A peek inside The Process Mind – excerpts
From CHAPTER 2: APPLE’S LITTLE SECRET P. 32-33
Of all the lessons from Apple, I believe the correlation between process design and success is the most important. So, why can Apple do it while so many others can't? ... It's simple. It's brilliant. It's process thinking. Thinking that reaches from the process mind to being installed in the guts of the company.
Apple leads the U.S. retail market in terms of sales per unit area.15 However, this was about more than simply being in the retail business; he wanted to add value through the entire process. He didn't just design a store, he created an experience, a market, a theater, and a process that ended in a place where customer satisfaction met customer expectations, and delivered better than anyone else. Apple stores redesigned the retail process. Like an army general, he understood that no matter how capable, if you can't control your supply chain, you are operating at high risk and low competitive advantage. And, if you are to be really fast, you must have the very best internal processes. Jobs and Cook decided they would build product on a make-to-order basis and, to achieve that, the lead time had to be inside demand. That was a tall order, an order that could only be achieved with a focus on process innovation that complemented product innovation.
Steve Jobs was a good manager. Apple board chair, Ed Woodward, said, "He became a good manager, which is different from being an executive or visionary, and that pleasantly surprised me."16 Even today, this aspect of Jobs' brilliance is little recognized. Why? Because many leaders still do not see what he saw or understand what he understood. His success is usually seen in his design of innovative products and in his passion, focus, and "right or nuts" character. However, his focus mantra led to the search for, and elimination of, inefficiencies and waste in the process—anything that disrupted flow. Perhaps his intuitive understanding of the power of flow stemmed from his lifelong following of Eastern, mystic beliefs like Prajna (i.e., wisdom) and the dynamic action and human involvement that is essential to Zen practice. This is the less understood factor in Apple's achievement and its capacity to deliver an endless stream of great products to satisfy extraordinary demand better, faster, and more efficiently than the competition.
It's simple. It's brilliant. It's process thinking. Thinking that reaches from the process mind to being installed in the guts of the company. Jobs and Cook designed their processes and instilled an understanding, in a macro sense, that the purpose of their process was to fill demand; meet and exceed customers' expectations. That's it. And, everything works toward that purpose. In Jobs' words, process design is not "how it looks, it's how it works."
The purpose of the process is to deliver customer value.
Tim Cook is not a tech genius or a nerdy guru or a John Sculley. He graduated from Auburn University in industrial engineering and got a business degree from Duke. He came to Apple from Compaq, where he was running the procurement operation and he had been at IBM overseeing distribution. At Apple, Cook dismantled Sculley's infrastructure. By 2012, Apple was carrying four days of inventory and turning it 74 times a year.17 That's extraordinary. Samsung was at 17 times a year. To put some perspective on it, in 2013, RIM (developer of the BlackBerry), at the height of their struggles and the low point of their value, had to write down almost a billion dollars or two years' worth of inventory.18 That represents about half a turn, which starkly illustrates the correlation between process thinking and dollars. In the retail electronics market, compare Apple carrying four days of inventory to people like Circuit City (we know what happened to them) who carried 60 days, or Best Buy at 50 days, Walmart at 40 days, Amazon at 30 days, and you see the difference—competitively and financially. Every day a product sits on a shelf, due to the inefficiency of the process, its value erodes by 1 to 2%.19
Of all the lessons from Apple, I believe the correlation between process design and success is the most important. So, why can Apple do it while so many others can't? Was Steve Jobs that prescient? Is Tim Cook the only industrial engineer who understands that the guys with the better process win, every time?
From CHAPTER 3: HISTORY REPEATS ITSELF – UNFORTUNATELY P. 65-66
Although today's management talks a lot about the customer being the center of gravity, the shareholder still rules in too many organizations.
Regardless of thousands and thousands of tours through the Toyota Production System, by some of the brightest and most influential figures in industry; despite tens of thousands of articles, books, courses, belt certifications programs, seminars, consortiums, benchmarking tours; and dedicated institutes, all preaching the power of TPS/Lean, it is all in vain without the ability to see beyond the tools and techniques. Most have never recognized that the organization is first and foremost a collection of core processes involving many steps that must be performed properly, in the right sequence, at the right time, as defined by the customer. I repeat, until they see this reality, the unfertile grounds of the conventional siloized organization cannot possibly sow and grow the seeds promised by Lean or any legitimate continuous process improvement undertaking.
