Is Emergency Room Expansion Really Necessary?

A recent news story about a hospital construction project concerns me, as I fear it may be an example of a healthcare organization that doesn’t get lean – and may have spent a lot of money unnecessarily as a result.

            The story in the Houston Chronicle involves Memorial Hermann Northeast Hospital near Houston and the construction either planned or recently completed there.

            The story describes how the 255-bed hospital, which employs 1,200, is going to be spending almost $9 million to improve or repair the roof, boilers, chillers and other equipment. No problem there.

            The plans announced by new CEO Keith Alexander also include spending as much as $10 million on computer updates. I’m a bit skeptical about that, but it may be perfectly legitimate and justifiable.

            However, the information that really raised my eyebrows was this:

            The hospital recently completed a $2.5 million expansion to the emergency department, which now has 40 treatment bays.

'With these improvements we hope to dramatically reduce the waiting time in emergency care,' he said.

            The article doesn’t say how many treatment bays there were before the expansion, but clearly the number has increased.

            The problem is the mindset that appears to be behind the expansion: If patients spend too much time waiting in the emergency room, it must be because there aren’t enough treatment bays.

            I’m guessing it never occurred to the people in charge at this hospital that capacity has as much to do with flow as with physical facilities. They may have no understanding at all that waiting times can be reduced without any expansion.

            In fairness, the hospital was also recently recognized as one of the top 100 hospitals in the country that, according to a news release,


            …have made the greatest progress in improving hospital-wide performance over five consecutive years (2001-2005). According to the award criteria, the 2006 Thomson 100 Top Hospitals®: Performance Improvement Leaders have set national benchmarks for the rate and consistency of improvement in clinical outcomes, safety, hospital efficiency, financial stability, and growth.


            However, that award doesn’t necessarily mean the hospital is a leader in applying lean principles. And if they felt a need to expand facilities to reduce emergency room waiting times, I suspect they aren’t.

            What you don’t know about lean can hurt you. Ignorance is not bliss.



The User-Centered Approach at Intel

One key to the success of Intel is that the company works very hard to learn what consumers want in a computer – even though Intel doesn’t make computers.

            That was clear from a presentation I heard at the recent Customer Needs Discovery & Innovation Congress, put together by the Management Roundtable.

            Herman D’Hooge of Intel, who holds the title of Innovation Strategist (Wouldn’t you love having a title like that?) described what he called Intel’s user-centered approach to developing products.

            In broad strokes, D’Hooge talked first about “looking out” toward the user to find needs and problems. The next step is translating the user needs into compelling user experiences. Finally comes “looking in” toward implementation and solving technical problems.

            In concept, being user-focused is a good approach for almost any company. And I was pleased to hear D’Hooge say, “this is as much about process as it is about culture.”

            However, what I found particularly fascinating is that the user, in this case, is not Intel’s customer. Its customers are the computer manufacturers who buy Intel’s silicon chips.

            But as D’Hooge noted, customer needs “actually do place requirements on what goes inside your computer.” Even more striking is the fact that Intel devotes itself to consumer research, rather than leaving it to the manufacturers who design and build the computers.

            This is an important lean issue. Lean is all about providing value to the customer. And even though the user here is not the customer, what the user wants drives development for both Intel and its customer. Therefore, the value sought by the customer – the computer manufacturer – has a lot to do with what constitutes value for the consumer.

            I don’t know whether Intel is actually a lean company, in the sense of being dedicated to the principles and strategies of lean. But if they aren’t, they’ve got a good foundation for becoming one.

            One example D’Hooge described had to do with computers developed for an Internet café in China. Use of computers at such Chinese cafes is different from what happens at American Internet cafes. In China, customers will sit at a computer for hours playing video games, at tables with small, cubicle-like partitions separating individuals.

            Research into the behavior of these individuals led to new features on the computers used there. One was the ability to store music on the machine, so the user could listen while playing. Another was a button that called up a menu on a small, separate screen, to be used for ordering food. This made it possible to place the order without forcing the user to abandon his game.

            (D’Hooge described this example briefly, and it wasn’t clear to me who actually manufactured the computer or exactly what modifications might have been made to Intel chips as a result of the research. However, Intel was clearly involved.)

            Most importantly, Intel understands that this kind of strategy goes to the very core of a company. D’Hooge talked about the need for establishing “a systemic user-centered capability and approach,” which he described as a multi-year process that involves “changing the DNA” of a business.

