Toyota builds cars (duh). In the past that didn’t involve much software, and the little software that was needed was mostly developed by suppliers and embedded in isolated components. Toyota assembled them and didn’t much care about the software inside. But “The importance of automatic electronic control system has been increasing dramatically year by year” said Ishii-san.
A modern car is pretty much a computer on wheels! In a hybrid car about half of the development cost is software, it contains millions of lines of code as all the different subsystems have to integrate with each other. He mentioned that a Lexus contains 14 million lines of code, comparable to banking and airplane software systems. Ishi-san concluded that “Therefore Toyota needs to become an IT company”.
Most of Toyota’s ideas about how to do Lean software development resonated well with me. My feeling was that they are on the right track.
One thing bothered me though – the extreme focus on detailed metrics. I agree with the value of visualization, standardization, and data-driven process improvement – but only if used at a high level. My feeling was that Toyota was going to far. They say engineer motivation is critical, but how motivating is it to work in an organization that plans and measures everything you do – every line of code, every hour, every defect, how many minutes it takes to do an estimate, etc?
I would describe Google’s culture as “creative chaos”. There was some confusion about where I was supposed to be when I started. This resulted in the following phone call, “Hello?”, “Hello Ben, this is Conner (that’s my new manager), where are you?” “Mountain View.” “Why are you there?” “Because this is where the recruiter said to go.” “Good answer! Nice of them to tell me. Enjoy your week!” This caused me to ask an experienced Googler, “Is it always this chaotic?” The response I got was, “Yes! Isn’t it wonderful?” That response sums up a lot about Google’s culture. If you’re unable to enjoy that kind of environment, then Google isn’t the place for you.
Paul Buchheit was a software engineer at Google. He didn’t need permission to write something like gmail. Corporate culture says that if you need something like that, you just go ahead and do it. In fact this is enshrined as an official corporate policy – engineers get 20% of their time to do with pretty much as they please, and are judged in part on how they use that time. I found a speech claiming that over half of Google’s applications started as a 20% project. (I’m surprised that the figure is so low.) To get a sense of how much stuff people just do, visit Google Labs. No corporate decision. No central planning.
Sick day policy. Don’t show up when you’re sick and tell people why you’re not showing up. Note what’s missing. There is no limit to how much sick time you get if you need it.
Business Week has a good article on the strides one hospital has been able to make at reducing costs and improving quality. Hospitals: Radical Cost Surgery
Walk into Providence Regional Medical Center, in Everett, Wash., and you will see a hospital trying something different: It brings the equipment to the patient. In 2003, Providence opened one of the few “single stay” wards in the nation. After heart surgery, cardiac patients remain in one room throughout their recovery; only the gear and staff are in motion. As the patient’s condition stabilizes, the beeping machines of intensive care are removed and physical therapy equipment is added. Testing gear is wheeled to the patient, not the other way around. Patient satisfaction with the “single stay” ward has soared, and the average length of a hospital stay has dropped by a day or more.
High quality at a low price. Every other industry strives for that combination, but a hospital that does both is all too rare. Providence and its cost-efficient brethren demonstrate that quality care can be delivered at an affordable price, provided hospitals can be persuaded to rethink decades-old practices.
The crazy world of hospital economics does not offer a lot of incentives to change. Both Medicare and private insurers reimburse on a piecework basis – known as fee-for-service – that encourages hospitals to treat more, prescribe more, and test more.
Providence has also published data showing that infections, lengths of stay, and surgical complications have dropped since starting its own program.
But hospitalists are still controversial in many communities, because primary care physicians are wary of giving up control of their patients, along with their share of inpatient fees. Dr. Joanne C. Roberts, one of the first hospitalists at Providence, has not seen this conflict in Everett, possibly because most of the hospitalists and primary care doctors are associates at one large medical practice, Everett Clinic. That’s not true everywhere, she says. “In another community where I worked, independent doctors were pretty hostile. Everyone was trying to grab part of the money. That just doesn’t happen here.”
In a study of 2,531 operations at Providence, Brevig reported that the incidence of transfusions was reduced to just 18% in 2007, from 43% in 2003, while the average patient stay was reduced by half a day. The changes have saved Providence an estimated $4.5 million.
