The Open Secret of Success

Very true, except one thing. Toyota’s innovation is not limited to process and execution. Toyota’s long term vision results in very dramatic innovation (that granted is not getting the press today - check back in 20 years, I think you will be reading about it then). For some examples see: Toyota’s Partner Robot, Toyota as Homebuilder, Toyota Engineers a New Plant: the Living Kind and The Birth of Prius.

A company truly driven by a focus on continual improvement, respect for all employees and reasonable executive compensation might be a company serious about adopting Deming and Toyota management principles. It is hard for me to imagine such a situation that doesn’t truly seek, as the primary aim of the organization, to benefit many stakeholders (workers, owners, suppliers, customers…) not just executives (or just executives, board and owners…).

Related: Toyota Management Develops the New Camry - Better and Different - Deming and Toyota - Toyota Keeps Improving - More Positive Press for Toyota Management - Good Execution is Important

The Defect Black Market

Well, this doesn’t sound very well thought out. Bonuses often distort behavior. Dr. Deming was not against such targets and bonuses because he thought they would not result in bugs being fixed: Dr. Deming on the problems with targets or goals. It is a question of how that will happen. The system being distorted is the most likely result of any such system.

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Why is 37signals so arrogant? by Don Norman

I don’t agree. Not compromising leads to solutions that are unlikely to be all things to all people. But with an intelligent and knowledgeable leader will lead to excellent solutions for those that share desires. Now I don’t think this is the best strategy, especially for growth. But it can be an excellent strategy for startup, innovators and those seeking 1,000 fans.
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Here is updated data from the UN on manufacturing output by country. China continues to grow amazingly moving into second place for 2006. I plan to write more on this data in the Curious Cat Investing and Economics Blog. UN Data, in billions of current US dollars:

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“The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.”
- George Bernard Shaw, Man and Superman

That quote sprang to mind when I read the great post - In praise of the lazy employee

My view of myself places me in both of these camps (lazy and unreasonable). But, honestly, I have become more reasonable over time and while it makes me less difficult to put up with I think I am less effective (my performance appraisals are more positive so maybe I am wrong or maybe my opinion of performance appraisals is right).

Marissa Mayer speech at Stanford on innovation at Google (23 minutes, 26 minutes question and answers). She leads the product management efforts on Google’s search products- web search, images, groups, news, Froogle, the Google Toolbar, Google Desktop, Google Labs, and more. She joined Google in 1999 as Google’s first female engineer. Excellent speech. Highly recommended. 9 ideas:

(inside these are Marissa’s comments) [inside these are my comments]

1. Ideas come from anywhere (engineers, customers, managers, executives, external companies - that Google acquires)
2. Share everything you can (very open culture)
3. You’re Brilliant. We’re Hiring [Google Hiring]
4. A license to pursue dreams (Google 20% time)
5. Innovation not instant perfection (iteration - experiment quickly and often)
6. Data is apolitical [Data Based Decision Making - this is true but as an operating principle requires people that really understand data. See: Data can't lie.
7. Creativity loves Constraints [process improvement and innovation]
8. Users not money [the opposite of what business school's teach business case]
9. Don’t kill projects morph them

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Often people have trouble understanding Dr. Deming’s disapproval of arbitrary numerical targets. What he was trying to prevent is what many see every day, such as managing to quarterly earnings targets. There are several problems with numerical goals but in here lets focus on one. The change from managing for what is best for the business to managing to hit a target. Google Profit Trails Analyst Estimates; Shares Slide:

Great statement. And if more people could manage that way, one of the problems with numerical goals would be eliminated. But with so many organizations tying huge bonuses to meeting arbitrary numerical targets you will have a great deal of difficulty getting managers to hire 3 extra people this quarter, who will help the business, but will ruin their chance at a bonus. Or even if they just take a hit on their performance appraisal compared to the other managers that meet the headcount target - even if it meant turning away talent the organization could have benefited from greatly - and then the manager that missed their target loses out in the next promotion opportunity.

