be days, weeks or even months later)

There’s no point in a particular activity being made ‘efficient’ if this is detrimental to the flow.

‘Economies of scale’ thinkers (and their management accountants) are obsessed with how much each activity costs and then targeting reductions. Their belief is that, by reducing the costs of each activity, these aggregated savings will come off the bottom line. Such thinking has led to:

  • ‘large machine thinking’ (which also relates to centralisation/ shared services);
  • ‘batch thinking’ to make these resources work (allegedly) more efficiently;
  • ‘push thinking’ to keep these resources always working – high utilisation rates are king; and
  • inflexibility due to highly specified roles and tasks

…which cause a huge amount of waste and failure demand.

Ackoff made incredibly clear in his systems TED talk (using the automobile as his example) that trying to optimise the components of a system will not optimise the system as a whole. In fact, the reverse will be true and we can expect total costs to rise.

Rather than trying to get the cost of a specific activity down, Toyota (and other system thinkers) focus on the end-to-end horizontal flow (what the customer feels). This is a different (systemic) way of thinking and delivers far better outcomes.

It is no coincidence that Ohno is also credited with much of the thinking around waste. It is only by thinking in terms of flow that waste becomes visible, its sources understandable, and therefore its reduction and removal possible.

In short, Cost is in flow, not activity.

Flow thinking has led the design of systems to:

  • ‘right-size thinking’ and ‘close to customer thinking’;
  • ‘single-piece flow thinking’;
  • ‘pull thinking’; and
  • handling variety ‘in the line’ thinking (Note to self: a future post to be written)

These all seem counter-intuitive to an ‘economies of scale’ mindset, yet deliver far better outcomes.

(How) does this apply to service?

Okay, so Ohno made cars. You might therefore question whether the above is relevant to service organisations. Here are examples of what the ‘Economies of scale’ mantra has given us in service, broken down into comments on each of specialisation, standardisation, centralisation and automation:

Specialised resources: Splitting roles into front, (middle) and back offices; into demand takers (and ‘failure’ placators), transactional processors, back room expert support teams and senior ‘authorisers’…meaning that:

  • we don’t deal with the customer when/ where they want;
    • causing delay, creating frustration – which needs handling;
    • incorrect setting of customer expectations;
    • unclear ownership, leading to the customer having to look out for themselves
  • we have multiple hand-offs;
    • causing batching, transportation, misunderstandings, re-work (re-reading, re-entering, repeating, revising);
    • we break a unit of value demand into separate ‘work objects’ which we (hope to) assign out, track separately, synchronise and bring back together again (…requiring technology);
  • we collect information to ‘pass on’ (…requiring technology)
    • often passing on incomplete and/ incorrect information (or in Seddon’s words “dirty data”), which escalates to the waste of dealing with the defects as the unit progresses down the wrong path;
  • we categorise, prioritise, allocate and schedule work around all these roles (…requiring technology)
  • …all of the above lengthens the time to deliver a service and compromises the quality of the outcome, thus generating much failure demand (which we then have to deal with)

Standardised activities: Trying to achieve a standard time (such as Average Handling Times) to perform a standard task (using standard templates/ scripts) that appears to best fit with the category that ‘we’ (the organisation) jammed the customer into

  • rather than listening to the customer’s need and attempting to deliver against it (i.e. understanding and absorbing customer variety);

Centralisation: Seeing ‘shared services’ as the answer using the “there must be one good way to do everything” mantra.

  • creating competition for shared service resource between business units and the need for SLAs and performance reporting;
  • requiring some ‘super’ IT application that can do it all (“well, that’s what the software vendor said!”);
  • ‘dumbing down’ the differences between services (and thus losing the so-called ‘value proposition’)
  • loosening the link between the customer and the (now distant) service.

Automation: Continually throwing Technology at ‘the problem’ (usually trying to standardise with an ‘out of the box’ configuration because that will be so much more efficient won’t it) and, in so doing, creating an ever-increasing and costly IT footprint.

