Gemba Coach talks PDCA

Business901 Podcast Transcription
Implementing Lean Marketing Systems

Gemba Coach talks PDCA
Guest was Michael Balle

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Copyright Business901


Michael Ballé is the co-author of, The Gold
Mine, a bestselling business novel of lean
turnaround, and recently, The Lean Manager,
a novel of lean transformation, both published
by the Lean Enterprise Institute. For the past
15 years, he has studied lean transformations,
helping companies develop a lean culture. He
is an engaging and colorful public speaker,
experienced in running interactive workshops.

As a managing partner of ESG Consultants,
Michael coaches executives in obtaining exceptional performance
through using the lean tools, principles, and management
attitudes. His main coaching technique is the “Real Place Visit,”
where he helps senior executives to learn to see their own
operational shop floors, teach their people the spirit of kaizen and
draw the right conclusions for their business as a whole. He has
assisted companies in their lean transformations in various fields
such as manufacturing, engineering, construction, services, and
healthcare.

Michael holds a doctorate from the Sorbonne in Social Sciences
and Knowledge Sciences. He is co-founder of the Projet Lean
Entreprise and the Institut Lean France (www.lean.enst.fr),
France’s leading lean initiative. It is conducted in collaboration
with Telecom Paris, where Michael is associate researcher.

Dr. Michael Balle is the Gemba Coach at the Lean
Enterprise Institute


Joe Dager: Welcome everyone; this is Joe Dager with the
Business 901 podcast. I would like to welcome Michael Balle.
Michael has been studying the link between individual reasoning
and large-scale change for the past 15 years. He's a Lean expert
and contributed to the Lean Edge and Michael you defined this for
me but you also are the European or the French arm of the Lean
Enterprise, is that correct?

Michael Balle: Senior Adviser to the French Lean Institute
which I have started here, yes.

Joe: I always think of PDCA as the culture of Lean or the culture
of the TPS system. How do you look at PDCA? Is it more of a tool
or is it a culture?

Michael: That's a very interesting question and you're certainly
not going to get a short answer on this one because it more of
our belief that tools and culture are interlinked. I think ultimately
we're all bias with our tools and much of our culture is made of
our tools and how we use our tools. What makes a big difference
is the fact that the same tools are used differently by different
people.
So, in this sense I have to answer yes to both. I think that PDCA
is essential to the Lean culture and it's also a tool. And as a
culture it's nothing else than a collection of individuals. We've
never seen a culture roam the streets or order a drink in a bar.
It's a collection of individuals and the question we have to ask
ourselves is what does PDCA mean at an individual level? And
here I think it's very interesting because we definitely are biased
with PND. We've developed a culture of planning which is very
highly valued and certainly of doing. So, most people will think
about planning the next move and then executing the next move.


We're appalling at confirming and we're terrible at drawing
conclusions because it's all water under the bridge and it's all
embarrassing and it's all a big debate. So what I think is really
interesting at PDCA is how do you as an individual learn to pause
and confirm your results? And then once these results are
confirmed try to draw some conclusions in terms of either
adopting or adjusting or the act part of PDCA and then starting
again.
I think that is what brings Lean so close to scientific thinking is
that just because you like an idea doesn't make it true. Even
though your chemistry tells you, I like this stuff. It sounds good.
It's intuitive; I have a gut feeling about it. It just means that you
like the idea. It doesn't make it true.
So we teach people when... It's a personal incident so you have
to learn how do you confirm your ideas? What makes you think
you're right? You feel right but everybody feels right about
everything. This is the summary field. If not we would have a
different idea.
Joe: Michael, when you say that, that's the tough part because
can everything be tested? You want to confirm it but it is really
difficult because so many times you can't test one individual thing
that you'll have two or three things that you are doing from the
plan stage and you're saying test it here is what you have to do.
But how do you test all that stuff? And how do you know that one
particular item caused it?

Michael: Well, OK. This is a very complex subject, let's take it
simply. Let's instead of testing, let's call it humbly, confirm it.
Can everything be confirmed? Yes it can. I can just talk to and
say, "This is what I think, would you confirm it?"

For instance I'm good friends with one of the CEO's and he's one
of the top guys in Lean construction, he's got a construction


company. And he's been making remarkable profits from the
Lean effort. When he took over the company the crisis just
happened so his volume crashed 40 percent in the first year he
was CEO.
With that 40 percent he went from a zero profit of the previous
year to a significant profit just doing Lean. So, we had this
conversation, why is it working? It's a serious conversation. We
know what we're doing. We think we know what is working but
we still have three years down the line in this conversation.