Brevig has been proselytizing for his plasma practices at medical meetings, but to little avail. Only some 200 U.S. hospitals have a blood conservation program. Since patients are billed the cost of the plasma, doctors aren’t motivated to change their habits.
There are many more great examples of positive actions being taken in health care. But all you have to do is look at the overwhelming evidence of how amazingly poorly the health care system in the United States is doing to know that it is, overall, an enormous failure. For decades the enormous cost of supporting special interest groups that benefit from the current broken system have forced the rest of society to pay for their unwillingness to improve. We can no longer afford to accept the poor performance. We need to adopt the new ideas much more quickly and eliminate the taxes on the rest of society to support those that want to take an every increasing amount from society to support their outdated, failed policies.
In June testimony before the Senate Commerce Committee, Potter said insurers “dump small businesses whose employees’ medical claims exceed what insurance underwriters expected. All it takes is one illness or accident among employees at a small business to prompt an insurance company to hike the next year’s premiums so high that the employer has to cut benefits, shop for another carrier, or stop offering coverage altogether – leaving workers uninsured.”
Joy Mosley, COO of Biotest Laboratories, a 77-person medical testing company in Minneapolis, recently got such a “requote” from her insurer, Medica, after an employee was diagnosed with pancreatic cancer. Medica covered the million-dollar treatment, but then said the large claim warranted $156,000 in additional premiums – a 72% increase.
Not all entrepreneurs are equally vulnerable. About a dozen states prohibit insurers from basing premiums for businesses with 50 or fewer employees on workers’ health status. But in roughly three-fourths of the country, so-called ratings bands allow for considerable flexibility in pricing. In states with loose ratings bands, such as Texas and Nevada, one small company can be charged nearly 70% more than another. In Pennsylvania and Virginia, there are no ratings restrictions. No matter what state you’re in, ratings bands don’t apply to companies with more than 50 employees.
Just from an insurance perspective the companies are not providing what is needed. They are quick to say you can’t have healthy people remain uncovered and wait to buy insurance once for example, “their house is on fire” (they are sick). They are right. Well you also can’t have the insurance company cancel coverage during the fire and have a system that works. Continue reading →
We lost another of the absolutely best minds in management history, this week. Somehow, many managers, do not know of Russell Ackoff’s ideas. I find that amazing. Dr. Ackoff is one of two management thinkers that any manager, that is serious about improving management results in their organization, must study (the other is Dr. Deming).
Like many management greats he had no limit to the great ideas he put forth. He believed in the value of people and the importance of social systems. He is well known his ideas on systems thinking and specifically human systems. He understood to create effective management structures the human element must be at the heart of the system. He firmly believed in respect for people and his management ideas built on providing the opportunity for people to flourish.
We lost another great management mind. But by reading Ackoff’s books and articles and learning from him we can continue the improvements he brought to management during his life. His ideas will continue to provide those that adopt them great success for a long long time. And the management community will continue to build on his work and that of others to help managers improve their organizations.
Peter Scholtes is an education, not a guru. A guru is one who develops a doctrine and seeks disciples who accept and transmit it without modification. No deviation is acceptable…
Educators, on the other hand, encourage and even try to inspire progressive deviations from what they have said. Their objective is not to remove the need for further learning, as is the guru’s, but to initiate it
Those words also describe Russell Ackoff perfectly. He inspired those he worked with to adapt and transform his ideas as they worked to improve their organizations. Take this opportunity to learn more about his ideas, you will not be disappointed.
Amazon is acquiring the unique company – Zappos: we have written about Zappos previously: Paying New Employees to Quit. Jeff Bezos uses the webcast above to talk to the employees of Zappos. Excellent job. The letter from Tony Hsieh, the Zappo’s CEO, to employees is fantastic. This is a CEO that respects employees. These are leaders I would follow and invest in (and in fact I am glad I do own Amazon stock).
First, I want to apologize for the suddenness of this announcement. As you know, one of our core values is to Build Open and Honest Relationships With Communication, and if I could have it my way, I would have shared much earlier that we were in discussions with Amazon so that all employees could be involved in the decision process that we went through along the way. Unfortunately, because Amazon is a public company, there are securities laws that prevented us from talking about this to most of our employees until today.
