Gemba Coach talks PDCA

Business901 Podcast Transcription

Implementing Lean Marketing Systems

Gemba Coach talks PDCA

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Gemba Coach talks PDCA Guest was Michael Balle

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Michael Ballé is the co-author of, The Gold Mine, a bestselling business novel of lean turnaround, and recently, The Lean Manager, a novel of lean transformation, both published by the Lean Enterprise Institute. For the past 15 years, he has studied lean transformations, helping companies develop a lean culture. He is an engaging and colorful public speaker, experienced in running interactive workshops. As a managing partner of ESG Consultants,

Michael coaches executives in obtaining exceptional performance through using the lean tools, principles, and management attitudes. His main coaching technique is the “Real Place Visit,” where he helps senior executives to learn to see their own operational shop floors, teach their people the spirit of kaizen and draw the right conclusions for their business as a whole. He has assisted companies in their lean transformations in various fields such as manufacturing, engineering, construction, services, and healthcare.

Michael holds a doctorate from the Sorbonne in Social Sciences and Knowledge Sciences. He is co-founder of the Projet Lean Entreprise and the Institut Lean France (www.lean.enst.fr), France’s leading lean initiative. It is conducted in collaboration with Telecom Paris, where Michael is associate researcher.

Dr. Michael Balle is the Gemba Coach at the Lean Enterprise Institute

http://www.lean.enst.fr/

http://lean.org/

http://lean.org/





Joe Dager: Welcome everyone; this is Joe Dager with the Business 901 podcast. I would like to welcome Michael Balle. Michael has been studying the link between individual reasoning and large-scale change for the past 15 years. He's a Lean expert and contributed to the Lean Edge and Michael you defined this for me but you also are the European or the French arm of the Lean Enterprise, is that correct?

Michael Balle: Senior Adviser to the French Lean Institute which I have started here, yes.

Joe: I always think of PDCA as the culture of Lean or the culture of the TPS system. How do you look at PDCA? Is it more of a tool or is it a culture?

Michael: That's a very interesting question and you're certainly not going to get a short answer on this one because it more of our belief that tools and culture are interlinked. I think ultimately we're all bias with our tools and much of our culture is made of our tools and how we use our tools. What makes a big difference is the fact that the same tools are used differently by different people.

So, in this sense I have to answer yes to both. I think that PDCA

is essential to the Lean culture and it's also a tool. And as a culture it's nothing else than a collection of individuals. We've never seen a culture roam the streets or order a drink in a bar.

It's a collection of individuals and the question we have to ask ourselves is what does PDCA mean at an individual level? And here I think it's very interesting because we definitely are biased with PND. We've developed a culture of planning which is very

highly valued and certainly of doing. So, most people will think about planning the next move and then executing the next move.





We're appalling at confirming and we're terrible at drawing conclusions because it's all water under the bridge and it's all embarrassing and it's all a big debate. So what I think is really interesting at PDCA is how do you as an individual learn to pause and confirm your results? And then once these results are confirmed try to draw some conclusions in terms of either adopting or adjusting or the act part of PDCA and then starting again.

I think that is what brings Lean so close to scientific thinking is that just because you like an idea doesn't make it true. Even though your chemistry tells you, I like this stuff. It sounds good. It's intuitive; I have a gut feeling about it. It just means that you like the idea. It doesn't make it true.

So we teach people when... It's a personal incident so you have to learn how do you confirm your ideas? What makes you think you're right? You feel right but everybody feels right about everything. This is the summary field. If not we would have a different idea.

Joe: Michael, when you say that, that's the tough part because can everything be tested? You want to confirm it but it is really

difficult because so many times you can't test one individual thing that you'll have two or three things that you are doing from the plan stage and you're saying test it here is what you have to do. But how do you test all that stuff? And how do you know that one particular item caused it?

Michael: Well, OK. This is a very complex subject, let's take it simply. Let's instead of testing, let's call it humbly, confirm it. Can everything be confirmed? Yes it can. I can just talk to and

say, "This is what I think, would you confirm it?"

For instance I'm good friends with one of the CEO's and he's one of the top guys in Lean construction, he's got a construction





company. And he's been making remarkable profits from the Lean effort. When he took over the company the crisis just happened so his volume crashed 40 percent in the first year he was CEO.

