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Source: Business-improvement.eu
Lead & Change: Leading a changing organization
Monitoring of takt times at ASML (1) The emotional side of value creation
By Dr Jaap van Ede, owner and editor-in-chief business-improvement.eu (may 8th, 2012)

Many organizations use Lean, Six Sigma or TPM to increase the value they create for their customers. Applying tools from these methods, like Value Stream Mapping or Kanban, is however not enough. This is acknowledged by companies like Philips, Sara Lee, ASML and Volvo. How to deal with the people part of continuous improvement? In this article, managers from the multinationals mentioned above explain how they show that everyone counts, and should contribute to improvement. Inspiring employees requires above all feeling for their emotions: how do they experience their work.

Interestingly, the same can be said regarding the customers. Today, how customers experience your products or services determines if these will be successful.  

When you combine these facts, the conclusion is that organizations should become dopamine companies in two respects:
  1. The employees experience ‘flow’, a feeling of energized focus, immersion and success
  2. The customers experience products or services which are so excellent, that they will recommend these to their friends

Today, customers know a lot more about you than the other way around! ‘A simple click on an app on a smart phone is enough to compare prices, or to exchange user experiences’, says Derek Miers, principal industry analyst at Forrester Research. ‘Besides that, they have more choices and access points than ever.’

High dopamine firms
Miers is the first speaker during the Process Excellence Regional Forum Benelux of IQPC, this congress was held in Amsterdam at the end of october1.
‘This is the era of Total Customer Power’, Miers continues. ‘Today, the most important question companies should answer is: What experience am I offering my customers? Disney and especially Apple are good examples of high dopamine firms: the mere mentioning of their brand triggers the release of dopamine in the heads of customers.’

Companies who start with improvement methods like Lean and Six Sigma usually focus only on waste elimination and cost reduction. ‘Improving the customer experience is however just as important. To do that you need value innovation, identifying and developing new products your customers will like. To put if briefly, you should balance these four things: waste elimination, cost reduction, customer experience improvement and value innovation. Achieving this balance is necessary if you want to transform your business into a process oriented organization. However, first you should develop a Vision: how will you serve your customers ideal experiences.’

Monitoring of takt times at ASML (2)Monitoring of takt times at ASML. Although the product lifecycles are short and there are many people with an academic degree on the shopfloor, ASML succeeded to standardize the work as foundation for Lean manufacturing (read more in box)

Net Promotor Score
Teleroute is an online freight exchange platform for carriers and forwarders. They use among others the Net Promotor Score (NPS) to measure how customers value their service.

Only when customers are really excited about the quality of a product, they will recommend it to their friends. Therefore, the NPS is defined as the percentage of people who say it’s extremely likely that they will give a positive advice (score 9 or 10), minus the percentage of people who will definitely not promote the product (score 0 to 6).

‘A positive NPS, indicating that you have more customers acting as promoters than as detractors, does not mean you are in safe water’, says Stéphane Odent, chief technology officer at Teleroute. ‘For example, you do not know how well you retain your customers’.

TRI*M index
‘Therefore, we also use the TRI*M index’, he continues. ‘This customer relationship indicator measures customer retention in multiple dimensions: the overall performance, the likelihood to repurchase, the likelihood to recommend and the competitive advantage. In a subscription business like ours, churn is a very important KPI. When our churn rate started to increase, customer satisfaction and retention became our highest priority.’

A Lean Six Sigma project was started to improve the customer lifecycle. ‘We discovered that we had a lot of touch points with new customers and also with old customers, to win them back. However, we had not much interaction with the group in between. Now, we contact potentially dissatisfied users much more frequently. Those are the ones which don’t login into our system anymore. As a result, our churn rates decreased with 15-20% within a year.’   

Stephane Odent, Teleroute
Stéphane Odent, Teleroute: "TRI*M measures customer retention in multiple dimensions"

Philips has similar experiences with the NPS. ‘Sometimes we measured high satisfaction levels for a product, but we saw no growth’, says Arne van de Wijdeven, director customer experience at Philips. ‘So, measuring satisfaction alone is not enough. You should also measure things which aren’t directly related to the quality of the product or service, such as the delivery time.’