            It does indeed.



Lean IT Gets Some Good Publicity

It’s always nice to read about organizations that reap benefits from adopting lean strategies. I found one recent article especially interesting because its focus was a type of organization that isn’t the typical setting for lean initiatives.

            The article, from CIO magazine, is about the IT department at Acuity Brands. Writer Stephanie Overby explains how Pat Quinn, VP of information systems and technology, overcame cultural resistance to make his department lean.


Quinn was charged with providing systems to enable the manufacturing changes. But as he learned more about lean tools and techniques for cutting waste and enabling continuous im­provement, he saw that IT could benefit from them as well. “Eliminating waste doesn’t just apply to scrap metal. It can mean eliminating the waste of intellectual property or human resources or anything else,' he says.


            Through a series of kaizen events, the department began putting the concepts into practice.


Results have ranged from finally weaning the company off IBM mainframes in use for 20 years to transitioning corporate headquarters (and 175 call center agents and 25 apps) to VoIP in less than two months.


            And even though Quinn was a believer in lean, even he was surprised by some results.


One lean event revealed that application development could be greatly improved with pair programming—multiple programmers working together on code. 'I thought, there’s no way that's going to work,' says Quinn, a former programmer himself. 'But I was completely wrong.'


            I was pleased by the fact that this article was generated by a magazine written not for manufacturers, but for IT professionals. That’s the kind of publicity lean needs.




A Nightmare of Delays for the Dreamliner

A recent report about work on the new 787 Dreamliner suggests that Boeing, which has long embraced lean strategies, didn’t apply them as well as it could have in planning assembly of the new aircraft.

            Boeing has already received its share of criticism on the Dreamliner, particularly from Kevin Meyer at the Evolving Excellence blog. Kevin has pointed out that key sections of the Dreamliner are manufactured in a variety of far-flung locations, then flown long distances to Everett, Washington, for final assembly. That involves a lot of transportation waste that is clearly not lean.

            Now comes a report from the Flightblogger, written by Jon Ostrower, that Boeing has delayed delivery of major structural parts for the second Dreamliner while employees work feverishly to finish the first one.

            Ostrower writes:


Put simply, there is a small bottleneck inside of Building 40-26 at the Boeing factory in Everett interfering with deliveries. Two of the four final assembly positions are in use. The first position in the rear of the factory is occupied by the Static Rig (ZY997), the second by Dreamliner One (ZA001).

Dreamliner One continues to undergo extremely extensive structural and systems assembly and is currently jacked up off its landing gear surrounded by scaffolding, making the forward movement to make way for the Static Rig difficult until it returns to pavement…


With Dreamliner One in its current position, there is no room in the rear of the factory to begin final assembly of the Fatigue Test Rig or Dreamliner Two. Delivery of Dreamliner Two structures from South Carolina, Kansas, Japan and Italy were all initially planned for an August 18 timeframe.

In addition, Dreamliner One still has yet to have its tail, engines, wing-body fairing, flaps and landing gear doors reinstalled following a comprehensive disassembly which occurred after the July 8th roll-out ceremony.

'Boeing is doing everything they can to finish the job but there are jobs that just cannot be sped up,' said one Boeing employee with knowledge of the program.

Testing on the Static Rig needs to take place three doors down in Building 40-23, which is located between the 747 and 767 final assembly lines. Before the Static Rig can move to Building 40-23, Dreamliner One must be rolled out of the factory. The width of Building 40-26 is only large enough to accommodate one 787 at a time.


            I understand that a commercial aircraft is big, and there are limitations to how much work a building can accommodate, even at the massive Everett complex. But still – did no one see this coming? Was there no kaizen activity in planning construction of the Dreamliner that would have avoided this?

            Meanwhile, according to Ostrower,


Boeing hopes that by delaying deliveries to Everett, they can allow the 787 subcontractors to more fully complete the assembly of follow-on aircraft fuselage sections.


The deferment of assemblies will allow for independent work to be done outside of Puget Sound, enabling the Everett-based final assembly and delivery team to continue its focus on Dreamliner One. Once Dreamliner One has been fully assembled, the follow-on fuselage structures can be joined in less time in hopes of keeping the flight test, certification and delivery on track.


            So in other words, they’re asking suppliers to take on more of the work because they can’t get it done in time themselves? Is this any way to run an aircraft manufacturer?


            There are certainly people within Boeing who understand lean. I hope they put their skills to use to improve the situation so this doesn’t happen again.



