"You're right," I try to calm the volcano that I have awak- ened. "But Bob, if we want to do the same in the entire division we must pinpoint what exactly the difference is between what we have done and what everyone else has tried to do."
"We haven't launched so many improvement projects," he says.
"That is not accurate," Stacey responds. "We have taken many initiatives: in shop floor procedures, in measurements, in quality, in local processes, not to mention the changes that we have made in the way we release material to production." Raising her hand to stop Bob from interrupting, she concludes: "True, we didn't call them improvement projects, but I don't believe the crucial difference is that we didn't bother to title them."
"So why do you think we have succeeded where so many have failed?" I ask her.
"Simple," Bob jumps in. "They talked, we did."
"Who is playing with words now," I shut him off.
"I think that the key," Stacey says in a thoughtful tone, "is in the different way we interpreted the word 'improvement'."
"What do you mean?" I ask her.
"She is absolutely right!" Lou beams. "It's all a matter of measurements."
"For an accountant," Bob speaks to the room, "Everything is a matter of measurements."
Lou stands up and starts to pace the room. I rarely see him so excited.
We wait.
At last he turns to the board and writes:
Then he turns back to us and says, "Everywhere, improve- ment was interpreted as almost synonymous to cost savings. Peo-
303
pie are concentrating on reducing operating expenses as if it's the most important measurement."
"Not even that," Bob interrupts. "We were busy reducing costs that didn't have any impact on reducing operating ex- penses."
"Correct," Lou continues. "But the important thing is that we, in our plant, have switched to regard throughput as the most important measurement. Improvement for us is not so much to reduce costs but to increase throughput."
"You are right," Stacey agrees. "The entire bottleneck con- cept is not geared to decrease operating expense, it's focused on increasing throughput."
"What you are telling us," I say slowly, trying to digest it, "is that we have switched the scale of importance."
"That's precisely what it is," Lou says. "In the past, cost was the most important, throughput was second, and inventory was a remote third." Smiling at me he adds, "To the extent that we regarded it as assets. Our new scale is different. Throughput is most important, then inventory-due to its impact on throughput and only then, at the tail, comes operating expenses. And our numbers certainly confirm it," Lou provides the evi- dence. "Throughput and inventory had changed by several tens of percent while operating expenses went down by less than two percent."
"This is a very important lesson," I say. "What you claim is that we have moved from the 'cost world' into the 'throughput world'."
After a minute of silence I continue, "You know what, it re- ally highlights another problem. Changing the measurements' scale of importance, moving from one world into another, is with- out a doubt a culture change. Let's face it, that is exactly what we had to go through, a culture change. But how are we going to take the division through such a change?"
I go to pour myself another cup of coffee. Bob joins me. "You know, Alex, something is still missing. I have the feeling that the entire approach we took was different."
"In what way?" I ask.
"I don't know. But one thing I can tell you, we haven't de- clared any improvement project, they grow from the need. Some- how it was always obvious what the next step should be."
"I guess so."
304
We spend good time. We bring up the actions we took and verify that each one actually has been guided by our new scale. Bob is very quiet until he jumps to his feet.
"I nailed the bastard!" he shouts, "I have it!"
He goes to the board, grabs a marker and put a heavy circle around the word 'improvement.' "Process of on-going improve- ment," he booms. "Lou and his fixation on measurements forced us to concentrate on the last word. Don't you realize that the real sneaky SOB is the first one?" and he draws several circles around the word 'process.'
"If Lou has a fixation about measurements," I say somewhat irritated, "then you certainly have a fixation about processes. Let's hope your fixation will turn up to be as useful as his."
"Sure thing, boss. I knew that the way we handled it was different. That it wasn't just a matter of scales."
He returned to his seat still beaming.
"Do you care to elaborate?" Stacey inquires in a soft voice.
"You haven't got it?" Bob is surprised.
"Neither did we." We all looked perplexed.
He looks around and when he realizes that we are serious he asks, "What is a process? We all know. It's a sequence of steps to be followed. Correct?"
"Yes..."
"So, will anybody tell me what the process is that we should follow? What is the process mentioned in our 'process of on-go- ing improvement'? Do you think that launching several improve- ment projects is a process? We haven't done that, we have fol- lowed a process. That's what we have done."
"He's right," says Ralph in his quiet voice.
I stand up and shake Bob's hand. Everybody is smiling at him.
Then Lou asks, "What process have we followed?"
Bob doesn't hurry to answer. At last he says, "I don't know, but we definitely followed a process."
To save embarrassment I hurriedly say, "Let's find it. If we followed it, it shouldn't be too difficult to find. Let's think, what is the first thing we did?"
Before anybody has a chance to answer Ralph says, "You know, these two things are connected."
"What things?"
305
"In the 'cost world' as Alex called it, we are concerned pri- marily with cost. Cost is drained everywhere, everything cost us money. We had viewed our complex organization as if it were composed out of many links and each link is important to con- trol."
"Will you please get to the point?" Bob asks impatiently.
"Let him talk," Stacey is no less impatient.
Ralph ignores them both and calmly continues, "It's like measuring a chain according to its weight. Every link is impor- tant. Of course, if the links are very different from each other then we use the principle of the twenty-eighty rule. Twenty per- cent of the variables are responsible for eighty percent of the result. The mere fact that we all know the Pareto principle shows us to what extent Lou is right, the extent to which we all were in the cost world."
Stacey puts her hand on Bob's to prevent him from interfer- ing. ^
"We recognize that the scale has to be changed," Ralph con- tinues. "We choose throughput as the most important measure- ment. Where do we achieve throughput? At each link? No. Only at the end of all operations. You see, Bob, deciding that throughput is number one is like changing from considering weight to considering strength."