A second tip regarding the NPS is that the right customers should be questioned, which are not necessarily the users of your product!  ‘When the radiologists in a hospital are very pleased with your MRI-scanner, but the top management is not pleased with the relationship with your company, you can’t expect that the hospital will invest in extra MRI-scanners.’

Where are the customers?
‘Most companies have strategies and targets to achieve growth and to make more profit’, says Arjan Gerritsen, senior manager continuous improvement at Sara Lee International. ‘However, often they improve only on a functional level, leading to silo optimization. When you look at these kind of improvement projects, the question presents itself: where are the customers?  Extra value for them is not necessarily created.’

To overcome this problem, Sara Lee defined value streams which all end at the customer. Interesting is that there are not only such value streams for production, but also for innovation, sales and marketing.

‘Take for example developing a new product’, continues Gerritsen. ‘This begins with getting insight about the customer needs, and you end with a new solution. During this process, many departments like marketing, sales, R&D, Operations and Finance make a contribution. The value stream should however be leading.’

Creativity and mind power
Defining and improving a value stream for innovation or marketing is more difficult than for production. ‘The first problem is that the flow is not visible. Second, a process like developing a new product is low-repetitive, value is not added by standardized work but by creativity and mind power.  Third, many company departments are involved. Finally, the work is typically done by people with an academic degree, who have low affinity with standardization.’

Nevertheless, optimization of this kind of value streams can be done, ensures Gerritsen. ‘You need to do four things. (1) structure every activity in the value stream, (2) connect clearly every sender with a receiver, (3) specify each flow path, and (4) test the flow path in daily work and continuously improve it. ’

Sara Lee has been applying Lean and similar methods for about 10 years. ‘Typical is that you are successful for 18 to 24 months. Then you get stagnation because the low hanging fruit is gone’, says Gerritsen. ‘I have seen this three times within our company. What you shouldn’t do at such a moment is formalizing your project management, to enforce the startup of new improvement projects. Instead, you should take your improvement initiative to a next level. The last time we did that, we started to apply value stream mapping to marketing and innovation. Often, such a revival gives you the feeling that you start all over again.’

Today, the term Lean is not used anymore within Sara Lee. ‘We think the philosophy is much more important than labels like Lean, (Design for) Six Sigma, and Agile.’

Peter Hines, co-founder of the Lean Enterprise Research Centre (LERC) of Cardiff University (GB), reminds us of the five Lean principles of Womack & Jones: (1) Identify customer value, (2) apply value stream mapping to reduce waste, (3) create flow, (4) introduce pull production, (5) pursue perfection.

‘Can’t you see what is missing? The role of the employees!’, says Hines. ‘Most companies start to reduce waste or muda with Lean, or they begin to reduce variation or mura with Six Sigma.  This frees capacity but does not lead to growth. On the contrary, Lean organizations are often shrinking!’

‘If you want grow, you should also apply Lean to R&D and marketing, like Sara Lee does’, Hines continues. ‘Second, you should extend Lean to your supply chain. The success of Toyota can be attributed more to their supplier relationship management, then to their Toyota Production System. Third, instead of eliminating waste, it is much better to start with reducing overburden or muri. This will improve the work environment, and as a consequence you will get involvement of your people. This is what you need to become and stay Lean. Finally, you should explain your people how they personally can contribute to improvement. Our research shows that on average, only 5 to 10% knows how to do that during their daily work.’

Berndt Forssell (Volvo)
Berndt Forssell (Volvo):  "Creating flow not ony means letting materials move fluently. People should also experience flow during their work"

Energized focus
‘People overcome resistance to change when the future is desirable and when they are dissatisfied with the current situation’, says Berndt Forssell, internal senior management consultant within the Volvo Group. ‘So, good communication is important. Besides that, you should know what will be the first step of the change process.’