We can see it working, but why? So, we have different ideas, we
try different things and all we do sometimes is just chat,
challenging each other and confirming the facts. I have a
hypothesis today, we were talking about better communication
and he said, "Well, yeah maybe you're right in some cases and
some not." So, to me that can be a very simple and humble
process that you are rather than defending your own ideas
because you like them. You go into a process with people you
trust, fact based, you're together at the Gemba and you just try
to confirm.
Joe: So you're saying that confirmation but we still need data
don't we?
Michael: First thing we need is facts. The way I see it is to have
information data needs context. So data plus context is
information. Information plus understanding is knowledge and
knowledge plus compassion is wisdom. So you build it up.
If you just have data and it's out of context it doesn't tell you as
much about anything. So the thing about facts is you're in the
real place, you're with the people and you look at the data and
the context and you understand where the data comes from.
Then what you confirm is you confirm your understanding. Yeah,
we understand the information, that's not what happened but do


we understand this and we compare it and it's this confirmation
of this understanding that gives us the knowledge.

The bit about compassion is actually very important because if
you don't put the people, your customers first, your people
second in the equation and try to feel how they feel and look
from their eyes and stand in their shoes, well you probably will
make some very unwise decisions. And we'll have fought together
for all the people we know and depend and all the terrible things
just seem to wilt were people who they thought had the perfect
knowledge but lacked compassion. They didn't put people in the
equation and they end up taking decisions that are technically
correct and humanly dumb.
There are many degrees of confirmation. The most obvious
confirmation is I have an idea, what do you think of it? Then we
compare our data, our facts, our experience and it's a
confirmation.
But if you are genuinely interested in knowing whether your
opinions are correct or not, you can go to greater degrees of
confirmation. Then you are asking their manufacturers when you
looked at a quality issue. First thing you say is, "Let's look at the
factors and what kind of experiment we could imagine to confirm
which factor is most important." Then you can move all the way
to Six Sigma and very quantitative methods and there I will agree
with you that not all things are quantifiably testable.
But you see, confirmation is a range of things. Now where PDCA
becomes very smart is by because it loops back on itself. So,
while you better understand your confirmation process you start
planning them.

Let me give you again an example of this construction company
again. So the CEO is very into being socially responsible. He
believed that we should have buildings that create less carbon


consumption and let's say, less heating consumption. So he
wants to reduce the waste of lost heat. Now, he has been very
serious about it for years. So, he put his company into a
competition.
He was actually gutted because his project didn't get selected
because all the projects got selected were the real showy, very
expensive, high tech, completely undoable in an industrial format
but looked good in a brochure and his project was more
reasonable and it didn't get selected. It was very interesting
because out of this failure Rob would then just say, "OK. This is
not for us. Forget it." We started thinking Lean about it.
We thought, "OK. Hang on. Do we have a test method for a lower
consumption building? Do we know what we're talking about?" He
went on a different way and he got an engineering firm and they
built together a carbon consumption calculation for buildings. So
now, he's got a different look at it, which is he's got a test
method.
He looks at when they're engineering the building. They look at
the carbon... They have a ranking of carbon consumption and
they started looking at things that would improve this ranking. So
here, we see PDCA you start integrating your confirmation
method into your plan and it takes you to complete different
directions. It takes you in terms of planning for complete different
actions.
Joe: If you developed your check into the plan itself then it just
becomes a way of doing business.
Michael: A firm belief and I think it was echoed in I think there's
a quote of such an old saying that business is a fight of opinions
with your empathy. I have a firm belief more generally that
business is about opinions. If your opinions are correct you make
money. So it's like in the stock markets on business if your


opinions are true, you make money. If you've got the wrong
opinions, well the market punishes you. So absolutely, PDCA is a
way to test your opinions and to build progressively through
testing more sophisticated opinions that fit the facts better.
PDCA is incredibly smart, because we've been discussing how the
plan should integrate the fact that he had a test method. But in
many cases, you don't even know where the plan should be. It's
an open area. So what do you do? You do Kaizen! You do Do.
Before you have a big plan you try things and there you just try
things and through the deep you just can start building a deeper
understanding and a bigger plan. So PDCA is not just one
mechanical, bureaucratic thing that you do PDCA like you see in
the A3. First do the... No. No. No. It's a thinking that you have to
plan, you have do things and you have to confirm and you have
to Hansei. You have to stop and think, "Are we reaching the right
conclusions?"
So, there are PDCA loops at every level. We do this at the CEO
level and at the very Gemba level with every operator we do this
as well, this is the right way to build the parts. So then, you were
talking about the culture. Yes, when you start having a critical
mass of people in the company who are starting use PDCA in
their way to do their job something happens. Something does
happen.
Joe: That's where you start seeing that and people just start
thinking differently, they start looking at things differently?
Michael: They start opening doors that they didn't know were
there. They start innovating - it's usually hard work, it's not very
glamorous - but they start innovating and adapting in ways that
you had not anticipated before. Which is for my part as an
observer where it becomes really fun?