With that 40 percent he went from a zero profit of the previous

year to a significant profit just doing Lean. So, we had this conversation, why is it working? It's a serious conversation. We know what we're doing. We think we know what is working but we still have three years down the line in this conversation.

We can see it working, but why? So, we have different ideas, we try different things and all we do sometimes is just chat, challenging each other and confirming the facts. I have a hypothesis today, we were talking about better communication

and he said, "Well, yeah maybe you're right in some cases and some not." So, to me that can be a very simple and humble process that you are rather than defending your own ideas because you like them. You go into a process with people you trust, fact based, you're together at the Gemba and you just try to confirm.

Joe: So you're saying that confirmation but we still need data

don't we?

Michael: First thing we need is facts. The way I see it is to have information data needs context. So data plus context is information. Information plus understanding is knowledge and knowledge plus compassion is wisdom. So you build it up.

If you just have data and it's out of context it doesn't tell you as much about anything. So the thing about facts is you're in the

real place, you're with the people and you look at the data and the context and you understand where the data comes from. Then what you confirm is you confirm your understanding. Yeah, we understand the information, that's not what happened but do





we understand this and we compare it and it's this confirmation of this understanding that gives us the knowledge.

The bit about compassion is actually very important because if you don't put the people, your customers first, your people second in the equation and try to feel how they feel and look

from their eyes and stand in their shoes, well you probably will make some very unwise decisions. And we'll have fought together for all the people we know and depend and all the terrible things just seem to wilt were people who they thought had the perfect knowledge but lacked compassion. They didn't put people in the equation and they end up taking decisions that are technically correct and humanly dumb.

There are many degrees of confirmation. The most obvious

confirmation is I have an idea, what do you think of it? Then we compare our data, our facts, our experience and it's a confirmation.

But if you are genuinely interested in knowing whether your opinions are correct or not, you can go to greater degrees of confirmation. Then you are asking their manufacturers when you looked at a quality issue. First thing you say is, "Let's look at the

factors and what kind of experiment we could imagine to confirm which factor is most important." Then you can move all the way to Six Sigma and very quantitative methods and there I will agree with you that not all things are quantifiably testable.

But you see, confirmation is a range of things. Now where PDCA becomes very smart is by because it loops back on itself. So, while you better understand your confirmation process you start planning them.

Let me give you again an example of this construction company again. So the CEO is very into being socially responsible. He believed that we should have buildings that create less carbon





consumption and let's say, less heating consumption. So he wants to reduce the waste of lost heat. Now, he has been very serious about it for years. So, he put his company into a competition.

He was actually gutted because his project didn't get selected

because all the projects got selected were the real showy, very expensive, high tech, completely undoable in an industrial format but looked good in a brochure and his project was more reasonable and it didn't get selected. It was very interesting because out of this failure Rob would then just say, "OK. This is not for us. Forget it." We started thinking Lean about it.

We thought, "OK. Hang on. Do we have a test method for a lower consumption building? Do we know what we're talking about?" He

went on a different way and he got an engineering firm and they built together a carbon consumption calculation for buildings. So now, he's got a different look at it, which is he's got a test method.

He looks at when they're engineering the building. They look at the carbon... They have a ranking of carbon consumption and they started looking at things that would improve this ranking. So

here, we see PDCA you start integrating your confirmation method into your plan and it takes you to complete different directions. It takes you in terms of planning for complete different actions.

Joe: If you developed your check into the plan itself then it just becomes a way of doing business.

Michael: A firm belief and I think it was echoed in I think there's

a quote of such an old saying that business is a fight of opinions with your empathy. I have a firm belief more generally that business is about opinions. If your opinions are correct you make money. So it's like in the stock markets on business if your





opinions are true, you make money. If you've got the wrong opinions, well the market punishes you. So absolutely, PDCA is a way to test your opinions and to build progressively through testing more sophisticated opinions that fit the facts better.

PDCA is incredibly smart, because we've been discussing how the

plan should integrate the fact that he had a test method. But in many cases, you don't even know where the plan should be. It's an open area. So what do you do? You do Kaizen! You do Do.

Before you have a big plan you try things and there you just try things and through the deep you just can start building a deeper understanding and a bigger plan. So PDCA is not just one mechanical, bureaucratic thing that you do PDCA like you see in the A3. First do the... No. No. No. It's a thinking that you have to

plan, you have do things and you have to confirm and you have to Hansei. You have to stop and think, "Are we reaching the right conclusions?"

