A project is proposed. Most projects have an return-on-investment (ROI) associated with them to help sell the idea. The ROI lists out the benefits of completing the project. The project gets approved. People work on it until it is completed…hopefully. Congratulations are given on good work. People move on to the next project. The End.
Notice anything missing? Arguably the most important part?
No one goes back to verify if the project produced the benefits that were stated in the ROI.
How does the organization know if the investment was a good one? A bad one? Or a great one?
Checking the benefits isn’t the “sexy” part of the project, but it is the rewarding part of the project.
Why don’t people go back and check the benefits? Is it because it is a month to a year after the project is complete before they are seen and people forget? Is it because people put inflated benefits on the ROI statement and they don’t want to get called out on it? Is it because putting a value to some of the benefits is extremely difficult?
Whatever the reason, it can’t stop you from checking the actual value realized from a project. What if you didn’t reach the realized value stated? Can something be done to increase the realized value. What if you exceeded it? Don’t you want to celebrate it? Use the learnings to sustain the extra value realized. The learning from verifying the realized value is immense.
I have had a hard time keeping up with the blog this year for a very good reason. Regular readers may know that my wife has had an online business selling handmade soaps and bath and body products that she makes. Over the last 4 years revenue has continued to grow at an incredible rate. So much so, that we out grew out house a year ago and have been searching for a space outside the house to make the products.
Everything finally fell into place. On Saturday, July 5th, 2014; Crimson Hill Soapworks and Gift Market retail soap opened for business.
It took almost a year and a half to find a place, negotiate the build out and rent, get the work done to the space and then set up the retail space and the kitchen. The opening went better than we could have hoped for and now we are fully open for business.
Are we using lean in the business? You bet. We aren’t perfect and we have a long way to go, but we have always applied the biggest tenant of lean from the start. Focus on value for the customer. We believe the customer sets the market price for the product and our profit is that price minus our cost without suffering quality.
We know our target market and that is who we aim to please. Our products may not be for everyone but for our target market we want to drive a high value proposition.
Here’s to new adventures!
After reading this piece and this response, I have spent a lot of time thinking about the Lean definition of value. (For those who didn’t click the links, the first is an article from a NPR intern who claims to only have paid for something like 1% of her music library and the second is a response from someone who teaches about the music business discussing the damage of those choices.)
As a quick reminder, the “Lean” definition says that in order for a step to be value added the thing has to be done right the first time, physically change the thing, and be something the customer is willing to pay for. It’s that last piece that has me hung up lately. I have zero insight on the recording or distribution of music to understand how much the recording process qualifies for the first two. I’m also not specifically speaking to music, although it makes a great basis because almost everybody has an opinion on music.
My line of thought overall goes something like this: Doesn’t the consumer bear some responsibility for paying a fair amount for something that they value? How much responsibility does a consumer have? And who defines what a “fair” amount is?
Almost anybody who has ever been involved in business can point to something they were involved in that was done well, but died because nobody was willing to actually pay enough money or buy enough of them to keep it alive. In the case of music, does this mean that not paying for (or sharing or stealing, however you want to phrase it) has become so institutionalized in culture that we risk its survival? Or does this mean that those who make the music are being treated like temp labor with the knowledge that if they won’t make it for a low price, someone else will? Maybe it’s just an offshoot of the rest of a capitalistic society where only the best of the best do well enough to make a career out of it and the rest move on.
In the US where the popular notion is that we care about things like locally grown food, fair trade coffee, and what happens to the people that make our iPhones at Foxconn, I don’t think there is a lot of real thought about what is truly value added and how our behavior as consumers fits in. I’m not saying that I do (or should) care whether or not everyone who built my truck, for example, is a self-actualized human being who is prospering in an encouraging and happy auto assembly plant. Even I’m not as big of a dreamer as to think that could or should be a likely scenario. Heck, I’m barely convinced that most of the people that I give my money to for their music even really enjoy what they are doing and are fulfilled by it. I do believe that we, as “Lean” thinkers, can use our ability to focus on the definition of value a little better as both producers and consumers. Maybe these are the kinds of discussions we can have with family and friends to help shape the way they look at their consumption. I think our observations have to go beyond just pointing out waste and go towards quality feedback we could provide to the people we give our money to, giving them a better understanding of how to make their business work.