Because it's like we've been walking down this corridor for years
and we never knew this door was there. But somebody, some guy
opened the door and said, "Oh. This is a dark strange room full of
objects we bump into." But then we shine some light on it
through the experiments and through use and so that door is...
And nobody's there. Nobody is going there.
In business this is absolutely brilliant. It's like this story about
that suddenly you find yourself... what are they called? The
company started coming up with patents and innovative ideas.
Usually it's not a killer app, it's not probably going to take away
the world. But you're definitely building knowledge your
competitors don't have and I think that's the glory of it.
Again, it's very far from a very restrictive... I would argue that
Lean is about cost reduction. But it's about being very innovative
in the way you seek to reduce cost. Cost first, cost for your
customers in terms of customer ownership and cost of
manufacturing and cost out the general operations or the
overhead. So, as you open these doors as you find new ways of
doing this you can attack these three forms of cost and Lean your
company.
Joe: But when you go into an engineering department and you
start talking PDCA to them, how do they react to it and how do
you first introduce that to them to make it effective?
Michael: Ah! It depends upon; again, it's all about people. Some
people will want to learn and some people hate it. So, which case
shall we take? Shall we take the easy case or the hard case?
We think that they want to do it, yeah? Sometimes they do. So
what we started saying, "Guys, first we organize as teams. So,
they said, "OK fine. We can organize ourselves with three to five
people as a team and let's assume that we can say one guy is a
team leader. He's not the boss but he's just the reference guy,


he's the more experience. He understands the technique better.
He's not a manager."

And the first thing we do is say we start it with checking. First
thing we do is every time we modify a part, every time we redraw
a part, let's just write very simply what was the problem we
solved on this part, how did we solve it and let's catch it. So, this
means that I have a PDCA interaction with every drawing.
When I finished every drawing my team leader comes for a
five-minute chat, just let's go through the problem you solved on
the part. That means that on the part you start accumulating a
history of a part. So, when you've done this for a couple of years
when a new guy takes the part he understands why the part is
the way it is because he could read all the reasons that this was
done and so forth.
And then we question it again, can we make it lighter? That's
where we'd start the PDCA in engineering.
Joe: One of the things I think is really funny about the whole
thing is that Lean and PDCA is a very visual tool. We talked about
Lean and visualization and I think that you go back and if you're
not visual you're not Lean. OK, I've heard that many times and I
think that's a good saying but the most visual, the most creative
people are the ones that seem to resist the implementation of
Lean in a company. Does that strike you as odd or do you see
why? Or do opposites just attract each other?

Michael: You once brought up a very interesting point in terms
of what's the link between the PDCA and the Nonaka adds explicit
stuff. And what PDC does particularly through the confirmation
mechanism is bring you to explicit, "What do you think?" You
have to spell out your plan.


You have to describe your experiments. You have to explain your
confirmation method and you have to make a stand. You have to
make a stand about your conclusions. I know some very creative
guys who are perfectly at ease with this and some who are not
and I think it's more of a question of trust and teamwork than the
personality itself.
I think that in a team that goes well... At first they all find it a bit
silly but if they go "Oh, well this is OK. We'll do it." And here is
this - what we discussed last time - you'll see the magic of it. Is
that this uncovers what people know and the others don't know,
rather than always discuss what we already know in common.
When you go through this visualization of "explicating," what is in
your mind so the guy next to you is saying, "I didn't know that."
Or, "What makes you think that?"

Then it becomes extremely very rich and when a team of
engineers has tasted how rich it is, the debates disappear. They
understand why they do it and they keep at it.
Joe: Well that's one of the things that I've talked about doing in
marketing a lot, is that I use an A3 - which is basically PDCA - in
the process so that knowledge can be transferred and recorded
and people know who to go to, to get it if there are some
questions left in it. I always thought that was a good way to
introduce Lean to the creative department or the engineering
department. What do you think the drawbacks are of doing it that
way?