Although today's management talks a lot about the customer being the center of gravity, the shareholder still rules in too many organizations. Slow, steady continuous improvement does not lead to immediate recognition, quick promotions, or soaring share prices. Managers are still looking for the "big bang" project that sounds good and comes with great fanfare even though these initiatives are usually not sustainable. And yet, everywhere I go, everyone agrees that continuous process improvement is the most formidable weapon an organization can acquire and many believe they are doing it. They have Lean, Six Sigma, and other reengineering initiatives, but they continue to live in a vertical world and do not understand process thinking. They must first develop a process mind and dismantle the functional structures.
From CHAPTER 7: PERFORMANCE ON PURPOSE P. 155-156
No doubt the mother of all contrived purpose is "month-end syndrome," driven by quarterly shareholder value targets.
It is hard to care about a customer in a system that does not encourage you to do so. Only when the purpose is expressed as "serve the customer" can process design be understood in customer terms.
Target-obsessive management behavior may be the greatest barrier to improving financial performance.
Where the true purpose of fulfilling customer demand is replaced by contrived purposes, the organization is seduced into focusing on discrete resources at the expense of the collective whole. A simple illustration can be extracted in almost any organization. In an engineering office, the contrived purpose might be "billable hours" or, in a service call center, "average call handling time" or, in a manufacturer, "equipment utilization." Upon reflection, one can discover numerous examples of "normal" business activities that are not based on purpose, but merely add costs to support contrived purposes. Experience suggests there is no correlation between billable hours and on-time, on-specification project delivery. And average call-handling time does not encourage first-time-right problem resolution. Machine utilization is useless if that machine is not a constraint to meeting customer demand. Machine availability better correlates to the purpose of the process. The Formula 1 pit crew is only utilized for a total of three to six seconds (of the 7200 seconds of the race), but their availability is critical to accomplishing the purpose of winning the race. Certainly, it would be silly to have someone drive your car continuously around the block while you read this book so that your vehicle is better "utilized." Contrived purposes in functional, sub-optimized processes are no less absurd. No doubt the mother of all contrived purpose is "month-end syndrome," driven by quarterly shareholder value targets. In turn, this artificial milestone forces employees to be run ragged in meeting month-end numbers (i.e., regularly shipping more product in week four than in week one). I would be a rich man if I had a dollar for every business who initially insisted that "no continuous process improvement work could be done the last week of the month" because all resources must be fully occupied to close the books. More batch thinking, I guess. Why not close the books every day?
From CHAPTER 9: ACTION: EXERIMENTATION AND THE SCIENTIFIC METHOD P. 189-191
Conventional organizations do not have the requisite thoughtware for developing a process of discovery, learning, reflection, and adaption and, yet, in the twenty-first century, it is imperative in order to make faster, more informed, better decisions.
FEAR OF FAILURE IS THE ENEMY
The fundamental principle of the scientific method is that the experiment informs the hypothesis. In rolling the die, the hypothesis is that one number might come up more often than others and the experiment sets out to prove, or disprove, that. In business terms, the hypothesis could be lower costs, faster turnaround, better quality—whatever you are trying to achieve, and the best way to achieve that is to experiment your way toward it, one small, investigative action at a time. Unfortunately, the main barrier to the application of this scientific principle is the inherent fear of failure embedded in organizations, and management's psyche—the thoughtware—thereby, creating an avoidance of perceived risk in experimentation as a legitimate action plan (i.e., the die could be wrong). Fear of failure is the enemy of innovation and ingenuity and it gets in the way of experimentation. Action on the process to remove waste and create value through experimentation is only effective when the experimenter accepts that the purpose of the experiment (the action) is to learn and then, based on the learnings, to adapt. Growth comes from doing things for which the outcomes cannot be predicted, which in turn, come from experimentation (think research and testing), which leads to learning. The sticking point is that learning requires failing. After all, a true hypothesis can only be tested through experiment if it is possible to refute it. However, the prospect of failure, for all kinds of psychological and sociological reasons, is not part of the business organization's DNA. And yet, to build a process-focused organization through the Purpose–Measure–Action model, failure must be acceptable; in fact, celebrated. Part of the mantra of a process-focused organization and the action it takes is failure. Fail fast and fail effectively through lots of experimentation. It is about incremental, low-risk improvement. Conventional organizations do not have the requisite thoughtware for developing a process of discovery, learning, reflection, and adaption and, yet, in the twenty-first century, it is imperative in order to make faster, more informed, better decisions. Ironically, the majority of our processes are not easily and readily adaptable to change despite the fact that western civilization has been built on this scientific principle. Adaptive and evolutionary systems by their very nature involve experimentation. Continuous process improvement in business requires us to learn and adapt through constant observation, assessment, trialing, and evaluation of the processes.
