Lean Startup Strike... er...Experiment 1

And the results are in.  The following Key Performance Indicators (KPIs) have been tallied:

Business Leaders Support Group:

• Direct emails: 85
• Total Tweets: 39
• Total Re-Tweets: 2
• Total Favorites: 45
• Total Mentions: 2
• Total Linkedin Posts: 1
• Total Linkedin Responses: 3
• TOTAL PAYING ATTENDEES: 0

2 Days a Month:

• Total Requests for Proposals: 1
• Total Proposals: 0
• Total New Clients: 0

 Butts Kicked: 1

As the results indicate this was not the week I was expecting.  Somehow going into my first Business Leaders Support Group session I had imagined myself by week's end either in the final stages of netotiating a multi-billion dollar buy-out with several global consulting firms.  Or discussing with my advisors just how big a valuation was reasonable for my Initial Public Offering.  Dragons Den....pffffft puh-leeez.

As I drove home from the event graciously attended by my three trusted (non-paying) advisers the magnitude of my arrogance washed over me in waves.  The first wave can best be described as a feeling of numbness.  In fact I was so distracted I missed several turns despite my GPS's best intentions.  Somewhat ironic that I was still failing to take advice from those around me.

The next wave to hit me, after I back-tracked and got myself pointed in the right direction, can best be described as shame and embarrassment.  It would have been one thing if no one had showed up.  But the image of my advisers entering the mostly empty room one after the other was seared into my brain.  I remembered with disgust my initial brief inclination to not introduce them to each other so they would each think the other two were potential clients.  But in the end there was no hiding it.  By 10 minutes past the start time it was obvious; no Business Leaders were showing up.

As I got closer to home my embarrassment had turned to full-on anger towards myself.  I knew better.  I was armed with every resource imaginable including extremely knowledgeable and diverse advisers, my own years (and years) of experience, countless books, conversations and hours of strategic thinking.  And yet in the end I had gone with my gut, ignored the fundamentals of Lean Startup, and paid the price.

So here's the good news.....

Because I was loosely basing my start-up on the Lean Startup methodology Wednesday night's failure could have been worse.....much, much worse.  My initial product launch hadn't been months and years in the making.  I hadn't spent hundreds of thousands (millions?) of investor funds leading up to that moment.  And all things considered the visibility of my catastrophic failure was limited to a handful of close friends and advisers, 125 Twitter followers, and now anyone who reads this blog.  Really all that had happened was that my first Lean Start-up experiment had failed.  Total out-of-pocket expenses including room rental, mileage and presentation supplies was under $300.  And besides, my direct email channel had generated a Request for a Proposal for our 2 Days A Month service offering.

So now what?  Learning

Once it became obvious that the Business Leaders weren't going to show up I decided to turn the evening into a review of my Lean Start-up Canvas.  Element by element I explained what I was thinking and then took notes (as best I could) as my advisers responded.  It turned out to be an extremely fruitful discussion.  I was forced to come up with much more clarity in terms of the Problems I was trying to solve, and how exactly to define my Solution.  And it did not take long for the group to focus on the biggest Risk; my Channels.  Here again the diverse nature of my advisers yielded huge benefits.  Having both client and marketing experts in the same room made for spirited and ultimately invaluable idea generation for me.

The next step is for me to get ready for Experiment Number 2: Toronto Business Leaders Support group scheduled for April 15th at the same venue.  That is not much time to implement many changes.  But on the other hand at least I did not set the bar too high as far as my Key Performance Indicators go.

@leanmind
www.2daysamonth.com

Difference Between Six Sigma and Lean

I was recently asked by a university student what the difference was between Six Sigma and Lean.  In order to make it easier to understand I used the example of a process that generates dozens and dozens of Weekly Reports for a large project management office (PMO).  In each example the starting point is the same.  However depending on which method you chose the outcome can be quite different.