So, there are PDCA loops at every level. We do this at the CEO level and at the very Gemba level with every operator we do this as well, this is the right way to build the parts. So then, you were talking about the culture. Yes, when you start having a critical

mass of people in the company who are starting use PDCA in their way to do their job something happens. Something does happen.

Joe: That's where you start seeing that and people just start thinking differently, they start looking at things differently?

Michael: They start opening doors that they didn't know were there. They start innovating - it's usually hard work, it's not very

glamorous - but they start innovating and adapting in ways that you had not anticipated before. Which is for my part as an observer where it becomes really fun?





Because it's like we've been walking down this corridor for years and we never knew this door was there. But somebody, some guy opened the door and said, "Oh. This is a dark strange room full of objects we bump into." But then we shine some light on it through the experiments and through use and so that door is... And nobody's there. Nobody is going there.

In business this is absolutely brilliant. It's like this story about that suddenly you find yourself... what are they called? The company started coming up with patents and innovative ideas. Usually it's not a killer app, it's not probably going to take away the world. But you're definitely building knowledge your competitors don't have and I think that's the glory of it.

Again, it's very far from a very restrictive... I would argue that

Lean is about cost reduction. But it's about being very innovative in the way you seek to reduce cost. Cost first, cost for your customers in terms of customer ownership and cost of manufacturing and cost out the general operations or the overhead. So, as you open these doors as you find new ways of doing this you can attack these three forms of cost and Lean your company.

Joe: But when you go into an engineering department and you start talking PDCA to them, how do they react to it and how do you first introduce that to them to make it effective?

Michael: Ah! It depends upon; again, it's all about people. Some people will want to learn and some people hate it. So, which case shall we take? Shall we take the easy case or the hard case?

We think that they want to do it, yeah? Sometimes they do. So

what we started saying, "Guys, first we organize as teams. So, they said, "OK fine. We can organize ourselves with three to five people as a team and let's assume that we can say one guy is a team leader. He's not the boss but he's just the reference guy,





he's the more experience. He understands the technique better. He's not a manager."

And the first thing we do is say we start it with checking. First thing we do is every time we modify a part, every time we redraw a part, let's just write very simply what was the problem we

solved on this part, how did we solve it and let's catch it. So, this means that I have a PDCA interaction with every drawing.

When I finished every drawing my team leader comes for a five-minute chat, just let's go through the problem you solved on the part. That means that on the part you start accumulating a history of a part. So, when you've done this for a couple of years when a new guy takes the part he understands why the part is the way it is because he could read all the reasons that this was

done and so forth.

And then we question it again, can we make it lighter? That's where we'd start the PDCA in engineering.

Joe: One of the things I think is really funny about the whole thing is that Lean and PDCA is a very visual tool. We talked about Lean and visualization and I think that you go back and if you're not visual you're not Lean. OK, I've heard that many times and I

think that's a good saying but the most visual, the most creative people are the ones that seem to resist the implementation of Lean in a company. Does that strike you as odd or do you see why? Or do opposites just attract each other?

Michael: You once brought up a very interesting point in terms of what's the link between the PDCA and the Nonaka adds explicit stuff. And what PDC does particularly through the confirmation

mechanism is bring you to explicit, "What do you think?" You have to spell out your plan.





You have to describe your experiments. You have to explain your confirmation method and you have to make a stand. You have to make a stand about your conclusions. I know some very creative guys who are perfectly at ease with this and some who are not and I think it's more of a question of trust and teamwork than the personality itself.

I think that in a team that goes well... At first they all find it a bit silly but if they go "Oh, well this is OK. We'll do it." And here is this - what we discussed last time - you'll see the magic of it. Is that this uncovers what people know and the others don't know, rather than always discuss what we already know in common. When you go through this visualization of "explicating," what is in your mind so the guy next to you is saying, "I didn't know that." Or, "What makes you think that?"

Then it becomes extremely very rich and when a team of engineers has tasted how rich it is, the debates disappear. They understand why they do it and they keep at it.

