Michael Ballé, Jim Morgan, Durward Sobek featured in MIT’s Sloan Review

Skilled people, not processes or new tools, create great products, according to an article on innovation by Lean Enterprise Institute researchers appearing in the Spring 2016 issue of MIT Sloan Management Review. “Why Learning is Central to Sustained Innovation,” by Michael Ballé, James Morgan, and Durward Sobek II, is part of a special report on product development.

For your convenience, we have licensed the article for download for a limited time.

According to the authors, evidence shows that people and people systems are the most important parts of a product development system, because people generate the knowledge necessary for innovation in new products, new manufacturing systems, and more robust supply chains. The authors recommend that companies ask three fundamental questions to improve developers’ skills and capabilities.

Forward-Looking Companies Attend LEI’s Lean Product and Process Development (LPPD) Open House at Summit Week 2017

Forward-Looking Companies Attend LEI’s Lean Product and Process Development (LPPD) Open House at Summit Week 2017

A wide range of industry participants came together on March 6th, 2017 in Carlsbad, CA the day before the annual Lean Enterprise Institute (LEI) Summit to learn about product and process development. Invited representatives came from a variety of industries, including medical devices, healthcare, mining technology, golf equipment, digital printing, and others. The audience actively engaged with key thought leaders and case study presenters as part of showcasing LEI’s Lean Product and Process Development (LPPD) initiative. Duplicate morning and afternoon half-day sessions were organized to provide flexibility for the attendees.

Introductions & Survey Themes with Eric Ethington

Eric Ethington, program manager for LPPD with LEI, kicked off the open house with introductions and an overview of the agenda. Eric reiterated that the purpose of the LPPD program was to focus on changing the way new value is created. Prior to the session, each participant was invited to complete a voice of the customer survey with two questions being discussed at the session:

  • What is your definition of LPPD?
  • What are key success factors for successfully applying LPPD thinking in your organization?

With the first question of LPPD definition, many of the responses were around two themes: process and customer-focus. Scott Schmidt from US Synthetic responded that a “declared process is tough for many organizations to follow in LPPD.” Dr. Jack Billi and Dr. Ted Lawrence from Michigan Medicine reiterated that the customer (patient)-first theme resonates in healthcare.

For key success factors, the trends were leadership priority, culture change, PDCA cycles, structuring the organization, and getting the knowledge. Dr. Billi commented that knowledge is not enough for success, as evidenced by the survey results. In addition, Eric Ethington stressed that there were many “people” elements for success, yet we do not strongly acknowledge this in our definition typically.

The Ford Story & Experiences with Jim Morgan

Jim Morgan, Senior Adviser for LPPD with LEI, next shared his experiences with LPPD and Ford’s product-driven revitalization that he helped lead. Over the course of 45 minutes, Jim summarized the key points of the eleven-year journey that Ford took in the LPPD space under his guidance.

Development typically drives 70-80 percent of committed costs and quality for a new product, which is why it is a competitive advantage to find success in LPPD. In addition, it engages the entire enterprise and creates your future. During the late 1990s / early 2000s, people were starting to notice Toyota’s success with LPPD because their development times were 50 percent lower with 33 percent fewer resources and the highest profits per vehicle in the industry.

When people studied the Toyota development system, they found it was foundational for Toyota’s Production System, plus it was a disruptive model for continuous product development versus the traditional automotive industry model of “batching” model releases. The basic principles of LPPD include people, process, and tools. People and learning are at the heart of LPPD. Every time you develop a new product, you are creating knowledge.

The Ford story that Jim shared began in 2005. At that moment in time, the company was on pace for a $17 billion annual loss and was in its twentieth year of a steady market-share decline. The company was losing money on every car that it produced. Customer satisfaction was the worst in the industry and the stock was hovering at a distressingly low $1.90. There was a culture described as “cage-fighting” with massive layoffs occurring to offset the shrinking volumes. In 2006, Ford brought in Alan Mulally to lead the company after being CEO at Boeing. Mulally summed up Ford with the statement, “I was right—Ford’s problems weren’t as bad as Boeing’s. They were much worse.”