Supporting Lean: Medicare Won’t Pay for Medical Mistakes

Medicare will no longer pay for treatment of certain preventable medical mistakes, it was widely reported this week. That’s a good thing for many reasons. One is that Medicare’s previous willingness to pay undermined efforts to apply lean principles to healthcare. More on that in a moment.

            Medicare’s new rule applies to eight conditions, and more are likely to be added to the list. The eight are: objects left in a patient during surgery; blood incompatibility; air embolism; falls; mediastinitis, which is an infection after heart surgery; urinary tract infections from using catheters; pressure ulcers, or bed sores; and vascular infections from using catheters. 
            One story notes that


            Last year, Mark McClellan, then director of the Medicare and Medicare programs, said the government could save hundreds of millions of dollars a year if the Medicare program stopped paying for medical errors such as operations on the wrong body part or mismatched blood transfusions.


            What does this have to do with lean? A lean strategy focuses on providing value to the customer, and a generally accepted definition of value is that which the customer is willing to pay for. So since Medicare was paying for fixing these errors – rework, you might say – hospitals had no incentive to reduce the number of errors (other than their desire to do the right thing).

            Look at it this way: If you are a manufacturer, and your customer pays for the products you produce, then is willing to pay you again to fix the products if they prove to be defective, would you have any reason to eliminate defects?

            Some of you may be thinking, wait a minute: Isn’t the patient, and not Medicare, the hospital’s customer? That depends on how you look at it. I would argue that, in at least some situations, the customer is the person or organization that provides payment – in this case, Medicare.

            This parallels a statement I heard last week at a conference on customer needs. A speaker from a consumer product manufacturer described a distinction that seems relevant here. The individual who goes into a retail store and buys the product (the end user), he said, is the CONSUMER. But the retail store, which actually pays the manufacturer for a supply of the product, is the manufacturer’s CUSTOMER.

            However you look at it, Medicare’s decision is a powerful additional incentive for hospitals to improve operations. I hope those who promote the concept of lean healthcare will use this new financial reality as a selling point for their efforts.




How to Define Customer Needs

Do you know what your customers need? That is a critical question for any business, a fact recognized by lean principles. The entire foundation of lean is delivering value to the customer – and the customer defines value.

            On this topic, I was intrigued by a presentation I heard recently at the Customer Needs Discovery & Innovation Congress, a conference sponsored by the Management Roundtable.

            The talk, by Tony Ulwick, was about defining customer needs. In other words, once you understand the issues facing your customer, how do you translate that into clear statements of need – which are the basis for design of the products or services you provide.

            It may sound like a semantic issue, but it’s a lot more than that. A poorly defined need may lead you to deliver less than the customer wants – or miss the point completely.

            Ulwick is CEO of consulting firm Strategyn and author of the book What Customers Want. He argues that there is no agreement on what a customer need is, which means companies cannot figure out what customers want.

            Ulwick addresses the issue with the observation that customers buy products and services to help them get functional and emotional “jobs” done. Needs, he says, should be defined in terms of those jobs – not in terms of products or services.

            Further, Ulwick says there are key principles to be followed in defining needs. A customer need, he contends, must:

  • Be based on a system of value measurement that is universally accepted by customers
  • Be relevant now and in the future
  • Not be left open to interpretation
  • Not confound the way it or other need statements are prioritized

            As an example, Ulwick discussed the “job” of farming corn. To do that job, the farmer must select the seed, control the insects, control the weeds, prepare the soil, plant the seed, grow the corn, protect the crop, harvest the crop, dry the harvest, market the crop and assess the yield.

            Ulwick and his firm (I believe they were working for a company that makes seeds for growing corn) identified a total of 156 needs associated with the steps in farming corn. A few of them are:

  • Minimize the time it takes for seeds to germinate.
  • Increase the percent of needed nutrients that are absorbed by the plant.
  • Minimize the likelihood of corn rotting during storage.

            Notice the phrasing of those needs. Using the first one as an example, it begins with “minimize,” which indicates the direction of the desired improvement. Then, “the time it takes” indicates the unit of measurement. Finally, “for seeds to germinate” is a statement of what must be improved.

            A seed company can use this information to improve the seeds so they produce the results farmers want.

            Marketers or product designers sometimes complain that customers do not clearly articulate needs. Ulwick contends that when the job is the unit of analysis, there are no latent or unarticulated needs. “Customers may not be able to articulate a solution, but they can certainly articulate what outcomes they want to achieve,” he says.

