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Lean Thinking

The Management Pocketbooks Pocket Correspondence Course

Pocketblog has gone back to basics. This is part of an extended management course.


Imagine that you were an Egyptian overseer, responsible for building a great pyramid for your Pharaoh. How would you want to organise things?

  • Would you want to start by knowing exactly what your Pharaoh wants?
  • Would you want to fully understand every part of the process?
  • Would you want to understand how stone moves from being part of the wall of a quarry to a perfectly fitting part of your Pharaoh’s pyramid?
  • Would you want to ensure that the giant blocks of stone arrived fast enough so the workers on the ramp always had a stone ready to move up?
  • Would you want to make sure stones got up to the top of the ramp fast enough to make sure that they were there as soon as the last stone was placed on the pyramid?
  • Would you want to avoid stones arriving too fast and causing a bottleneck?
  • Would you want to make sure every stone was perfect to avoid having to stop and find a replacement or re-dress the stone on site?

If your answer is yes to all of those questions, then congratulations: you are instinctively an ancient Lean Manager.

Lean thinking is not new: the ideas have been around for a very long time and accumulated in industry over the years. But there are a few names that are strongly associated with its emergence as a driving force in organisational effectiveness in the last years of the twentieth and early years of the twenty first century.

The thinking was done by the founder of Toyota, Sakichi Toyoda, his son, Kiichiro Toyoda, and their postWW2 production chief, Taiichi Ohno. The Toyodas set out how a production line could work best, avoiding the problems of Henry Ford’s original ‘don’t stop the flow of the line if anything goes wrong – sort it out at the end’ approach. When they could not make it work due to the flaws in their supply chain, it was Ohno who then solved the practical problems.

The message came out in a landmark study by researchers from The Massachusetts Institute of Technology (MIT). This was published in the 1991 book ‘The Machine that Changed the World’ which introduced the world to the term ‘Lean’. Two of its authors: James Womack and Daniel Jones, went on to write a series of influential books, spelling out how to apply the lean principles they had researched at Toyota, starting with ‘Lean Thinking’ and becoming even more practical, with ‘Lean Solutions’.

The Value Chain

At the heart of Lean Thinking is an understanding of the value chain, which we discussed in an earlier post. Lean thinking starts by defining value from the point of view of the end customer for your products or services. When you do this, you usually find that only a small proportion of your activities directly contribute to that value (from the customer’s perspective). The rest – including some parts of what Michael Porter described as Primary Business Activities are only necessary as supporting this value creation.

Performance improvement comes first from eliminating steps and interactions that are not necessary for value creation and then, redesigning those that are to be as effective and efficient as possible. This means less wastage due to delays, re-work, duplication, scrapping below quality products, and oversupply.

The five principles of Lean Thinking are set out below.

The Five Principles of Lean Thinking

Waste

At various points, Lean Thinking decries wastage. The Toyota production chief set out seven sources of waste that destroy value.

  1. overproduction
  2. excessive inventory
  3. defects
  4. delays
  5. unnecessary transportation of goods
  6. unnecessary movement of materials
  7. unnecessary processing or materials

Where is there waste in your organisation?

Further Reading

In 1997, James Womack founded the Lean Enterprise Institute. Its website is a valuable source of resources for understanding more about Lean thinking.

In our Management Thinkers series, you may like Taiichi Ohno: Lean Production.

From the Management Pocketbooks series:

  1. Improving Efficiency Pocketbook
  2. Improving Profitability Pocketbook
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Synergy: Mutualism in the Human World

Synergy

SynergySynergy is a Big Idea that has been around… forever. Or as near as makes no difference on a human scale.

In the animal world, we call it mutualism, but you know how fundamental an idea is, when your mum expressed it to you in plain language when you were just a small child. ‘The whole is greater than the sum of the parts’. That’s what synergy means. So, why is it such a widely used word in business – so much so that it has pride of place on many-a buzzword bingo card?

And there’s another question we need to get to grips with… How real are the synergy benefits that leaders so often advocate for? The fact is that the whole being greater than the sum of its parts is a nice idea – but logically, it would seem to be flawed. So, when does the concept apply?