Fast forward eleven years, the turnaround that was reached based on the product-led revolution was dramatic—industry-leading customer satisfaction, $9 billion in annual profits, $15 stock price, and hiring of new employees. A key decision was Ford leadership securing $23 billion in loans in late 2006 before the credit markets later seized up in 2008. The leadership invested in new product, not spreading the money to poor existing infrastructure or programs that were not core to the future. The goal was to “create products that people actually want”.

People: The Best People Create the Best Products

In order to develop products that customers actually desired, the new global development process at Ford focused on not just developing products, but simultaneously developing people. Ford evolved their development organizational structure to support this vision, eventually settling on the product-focused matrix. A chief engineer had full responsibility for a product from idea to post-launch in this new structure. Groomed to be super engineers and superb leaders, Ford found it difficult to find and develop chief engineer candidates, but worth the effort.

Chief Engineer & Supporting Organizational Structure for People Development

Within the product-focused matrix, each function had an integration leader that was dedicated to the program (F-150, Mustang, etc.). In addition, there was an assistant chief engineer (ACE) that was being developed for possible future chief engineer role. The ACE would support regional development work. “A Faster Horse” available on Netflix tells the story of the development of the 2015 Mustang and the chief engineer at Ford.

In this structure, the functional leader’s job is to make the chief engineer successful. The chief engineer owns the “what,” and each functional leader owns the “how.” As Jim noted, “organizational software trumps organizational hardware,” meaning the behaviors and interpersonal relationships drive the success. And one yardstick for measuring success is product award recognition.

As for individual people development, prior to 2005, Ford typically hired engineers from the best, top-ranked engineering schools. Once hired, there was not much personal development, but rather a tendency to move around to get promoted faster. This eventually led to limited technical depth at key levels. One countermeasure in order to build “towering technical competence” was crafting technical maturity models (TMMs) that were plans for individual development. As Jim noted, most technical skills are “tacit” not explicit, so there needed to be a deliberate, intentional plan to develop the expertise.

One participant asked Jim how an organization could develop a chief engineer. The first step could be acting as the integration leader for a function (functional “chief engineer”). The second step could be as project manager for the chief engineer (“keep the trains running on-time”). The third step could be as a regional assistant chief engineer (ACE), with the fourth step as a possible chief engineer. Some companies start out with a Commercial Leader and Technical Leader (matched pair) that share the chief engineer role since it is difficult to start with one person with the appropriate skills and experiences.

Design reviews are another key people-development aspect of LPPD. Design reviews can be cadenced or event-driven (product-level) and led by the Chief Engineer. The purpose is to make it safe to surface problems with the development program to help improve the product outcome while also developing people. In addition, it improves the leaders’ knowledge. Design reviews should focus mainly on the current issues or teams will run out of time each review session.

Another participant asked how a design review would look in an LPPD organization. Jim recommended limiting (“outlawing”) typical presentation materials, while focusing on data and direct evidence. Hold the reviews outside of conference rooms and in the “gemba” (Japanese for “actual workplace”), whether that is at dealers, tool rooms, model shops, etc. Surface real problems…and get them solved—this will increase the interest and attendance, while minimizing other unnecessary meetings. Allocate enough time to discuss conflict and risks so leaders can prioritize the right actions.

Extended Enterprise

The development of people does not just stop within the internal organization. Supplier content made up about 50-60 percent of Ford’s end products, making it critical to work more proactively with key suppliers. Within six years of engaging more closely with the supply base, Ford’s overall supplier quality levels went from worst to third-best in the industry. Some ways that Ford worked closer was by matching up key pairs of engineering and purchasing leaders (matched pairs) to support longer term relationships, to experiment with expanded commodity plans, and to visit supplier gemba locations on a planned cadence.

The Process Components for LPPD

Jim next introduced the three components of the LPPD process: Study (“kentou” in Japanese), Execution, and Reflection. The Study phase is the most important since the challenge is to find and create the right product. Voice of the customer, immersion, concept paper, set-based concurrent engineering, and other techniques of LPPD are found in this phase. Jim also cautioned the group and quoted former basketball coach Johnny Kerr in that “if you listen too much to the fans, you end up sitting with them.” The Concept Paper helps compile a vision for the product from the mind of the chief engineer after gathering wide input. After incorporating this input and communicating it out, the Concept Paper then serves to align the organization, and then ultimately becomes a contract for the product success.