For the sake of example consider the following situation:

• Process: dozens of project managers, project coordinators and other support staff put together detailed reports each week outlining the status of each project within the organization.
• Product: 100 project status reports each containing 100 pieces of data on average
• Total Data Points: 100 x 100 = 10,000
• Effort Required: 4 hours per report
• Total Effort Required: 4 hours x 100 reports = 400 hours
• Total Cost: 400 hours x $50/hr = $20,000 per week or $1,000,000 per year
• Error Rate: 10%
• Average Number of Errors: 10% x 10,000 = 100 errors
• Standard Deviation: 10 errors

Six Sigma Approach:

A team is assembled to study the problem of errors appearing on weekly project reports.  They interview stakeholders throughout the process and discover the following major problems:

1. Inconsistent Training: Initial training when the electronic reports were first introduced was extensive.  However over the past year and a half there have been many new staff who do not always receive the same level of training.
2. Inconsistent Auditing: Some departments have extensive review and feedback processes in place designed to catch errors and report them back to the project teams for correction.  However across the organization the level of auditing and tolerance for errors varies widely.
3. Lack of Restrictions: There are many pieces of information that should follow a standard format.  However the electronic forms do not take advantage of the error catching capability of the software.  As a result project managers are allowed to enter and submit incorrect information.

Using the information collected the team quickly comes up with a list of recommendations.  In addition they install run charts throughout the entire process to track the rate of errors.  Based on this quantitative information they are able to quickly identify the departments where most of the errors occur.  Corrective actions such as re-training and consistent auditing are utilized to reduce the number of errors.  Also they are able to use their tracking data to get approval from senior management to pay for the re-configuration of the on-line reports so that many of the errors are caught at the point of entry.

The Six Sigma Results:

• Effort Required: 3 hours per report
• Total Effort Required: 3 hours x 100 reports = 300 hours
• Total Cost: 400 hours x $50/hr = $15,000 per week or $750,000 per year
• Savings: $250,000 per year
• Error Rate: 2%
• Average Number of Errors: 2% x 10,000 = 20 errors
• Standard Deviation: 2 errors

Lean Approach:

A team is assembled to study the problem of errors appearing on weekly project reports.  They start by talking to the organization's customers to find out how much Value the reports provide.  What they discover after talking to external and internal customers is the following:

1. External Customers: Not surprisingly the team quickly discovers that the external customers, those who purchase the products and services produced by the organization have little or no idea that the firm even has a Project Management Office.  And these customers certainly have no idea what the Weekly Status Reports are or why they would need them.
2. Internal Customers: Perhaps somewhat surprisingly the team learns that even the internal customers who are the beneficiaries of the various projects have little use for the reports.  In fact one manager comments "all I want is the project finished on time, on scope and on budget.  Maybe they should spend less time on those reports and more time managing my projects."
3. Senior Executives: Most surprising of all they learn by talking to the senior executives, the group who everyone agrees asks for the reports, that they only read a very few of the 100 reports that are generated weekly.  When asked why they asked for the reports in the first place one executive explains "well having them make all those reports is how I ensure everything is being properly managed."

Based on the Voice of the Customer the team is forced to acknowledge that the Weekly Status reports add no Value to the firm's customers and are therefore Waste.  They begin work on the Value Stream used to create the reports and classify each task as follows:

1. Type 2 Waste: These tasks can be immediately stopped with no negative impact
2. Type 1 Waste: These tasks require Kaizens or small improvement efforts before further action is taken

After a series of Kaizen events are conducted changes similar to the following examples are made to the process that generates the reports:

1. Reduce Data Points: The number of required data points on each report is reduced from an average of 100 down to less than 10 Key Performance Indicators.
2. Reduce Reports: The number of reports is reduced from 100 down to 25 to track just the projects with a high Impact or a high Risk for the organization.
3. Reduce Auditing: With the simpler reports it is discovered that it is no longer necessary to have an extensive audit system in place.  In addition the senior executives acknowledge that holding people accountable for errors in the reports is not a substitute for good project governance.

