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Amazon Innovation

Posted on November 9, 2006  Comments (10)

Jeff Bezos’ Risky Bet

And, he hopes, making money. With its Simple Storage Service, or S3, Amazon charges 15 cents per gigabyte per month for businesses to store data and programs on Amazon’s vast array of disk drives. It’s also charging other merchants about 45 cents a square foot per month for real space in its warehouses. Through its Elastic Compute Cloud service, or EC2, it’s renting out computing power, starting at 10 cents an hour for the equivalent of a basic server computer. And it has set up a semi-automated global marketplace for online piecework, such as transcribing snippets of podcasts, called Amazon Mechanical Turk. Amazon takes a 10% commission on those jobs.

In my view Amazon is doing some very interesting innovation. As with most true innovation it is not easy to understand if it will succeed or not. I believe Amazon uses technology very well. They have done many innovative things. They have been less successful at turning their technology into big profits. But I continue to believe they have a good shot at doing so going forward (and their core business is doing very well I think). Innovation often involves taking risks. Bezos is willing to do so and willing to pursue his beliefs even if many question those beliefs. That means he has the potential to truly innovate, and also means he has to potential to fail dramatically.

Related: Bezos on Lean Thinking – Making Changes and Taking Risks – 10 Stocks for 10 Years Update – A9 Toolbar for Firefox Browser
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Hiring the Right Workers

Posted on October 7, 2006  Comments (13)

The job market is an inefficient market. There are many reasons for this including relying on specification (this job requires a BS in Computer Science – no Bill Gates you don’t meet the spec) instead of understanding the system. Insisting on managing by the numbers even when the most important figures are unknown and maybe unknowable. Using HR to find the right person to work in a process they don’t understand (which reinforces the desire to focus on specifications instead of a more nuanced approach). The inflexibility of companies: so if a great person wants to work 32 hours a week – too bad we can’t hire them. And on and on.

At first I titled this post the Hiring Process but that creates a analytic view of the hiring process separated from the important part which is workers actually working. The hiring process just provides resources that are needed. But in many places it is the reverse, the hiring process provides resources and then the rest of the process deals with that output as best it can.

Seth Godin had a very good post recently, The end of the job interview:
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Toyota IT Overview

Posted on September 5, 2006  Comments (9)

What’s Driving Toyota? by Mel Duvall is an interesting, long article discussing Toyota overall and focusing on Toyota’s Information Technology systems.

Technology does not drive business processes at Toyota. The Toyota Production System does. However, technology plays a critical role by supporting, enabling and bringing to life on a mass scale the processes derived by adhering to TPS.

“What strikes me about Toyota is, if you were to ask them if they have a technology strategy, they would probably say no, we have a business strategy,” says Philip Evans, a senior vice president at the Boston Consulting Group who has studied Toyota. “They have a very clear understanding of the role technology plays in supporting the business.”

This is such a simple point but so hard for many to truly adopt. IT is a support function. IT is a means to an end.

As with almost all of its technology implementations, Toyota started small, carefully rolling out the portal to its Lexus dealers as a test. While it worked out the bugs, it continually expanded the offering, eventually making it available to all 1,200 of its U.S. Lexus and Toyota dealers.

Great way to deploy software: nice use of PDSA methodology.

Related posts: Toyota IT for Kaizen – Planet Kaizen – Toyota Robots – management blog posts on information technology
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Gladwell (and Drucker) on Pensions

Posted on August 21, 2006  Comments (1)

The Risk Pool by Malcolm Gladwell (author of The Tipping Point and Blink):

The most influential management theorist of the twentieth century was Peter Drucker, who, in 1950, wrote an extraordinarily prescient article for Harper’s entitled “The Mirage of Pensions.” It ought to be reprinted for every steelworker, airline mechanic, and autoworker who is worried about his retirement. Drucker simply couldn’t see how the pension plans on the table at companies like G.M. could ever work. “For such a plan to give real security, the financial strength of the company and its economic success must be reasonably secure for the next forty years,” Drucker wrote. “But is there any one company or any one industry whose future can be predicted with certainty for even ten years ahead?” He concluded, “The recent pension plans thus offer no more security against the big bad wolf of old age than the little piggy’s house of straw.”

Pension plans did work well for a short period of time. But recently they (along with the attached retiree health care) are one of the big problems facing large old companies: like GM. Gladwell talks about the dependency ratio for an economy and the dependency ratio of companies. Worsening dependency ratios can cause pension plans to kill companies (if they are not funded when the obligation is incurred) – as the company is forced to pay for more and more retirees with fewer and fewer workers.
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Eliminate Slogans

Posted on August 13, 2006  Comments (2)

De-motivation Poster

This poster may do a better job, than my posts, of showing why posters and slogan are not an effective management strategy. Text from the poster: “If a pretty poster and a cute saying are all it takes to motivate you, you probably have a very easy job. The kind robots will be doing soon.”

