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Op Ex June-12

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Op Ex June-12

  1. 1. June 2012 | Issue 2 OpEx Review A TBM Consulting Group Publication Enterprise-Wide Operating System Connects Strategy to Execution, Delivers Dramatic Returns Carlisle competes in five major business segments, including interconnect technologies for aerospace“ was tired of hearing I Like most U.S. operating method for all of compete with China.” about lower cost manufacturers, Carlisle our factories.” Since TBM helped it roll Companies Inc. had been manufacturing in But consistently measuring out the Carlisle Operating using various lean and China. I was convinced productivity was just the System (COS) almost four Six Sigma tools to make start. There were, Roberts years ago, the company has that if we did the right operational improvements believed, significant started to realize many of those things, we could com- for decades. But even though opportunities to perform opportunities. Since 2009, it was keeping up with pete with China.” better, much better in fact. COS initiatives have generated competitors and consistently — David Roberts “Frankly, I was tired of more than $70 million in outperforming the SP 500 Chairman, President and CEO hearing about lower-cost cost savings and reduced the index, something was missing. Carlisle Companies Inc. manufacturing in China. company’s manufacturing and That something was clear I was convinced that if we warehousing footprint by to CEO David Roberts did the right things in the when he first started visiting organization, we could (continued on page 4) the plants after joining the company in 2007. Also in this issue: “When I walked into a 2| Technology: Improvement opportunities factory, I would have no abound in IT idea how they measured productivity,” he recalls. 5| Leadership: Carlisle CEO talks about “Every plant measured it strategy deployment and growth differently. It was obvious 6| Lean Progression: Insights into real-time that we needed a consistent triumphs and challenges www.tbmcg.com
  2. 2. Leading Thoughts Technology Matters Invisible Waste and Hidden June 2012 | Issue 2 Opportunities in IT Lean IT: A Process Is a Process By Tonya Vinas Here’s a familiar situation: People are more focused on technology and technical details than on business processes, performance and end What would happen if a team of employees met to hold results. When problems pop up, which a kaizen event and found that suddenly no one could happens frequently, everyone goes into speak? Or that everyone could speak, but no one couldfirefighting mode. There’s little root cause analysis or attempt hear? Or that everyone could speak and hear — but into identify underlying issues that would prevent recurrence. different languages?Management priorities shift every six months. Obviously, no problems would be solved during that kaizen.I could keep going, but what I’m describing is a typicalcorporate IT department. Fortunately, the same operational Lean process improvement can’t happen without openexcellence practices that can transform a production communication and immediate action. Increasingly, bothline or product development process can transform an IT require IT tools. Many in process improvement focus onlyorganization and dramatically improve the service it provides on the ills of organizational-wide IT systems, which oftento company employees and partners. are the cement of silo walls and the breeding grounds for misapplied data. But we can’t ignore the fact that theseFor example, single-minute exchange of dies (or SMED) days, all types of business communication and transactionswas one of the first tools that American companies adapted happen via real-time electronic connection, and thesefrom Japanese manufacturers. It boils down to completing all connections are as much a part of process infrastructuresetup work that can be done externally when equipment is as warehouses and machinery. Many problems/solutionsstill running, and accelerating all setup activities that have to reside in IT systems, and as use of these systems expands,be performed when the equipment is shut down. A machine so does their role in lean continuous improvement.changeover team becomes more like a racing pit crew.TBM has helped companies implement such quick changeover Consider what happened at Milbank Manufacturing Co.techniques in a variety of industries, some far removed from the when the IT department created value stream maps for allfactory floor. In the IT realm, the techniques can be applied to of the IT systems used in various departments.system updates and routine maintenance, reducing downtime “The one for the sales department was beyond a spaghettiand making it possible to perform such updates more frequently. map,” said Brad Skinner, Vice President of Sales Applying