Joe: Well that's one of the things that I've talked about doing in marketing a lot, is that I use an A3 - which is basically PDCA - in the process so that knowledge can be transferred and recorded

and people know who to go to, to get it if there are some questions left in it. I always thought that was a good way to introduce Lean to the creative department or the engineering department. What do you think the drawbacks are of doing it that way?

Michael: I think again it's a sliding range. The first thing I would say to engineering I'd start with these very simple checklist for the part, then we say, "OK, let's take the folder and in this folder

you just put a lot of checklists, anything that comes to your mind that you consider as a standard." For instance, I have standards and when I break them I suffer. One of my standards is never





discuss... Never do business in Lean with a guy who's not interested in Lean.

In the Lean world you have all these guys who are complete mercenary and they think they're onto something and they say, "Don't worry. I don't need to understand Lean myself. I don't

need to do it myself. I just need to sell Lean and that's going to be fine." Well one of my standards is just stop talking to these guys, there's no point because it's going to end badly.

You have standards and engineers they discover they have standards and standards are not rules. Standards are things that you know that if you step over that line, something will happen. So the next step is we'll have a folder of standards and every time we get out of the standard we'll discuss why. If we have an

extra part, if we suddenly do an assembly process differently, it's fine. We can do whatever we want but we'll discuss one.

Then third, finally we get into actually using the A3's. Now the A3's is heavy machinery. The A3, we use it when we want to go to the end of a problem we really don't understand. The A3 for me is really collaboration between the very senior engineer and more junior engineer and together the senior guy gets the junior

guy to go all the way to a deeper understanding of the physics of the problem.

The other way we use A3 is when we want to share a proposal. If we want to do things differently on a new product we'll have a proposal. We'll put it in A3 because then we can circulate it among everybody and ask for everybody's input and idea.

So, absolutely I think A3 is a great tool. They're a bit heavy for

everyday use. Again, assuming it's a sliding rule and the tool should correspond to the difficulty of the problem.





So a very easy problem we just say hey, stay a bit longer, look at it a bit harder. Then we go into the Agile, using the checklists, and then into the very difficult problems we use the A3. So, does that answer the question?

Joe: They call themselves a Lean company but they really are

not when they leave sales and marketing as silos out there by themselves. They don't want to touch that.

Michael: I see what you mean.

Joe: To introduce it to the creative department. To introduce Lean, the typical first thoughts people have of Lean is price reduction, waste. But it's really about building knowledge.

Michael: I completely agree. I think John Shook has been brilliant in seeing two... He has written the books about the two tools which are the granular ways to introduce anybody to Lean. One is value stream mapping. To somebody who's never done it it's just such that the light goes on and go "Wow!"

The other one is A3, absolutely. To somebody who's never done it, the light goes on. So, absolutely, if we go into a department, into places that haven't been touched by this, the two tools I

would use without any hesitation would be to draw the value stream of what we're doing - it's always enlightening, whatever happens it's enlightening - and to start using A3 as a communication method. Absolutely! This is absolutely where I'd start. The risk is of getting bumped down.

Joe: What do you mean by that?

Michael: Well the A3's are high maintenance tools.

Joe: You're saying that's a lot for someone to start out with?

Michael: I'm saying the first time. I'm saying they'd probably do it a second time but we were talking about culture and PDCA as a





culture. I'm saying that if you don't learn to be a bit Lean, about how you use your tools, you can get people a bit tired of it and soon they get into the formalism of it without putting the spirit into it. If you want to use A3's continuously we want to give other PDC or methods for people to do simple stuff without going through the whole collabra of the A3.

Joe: Can you tell me some of the simpler PDCA methods then? How would you term that? What is that?

Michael: Checklist? First, as we're doing this podcast now, can we write on one simple sheet of paper, not to do the podcast but to do it well? I have to get the lighting right, I have to make sure the microphone is switched on, I have to put the kids to bed, and this will fit on one A3 sheet... Sorry, A4 sheet of paper and will

have five lines written in large black and white large letters.

This is already knowledge capture and creation and you have "read then do" checklists or you have "do then check" checklists. So, checklists definitely in marketing think about the number of checklists you have. So the idea is that everybody, actually I've got it here...

It's this old tired book. This old tired book has all my Lean

standards and all the things I picked up through traveling the world. And I go back to it. I refer back to it and when I have a problem I go back and with any new problem I'd look through the book and saying, "Get my head back into it."