Despair (link to the motivation poster shown here), offers many such de-motivational posters and note cards – well done satire, in my opinion, but they might be too much for some.

Along the lines of our post, Stop Demotivating Employees, the founder of Despair wrote a book entitled: The Art of Demotivation.

Another poster example: Ambition – The journey of a thousand miles sometimes ends very, very badly.

One of Deming’s 14 obligations of management was to eliminate slogans.

Also see:

Related: Why Extrinsic Motivation Fails – Dangers of Extrinsic Motivation – Alfie Kohn has some great books and articles on the problems with extrinsic motivation

New Rules for Management? No!

Posted on July 14, 2006  Comments (6)

Fortune recently published an article talking about the “new rules” for management using Jack Welch (GE six sigma) as the focus of the old rules. It seems to me there is nothing new here (once again).

“New” rule: “Agile is best, being big can bite you”
Yeah. Does anyone think this is new. Do they really believe Jack Welch thought agile was not a good thing? Yes, Jack Welch wanted to be number 1 or number 2 in the field or get out of that business line. I still don’t think that he thought being a big un-agile organization couldn’t hurt you.

“New” rule: “Find a niche, create something new.”
Yeah, good idea. I seriously doubt GE was against creating new things. Finding niches in fact is basically what being number 1 or 2 is about. Find those niches you excel in and focus there. I think saying you have to be number 1 or 2 is a silly arbitrary target. But that was just as true 10 years ago as today. Lets look at who the article for these new ideas quotes (with big photos on the main page): Starbucks – number 1 coffee shops, Xerox (I don’t know), Cisco – number 1 switches/routers, Coke number 1 sugar water sellers. Boy this old idea of number 1 or 2 is sure old thinking. Why are those highlighted as experts all perfectly suited to the old rule?
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Quality and Innovation

Posted on July 4, 2006  Comments (5)

I think the The Quality Movement Vs. The Innovation Movement by Bruce Nussbaum makes a mistake in calling the innovation movement separate from the quality movement.

Wow. It makes sense. The father of quality, of course, was Dr. W. Edwards Demming, and he preached for a very long time before he was really heard. In fact, as I recall, Japanese companies first accepted Demmings teachings long before U.S. and European corporations.

Lets quote Deming on innovation from New Economics, page 10:

No defects, no jobs. Absence of defects does not necessarily build business… Something more is required.

What is required? Innovation.
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Management Advice Failures

Posted on June 10, 2006  Comments (17)

Topic: Management Improvement

Management Advice: Which 90% is Crap? by Bob Sutton, Stanford University:

At first, I couldn’t believe that someone as well-read as Hamel claimed an old idea was new and that he had invented it. But I eventually realized the problem wasn’t Gary Hamel, or any other individual making claims of originality. Rather, his column reflected a prevailing practice in the business knowledge business. I asked two former Fortune columnists why “Hamel’s Law” and similar claims that old ideas are brand new appear so often in the business press.Both emphasized that you couldn’t blame Hamel – that was just how things were done. Both writers even speculated that some Fortune editor probably had inserted the phrase, “Hamel’s Law,” to create the impression that the magazine publishes exciting new ideas. After all old news doesn’t sell magazines!

I share this frustration with declaring old ideas new: Management Improvement, Better and Different, Quality, SPC and Your Career, Deming and Six Sigma, Management Lessons from Terry Ryan, Everybody Wants It, Toyota’s Got It, Fashion-Incubator on Deming’s Ideas and on and on.
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Respect for People

Posted on May 8, 2006  Comments (8)

A very thoughtful post, Respect for People on the Kaikaku blog raises some interesting questions. What does respect for people really mean?

Toyota empowers people: To stop the line – to stop every other worker from working – that is real respect and trust. To implement creative improvement ideas around their work area. They trust you to come up with the best idea to make your work easier and more interesting. You don’t have to wait for management to tell you what to do. By asking people to solve problems and become problem solvers.

Those are indications of respect. The post also notes “Ohno was absolutely ruthless, employees and suppliers lived in fear of him.” I would say that while Taiichi Ohno was truly remarkable that doesn’t mean he did everything right. And he might well have failed to communicate in a way that conveyed respect for people. That doesn’t mean doing so is good. It might mean that if you offer as much positive value as Ohno did people may be more forgiving of your weaknesses (I know that is my tendency). Continue reading →

Find the Root Cause Instead of the Person to Blame

Posted on May 3, 2006  Comments (5)

When encountering a problem or defect the inclination of many is to find a person to blame. W. Edwards Deming believed that the system was responsible for 93% of the problems and over time he increased that number to at least 97%. Why did he see it that way, while so many others first inclination is to blame someone?

