A friend forwarded this cartoon to me a couple of weeks ago. It seems to come from the website Sketchplanations, drawn by Jono Hey. You can find the original here.
Of course statistics are central to the Quality discipline, so we need to understand how sampling works. And I think the cartoon makes a serious point in that regard, rather deftly.
It's also funny, and high time too!
There's an old story about a wise man that has some relevance for bloggers as well.
Once upon a time there was an old man renowned for his wisdom. Whenever a discussion got tangled and tempers rose, he always told a parable that resolved the question perfectly. Finally a little boy asked him, How could he unfailingly pull out a story each time that summarized the issue so well? "Ah," said the old man, "you don't understand my method. I don't ransack my brain looking for a parable to match each new conversation. Rather, I introduce a topic of conversation for which I already have the perfect parable."
Blogging is a little like that. We bloggers are sure we have the right answer, whatever the question. And by the time you read a post all the way to the end, we've usually made the point pretty convincingly. It almost looks like we're right about everything. (Or I hope it does. 😃) But then, ... who picked the topic for the post in the first place? We did! So of course we're going to pick topics where we think we can win the argument.
But I've been thinking recently about a plant I encountered a few times during my career, where things seemed slightly off-kilter but I could never tell why. I didn't work there, and they weren't part of my normal responsibilities. But I visited a couple of times, to support audits or for other reasons. The audits turned up findings, as audits always do; and the findings were always addressed in the usual way. Somehow, though, I never got the sense that we uncovered anything more than surface issues. It felt like there was something more basic that we were missing.
This plant was located in a town I'll call Riverville, so I can refer to the place as the Riverville plant.
Recently I've been formulating a hypothesis that might account for part of the situation there. So I want to describe the hypothesis, and ask whether you think this could pose a problem in real life? I won't go into a lot of details about how things were at Riverville, if only so that I don't identify it too plainly. But let me know if you think the circumstances I describe could cause some related mis-fires.
Then if it turns out that I'm all wrong, I can go back to questions where I (think I) already know the answer in advance. 😀
Despite the acquisition, though, the plant never felt like the other Octopus plants that I had seen. When visitors started to quote a lot of the normal Octopus management terminology, I thought I could see the Riverville old-timers smile to themselves, as if to say, "Sure, we'll play along until you go home. But that's not how it really works." When I audited, I kept turning up forms that I'd never seen at any of the other Octopus plants. "Don't you use the standardized Octopus forms?" "Oh sure, sure, ... mostly we do. But that one's an exception because of the special way we handle [topic] here. It's authorized, though. Let me show you the procedure document!"
And there was always a procedure document to back it up. There were so many procedure documents, in fact. Sometimes I thought it would be an interesting project to collect all of them and paste them together, to try to get a picture of how the whole plant functioned. But of course I couldn't. As I said, I never worked there regularly, so in the normal course of things I would have had no business even raising the question. And in the absence of a total breakdown of their system—which never happened during the time I was familiar with the plant—I could never have made an argument to justify the time and effort. Besides, mostly the folks at Riverville were able to provide the right management deliverables back to Octopus headquarters when asked, and mostly they were able to get their regular work done in a routine way.
As for those forms? Oh, the forms were awesome! Someone had put a lot of time into these. There were links to data sources on the internal network, so that when you needed to fill in fields 5-15 you just clicked a button on the form. Then you added a little more data by hand and clicked another button, and right away the form routed itself to the next person in line. None of this was managed by some overall data management tool. It was all hard-coded into the forms with URLs that pointed to archive repositories where project information was stored in suitably-structured Word and Excel files.
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| Rebuilding the engine in flight. This is not recommended. |
In fact, the forms were the key to my recent hypothesis. I think the Riverville plant was too optimized to change! They had worked together for so long that they had optimized every single transaction in a large and diverse factory. But they optimized them all according to the outlines of the old Riverville management system. If a new owner let them run themselves, and just showed up at the end of the year to collect the profits, there was no harm done. But when Octopus Enterprises tried to make them integrate with the Octopus management system, the only way they could do it was to run two systems in parallel. They couldn't stop using the old forms, because everyone relied on them. They couldn't stop using the old databases, because the forms pulled data from them. They couldn't stop working in the old way, because everyone in the company depended on every step of the old system. To replace the old Riverville system with the new Octopus system would have meant rebuilding the airplane engine in flight.