            Ulwick’s firm works with clients to, first, identify the needs of their customers. They then conduct an analysis to determine whether, in the current marketplace, those needs are being under-served, over-served or served appropriately. That helps determines the client’s strategy for coming up with new products and services.

            One example he described was how the Bosch company used this data to design a new circular saw. The analysis determined that customers had needs to minimize problems related to problems with the cord. (It would get cut accidentally, snag on the material, etc.) Bosch eliminated the cord, so the extension cord that is almost always used plugs directly into the saw, but in a way designed to improve safety.

            Also identified were needs to minimize the amount of debris thrown up into the user’s face, and to minimize the likelihood of moving off the cut line because it is obscured by debris. The new saw takes the wind created by the saw and directs it forward, blowing sawdust off the cut line and away from the user’s face.

            Do you know what your customer’s needs are? Do you have confidence that you are truly delivering value to the customer? Defining your customer’s needs is something you can never stop doing.



Productivity in Services: Limits to Growth?

Is there a limit to how much productivity can be increased in services?

            We lean advocates might be inclined to say no. Continuous improvement means you are always getting better, and I’ve never heard any lean believer suggest that gains in productivity are less achievable in one business sector as opposed to another.

            But I had to stop and say “Hmmm…” after reading The Outlook column this week in The Wall Street Journal. Writer Brian Blackstone questions whether the economy faces an incurable ailment known as Baumol’s Disease.

            This “disease” is named after economist William Baumol, who argues that the labor-intensive nature of some services acts as a constraint on productivity growth in an economy that increasingly produces services – such as the United States.

            Baumol’s prime example is a classical string quartet – it always requires four people, and it always takes roughly the same amount of time to perform a given piece of music.

            Blackstone makes clear that there is by no means universal support for Baumol’s position. Indeed, one pair of economists used available data on the economy to declare four years ago that Baumol’s disease had been “cured.”

            However, the reason the issue is being raised now is that the numbers on U.S. productivity growth were revised downward last week, indicating that productivity growth has slowed for four straight years. At the same time, Blackstone notes,


            …employment in traditionally less-productive sectors such as health care and leisure is growing rapidly, while employment in higher-productivity business services is growing more slowly; in manufacturing and retail trade, it is flat or shrinking. Therein may lie clues into whether the recent dip in productivity growth is a major turn or a temporary lull.


            Baumol, who is now at New York University, is quoted in the column as saying that not only has his namesake disease not been cured, but


            'I can brag and apologize that we've made the longest-lasting [correct] prediction that's ever been made in economics.'


            What do you think? Are productivity gains in services destined to always be lower than those in manufacturing? Post your comments below.




Study: Managing Supply Chain Inventory is the Priority

The importance of reducing or eliminating inventory has long been known to lean disciples (even if standard accounting practices mistakenly think inventory is an asset). A new study shows that increasing numbers of companies with global supply chains also are coming to understand what inventory is all about.

            The study, conducted by Aberdeen Group and partially sponsored by software vendor E2open, was based on a survey of more than 200 enterprises.

            It found that inventory management is the top priority for companies, with nearly two-thirds of respondents indicating that they are re-evaluating their inventory management process and technologies.

            The second-place priority, which Aberdeen said was “very closely behind” inventory management, is supply chain visibility.

            The study also said that innovators are 1.5 times more likely than all others to indicate that globalization is their top driver for supply chain improvements. (An Aberdeen news release announcing the results of the study did not say how a company was classified as an “innovator.”) Another driver Aberdeen mentioned is new customer-specific fulfillment mandates.

            'Aberdeen's research validates conclusions we've drawn from our customer base that industry leaders are achieving operational excellence by executing key supply chain transformation initiatives, such as globalization, lean demand-driven, low cost country-based sourcing, outsourced manufacturing, process automation and trading partner integration,' said Lorenzo Martinelli, senior vice president, E2open.

            Like many Aberdeen studies, this one has a significant focus on technology. The study notes that five times as many companies plan to spend more on new supply chain technology in 2007 than plan to spend less. Overall, 41 percent of respondents, and 77 percent of large enterprises, plan to spend at least $500,000.