operational excellence practices to IT processes Marketing. “It was obvious that we weren’t set up to servethus improves uptime. But there’s more to it than that. When the customer.”IT becomes more flexible, responsive and cost effective, usersgain access to new technology sooner, which means that they Skinner decided to make his department the focus of leancan do their jobs more efficiently and serve your customers process improvement and so began a series of kaizen events.better. That, in my experience, is always a good thing. During one of the events the team discovered a crucial disconnect that was causing a tremendous amount of wasteKeep up the good work, and service issues. Milbank’s private-label partners used IT  systems that spoke a different language than Milbank’s; so as soon as private label orders came in, they lost visibility.Bill Remy No one could track them. Well, one person tracked them. ItExecutive Vice President, was the only job that person did — full time.International Operations The solution was simple. An IT specialist wrote a patch of coding to connect the two systems. Now, all of the private- label orders have as much visibility and automation as Send OpEx newsletter feedback others, and the person who used to track them performs and story ideas to opex@tbmcg.com. work that creates much more value for customers. 2 | OpEx Review | June 2012 | www.tbmcg.com
  3. 3. Technology Matters, continued“Private-label orders were stumbling,and it was our fault,” Skinner said. CLOGGED SERVERS“Now they are taking off.”In addition to process disconnections, EMAIL WASTEIT systems house mountains ofwaste: redundancies, excess inventory(irrelevant and outdated data),overflowing email inboxes, cloggedservers, etc. IT systems and processleaders, then, need to be part of DATAprocess improvement not just becausethey enable work, but also because EXCESSIT processes are as broken as all otherprocesses. Convincing IT experts of OVERLOAD INVENTORYthis can be difficult, but there’s plentyof precedence in what has becomeknown as “office kaizen.” uses standard lean tools to root out You might think that a clear loading waste in administrative work. dock means everyone is doing a good job managing inventory and Armstrong World Industries These include: that an improving OEE means uses standard lean tools • alue stream mapping for V assets are running efficiently, but waste identification; what about your IT systems? to root out waste in • 3P/2P (product and process Just because you can’t see those administrative work. processes doesn’t mean they aren’t creation to eliminate waste) and, loaded with waste and problemsRobert Abel, Director of Global • MDI (visual management, — or, if included in lean processProcess Improvement for Armstrong daily accountability, workplace improvement — efficiency andWorld Industries, said his company observation, standard work and 5S). opportunity. 3P/2P in a Transactional Work Environment LeanSigma® Global 3P – Product Production 2P – Production Lean Tools for Continuous Summit 2012 Preparation Preparation Improvement This column is based on Create the presentations made at TBM’s Process that Transactional 2011 LeanSigma Global Create Your Work “Product” Optimizes Summit. Sign up for this year’s Making the Environment summit September 19–20 in “Product” Atlanta today to hear more lean process improvement Optimize to Vigilance in Eliminate Waste Waste Elimination success stories. www.LeanSigmaGlobalSummit.comThe principles of 3P/2P are the same in both manufacturing and transactional workplaces:If we don’t design the product and the process to create the product correctly, we introducewaste and cost into the product in our ongoing work. How a customer experiences an Tonya Vinas is a freelance writer andorder for a spare part, for example, is as much a product as the part itself. The customer editor specializing in business andcan experience poor quality in the form of waiting, excessive processes (too many steps), leadership issues.part mix-ups, shipment mishaps, etc. Source: Robert Abel, Director of Global Process Improvement, Armstrong World Industries OpEx Review | June 2012 | www.tbmcg.com | 3
