The Value of a Management System Accommodating Remote Work

Working remotely creates a significantly different system than working all next to each other. There are big advantages to working right next to each other. There are also really bad office designs (which are very common) which detract from success of working next to each other (distractions etc. that cubical farms, "hoteling" create etc.).

There are challenges to managing a system of work with people not being right next to each other. There are also huge advantages of hiring people that are not within commuting distance of your location. In my opinion organizations that learn to manage a dispersed workforce effectively will have huge competitive advantages long term.

Of course we have decades of evidence of organizations electing to ignore better management practices so I imagine most organizations will be dragged kicking and screaming into the future (if they ever get there at all).

There is some sense in my opinion to focusing on working all next to each other as your organization's management style. But my guess is for all but the richest organizations (that can afford to overpay, pay premiums to those that are willing to commute, willing to tie themselves to one physical location, happen to be in the area...) there are large gains possible by learning and creating a manage system that works effectively with remote workers. When you can't just pay huge salareis to put up with the large shortcomings of your management system it is important to find other ways to compete in the marketplace.

Figuring out how to work effectively remotely provides huge potential advantages for many organizations.

Related: Employees That Telecommute are the Most Loyal (2007) - The Management System is the Key - Shared Principles for Managing People Engaged in Diverse Tasks

Take Risks to Learn and Improve, But Do So Wisely

My edited comments on: The Limits of Learning From Failure

Failure can be a great learning tool, especially if it is planned. Create an environment that supports and learns from failure, but also use the scientific method, coupled with experience, to understand and mitigate the risks.

I agree, I wrote about this on my blog: Accept Taking Risks, Don’t Blithely Accept Failure Though

The goal is to maximize innovation and improvement. To the extent we need to take risks and accept some failures to achieve this we should accept failure. But that doesn’t mean we don’t continually try to improve our management systems to reduce the costs of failure. Even while we take risks we want to do so intelligently.

It is true many organization are so fearful of being blamed for failure that sensible risks are avoided. We do need to create management systems that allow taking sensible risks but we need to learn while still limiting damage from failures. Do experiments on a small scale, iterate quickly and expand the scope as you learn.

Related posts: Learn by Seeking Knowledge, Not Just from Mistakes - Risks Should be Taken Wisely - What is the Explanation Going to be if This Attempt Fails?

Iterate to Continually Improve

Thoughts on: The Challenge of PDSA: Feeling Like You’ve Fallen Short

For me, this snowball was the understanding of the continuous improvement cycle, the iterative process towards ideal state or what many call “true north.” I have seen and explained the well-known visual many times; the person climbing up towards target state and, ultimately, ideal state through PDSA, only seeing ahead of them as far as the flashlight reaches.

The relationship of PDSA iterations and ideal state never really dawned on me while I was working through PDSA cycles in problem solving. The visual depicts the learner stair-stepping up through PDSA cycles, each step up the flashlight seeing further, learning more and getting closer to ideal.
...
In absence of a clearly defined Target state, satisfaction with progress, pace, and incremental improvements may more times than not, leave you feeling as if you have fallen short.

Iteration and continual improvement are key. Understanding that "target state" is a temporary target is important. If a "ideal state" is too specific it can hamper innovation. This usually isn't so critical on fairly short term PDSA (except in those cases when we should look at innovation instead of improving the current process).

The PDSA process doesn't hamper innovation. But, when people set in their minds ideal states or targets that they move toward and don't see those as flexible based on new learning they can stunt innovation.

Related post: Resources for Using the PDSA Cycle to Improve Results - Continually Improving Using a Focus on Delighting Customers

The Absence of Defects Does Not Necessarily Build Business

Comment on: Saving Money vs Making Money

by saving money, we make more money – simple (and easy); anyone should be able to see that! And while this may be true for the short term, it doesn’t support any longer term growth.
...
So, what do you want to do? Do you want to save money or make money?

Let me know your thoughts!

How about Deming's thoughts :-)

"No defects, no jobs. Absence of defects does not necessarily build business… Something more is required." W. Edwards Deming

Waste can be equated to defects and the sentiment is the same. I share more of my thoughts on the topic in a 2006 post: Quality and Innovation.

Related: Zero Defects Isn't the Right Goal - Customer Focus by Everyone

I Don't Take "Better Management" for Granted

My response to a post on Management Innovation is at the Top of the Innovation Stack [the broken link was removed] and the authors reply to my first comment:

JD Meier: "I think we are so used to 'better management' now that we take it for granted."