I am happy to own a tiny portion of Google and glad they are making decisions like this. Now just because I think there is a good case to be made for exceeding the targets that doesn’t mean that hiring more people is necessarily good. It is perfectly possible Google is hiring too many people and making a bad prediction about how these people will benefit Google in the long run. I am just saying I strongly support not tying yourself to short term numerical targets, if you predict a better decision requires taking actions that will cause the target to be missed.

Google increased profit by 28%, from the second quarter last year, to $925 million (and down from $1.0 billion in the first quarter of 2007). Lest you think personnel can’t really cost Google that much can it, just the stock based compensation in the second quarter reduced earning by $242 million in the quarter (an “expense” that wasn’t reported just a few years ago). Google had 13,786 full-time employees as of June 30, 2007 (up 1,548 in the quarter) - so that is over $17,500 per full time employee. If anyone at Google wants to talk I am open to considering an employment offer.

Every so often an article appears discussing the need to change focus from process improvement to innovation (and recently they are followed with quite a bit of blog talk). I disagree on several grounds. First you have needed to focus on both all the time. Second, it is not an either or choice. Third, the process of innovation should be improved.

I do not believe process improvement is bad for innovation. Bad process changes can be bad for innovation. But if we are looking at a research and development organization where the output is new products then process improvement would be focused on improving the processes to make that happen. The type of process improvement would be different than those made to manufacturing a product better.

Some six sigma efforts are little more than cost cutting efforts. And those efforts might claim a “process improvement” that is really just cutting costs in R&D. But we should not confuse bad management with the good practice of process improvement. Yes, cutting costs for the sake of cutting costs often leads to problems. Waste should be eliminated (which can reduces cost). Focus on eliminating waste. Eliminating waste in innovation activities is no worse than eliminating it anywhere. It might be more difficult to determine what is waste (that is where management skill and knowledge come into play) but the idea that process improvement (including eliminating waste is bad for innovation is something that should be rejected). And process improvement in innovation should not be limited to eliminating waste.

A good example of process improvement in innovation activities: Fast Cycle Change in Knowledge-Based Organizations (pdf format) by Ian Hau and Ford Calhoun, published by the Center for Quality and Productivity Improvement, University of Wisconsin - Madison.

Related: Better and Different - New Rules for Management? No! - Quality and Innovation - “New” Management Needs - Management Advice Failures

In response to Is Laying People off Really Anti-Lean?:

Layoffs are a failure of management. If the company has not been executing a long term strategy to respect people and manage the system to continually improve, manage for the long term, working with suppliers… it might be they have created an impossibly failed organization that cannot succeed in its current form. And so yes it might be possible that layoffs are required.

It is very easy to jump to layoffs as the “answer” though. While it is possible to construct a situation in which they make sense that such a hypothetical situation it rarely is the case that an organization is committed to lean and then makes layoffs. Instead they just think the same old way and mention the word lean since they see others doing it and layoff sounds like it is lean to someone that doesn’t know the first thing about lean thinking.

I would not see, “a focus on improving operating income above all else” as a lean way of thinking. Improving that is one focus among many that are needed to achieve long term success.

Does that mean a organization doing a great job of managing in a truly lean way may not find itself in a position where layoffs are necessary? No. Failing to predict and execute may have consequences and those may include layoffs. In your example things are confused a bit by separating the responsibility of getting into the mess from what to do next. Definitely, riding out a few poor quarters would be preferable. I have absolutely no question about that.
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Why Write it down?

Right on. In meetings writing down decisions (what is the issue, who is going to do what…) is very helpful. It is very easy for people to think people agree to some somewhat clear statements made in the meeting. Only later it becomes obvious several people have different understandings (sometimes this is even really basically know in the meeting but it is easier to let things slide instead of confronting the disagreement - but this is not helpful, it just means the issue is not properly address, it might make the meeting easier but that should not be the goal). Writing it down greatly reduces the chance of miscommunication.

Russell Ackoff also has some great stuff on the importance of documenting decisions - both to serve as guide posts to future action and to serve as documentation that can be examined over time to find historic weaknesses and strengths with decision making in the organization. The Team Handbook is a very good book for improving team meetings and team performance.

Ackoff on decision making (pdf):