  4. 4. From Strategy to Execution to Dramatic Results, continued from page 1 Working Capital as a Percent of Net Sales How each unit will achieve its objectives is determined during the “strategic 32% deployment” process, which establishes annual improvement priorities (AIPs) 30% and key performance indicators (KPIs) at every level of the business. 28% Monthly management team reviews of performance metrics, linked to their 26% objectives, maintain focus and prompt fast corrective action when any area falls 24% behind. The approach forces leaders — and the organization as a whole — to 22% focus on a small number of initiatives that will make the biggest impact on 20% growth and profitability. Q1 ‘09 Q2 ‘09 Q3 ‘09 Q4 ‘09 Q1 ‘10 Q2 ‘10 Q3 ‘10 Q4 ‘10 Q1 ‘11 Q2 ‘11 Q3 ‘11 Q4 ‘11 Systems and procedures to improve demand-forecasting capabilities, procedures that reduce payment cycle times, and implementation of best payment practices, Carlisle regularly assesses how have improved Carlisle’s working capital and return on invested capital metrics. each site is doing in terms of management behavior through a process known as managing for nearly two million square feet. Like most Begin With the End in Mind daily improvement (MDI). U.S. companies, Carlisle saw revenues An overview of the Carlisle Operating fall in 2009 during the recession. But System doesn’t start with the elements unlike most others, the company’s net of the system itself. It starts with “In the beginning, each of our businesses income increased that year, in part Carlisle’s strategic vision. As stated in the had six, seven or eight AIPs. Now each because of its COS initiatives. For 2011, company’s annual report, Carlisle’s road business has three or four,” says Mike Carlisle posted record sales of $3.2 map to 2014 has five key targets: global Voigt, Vice President of COS. “You have billion, up 28 percent over 2010. sales of $5 billion, an operating margin to be able to resource them right. You’re “Because of the productivity improvements increase to 15 percent, an increase in better off working on the business and that we’ve implemented, we’ve even sales from outside the United States to executing three AIPs really well.” brought work out of our China plants and 30 percent, a reduction in working Today, well over half of Carlisle’s back into the United States. We’re cost capital to 15 percent of sales, and a total workforce has received COS training, competitive with the Chinese, particularly return on invested capital of 15 percent. mostly in the context of kaizen events. with the cost of wages in China going up,” Each business unit has its own roadmap To date the company has conducted Roberts reports. with specific targets that, when achieved, 1,500 weeklong and point kaizen will roll up to the corporate objectives. improvement events. Such results are only the beginning. Those targets are fixed and don’t change Rolling out COS across five major from year to year. (See QA with CEO Carlisle regularly assesses how each business units — which all operate fairly David Roberts, on page 5.) site is doing in terms of management independently — and 75 manufacturing locations worldwide has been no small feat. What ties everything together at Carlisle, as this case study reviews, is Carlisle Companies Inc. strong leadership engagement; a clear Headquartered in Charlotte, N.C., Carlisle Companies Inc. alignment between improvement is a global manufacturer with five major operating businesses: construction materials, priorities and five-year business goals; transportation products, brake and friction products, interconnect technologies (wire, and a uniform, clearly communicated cable, connectors and related assemblies) and foodservice products. Founded in 1917, operating system that continues to today the company has 75 facilities worldwide. Carlisle reported annual sales of $3.2 expand as Carlisle’s needs evolve. billion in 2011. In 2011, the company won TBM’s Perfect Engine Corporate Award.4 | OpEx Review | June 2012 | www.tbmcg.com
  5. 5. From Strategy to Execution to Dramatic Results, continuedbehavior through a process known asmanaging for daily improvement (MDI).The MDI program includes SQDC Executive QAboards (for safety, quality, deliveryand cost) that display performance in Why Operational Excellence?each work area and for the whole site An interview with David Roberts,and sustainment of 5S. The metrics Chairman, President and Chief Executivedisplayed on the boards align with the Officer, Carlisle Companies Inc.overall business and corporate goals. (www.carlisle.com)During daily facility walkthroughs,plant managers review performance in How do you gauge the impact fromeach department and work cell, notingareas that require action. The system has the Carlisle Operating System?instilled accountability and ownership If you look at our true hard savings over thefor daily decisions and forced cross- past three years, it’s been a little bit northfunctional cooperation. of $20 million each year. And frankly, we have $20 million in savings forecasted“Now I can walk into any factory or for this year. It would have been difficultdistribution center and those boards are going for us during the downturn thatthere,” Roberts says. “The measurements started in 2008 until now without havingare different. They might be measuring implemented lean. What we were able to save over that period wasa different cost metric in a tire plant the result of the COS efforts of all of our people. Our profitability infrom what they’re measuring in a 2009, in the midst of the downturn, was