Several months ago, they reached out to us and said they wanted to join forces with us so that we could accelerate the growth of our business, our brand, and our culture. When they said they wanted us to continue to build the Zappos brand (as opposed to folding us into Amazon), we decided it was worth exploring what a partnership would look like.
We learned that they truly wanted us to continue to build the Zappos brand and continue to build the Zappos culture in our own unique way. I think “unique” was their way of saying “fun and a little weird.” 🙂
Over the past several months, as we got to know each other better, both sides became more and more excited about the possibilities for leveraging each other’s strengths. We realized that we are both very customer-focused companies — we just focus on different ways of making our customers happy.
Amazon focuses on low prices, vast selection and convenience to make their customers happy, while Zappos does it through developing relationships, creating personal emotional connections, and delivering high touch (“WOW”) customer service.
Toyota has developed a thought-controlled wheelchair (along with Japanese government research institute, RIKEN, and Genesis Research Institute). Honda has also developed a system that allows a person to control a robot through thoughts. Both companies continue to invest in innovation and science and engineering. The story of a bad economy and bad sales for a year or two is what you read in most newspapers. In my opinion the more important story is why Toyota and Honda will be dominant companies 20 years from now. And that story is based on their superior management and focus on long term success instead of short term quarterly results.
Yes Toyota can improve their performance, based on the last few years. Does management understand what they need to do? I think so. Does management understand that the system needs to be improved rather than the numbers on the spreadsheets of various managers have to be made better? I think so. Do I think most companies today, with bad results, understand the difference between bad numbers on spreadsheets that are used to judge various managers and a system that needs to be improved? No.
I do not believe the bad earnings for the last year for Toyota are indicative of a failed system. The results do show a weakness in the Toyota system that allowed them to perform this poorly during this credit crisis. The risk to Toyota’s future is that they become too focused on short term results, mistakenly thinking the problem to be fixed in the bad quarterly results recently. They need to focus on improving the system for the long term. And the recent experience likely shows some areas that need to be improved. But in no way do the fundamental tenants of the management system need to be changed. For many other companies today, changing fundamental aspects of their management is what is needed.
“We actually recruit for values,” says Chief Operating Officer Robert McDonald. “If you are not inspired to improve lives, this isn’t the company you want to work for.”
The P&G strategy starts on college campuses. The Cincinnati company dispatches line managers rather than human resource staffers to do much of its recruiting.
For the few who get hired, their work life becomes a career-long development process. At every level, P&G has a different “college” to train individuals, and every department has its own “university.” The general manager’s college, which McDonald leads, holds a week-long school term once a year when there are a handful of newly promoted managers. Further training—there are nearly 50 courses—helps managers with technical writing or financial analysis.
Career education takes place outside the classroom, too. P&G pushes every general manager to log at least one foreign assignment of three to five years. Even high-ranking employees visit the homes of consumers to watch how they cook, clean, and generally live, in a practice dubbed “live it, work it.” Managers also visit retail stores, occasionally even scanning and bagging items at checkout lanes, to learn more about customers.
Going to visit the gemba, the actual place is incredibly important, and far too often ignored by managers today.
The emphasis on life long learning (in practice, not just words) is also very wise. In my experience far to little emphasis is placed on continual improvement of what many companies will say is their most important asset: their people. If you don’t invest in education of your staff that is going to harm your long term success. The investment P&G makes shows a respect for people.
At no other time in recent history has it been easier or cheaper to start a new kind of company… These are Web-based businesses that cost almost nothing to get off the ground
The term ramen profitable was coined by Paul Graham, a Silicon Valley start-up investor, essayist and muse to LILO entrepreneurs. It means that your start-up is self-sustaining and can eke out enough profit to keep you alive on instant noodles while your business gains traction.
“At this point, it would be hard for companies to get any cheaper,” Graham said. Since everyone already has an Internet-connected computer, “it’s gotten to the point that you can’t detect the cost of a company when added to a person’s living expenses. A company is no more expensive than a hobby these days.”
I see a great deal of truth to this and it provides interesting opportunities. Including being able to build a business slowly while still working full time. I have written about Y-combinator previously they have helped make this model popular. And the services these companies make seem to me to often be much more refreshing than ideas so watered down they lose much passion (so common from so many companies). Though some large companies provide great web sites.