Waste needs to be identified and eliminated or reduced, but that is hard to do if values is not defined. Without a definition of value, the separation of wasteful items and non-wasteful items becomes harder.
Here is the definition of value that I use:
- It must be something the customer finds valuable and is willing to pay for
- It must change the form, fit, or function of the product/service
- It must be done right the first time
All three of the criteria must be met. No Exceptions!
I am very strict in my definition of value When I look to improve a process I want to first work on eliminating or reducing the non-value added steps/actions. Not squeeze the juice out of the value added items. The non-value added actions/steps is the place where the headaches and pain points for the employee occur. It isn’t changing the product/service that cause headaches as much as it is looking for the things needed to be able to do the change to the product/service.
Defining what is value is the first step in being able to eliminate waste. Feel free to use the one above. If not, be sure to have one of your own. You don’t want to eliminate something that a customer may find valuable.
Improvements are improvements whether they are days, hours, minutes, or seconds. Of course everyone wants to save days or hours when they make an improvement, but the improvements that save seconds are the most valuable.
I know. I get a crazy look every time I say that because it is the smallest measurement of time. How can that be a big savings?
First of all, if any savings is good then we should applaud even a 1 second savings that someone comes up with. Organizations and people who do this are the ones that I see become more and more successful with their lean implementation.
Too many times I have discussion where people are looking for the big hit improvement. How do I take weeks out of my lead time? How do I get hours out of my changeover process? The list goes on.
It is good to look for big improvements in the process, but once it is found it becomes harder and harder to find the next big improvement. This behavior reinforces the thought that only big improvements are what we are looking for and beneficial. When this is the mentality, the improvement process stalls. No one is valuing the seconds that could be saved just by moving something 5 feet closer to the point of use.
When seconds being saved is valued the mentality of every improvement no matter how big or small is important is reinforced. We should recognize a 3 second improvement the same way we recognize a 3 day improvement. Eventually, seconds are the difference that will take the process from good to world class.
Seconds being valued makes it easier for people to find improvements within the world they can control. The easier it is to find an improvement, the more improvements will be made. This will lead to better engagement across the organization.
The next time someone makes an improvement that saves them or anyone just a few seconds stop and recognize them for doing so. Value the seconds that can be saved by everyone.
The lean philosophy is one that wants to see everyone get valuable and honest feedback in order to improve. Giving honest feedback to a person shows respect even if the person may not want to hear it.
I was thinking about the things an executive coach really does–or should be doing. One of the most important is this: Seeing people for who they are, realizing what they can be, and helping to take them there.
I agree with Steve on this point. Putting it into practice can be a very hard thing to do. Sometimes people think they already know it all. They have don’t know what they don’t know, making influence a much harder task to accomplish.
Sometimes the mindset is they got there by doing things the old way so why change. This can be hard to overcome too, but in my experience these mindsets are easier to overcome.
Here is what Steve has seen:
I see highly motivated people getting performance appraisals that are designed to force rankings on a curve so they never accurately portray an individual’s contribution and worth. I see employees at all levels getting feedback on the gaps in their performance–and then receiving direction to “close the gaps.” I see the same people then coming to workshops and seminars, hearing theoretical–but good–teaching, only to go back to work and say “what do I actually do with that?”
To me this is a third category of people. These are people that want to learn and apply but just don’t know where to start. These are people that can be influenced.
It is not only a task of a coach but also of the individual to let people see their value. Steve believes that letting people know who you really are is a way to show your value.
If you want your talent to be valued, you’ve got to let people around you know who you really are. Make it impossible for them not to see you clearly.
This goes back to being transparent and honest. If we want to build the people around us we must know who we are and then understand who the people we are helping are and get them to see it too.
I was perusing some random older Dilbert comic strips and stumbled upon this one. What a great example of traditional accounting gone wrong.
(Click on image for a larger view)
I couldn’t pass posting this Dilbert cartoon. How many times as lean change agents do you have work halted or the value not seen because of the way the accounting system calculates standard costing or budgeting? How many times have you made an improvement that required less people for that area. The people were reassigned (showing respect for people by not laying off due to improvement), but accounting system claims a labor savings. At the end of the year, management is asking where is all the savings that was promoted throughout the year? It’s not hitting the bottom line.
This is always one of my favorites to explain. How about you?