The Lean Results:

• Effort Required: 15 minutes per report
• Total Effort Required: 15 minutes x 25 reports = 6 hours, 15 minutes
• Total Cost: 6.25 hours x $50/hr = $312.50 per week or $15,625 per year
• Savings: $984,375 per year
• Error Rate: n/a
• Average Number of Errors: n/a
• Standard Deviation: n/a

Conclusions:

In both instances the organization did the right thing by establishing teams to address the problem with reports.  And in the case of the team that used the Six Sigma approach they also did the right thing by engaging all the internal stakeholders in order to gain consensus on what the root causes of errors were and how best to fix them.  What this example illustrates however is the risk that any process improvement effort takes when they do not listen to the Voice of the Customer in order to properly assess Value and Waste.  By assuming that the reports represented Value the Six Sigma team focused all their energy on reducing errors.  By learning from their customer that the entire process was Waste the Lean team focused their energy on eliminating all but the minimum essential effort required.

The irony is that most often the further one gets in an organization from the paying customer the easier it is to forget about listening to the Voice of the Customer.  The result being the greater the likelihood that any improvement efforts will do little more than optimize Waste.

@leanmind

Low Cost of Capital, Low Chance of Lean

This will be short and sweet.  I was having a conversation with the CEO of a major food producer recently.  We talked about what he needed to do in order to start to turn his company Lean.  During our conversation it became clear that excess inventory, both raw materials and finished goods was a major problem for them.  I explained that one of the intents of Lean is to minimize inventory at which point he made an interesting observation.  He said "we haven't actually worried as much about inventory levels since the cost of borrowing got so cheap."

I thought about that and realized that he was probably right.  When the cost of capital is high it costs companies more money to hold onto inventory and as a result they are more likely to manage that spending.  However when inventory doesn't "cost" much in terms of interest rates there is less incentive to control those costs.  I wonder just what the impact of lower interest rates is on the rate of adoption of Lean principles.

@leanmind

One Reason Not to Ask Your Customer

You have all seen me go on and on about how important it is to listen to the Voice of your Customer in order to define Value for your process.  I even recently simplified things by writing a blog that gave Two reasons to have customers define value.  In this blog I want to give a compelling reason NOT to listen to the voice of your customer.

As a passionate Lean practitioner I am always on the lookout for great examples of organizations applying Lean techniques.  In particular I am forever looking for great ideas to share on how to listen to the Voice of your Customer.  As a result I tend to complete a lot of on-line surveys that I usually find on the back of my (retail) sales receipts.  It is no surprise that folks in retail have a much greater sense of Customer and Value than people who never see their customers.

I see a disturbing trend in these on-line surveys, however and I am not sure if it is Sales or Marketing or both who are to blame.  But I certainly hope there are no Lean consultants behind this idea.  If there are then it is time to switch firms....or just read the first 28 pages of the book "Lean Thinking" by Womack and Jones.

The problem is this: most on-line customer surveys are poorly disguised tricks to solicit personal contact information from customers that will undoubtedly be used at a later date to spam respondents' Inboxes with deals and promotions.  This is wrong, wrong, wrong!

First of all how dare you waste your customers' time by making them go through a tedious process to set up a "feedback" account with your firm complete with mandatory fields and requests for everything but bank account numbers and PINs?  What can you possibly need that information for anyway?  And those of you in Marketing about to lecture me on customer profiling leave the process improvement to those who care about adding Value and go back to ordering the fancy display booth and brochures for your next trade show.

Second of all what's with the locked list of 20 attributes asking me to rank my "customer experience" on a scale of 0 to 10?"  Again that's great if you are the head of Marketing and you are trying to justify your existence by tracking "quantifiable and repeatable" metrics that no one pays attention to.  And how can you possibly know the only 20 attributes that completely define your product or service anyway?

Finally don't insult your customer by telling them that by completing this bogus survey they'll be entered into some random contest to win a trip to a fake holiday destination.  First of all everyone knows that no one ever wins those things.  And second of all....well the fact that no one ever wins is enough.

If you are serious about listening to the Voice of your Customer and you are going to use on-line surveys then do not farm it out to a 3rd party marketing group.  Do it the old fashioned way.  Pay your customers for their valuable time with a 5% off coupon.  Don't make them give personal contact information if they choose not to.  And allow them to be as open ended in their feedback as possible.  The following two simple questions with unlimited room to write free-form responses before printing off a 5% off coupon will suffice:

1. Please describe how our organization adds Value to you.
2. Please describe all aspects of your experience with us you feel is Waste.