I was never able to dig deeply enough to prove that the Riverville personnel were running two systems in parallel—I mean, as opposed to adapting the Octopus system by adding "just a couple" of the old Riverville forms—but it would make sense of my general observation that somehow things were a bit off. As we discussed last week, running the Octopus management system as a Potemkin system would have been a perfectly natural response, if the Riverville management felt that they were being forced to make changes that didn't help them any.
The problem, of course, is that working in two parallel systems takes twice as much effort as working in one. Also, if you have data in two places, it is almost impossible to keep them both consistent. Whatever options Riverville faced, this one cannot be called The Easy Choice.
My thinking about Riverville has been supported in an interesting way by an article that appeared in LinkedIn around the end of March. The author is Marco Nutini, a risk-management expert from Brazil, and the title is "1177 BC Called. We're Not Listening."
It's a fun article, and not long. Read it, if you have a few minutes. Nutini starts off summarizing his thesis with admirable brevity:
In the late Bronze Age, the Eastern Mediterranean was a marvel of interconnection. Egypt, the Hittites, Mycenaean Greece, Ugarit, Cyprus — linked by trade routes, diplomatic marriages, and supply chains that moved copper, tin, grain, and luxury goods across vast distances. It was, by the standards of the era, a globalized world.
Then it collapsed. Not from a single cause, but from all of them at once.
His point is that the highly interconnected world of the late Bronze Age was optimized for current circumstances. Assuming that the world stayed at peace, that the rain fell reliably, and that no major population centers were wiped out by earthquake or volcano—assuming all that, the world ran just fine. But when those assumptions failed—when drought, famine, and earthquake came, when cities revolted and the Sea Peoples were landing on every shore—the finely-calibrated economy of the late Bronze Age could not withstand the shocks. It fell apart, collapsing into the Greek Dark Ages. Optimization for normal times is not the same thing as resiliency in trying times.
Admittedly, having your factory bought by Octopus Enterprises shouldn't be as devastating as having your seacoast raided by pirates, or your island explode. But either way, I think there is a risk that over-optimization can make you fragile and unable to adapt when circumstances change.
If I'm wrong, feel free to tell me so!
We've talked at some length about how companies learn to improve. But in many ways it sounds like a difficult process, requiring a lot of persuasion over a long period of time. So it must be tempting to wonder if there is anyway to shorten the exercise.
Can you force a company to get better?
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| Henry Kissinger, of course! |
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| Grigory Potemkin: Don't let him plan your ISO 9001 implementation! |
Does it work? Well, we got our ISO 9001 certification, although by the time we finally achieved it our market had changed and we no longer relied so heavily on that one customer. (The tech market is notorious for turning on a dime.) But there's a risk to this kind of forced compliance. If you are not very careful with the implementation of the new measures—ISO 9001 regulations or whatever else they might be—your organization could settle for a superficial or "Potemkin" compliance in which the new methods are used to create an overlay over top of the old ones. One day every year, at the time of the audit, everyone follows the new methods and uses the new terminology; then for the next 364 days, work is done like it always was before. This is not an effective approach.
We've talked about this risk before (for example, in this post and this one) and it is always real. When Robert Cole summarized research on American companies adopting Japanese quality methods in the 1980's and 1990's, one study in his pool focused on six second-tier automotive suppliers who were required by the major OEMs* to adopt Total Quality Management (TQM). Of those six, only one adopted the methods in a way that made a lasting difference, or that was fully integrated into the normal way of working. Four suppliers adopted the new approach "rather mechanistically, with the methods not being used regularly or to their greatest potential." And one supplier did nothing at all. Cole describes this nearly-perfect statistical distribution dryly as "a full range of outcomes," and points out that in many cases it was only years later that these suppliers finally put in the effort to upgrade their operations.**
Naturally this is only one study. It doesn't prove that if you try to force improvements on your suppliers, you'll have only one in six odds of success. But it does remind us—what we already know—that improvement is never easy. It does suggest that if you want your suppliers to improve in some respect, you should work with them, stay engaged, and support them on their journey. As we've seen, external support always makes a difference. And in the long run that support may be more effective than giving your suppliers an offer they can't refuse.