The process needs to be designed so that the people are willing and able to repetitively run a series of experiments and problem solve, every day. They need to think and breathe process. They need a process mind. They need to understand that they are not making shirts, picking parts, filling buckets, they are solving problems to meet the purpose, which is, in the end, to fulfill customer demand. They know how their part of the process relates to that. The only method that I know that achieves this is the scientific method:
Run an experiment and see if the experiment moves you closer to an answer. Like in rolling the dice. Process thinking and action based on a hypothesis is fundamentally different from functional thinking and actions based on historical facts. The former uses more set-base decision making, while the latter uses more point-based decision making. In set-based thinking, you begin measuring the set, the process, and, as you get closer, you refine the targets. For example, if I ask you: “Can we meet Monday at 3 p.m.?” You will likely say, “No, I’m busy. How about Tuesday at five?” And I say, “No, I’m tied up.” Then the following day you are going out of town and I’m out of town the next week. Conversely, if I said to you: “Are you available to meet next month?” the odds are that I will get a “yes.” It’s not point-based; it’s set-based. Once we decide it’s the next month, we have eliminated the other 11 months and we can focus on a week in the month. It’s a process working a clear condition (a meeting), but with a grey territory to be traversed to get there. Let’s do it in a series of sets: month, week, day, and hour. It’s as Rother defines in his book, Toyota Kata,1 we are establishing a target condition (i.e., month), then another target condition (i.e., week), until we secure a one-hour meeting between us. Action through experimentation is a daily habit of the process mind.
From CHAPTER 12: CARROTS AREN’T FOR EVERYBODY P. 274-276
An air traffic controller can do all the scheduling he/she wants, but he/she has to be ready to adapt, on a moment's notice. The same in a distribution center.
TECHNOLOGY IS NOT A PANACEA
Inherent in most of this discussion about continuous process improvement is the old thoughtware that tries to solve capacity problems with technology, specifically business management software. Companies spend millions on bringing in a suite of integrated applications that a company can use to store and manage data from every stage of business, including selling, ordering, planning, scheduling, building, shipping, and costing. The claim is that the system will provide an integrated real-time view of core business processes, using common databases maintained by a database management system, to track business resources—cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll. However, multimillion-dollar enterprise-wide system software mirrors the functionalized organization it is selling to, managing multiple interdependent variables as discrete resource points, with little regard for understanding and improvement of the business process. We don't need to report on our processes, we need to eliminate the waste in them. All the information required can be extracted through a treasure hunt and its problem-solving tools and techniques. Over the past decade, IT investments have become the largest category of capital expenditure in American businesses; however, none of them are geared to the core task of creating processes that expose disruption in the flow of value to the customer and give employees the information required to fix these disruptions before they reach the customer.
These systems are essentially another fix-the-resource solution. They don't always work. As I mentioned earlier, the traditional thinking behind centralized information systems in these situations is one of building a reliable process, but the process-focused organization is looking not to reliability, but to building—an adaptive process that can respond to incessant variation. These management information systems eliminate the ability of the people in the process to solve the problem. It's a classic example of trying to use technology to build in reliability when what is really needed is more adaptability and flexibility.
TECHNOLOGY CAN'T REPLACE AIR TRAFFIC CONTROLLERS
The idea of buying an enterprise-wide software management information system to schedule a distribution center or plant is not only old thoughtware, it's fundamentally impossible. As I said in Chapter 2, there is a real difference between investing in capability and capacity. A colleague of mine once shared with me a brilliant analogy of air traffic control and the folly of forecasting, scheduling, and trying to control multiple active, dependent variables with a passive, distant information system.
An air traffic controller can "sell" slots to land a plane and build what we might call capacity planning and give lead time indicators to pilots (i.e., vendors, suppliers), but they can't schedule moment-to-moment because there is too much dependency and too many variables. You might schedule a plane to land in Nashville at 9:02, but that is dependent on traffic at O'Hara in Chicago, weather, overbooking, and many other factors. An air traffic controller can do all the scheduling he/she wants, but he/she has to be ready to adapt, on a moment's notice. The same in a distribution center. You can schedule all the workflow (i.e., trucks for a week), but you know the reality will be quite different. Because there's too much interde- pendency in the process and every day, every hour, every minute there are variables. So, trying to build an algorithm or framework to predict dependent variables is impossible.
Think of your employees as air traffic controllers, overseeing a crucial process all day long.
The only way to deal with dependent variables is to go into the process, directly observe the process, understand it, and give the people the power to make moment-to-moment decisions as the variables occur, like any clear-thinking supervisor does with the air traffic controller. Think of your employees as air traffic controllers, overseeing a crucial process all day long. If you do, they will create a faster, better, safer process than you can imagine.