Eliminating "TIMWOOD" for Success

I have the pleasure today of featuring a guest post from Tony Ferraro of Creative Safety Supply. Tony has an excellent understanding of lean, and I thought he would do a good job explaining how the elimination of waste can be beneficial to a sporting goods retailer. *                         *                        *                      *                        *                           *

Most businesses are constantly on the lookout for new and innovative ways to increase sales, enhance customer satisfaction, and streamline business practices for better efficiency. One tactic that is growing in popularity is the focus on waste elimination through "TIMWOOD."

For those of you who are unfamiliar with this expression, TIMWOOD is an acronym that outlines the seven most common wastes in business. The seven wastes are: Transport, Inventory, Motion, Waiting, Over processing, Overproduction, and Defects. If you're a sporting goods retailer, here's how focusing on just two of these areas can improve your business.

T: Transport Every time an item is moved it runs the risk of being lost or damaged, thus losing value. Most retailers inevitably transport items multiples times into and around the store: there's the initial unloading of the goods off the truck and into the storeroom or warehouse.  There's putting the goods onto the floor or the shop window. There's the transport involved in refreshing the window or floor display, to say nothing of the daily cleanup and maintenance of the store fixtures. Each time store staff touches and moves the product, there's a chance for damage, which inevitably lead to markdowns.

O: Overproduction Overproduction is commonly referred to as one of the largest wastes in the business world. In the case of a retailer, overproduction is actually the over-purchasing of inventory, which leads to items sitting on shelves, tying up financial resources and physical space. Obviously, it's impossible to forecast consumer demand perfectly, particularly when you're ordering 6-9 months ahead of the actual delivery date to take advantage of early order discounts. Consequently, it's essential to have a strategic plan for balancing your pre-season orders with your fill-in orders. Too many retailers gorge themselves on products with special discounts without factoring in the true cost of the inevitable markdowns.

Take a Closer Look In future posts I'll address the other types of waste in "TIMWOOD." In the meantime, it may be beneficial to take a closer look at the amount of unnecessary transport and overproduction/purchasing that might be costing you money. Just by implementing a few simple steps, you could take your sporting goods store from mediocre to magnificent.

How can you bring standard work to communication?

I'm back from the annual Shingo Conference, where my book, A Factory of One, received a Shingo Research Award. A common topic of conversation at the meeting was the importance of standard work in an organization. Seems that whether you're talking about the factory floor or "carpetland" (the office), companies aren't reaping nearly as much benefit from standard work as they could. The R&D engineers at one of my clients have done some interesting work in this area. They're inundated with email (like most people), and they're obligated to check messages as they come in because there might be something urgent. Of course, most messages aren't urgent at all, but the possibility -- and the anxiety -- exists that they might miss something critical, like a major product quality problem.

Their situation is hardly unique, of course. But unlike most groups who simply wave their hands feebly and bemoan their fate, they've deployed standard work to fix the problem. They created a new, standard communication protocol:

Pay attention to the critical benefit here: everyone has agreed that email is NOT to be used for urgent or complex issues. This agreement really is significant, because it unshackles people from their BlackBerries during meetings, or product development work, or strategic planning. Or their kids' soccer games. Or dinner. Or sex. Which means that there's now a fighting chance to have some uninterrupted time to, you know, think.

This protocol isn't a breakthrough along the lines of, say, cold fusion. (Or duct tape. Or Oreos, for that matter.) However, the clear expectations and standards around the use of communication tools give the engineers license to ignore the beep of their smartphones and focus on real value-creating activities.

This exact protocol might not work for you. You might want to account for text messages, or IM, or even old-school memos. Every company has an idiosyncratic culture and needs. The important thing isn't how you define your communication protocol, but that you define it.

Give it a try, and let me know how it works out.

Size matters. Not.

I brought my Prius to the Toyota dealership today for a regular check-up and a recall repair (some pin thingamajiggy in the steering column). I said to the service guy that Toyota sure seems to have a lot of recalls these days -- four in the past three years for my car. He said,

"Sometimes it's tough to keep track of all the little things when you're the world's largest car company."