Whilst technology is amazing (and can be very useful), computers are brilliant at performing algorithms (e.g. calculations and repetition) but they are rubbish at absorbing variety, and our attempts at making them do so will continually create failure demand and waste.

In summary: ‘Economies of scale’ thinking is more damaging in service because of the greater variety in demand and the nature of the required outcomes.

To close:

This post isn’t saying that scale is wrong. It is arguing that this isn’t the objective. Much harm is, and has been, done by blindly following an activity focused logic (and the resultant ‘specialise, standardise, centralise, automate’ mantra)

Further, I get that some of you might say “you’ve misunderstood Steve…we aren’t all running around saying we must be big(ger)!”…but I’d counter that the ‘economies of scale’ conventional wisdom is implied in a relentless activity cost focus.

Put simply, “Economy comes from flow, NOT scale” (Seddon)

End notes

Beware ‘Common sense’:

“There is a time to admire the grace and persuasive power of an influential idea, and there is a time to fear its hold over us.

The time to worry is when the idea is so widely shared that we no longer even notice it, when it is so deeply rooted that it feels to us like plain common sense.

At the point when objections are not answered anymore because they are no longer even raised, we are not in control: we do not have the idea; it has us.” (Alfie Kohn)

Credit: The ‘Economies of scale’ explanation comes from reading a John Seddon paper.

Being fair to Adam Smith: He understood that the specialisation of tasks can lead to “the almost entire corruption and degeneracy of the great body of the people [the workers]. … unless government takes some pains to prevent it.” i.e. it might be great for the factory owners…but their workers are people, not machines.

Pulling Power

Beer pumpThere are two very different productivity ideas:

  1. Make as much as you can! …meaning that:
  • you are always busy (it is a ‘corporate crime’ to be idle!);
  • it is irrelevant whether the next activity down the track is already snowed-under with work or even if it is available….you just keep pumping it out! They aren’t your problem;
  • the ‘performance police’ are likely measuring the cost of the activity being performed, and judging you accordingly.

…this reflects a Push system, which fits with an ‘economies of scale’ efficiency mindset (“how many did you make!”).

  1. Make only what is needed when it is needed…meaning that:
  • each person is highly connected to the next activity down the track (because they need visibility of how the next step is going);
  • it becomes immediately obvious if there is a blockage and where it is;
  • the process performers can:
    • collaborate on making improvements at the (now visible) bottlenecks; and
    • see and measure the overall flow, from customer demand through to its satisfaction.

…this reflects a Pull system, which fits with a ‘flow’ effectiveness mindset (“how did we all do together for the customer?”)

Now, you might think that push will cost a lot less than pull because everyone is always working flat out, not waiting to do something….but you’d probably be wrong, and by a profound margin.

What’s so good about pull?

Here’s a simple ‘push’ diagram from the Lean Enterprise Institute to assist:

overproduction-e1351860597383

Stick man ‘A’ is happily making stuff, much to the despair of ‘B’ and, given that a real life process will have far more steps than A and B, you can imagine what this looks and feels like on a bigger scale – organised(?) chaos:

  • work will pile up throughout the process, meaning that there will be loads of ‘work in process’;
  • process steps might be working flat out, but it takes a really long (and usually increasing) time for a unit of work to get from start to (proper) completion. It spends a massive amount of its overall cycle time simply waiting;
  • defects are hidden within this mess, so it takes a long time for them to surface….with the time and cost to rectify the defect rising alarmingly as more work is performed on the defective unit of work;
  • changes in specifications or customer needs whilst units are (a long time) in process mean a huge amount of rework, and even scrapping of work done to date (Customer: “In the time you’ve taken, things have changed….I don’t want that anymore!”);
  • the long cycle times will create a huge amount of failure demand (blue marbles) from customers asking where their unit of value demand has got to and how long it will be.

Is this relevant to Service?

