Hansei, "stop doing," and exiting a market.

Sunday's NYTimes Corner Office interview of Clarence Otis, Jr. (CEO of Darden Restaurants, which owns Red Lobster, Olive Garden and Capital Grille) made me think about an oft-forgotten element of lean: the process of hansei, or reflection. We focus so much on *doing* stuff during the day, and figuring out how to *do* even more stuff, that we often forget that the post-mortem is just as important as the project itself. After all, it's the reflection after the work is done that provides the information that enables the company to replicate success (or avoid the same failure).

In response to the interviewer's question about time management, Otis answers,

I schedule and block the calendar to have downtime, because I do think that in senior leadership positions, one of your jobs is to reflect, and you have to schedule time to do that. I try to leave a few hours a week that are unscheduled.
Scheduling time to think isn't common: a recent Basex study of knowledge workers revealed that they spend on average only 12% of their day thinking and reflecting. Although Basex didn't examine that figure, my guess is that most of that 12% was unscheduled, broken into feeble, ineffective 5-10 minutes bits, rather than large chunks of time mindfully carved out of the week's inventory of work hours.

And yet that's where the learning is. Hansei is critical to learning after a project, every bit as much as the shorter PDCA cycle is during the course of a project. Hansei is the "stop doing" that Matt May writes about on his blog and in his new book, In Pursuit of Elegance.

Here's an example of the power of hansei from earlier in my business career, when I worked at the athletic footwear company Asics Tiger. In the early 1990's, we had been gaining share in the running shoe market. Much of that growth had come with an influx of new products in the lower end of the market: $55-65 shoes targeted at the occasional jogger and sold through large chains like Foot Locker, Finish Line, and FootAction. Success, right?

Well, not exactly. For Asics, the market for those lower-priced shoes was extremely volatile. Demand in that segment was driven by fashion, not function, and Foot Locker could easily cancel an order for 50,000 pairs of shoes because consumer tastes shifted. There were many instances where we had to closeout a bunch of shoes because the demand for them evaporated. On top of that, Asics wasn't very good at making fashionable shoes at that price. The company didn't have Nike's skills at reading (or creating) customer demand, and its cost structure was higher, so that these shoes weren't as profitable as the higher-end, technical running shoes it excelled at making.

Despite the success of the foray into lower-end of the market, Asics abandoned it completely -- over howls of protest from the sales force. A 2-3 month period of hansei led to the realization that the short-term profits from these shoes were putting the company at risk: financially, due to the large swings in demand, and image-wise, in terms of the dilution of brand equity as a maker of the best technical running shoes on the market. It was a big financial blow in the short-term: revenues and profits fell for the next year. But it allowed the company to put its resources completely into more profitable, and more stable, higher-end products, and set the stage for 12 years of uninterrupted growth in sales and profits.

As the guy responsible for driving that decision, I remember struggling with the heads of sales and product development to convince them that this was the right decision for the long term health of the company. Without adequate time for reflection, I don't think I ever would have come to this conclusion. It would have been too easy to continue making lower-priced shoes and counting the money coming in the door. But by pulling myself away from the daily requirements of planning the next season's product line, I was able to think a bit more deeply about the road we were one -- and where it was leading.

It's certainly not easy to make the time for hansei, as I've written about here and here. But avoiding it is like leaving out the C in PDCA. And that's a recipe for failure.

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