Michael: I think again it's a sliding range. The first thing I would
say to engineering I'd start with these very simple checklist for
the part, then we say, "OK, let's take the folder and in this folder
you just put a lot of checklists, anything that comes to your mind
that you consider as a standard." For instance, I have standards
and when I break them I suffer. One of my standards is never


discuss... Never do business in Lean with a guy who's not
interested in Lean.

In the Lean world you have all these guys who are complete
mercenary and they think they're onto something and they say,
"Don't worry. I don't need to understand Lean myself. I don't
need to do it myself. I just need to sell Lean and that's going to
be fine." Well one of my standards is just stop talking to these
guys, there's no point because it's going to end badly.
You have standards and engineers they discover they have
standards and standards are not rules. Standards are things that
you know that if you step over that line, something will happen.
So the next step is we'll have a folder of standards and every
time we get out of the standard we'll discuss why. If we have an
extra part, if we suddenly do an assembly process differently, it's
fine. We can do whatever we want but we'll discuss one.
Then third, finally we get into actually using the A3's. Now the
A3's is heavy machinery. The A3, we use it when we want to go
to the end of a problem we really don't understand. The A3 for
me is really collaboration between the very senior engineer and
more junior engineer and together the senior guy gets the junior
guy to go all the way to a deeper understanding of the physics of
the problem.
The other way we use A3 is when we want to share a proposal. If
we want to do things differently on a new product we'll have a
proposal. We'll put it in A3 because then we can circulate it
among everybody and ask for everybody's input and idea.
So, absolutely I think A3 is a great tool. They're a bit heavy for
everyday use. Again, assuming it's a sliding rule and the tool
should correspond to the difficulty of the problem.


So a very easy problem we just say hey, stay a bit longer, look at
it a bit harder. Then we go into the Agile, using the checklists,
and then into the very difficult problems we use the A3. So, does
that answer the question?
Joe: They call themselves a Lean company but they really are
not when they leave sales and marketing as silos out there by
themselves. They don't want to touch that.
Michael: I see what you mean.

Joe: To introduce it to the creative department. To introduce
Lean, the typical first thoughts people have of Lean is price
reduction, waste. But it's really about building knowledge.

Michael: I completely agree. I think John Shook has been
brilliant in seeing two... He has written the books about the two
tools which are the granular ways to introduce anybody to Lean.
One is value stream mapping. To somebody who's never done it
it's just such that the light goes on and go "Wow!"
The other one is A3, absolutely. To somebody who's never done
it, the light goes on. So, absolutely, if we go into a department,
into places that haven't been touched by this, the two tools I
would use without any hesitation would be to draw the value
stream of what we're doing - it's always enlightening, whatever
happens it's enlightening - and to start using A3 as a
communication method. Absolutely! This is absolutely where I'd
start. The risk is of getting bumped down.
Joe: What do you mean by that?

Michael: Well the A3's are high maintenance tools.
Joe: You're saying that's a lot for someone to start out with?

Michael: I'm saying the first time. I'm saying they'd probably do
it a second time but we were talking about culture and PDCA as a

culture. I'm saying that if you don't learn to be a bit Lean, about
how you use your tools, you can get people a bit tired of it and
soon they get into the formalism of it without putting the spirit
into it. If you want to use A3's continuously we want to give other
PDC or methods for people to do simple stuff without going
through the whole collabra of the A3.
Joe: Can you tell me some of the simpler PDCA methods then?
How would you term that? What is that?
Michael: Checklist? First, as we're doing this podcast now, can
we write on one simple sheet of paper, not to do the podcast but
to do it well? I have to get the lighting right, I have to make sure
the microphone is switched on, I have to put the kids to bed, and
this will fit on one A3 sheet... Sorry, A4 sheet of paper and will
have five lines written in large black and white large letters.
This is already knowledge capture and creation and you have
"read then do" checklists or you have "do then check" checklists.
So, checklists definitely in marketing think about the number of
checklists you have. So the idea is that everybody, actually I've
got it here...
It's this old tired book. This old tired book has all my Lean
standards and all the things I picked up through traveling the
world. And I go back to it. I refer back to it and when I have a
problem I go back and with any new problem I'd look through the
book and saying, "Get my head back into it."

Joe: So, you're really saying is that one of the best ways to
introduce Lean to let's say a non-Lean department is to create
standard work. Without, let's say maybe taking standard work to
the far end but I mean...