The supply chain infrastructure areas companies said are most important include:

  • Supply chain management exception and alerting platforms (52 percent)
  • Master data management (47 percent)
  • Business process management (46 percent)

            Certainly, we’ve seen shifting emphasis in the lean community in recent years, with growing focus on the supply chain and not just on in-house operations. It’s an area of vast opportunity, and one I suspect will be the center of increasing numbers of lean initiatives in the years ahead.



Still Made Here: The Latest in Consumer Trends

I enjoy the thoughts offered on Trendwatching.com, a site that looks at global consumer trends, ideas and insights. And if you want to pursue a strategy that reflects a trend described in one of their most recent articles, you would do well to make lean a part of that strategy.

            Trendwatching labels this new trend (Still) Made Here.

            (STILL) MADE HERE encompasses new and enduring manufacturers and purveyors of the local. In a world that is seemingly ruled by globalization, mass production and ‘cheapest of the cheapest’, a growing number of consumers are seeking out the local, and thereby the authentic, the storied, the eco-friendly and the obscure.

            The article lists several drivers for this trend. The first is eco and ethics; consumers want to know that products were produced in eco-friendly ways, and they want to know that a product did not involve exploitation of poor workers in a third-world country, for example.

            Story and status are listed as the second driver, referring to the idea that the location of production, usually local, can be regarded as important.


            Millions of consumers will gladly continue to pay a premium for these goods as they tell a story of authenticity, of connoisseurship, of the owner knowing where in the world to source the best of the best for each product category.


            The third driver is described as the importance of community, meaning:


            …to many consumers, ‘global’ has come to represent faceless, rootless mega-corporations and supranational bodies, headed up by money grabbing executives whose golden parachutes seem to grow with the degree of incompetence they've let loose on employees and other stakeholders. Far from being chauvinistic nationalist movements, (STILL) MADE HERE and (STILL) SOLD HERE will increasingly be about supporting one’s neighborhood, one’s city, one’s region, to regain a sense of place and belonging and to safeguard future access to the special and original, vs. the bland, the global and the commoditized.


            The article mentions a variety of companies that, in a variety of ways, are taking advantage of this trend. For example,


            American Apparel. The most famous advocate of (STILL) MADE HERE deals with ethical concerns in a radical way: by manufacturing its garments in… high-cost LA. American Apparel now operates the country's largest garment factory, employs more than 5,000 people and operates 145 retail locations in 11 countries. Workers are paid (on average) USD 12 an hour, almost twice as much as California's minimum wage.


            If Trendwatching is correct, then local production is good. That is also true in the eyes of lean advocates, who view transportation over long distances as an expensive form of waste.


            The article does offer this caution:

            (STILL) MADE HERE is a good conversation starter. It doesn't in any way signal the end of globalization and it won't save incompetent, uncompetitive local producers from innovative, global competitors. To further downplay its importance, remember that trends rarely apply to all consumers. (STILL) MADE HERE is no exception to the rule. Some consumers will not care at all about the origins of their purchases, will feel no need to sacrifice money or time for the environment, or have no interest in sharing stories with others. And when it comes to local versus global, never forget that globalization has brought consumers plenty of delights and excitement.

What (STILL) MADE HERE does provide eager marketers with is a fantastic source of inspiration: those consumers who are interested in something with a sense of place, the local, the storied, want you to bring them innovative new goods, services and experiences that appeal to those desires.

            So pursuing a lean strategy will do more than help you achieve low-cost production and rapid time to market. It can help you stay current with the latest trends in consumer desires.



Chrysler’s Problem is Not the Unions

Whether the appointment of Bob Nardelli as CEO is good or bad for Chrysler should really be focusing on what the real problem is at Chrysler (and whether Nardelli can solve it).

            In that vein, I am disturbed by a recent blog posting – which I fear represents the views of many people – that implies the best thing Nardelli can do is beat down the unions. I’m personally not a big defender of unions, but I don’t view them as the primary source of Chrysler’s problems.

            I’m referring to comments on the Ideoblog, written by Larry Ribstein, a law professor at the University of Illinois. Ribstein, in a posting this week, refers first to an earlier post in which he said:


            Cerberus is bringing a lot of money to the table, in return for which it is demanding cooperation. One way to characterize this is that private equity is bidding to clean up contracting problems that are threatening to send an otherwise viable business down the tubes.


            And in a separate posting, he said:


            The problem with US automakers clearly isn't the basic business (see BMW, Toyota and Honda). So it must be the managers or the unions, depending on whom you ask. The private equity players aren't easily going to be able to dispense with either – they need the managers' expertise, and somebody has to make the cars. But if there's money to be made, and it's just a matter of dividing the pie, I suppose it might help to have a new pie-slicer – particularly since the alternative is burning the pie in bankruptcy.