Okay, he was proud of Toyota's growth, but really, that was a disappointing response.

Consumers don't care if you're the largest car company, heart transplant clinic, or high-cholesterol salty snack food producer. They only care that you're the best. Period.

Much of my work is done in the outdoor industry, where products are, by and large, guaranteed for life. No one will buy a tent or a carabiner that isn't backed by the full confidence and credibility of the company. No consumer will buy a tent because it comes from the largest tent maker; that's totally irrelevant when you're hunkered down in a hail storm in the Wind River Range, or anchored to the side of El Cap. The only thing that matters is the value and the quality of the product.

Size doesn't matter. If you can't keep track of "all the little things," you won't be the largest company in your industry for long.

Focusing on quality and value will get you size. Focusing on size will get you trouble.

May 2013 Newsletter: How to Make Your Work Flow

If you’re a supervisor, a manager, or an executive, your days and weeks probably seem impossibly hectic, filled with an unending series of fires that you have to put out. There’s so much variation in your daily job that it probably seems impossible to create a smooth flow of customer value—and that’s stressful and exhausting. Nevertheless, you can create some semblance of flow in white-collar work. . . . Download PDF to read more

A Factory of One receives the Shingo Research Award!

I'm at the Shingo Conference this week to receive a Shingo Research Award for my book, A Factory of One. Here's the 30 second video I made for the conference to explain the purpose of the book. Aside from my inability to hold the camera perfectly still, and my eyes shifting heavenward to my cue cards, I think I do a pretty good job. (Next time, I'll hire a videographer.)

For more info on the book, check out the website here. To order from Amazon, click here.

http://www.youtube.com/watch?v=CKNVgfA8p3A

Little's Law, redux

In reference to my April newsletter, about the perils of a multi-tasking environment that forces teams to constantly switch activities among multiple projects, a client wrote:

I am a little surprised you didn’t refer to Pull and WIP control more overtly as part of the solution. I know it is production language, but it should work in admin and is a great way to match input/output rates and to keep resources dedicated until a job is done. Also the queues can then be used as indicators of true capacity (vs coordination) opportunities.

I anchored my argument against this kind of multitasking in Little's Law, which demonstrates that the more items in a queue of work (particularly manufacturing or service), the longer the cycle time for that work becomes.

My client is exactly right, however. A push system, where work is foisted upon a department from the outside, by its very nature will lead to overloading a system and exploding lead times. A pull system, where work is taken from a pile of projects by the people doing the work when they're ready for it, ensures that the department matches inputs and outputs for maximum efficiency.

Interestingly, this approach is rare. There's a tendency in the office environment to treat "production" capacity as infinite. Partly this tendency is due to people's willingness to work late into the night or on weekends. Partly this tendency is due to the difficulty of calculating how much time a particular project will take. Inherent in knowledge work is the inability to take a project to completion in a smooth, uninterrupted flow.

Because there are so many interruptions, and because these projects tend to be multi-stage affairs, there's a powerful argument to use more visual management tools and lean/agile development methods. Both will help clarify and make workloads visible, and help to better match capacity to business opportunities. And that results in shorter lead times, happier customers, and less-stressed employees.

Are you providing leadership or support?

I’ve been talking to many companies recently that are committed to improving their processes. Or at least they say they are. What I usually see is a company that wants improvement, but management isn’t necessarily willing to make the commitment to the changes necessary for real, sustainable improvement. Case in point: one firm I know has embarked on a project to speed up product development. Although the company dominates its category, there are far too many dropped balls, rework, and missed deadlines for it to continue thriving in its market.

However, management is unwilling to postpone any of the current development projects to free up the developers’ time—these new projects have terrific revenue potential. But to the developers, who are currently working 60 hours per week, this decision seems unreasonable. The developers are expected to carry their current—full—load of work, and still add on this major new responsibility.

This is where real leadership comes in. As Jamie Flinchbaugh says,

I go to many organizations that say, “We have management support. They’re 100% behind us.” The problem is, behind is behind. Leadership is out in front. Leading lean is an inside out transformation, and must begin with the leader’s own mindset and behavior.