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* OEM = Original Equipment Manufacturer. In this context, it means General Motors, Ford, Chrysler, and so on.
** Robert E. Cole, Managing Quality Fads: How American Business Learned to Play the Quality Game (New York, Oxford: Oxford University Press, 1999), pp, 127-128.
Who needs to understand the procedures in your department?
How about your boss?
Of course. The boss established all the procedures, so of course he understands them.
How about his boss? How about top management?
Umm ... I guess. Maybe not in detail, but overall. Why? What's your point?
You'd be surprised.
In a sense, maybe it shouldn't be a surprise when top management doesn't know the procedures that run their own company. Most of their day is spent doing other things. Still, it can be awkward. These are the people, after all, who decide on the company's strategic direction. But what if the new direction points somewhere that the procedures aren't designed to go?
It sounds like a frivolous or captious question, but it has been known to happen. Robert Cole tells the story that in 1983, Ford's CEO instructed the company to improve relations with their supply base, as a key to improving their suppliers' performance.
"Based on this, [L. M.] Chicoine [Ford's vice-president for purchasing and supply,] publicly called for increasing the number of long-term contracts (greater than one year) with Ford. To his surprise six months later, he found there was no change. Because Ford rules called for extensive bureaucratic approval for any contract greater than one year, no supplier was interested in tackling that."*
Sometimes the disconnect between management direction and corporate behavior is more subtle. Another story from Cole tells of ongoing discussions in the early 1980's between Intel and one of their major suppliers, the Japanese firm Kyocera. Intel argued that they got poor service and poor terms from Kyocera, compared to Kyocera's other customers.
"The Japanese managers responded with a riddle to Intel queries: 'To Kyocera, the customer is always king. But reliable kings have reliable servants.' The Intel managers finally figured out that the point of the riddle was that although the customer (Intel) might be king, it nonetheless had to act in certain ways to produce reliable supplier behavior. Above all, that meant no order cancellations, level production, and an overall predictable environment for suppliers."**
In the story about Ford, top management genuinely did not understand what steps were required by their own procedures. In the story about Intel, top management did not understand how their normal behavior was perceived by others. But both cases represent a kind of disconnect between the strategic direction that top management wanted to go, and the organization's ability to get there.
I have tried to think about my own experience, and can't recall any disconnects as significant as these ones. But I have certainly seen how easy it is for top management to miss realities on the ground, because the people around them shield them from inconvenience. Once I worked for a company where the management held periodic Town Hall meetings, to get feedback from those of us in the trenches. At one of these meetings, someone complained that the IT department needed more resources, because whenever his PC broke it took three weeks to get it fixed or replaced. The vice-president who fielded the question genuinely didn't understand the issue: he explained that whenever he had a problem, IT always fixed it the same afternoon!
This phenomenon—this disconnect—is why it is so important for top management to get out of their offices and understand how the work is done. It is why John Seddon says that his first step when working with a new client is to send the management staff out to the front office to watch a single order come in, and then to track that order through its whole life-cycle. It is why Taiichi Ohno invented the Gemba walk.
The terminology differs, but the basic idea is the same. Before you can make decisions about what to do next, you have to understand what you are doing today. And that's not always easy.
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* Robert E. Cole, Managing Quality Fads: How American Business Learned to Play the Quality Game (New York, Oxford: Oxford University Press, 1999), p. 112.
** Ibid., p. 113.
Last week I wrote about Florida Power and Light learning Total Quality Control from Kansai Electric in Japan, and I mentioned that "FPL and Kansai set up an extensive program of travel and visitation, so that personnel from each company could build personal contacts with their counterparts." It was a single bullet-point in an article largely about other things, so many readers might have missed it. But the technique is a powerful one.