            In his comments this week, Ribstein concludes:


            If you want a tough pie-slicer, Nardelli's tough attitude toward the unions (including some of the Home Depot shareholders) is a job qualification, not a drawback.


            Ribstein gets it wrong. I don’t dispute that expenses under union contracts – particularly for retirees – are a big issue at all the U.S. automakers. (Of course, those expenses are under contracts that management agreed to, but let’s not get into that right now.)

            However, the “basic business” Ribstein cites – or more accurately, the way in which the U.S. automakers operate – is, in fact, the problem.

            The Big Three have a long history of top-down management, showing too little respect for the knowledge and ideas of employees, and treating suppliers as adversaries rather than partners. Toyota is now ahead of all of them because of its commitment to continuous improvement, its culture of respect for employees and its dedication to working with others in its supply chain.

            Ironically, Ribstein quotes the Wall Street Journal as saying Cerberus is “a big believer in the Six Sigma system and other lean management strategies.” He notes Nardelli’s experience at GE and says Nardelli “does have the sort of experience that private equity values.”

            I previously expressed skepticism that the Cerberus acquisition of Chrysler represented any real belief in or commitment to lean principles. And if Nardelli is being hired at least partly for his tough stand against unions, it clearly doesn’t.

            Nardelli’s approach may cut expenses at Chrysler and maybe even help the company show a profit. But it won’t turn Chrysler into a market leader.


Mistake-Proofing in Hospitals: The Case of the Wrong Film

A disturbing account of a medical error appeared recently in a story in the Modesto Bee newspaper in California. It highlights the need for mistake-proofing measures.

            A surgeon performing coronary bypass surgery on a woman discovered midway through the operation that he was using angiogram films from a different patient. An angiogram film serves as a roadmap for a surgeon in deciding where to bypass clogged arteries.

            The surgeon, Dr. Lit Fung, claims that the woman’s heart was very similar to the other patient’s, and he was able to finish the surgery successfully.

            However, the woman, Sandy Baumgartner, sued. She claims that her condition was no better after surgery than before, with some symptoms worse. And she contends that a second doctor she consulted after the surgery discovered that one bypass had missed the worst blockage, requiring follow-up treatment involving a stent and an angioplasty.

            The hospital involved, Memorial Medical Center, agreed to a settlement, but the suit against the surgeon is still pending.

            I won’t attempt to pass judgment on the merits of the suit. But the broader question is, how did the error occur and how can future errors be prevented? According to the story,

            At Memorial, the pictures are put on discs in the cath lab and must be hand-delivered to the operating room. The patient's name appears on the films when they're opened on the computer.

According to Baumgartner, a hospital representative told her a catheterization lab employee had burned two discs of the other patient's angiogram and mistakenly put her name on the cover of one disc.

Fung wrote on the medical record of Baumgartner's surgery that the films of 'a different patient had been loaded onto the computer.'

Gary Baumgartner has run his wife's angiogram films on his home computer and said her name is on the film. He believes the other patient's name also would have appeared and is outraged that the surgeon and operating personnel did not notice that during surgery.

            What type of mistake-proofing could prevent this from happening? The story, by Ken Carlson, offers one idea:

            Another Modesto heart specialist said the computer system at Memorial does not have a database link between the cath lab and operating rooms, so employees have to handle the discs.

In comparison, surgeons at Doctors Medical Center can access angiogram films from computers in the operating room. The surgeons click on the patient's name to call up the films.

A surgeon would have to click on the wrong name to make a mistake.

            Does anyone really need to be reminded of how critical it is to avoid errors in hospitals? Apparently so.


Why Mergers and Acquisitions Fail

What’s the biggest problem in making a merger or acquisition succeed? Failure to address process issues, particularly in the supply chain.

            That is the key finding of recent research by Accenture. The consulting firm surveyed 300 executives from North America, Europe and Asia-Pacific. The study found, not surprisingly, that executives view M&A as the most important way to increase the scale of their global operations – more important than investing in new production and distribution capabilities or finding new markets or suppliers.

            I think that may be a wrong-headed approach to growth, but let’s save that discussion for another time.