Joe: So, you're really saying is that one of the best ways to introduce Lean to let's say a non-Lean department is to create standard work. Without, let's say maybe taking standard work to

the far end but I mean...

Michael: You're taking it a bit far because we're talking about introducing... I think the first thing I'd do, would be to think





about stable teams. I really think that understanding who's a team and who's not, where's the team and who's the team leader is really important. Then I'd say, well though let's do the two things you mentioned. That's where I start; let's have a value stream exercise, which I will never touch again, but as a way to bring them in to understand that they are part of something bigger. I think that is very important.

Then we will probably start doing some A3's which I won't touch immediately again. Having done that, they are interested I say by now let's everybody take one Kaizen subject. One Kaizen topic and this is how I start. So I first start with Kaizen and just Kaizen and piece and confirmation.

Once we've done that then I say to people, well what came out of

this Kaizen? Write it up as a checklist in your words as a standard, as a checklist. But my approach tends to be small steps continuously so we build it up slowly.

Then later on I will bring back the increase and typically in the companies I work with we've done a burst of A3's at the beginning that people don't know how to maintain and that's OK. We say, "OK. Never mind." Later on when they have worked with

PDCA and all the methods of visualizing PDCA, which is usually just P-D-C-A. At some point one of them does something quite complex and say, "You know what? You remember that A3 stuff? I could put it in an A3." And you say "Yeah, go ahead."

Joe: We talk about Kaizen and we talk about PDCA, can you define the difference. They sort of run together don't they?

Michael: Well, there are two types of Kaizen. Yes, they run

together. I'd have to distinguish two types of Kaizen. One type of Kaizen is problem solving which will be as SDCA to nitpick. Which you start with a standard, the standard is already there and the P is that fact that you're not working a standard. So, you have to





then do something to bring it back to standard, check that you're back to standard and A; draw the conclusions on why you were not on standard.

Then there's a Kaizen which you want to move one step forward, you want to improve. So then you would do PDCA in terms of

what's your plan to improve. Do something and confirm that you have improved and draw the conclusions. But essentially yeah, that Kaizen and PDCA are linked, but in many cases it can be a very active PDCA.

It can be a just do it PDCA. It can be I'm a great believer in back of an envelope PDCA. See, when you're in front of a cell and somebody looks at it then says, "Well, we can do a Kaizen or PDCA or we can do an A3 while we have too many people." I

could have the kind of PDCA that would say "Listen. Let's pull somebody out and see how the cell works. Let's write on the back of an envelope what we think and then pull somebody out and write what happens." That would be PDCA as well. Kaizen equals PDCA. Yes. I can buy that.

Joe: I just seen some different terminology and when I'm thinking about it I'm thinking about Kaizen, I'm thinking about

PDCA, and I'm thinking about continuous improvement and a lot of the names seem to blend together. That part, I think, of just evolvement of a methodology that becomes fewer things to distinguish between them.

Michael: You have to distinguish. Kaizen is the idea that tomorrow is going to be better than today and that it's not going to be a big step, but a small step. Then the day after tomorrow we're going to take another small step. So Kaizen, what are you

doing tomorrow? Joe, ask yourself in what you do in marketing, what have you planned to do tomorrow that will make tomorrow better than today?





What have you planned to do tomorrow that would make the way you edit this podcast better? Now that's a Kaizen question and to be a really Kaizen question is, what have you got to do tomorrow in less than one minute that is going to make your work better than today?

It has to be a small step. This is very clear. Kaizen is about tomorrow I have an idea that is going to make the way I do my job better; my workstation, my cycle or something better than today. That's Kaizen and the day after I'll have another.

PDCA is the method so I don't lose myself. Once I have this Kaizen in mind I'm going to do this through PDCA. I'm going to write my plan; I'm going to do it. I'm going to confirm what I've done and I'm going to draw conclusions so I learn. So, you can

make Kaizen without PDCA but chances are that you'll end up with a random walk of changing things without actually improving, if you see what I mean. But they are two different concepts.

Joe: When we talk about knowledge, how do lean companies that you've worked with capture that knowledge? What mechanism do they use when you're taking let's say that tacit

knowledge and move into explicit, is that standard work?

Michael: The Lean companies I worked with recognized from the outset that knowledge is embodied in a person. They recognized that there is no such thing as knowledge in general. They don't so much capture knowledge as the capture of the ability to communicate the knowledge. Now let me go into a bit of tantrum trip but I think in many jobs we have...