Absolutely! But, like most things, it can be a bit different to manufacturing.

THE big difference in service is that the trigger to start work is pull by default i.e. you can’t make a service in advance ‘and put it into stock’…you need to wait for demand to trigger the work. But, just because we have a customer pulling the demand lever doesn’t mean we should then be pushing their unit along a value stream before the downstream activities are ready for them.

For a really obvious example, let’s take a natural catastrophe (flood, earthquake, etc.), which results in an insurer getting a huge spike of claims demand. The insurer wants to help everyone as soon as they can but they a) are still getting the necessary processes defined ‘on the ground’ and b) have limited resources to do the work.

Now, this is a challenge: Insurers want to be seen to be pro-active and ‘getting on with it’ for their customers. But beware of creating a seemingly good short-term impression at the expense of a huge longer-term mess.

If you push claims through a process that isn’t yet defined and resourced then you can expect to:

  • only partially perform the necessary work, but not realise this;
  • set expectations that turn out to be incorrect (e.g. what you thought looked clearly a house rebuild turns out later to only be a repair…and vice versa);
  • go back and perform a great deal of re-work (ending up in multiple site visits, ‘reconciliations’ with previous findings, defensive explanations and compensatory actions);
  • throw away old work and virtually start again to cope with changing customer circumstances (“I was okay with you doing that 6 months ago…but not anymore”); and
  • lose the trust of the customer (your unintended mistakes are seen by them as malice and trickery)…which creates much failure demand, to be cautiously tip-toed through.

If you hear management say “right, let’s get all the claims through ‘assessment’ by [date x] and then we’ll focus on the next stage”, you know you’ve got push and all its associated problems.

This doesn’t mean that you don’t do all you can to make sure your customer is okay whilst you work things out (e.g. temporary repairs, emergency accommodation) and explain to them what is happening (including what you haven’t got in place yet)…but it is saying pull work through your flow when, and only when, you (& they) are ready for it.

This means that you focus your attention on defining and refining the flow, rather than wasting it firefighting each and every ‘undoing what’s already been done’ disaster.

A specific example for the catastrophe claims scenario: If a builder has a number of house builds on the go, don’t push any more on them (they may very well tell you they can take them!). Instead, allow them to pull the next one only as and when each build is satisfactorily complete. This will mean that the builder is focused on making their build processes effective, rather than trying to stockpile work for the next few years.

Moving on to ‘workflow management’:

Okay, so thankfully catastrophe management doesn’t happen all the time…so what about ‘day to day’ pull in service?

Who works in an area that has a ‘workflow management’ role (or even team) that sorts out work as it comes in the door by briefly looking at what it is, categorising it and then assigning it to people as fairly as they can? This is pushing.

What does this cause?

  • Incorrect classification: As explained in ‘The Spice of Life’, there is huge variation in service demand. It is impossible to properly appreciate the necessary work content until you do the work; which means that…
  • Feelings of unfairness: …it is impossible to fairly divide up the work. This wouldn’t be such a problem if judgement and rewards weren’t hanging on it…but they usually are! This creates a constant tension between the work assigner and the workers; leading to…
  • Dysfunctional behaviour: …people will do what they can to protect themselves. You can read ‘The trouble with targets’ to see the general techniques that people understandably use to survive;
  • Re-working the workflow: So the work has been carefully assigned for the week ahead but Jack’s work is turning out to be slower than expected (Bob’s is easier than expected but he isn’t going to tell you!), and Jill is off sick…this only comes to light mid-way through the week so customers in Jack and Jill’s trays have been waiting in vain. Push requires a constant need to review and re-sort allocations between queues as circumstances (always) change…which is pure waste.

What’s wrong with people pulling work from a central and highly visible ‘pile’?

‘Command & Control’ Manager: “Well, people can’t be trusted to do this can they!”

Counsel: “Eh? Why ever not?!”

Manager: “Well, they will slow down and look for the easy ones.”

Counsel: “and why would they do that?