            Mergers and acquisitions often run into problems, especially costly procurement and supply chain disruptions. The results, cited by close to half of the executives, include increased product-launch disruptions, a loss of talent, diminished product or service quality, problems with order-fill rates, stock outs, inventory build-ups and increases in supply disruptions.

            And according to Accenture, the most frequently cited cause of these problems is “corporate management’s fixation on cost savings and paying too little attention to supply chain issues and prospective synergies.”

            “Apparently, many execs are confident that supply chain issues can be handled later in the merger process, and they de-emphasize important service-oriented metrics such as quality, inventory turns and order-fill rates,” Pat Byrne, managing director, supply chain management practice, writes in Accenture’s corporate blog. “Their reward, in Accenture’s experience, is potentially compromised service and at-risk revenues – greater dangers than failing to capture every last quick-hot cost reduction.”

            Surprise, surprise.

            Byrne also says it is Accenture’s experience that the supply chain often accounts for 30 to 50 percent of the savings a merger ultimately generates. “It’s the last thing companies should postpone or overlook,” he adds.

            In other words, it’s the process, stupid. What merging companies should be doing at the outset is developing extended value stream maps and creating a vision of their future state. Identify the waste and eliminate it; the cost savings will then take care of themselves.



Ohio Educators Misunderstand Continuous Improvement

When recognition grows for a concept like continuous improvement, it is perhaps inevitable that the terminology will be more widely used – and misused. I recently saw a striking example of this.

            I had already noticed a trend of increasing use of the phrase “continuous improvement” in the field of education. In one sense, that is understandable. You could argue that educators are in the business of continually improving their students – or that continuous improvement is what education is all about. I am sure many educators see themselves this way.

            However, the Ohio Department of Education has found a way to completely misuse the term. I discovered this in recent news reports about the Cleveland school district, which has struggled in recent years to meet state standards for education.

            The latest reports were good news for Cleveland. Performance of the district’s students has improved. As a result, the state education department removed the district from the category of “academic watch.” Now Cleveland has been moved up to the classification of “continuous improvement.”

            Excuse me?

            Continuous improvement is a way of operating. It is an approach and, more importantly, a philosophy – the idea that you can always make things better. It is not a grade or a ranking or a category or a classification. Not only is Ohio’s use of the term incorrect, it is also confusing. I don’t know what their classification means.

            I am a journalist by background, so I tend to focus on word usage perhaps more than most people. However, this is not just about word usage. When the terminology surrounding an important concept is misused, it creates misunderstandings about that concept, which can damage or undermine efforts to promote valuable ideas.

            It is a shame that this has happened. Someone needs to educate the state educators.



How Renting a Car Could be Easier

Lean disciples know that, in addition to eliminating unnecessary process steps, it is also important to create the right sequence of value-adding steps. Having the right steps in the wrong order can be just as bad as including wrong steps.

            I was reminded of this during my recent vacation when, on two separate occasions, I rented cars.

            Reserving a car online is a fairly simple, straightforward process, which can be completed through almost any travel website. You specify when and where you will pick up and drop off the vehicle, and you indicate what type of vehicle you want (i.e., mid-size car, full-size SUV, etc.).

            But when you actually pick up the car, you are asked additional questions. Do you accept or decline insurance from the rental company? Will you return the car with a full tank, or pay the rental company to fill it?

            Why can’t those questions also be asked online, at the start of the process? It would save time at the airport. (And believe me, after a long flight, every minute you spend standing at the rental counter, waiting to get started on your actual vacation, is frustrating. It’s even worse when you encounter a rental agent with a bad attitude, but don’t get me started on that.)

            The car-rental companies have done a pretty good job of making the return of a vehicle a fast, painless process. (You drive in, an agent with a handheld device walks up to you, looks at the car, asks a few questions and prints out your receipt.) The same is not true when it comes to picking up the car.

            Does anyone else feel the same way?



Improving Flow at Pearl Harbor, Part Two

The Visitor Center at Pearl Harbor serves more than one purpose. First, it is a jumping-off point for the memorials at the U.S.S. Arizona, the U.S.S. Missouri and the U.S.S. Bowfin.

            It is also a gathering place, where on any given day a WWII veteran or other VIP might be on hand to answer questions and sign autographs. The gift shop is in the center, so you can purchase Pearl Harbor memorabilia.

            But the center is also an exhibit in its own right, with educational displays throughout the interior as well as on the exterior grounds. And that is where you run into a problem.