You are much luckier than I (both as an employee and customer). I find very few companies show evidence of practicing what Deming, Drucker, Ackoff etc. talked about many decades ago. Better management is still a distant hope for most organizations in my opinion.

I do think Hamel talks about lots of good stuff. I admit my study of his is not extensive, but from what I remember he does tend to (as do nearly all these people trying to sell their ideas) make more of what he is saying than is merited.

It reminds me of college when about 50% of my professors in the first lecture had some version of: In [this class] we are studying the true core of knowledge, everything else is just a different take on what we will study here. If it was physics then chemistry, biology... are really sub-disciplines of physics. If it was philosophy everything else was a sub-discipline of philosophy. I thought it was pretty funny. And that passion likely made them great professors, even if I think they lost perspective on reality.

I think even many fairly good management thinkers get hung up on the wonderfulness of their thoughts and how critical their details are. I do still I do like Hamel but I think he is too caught up with his ideas and thinking what he has been looking at is more important than it really is.

My first comment:

I agree with what I think is the premise - that better management is critical for the ability for an organization to successfully innovate. And that bad management can kill otherwise excellent innovation in the other domains you list.

I think calling it management innovation however is misleading. It is true management at very valuable companies (and less valuable ones) needs a great deal of improvement. But it is mainly adopting good management practices people like Deming, Ackoff and Drucker talked about many decades ago.

Related: The Need to Improve Management While Building Organizations Fit For Human Beings - Quality and Innovation - New? Different? How About Better?

What Works for One Business May Not Work For Others

How “flat” should an organization really be? Zappos eliminates managers [the broken link was removed]

My concern isn’t Zappos. It’s all the organizations that read about Zappos and decide to copy them without understanding why they are copying them, or what needs to be in place to enable this.

This sentiment needs to be adopted by managers for everything they learn about management. There are good management ideas. But there are very few management ideas that you can just take and adopt easily in your organization.

The success of management practices is highly dependent on the rest of the management system of the organization.

I find we are nowhere near accepting enough of the complexity involved in management. We want simple solutions. This unwillingness to deal with the full system is responsible for a great deal of failed management effort.

What Zappos may be able to do successfully may well make little sense for most other organizations. I don't see eliminating all management positions as a wise management practice in general. But I am willing to believe it might be that such a move can work in some organizations.

Related: Pilot on a Small Scale First, Good Advice We Often Ignore - Paying New Employees to Quit at Zappos - Toyota Execution Not Close to Being Copied - Experience Teaches Nothing Without Theory

Lean Thinking at Amazon

My comments on Michel Baudin's post discussing lean, service and Amazon:

Unlike other Shmula readers, I can't jump from this to the conclusion that Amazon are based on Six Sigma or Lean. Instead, what I hear Bezos saying is "We studied what's out there, and went our own way." And that way is a game changer in retail worldwide, worthy of study in its own right...

It is interesting to see what Amazon continues to do. I think you are right that they have learned good things and are applying them their way. Often Bezos does what I see as much more fundamental lean thinking than those that spout the term a great deal.

For example: Bezos going to the gemba, Bezos root cause analysis ... Bezos understand the weakness of traditional accounting more than most any executive (he was a Wall Street analyst), this is way more important than I ever see mentioned in what makes him, and Amazon, different.

Bezos practices long term thinking better than nearly every "lean" company (though Toyota, and some others do this very well). From this mindset many things spring - focus on long term customer value, invest in value stream (Amazon's purchase of Kiva robots for example). Willingness to go against the current fashion, being directed by Wall Street analysts what is in the businesses, etc..

There are also job announcements, over the years, looking for lean experience and expertise I have seen from Amazon (which is a clue they are interested in lean).

Hopefully Other Countries Will Save Us From USA's Attempt to Sell Us Out to Aid Big Political Donors

The Trans-Pacific Partnership has been atrocious.  Essentially the USA has been strong arming other countries into secretly selling out their citizens to provide benefits to large USA political donors.  The Obama administration has once again done the opposite of being the open and honest organization candidate Obama promised.

The hopes of stopping the corruption of the USA political system, in this case, wrests with other countries protecting their citizens (and the citizen's of the USA from the corrupt practices.  Vice President Bidden seems particularly focused on paying off his donors and friends with this horrible treaty.  The USA administration realizes the selling out the innovators and rights of citizens for large political donors is so toxic it would likely not survive if there was the transparent government candidate Obama promised.