In this case, leadership means making the difficult decision to forego some short-term revenue by postponing one (or more) of the new products in development in order to create the capacity for process improvement. Truly leading the improvement effort means making the organization-wide, financially challenging investments that will lay the foundation for future success. Leadership means hacking through the jungle with a machete, clearing a path for front-line staff, supervisors, and managers to follow.

What are you doing in your company? Are you leading or supporting the efforts of your team?

Change management? Stop wasting your time.

Your change management efforts are a waste of time. And effort. And energy. And money.

I just returned from giving a talk at the Association of Change Management Professionals in LA. Just as with corporate mergers, the vast majority -- from 60-90% -- of change management initiatives fail miserably.

Why? It's certainly not due to a lack of change management models, books, or conferences. I think the high failure rate is due to the framing: when we talk about change, we talk about how *we* will change *them*. I think that says it all. No one likes to be changed, even if the change is beneficial to them.

In my talk, I argue that we should forget about "change management." Instead, we should involve people in solving business problems. Human beings are problem solving machines. We love solving problems. Someone invented the bow & arrow when she realized that the fastest human carrying a knife wasn't going to outrun the slowest gazelle. The brilliance of Angry Birds is that each level requires a new round of problem solving -- which birds to use and where to aim them.

Of course, I'm partial to using A3 Thinking to solve problems, but the truth is that it doesn't really matter what problem solving tool you use. The key is to pose a problem to the workers actually doing the job and have them design the change. The autonomy and skill development that comes with solving the problem for oneself will do more to overcome resistance and motivate change than anything that a cloistered HR professional can develop. Dan Pink makes this point eloquently in his book, Drive. And in her new book, Sleeping With Your Smartphone, Leslie Perlow recounts the enormous change in work habits she was able to foster among BCG consultants by simply setting a goal and having them work towards a solution themselves.

It's commonly said that successful change requires you to explain to everyone "what's in it for me." That's not enough. If it were, you wouldn't have meetings that start late and end later, your mailbox wouldn't be engorged with a daily supply 75 irrelevant reply-all emails, and you wouldn't have 20-30% non-enrollment in employer-matched 401(k) plans.

April 2013 Newsletter: The Single Biggest Mistake in Managing Projects

Managers hate idle time. When people aren’t working every minute of the day, managers see excess capacity, and they start a new project. Even if it’s clear that the new project won’t be completed immediately, they assume that starting sooner means the project will get done sooner. . . . Download PDF to read more

First things first.

I've been helping a large outdoor goods company with its strategy development. The CEO has been struggling to move the process forward for a few months now, and he turned to me for outside perspective. It became quickly apparent that his difficulty was not with the process per se. The difficulty was rooted in the lack of a clear direction: what does his company represent, and where does it want to go in the next 5-10 years? You can't develop a strategy until you can answer those questions.

I'm personally fond of the approach Jim Collins described in Built to Last. He suggests that you first clarify your core values and purpose, and a "big, hairy, audacious goal" that will take you 10-30 years to reach. (Read more about it in this HBR article, and download this helpful worksheet from his website.) Now, not many companies are ready to commit to a 10-30 year goal, but there's no reason you can't modify it by setting a 5-10 year goal.

I haven't consulted to them, but my guess is that both Nike and Patagonia have absolute clarity in these areas, and as a result they're able to set -- and change -- their strategies as needed to attain their goals. Their strategies are documents designed to help them create their envisioned future. As for what particular tool or process they use to develop the strategies? Who cares. There are a host of approaches out there, any one of which will do an adequate job. And since strategy is flexible -- It has to be, since external conditions change so frequently -- it doesn't really matter which you use. The critical part is defining who you are and where you want to go.

Following a strategy without first having a core ideology and a clearly defined goal is like following a compass without a magnetic needle pointing north. You'll certainly move, but you have no idea where you'll go.