What has happened latest DK's is complexity. Whatever job every company knows to do an enormous amount of things, they know how to do many, many things but the problem is the person you





have right in front of you doesn't. They're not incompetent, they're inept. It drives you crazy.

You go to the bank and you know the company knows how to sort out your problem. You know somebody in the company knows but the guy or the lady in front of you doesn't. And it drives you

mad. So knowledge is captured somewhere in all the procedures and how do you work with banks? They receive hundreds of procedure modifications every week. Of course they don't read them. But the poor person in front of you doesn't.

So really then, in a Lean company we understand this problem and what we work at is the communication within the company so people get access to the knowledge. For me, the A3 is a communication tool more than anything else. Checklist is a

communication tool.

For instance, if the lady at the bank knows that when she doesn't know something she rings her boss, "I don't know how to do this." Either the boss comes and does it and she doesn't learn or he says, "Pull out your folder, read on page 14 and follow that and then I'll come and you'll tell me how it went." Then she has learned tremendously.

So knowledge captured in a Lean company comes in a form that it's not so much about capturing knowledge but facilitating the communicating link between the person who knows and the person who doesn't.

Joe: What we're really saying is pull the "andon chord."

Michael: That's the core of Lean culture. That's the one tool that the old man invented that was the first stone of Lean. This is the

one stone that is still so hard to see in companies but that is the heart and soul of Lean is the andon chord. In order to pull the





andon chord you have to know the standard because if not you don't know when to pull.

In order to answer the andon chord you have to know the standard because if not you don't know what to tell the operator, absolutely.

Joe: So, when we pull the "andon chord" we also have to feel like gee, I don't know that it's bad. It's got to be OK to pull the "andon chord."

Michael: It's part of the secret of Lean. We have this expression in Lean. Not guilty. Not guilty. We know the guy drinks. Fine. Not guilty.

It's a very militant assumption that people are not guilty. If they're doing something strange it's because they're in a strange situation or they're not being helped and we need to figure out what made them do what they did. So, not guilty and no fear are absolutely essential to a Lean culture because if not they will not pull the andon chord.

Joe: I think one of the problems we have in the western culture is that pulling the andon chord is admission that we don't know

something and that's looked at as bad.

Michael: Absolutely. When one of the things that I think they got from Taichii Ohno is we must reveal our mistakes. It's very painful. This is what, about red veins and endless cords and whatever it is. We've created an environment of trust in which we reveal our mistakes.

Our mistakes are not something to blame someone for but

mistakes just become interesting. The better you are, the rarer you're mistakes, the more interesting mistakes you make. It's kind of fun. It takes some getting used to but after a while once





you've gone over that pain threshold and you realize this is not about you, this is a way to work,

Then I'll everything is a lot cooler, conflict goes down. There's no blame. You just did something, fine. Let's talk it over. Let's see what happened.

Joe: One of the things I think about from let's say the marketing perspective you have to externalize PDCA to be successful. You have to have continuous improvement in your marketing but also the companies that you work with, you have to be willing to share that knowledge and pulling the "andon chord" for a customer, as a company saying I don't know something that I need to know from you, to develop that culture and that relationship, that teamwork between them is really what I think is the essence of

marketing today is where it needs to go.

Michael: I think you're absolutely correct. I think you're totally right. At engineering it's a problem we have because when you work with an engineering product you know you can't ask the customer. Because if you have a customer and says "What do you want with this?" The customer will come up with whatever comes to the top of their mind. They want bells and whistles and

the chances are that it's actually not true in terms of yes, they do want them, but they'd never use them.

And to me it's the difference between the brilliance of Google. The Google site just does one thing. It helps you do it because if you misspell, it tries to figure out what you meant to do so you can still get to where you want as opposed to most websites that do millions of things.

You'll probably one day ask them that "Oh yeah, it would be a great idea to have my if I could have me horoscope every day next to the weather forecast next to the stock market." The truth





is that right now, when you actually want to use the website, you don't care.

So what we have in mind in engineering is that we want our product to become a standard for the customer, a default for the customer, that they take our brand, they take our product, not

somebody else's, ours. And to do this, we try to understand what the cost of ownership of our product is.