higher than in 2008 beforefoodservice product plant. But at least the downturn started, on 23 percent less revenue.I can understand what they’re trying tomeasure, see that they’re measuring it How do you use strategy deployment to prioritizeevery day, see that they’re going on their improvement activities?walks every day, and see if they havecorrective actions in place for any issues Every month we have a strategy deployment meeting with my staff.that have come up.” It’s usually on the telephone. We go through the bowler charts and KPIs and determine how we’re doing. We have five strategicSee the full case study at tbmcg.com elements: revenue growth, margin improvement, globalization, returnfor more information about the on invested capital improvement, and working capital improvement.Carlisle Operating System. That’s what we look at every month, if they’re red or green. If it’s green, we don’t talk about it; if it’s red, we talk about what we need to do to turn the objective to green. What are the primary challenges and goals that you’re working on this year? We work toward the same five strategic goals every year. They never change. They’re the same, and everybody’s compensation program is tied to how we do against those five goals. Consistency is important. You can’t keep changing the goals because if you do, your employees would have no idea what our overall vision is for the company. Our goals remain consistent, and we talk about them every time we get together. David Roberts will be a keynote speaker at the LeanSigma® Global Summit in September 2012. Visit: www.LeanSigmaGlobalSummit.com to view the agenda. OpEx Review | June 2012 | www.tbmcg.com | 5
  6. 6. Management Update: Lean Progress AssessmentCI Program Satisfaction High in the Early Years and Overthe Long-Term; Many Firms Struggle Around Year FiveBy Angela ScennaEarly analysis of benchmarking data from Lean Progress ObservationsTBM’s Lean Progress Assessment reveals Based on participant responses to date, here are some of oursome fascinating insights about the progress initial observations:companies make and the challenges they face. • he Shiny Wears Off. In comparison to the average TIn a 2011 IndustryWeek survey of business leaders, more score, respondents four to five years into their lean journeythan half of respondents indicated that their continuous rate their progress highest (see Figure 1). Companiesimprovement (CI) initiatives are failing to meet operational in years six through nine struggle to sustain gains andand market objectives. Such experience supports TBM’s view therefore score noticeably lower (see Figure 2). This suggeststhat the mere initiation of a CI program, the creation of a CI that many companies’ CI efforts hit a plateau aroundoffice and a stable of Lean SixSigma tools will not guarantee the five-year mark. Potential reasons for the plateau maysuccess. Instead, a wide range of forces and factors must be in be changes in leadership, changes in strategic direction,place to assure that continuous improvement strategies are, in lack of sustainment or inability to extend improvementsfact, aligned with core business objectives and contributing throughout the enterprise.meaningfully to revenue growth and profits. • lder and Wiser. In contrast, companies 10 or more OTo help our clients and similar organizations assess the extent years into their continuous improvement programs ratedto which their CI efforts have progressed, earlier this year we their progress significantly higher overall and twice as highdeveloped the Lean Progress Assessment. Companies taking in the quality of their lean value chain, leadership and toolsthe assessment answer a variety of questions that yield progress used (see Figure 1). These organizations have internalizedscores for leadership, lean value chain, growth and tools used. and institutionalized lean principles from the top downComponent scores and the total score place each participating and enjoy segment-leading growth and profit performance.organization into one of three discrete groupings — tool-driven,system–driven and principle–driven — which allows them tocompare and contrast their efforts with those of their peers.Figure 1 – Comparison to Overall Average Figure 2 – Short-Term Vs. Long-Term Performance LVC Growth Final Score Scoring Tools Score Leadership 30% Score Score Year 1 -46% -48% -51% -59% -28% 20% Year 2 -9% -15% -18% -1% -10% Year 3 -4% -18% -4% -1% 1% 10% Year 4 16% 21% 19% 9% 19% Year 5 8% 17% 8% 5% 6% 0% Year 6–7 -16% -31% -24% -12% -7% Year 8–9 -7% -21% 0% -7% -5% -10% Year 10–14 12% 19% 13% 15% 2% Year 15–21+ 22% 29% 28% 21% 14% -20% Y1 vs. Y15+ -88% -107% -110% -102% -49% -30% Y1 vs. Y10–14 -65% -82% -73% -85% -30% Y1 vs. Y5 -59% -77% -65% -68% -37% -40% Y2 vs. Y5 -19% -38% -28% -7% -17% -50% Year 1 Year 2 Year 3 Year 4 Year 5 Years Years Years Years 6–7 8–9 10–14 15–21+ Respondents in Years 4 and 5 of their lean journey rate them- Companies that are at least a decade into their CI programs selves the highest when comparing their progress with the rate their progress significantly higher than those with average overall score. shorter tenures.  6 | OpEx Review | June 2012 | www.tbmcg.com