The TPP should be stopped.  I would not trust politicians that don't speak out against it publicly now.  Politicians have become adept at hiding what they promote behind secrecy and misdirection.  Many are hoping they can hide behind the secrecy around the trampling of innovators and citizens in the TPP to pay off their donors while claiming the appose the horrible policies of the TPP.  If they are not speaking out now, all they are doing is taking advantage of the secrecy the Obama administration has made its policy for trying to hide government action that harms the country from public view.

The Trans-Pacific Partnership being pushed by Washington is nothing more than a corporatist power grab by William Pesek.

American lawmakers and civil liberties groups have complained for some time about the opacity surrounding the treaty's terms. Mild grousing turned into outrage last month after WikiLeaks did what Barack Obama's White House refuses to: share portions of the document with the public. The draft of the intellectual property rights chapter by Julian Assange's outfit validated the worst fears - that TPP is a corporatist power grab.

Rather than heed the outcry, the US doubled down on secrecy, refusing to disclose more details.

Hasn't the US wondered why so many of east Asia's most promising democracies have avoided the treaty? The popular excuse for why Indonesia, the Philippines, South Korea, Taiwan and Thailand aren't among the 12 TPP economies is that they aren't ready or are trapped by their own timidity. A better explanation is that their leaders realise that truly transparent and accountable governments, to borrow Kerry's own words, shouldn't be leading their people into the unknown.

The root cause of this situation is the corrupt USA political system. At a bit less abstract level the TPP seeks to worsen the deadly diseases of the broken patent and copyright system (and also worsen the broken health care system). The TPP is an attempt by those that understand systems thinking to mold the system in secrecy to benefit those giving USA politicians lots of cash. We can only hope that other countries are not willing to do the bidding of the USA in this case (though the USA is willing to provide incentives and threats to allow it to deliver for those giving USA politicians cash).

Related: Intellectual Property Rights and Innovation - The People We Elect Recently Are Dramatically Falling Us - Cash for Votes subreddit (political corruption) - Why Copyright Extention is a Very Bad Idea

Risks Should be Taken Wisely

I agree. I think it is wise to understand you are willing to take certain risks in order to improve and innovate. Sometimes things might not work out. That doesn't mean you don't do what you can to mitigate the impact of things that don't work out.

It does seem to me the "accept risk" (fail fast, accept failure...) folks would be better served to focus a bit more on mitigating the results of failure. Sure accept risks when you determine it is worth taking the risk due to the benefits.

I wrote about this earlier this year: Taking risk, but do so wisely.

Accepting risk doesn't mean failure is good. And it doesn't mean the results of experiments are all blameless. You can do a poor job of taking risks. If that is done, we should learn from it and improve how we take risks going forward. I would also put my focus process over people (what, good and bad, can we learn about how we did this experiment or took this risk to do better experiments and risk taking going forward).

In response to: To Blame or Not to Blame

Related: Find the Root Cause Instead of the Person to Blame - Blame the Road, Not the Person - Respect for People Doesn’t Mean Avoiding Any Hint of Criticism

Lean v Innovation is a False Dichotomy

The whole idea that process improvement efforts are harmful to innovation frustrates me. It is due to misunderstanding what is labeled as process improvement. Lean isn't about just making whatever process exists less wasteful. Lean focuses on value added to customers but people forget that.

A separate idea people have is that in order to improve processes you need to improve all of them the same way. Wrong! The way you improve the internal operations of a fast food restaurant are not going to be the same things you do to improve a think tank or research lab. But both have processes. The results of both can be improved by improving how the systems work.

Yes a think tank or research lab would not be served well by the same types of processes as a fast food restaurant. And a fast food restaurant wouldn't be served by the type of process improvement that would benefits a research lab.

I have written about this several times, including:

• New – Different – Better
• Process Improvement and Innovation

Response to: Lean v. Innovation…Wrong Question!

Related: Clayton Christensen on Innovation and Macro Economics - Accept Taking Risks, Don’t Blithely Accept Failure Though

The Failure of Hero Worship Thinking at JC Penney

Where J.C. Penney And Ron Johnson Went Wrong

Penney’s board opted for a silver bullet that didn’t exist. Rather than do the hard work and heavy lifting necessary to turnaround a brand that had been mismanaged for years, they wanted a quick fix – they bought smoke and mirrors rather than sound business practice.