To be sure it will take more time to sift through the written responses.  But your organization will have a much more objecive description of what you do that adds Value.  And you will have customers much more willing to help you along your Lean journey.

@leanmind

Two Reasons To Have Customer Define Value

Everyone who studies Lean knows that the customer defines Value, at least they should know that.  As for how many actually involve the customer?  Well that depends.  In a recent on-line survey that we conducted 100% of respondents reported that they directly involve their customers in Kaizen events "always" or "most of the time."  Yet in a subsequent on-line poll asking how people involve their customers (surveys, interviews, etc.) only a tenth the number of people responded.  That leads us to believe our suspicion that most do not involve the customer.

Well for those of you who do we salute you.  Keep up the good work.  For those of you who do not the good news is you are not alone.  In fact you are part of the vast majority.  And for those of you feeling special let me emphasize that "reading your customer's minds" is not the same as involving your customers; far from it.

So why involve the customers at all?  Why not just get an enthusiastic group of employees together, assign them to an important area within your organization, give them some tips on how to conduct a Kaizen, or better yet hire an expert to facilitate the exercise, and go to it?  Why bother with customers at all?  I mean really what do customers know about what goes on in the depths of your organization anyway?  And all they'd probably do is question most of the things you do and just kill everyone's buzz (yes I was born in the 60s).

Reason 1: Maximize your Return on Investment

Let's face it, making improvements requires time and energy from those involved.  And both of those cost money which means you are making an investment.  Mind you if done properly an improvement effort is highly enjoyable and satisfying for all involved.  But all improvement events require a certain level of investment to be successful.

So if you are going to make the investment into an improvement exercise you owe it to yourself and those putting in the effort to ensure that what you fix will actually improve things.  And who better to determine whether things are "better" than your customers.  Sure it's important that staff feel loved and appreciated and comfortable and safe and all those good things.  But if you are improving all those things yet doing nothing to add more Value to your customers then you are wasting your time, your energy and your money.

Reason 2: Reduce Resistance to Change

Let's also face it, everyone embraces change...for everyone but themselves.  Not too many people in an organization will say to themselves "you know 99% of what I do day in and day out adds no Value to our customers."  As human beings we have evolved amazing abilities to justify what we do well to others and ourselves.  Because we are good at something it must add Value.  Because we have always done something it must add Value.  Because we enjoy doing something it must add Value.  And so on.

So really the only way a group can truly tackle the Waste that is most of what they do is to have an objective 3rd party tell them that it's Waste in the first place.  I have yet to find a Customer Help Desk that rallies behind the motto "Everything we do is Waste so let's eliminate everything!"  Or a maintenance department that aggressively attacks every repair job and every preventive maintenance activity with the intent to eliminate everything.  And so on throughout every organization.  It is only in the cold bright light of the Voice of the Customer that we truly see the vast quantities of Waste that blanket most everything we touch.

So for those of you just starting out on your Lean journey, or those of you who are months or years into it and starting to get that uncomfortable feeling of "was it all worth it," I can't emphasize enough the importance of interacting directly with your customers, your clients, your patients, your .... well whoever it is who pays your bills.  You will be amazed, crushed, astounded and eternally grateful that you did.

@leanmind

Kaizen without customer is Waste (again)

I would like to share yet another example of an improvement effort (Kaizen) that did not involve the customer and turned out to be complete Waste.  I had the privilege of working for a client in the medical devices business.  Without giving too much away they have a technology that allows a patient to wear a tiny mobile device that reads every heart beat and sends it back in real time to a central monitoring station.  After a week or two of collecting data my client then provides the patent's doctor with days worth of detailed data that can then be used to make accurate diagnoses.

One particular engagement with this client involved their Help Desk.  These are the people who answer the phones 24/7 whenever a patient has a problem that needs to be resolved.  Those of you who read my blogs will immediately recognize a Lean gold mine when you read it.  Sadly this was not the case at first for this client.  For them the Help Desk was simply a part of their process.  As opposed to a continual feed of invaluable customer feedback on Value and Waste.