Through the use of the cost of ownership we figure out not so much what the people say they want, but what they really do value in the use of their product. These things are the things we try to deliver value on.

So again the whole thing about PDCA is linked to the kaizen in

terms of what do you apply PDCA to, because if you start applying PDCA to everything, you just go crazy? You just bog down, it's just too complex. You have to very clear in what you're seeking to learn with PDCA.

Joe: I think that's a good way to put it and to sum it up because I've seen where someone has went and asked a customer and they come back with a list of all the things that they want in this particular product. You can't build it in the price range that the

customer is going to pay for it.

But if you go out and ask the customer to define his needs clearly, you can engineer the product to fulfill his needs. And that you can do at a price, in a...

Michael: It seems very ambitious. What I do is I get my engineers to go out and ask their customers "Is there one thing that really, really, really pisses you off about the product? Just

tell me one thing that you have a problem with this product, just one." And you come back with one and you fix that and then you start again.





When you're talking about kaizen you have to do it in very small steps. Now, the truth is that if you do this relentlessly for a number of years, and we're back to the discussion of finding doors you didn't expect that were there in the corridor. You're going to come up with some innovative and adaptive solutions nobody has ever thought of. But it's a kaizen; tomorrow's product has to be better than today's by a small step.

So we ask the customer "Listen, if there's one thing that we could fix for you on this product, what would it be?" They'll tell you. One thing they can tell you. They'll tell you three things and you can sum up, again, all the data into one thing. So OK, let's fix this one. Then you start again.

Joe: We're saying that to be effective and to do it outside and

externalize it, it's best to go ahead and bottle it up into smaller iterations that you can manage and you can handle, because you can't do everything at once?

Michael: I think there are really two radical ways of looking at this. Companies often look at markets and they want to come up with a killer app. They want to come up with a product that takes everything in the market. So what they do is they take all of the

new technologies out there, everything a competitor has, they take it and they put it in their product. And of course, they don't master any of this very well, so that the product comes out, it's like, I think we discussed this already.

If you take the body of a Ferrari and the engine of a Porsche and the interior of a Toyota, whatever, and then you put all those together as a car, you wouldn't get a very good car. But in fact this is what many people do in terms of this idea that they want

to get the market.

We think virgin. We take a product and we want it to be standard of the customer. So we take it to the main customer type and say





"Guys, this is what you're already buying. This is good. If there was something we could do to make this product better for you, what would it be?" And you fix that in small iterations. And you end up in a different place. So yes, I would completely agree with you on this one.

Joe: I think it's kind of funny what you just said there, because you gave a perfect description of how most government contracts and government bids are written. They take the best of like four or five different companies and they combine them into bids so that it comes close that nobody can build it. And they wonder why the price is high.

Michael: There you go. I'm going through it right now. That's it exactly. And on top of it, they ask you to be accountable for

results.

Joe: It goes back to really defining the needs of the market, the needs of the customer. And not so much in the terms of how you apply it, but how they apply it and then making your product or service meet those needs.

Michael: I think that Jim and Dan, when they wrote "Lean Thinking," were incredibly insightful. The first thing they said was

"Well, can you define and specify value?"

I think that's very interesting because when people read this, they say "Ooh wow, yes we should do this. But ooh, wow, it's too hard. Let's move on to the next one. Oh, flow. Oh yeah, we can draw a map."

But I think you're absolutely right. You talk about needs, I talk about preferences. What makes a customer in front of two similar

products prefer one? That's what we need to capture. Usually it's a feeling. How do we translate these feelings in technical ways?





You know, when you buy a Toyota, your preference is to peace of mind. Other people buy cars that their preferences would be sportiness, or look, or size. Toyota sells peace of mind, which explains why when they had the safety scandal it was such a huge problem to them. Suddenly, regardless of the fact that there was nothing wrong with their car, the scandal negatively affects the peace of mind of Toyota owners. So you take a lot of value out of it.

Certainly when I drive my Prius one of the things I value is the silence inside. Again, this is the feeling of silence. It's just not that the car is not noisy; it's the feeling of silence. So I would go beyond needs; it's preferences. Preferences are usually about a feeling that the object gives you.

As engineers, how do we translate this into technical parameters that we can then reproduce through a manufacturing value stream or through a knowledge value stream? I think this is hours of fun. When you get into it, it's very hard, it's very demanding, but it really takes you into very different directions for your products .And in the end it's interesting to see that you make very different technical choices.