As I see it the issue has to do with what is the effective way to improve. Often if you ask why do we have this problem or defect, people will point to some error by someone. So you can blame that person (there are reasons this is not a very accurate way to view the situation often but even without accepting that premise the blaming a person strategy is not wise). The reason the blaming a person is a bad idea is that your organization will improve much more effectively if you keep asking why.
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Stop Demotivating Employees

Posted on April 20, 2006  Comments (18)

Why Your Employees Are Losing Motivation by David Sirota, Louis A. Mischkind, and Michael Irwin Meltzer from the Harvard Management Update:

Most companies have it all wrong. They don’t have to motivate their employees. They have to stop demotivating them.

Clear, simple and right. Douglas McGregor explored this topic well in 1960. He explained theory X management (managers believe the workers will do only what they are forced, coerced into doing) and theory Y management (managers believe the workers want to do a good job and the managers job is to help them do so) in his excellent book: The Human Side Of Enterprise.
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China’s Manufacturing Economy

Posted on April 15, 2006  Comments (2)

Brad Setser posts on manufacturing comparisons: Have China’s manufacturing powers been exaggerated?

I am all for pushing against over-generalizations that get repeated so often that they become conventional wisdom. The oft-stated argument that France isn’t growing is one example. In fact, France has grown faster than either Germany or Italy over the past few years, and France grew for the same reason the US grew: soaring real estate prices have pumped up domestic demand.

But I would submit that the real story here is the growth in China’s conventional wisdom to improve our understanding of the real situation. I agree with him that the growth in China’s manufacturing sector is the most important story.

But, to me, that story is so over-reported that many get the wrong impression. Continue reading →

PBS Documentary: Improving Hospitals

Posted on April 9, 2006  Comments (7)

Clare Crawford-Mason and Llyod Dobyns have teamed up on a new documentary. Previously they created If Japan Can-Why Can’t We? and the Deming Library Tapes.

Good News – How Hospitals Heal Themselves
A One-Hour Documentary Airing on Public Television Spring/Summer 2006
Reported by Former NBC Anchor Lloyd Dobyns

This rare good news documentary reports on a surprising solution to escalating costs, unnecessary deaths and waste in America’s hospitals. Doctors and nurses tell how they did their best, working overtime, while hospital conditions worsened. They were delighted to learn a new way to improve patient care dramatically and reduce unnecessary deaths, suffering, errors, infections and costs without additional resources or government regulations.
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Manufacturing Jobs Data: USA and China

Posted on April 7, 2006  Comments (6)

Manufacturing Productivity and the Shifting US, China, and Global Job Scenes-1990 to 2005 (working paper – July 2005) by William Ward, Clemson University:

Manufacturing productivity growth from 1990 to 2004 should have taken away 7.5 million of the 17.7 million manufacturing jobs that existed in the US in 1990, while GDP growth should have added back (at the new productivity levels of 2004) 5.7 million manufacturing jobs-for a net loss of 1.8 million. In fact, the US economy lost 3.3 million manufacturing jobs during that period
…
I find that 100% of the (3.0 million) manufacturing jobs lost since 2000 were lost to manufacturing productivity growth and that 100% of the (1.8 million) jobs that should have been added back by GDP growth in the US after 2000 were shifted to other sectors of the US economy than manufacturing.

In this paper he is examines the factors leading to a reduction in manufacturing job worldwide. He concludes that job losses are mainly due to increased manufacturing productivity (worldwide, manufacturing productivity is increasing and jobs are decreasing – including China). Continue reading →

Deming and Toyota

Posted on March 17, 2006  Comments (1)

In response to Deming Electronic Network message, Deming and Toyota:
“I have read a few of the threads referring to Toyota and their success. I am somewhat familiar with the Toyota Production System (where Lean principles sprouted from), but I have often wondered if Toyota subscribed to all of Deming’s 14 points.

I believe Toyota applied Deming’s ideas to create a management system and continued to develop that system to create the Toyota Production System (also known as lean manufacturing). I believe a convincing argument can be made for Toyota following all 14 points.

An interesting article on Toyota’s web site illustrates their commitment to several of the points, Toyota Special Report: Thinking Production System.
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Global Manufacturing Data by Country

Posted on February 22, 2006  Comments (9)

I am still looking for a good source for manufacturing data by country and year. Today I found some data from the United Nations Statistics Division. The data for the top five manufacturing economies: China, Germany, Japan, United Kingdom and United States. Figures are in current $US billion. The data used is for Mining, Manufacturing and Utilities (because China and Germany do not have manufacturing data separated out).