But as I said we were not there to mine this data but rather to help cut costs for the company.  And that meant understanding why the calls were coming in, prioritizing the most frequent causes and eliminate them in order to reduce call volumes.  I'm not saying I'm necessarily proud of everything I have done in the past.  But my heart is always in the right place.

It did not take us long to put call logs in place that allowed Help Desk operators to simply tick off the root cause for each inbound call on a check list (I love check lists) they helped us create.  After a week or so we had thousands of data points and immediately we saw that "Leads not sticking" accounted for 19% or almost one in five calls.

We sat down with some of the people in the call centre and asked for help interpreting the results.  Not surprisingly they were not surprised.  "Of course that's our number one reason for calls.  Everyone thinks the wet wipes are to clean their skin."  I should mention that when the kit shows up at the patent's home they are required to stick four leads to their chest and abdomen and then attach tiny wires.  It turns out included in the kit is a small square packet that looks exactly like a wet wipe you would get when you order chicken wings at a greasy restaurant.  Not surprisingly the first thing patients do is open the wet wipe and clean their skin before adhering the leads.  Makes sense.

Unless you actually read the instructions and find out that the wet wipe is actually a solvent to help clean off the glue from the leads after the monitoring is finished and you are removing the leads.  So wiping your skin first has the effect of making the leads not stick.  Hence the 1 in 5 calls to the Help Desk complaining that the leads are not sticking.

Not being medical experts ourselves we respectfully asked the question "....so why do you include the wet wipes in the kit in the first place if this is what happens?"

We were told that the folks at the Help Desk (who listen to the Voice of the Customer all day long) had been telling the folks in Operations to please take the wet wipes out of the kit because of this exact problem.  They didn't even need a call log to know this.  But they were repeatedly told by the Operations folks that the wet wipes were necessary to help patients clean off the glue residue after the testing was finished.

Again not being medical experts we respectfully asked "....well they have a point, don't they?  I mean people probably would want to have a way to clean the glue off after they removed the leads."

And here again we were told by those who listen to the Voice of the Customer all day and all night long that most patients have already used the wet wipe to make the leads not stick in the first place so they have nothing to clean off the glue anyway.  If someone does call the Help Desk with this complaint all they do is recommend the patients use a wash cloth and warm soapy water which is just as effective at removing the glue.

We took our information to the VP Operations who was responsible for both areas within the company and explained our findings.  He brought in the heads of both areas and put the idea in front of them.  After a brief discussion the decision was made to take the wet wipes out of the patient kits starting the next day.

I don't have to tell you the effects were immediate.  Fortunately for us as consultants there was a very short cycle time between the time the kits were packed and the patients received them.  That meant that within three to four days we saw a dramatic drop in inbound calls - almost 20% to be exact.  And you guessed it almost all the calls regarding leads not sticking immediately went away.

The lesson is this: at some point the company made the decision to add wet wipes to the patient packages because it "seemed" like something the patients would Value.  And from the point of view of the company this made sense.  However they did not listen to the Voice of the Customer even when the customer called them hundreds of times a week to verify whether or not they had added any Value or Waste.  And even when one in five calls from customers told them that they had added Waste they still did not listen.  They took their own perception of Value and Waste over the opinion of their customers.

This is a lesson in just how difficult it is to overcome internal perceptions and let go of everything you assume is Value.  I recently concluded an online poll where 51% of people responded that the customer is the one who decides whether a task is Value or Waste and just 1 in 10 felt the front line staff could make the distinction.  And in a related poll I am currently conducting I ask how many improvement initiatives directly involve the customer so far 100% of respondents say they do just this. 

Now I find it hard to believe that 100% of the time people directly involve their customers, especially given I can count on one hand the number of times I have seen this done effectively in practice.  And to demonstrate this I have a 3rd poll where I ask people how they engage their customers for feedback.  Someone please explain to me why after two weeks of having the 3rd poll open only a tenth the number of people have responded as answered the first.

Even if you think you directly involve your customers because you think you know how your customers feel, do yourself a favour and ask anyway.  I guarantee that you will be shocked, amazed, and ultimately far more successful if you do.