Joe: I think the age of marketing has become - you have the four Ps of promotion, price, product and place. But I think there is a fifth P now and what I would say is preciseness, precise, is really what it's come down to. You have to be very precise in what I call, not just customer value, but the CTQs, the critical to quality issues of customer value is what you have to address.

It's just not customer value now. You have to go right to them CTQs and address it. And to do that, you really have to go to

Gemba, which is the customer's place.

Michael: Right, it brings us back to conversation on PDCA and explicit knowledge. I think you're totally correct. I mean, we're no





longer madmen, being brilliant and having these large statements or these hunches and feelings are not enough.

We now have to have bring it back to precise statements of what we have in mind and to confirm these statements with customers through experiments with products so that the knowledge is yes,

precision, the knowledge is far more precise. Absolutely, I agree with you.

Joe: I think the reason for that is, as I go back, is that we're in a demand-driven environment versus just supplying people things. So that customer does have that choice; he can go buy a product anywhere.

Michael: Well, we're in a renewal environment. We see this

when we look at studies about well-being and economy. At first, well-being increases with wealth and then it plateaus. One of the reasons for that is because if you don't have a washing machine and you get one, you're massively better off. You feel much better.

But when you have a washing machine and you replace it, you're marginal well-being is very limited. I think we've reached the stage where now there are very few products you get excited

about. The iPad, I mean there are so very few products that are new. Most of the products we have or services we have are renewal products. The new one is not even really better than the old one; it's just a bit different.

So it's hard to get that pizzazz, that interest. So yes, it's very demand-driven. And in that world, taking away cost of ownership is a very sane strategy because again, you establish yourself as a

standard because there is a burden to choice.

One thing I would add to demand-driven, I would really think about increased complexity. We have the means to do everything





in our lives, but the complexity compared to just 100 years ago has exponentially increased. It's incredible. There is everything everywhere. The knowledge is everywhere; it's very complex. There is a psychological burden to this complexity. We have to make far many more choices than anybody before.

So if as providers, we simplify the choices because it's a no-brainer then our product just works better, is less cumbersome to use, is less costly, then customers will naturally flock to it and be loyal to the brand. Not because of the brand image, because they trust it.

I think this is where the lean approach is completely adapted to a world of change, of demand-driven and complexity-driven world of marketing.

Joe: I see lean as just a natural, just spot on for what's happening with the demand-driven world. Lean is a natural reaction to it.

The best way to get a hold of you, you're a contributor to "Lean Edge," and also you have your own website also, don't you?

Michael: The best way would probably be the Coach column on

lean.org. Every week I answer specific questions about lean. I think that's probably where we can go into more detail about lean problems and lean applications, which I find quite challenging and interesting. People come up with the strangest questions. I try to answer in a more specific way.

Joe: This podcast is available on the Business901 blog site, and also the Business901 iTunes store. So thank you very much Michael, I appreciate it again.

Michael: Joe, I thank you. You had some very insightful questions. Thank you. It's a great conversation. I think it is really good, I really enjoyed it.





Joseph T. Dager

Lean Six Sigma Black Belt Ph: 260-438-0411 Fax: 260-818-2022

Email: [email protected] Web/Blog: http://www.business901.com

Twitter: @business901 What others say: In the past 20 years, Joe and I

have collaborated on many difficult issues. Joe's

ability to combine his expertise with "out of the box" thinking is unsurpassed. He has always delivered

quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with." James R.

Joe Dager is President of Business901, a progressive company providing

direction in areas such as Lean Marketing, Product Marketing, Product

Launches and Re-Launches. As a Lean Six Sigma Black Belt, Business901 provides and implements marketing, project and performance

planning methodologies in small businesses. The simplicity of a single flexible model will create clarity for your staff and as a result better

execution. My goal is to allow you spend your time on the need versus the plan.

An example of how we may work: Business901 could start with a

consulting style utilizing an individual from your organization or a virtual assistance that is well versed in our principles. We have capabilities to

plug virtually any marketing function into your process immediately. As proficiencies develop, Business901 moves into a coach’s role supporting the

process as needed. The goal of implementing a system is that the processes will become a habit and not an event.

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Gemba Coach talks PDCA

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