The Second Century: Book Review By Stephen Parry

 

You need to not only think outside the box but work outside the box,

The Second Century: Reconnecting Customer and Value Chain Through Build-to-Order

Implementing lean

Matthias Holweg and Fritz K Pil

Book review By Stephen Parry

This is a timely reminder for those companies who consider themselves to be Lean to take another long hard look at themselves.

The authors demonstrate that within the four walls of the production plant many manufacturers have put into practice Lean principles, but they go on to demonstrate that all the company has succeeded in doing is optimise a small part of the real value chain. The Authors criticise short-sighted approaches to Lean which provide little or no benefit for the customer and loses the opportunity for companies to differentiate their business.

The next competitive advantage will be gained by those companies who are brave and confident enough to really start connecting their value chains to the customer (end-user) and their suppliers.

Often companies say things like, ‘we have enough to worry about getting our own part of the business sorted out without worrying about what our suppliers or distributors are doing’ this thinking illustrates the problem the authors are discussing and provide direction for companies who simply cannot think outside the box let alone work outside their box.

This is well written, researched and provides a clear direction for lean Manufacturers, lets hope it does not take another century for them to learn.

Human-Side-Enterprise-Annotated Version: Douglas McGregor review by Stephen Parry

Human-Side-Enterprise-Annotated Version By Douglas McGregor

‘The greatest waste in organisations today is the waste in human potential’

This book has been wonderfully brought back into the sunshine and placed in the modern setting by Joel Cutcher-Gershenfeld, Senior Research Scientist in MIT’s Sloan School of Management.

Book Review by Stephen Parry.

Let me start by stating for transparency that my own book Sense and Respond: The Journey to Customer Purpose has been cited in this updated classic book as providing modern evidence of the Theory Y organisation in action.  Now onto the review.

The Human side of enterprise is a forgotten landmark in the history of management-research and thinking, which is very surprising considering it clearly provides an explanation for the pitiful state we find within many organisations today. Maybe it’s been ignored because it shines a clear light on the fallacious assumptions many organisational designers and developers have about human beings? Maybe it has been ignored because people in influential positions feel threatened by the perceived loss of power and control any change of assumption might bring?

Whatever the reason we are left feeling that the greatest waste in organisations today is the waste in human potential, and this, McGregor points out, is a result of the wrong-headed and unscientific assumptions management have about encouraging the best from people.

McGregor’s system and research demonstrates clearly that systems designed to control people certainly provide control but we must ask, what type of control and at what cost? – the cost to productivity, innovation, enterprise, society and human fulfilment?

Lean business consultants in Europe

It is no mistake the book is called `The Human side of enterprise’ and not – The Human side of THE enterprise. We are talking here about the enterprise of humans as a natural instinct, not the organisational enterprise which is an unnatural construct.

Traditional management systems are an invention to maintain control over power and resources in an effort to maintain compliance. This creates organisations where everything is forbidden unless permitted and limits the enterprise and potential of human beings.

Traditional organisations trying maintain control narrows focus and closes down possibilities hence the need for extrinsic rewards and punishments to make people do what they would not otherwise do. However, enabling the human side of enterprise opens possibilities by designing organisations around assumptions that people will respond to purpose, autonomy and intrinsic rewards because the ends and means are rewards in themselves.

Creating an enterprise where everything is permitted unless forbidden encourages human enterprise and creates healthier societies.

Run experiments not pilots.

In Lean we start by not knowing the solution, in Mass you only start once you ‘know’ a solution. That’s why we run experiments not pilots.

Why do we need to stop running pilots and start running experiments instead?

Well, the message you give as a Lean practitioner to employees and to managers is that pilots are almost finished products, then they get very upset when they find that you don’t have all the answers and a detailed plan on how to implement them. They even accuse you of being incompetent or wasting their time.    ‘this is all too wishy-washy. Just tell me what I need to do, you can be so frustrating’. They often say.

This is usually the first reaction from people who are being asked to think for themselves maybe for the first time.

We ask about how they do their work, it’s design and to think about the end to end business process and customer outcomes,  this is all very strange for them.

These questions are not appropriate  in the mass world except maybe at the senior management level but they cannot answer these questions- the mass design has separated them from the workplace and the data.