Respect for People -- Salary Edition

Salaries are an often-overlooked aspect of respect for people. We all know that money alone doesn’t make employees happy, nor does it make a lousy job or a lousy work environment rewarding. Money is considered a hygiene factor. But salaries are nevertheless important, and it’s high domestic wages that are usually blamed for the need to ship jobs overseas. However, Sophie Quinton on the Atlantic Cities website tells the story of several retail companies that are not only thriving in the US with its high salaries, they’re thriving while paying front line employees significantly more than minimum wage.

The average American cashier makes $20,230 a year, which in a single-earner household would leave a family of four living under the poverty line. But if he works the cash registers at QuikTrip, it’s an entirely different story. The convenience store and gas station chain offers entry-level employees an annual salary of around $40,000, plus benefits. Those high wages didn’t stop QuikTrip from prospering in a hostile economic climate. While other low-cost retailers spent the recession laying off staff and shuttering stores, QuikTrip expanded to its current 645 locations across 11 states.

Zaynep Ton of MIT’s Sloan School of Management points out that retailers such as QuikTrip, CostCo, and Trader Joe’s don’t view employees as a cost to be minimized:

They start with the mentality of seeing employees as assets to be maximized," she says. As a result, their stores boast better operational efficiency and customer service, and those result in better sales. QuikTrip sales per labor hour are two-thirds higher than the average convenience store chain, Ton found, and sales per square foot are over fifty percent higher.

These companies make trade-offs to compensate for their higher personnel expenses. Trader Joe's streamlines operations by limiting its product selection and seldom puts items on sale. Costco feels only slightly more luxurious than a warehouse, with products stacked on pallets. But (in my opinion, at least) consumers get a higher quality of service from friendlier, better-trained people than they do at, say, Wal-Mart.

Even if you’re not in retail – and especially if you’re not in discount retail – these companies provide a valuable lesson. Paying people a decent salary is an important form of respect. If you want to get the most out of these assets, it makes sense to show respect through decent pay.

I’ve been in many high-end sporting goods companies that don’t invest in front line staff – particularly customer service or warranty. These jobs are typically low paid, and people in these roles are often not well-integrated into the company: they’re seldom included at the start of the product development cycle, and their opinions generally aren’t solicited during the creation of marketing campaigns. Not surprisingly, turnover in these departments is high. And that’s a real loss to the companies, because these are the people with the most contact with customers.

Better wages (and better integration into the product and marketing functions) will yield surprising benefits. If it works at QuikTrip, imagine what it could do for you.

Children’s Apparel Manufacturer

Situation: The CEO and executive team of a $75 million apparel company were struggling to bring focus to their strategic initiatives. They were fragmenting their energies among so many important—but competing—projects that they weren’t moving them forward as rapidly as they wanted. They needed a way to assess the relative value of each one so they could decide where to focus their resources. Intervention: We scored each initiative on four scales: strategic fit with the company; impact on the company’s growth for the 18 months; the difficulty of implementation; and its relative urgency. Each person on the executive team scored the projects individually, so that we could identify any significant misunderstandings (e.g., the CEO thought the new product development system would be difficult to implement, but the VP of operations considered it a relatively simple change). We then compared scores for each project and reconciled the differences.

Resolution: The executive team gained a clear picture of all the initiatives they were working on, and by focusing their energies on the projects that scored highest across all criteria, they ensured that they were investing in the right opportunities. Finally, restricting their efforts to a small list of projects freed up about 20% of the CEO’s time and enabled the company to bring several projects to completion within three months.

Why all those shiny products may not really be helping you at all.

  SKU over-proliferation is one of my pet peeves since I was in charge of the product marketing for running shoes at Asics. (See my March 2013 newsletter for a longer exegesis on the epidemic of product line obesity.)

Apparently, I'm not alone on this bandwagon. Andy Mooney, the new CEO of Quiksilver, just announced that Quiksilver Women’s and Quiksilver Girl’s lines were cannibalizing sales of Roxy apparel and taking space away from men’s wear in its stores. As a result, both Quiksilver and Roxy are exiting the skate business and DC (another sub-brand) has exited surf. As Mooney says,

Having fewer, better products is better for the brand than having more, average products.