This meant that the office in California where I worked had regular visitors—from the other ETAS office in America, and from the home office in Germany. We had workshops to bring together our engineers with their counterparts from other product lines. Likewise for the sales force; likewise for the customer service team. The global Process Owners for each of the business processes in our Quality Management System visited regularly to check how the systems were working for us. Nor was the travel all in one direction: there were events held in Germany by this department or that one, and our people were regularly invited—expected—to attend.
The organizational structure was international, as well. For some years my immediate supervisor sat in Germany. (I was still in California, so we were separated by nine time zones.) Three key positions in our office's management structure were filled by ETAS personnel who relocated from Germany. On the other hand, ETAS's Global Director for Operations and Finance was an American. International conference calls were routine, and so was the travel.
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| Not my passport. I downloaded this picture from Wikipedia. But you get the idea. |
So did it work? Yes! It worked very well.
The net result of all this travel is that we really were able to work with our colleagues from other offices and other countries as if they were just down the hall. It was not unusual for me to chat with one of our engineers and hear him casually reference recent conversations with our German top management—referring to them by first name. We discussed common concerns, asked and gave support on common projects, all as if we were working in the same building. Of course there were occasional misunderstandings arising from imperfect translation or differing legal backgrounds; but they were easily managed, because we had built up friendship and familiarity by working together.
Ultimately, as the company continued to mature, we got to the point where it was no longer as critical as it had once been to reinforce the cultural framework; and we no longer poured quite so much money into travel. The savings certainly made a difference: there is no question that our travel-based management strategy had been very expensive. At the same time, it is also unarguable that it helped tie together a collection of far-flung offices into a single operating unit.
Do I recommend the same strategy for every company? Well of course it depends. Not every company has multiple offices in different countries; of the companies that do, not all of those need their offices to work together seamlessly. As a result, many companies don't need anything like this approach. And I'm sure that some companies which might otherwise benefit from it, can't afford it. If the margins in your industry are too narrow, that limits what options are available to you.
But it is still true that the best communication takes place in-person. It is still true that no electronic tool ever quite takes the place of being there. That's what makes travel and visitation such powerful tools for building a culture and binding a company together.
How do companies learn?
We've discussed this question on and off for years, and mostly it's not easy. Two years ago, in the middle of a series of posts on Boeing, I wrote about data falsification scandals at Toyota and suggested that it can be phenomenally difficult for a company to learn new attitudes. Two weeks later I backed off to say that it's possible but not easy. And just last month I wrote about Robert Cole's study, Managing Quality Fads, about how American companies learned quality methods from the Japanese during the 1980's. So yes, it's possible but not easy.
That conclusion just brings us back to the original question: If it's possible, then how? And here it can be useful to look at success stories—companies that did learn a lot from others, and improved their operations accordingly. One advantage of Cole's book is that he gives a lot of detailed data about the period he describes, including a number of case studies. Of these, the first big success in adopting the new quality methods was Florida Power and Light (or FPL).
Cole sets the stage by explaining: "FPL [began] its quality improvement ... in 1981. In 1985, it became the first large American company ... [to start] learning directly from the Japanese. It entered into a deep exchange relationship with Kansai Electric and other ... Japanese companies[,] and worked closely with Japanese professors...."* But there were a number of special factors that supported FPL's quality initiative.
Perhaps more to the point, FPL's success got the attention of other American companies. Soon FPL was giving seminars on quality improvement; and in 1986 they spun off a subsidiary (Qualtec) as a for-profit consulting firm. In the end, Qualtec could not keep up with the demand for its services, so FPL sold it to the Marshall Group in 1995.
Newton's Third Law of Motion famously says that to every action corresponds a reaction, and I'm not the first author to apply the same phrase metaphorically to human organizations as well. In 1989, James Broadhead took over as FPL's new CEO; and after the company won the Deming Prize, he began to dismantle much of the quality superstructure and documentation requirements. He argued that this structure and these requirements were too extensive to be cost-effective, and therefore that they were inconsistent with FPL's overall business objectives.