A core element of the Execution phase includes process milestones. The milestones are not treated as traditional “gates,” but rather to provide functional integration points to determine normal from abnormal for progress. Milestone points need to have clear purpose statements and quality of event criteria in order to synchronize all the LPPD activities. Compatibility before Completion (CbC), Digital Pre-Assembly (DPA), Perfect Drawing Plans (PDPs), and other techniques of LPPD are critical in this phase. The Reflection phase is capturing the key learning to embed into the next cycle of development.

TechnipFMC Schilling Robotics: A Brief Introduction to their LPPD Experience

David Furmidge, product development manager, shared the learning and experiences that the Schilling Robotics division of TechnipFMC has had as an LEI LPPD Learning Group member with their Gemini development program. Jeff Fritts and Hannah Waldenberger also joined with David to share the learning. Gemini is a remote operated vehicle (ROV) for the subsea oil and gas industry. The innovative new design greatly enhances the productivity of the tool changes, leading to a competitive advantage for the product that traditionally costs up to $1 million per day for customers.

Hannah Walderberger – TechnipFMC Schilling Robotics

David discussed two areas where the Gemini team started experimenting with concepts with LEI’s LPPD coaches—Post-Launch Design Changes and Late Product Launch. For Post-Launch Design Changes, the concepts were A3 problem solving, obeya/visual management, and strategic planning. For Late Product Launch, the concepts were set-based design, trade-off curves, question mapping, high-tech anthropology (HTA from Menlo Innovations in Ann Arbor), storyboards, product roadmaps, and product development value stream mapping (PDVSM). David shared an assessment of each of the experiments with the concepts. In reflection of the activities, the 2016 goals were met two weeks early, which was a critical success for the new Gemini product.

LPPD at LEI with Eric Ethington

Eric Ethington provided an overview of LPPD at LEI for the last part of the session. LEI’s LPPD program is made up of four initiatives—Learning Group, Research, Education, and Community. The program began in early 2015 with Jim Morgan with a couple of partner organizations. His vision was to create a learning experience that could not be rivaled by any one conference or event. Since then, the LEI LPPD team has expanded with an additional four coaches supporting learning group partners Herman Miller, Bose, TechnipFMC (four sites), GE Appliances, Michigan Medicine, and Honda R&D.

Eric Ethington, LEI LPPD Program Manager

Eric focused in on the levels of engagement that an organization can have with LPPD at LEI, starting with monthly newsletters all the way up to co-teaching partner in the learning group. Eric also showed the unique learning model that the LPPD coaches and the learning -group partners use together.

The outreach event concluded with a question-and-answer session with Jim Morgan and John Shook, Chairman and CEO of LEI.

Enabling Fast and Innovative Product Development at Bose

Product and process development is how new value is created through delivering great products that meet customer needs with profitable value streams. The decisions made in product and process development have an outsized influence across the entire value stream. The faster an individual or organization can learn, the greater the knowledge available is to make better decisions, and/or the quicker decisions can be made. This enables products to get to market faster and start providing customer value.

Indeed, Toyota founder Kiichiro Toyoda said this about the importance of rapid learning: “We are going to build cars. Let’s all learn as much as we can, and work together to create something our customers will buy. My job is the same as yours: to learn as fast as I can.”

LEI Lean Product and Process Development Learning Partner Bose Corporation sees the value in enabling rapid learning and created a “Rapid Prototype Development Center” at its Framingham, Massachusetts headquarters. Its goal was to enable fast and innovative product and concept development. Now LPPD coach Katrina Appell tells the story of the RPDC and the benefits Bose is enjoying from it.

You’ll learn:

1. How the RPDC is providing Bose with a competitive advantage.

2. How the design of the RPDC enables higher levels of creativity, greater collaboration, and increases employee engagement.

3. Specific examples of the tangible benefits realized through the RPDC.

4. How Bose is learning through the LEI LPPD Learning Group while continuously improving rapid prototyping capabilities.

The case study may be found here.