  7. 7. Management Update: Lean Progress Assessment, continued• tuck in the Middle. Interestingly, smaller companies S Key Take-aways ($100 million) and very large companies ($5 billion) rate their progress higher than organizations with revenues 1) xecutive leadership engagement is the most E between $3.1 and $5 billion (see Figure 3). Companies critical determining factor in the success of in this size range may have grown through acquisition, continuous improvement initiatives. experiencing rapid expansion and growth, and they are likely focused on how to become even bigger. Oftentimes, 2) Broad, senior management-led participation these organizations are at a critical point where they in strategy deployment is needed in order to need a comprehensive business system and a disciplined achieve breakthrough objectives. management process for profitable growth. One can argue that larger ($5 billion) organizations have learned their 3) ompanies need to step back and align CI C lean lessons well, sustaining gains, leveraging competitive improvement initiatives with their strategic advantages and breaking through revenue plateaus. plans. Managers working “in” the business must also be working “on” it.• ertically Challenged. Non-manufacturing V companies rate themselves marginally higher than The potential for loss of momentum is high with so many manufacturers (see Figure 4). And healthcare companies manufacturing companies nearing or entering the six- to score substantially better than their peers in many other nine-year maturity range for their CI programs. Now is the vertical markets. In leadership alone, healthcare time for these companies—possibly yours—to prevent that companies rate themselves almost 29 percent higher. from happening by more tightly aligning your continuous What’s interesting here is that CI is relatively new to efforts with your strategic plans and business results. In the these types of organizations; they may not have hit the near future we will be asking our pool of participants to map six-to-nine-year sustainability challenge so they are largely their CI progress to their actual business results. Look for this positive about the benefits of their CI programs. data in an upcoming edition of OpEx.Figure 3 – Small Companies Vs. Large Companies Figure 4 – Scores by Segment and Vertical Market LVC Growth Tools Leadership 30% Final Score Scoring Score Score Score 20% Manufacturing 43.6 7.7 8.4 15.4 12.0 Non-Manufacturing 47.2 8.3 8.7 16.8 13.4 10% Ag., Forestry, Fishing 37.0 4.5 6.5 15.5 10.5 0% Construction 54.0 10.5 10.8 18.8 14.0 -10% Educational Services 66.0 10.0 8.0 25.0 23.0 Healthcare 51.6 8.6 9.4 17.6 16.0 -20% Information 34.0 4.0 5.0 17.0 8.0 -30% Mgmt. of Companies 45.0 10.0 8.0 17.0 10.0 Mining 34.0 7.0 5.3 11.3 10.3 -40% Less than $101 to $500 to $1B $3.1B More than Other services 30.7 5.7 5.7 10.3 9.0 $100M $499M $999M to $3B to $5B $5B Public Administration 46.0 7.5 8.0 16.5 14.0 Real Estate 46.0 7.5 8.0 16.5 14.0 Final Score Tools Score Growth Score Utilities 44.0 9.0 6.0 14.0 15.0 Leadership Score LVC Scoring Wholesale trade 56.0 9.0 11.5 19.5 16.0 Companies at each end of the size spectrum rate themselves Non-manufacturing companies rate themselves higher than higher than those companies in the middle. manufacturers, perhaps because big efficiency gains early on are common. OpEx Review | June 2012 | www.tbmcg.com | 7
  8. 8. Updates and EventsAlignment: Three In-depth Articles AvailableBelow are summaries. Full versions available at www.tbmcg.com Resource Center. THE LEAN PROGRESSION MODEL Maximize the Returns from Your Operational MANAGEMENT BRIEFING The Lean Progression Model: Maximize the Returns From Your Operational Improvement Efforts Over the Long Term Improvement Efforts Over the Long Term By Ken Koenemann Most corporate-led, enterprise-wide business improvement initiatives Executive Summary By Ken Koenemann will fail. Observers put the failure rate somewhere between 50 and 95 percent. Recalling past grand initiatives and subsequent failures, it’s no wonder that employees are always skeptical of any new acronym-riddled This management briefing improvement program promising to help them do their jobs better. by TBM Consulting Group describes how recognizing the maturity of your organization’s Understanding where your company is operational improvement in the lean progression model—the tool- efforts and culture—whether you’re at the tool-driven, driven, system-driven or principle-driven system-driven or principle- stage—is the first step toward avoiding Recognizing the maturity