Manager: “Erm, because of their personal metrics…needed because their performance is being judged…which will affect their linked rewards/awards.”

I hope you can see that this is a classic case of looking past a logical tool/technique (in this case ‘pulling work’) and seeing the root causes within the ‘command and control’ management thinking.

If the team:

  • had a capability measure as to how they are all doing (so that they could see the system, rather than being blinded by personal targets);
  • were being coached, not judged (so that they wanted to improve, not protect, themselves;) and
  • were sharing in their success (so that they wanted to collaborate, not compete)

…then a) designing an initial* pull system could deliver great results and b) the workers would likely look for, and make, continual improvements to it…so that it worked better and better and better.

* don’t try to implement the perfect pull system: let the workers move towards pull through experimentation….but management must remove the constraints that are in their way.

Examples of service moving from push to pull:

In fact we have all felt moves from push to pull. One obvious area has been customers (that’s us) being able to book appointments (pull) rather than being assigned a slot (push). This has happened from medical appointments, through school parent evenings, to home deliveries.

Note that ‘pull’ is actually an ideal, not a tool. You need to think widely (and differently) about achieving it. It isn’t an easy journey…but it’s well worth the effort.

How about this one from John Seddon: When a contact centre agent gets a customer demand that they are unfamiliar with, they should ‘pull’ in the necessary expertise to handle it, instead of ‘pushing it’ to the expert to perform. In this way, the agent is developing on the job and the customer feels that one person is caring for/ owning their need…developing great trust: a win/win.

Pulling is linked with continuous improvement, like an umbilical cord.

Notes:

  • Pull is a key part of the Toyota Production System (TPS), and is the 4th of the 5 ‘Lean Thinking’ principles;  
  • Kanban is a Japanese word and refers to a visual signal (often a card) used to trigger an action. The downstream process provides the kanban (signal) to the upstream process (i.e. it pulls the work along the value stream).
  • You can substitute the catastrophe example used above with any service process where a) the process isn’t yet properly defined and/ or b) a spike in demand has to be handled (i.e. exceeds capacity)

What do germs have to do with modern management?

5248_1651_2006-021If a hugely important message is so different to how people currently believe and behave, how do we best help people ‘get it’ and, even better, passionately ‘jump ship’?

I’d like to use an excellent ‘germ theory’ analogy, written about by Myron Tribus (see credit at bottom of this post).

Imagine it is the year 1869

Louis Pasteur has recently demonstrated that fermentation is caused by organisms which are carried in the air. Joseph Lister has applied Pasteur’s work and experimented with the first antiseptic and found that it worked to prevent infection after surgery.

Between them (and others), they have opened up a whole new theory – the germ theory of disease.

However, their contemporaries, the doctors administering to their patients have no understanding of this knowledge. Worse, current practises contaminate patients with virtually every action taken. Surgeons routinely operate with unwashed instruments and unwashed hands and then ‘sew death into the wound’ with unsterilised needles and unsterilised thread. Some people recover, some stay the same, but many die. In each case, some rationale (from what is currently believed) can be used to explain the outcome.

Today we cringe at the actions of these doctors…but at that time the medical world believed in a totally different (Miasma) theory and, as such, the practising doctors were constrained by this thinking. These professionals knew no better – they were prisoners to the state of knowledge of their profession, to the current way of thinking and were under pressure to conform, to follow ‘best practise’. They could not apply what they did not know or believe.

So, going back to the year 1869…the American civil war has recently ended. Imagine you are a young researcher in an American medical school and you have learned about these incredibly important new European developments in germ theory. The spread of such knowledge is rather slower than it is today (there’s no internet, no email).

You want to spread the new germ theory knowledge and the importance of sterilisation! You’ve been invited to speak in front of a group of distinguished doctors. They have achieved their fame from heroic work as surgeons in the field during the war (they are very good at sawing limbs off!)…but your underlying message to them is that they have been killing their patients.