Michael: You're taking it a bit far because we're talking about
introducing... I think the first thing I'd do, would be to think


about stable teams. I really think that understanding who's a
team and who's not, where's the team and who's the team leader
is really important. Then I'd say, well though let's do the two
things you mentioned. That's where I start; let's have a value
stream exercise, which I will never touch again, but as a way to
bring them in to understand that they are part of something
bigger. I think that is very important.

Then we will probably start doing some A3's which I won't touch
immediately again. Having done that, they are interested I say by
now let's everybody take one Kaizen subject. One Kaizen topic
and this is how I start. So I first start with Kaizen and just Kaizen
and piece and confirmation.
Once we've done that then I say to people, well what came out of
this Kaizen? Write it up as a checklist in your words as a
standard, as a checklist. But my approach tends to be small steps
continuously so we build it up slowly.
Then later on I will bring back the increase and typically in the
companies I work with we've done a burst of A3's at the
beginning that people don't know how to maintain and that's OK.
We say, "OK. Never mind." Later on when they have worked with
PDCA and all the methods of visualizing PDCA, which is usually
just P-D-C-A. At some point one of them does something quite
complex and say, "You know what? You remember that A3 stuff?
I could put it in an A3." And you say "Yeah, go ahead."
Joe: We talk about Kaizen and we talk about PDCA, can you
define the difference. They sort of run together don't they?
Michael: Well, there are two types of Kaizen. Yes, they run
together. I'd have to distinguish two types of Kaizen. One type of
Kaizen is problem solving which will be as SDCA to nitpick. Which
you start with a standard, the standard is already there and the P
is that fact that you're not working a standard. So, you have to


then do something to bring it back to standard, check that you're
back to standard and A; draw the conclusions on why you were
not on standard.
Then there's a Kaizen which you want to move one step forward,
you want to improve. So then you would do PDCA in terms of
what's your plan to improve. Do something and confirm that you
have improved and draw the conclusions. But essentially yeah,
that Kaizen and PDCA are linked, but in many cases it can be a
very active PDCA.

It can be a just do it PDCA. It can be I'm a great believer in back
of an envelope PDCA. See, when you're in front of a cell and
somebody looks at it then says, "Well, we can do a Kaizen or
PDCA or we can do an A3 while we have too many people." I
could have the kind of PDCA that would say "Listen. Let's pull
somebody out and see how the cell works. Let's write on the back
of an envelope what we think and then pull somebody out and
write what happens." That would be PDCA as well. Kaizen equals
PDCA. Yes. I can buy that.
Joe: I just seen some different terminology and when I'm
thinking about it I'm thinking about Kaizen, I'm thinking about
PDCA, and I'm thinking about continuous improvement and a lot
of the names seem to blend together. That part, I think, of just
evolvement of a methodology that becomes fewer things to
distinguish between them.
Michael: You have to distinguish. Kaizen is the idea that
tomorrow is going to be better than today and that it's not going
to be a big step, but a small step. Then the day after tomorrow
we're going to take another small step. So Kaizen, what are you
doing tomorrow? Joe, ask yourself in what you do in marketing,
what have you planned to do tomorrow that will make tomorrow
better than today?


What have you planned to do tomorrow that would make the way
you edit this podcast better? Now that's a Kaizen question and to
be a really Kaizen question is, what have you got to do tomorrow
in less than one minute that is going to make your work better
than today?
It has to be a small step. This is very clear. Kaizen is about
tomorrow I have an idea that is going to make the way I do my
job better; my workstation, my cycle or something better than
today. That's Kaizen and the day after I'll have another.

PDCA is the method so I don't lose myself. Once I have this
Kaizen in mind I'm going to do this through PDCA. I'm going to
write my plan; I'm going to do it. I'm going to confirm what I've
done and I'm going to draw conclusions so I learn. So, you can
make Kaizen without PDCA but chances are that you'll end up
with a random walk of changing things without actually
improving, if you see what I mean. But they are two different
concepts.
Joe: When we talk about knowledge, how do lean companies
that you've worked with capture that knowledge? What
mechanism do they use when you're taking let's say that tacit
knowledge and move into explicit, is that standard work?
Michael: The Lean companies I worked with recognized from the
outset that knowledge is embodied in a person. They recognized
that there is no such thing as knowledge in general. They don't so
much capture knowledge as the capture of the ability to
communicate the knowledge. Now let me go into a bit of tantrum
trip but I think in many jobs we have...
What has happened latest DK's is complexity. Whatever job every
company knows to do an enormous amount of things, they know
how to do many, many things but the problem is the person you


have right in front of you doesn't. They're not incompetent,
they're inept. It drives you crazy.