of your organization’s operational improvement efforts and culture—whether driven stage—can ensure that the improvement plateau and keeping your process improvement your organization moving forward. efforts continue to deliver significant results year after year. The briefing describes For those companies that succeed though—for companies that make the top priorities at each stage the commitment, change expectations and change how they work—the returns can be impressive. For example, companies that have adopted of the lean progression model lean manufacturing and Six Sigma practices (which TBM combines as you’re at the tool-driven, system-driven or principle-driven stage—can ensure that your process that need to be targeted to LeanSigma) frequently report double-digit productivity increases year after move forward. year. They achieve cost savings that add up to millions of dollars annually. Their revenue growth exceeds the industry average by a healthy margin, and net income increases even faster. (See boxes, “How Operational To get from the tool-driven Improvements Can Add Up,” and “Long-Term Performance of Principle- to the system-driven stage, Driven Lean Businesses” on pages 7 and 8 for examples.) Many case for example, requires: a studies over the past 20 years or so have documented such performance leadership-driven method gains again and again in industry after industry.i improvement efforts continue to deliver significant results year after year. The briefing describes the top for prioritizing improvement projects, process improvement Why then do so many business improvement programs flounder and fail work beyond the factory— to achieve anything close to their full potential? This TBM management briefing describes how understanding where your company’s business such as engineering and new units and facilities fall within the lean progression model— the tool-driven, product development—and system-driven or principle-driven stage—can help maintain momentum a more thorough effort to and ensure that you realize the maximum financial returns from your develop employee skills and performance improvement efforts. knowledge. 800.438.5535 | www.tbmcg.com priorities at each stage of the lean progression model that need to be targeted to move forward. CONTINUOUS IMPROVEMENT BUSINESS ALIGNMENT MANAGEMENT BRIEFING Continuous Improvement and Business Alignment: Link Operational Improvements to Financial Results Link Operational Improvements to Financial Results By Ken Koenemann By Ken Koenenmann Make the connection between continuous improvement Executive Summary initiatives and financial returns by understanding the links to shareholder value and capturing the benefits of Depending upon who you performance gains. talk to, somewhere between 5 and 50 percent of business Operational improvement initiatives often lead to dramatic improvements in improvement initiatives actually throughput, inventory levels, quality, productivity and overall efficiency. Such efforts can make the workplace look better and make employees feel like deliver the targeted benefits. they’re working more efficiently. But despite double-digit gains in productivity One of the characteristics of and other operational metrics, many companies have a difficult time realizing companies that are successful the benefits from their work on their financial statements. Depending upon whom you talk to, somewhere between 5 and 50 percent of business improvement is a tight alignment between improvement activities and Today, the top priorities of manufacturing executives are revenue growth, business objectives, including improving cash flow and containing costs, according to a recent study of business improvement activities by IndustryWeek magazine. If such financial ones. This TBM results aren’t achieved and documented, it will only be a matter of time management briefing explores before an operational excellence program loses both momentum and the connections between management support. business improvement initiatives actually deliver the targeted benefits. One of the characteristics of companies that are successful is a projects and financial returns, This TBM Consulting Group management briefing explains how and some of the steps that key performance indicators (KPIs) should align current and planned improvement projects with business priorities and directly contribute management must take to financial benefits. capture the financial gains. Translating Lean and Six Sigma Gains Into Shareholder Value At a fundamental level operational improvement programs build shareholder value by increasing profit and reducing the assets required tight alignment between improvement activities and business objectives, including financial ones. This TBM to generate it. Shareholder value can be expressed as a simple equation of profit over assets, or return on assets (ROA). Profits