So your task is to persuade them to forget what they have been taught, to abandon the wisdom they thought they had gained through many years of experience and to rebuild their understanding around a new theory…but think about this:

  • they have a very nice life based on what they have been doing (respect and prestige in their community, a nice house, some fine horses and a few servants);
  • you are effectively telling them that they are (currently) a menace…that they are dangerous!
  • …what about their reputation if this ‘gets out’?

How do you go about winning them over? Do you think they will be glad to hear you?

Let’s apply this analogy to management

Here’s the preface to W. Edwards Deming’s important book ‘The New Economics’:

“This book is for people who are living under the tyranny of the prevailing [command and control] style of management…Most people imagine that the present style of management has always existed, and is a fixture. Actually it is a modern invention – a prison created by the way people interact.”

Deming’s book (and his famous lectures) goes on to explain that what is considered as ‘best practise’ in management is in fact not…and that, instead, it is doing much harm and there is a better way….which sounds rather familiar to trying to educate doctors about germs in the late 1800s.

Now there are successful companies (think Japan for starters, and many forward thinking companies) and hugely respected educators (Ackoff, Scholtes, Womack & Jones, Seddon,….) around the world that have taken on and advanced Deming’s work. Deming is for management what Pasteur and Lister were for medicine.

But Deming’s message is some mouthful for the successful ‘command and control’ Executive to take!

In the same way that the doctors wouldn’t have liked to hear the “you are killing your patients” message, neither would an executive who has ‘got to the top’ using their knowledge and understanding of the traditional ‘command and control’ management system.

So what reactions should we expect from the 1869 doctors and today’s ‘command and control’ executives to a new way of thinking? Well, that depends on how the message is delivered!

One way will result in denial, the other curiosity (by some) to learn more.

Rational vs. Normative change

So what actually happened? Well, the doctors fought tooth and nail against the idea of having a sterile environment. “What, stop to wash my hands…don’t be silly. I have important things to do!”

But, consider this. Those doctors who were curious leapt ahead…those who wouldn’t change eventually became ridiculed, sidelined and even ruined. It took time…but the new theory eventually won out.

So back to delivering that message…here’s a comparison of two intervention methods:

  • Intervention Method 1: Rational change – This is the idea that you can use logical arguments to rationalise the proposed change (you explain, they listen)…but, if you do this, they will always map what you are saying onto their current world view (which is the very thing you are trying to change!) and then they will defend their current thinking since they know no better – this results in denial. You won’t get any traction here!

  • Intervention Method 2: Normative change – This is where you get them curious to look for themselves, to study their system (stand back, observe, collect information, consider) and thereby open their eyes to that which they could not see. Then, and only then, will they be ready to change. This change in thinking (unlearning and relearning) is achieved through experiential learning – people don’t deny what they see.

So, the task is to get ‘command and control’ leaders to become curious and then help them study their system, to open their eyes to what is actually happening….and then work with them to experiment towards a new way of management.

There are a couple of obvious ways to begin this study:

  • Demand: Take them to where the demand comes in (a branch, a contact centre, the mail) and get them to listen to/ observe demand. Get them to classify this as value or failure demand… get them thinking about what they ‘see’;

  • Flow: Get them to follow some units of value demand all the way through the current system, from when the demand first arose (from the customer’s point of view) all the way to when the customer achieved a satisfactory closure (to them) to their actual needs. Get them to identify the value work, seeing everything else as waste…get them thinking about what they ‘see’.

…now they should be curious to think about the why, why, why.

“Okay Steve, we get the ‘germ theory’ example….but what’s your supposedly missing management theory?”

Well, actually, it’s not just one missing theory – there are four!! I’ve put an introductory table at the bottom of this post if you are curious 🙂

Deming aptly referred to the understanding of these four theories, and their inter-relationships, as ‘profound knowledge’. Obviously, my simple (rational) writing about these can’t change anything much…but it might help you when studying your system.