Lean highlights the illusion of control provided by Mass and outlines a better approach to gain and maintain control by assigning responsibility and accountability at the employee level.

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So how do we start conditioning managers and employees to a shift in responsibility – by running experiments together to learn together to find better ways to meet our customers purpose together.  There is no us and them.

Data and facts from the customers perspective puts everyone at the same level on the org chart.

The purpose of experimentation is to test management and employee assumptions and to find answers and solutions to the many questions they have.

One other important feature of running experiments is that we are openly saying ‘none of us know for sure the answers but we want to surface and solve our problems together’

Call Centres: All Businesses Have costs but Waste is Optional

By Stephen Parry
At the risk of being accused of stating the obvious, a well-known research company has demonstrated that call centres resolving customer issues at the first point of contact will increase customer satisfaction.

This influential report has fuelled the drive by many companies to increase their first-contact resolution performance through the introduction of call eradication or call avoidance schemes. All well and good, you might say. But hang on a moment. The research results may seem obvious but everybody appears to have missed a very important point. Does anybody truly know whether these first-time resolutions are actually creating value for the customer or are we unintentionally creating cheaper, faster, neater forms of waste?

The research is fundamentally flawed, because it fails to consider the customers’ perspective of value, and the company actions are quite literally the wrong solution to the wrong problem. Why? Because our own findings have demonstrated that in many call centre operations, as much as 90% of the demand made for the service is actually waste that has inadvertently been created by the organisation itself. Fixing things which should not have gone wrong in the first place is not creating value for the customer. And to add insult to injury many companies are calling customers to let them know in advance that they will fail to meet their commitments. Again this seems reasonable until you dig a little deeper. We all accept things can occasionally come off the rails so calling customers in advance to let them know may be thought of as proactive and ‘good-service’. However when you look at the army of people many call centres employ on this task, it reveals these ‘occasional’ incidents for what they are, predictable failures of a badly designed and unorganised service. A service where incidents are allowed to proliferate leaves front-line staff with but one option, to try and tone down the situation and pacify the customer. This is anything but proactive, it’s institutionalised waste.

There is also a human cost to these strategies. Research has demonstrated that the biggest source of call centre staff turnover/attrition is created when staff are expected to continually calm down irate customers, it is a cost paid for by emotional stress. If companies design call centres around the problems of their own products and services, these operations end up as a mere corporate waste disposal units.

The Modern Call Centre is not designed to meet the needs of the modern customer.

Take a closer look at the costs associated with this type of approach. A conservative cost estimate of a call centre with 1,000 staff will be around £30m per annum, and anywhere between 40-90% of the calls handled by a typical call centre, add no value to customers. This means that businesses incur unnecessary costs of between £12m-£27m. It’s no wonder there is a drive to reduce costs through the use of automation or ‘off-shoring’ to low-cost labour markets, but again, this is the wrong solution to the wrong problem.

All businesses have costs, but waste is optional.
So, let me pose a few important questions: Do you have any idea how much value you create for your customers today? Even if you think you do, can you quantify it? And can you identify how much waste presently resides in your processes and how you could create value at no additional cost?

If you answered ‘no’ to any of the above, the likelihood is that you’re generating unnecessary waste with associated negative cost implications. The answer is to create a framework for defining what is and is not value from the customer’s perspective. To understand this we must examine the customers’ purpose, for it is the customer’s purpose which provides the one true definition of value, not the organisation’s belief. Once the customer’s purpose has been identified it becomes obvious what types of calls are valuable and must be resolved first time, and those which are waste to be eradicated.

This change of emphasis has a significant impact for the role of the contact centre. It is no longer about simply understanding the transaction, but is about seeking out a thorough understanding of the customer’s purpose within the context of the whole value stream. It really is a different type of organisation with a different purpose.

CORE Profile: A Purpose Framework
Most companies genuinely want to create value for their customers and sincerely believe that their customer-service operations are indeed doing that, but often they are simply restoring lost value caused by a failure to do something right the first time. Customer demand can therefore be classified into two types: demand that is essentially driven by the customers’ positive needs, and demand that is negative or remedial in its origins.