This is a decision that smart -- and lean -- companies are always willing to make. I've written before about the way that Jim Collins uses his "stop doing list," and many people have reported about the slash and burn approach Steve Jobs took to the Apple product line upon his return to the company. As Matt May reports, Jobs was always proudest of the thousands of things Apple said no to.

When people think of Lean, they often think about the drive to eliminate waste from processes and systems. It's important to remember that waste can creep into your products and services, too.

March 2013 Newsletter: You've Got HOW many SKUs?

You need a certain amount of product line breadth to be a relevant brand, but many companies have gone well past the point of relevance and deep into the metastatic zone. If you want to be relevant, focus on providing fewer products that sell through easily, rather than trying to cover every single market niche and color preference. . . . Download PDF to read more

The Ikea effect, and putting the power in consumers' hands.

Ed Schmults, the CEO of Wild Things, is putting power in consumers' hands. He's aggressively pursuing a mass customization model that allows consumers to design their own apparel using several base models. It's similar to Nike ID shoes: consumers can choose fabrics, colors, zippers, pocket location, etc. in order to make the item that they desire. What's really intriguing about this initiative is the prospect for reducing the waste in the design, development, and production of products that are doomed to fail.

When I worked at Asics, I invested an enormous amount of time and energy on the redesign of our best-selling running shoe, the Gel 100-series. I wanted something fresh and different from anything we had done in the past, and I decided to use jelly rubber, rather than the traditional synthetic leather, stripes on the quarter panels. I was convinced that the shoe looked great, and that retailers and consumers would reward us for our new design.

Oops. Sales actually dropped 40% -- about $4 million. Consumers hated the new design. I single-handedly destroyed the pillar of our running line, because I was so emotionally invested in the idea.

The Ikea Effect describes how people like and value things in which they've invested their own effort. As researcher Daniel Mochon explains it,

Imagine that, you know, you built a table. Maybe it came out a little bit crooked. Probably your wife or your neighbor would see it for what it is, you know? A shoddy piece of workmanship. But to you that table might seem really great, because you're the one who created it. It's the fruit of your labor. And that is really the idea behind the Ikea Effect.

This is precisely what happened to me, and to countless other companies every year. Employees at every level of an organization get attached to the things they create -- plans, policies, products -- and are unable to see the weaknesses in them. In the case of product development and marketing, this can be a particularly expensive problem.

Ed Schmults says this about relinquishing control of design to the masses:

People say consumers can't design a good jacket, but the quality is ensured by the brand. Who are you to say what is ugly?

I think he's right. And I'd go one step further: allowing consumers to design their products is not only a part of the future of commerce, it can help immunize you and your business from the dangers of the Ikea Effect.

Respect for people -- Marissa Mayer edition

Good god -- the blogosphere and the press is full of judgments on Marissa Meyer's decision to end telecommuting at Yahoo. Depending on who you read, she's either a savvy executive making the tough choices necessary to rescue the sinking Yahoo ship, or she's an industrial era luddite clinging to an old work paradigm who, not incidentally, has betrayed women. Of course, none of these armchair quarterbacks (as near as I can tell) actually work at Yahoo. None of them know what the real situation is, either in the head office or in the home offices of the telecommuters. Without actually spending time at Yahoo, passing judgment on her decision violates the "go and see" principle of lean.

I have my own opinions about her decision, but in the absence of observable fact, my opinions are based on preconceptions, personal biases, and assumptions. It would be both foolish to judge her decision without knowing what's really going on.

Before we condemn Mayer's new policy as showing a lack of respect for her employees, we should show *her* some respect by going to the gemba and seeing first-hand what's happening at Yahoo. Until then, we have no right to opine on her new policy.

Really, Hertz?

Seth Godin (and others) have written eloquently on the concept of "permission marketing." As Seth writes,

Permission marketing is the privilege (not the right) of delivering anticipated, personal and relevant messages to people who actually want to get them.

To me, the converse (or is it the obverse?) of permission marketing is the ability to retract that permission. Easily. The SafeUnsubscribe feature of most email marketing services guarantees that ability, and makes it painless and risk-free to sign up for newsletters that you're not 100% sure about.