But it is important to understand that Broadhead did not rip out the company's quality measures root and branch. And FPL's overall quality levels did not suffer under his administration.*** What he did was to integrate the quality measures into normal operations, so that they became "just how we do things" rather than adding them as special steps administered by the Quality Department. As that integration took place, he could also shrink the size of the Quality Department because there was no longer a need for so many extra staff. He found that FPL had implemented a lot of documentation requirements because they were demanded by the Deming Prize; but in fact, no one ever looked at the documents again after the prize committee left. So he eliminated those requirements that had no use. He continued to support benchmarking, self-managing teams, process reengineering, and employee empowerment. So while the American business press described Broadhead's administration as a massive rejection of Japanese quality principles, it was nothing of the kind. He kept what worked—all the measures that reduced downtime and outages and disruption of service—because they worked! All these measures were profitable. He just made them unremarkable enough that they no longer drew special attention.
The original question was, How do companies learn? So concretely it is fair to ask, How much of FPL's experience can apply to another company?
Obviously FPL faced special circumstances that gave it almost a perfect framework for learning from someone else: for starters, the partnership with Kansai, who was not a competitor and who used exactly the same equipment.
But I think there are three points that have a wider application, and it is important to remember all three.
If you remember all three points, is that enough to make it easy for your company to learn? Probably not. But they are sure to help.
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* Robert E. Cole, Managing Quality Fads: How American Business Learned to Play the Quality Game (New York, Oxford: Oxford University Press, 1999), p. 66. This whole story comes from the same work, pp. 66-71.
** If I remember the early 1980's correctly, FPL's attitude could not yet be reliably assumed across the country as a whole.
*** So James Broadhead's career at FPL does not foreshadow that of (let's say) Harry Stonecipher at Boeing, a few years later.
Years ago, I worked for a small tech startup. We were scrappy and energetic, and we hadn't quite decided how finished a new product had to be before we could ship it.
In all these discussions, our head of engineering usually wanted to ship now and not later. (Of course he also saw the financial statements, and knew that we needed the revenue!) His argument was that if the product was basically good enough, then what we needed was for it to operate in a real-world environment so that we could identify which remaining defects really mattered. Then when we fixed those, the product would be ready. Other nominal defects might exist, but they would be merely cosmetic. He called this process "hardening in the field."
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| "Let's see: eggs, cheese, filling. I guess it's ready to serve!" Or maybe not. |
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| "But wait—this is OK?" |
Rapid innovation is a more or less constant feature of the high tech market landscape. Everybody knows that brand-new implementations of new technology are usually full of bugs; stable, reliable implementations take longer. So what do you do? Partly it depends on the inherent risks of the exact product you are designing. Is it a car or a rocket that can hurt people if it fails? Or is it a toy, where failure will just disappoint them? Is it easy to recover? And what does the regulatory environment look like? Obviously you have to take account of all these factors.
Beyond those factors, though, you may just have to decide where you want your organization to fit in the ecosystem of high-tech products: do you want to be first to market with innovative technology, or are you willing to trade speed of innovation for product reliability?
And then, if possible, you would like to design your Quality Management System so that it supports your decision—so that it nudges you into being the kind of company you want to be.
If it is important for you to be first to market, you should measure your development process with KPIs that track (among other things) how fast new releases reach the field. Since your initial releases are likely to be buggy, your customer support process should monitor KPIs that track the speed with which customer issues are resolved. You may wish to implement an Agile development model, or offer customers the opportunity to work with you as partners in exchange for providing their feedback as active members of the development process.
Conversely, if it is more important to you that your products be fully reliable before they reach a customer, then you should not measure speed of delivery as one of your development KPIs. What you measure is what you optimize; if you are willing to sacrifice speed for reliability, don’t measure speed. In this case, you are more likely to set metrics around the extent and comprehensiveness of testing, and the number of known bugs at time of release. You might also choose to use a waterfall development model (instead of an Agile one) so that testing is done on one version at a time, thus reducing the number of variables in the development process and presumably some quantum of risk.
It's interesting to realize that "Quality" doesn't always mean the same thing—or rather, that it can mean two different things (in this case both speed of innovation and reliability of performance) which are incompatible, and which you have to choose between. And that single choice can have ripple effects across your metrics, your processes, and your strategy.