So who’s this post actually written for?

If you are reading this, are part of the system and already ‘see’ some or all of the new way, then it is to explain to you that rational change is unlikely to work…so try to go down the normative change track with your leaders.

If you are a leader who is responsible for the system, then this post is merely to make you curious. I cannot rationally convince you that there is a far better way than your existing ‘command and control’ management system but I can help you study and learn for yourself.

…and finally, on a positive note…

Not everything that the doctors, or ‘command and control’ managers did was wrong. They did what they could with what they knew and they were sincere in their efforts to do the right things.

Four missing theories from command-and-control management:

The theory of:

Meaning…: Which will show the madness of:
A system When we break up the system into competitive components, we destroy value of unknown magnitude.

What matters most is how the components fit, not how they act taken separately.

An unclear purpose, vertical hierarchical silo’d thinking, continual reorganisations, cascaded personal objectives, and the rating & ranking of peoples’ performance;

Failure demand and waste

Variation There is natural variation in everything: we need to understand the difference between a signal and noise.

Targets are ‘outside’ the system and cause dysfunctional behaviour.

Binary comparisons, targets, traffic lights and tampering.
Human Psychology Understanding people and why they behave as they do (particularly in respect of motivation, relationships and trust). The use of extrinsic motivators, such as competitive awards and incentives (and a misunderstanding of money);

Management by fear and compliance; Treating people as the same, an obsession with ’empowerment’ and the missed opportunity of developing people

Knowledge True learning and development occurs through experimentation (e.g. PDSA) – from a theory that is properly tested and then reflected upon…leading to true and sustainable improvement.

Benchmarking and implementing solutions rather than experimentation; saying something is ‘an experiment’ when it’s not; a focus on results rather than their causes; Speeches and workshops rather than Gemba walking.

After thought: ‘Germ theory’ is but one example of a scientific theory that could have been used as the analogy in this post. In generic terms, ‘old knowledge’ hangs around for a while in spite of our efforts…but it does eventually die out, allowing us to move forward.

Credits:

  • The analogy comes from Myron Tribus: ‘The Germ theory of management’ (1992), SPC Press
  • The intervention thinking comes from an enlightening email exchange with John Seddon

Image: I had some fun looking for an appropriate image to go with this post. I came across some gruesome pictures of 19th century (unsterilised) amputations but, given that some of you might not appreciate seeing this, I limited myself to just showing you a 19th century surgeon’s instrument kit…and those of you that want to can let your imagination run riot 🙂

A Service Revolution!

RevolutionService is different to manufacturing…and this difference is gob-smackingly important for a service organisation to understand if it is to truly move towards its (stated) customer purpose.

I was recently passed a link to a Malcolm Gladwell TED talk by a colleague and whilst watching it I thought…

“Nice! This is a simple tie-in to the incredibly important concept of variety in customer demand.”

So here’s the link to the very watchable talk (18 mins): Choice, happiness and spaghetti

Here’s the key points from the talk:

  • that Howard Moskowitz (a psychophysicist) had his ‘aha moment’ that “they had been looking for the perfect pickle…but they should have been looking for the perfect pickles“;  
  • the false assumption that the way to find out about what people want is to ask them….leading to years of fruitless and misleading focus groups. The truth is that:
    • people commonly don’t actually know, or cannot (and even will not) express, what they want; and
    • they will be constrained by what they currently know. No customer asked for an automobile. We have horses: what could be better.” (Deming)  
  • the importance of horizontal rather than hierarchical thinking about customer demand: we thought that customer demand was hierarchical (from cheap up to expensive products or services). Instead, there are only different kinds of products and services that suit different kinds of people;
  • that, instead of looking for one way to treat all of us, we now understand the importance of variability;
  • when we pursue universal truths [one standardised product/ service/ way of doing things], we aren’t just making an error, we are actually doing our customers a massive disservice;
  • We need to embrace the diversity of human beings

Hang on a minute….