Continue reading Synergy: Mutualism in the Human World

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Product Manager: Strategist, Advocate, Keystone

Product Manager - Product Management

Product Manager - Product ManagementMovie stars, celebrities, and sportspeople have managers to take care of their business affairs. So, why shouldn’t a superstar product? And if every product can aim to be a superstar, then they will all need their own Product Manager.

And that’s what we’ll look at in this article; the role of a Product Manager:

  • Why we need them
  • What they do
  • The breadth of their role

So, let’s dive into the world of Product Management.

Continue reading Product Manager: Strategist, Advocate, Keystone

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Outsourcing: Outsiders Working for You

Outsourcing

OutsourcingOutsourcing feels like it’s been around forever. And doubtless, as an adjunct to business operations, it has. But, as a widely-used business strategy, it really only dates to the 1980s.

Since then, outsourcing has become a vital option for large and small business, and for many public services too.

So, what is outsourcing, why do organisations use it as much as they do, and what are the risks?

Continue reading Outsourcing: Outsiders Working for You

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Value Engineering: The Same for Less

Value Engineering: The Same for Less

Value Engineering: The Same for LessHow do some products achieve astonishing quality and functionality at affordable prices? The answer is in the discipline of Value Engineering.

Value Engineering is often tarred with the same brush as ‘cost-cutting‘. Although it has a similar role, it plays to a wholly different business strategy. So, let’s look at what it is and why it matters.

Continue reading Value Engineering: The Same for Less

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Key Performance Indicators: KPIs

Key Performance Indicators - KPIs

Key Performance Indicators - KPIsKey Performance Indicators – or KPIs – stem from an insight that is most often attributed to Peter Drucker, in his 1954 book titled, ‘The Practice of Management’:

‘What gets measured gets managed’

That attribution may be contested, but the central assertion seems pretty sound. If your organisation measures performance against a specific metric, then its managers feel an incentive to manage their parts of the business, so that they perform well against that metric. KPIs are nothing more nor less than the key – or most valuable – metrics.

Continue reading Key Performance Indicators: KPIs

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The Pareto Principle | The 80-20 Rule

The Pareto Principle | The 80-20 Rule

The Pareto Principle | The 80-20 RuleThe Pareto Principle – also known as the ’80-20 Rule’ – is one of those ideas that crops up in many places. It is ubiquitous because it is an expression of a general principle of nature. It is an example of a power law. Extremely long rivers are rare. Small ones are very common. A small number of words appear frequently within a language, whilst there are very many words that we hardly use at all.

But what makes the Pareto Principle a valuable version of this phenomenon is that it is easy to articulate and understand. And it is therefore easy for managers to apply, to get better results. Consequently, since Joseph Juran rediscovered and named the idea in the 1930s, it has become an indispensable snippet of knowledge, for anyone in management.

Continue reading The Pareto Principle | The 80-20 Rule

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ERP: Enterprise Resource Planning

ERP: Enterprise Resource Planning
ERP: Enterprise Resource Planning
ERP: Enterprise Resource Planning

ERP, or Enterprise Resource Planning is nothing more than a big piece of software. It sits at the centre of big organisations, handling lots of important tasks.

More recently, smaller scale ERP applications have come onto the market. These allow new and small businesses to get the benefits of  linked back office functions. This is due, in large part, to the availability of managed, cloud-based software.

Continue reading ERP: Enterprise Resource Planning

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Frank & Lillian Gilbreth: Time and Motion

In the modern world, we often wonder how we maximise our productivity, so we can have a successful work life and also a thriving family life. Two people who could have told us about that  were Frank and Lillian Gilbreth. They did not just, together and separately, make significant contributions to management theory.

They also had (together) 12 children. Cheaper by the dozen, Frank Gilbreth was once reported to have said. But it was Lillian’s work that continued after Frank’s early death after only 20 years  of marriage. And she continued as a researcher, as well as being a single mum!

Frank Gilbreth & Lillian Gilbreth
Frank Gilbreth & Lillian Gilbreth

Frank Gilbreth

Frank Gilbreth was born in Maine, in 1868. Passing up on the opportunity to study at MIT because he wanted to support his mum, he became a bricklayer. But his intelligence meant that, by the age of 27, he had his own engineering consultancy, Gilbreth Inc.