CORE Profile: Value definitions

Creation demand
Creation demand comes into a service organisation because customers want to understand how to optimise the functionality of their service or product, or how to obtain more of what they already have. Creation demand is not the result of something being wrong, therefore, such that customers have lost the value of a service or product, but rather the result of customers’ questions such as: ‘Which product is best?’ or ‘How can I get more out of my product or service?’ For efficient delivery, creation demand must be optimised (Womack and Jones, 1996). This is the type of demand that the organisation wants to keep, so the organisation needs to make it simple and easy for the customer to ‘pull’ service. Identification and analysis of how the end-to-end processes deliver against this demand type will indicate clearly which elements of the support structure could be improved, for example using tools for automation or web based assistance.

Creation demand is seen in many service sectors. Customers of a bank, for example, may wish to gain more information from their bank statements and transactional details, to understand how they could better invest their existing savings, or to find out in which countries they could use their bank cards.

Similarly, customers enquiring about their utilities may wish to set up a direct debit for payment or to ascertain how much the amount of their next bill.

Opportunity demand
Opportunity demand occurs when the customer wants something that is not currently offered. Most organisations will merely apologise to customers, saying that they can’t fulfil the demand, and will then terminate the transaction. In a customer-centric organisation, in contrast, it is critical to capture this type of enquiry: these can provide a rich source of ideas and data for new services or product lines. Opportunity demand needs innovation to create new services and
potential revenues need to be examined.

Consider as a simple illustration an independent burger bar. If enough demand is created for a specific burger topping, then the business can adapt very quickly and just add this topping to the menu so that it can now meet demand. If, however, several people request not burgers but pizzas, these customers present an opportunity. The outlet may not sell pizza currently, but over a period of time, in a completely unscientific way, the owner will recognise the
sustained demand for pizza. The owner may have ‘drilled down’ and even identified that these requests arise on a particular day of the week. When the demand reaches a significant proportion, the burger bar owner will offer pizzas

for a limited trial period. It may happen that there is little take-up, and pizza will then be withdrawn again. Or it may happen that the demand for pizza grows and eventually outstrips the demand for burgers. Having made an informed decision, the business may then swing around to become a pizza outlet rather than a burger outlet.

Implementing lean

Restorative or Remdial demand
Restorative demand occurs when the organisation delivers unfit products or services, generating unwanted demand as a consequence. This causes customer dissatisfaction, resulting in loss of money, time, reputation and loyalty.

The work involved in correcting this situation is deemed to be restoring lost value. In the eyes of the customer, restoring value is seen thus: ‘You broke it, you fix it!’ Restorative demand needs to be removed by identifying and rectifying the originating cause, which may reside in other parts of the organisation.

Only in poorly run or unethical companies would you find revenue being generated against demand of this type. Restorative demand becomes a drain on resources, and ineffective organisations inadvertently generate between 40 and 90 per cent of the total customer demand in this negative way.

Here’s a golden rule: never automate this restorative demand. Automation locks in frustration for the customer as well as for the frontline staff whom the customer has to call repeatedly about the organisation. Support staff also feel disenfranchised because existing constraints prevent them from making any difference in this situation. The spiral
continues, with the customer becoming more and more disillusioned, which generates additional negative demand, and all the while the frontline staff feel powerless to change things.


External demand

External demand is failure generated externally by other agencies, institutions or companies. Organisations can generate revenue against this type of demand as long as it continues to present itself – that is, until a competitor (to return to the earlier example) fixes the road and removes the need to fix tyres.

External demand should be addressed by rethinking the environment that allows it to exist and by developing new solutions. In this context it is perfectly respectable to restore value, because the other things that are not working are

business is and whether or not it is totally dependent on restoring value as a the responsibility of other people. In fact, some businesses are set up specifically to handle this type of demand. However, organisations with this business model have to question the basis of their future: are the revenues that they are generating largely dependent on other companies failing to perform their duties? If so, what happens if those companies start performing well? This business model can be fundamentally flawed, depending on how exposed the revenue stream.

Download full White Paper. Avoid the waste but no the Value. from our Slide share site.

©Stephen Parry 2010 All rights reserved.

To do or not to do, is it your choice to work on the system?