You go to the bank and you know the company knows how to sort
out your problem. You know somebody in the company knows
but the guy or the lady in front of you doesn't. And it drives you
mad. So knowledge is captured somewhere in all the procedures
and how do you work with banks? They receive hundreds of
procedure modifications every week. Of course they don't read
them. But the poor person in front of you doesn't.

So really then, in a Lean company we understand this problem
and what we work at is the communication within the company so
people get access to the knowledge. For me, the A3 is a
communication tool more than anything else. Checklist is a
communication tool.
For instance, if the lady at the bank knows that when she doesn't
know something she rings her boss, "I don't know how to do
this." Either the boss comes and does it and she doesn't learn or
he says, "Pull out your folder, read on page 14 and follow that
and then I'll come and you'll tell me how it went." Then she has
learned tremendously.

So knowledge captured in a Lean company comes in a form that
it's not so much about capturing knowledge but facilitating the
communicating link between the person who knows and the
person who doesn't.

Joe: What we're really saying is pull the "andon chord."
Michael: That's the core of Lean culture. That's the one tool that
the old man invented that was the first stone of Lean. This is the
one stone that is still so hard to see in companies but that is the
heart and soul of Lean is the andon chord. In order to pull the


andon chord you have to know the standard because if not you
don't know when to pull.

In order to answer the andon chord you have to know the
standard because if not you don't know what to tell the operator,
absolutely.

Joe: So, when we pull the "andon chord" we also have to feel
like gee, I don't know that it's bad. It's got to be OK to pull the
"andon chord."

Michael: It's part of the secret of Lean. We have this expression
in Lean. Not guilty. Not guilty. We know the guy drinks. Fine. Not
guilty.

It's a very militant assumption that people are not guilty. If
they're doing something strange it's because they're in a strange
situation or they're not being helped and we need to figure out
what made them do what they did. So, not guilty and no fear are
absolutely essential to a Lean culture because if not they will not
pull the andon chord.
Joe: I think one of the problems we have in the western culture
is that pulling the andon chord is admission that we don't know
something and that's looked at as bad.
Michael: Absolutely. When one of the things that I think they
got from Taichii Ohno is we must reveal our mistakes. It's very
painful. This is what, about red veins and endless cords and
whatever it is. We've created an environment of trust in which we
reveal our mistakes.

Our mistakes are not something to blame someone for but
mistakes just become interesting. The better you are, the rarer
you're mistakes, the more interesting mistakes you make. It's
kind of fun. It takes some getting used to but after a while once


you've gone over that pain threshold and you realize this is not
about you, this is a way to work,

Then I'll everything is a lot cooler, conflict goes down. There's no
blame. You just did something, fine. Let's talk it over. Let's see
what happened.

Joe: One of the things I think about from let's say the marketing
perspective you have to externalize PDCA to be successful. You
have to have continuous improvement in your marketing but also
the companies that you work with, you have to be willing to share
that knowledge and pulling the "andon chord" for a customer, as
a company saying I don't know something that I need to know
from you, to develop that culture and that relationship, that
teamwork between them is really what I think is the essence of
marketing today is where it needs to go.
Michael: I think you're absolutely correct. I think you're totally
right. At engineering it's a problem we have because when you
work with an engineering product you know you can't ask the
customer. Because if you have a customer and says "What do
you want with this?" The customer will come up with whatever
comes to the top of their mind. They want bells and whistles and
the chances are that it's actually not true in terms of yes, they do
want them, but they'd never use them.
And to me it's the difference between the brilliance of Google.
The Google site just does one thing. It helps you do it because if
you misspell, it tries to figure out what you meant to do so you
can still get to where you want as opposed to most websites that
do millions of things.
You'll probably one day ask them that "Oh yeah, it would be a
great idea to have my if I could have me horoscope every day
next to the weather forecast next to the stock market." The truth


is that right now, when you actually want to use the website, you
don't care.