@leanmind

Kaizen - Customer = Waste

Now that I have your attention I'd like to describe a situation where I personally observed a well-meaning Kaizen that did not involve the customer.  And I'd like to show you how it turned out to be a complete waste of time for all involved.

For those of you not familiar with the selling process that most implementation based consultants go through it generally involves something called an Assessment or Analysis.  This is an exercise that the consulting firm performs, usually at their own expense, intended to scope out the project and convince the client that the firm is up for the challenge.  Assessments can take anywhere from a few days to a few weeks to complete depending on the size of the potential engagement.  And at the end of the exercise it is obviously the hope of the consulting firm that they present a compelling enough case to convince the client to buy the project.

The firm where I first worked has a rigorous approach to how they performed a two-week Analysis.  In fact they had the process down to a science where each hour of each day was carefully scripted out.  And the only decision the lead analyst had to make was where to schedule the various studies.

The other thing you need to know about these assessments is they are gruling for the consultants involved.  In fact if a consultant does not work a minimum of 20 hour days conducting and writing up their studies then the firm doesn't feel that the analyst is doing their job properly.  I actually had a partner explain to me that a big part of the assessment is demonstrating to the potential client "just how hard we work."  I noted that the partner usually only popped in and out during the day to see how the assessment was going.

So back to the Kaizen.  As I mentioned a huge part of the effort for the consultants was the time it took usually back at some dingy hotel room to manually write up their studies.  An 8 to 10 hour study could take half as long again to write up.  And if the analyst was feeling particularly grouchy they could make you re-do much or all of your work again.  This colosal waste of time was definitely not lost on bright young minds fully capable of generating masterpieces on Excel or PowerPoint.

That was how the studies were being done when I left the firm almost 10 years ago - long hours spent manually writing out the studies and filling in the graphs with coloured tape.  Then about 4 years ago I had the opportunity to work with a spin-off firm that was basically a pale shadow to the firm where I had originally started.  One of the things I noticed on my first analysis was the fact that spreadsheets and colour printers were now being used to write up the studies.  Apparently this was a process improvement (Kaizen) that the original firm had finally given in to.

I was happy to see that even a process improvement firm could look at its own process and make improvements.  And my immediate assumption was that the length of the assessments must be similarly cut in half.  My mistake.  Apparently all the firms had done was take the additional time available to the consultants working 20 hours a day and assigned additional studies to be completed.  That meant it still took two weeks to compile the findings.  And in the final presentation there were almost twice as many studies taped up around the board room table.

So what's the problem?

Well those of you who follow my blogs and tweets will know that I am passionate about the importance of starting every Lean exercise with having the customer define value.  My point being you may have your own internal perceptions of what adds value and what does not.  But at the end of the day the only person's perceptions that matter are those of the customer.  Despite this I still read blogs and watch pod casts from Lean "experts" who rarely if ever even mention their client's customers.

Take the consulting firm for who I used to work and for whom I have to thank for bringing me into the world of management consulting.  They were right in looking at their own internal process to find ways to reduce waste and add more value.  However by ignoring their customer, they automatically assumed that writing up studies was somehow adding value.  They came up with a method change to reduce the time required to complete this task.  However rather than leaving the number of studies the same and reducing the time they took to complete these highly intrusive assessments, they simply maintained the two week cycle time and piled on more colourful graphs to show at the end.  That's like Toyota designing a clever way to reduce inventories of parts in one location, only to store more parts in the freed up space.

What's even more interesting is I noted that the final presentations to the clients often only focused on a small percentage of the completed studies.  This was because there were simply too many to go through in the time allowed by the busy clients.  The untouched studies were waste in their purest form.

As an interesting aside I had the opportunity to conduct a full assessment at a potential client in just two days.  We only had two days because that was all the interruption (waste) the client would allow.  One other consultant and myself were able to conduct multiple simultanious studies covering all critical aspects of their process.  We were then able to write up all the studies on computers and give a full presentation to the senior executives the afternoon to the the second day.  The point being the client was telling us that to him our studies were waste.  So we utilized the results of the previous Kaizen to shorten our cycle time and minimize as much waste as possible.  I am also happy to report that I remain an advisor to that client to this day.

@leanmind