He had been watching how bricklayers laid bricks, observing as many as 18 independent movements. Gilbreth would later label these motions ‘therbligs’ (see below). By deploying unskilled labourers, Gilbreth radically reduced the number of motions and increased bricklaying rates from 1,000 per hour, to 2,700. It is the same principle that means surgeons no longer riffle through a tray to find the implement they need: now nurses find and pass the instruments.

In 1903, Gilbreth met Lillian Moller in Boston, and they married the following year. Gilbreth soon got his wife interested in the new ideas of Scientific Management and Taylorism – the scientific management principles set out by FW Taylor. They met Taylor in 1907 and were in Henry Gantt’s apartment when the term ‘scientific management’ was coined.

Gilbreth believed that companies which gained from his time-saving advice should share the benefits with employees, rather that use the gain only to increase profits. So he only contracted with companies that promised to increase wages where his methods brought results. Among his clients were Eastman Kodak, U.S. Rubber, and Pierce Arrow. When the United States entered the First World War, Gilbreth enlisted and was commissioned into the Engineers Officers Reserve Corps.

While his focus was on the time and motion aspects of work efficiency, Lillian would come to focus on the human aspect. They complemented one another well, and also adopted the Gantt Chart in the work, extending the idea to develop  the first flow charts. They were convinced that there was a best way to do anything and in timing everything and tracking processes to reduce steps, they pre-empted the late 20th and early 21st century fashions for continuous improvement, process re-engineering, and lean management.

Frank Gilbreth died in 1924, of a heart attack.

Lillian Moller Gilbreth

Lillian Moller was born in 1878, in California. After a period of home schooling and then high school, Moller commuted to the University of California, Berkeley. There, she achieved her BA in English literature. after a short time at Columbia, where she first studied psychology, she returned to UC Berkeley to complete an MA in English Lit in 1902 and then studied there for her PhD. Denied it on a technicality, she went travelling and met Frank Gilbreth in Boston.

Continuing her travels, the Gilbreths were married in 1904, after she returned, and moved to Rhode Island in 1910. She resumed doctoral studies at Brown University, starting again, and achieving her PhD in psychology, in 1915. Her focus was far more on the human side of workplace efficiency.

After Frank Gilbreth died, Lillian continued their joint work, accepting consulting work through Gilbreth, Inc. In 1935, she became the first female professor in the engineering school at Purdue University, becoming known as ‘The First Lady of Management’. She was, without doubt, a pioneer of industrial psychology. Lilian Gilbreth died in 1972.

Time and Motion

The Gilbreths took a rigorously scientific approach to understanding the way employees carried out work, sometimes measuring time and motion to 1/2000 of a second, using photography and  a ‘microchronometer’ that they devised. With flow charts and therbligs, they analysed to a fine degree.

Therbligs

In many languages, the ‘th’ sound is one letter (theta in Greek, for example). Replace the th in Gilbreth with a single phoneme and reverse the word, and you get ‘therblig’. This is a coinage by Frank Gilbreth that never made it to the mainstream. But the idea is ingenious.

Each therblig is a distinct motion that a worker makes. it is a fundamental element of work and there are 18 of these basic motions. Today we’d no doubt add moving a mouse and hitting return. Ever since I heard the ugly word and looked it up, I’ve loved the concept and the list of movements. Look up therblig on Wikipedia to see the list of 18, and their symbols.

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Alan Sugar: Street Smart

While not quite the classic ‘rags to riches’ story, Alan Sugar is a genuine example of the trope of a smart, hard working street trader, who makes it to the big time. And what a big time it is. The Sunday Times Rich List rates him as a Sterling billionaire. It’s easy to feel we know Alan Sugar, through his successful appearances on the UK version of The Apprentice. I suspect that what we see on screen, however, is a character: part Alan Sugar, and part the creation of the shows directors, producers and editors.

Alan Sugar

Short Biography

Alan Michael Sugar was born in 1947 and grew up in Hackney, in East London. His father worked in the East End garment industry, as did my grandmother. After leaving school at 16, Sugar spent a short time in the Civil Service, before investing £50 of his savings in a van and some electrical goods to sell from it.