Lean managers create flow: they see to it that materials move fluently across the factory floor because this increases the output. However, the creation of flow has also a psychological side. ‘Your people should also feel and experience flow during their work. I mean a feeling of energized focus, immersion and success regarding the processes they are involved in.'

Similarly, creating pull has two faces.  'The technical side is introducing production to order. The emotional side in this case is creating an environment in which people have the desire to contribute to process improvement.’

Forssell uses the metaphor of an iceberg. Visible are objective things like KPI’s and process descriptions. Below the surface there are objects like values, attitudes and emotions. Changing these subjective things often has the biggest effect. 

‘Our Operative Vision, the way we think our company should look like a couple of years from now, therefore encompasses both objective and subjective targets. Having such a Vision sets the direction like a lighthouse in the fog, and it frees energy in our people. In creating the Vision, of which the short-term focus can change half-yearly, we collect information from the shop floor.  This stimulates the involvement of everyone. Do not push your people towards the Vision, they should want to go in that direction. Story telling is a very powerful tool to discuss it. This invites everyone to help to create the future.’

Volvo Buses
Volvo buses is one of the business units that succesfully uses an Operative Vision as guideline (copyright photo: Volvo)

Space shuttle
To conclude: Involving your workforce and satisfying your customers is all about creating great experiences and arousing energizing emotions. Seen in this light, it is rather strange that during the presentations at the Process Excellence Regional Forum1, I saw many sheets with very strictly defined transformation phase like “forming, storming, norming, transforming and performing”.

The image of launching a space shuttle forced itself upon me. It seems that business managers become highly controlling, when they want to introduce smarter and more value adding processes. Personally, I do not think that emotions and creativity can be controlled in such a strict way.

1) The Process Excellence Regional Forum ‘Benelux’ of IQPC took place in Amsterdam, October 26th-28th 2011. All quotes in this article are from lectures, round table sessions and interviews during this event.

ASML standardizes highly skilled work
One of the fundamentals of Lean manufacturing is standardization, not only of the work, but also of the way in which problems are solved. Can this also be done when many of the operators have university degrees? According to ASML, the answer is yes!

‘As manufacturer of lithography systems for the production of computer chips, we yearly invest approximately 78.000 euro per employee in R&D. Only some pharmaceutical companies spend similar amounts’, says Rogier Kuijpers. He is manager manufacturing means, methods and training within ASML. 

Rogier Kuijpers (ASML)
Rogier Kuijpers (ASML): "Introducing Lean was quite a challenge, since our production characteristics are not typically suited for that production system"

Short delivery times

Short delivery times are very important for the customers of ASML. ‘Computer chips have a short product lifecycle. The faster we can deliver a machine which can makes the latest type, the more profit a customer can make’, explains Kuijpers.

To shorten the time to market, lean manufacturing was introduced. ‘This was quite a challenge, since our production characteristics are not typically suited for Lean. We produce only about 5 to 6 machines each week, not exactly mass production. Besides that, our product lifecycle is short and as a result our production lines change frequently. Finally, since the work demands highly skilled people, even our operators often have a university degree. This makes it more difficult, also emotionally, to standardize tasks.’

Yet this is essential if you want to produce ‘Lean’. In that case standardization of the work forms the basis for improvement. Besides that, a standard way of problem solving is also needed, to make sure that the root cause of problems are found and dealt with.

‘The operator who creates value for our customers is in the center of our organization. Around him or her there are layers of people who give support when needed. To emphasize that, we asked our team leaders and first line support teams to move their offices to the shop floor. Now they work inside the clean room.’

According to Kuijpers, the supporting teams had high technical skills but relatively poor communicating and troubleshooting skills. Now these skills are brought in balance. ‘Almost everyone, including the highly skilled people, soon accepted that we needed to standardize the trouble shooting work. After that, it would possible to transfer problem solving tasks between shifts, and we would be able to capture all solutions for future usage.’

Previously, problems were “fixed” immediately, without looking for the root cause first. ‘You could say that we asked “why” only a half time, instead of the five layers of asking why prescribed by Lean. From the moment we introduced a standard way for solving problems, the cycle times on our shop floor started to become smaller.’

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