            The center consists primarily of a large central area surrounded by walls on most sides. (Like so many public areas in Hawaii, including restaurants and hotel lobbies, the center is partially open to the outside.) There are some enclosed rooms off to the sides, including the theater, the gift shop and rest rooms.

            A great many people who visit take the time to look at the wall and exterior displays, which are numbered and feature photographs and text. Many visitors rent equipment to listen to a self-guided audio tour, which – using the numbers – walks you from one display to the next, first inside, then outside.

            The problem is, aside from putting the displays in numerical order, the people who set them up failed to adequately address the issue of flow.

            First, Pearl Harbor consistently attracts large crowds, so at any given time you may have dozens of people gathered near each display.

            Second, the physical layout makes no distinction between those listening to the audio tour and those who are not. So people on the audio tour, steadily progressing from one exhibit to the next, are in the same area as people not on the tour, who may or may not be following the exhibits in order. Gridlock often results. (And in a building without air conditioning, open to Hawaii’s warm, humid weather, this is not a good thing.)

            In a visit to Pearl Harbor last month, I did not attempt the audio tour. My wife and daughter did, but after encountering the crowds, they both chose to sit outside and simply listen to the recordings. My son-in-law stuck with the audio tour, but expressed disappointment at the end that he was unable to see many of the exhibits because of the crush of visitors.

             A fund-raising effort is under way to expand the facilities at the center. But after viewing plans for the expansion, I concluded that it does nothing to address the flow problems.

            The first thought that occurs to me is that it might make sense to reconfigure the displays with two ways to view them – one would be a path for those on the audio tour, with some other arrangement for everyone else. (In lean terms, think of the two groups of people as different families of products, going through different manufacturing cells.) That might involve making the displays free-standing, rather than having them hang on the wall, so that people could view them from two sides.

            I’m sure there are additional approaches that might help. If you have any suggestions, please post your comments below.

            Most people have limited interest in history. But there is huge interest in the displays at Pearl Harbor, which represent a great opportunity for adults to brush up on their history and teach it to their children as well. It’s a shame that opportunity is being squandered by poor flow that interferes with the public’s ability to view the displays.



Improving Flow at Pearl Harbor, Part One

I spent most of the past two weeks not thinking about lean or anything work-related, while I enjoyed a wonderful vacation with family in Hawaii.

            However, there were a few moments during our trip when the lean part of me came to the forefront. Some of these occurred during our visit to Pearl Harbor.

            The memorials there are an extremely popular tourist attraction, which, unfortunately, is troubled by some significant flow problems. This post and the next one will be devoted to discussions of those problems.

            Most people who come to Pearl Harbor want to visit the memorial at the U.S.S. Arizona. This memorial is a simply-designed white structure built like an island in the middle of the bay, directly above the spot where the Arizona, sunk by the Japanese attack on Dec. 7, 1941, still lies beneath the waves. The ship is a tomb for the sailors who died on board during the attack, and their names are engraved inside the structure. Visiting the memorial is a moving experience, and well worth the trip.

            (The Arizona is not the only memorial at Pearl Harbor. You can also climb aboard the U.S.S. Missouri, the battleship aboard which Japanese leaders formally surrendered at the end of the war. And you can climb down into the U.S.S. Bowfin submarine. But neither of those attracts the number of people who flock to the Arizona memorial.)

            To visit the Arizona, you first obtain a ticket for a particular time. At that time, you enter a theater within the visitor center, located on shore. After viewing a 20-minute video about the attack on Pearl Harbor and the war with Japan, you walk to a pier, board a ferry and sail to the memorial. After you disembark for your visit, the group that preceded yours boards the ferry for their return trip to shore.

            That system seems to work reasonably well. The problem occurs at the start of the process when you get your ticket, which is free.

            The travel books I read in advance of our trip warned me about the high demand for tickets and the need to arrive early – so my family and I got to the visitor center at around 8:30 a.m., about an hour after the ticket office opened.

When we arrived, we saw a line at the ticket office that snaked out the front door of the center and all the way around the front grounds. I would estimate there were at least 200 people standing in line, and probably more – a scene, I am told, that is repeated almost every day. After spending at least 40 minutes in line, we got tickets for 10:30 a.m. I understand that distribution of tickets ends each day by early afternoon, once capacity has been exhausted. As far as I know, tickets cannot be obtained in advance.

The lean part of my brain was yelling at me: It shouldn’t have to be like this! There must be a way to apply lean principles and improve the flow!

Any suggestions?