Sugar was an adept street trader and gradually moved up the value chain to wholesaling and import, founding his first company, Amstrad (AMS Trading), in 1968. But Sugar realised he would only find the big profit in manufacturing. The business he understood best was consumer electronics, so Amstrad’s first manufacturing venture was record turntables. This was the first of many examples of Sugar finding ways to reduce manufacturing costs substantially, so he could out-compete rivals on price.

The 1980s were great years for Sugar and Amstrad, starting in 1980 with its flotation on the London Stock Exchange. The company grew rapidly and launched its first computer in 1984. Although outcompeted by Apple, Commodore and the BBC Micro, it did sell well domestically, as did the following year’s business-oriented word processor. The 1980s ended with the launch of Amstrad’s first satellite TV receiver dish – a line that was to be extremely profitable, with the growth of satellite broadcasting by Sky, BSB, and later, the merged BSkyB. The 1990s were more troubling for Amstrad, which suffered a number of commercial setbacks.

I cannot help wondering if Sugar ‘took his eye off the ball’ in the 1990s, because this was the time too, that he bought and chaired the Premier League football Club Tottenham Hotspur (1991-2001). He later described this period as a waste of his life, and it was certainly a fractious time at the club.

In 2007, Sugar cleared house, selling off Amstrad to business partners BSkyB and his final stake in Tottenham Hotspur.

In 2000, Sugar was knighted “for services to the Home Computer and Electronics Industry” and became Sir Alan Sugar, and then in 2009, was enobled as Baron Sugar of Clapton, to take up a place in Gordon Brown’s Labour Government, sitting in the House of Lords. In 2015, Sugar resigned the Labour Whip, saying that the party’s policies had drifted too far in a direction away from the needs of British business.

Amstrad is also a serious philanthropist, donating substantial funds and time to care and arts organisations. He has written four books too, of which the most important and best selling is his autobiography, What You See Is What You Get. And, of course, he is best known in the UK for his appearance in every series of BBC TV’s The Apprentice.

Business Lessons from Lord Sugar

Much has been written on this – including by me, in a series of blogs drawing lessons from episodes of The Apprentice over a number of years. So let’s keep it simple. Here are five important lessons for managers and business people to bear in mind.

Lesson 1: Character is Destiny

Whether you like or loathe the image he portrays in public, Sugar cleaves firmly to his own principles and business values. If I had to assess ‘the real Alan Sugar’ – and bear in mind, I have no privileged knowledge here – I would speculate that he is someone who has deep respect for people who can demonstrate their capabilities and expertise at the highest level, and has no time for people who have little ability. Anyone who tries to make up for their shortcomings through ingratiation or deception will incur his wrath.

I suspect trusting his closest allies and advisors profoundly has been important in building his success, but his blunt, no nonsense, and occasionally abrasive style has created detractors. His management style has been criticised, as has his attitude to women at work.

Lesson 2: Spot the Next Big Thing… then move quickly

Computers, word processors, TV satellite dishes, email, PDAs, satellite TV receivers… Sugar was in on the ground floor of all of these. At each stage, he used the knowledge and skills gained in earlier ventures to move quickly and seize market share. He also has a strong insight into customer desires and behaviours, which is critical in commercial decision-making. Not all his ventures have been hugely successful, but in business, it is the cumulative success that matters. Indeed, not all his customer predictions have been sound either: he famously predicted the demise of the iPod within a year. Whoops.

Lesson 3: Out-compete ruthlessly

Sugar’s primary competitive strategy is to out-compete on price. Take early stage technology that has started to stabilise, and find a way to manufacture and ship it at vastly reduced costs. The Amstrad computer was reportedly designed on an airline napkin, on a flight from Japan (where he’d seen early computers on sale) and Hong Kong, where he had business contacts that could help with manufacturing.

Lesson 4: Roll with the Punches

Sugar is a great example of business resilience. Not every venture was a success and he has had difficult times in his commercial life. Maybe a stable family life (40+ years of marriage) helped, but I suspect his personal resilience is also down to his character. Expect set backs, take them on the chin, learn from them, and come back fighting.

Lesson 5: Learn how to Negotiate well

I don’t know what Lord Sugar’s negotiating secrets would be – or even if they are anything more than consistent and ruthless application of sound basic principles. But it is certain that he is able to secure every last ounce out of a deal and is scathing of people who ‘leave money on the table’ in a negotiation.

For more on Negotiation, see:

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