So what we have in mind in engineering is that we want our
product to become a standard for the customer, a default for the
customer, that they take our brand, they take our product, not
somebody else's, ours. And to do this, we try to understand what
the cost of ownership of our product is.
Through the use of the cost of ownership we figure out not so
much what the people say they want, but what they really do
value in the use of their product. These things are the things we
try to deliver value on.
So again the whole thing about PDCA is linked to the kaizen in
terms of what do you apply PDCA to, because if you start
applying PDCA to everything, you just go crazy? You just bog
down, it's just too complex. You have to very clear in what you're
seeking to learn with PDCA.
Joe: I think that's a good way to put it and to sum it up because
I've seen where someone has went and asked a customer and
they come back with a list of all the things that they want in this
particular product. You can't build it in the price range that the
customer is going to pay for it.
But if you go out and ask the customer to define his needs
clearly, you can engineer the product to fulfill his needs. And that
you can do at a price, in a...
Michael: It seems very ambitious. What I do is I get my
engineers to go out and ask their customers "Is there one thing
that really, really, really pisses you off about the product? Just
tell me one thing that you have a problem with this product, just
one." And you come back with one and you fix that and then you
start again.


When you're talking about kaizen you have to do it in very small
steps. Now, the truth is that if you do this relentlessly for a
number of years, and we're back to the discussion of finding
doors you didn't expect that were there in the corridor. You're
going to come up with some innovative and adaptive solutions
nobody has ever thought of. But it's a kaizen; tomorrow's product
has to be better than today's by a small step.

So we ask the customer "Listen, if there's one thing that we could
fix for you on this product, what would it be?" They'll tell you.
One thing they can tell you. They'll tell you three things and you
can sum up, again, all the data into one thing. So OK, let's fix this
one. Then you start again.
Joe: We're saying that to be effective and to do it outside and
externalize it, it's best to go ahead and bottle it up into smaller
iterations that you can manage and you can handle, because you
can't do everything at once?
Michael: I think there are really two radical ways of looking at
this. Companies often look at markets and they want to come up
with a killer app. They want to come up with a product that takes
everything in the market. So what they do is they take all of the
new technologies out there, everything a competitor has, they
take it and they put it in their product. And of course, they don't
master any of this very well, so that the product comes out, it's
like, I think we discussed this already.
If you take the body of a Ferrari and the engine of a Porsche and
the interior of a Toyota, whatever, and then you put all those
together as a car, you wouldn't get a very good car. But in fact
this is what many people do in terms of this idea that they want
to get the market.

We think virgin. We take a product and we want it to be standard
of the customer. So we take it to the main customer type and say


"Guys, this is what you're already buying. This is good. If there
was something we could do to make this product better for you,
what would it be?" And you fix that in small iterations. And you
end up in a different place. So yes, I would completely agree with
you on this one.
Joe: I think it's kind of funny what you just said there, because
you gave a perfect description of how most government contracts
and government bids are written. They take the best of like four
or five different companies and they combine them into bids so
that it comes close that nobody can build it. And they wonder
why the price is high.
Michael: There you go. I'm going through it right now. That's it
exactly. And on top of it, they ask you to be accountable for
results.
Joe: It goes back to really defining the needs of the market, the
needs of the customer. And not so much in the terms of how you
apply it, but how they apply it and then making your product or
service meet those needs.
Michael: I think that Jim and Dan, when they wrote "Lean
Thinking," were incredibly insightful. The first thing they said was
"Well, can you define and specify value?"
I think that's very interesting because when people read this,
they say "Ooh wow, yes we should do this. But ooh, wow, it's too
hard. Let's move on to the next one. Oh, flow. Oh yeah, we can
draw a map."
But I think you're absolutely right. You talk about needs, I talk
about preferences. What makes a customer in front of two similar
products prefer one? That's what we need to capture. Usually it's
a feeling. How do we translate these feelings in technical ways?


You know, when you buy a Toyota, your preference is to peace of
mind. Other people buy cars that their preferences would be
sportiness, or look, or size. Toyota sells peace of mind, which
explains why when they had the safety scandal it was such a
huge problem to them. Suddenly, regardless of the fact that there
was nothing wrong with their car, the scandal negatively affects
the peace of mind of Toyota owners. So you take a lot of value
out of it.
Certainly when I drive my Prius one of the things I value is the
silence inside. Again, this is the feeling of silence. It's just not
that the car is not noisy; it's the feeling of silence. So I would go
beyond needs; it's preferences. Preferences are usually about a
feeling that the object gives you.
As engineers, how do we translate this into technical parameters
that we can then reproduce through a manufacturing value
stream or through a knowledge value stream? I think this is
hours of fun. When you get into it, it's very hard, it's very
demanding, but it really takes you into very different directions
for your products .And in the end it's interesting to see that you
make very different technical choices.
Joe: I think the age of marketing has become - you have the
four Ps of promotion, price, product and place. But I think there is
a fifth P now and what I would say is preciseness, precise, is
really what it's come down to. You have to be very precise in
what I call, not just customer value, but the CTQs, the critical to
quality issues of customer value is what you have to address.