So, I started off this post by saying that service is different to manufacturing but Gladwell uses lots of examples of physical products in his TED talk to make his point about the importance of customer variety (cola, pickle, spaghetti sauce, coffee,)…“make your mind up Steve!”

Well, this is a nice segue to explain about two types of variation, and how incredibly important this understanding should be to a service organisation (or the service part of any value stream).

These two types of variety are:

  • Customer-introduced (i.e. within their demand); and
  • Internally created within the process (regarding flow)

To go back to Gladwell’s spaghetti sauce: Different consumers like different sauces (this is variety in demand) but, once they have determined which variety of sauce they like, they then expect each jar they buy to be the same week in, week out (i.e. minimal variation in the process that creates that sauce).

So, whilst we definitely want to reduce and remove variation in the quality of the process, we should not remove the ability of the process to provide a suitably varied experience and outcome. Rather, it is the opposite – we should be trying to cater for this variety.

In fact, variety in service is MUCH bigger than Gladwell’s product examples:

One of my earlier posts set out five categories of variety in customer demand, as identified by Professor Frances Frei (see The Spice of Life).

Now, whilst it might be useful to categorise service variation (purely to help you ‘see’), the bigger point is that the customer sets the nominal value – the specific value of a service to them.

“The customer comes in customer shaped

…there is virtually infinite variety in people….and that variety can change for a given person depending on, say, time of day/ external influences/ mood….

Standardisation is NOT the answer…in fact, it is often the problem:

There are legions of service organisations that have hired manufacturing improvement experts (or people who have read books about them) to ‘standardise, specialise, centralise and automate’ because they say “this is the solution”.

Examples at attempts to standardise the customer include:

  • using IVRs to standardise customers into categories (“press 1, then press 3…”);
  • using call scripts to standardise the content of customer conversations;
  • using average handling times to standardise the length of a conversation;
  • using ‘box ticking’ forms to standardise customer information collection;
  • using ‘black and white’ rules above common sense, when dealing with a customer’s needs;
  • forcing customers down one path (e.g. you can only pay by direct debit, you can only interact online, you can only use these suppliers, …….and on and on).
  • …..

Interestingly, if you read the list above with your ‘I am a customer’ hat on, you will likely recall many instances where you have tried interacting with a service organisation and one or many of the above attempts at standardising you and your demand has seriously frustrated you!

This leads to much failure demand, waste (and cost) but with little value delivered (as written about in an earlier post).

Clarification: this isn’t to say that technology cannot assist or that there is no place for any standards. It’s making the point that the starting point should be that:

“….in service organisations, the problem is how to design the system to absorb variety” [and not frustrate it]. (Seddon)

Our starting point always seems to be ‘efficiency’ and a focus on activity cost. Perverse as it may seem, a focus on activity cost often has the unintended consequence of increasing total cost (though this is not visible to a silo’d organisation and is nigh on impossible for them to measure).

If we standardise, say, a site visit (the activity) such that it can’t absorb the variety in the customer’s demand…then don’t be surprised that:

  • there is failure demand from the customer when they complain and/or disagree with the outcome of the visit;
  • there is much ‘expert’ time spent reviewing this complaint;
  • there are yet more site visits required to resolve the problems;
  • there is lots more paperwork/ computer inputting/ workflow management required;
  • there is much confusion created by all this extra work (who did what when, who authorised what change from the standard, who is explaining all this jumble to the customer?); and
  • trust has been lost with the customer who now questions everything we do

The most important point to note is that “cost is in flow, not in activity”

So why the title of this post?

Well, the above is quite different thinking to where ‘command and control’ service organisations have been going. A revolution if you will.

Put simply, if we understand the variety in our customer demand and try to design our system to absorb (rather than frustrate) it we will go a long way towards our customer purpose…with the likely side effect of doing so for less cost.

“Managing value [for the customer] drives out cost….Focussing on cost paradoxically adds cost and harms value.” (Seddon)