consist of revenues minus costs; and assets consist of net working capital plus fixed assets (see Fig. 1). This may be obvious to most business executives, but it’s important for the management team to clearly define and review these factors to make sure improvement activities are aligned with financial performance goals. Building deeper financial literacy within the organization is one of the management briefing explores the connections between business improvement projects and financial returns, primary priorities—often overlooked—that companies must address when committing to a long-term business improvement program. Many supervisors and department heads, and even business managers, tend to focus on hitting and protecting their own budgets. and some of the steps that management must take to capture the financial gains. 800.438.5535 | www.tbmcg.com GET MORE OUT OF YOUR BUSINESS IMPROVEMENT INITIATIVES MANAGEMENT BRIEFING Align Projects With Strategic Objectives: Achieve Annual and Longer-term Objectives by Maintaining Strong Connections Align Projects with Strategic Objectives By Anand Sharma, Bill Remy and Ken Koenemann Between LeanSigma Improvement Projects and Business Strategies Achieve annual and longer-term objectives by maintaining Executive Summary strong connections between LeanSigma® improvement projects and business strategies. More and more companies are Leadership, at its heart, is largely about recognizing the need for using policy deployment — a change, determining what kind of change is necessary, and pushing the management tactic that’s also organization in that direction. Strategic planning processes determine the known as strategy deployment, direction. But as grueling as such planning sessions can be, that’s the easy hoshin kanri or hoshin part. Execution requires a day-to-day and week-to-week focus that is difficult planning—to keep change for any organization to maintain, which only becomes more difficult as business size and complexity increase. By Anand Sharma, Bill Remy and Ken Koenemann and process improvement activities aligned with strategic objectives. Achieving business Effective execution boils down to three primary targets depends in large part management roles: on how well policy deployment itself is executed across multiple 1. Make sure the organization is working on projects and process businesses, sites and teams. improvements that will have the greatest impact realizing the As this management briefing strategic objectives. describes, companies that 2. Ensure that changes are implemented and institutionalized, with maintain a strong linkage minimal backsliding. More and more companies are using policy deployment—a management tactic that’s also known as between projects and objectives are more likely to 3. Understand the leverage points and effectively convert process make business changes that changes into financial results, for example, by closing facilities to contribute to both cost savings reduce fixed costs, or using the newfound capacity to boost sales. and revenue growth year This management briefing describes how to align business improvement after year. The extent of that projects with strategic business objectives by using policy deployment, contribution depends on how a strategy execution tactic also known as strategy deployment, hoshin strategy deployment, hoshin kanri or hoshin planning—to keep change and process improvement well projects are executed kanri or hoshin planning. at all levels. Projects are the best reflection of management’s true intent Cathleen Benko and F. Warren McFarlan argue in their book, Connecting the Dots1, that most companies fail to capture the full value of their projects, and do a poor job of connecting projects activities aligned with strategic objectives. Achieving business targets depends in large part on how well to the organization’s top priorities. 800.438.5535 | www.tbmcg.com policy deployment itself is executed across multiple businesses, sites and teams. As this management briefing describes, companies that maintain a strong linkage between projects and objectives are more likely to make business changes that contribute to both cost savings and revenue growth year after year. The extent of that contribution depends on how well projects are executed at all levels. Publisher: Anand Sharma: asharma@tbmcg.com Executive Editor: Angela Scenna: ascenna@tbmcg.com Contributors: David Drickhamer, Bill Remy, Angela Scenna, Tonya Vinas Art Direction and Design: Crossbow Group, crossbowgroup.com Printing: Carter Printing Graphics, Inc., carterprintingnc.com OpEx Review is a publication of TBM, the TBM logo, and LeanSigma® are registered TBM Consulting Group trademarks of TBM Consulting Group, Inc. 4400 Ben Franklin Boulevard our Durham, North Carolina 27704 Find us on blog 800.438.5535 www.tbmcg.com8 | OpEx Review | June 2012 | www.tbmcg.com