Lean Transformation Diary Entry from Andreas Heinz, October 22, 2010

Some readers in Germany might have come across a book called ‘Momo’. It was a great success in the 90ties telling the story of mysterious men in black suits who steal time from people. A little girl – Momo – get’s into the adventure by trying to find out what these men do and how they steal time.

In the story, I remember, she reveals they don’t do it by influencing ‘the time’ itself but by driving people to do more activities throughout their day. These men are the cause of additional activities that finally leave people with the impression that their time has been stolen.

I am reminded of that story when I hear time and time again statements from various corners in our organization: “We don’t have time to work on change”. This is often the answer we hear from others and very often we say the same thing particularly when we are asked about the progress of our own plans.

If we are honest the statement does not only apply to the workplace but also to our private lives “I don’t have time”  is a welcome and easy label putting a dense fog in front of our real problems and saving us from serious reflection or revelations about our personal priorities or weaknesses.  Maybe a better way to expresses this ‘time-problem’ while avoiding the dark depths of those personal weaknesses, is like this  “I don’t spend my time on this, but on other things.”

Clearly – very clearly – we all have too many things to do within any busy organisation but we all have the same amount of time, that’s the law of ‘physics’. However, how about changing our use of language again by saying: “I don’t spend my time on this, but on other things.” and: “I have more tasks to do than I can do”. This changes the focus of our attention.

Simply saying “I have no time” distracts us towards an imagined scarcity of time – as if somebody had stolen the time like the men in black from the ‘Momo’book.- It does not have to be like that.

In contrast, saying “I spend my time on other things” leaves us at the end of the sentence with –  “other things”. Which is a perfect starting place to think about what these other things are and where these other things are coming from. Questions can then be asked such as: “What causes these activities? What is the real need for it? What is their purpose? Finally, we might ask: How can I reduce the number of these things that hinder me to do those things where purpose, need and value are clear to me?

In a situation of  ‘too much to do’ we are the ones, who are making the choice of which activities we do and don’t do. Nobody,  in normal organisations, puts us in chains or gives us drugs or stands with a loaded revolver behind us to force us to do certain activities. If there is a list of more things to do than we can do, we are obviously making a choice but what is informing that choice?  How do you choose what to do or not to do?

Our time is not stolen we give it away without realising because we let others choose for us, we blame others not ourselves for being overburdened. We choose to say, it’s not us, but our managers or our customers that are removing choice: We should keep in mind that as long as they ask from us more than we can do, it is not their choice, but ours in the end, simply because, again, it is impossible to do all within the time we have.  So, from that angle, it looks like if we have some freedom of what we do as human beings in a normal office environment. We are not slaves or robots, and we are not Human doings but human beings.

Lean business consultants in Europe

However, I realise it does not feel like that. Yes, it is hard to deal with pressure and to keep control, feeling you have no chance to become proactive and sometimes no chance to even be reactive. Because something is working on us from outside. Something not someone is stealing your time. You could call this stealthy time stealer ‘the system’.

The ‘business and working system’ pushes and pulls us in so many directions that at the end of the day we say ‘I had no choice’. And indeed, as long as we only think and react within the logic of that system, we feel as if we do not make choices. However, thinking and staying in that system is a choice we make. We could also choose to think and act and work on the system, instead of thinking and working in the system.

So How to get out of this trap? A very simple start is to delete “I don’t have time” from our vocabulary and to replace it with: “I don’t spend my time on this, but I spend my time on other things.” Then, ask: “What are these things?”, “Where do these things come from?” is already thinking about the system, instead of just reacting in the system. Asking: “What activities on my list are those who can remove causes of other activities on the list?” – is thinking about where I can start to influence the system, thinking about where I can choose those activities on my list where I work on the system, where I change the system.

Do we ask what is creating value for our customers? What is value for our management? Can we change the system to produce less waste?  Can we create a space for new possibilities and different ways of working that give back time instead of stealing it.

I still wonder why we choose to do the important things last or not at all, the things that will secure our future by changing the system and that can open a way out of the waste that fills our task lists. Wouldn’t it make sense to choose those activities first, that can help to remove the need for other waste activities on our list?

So, give it a try. Stop saying “I don’t have time.”  And go with “I don’t spend my time on this, I spend my time on other things.” And listen to the echo to follow and track down from which corner in the system they come from, those ‘…other things…other things …other things…’