Country 2001 2002 2003 2004
United States 1,781 1,779 1,876 2,012
Japan 991 929 1017
China 507 551 638 754
Germany 421 449 545 613
United Kingdom 280 283 322 378

For manufacturing output only:

Country 2001 2002 2003 2004
United States 1,460 1,463 1,523 1,623
Japan 866 812 894
United Kingdom 220 223 254 298

This data shows the United States manufacturing economy is continuing to grow and is solidly the largest manufacturing economy: which contradicts what many believe. It is true manufacturing jobs are decreasing in the United States and worldwide – China is losing far more manufacturing jobs than the USA.
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Management Improvement Leaders

Posted on January 17, 2006  Comments (6)

Who’s Driving Quality Today by Laura Smith, Quality Digest.

Ten years ago, in our March 1995 issue, we profiled 45 “New Quality Gurus.” Although it was one of our more popular articles, some of the “gurus” and their causes have faded into obscurity. Other gurus chased the latest fads into oblivion. A few have shown remarkable staying power.

When we decided to revisit the quality gurus issue, one thing was immediately apparent: There isn’t any one guru who stands out above the rest. In fact, the quality profession is remarkably free of fads at the moment. Six Sigma has settled into the mainstream, and ISO 9001 has become firmly entrenched in Corporate America. So while we wait for the “Next Big Thing,” we’re also waiting for the next big guru.

Who does Quality Digest select this time? Dennis Arter, Paul Borawski, Joe Bransky, Michael Carmody, Subir Chowdhury, Joe De Feo, Ellen Domb, H. James Harrington, Mikel Harry, Harry Hertz, Robert H. King, Denise Robitaille, Ola Rollen, Shin Taguchi, Jack West and Donald J. Wheeler.

Who would I select, as the leaders of management improvement (lean thinking, six sigma, systems thinking, continual improvement, customer focus, innovation, leadership, quality management, theory of constraints…) thought and practice today? Continue reading →

TPS v. Lean Manufacturing

Posted on December 19, 2005  Comments (1)

Great article from Superfactory, TPS vs. Lean and the Law of Unintended Consequences by Art Smalley:

Real TPS is not just about “flow”” or ““pull production”” or ““cellular manufacturing”” or any of the other catchy phrases or tools you may frequently hear. For over fifty years TPS in Toyota has been primarily concerned with making a profit, and satisfying the customer with the highest possible quality at the lowest cost in the shortest lead-time, while developing the talents and skills of its workforce through rigorous improvement routines and problem solving disciplines. In every piece of TPS literature from Toyota, this stated aim is mixed in with the twin production principles of Just in Time (make and deliver the right part, in the right amount, at the right time), and Jidoka (build in quality at the process), as well as the notion of continuous improvement by standardization and elimination of waste in all operations to improve quality, cost, productivity, lead-time, safety, morale and other metrics as needed. This clear objective has not substantially changed since the first internal TPS training manual was drafted over thirty years ago.

This is a great article, I strongly recommend reading it.

Management Improvement

Posted on November 27, 2005  Comments (6)

Lean Manufacturing Visionary Jim Womack On Frontiers Of Lean Thinking, webcast and additional questions and answers:

Question: For a firm seeking to improve — what comes first? Six Sigma quality or lean implementation?

James Womack: Agh! These are all the same thing. You need to start with the value stream for very product, draw a map of its current state, and ask about each step: Is it valuable? Is it capable? Is it available? Is it adequate? Is it flexible? Then ask whether each step flows smoothly to the next but only at the pull of the customer as the process approaches perfection. Doing this simple exercise wraps together everything you need to know about TQM, TPM, TPS, Six Sigma, TOC, etc

I believe while they are similar to varying degree they are not the same thing. They may have similar goals – they are largely focused at improving performance of the organization (but even how they would measure success is different). And when implemented well each of these methods have value. However what is done in an organization focused on six sigma is different than one focused on lean thinking.
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Manufacturing and the Economy

Posted on October 30, 2005  Comments (3)

In Global Market, Iowa Manufacturers Fight for Survival:

The conventional wisdom has been that expanded trade would result in the United States losing low-pay, low-skilled manufacturing jobs, said David Swenson, an economic scientist at Iowa State University. But “a lot of the jobs that we have traditionally thought of as high value, high quality, high benefits are in trouble, too.”

The conventional wisdom was that the rest of the world would not be able to compete with the United States for high wage, high value jobs. It turns out the rest of the world is much more able to compete for that work than was expected.
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