I think 2 fatal mistakes were made.  First paying Johnson and 3 executives $170 million shows a failure to understand management, leadership and organizations.  It values up hero worship and huge risk taking instead of valuing the deep changes needed to improve a company such as JC Penny.

Lots of boards share this hero worship vision of organizations.  Largely pushed by such a hero worship vision they then took huge gambles instead of experimenting learning and adjusting, experimenting some more and adjusting and only once the evidence supported the wisdom of adopting changes system wide taking that step.  Using the PDSA improvement cycle would have made the experiments much less damaging and hopefully a success strategy (certainly they didn't find one) could have been found.

I have written previously that the CEO is only one person. Ron Johnson showed 4 people (that paid themselves $170 million) are not enough either. The whole attitude such people have about the appropriateness of hero worship and disrespect for the vast majority or workers sets up likely failure.

Related: Netflix is Well Managed, People are Overreacting to Short Term Issues - The Market Discounts Proven Company Leadership Far Too Quickly - How Could They Know?

Lean Thinking Aids Innovation Even if Poor Management Labeling Itself Lean Doesn't

Response to LinkedIn discussion asking if lean and innovation can co-exist (closed access and I don't think LinkedIn understands how urls work anyway so links wouldn't help):

I would say we too often criticize lean based on very poor applications called "lean." Studying Toyota is what gave us the name lean. Toyota has significant investments over the very long term in robotics; they innovated to create the Prius (and still dominate the hybrid market) and invest in research on things including home building, biotechnology and a thought controlled wheel chair.

It isn't lean thinking that is the problem with long term thinking. It is normally other bad practices (having nothing to do with lean) that create these problems. Sure plenty of places saying they are doing lean also have stupid practices like cost centers, short term ROI needed on everything, MBO... None of those are lean.

Innovation and lean can work great together, as can other measures to improve the performance of systems (in this case systems around innovation). Innovation comes from those close to the process and those outside the system. It isn't limited to one or the other. 

Yes, lean thinking can be applied to new situations with specific adjustments. Lean software ideas take lean thinking and provide some common practices that are often useful for those involved in software development. Toyota was definitely a follower in applying lean thinking to software development not a leader. Which shows even a company doing as many things right, as Toyota does, has plenty of room for improvement.

Profit = Market Price - Actual Cost or Price = Cost + Desired Profit

Comments on Google Nexus Q – Made in the USA

I agree with

"Deserved Profit = Market Price – Actual Cost"
   not
"Price = Cost + Desired Profit."

But what I see glossed over by many lean folks when they present this is volume and the complexity involved.  The iPhone could sell 10,000 (say, or some number anyway) at $2,000 in addition to an carrier subsidy.  They can sell millions at a much lower price point.  Market price is a movable thing (depending on volume).

Also the 2nd formula is fine for deciding what products to build (theoretically - you have to be guessing at the values).  But it is totally fine to say we need a price of $350 for x product for us to decide to offer it.

The task is then to guess right.  If $350 is not going to work you give up - or more likely go back to the drawing board.  Can we make it better for just a bit more and then sell it for $400?  Can we re-engineer certain things and lower the price to $250 and even if that means we had to get rid of the ability to use wifi will that work in the market?

It definitely can be sensible to say we can't make x for less than $400 - we are not pricing it at $300.  It might mean we can only sell 10,000 instead of 30,000 if we priced it at $300.  But since at $300 we are losing $100 a unit high volume isn't great.

I think "If the market price for a device like this is $100, then you have to engineer the total product cost so it can be profitable at that price." is very well said.  Again volume is still a big issue.

Sometimes there are price cliff points - I can't imagine selling a tablet that isn't hugely better than the iPad on specs for more than the iPad price.  So above that level the volume may be miniscule.  But I think often there are not cliff points.

And the company does get to set the price.  The market then decides to buy or not, and buy in what numbers.  Apple would probably sell very few iPhones for $3,000 more than they cost today.  How many they would sell at $100 more or $100 less may change significantly but they would still be huge sellers at either of those prices.  So that "market sets the price" idea is not 100% accurate (I don't think anyway).  I do think the first formula is a better concept than the 2 formula.  But it is something that is maybe 80% accurate?  And the 2nd isn't totally worthless (it is just that it should be looked at more as a should we offer this product or not decision).

Pricing decisions also have big long term versus short term considerations.  Apple has started pricing many things in a way which makes it really hard for competitors to undercut them.  Apple, almost for sure could charge more for the laptops they sell and the iPad and iPhone.  But if they did they make it easier for a competitor to compete on price.  This pricing decision is an Apple decision not a market decision.  The market weighs in after Apple make the pricing decision.

