1/26/2008

The Strategic Value Stream - How Organizations Create Wealth

Filed under: Corporate Culture, Learning Organization, Organization Design and Process Improvement — Larry Miller @ 7:57 pm

The purpose of corporations is to create wealth… not only financial wealth for stockholders, but total wealth for society. When corporations build competence in their employees they are creating wealth. When they innovate they are creating wealth. When they build relationships across groups of people and countries they are creating wealth.

Wealth is not only money. In my New Capitalism book I define total wealth as including not only financial capital, but also social, spiritual, human and process or technology capital. These five forms of capital represent an holistic understanding of value. On an individual level, when you educate yourself, when you improve your physical health, when you develop a strong social network, you are creating personal wealth. You don’t create personal wealth by focusing your energies on money. You are more likely to create financial wealth by investing in your competencies, your values, your social relationships. Then, in an organic, or natural manner, these result in higher income and financial wealth.

The same is true in corporations. Corporations that just focus on money are likely to be bureaucratic, uncreative, lack strong values and the loyalty of their people. The money focused company is less likely to make money in the long term than the company that focuses on the whole value creation stream.

Every process can be defined as input-work process-output. The value creation stream follows this same flow. The stuff you need to start or build a company are all five forms of capital. The work processes, the things you do to transform input into higher value output include the core work process of the organization, the HR development systems, the information systems, etc. These are the nuts and bolts that get the work done. The outcomes of the value stream are an increase in all five forms of capital.

value-creation-flow.jpg

Strategic planning is most often focused on finances, increasing revenue and reducing costs, and then focusing on enhancing competitive market position. Nothing wrong with this. But, market position and financial success are the end of the line, the final result of enhancing human competence, improving brand equity and internal social capital, and innovations in technology or process. The new strategic planning must now focus on the entire value stream from input to output and all forms of capital.

8/7/2006

Lean Organization Requires Alignment of Social and Technical Systems

Filed under: Lean Culture, Lean Manufacturing, Learning Organization — Larry Miller @ 4:49 pm

Some years ago while speaking at one of Norman Bodek’s Productivity Conferences, Norman referred me to an article by UCLA professor Lou Davis. Norman thought that Lou Davis and I were talking about the same things, but from different perspectives.

(Norman and I have a lot in common. At about the same time we both sold our companies (his was Productivity Press, mine was Miller-Howard Consulting Group) and he went off to follow Budhist philosophy and I went off to find God on the oceans. Now we are both back at work and both with new books.)

The Lou Davis article was on Socio-Technical Systems (STS) design (I know the very name makes managers fall asleep!). The first self-managed team manufacturing plants, long preceding the arrival of the first Japanese transplants, were created using STS. Gains Topeka, the first of these plants served as a model, and Proctor & Gamble picked up the technique and converted every manufacturing plant using STS. They considered it such a competitive advantage that they would not allow visitors in their plants. Whole-system design (the term I prefer) is an up-to-date version of STS, incorporating our knowledge of lean.

At its heart, STS was a simple and under appreciated idea. Manufacturing plants (and offices) are designed primarily with the flow of materials, equipment, and safety in mind. They were not designed with the competence and motivation of people as a primary design criteria. The founders of STS (Fred Emery, Eric Trist) demonstrated you would get optimum performance if the plant was designed with both the technical and social systems in mind and was created in a way that aligned these systems.

The more experience one has with Lean manufacturing or organization, the more clear it is that lean is a system in which both human and technical systems have been aligned.

The following illustrates the social and technical systems that need to be designed and aligned to create a true lean culture in the organization. This diagram may not include everything, but it is a good start.

Alignment2

7/18/2006

Getting to Lean - Whole System Design

Filed under: Lean Culture, Lean Manufacturing, Learning Organization — Larry Miller @ 12:50 pm

Lean organizations are learning organizations, a culture, not a technique. How do you create that culture?

Some good number of years ago I received a call from Honda America Manufacturing. To my surprise, I learned that the first plant manager of the Marysville Plant bought my book American Spirit in the Tokyo Airport waiting to move to the United States and take up his duties. He read it on the plane and concluded that “if this is what Americans believe, we can succeed in the United States.” For a number of years it then served as the text for their course on the Honda Way, taught by the Executive Vice President, Scott Whitlock to all new managers.

I am not sure that my book reflected what Americans believed then, but this coincidence did give me the opportunity to visit Honda on several occasions and learn a good bit about how their system of work, management and organization worked. They were very frank in attributing much of their own system to the Toyota Production System. This system is now commonly referred to as Lean production, lean organization or lean culture.

The most important lesson of visiting Honda is that you cannot find the explanation for their excellence in any one technique. When I first visited there the U.S. was in a frenzy over Quality Circles and its devotees were certain that it was the key to Japanese success. They were wrong. Then statistical control charts were given great credit for Japanese success. Few could be found at Honda. A dozen other simplistic explanations have been given.

The truth is that Honda and Toyota are “whole-systems” and the sub-systems of the work flow, motivation and incentive systems, training systems, organization and management levels, improvement processes, and many other factors are all components of the “whole-system.” It is a culture and all cultures are complex.

At this same time my consultants and I were practicing socio-technical systems design, the method used to create the first self-managing team plants in the United States. We took this methodology and applied it to the design of organizational system that incorporated the lessons of Honda, Toyota, Federal Express, and other great companies.

I recently attempted to describe this process on one page, inspired by the Strategy Maps of Kaplan & Norton. This map includes the principles and of the New Capitalism in my recent book with the process of whole-system design.

I know that without a great deal of explanation it is likely not fully comprehensible. But, if you have a question about it, send an email or make a comment.

Cheers, LMM