It's just not customer value now. You have to go right to them
CTQs and address it. And to do that, you really have to go to
Gemba, which is the customer's place.

Michael: Right, it brings us back to conversation on PDCA and
explicit knowledge. I think you're totally correct. I mean, we're no


longer madmen, being brilliant and having these large statements
or these hunches and feelings are not enough.

We now have to have bring it back to precise statements of what
we have in mind and to confirm these statements with customers
through experiments with products so that the knowledge is yes,
precision, the knowledge is far more precise. Absolutely, I agree
with you.
Joe: I think the reason for that is, as I go back, is that we're in a
demand-driven environment versus just supplying people things.
So that customer does have that choice; he can go buy a product
anywhere.
Michael: Well, we're in a renewal environment. We see this
when we look at studies about well-being and economy. At first,
well-being increases with wealth and then it plateaus. One of the
reasons for that is because if you don't have a washing machine
and you get one, you're massively better off. You feel much
better.
But when you have a washing machine and you replace it, you're
marginal well-being is very limited. I think we've reached the
stage where now there are very few products you get excited
about. The iPad, I mean there are so very few products that are
new. Most of the products we have or services we have are
renewal products. The new one is not even really better than the
old one; it's just a bit different.

So it's hard to get that pizzazz, that interest. So yes, it's very
demand-driven. And in that world, taking away cost of ownership
is a very sane strategy because again, you establish yourself as a
standard because there is a burden to choice.

One thing I would add to demand-driven, I would really think
about increased complexity. We have the means to do everything


in our lives, but the complexity compared to just 100 years ago
has exponentially increased. It's incredible. There is everything
everywhere. The knowledge is everywhere; it's very complex.
There is a psychological burden to this complexity. We have to
make far many more choices than anybody before.
So if as providers, we simplify the choices because it's a
no-brainer then our product just works better, is less
cumbersome to use, is less costly, then customers will naturally
flock to it and be loyal to the brand. Not because of the brand
image, because they trust it.
I think this is where the lean approach is completely adapted to a
world of change, of demand-driven and complexity-driven world
of marketing.

Joe: I see lean as just a natural, just spot on for what's
happening with the demand-driven world. Lean is a natural
reaction to it.
The best way to get a hold of you, you're a contributor to "Lean
Edge," and also you have your own website also, don't you?
Michael: The best way would probably be the Coach column on
lean.org. Every week I answer specific questions about lean. I
think that's probably where we can go into more detail about lean
problems and lean applications, which I find quite challenging and
interesting. People come up with the strangest questions. I try to
answer in a more specific way.
Joe: This podcast is available on the Business901 blog site, and
also the Business901 iTunes store. So thank you very much
Michael, I appreciate it again.
Michael: Joe, I thank you. You had some very insightful
questions. Thank you. It's a great conversation. I think it is really
good, I really enjoyed it.



Joseph T. Dager
Lean Six Sigma Black Belt
Ph: 260-438-0411 Fax: 260-818-2022
Email: jtdager@business901.com
Web/Blog: http://www.business901.com
Twitter: @business901

What others say: In the past 20 years, Joe and I
have collaborated on many difficult issues. Joe's
ability to combine his expertise with "out of the box"
thinking is unsurpassed. He has always delivered
quickly, cost effectively and with ingenuity. A brilliant mind that is always a
pleasure to work with." James R.

Joe Dager is President of Business901, a progressive company providing
direction in areas such as Lean Marketing, Product Marketing, Product
Launches and Re-Launches. As a Lean Six Sigma Black Belt,
Business901 provides and implements marketing, project and performance
planning methodologies in small businesses. The simplicity of a single
flexible model will create clarity for your staff and as a result better
execution. My goal is to allow you spend your time on the need versus the
plan.

An example of how we may work: Business901 could start with a
consulting style utilizing an individual from your organization or a virtual
assistance that is well versed in our principles. We have capabilities to
plug virtually any marketing function into your process immediately. As
proficiencies develop, Business901 moves into a coach’s role supporting the
process as needed. The goal of implementing a system is that the processes
will become a habit and not an event.

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