And then there's Hertz.

Hertz started spamming me recently with promotions I don't want.  For no comprehensible reason, they've decided to make it difficult to unsubscribe from their mailing list. When I tried to unsubscribe, the link sent me to this page:

As a #1 Club member -- one of their most valuable customers -- they're forcing me to take SEVEN (7!) steps (which I've circled in red) to unsubscribe from their mailings: entering my email twice, clicking three checkboxes, and even entering my #1 Club member number. Really? They can't associate my member number with my email address? They need me to specify THREE times that I don't want their emails?

This is not permission marketing. This is "hassle marketing" -- as in, it's too much of a hassle to opt-out of your marketing, so I'll just delete the messages. Wrong.

Whatever your product or service, do you make it easy for people to *stop* doing business with you? To me, that's the unspoken flip side of permission marketing. You have to respect people's desires not to talk to you, and make it easy for them to move on.

The last thing your customer or prospect wants to deal with is a company acting like you're their first boyfriend or girlfriend, unwilling to let go and pestering you while you start dating someone else.

A 20% cut shouldn't be Armageddon

Leon Panetta notified Congress that, as a result of the sequester, most of 800,000 Department of Defense civilian employees will see their work weeks shortened by 20 percent from late April through September. Predictably, his announcement was met with dire warnings about an irrevocable loss of military readiness and catastrophic vulnerability to military and terrorist threats from around the world. I don't know nearly enough about the cuts or about how the military uses its money (except for the egregious excesses like the Littoral Combat Ship or the F-22 Joint Strike Fighter), but I do know that the 20% reduction in civilian employee work hours shouldn't really be that big of a deal. Mind you, I'm not minimizing the effect on the workers' pocketbooks, just the effect on the military.

In contrast to the sackcloth-and-ashes mood relating to these cuts, consider Jason Fried, the founder of 37signals. As I wrote before. Jason's company operates on a 4-day workweek for half the year -- not just for work-life balance, but for improved productivity:

From May through October, we switch to a four-day workweek. And not 40 hours crammed into four days, but 32 hours comfortably fit into four days. We don’t work the same amount of time, we work less….The benefits of a six-month schedule with three-day weekends are obvious. But there’s one surprising effect of the changed schedule: better work gets done in four days than in five. When there’s less time to work, you waste less time. When you have a compressed workweek, you tend to focus on what’s important. Constraining time encourages quality time.

Delivering more with less. That's a lean lesson the Pentagon -- and probably your company -- could learn from.

Look downstream before crossing.

The flight attendant on United Airlines got my name wrong three times yesterday. She checked her passenger list when she asked for my food order, but the list was no longer laid out like a seating chart. It used to be that way -- the passenger names were organized into a grid that corresponded to the seat arrangement in the cabin -- but a recent change in the IT system changed the layout. And now the flight attendants struggled to match the names with the people in the seats.

This wasn't a big deal to the passengers, but it was clearly frustrating and a little embarrassing for the flight attendants. They wanted to provide high-quality, personal service (yes, I know, hard to believe, but at least on the United PS Service between JFK and SFO this is true), but they kept calling people by the wrong name.

Presumably, someone in the IT department made a change to the way that passenger names were printed on the manifest for a reason. However, without talking to the downstream customer -- the flight attendants -- the change created all kinds of waste.

The complexity of organizations and IT systems means that changes in one area usually have ripple effects farther down the value stream. If you don't talk to your internal customers before you make the changes, you're likely to create problems that undermine larger corporate goals (in this case, providing high service levels).

Obviously, I don't know what went into this change, but it seems as though the IT folks didn't look downstream before crossing.

February 2013 Newsletter: Your Passion is Killing Your Company

Your obsession with keeping your culture pure leads you to make poor hiring decisions and blinds you to talented people who could help your company grow. It may sound like heresy, but not everyone in your company has to love spending an afternoon hanging from a frozen waterfall or paddling down Class 5 rapids. . . . Click here to download PDF