But the price point for a kinda ok tablet at $199 - maybe will work?  Fire seems to be doing ok, for a pretty small, kinda lame, really cheap tablet.

Apple has done well create products for prices much above what people thought was market price.  It turned out people were willing to pay more for a great product.

You can notice that we are trying to sell this car for $35,000 and we are hardly selling any.  Ok, lets make it $30,000 and see what happens.

When setting what prices you will try to sell for, looking at your costs is a perfectly sensible thing to do.  Once the market tells you that you are off, you need to adapt to the market.  It isn't super easy though.  Often you can think the market failed to appreciate the value we offered because we messed up x feature and with y missing it was an issue and people will buy only black from Apple but they won't accept that from us (or whatever).  What we need to do is fix those mistakes.  The pricing given those mistakes the market sets below what we expected but that isn't really a pricing issue it is really a damaged offering issue.  Eventually mis-understanding pricing may become obvious, but it often isn't.

Anyway, my main point is just that the "market price" isn't some easy thing to know.  It isn't like looking up the freezing point of water.  I do agree with the "formula" I just think the way it is presented is often not as useful as it could be.

Zipcar: Systems Improvement

Zipcar Customer Experience: Variability, Utilization, and Queueing

Late returning of cars appears to be a problem and long-standing theme with Zipcar. In fact, for late returning cars, the customer is charged a substantial late fee of $50. With such a high late fee rate, one can only surmise that late returning cars is a large enough of a problem and Zipcar’s response to this is to change the behavior with a large penalty.

Good stuff. Without knowing the situation (myself) couldn't a high late fee be the solution? The high late fee makes those renting cars very likely to return them on time to avoid the fee. It isn't clear if you have data that the high late fee is just a penalty that doesn't make the system perform better or not (to me reading this anyway). I agree, I think zipcar is an interesting innovation. It would seem to me real time (internet enabled communication) would help a great deal - notify of bottleneck, report cars needing service, tell user that car is late but these 5 nearby location have a car... Some of this is just trying to make the problem have a lessor negative impact.

I really like innovative ideas like zipcar especially that find solutions that are more efficient. Zipcars can reduce the waste of cars sitting around unused in millions of driveways.

Related: Zipcar Innovation (2008) - Traffic Congestion and a Non-Solution - Customer Focus and Internet Travel Search

Lean, Six Sigma and Innovation

Jeffrey Phillips brings up the question of how lean and six sigma work with innovation in his post: Lean on me. He raises many good questions. Let me share some thoughts on this topic here and later I will try to address this area more comprehensively.

Fast Cycle Change in Knowledge-Based Organizations by Ian Hau and Ford Calhoun is a good example of lean thinking, eliminating waste... in an innovation setting.
In, Turning Limitations into Innovation, Marissa Ann Mayer explains one of the systems improvements well:

Since only 1 in every 5 to 10 ideas work out, the strategy of constraining how quickly ideas must be proven allows us try out more ideas faster, increasing our odds of success.
...
In cases like these, the people working on it have spent so much time and are so personally invested that it's too painful to walk away. They often know the project is misguided, yet they see the effort through to the painful, unsuccessful end. That's why it's important to discover failure fast and abandon it quickly. A limited investment makes it easier to walk away and move on to something else that has a better chance of success.

This is a great example of applying management improvement ideas to innovation. You need to look at the system of innovation. Determine weaknesses in the system. Implement procedures to counteract those weakness. You also want to systemically support what is good, of course.

The PDSA cycle is a great tool for innovation, even for only for a portion of the innovation process. Other "lean" methods that support innovation: long term thinking, respect for people, constancy of purpose (shared vision), customer focus).

The tools (of quality, TQM, six sigma, lean thinking...) each have benefit. Those tools can be misapplied in relation to innovation. That would be an example of using the tools improperly, not an example that lean (or six sigma) doesn't work with innovation.

Can lean and Six Sigma concepts work in an area that almost demands that we work on items that can't really be quantified.

Yes, Deming knew you need to manage what can't be quantified and I believe lean thinkers do too (six sigma proponents might have more trouble with this but they can see this too).

DeBono, Hamel and Christensen have many good ideas on innovating effectively.

Also see:

• Managing Innovation
  
• Deming on Innovation
  
• Innovation and Research and Development
  
• Innovation at Toyota