Five steps for big improvements

Managers, whatever their level, need to take just five basic steps to make big productivity improvements – click on the link below for outline details

http://www.productivityknowhow.com/?page_id=378

BUT:

1. Corporate plans – If they exist, they’re not seen or understood by most managers

2. Performance measures – Most lack 80% of the measures they need

3. Analysis of potential – Most managers don’t know how to assess their % scope on offer to improve

4. Special improvement projects – Most have not been taught how to manage special improvement projects

5. Continuous improvement – Most in the West ignore the huge benefits possible from taking such action on a daily basis

No wonder national productivity improvement is slow at best, whatever the nation

The same five steps also apply to the action required of government ministers for they have a significant role to play – click on the following link

http://www.productivityknowhow.com/?page_id=1331

Again, the same problems as above arise with each step

Hence, despite well-intended speeches and media headlines about the need to improve productivity and ‘close gaps’, little effective change happens

May 15

Productivity positions built on sand

 

On Fri, May 12, 2017, I read an article about Chinese productivity posted by Bloomberg journalist Michael Schuman and sent him the following email:

Michael,

I read your article about Chinese productivity with great interest

The first step in any major productivity improvement drive is indeed to establish the current position – where are you now?

Most ‘expert’ commentators try to do this but are forced to use flawed GDP and so flawed national productivity statistics – then they offer a wide variety of broad solutions to close productivity gaps

Meanwhile, lowly managers on the front-line are left with little practical help on what they should do at their level – yet it is only at their level where some 80% of any national productivity improvement can be made

Given this ‘productivity support vacuum’ affecting all nations, not just China, you may be interested in a newish website which offers free advice for all managers at all levels in all sectors, public and private

If I can be of any further help, do please let me know

Cheers

DS

—————————————————————————————————————————————————

Michael replied the same day, from Peking:

Thanks for reading.

Yes, the data isn’t perfect, but at least you can get a sense of trends in productivity — ie is it going up or down, or how countries compare.

Best,

Michael

May 12

CEOs rate potential of new technology ‘very low’

A new Gartner survey of 388 CEOs/ senior executives found they rated as “very low” the potential for productivity improvement from new breakthrough technologies i.e. IoT, AI, blockchain (secure databases) and 3D printing

In particular, when asked for their ‘top enabling technology for improving productivity’:

  • Only 2% chose IoT – and only 1% picked either AI, blockchain or 3D printing

  • Whereas 10% chose ERP, 7% the cloud or data analytics, 4% CRM, and 3% mobiles or marketing tools

However, about half expected IoT would have a major impact on business changes to come, a third said the same about AI, and a quarter for blockchain and 3D printing

Gartner thus suggests ‘it may be too early in the game for CEOs to fully appreciate the benefits of these four general purpose technologies (GPTs)” – “CEOs are still largely judging productivity based on management theory from the industrial manufacturing era” – “they need ways to judge the value of such new technologies such as increases in customer approval ratings rather than, or instead of, using just revenue”

At present, according to Jack Gold, an analyst: “Most companies have no idea how to get the most out of all the new technology piling-up, nor how to measure return on its investment and the competitive advantage it might give them” – hence most use “seat of the pants guessing”

New measures and methods for employing these new GPTs are thus needed urgently

 

May 11

Unipart & Vanguard show ‘Ways’ for BIG improvements

  • Productivity is the most important peacetime issue facing any nation or organisation – therefore, one would expect all governments and major business schools, management organisations and consultancies to focus on it

  • Not so

 

  • For example:

    • The UK has no well-known, well-supported productivity ‘centre of excellence’ e.g. a UK Productivity Centre – HMG might occasionally set up study groups to evolve better measures of economic performance or advise on ways to improve national productivity but nothing much ever results

    • Major UK business schools offer no courses on the subject

    • The CBI and IoD offer no useful help or comment about productivity on their websites

    • Major consultancies offer their expensive advice on anything but – the one exception being McKinseys who delve into the subject, albeit only at the macro/ global level

  • So, for all the huffing and puffing about productivity being ‘almost everything’ and ‘the guts of capitalism’, managers and ministers are left with all sorts of productivity experts forever trotting out their groupthink wisdom about dismal ‘productivity gaps’ followed by widely different theories but little good practical help on how to close them – hence, most productivity gaps persist

  • However, hope is at hand

  • Two management consultancies have emerged who already have a successful track record in obtaining BIG quantifiable productivity improvements for organisations in both public and private sectors viz:

    • Vanguard Consulting

    • Unipart Consulting

    • N.B. I have no connection with either and only a limited understanding of their approaches but I do like what I know of them

  • Vanguard, led by John Seddon, has cut through all the highfalutin fads and TLAs on offer to identify HUGE improvement potential available in most organisations, much from cutting waste caused by what they call ‘failure demand’ or which arises within most processes – their approach is based on the thinking of Taiichi Ohno, his revolutionary TPS (Toyota Production System) and his focus on ‘removing the non-value adding wastes that occur in all OCTs (Order Cycle Times)’

  • Unipart, the car parts company, founded by John Neill some 30 years ago and a huge success since given it now has £1bn revenue and 10,000 employees – this week I was invited by Frank Nigriello, their Director of Corporate Affairs, for what turned out to be a long chat about their approach, the ‘Unipart Way’ and whether it could be improved:

    • Driving up to their Oxford HQ, one is peppered with roadside hoardings announcing ‘Productivity up by 33%’, ‘Waste down by 80%’ and so left in no doubt about what matters there

    • Frank and I then sat in the canteen that all levels of staff use – no separate directors’ dining room, lifts or loos as was often the case in my ‘old days’

    • Apparently, it’s difficult to summarise the Unipart Way as a sequence of discrete steps but my understanding was it’s a mix of:

      • Management communicating company plans to all staff – and highlighting exciting changes en route e.g. a new working environment such as that found at Disneyland

      • Hoshin Kanri – aka policy deployment – a system which translates directors’ aims into meaningful action and improvement projects for levels below – it also seeks feedback from below on possible problems/ barriers and suggestions for even better projects to produce changes needed

      • Less than 20 specific KPIs (Key Performance Indicators) employed overall – for example:

        • Customer satisfaction measures cover customers’ ratings of the price, quality and service levels offered them – as I also recommend

        • However, Frank added an extra heading ‘innovation programme’ saying customers put great emphasis on efforts made there

      • ‘Circles’ of representatives formed for each work area – members are empowered not only to think of lots of ways for continuous improvement (CI), no matter how small, but also implement them – CI is an approach ignored by most in the West yet it offers huge benefits for little cost and risk – go figure!

      • Process mapping helps identify wasteful activities and agree ‘standard methods’ for doing things – at least until even better ways are found

      • LEAN is used to reduce ‘seven’ causes of waste – Toyota had even been over to teach Unipart how to do this well – now, they offer to pass on this knowledge

      • Performance charts per work area displayed on several of the canteen walls showing trends and gaps, plus action planned and taken:

        • All are audited daily by internal staff – and there was no sign they found this ‘a chore’

        • The key is all this performance information is visible to all employees who can then offer their own ideas anytime

      • Frank then reeled off an impressive list of household name clients (e.g. Vodafone) where the Unipart Way had achieved significant hard-nosed results

      • I had originally thought their approach was essentially just another version of CI with a large dose of wishy-washy five year journeys and culture change thrown in

      • Wrong

      •  UW = ∑ (QL + CI) projects = a mix of Quantum Leap + Continuous Improvement projects underpinned by strong employee motivation/ involvement levels

  • The latest buzzword for the latter is ‘employee engagement’ exemplified on my visit by the following:

    • First, the smiley/ friendly atmosphere that greets you as you walk into the HQ building – after countless client visits, one learns to spot the difference between happy companies and others

    • Then the same in the canteen where girls behind the counter or on the till called Frank ‘Frank’, not ‘Sir’ – and Frank called them by their first names too – no aloof ‘command and control’ here

    • Then Sid happened to walk by us – he was an ex-employee who had retired to South Africa five years ago and was visiting the UK – he just wanted to meet up with his old chums, including Frank, whilst over here – and, again, it was first names only

    • My only quibble was Frank kept banging on about ‘employee engagement’ whilst I dared suggest it depended largely on the quality of leadership over said employees – perhaps modesty forbade any follow-up comment

  • Last, I asked Frank whether any further steps were in hand to improve the Unipart Way

  • ‘Digitalisation’ of all staff i.e. the ongoing teaching all about the potential benefits from use of robotics, 3D printing and AI (Artificial Intelligence) – already, this has produced a suggestion to instal sensors in canteen fridges so staff don’t need to keep checking that temperatures are kept within strict limits and food is not wasted

  • Before I left, and knowing that Frank and Chairman John Neill are keen to help improve UK productivity, I suggested that Unipart sponsor/conduct an annual UK productivity survey – much like the survey I led in the late 80s in conjunction with the CBI – in the process, they would enjoy splendid publicity for their consultancy arm as well as do something positive for the nation

  • And, if/ when that proved successful, Unipart might consider pushing for a powerful successor to the old UKPC, along the lines followed by Carla O’Dell and her APQC (American Productivity and Quality Center) – a win/ win result for all

  • Overall, my conclusion is “all power to Unipart and Vanguard” in their efforts to improve the performance of others – they might disagree on how best to get there but both seem to offer what most organisations desperately need i.e. practical solutions for big quantifiable productivity improvements and quick paybacks

Apr 26

By George, ‘every company is dying’

According to Sir George Buckley, a top quality UK export from the North of England to the USA and now Chairman of Stanley Black & Decker and Smiths Group,  the ‘basic building blocks are the same in all companies’ – he says:

  • ‘At the 30,000ft level, every company needs:

    • A dream

    • To know what it wants to be when it grows up

    • Good people

    • Relentless execution’

  • ‘At the 10,000ft level, senior executives have only five levers to pull:

    • Sales growth

    • Margin expansion

    • Working capital for improvement

    • Tax rate

    • P/E multiple’

That said, he claims many executives ‘do not know’ the above

Indeed, ‘the core of every company in the world is dying because of competitive attacks, the end of life of its products and maybe even cannibalisation of its own products’ – the trick is calculating how fast you are dying and then working out how much more stuff you need to put in at the top to counteract what is leaking out at the bottom’

‘If you only focus on short term results and not on replacing that core or expanding your capabilities, then you die’

He then claims there are only three ways to make new money in the Adam Smith sense of the phrase – via Manufacturing, Minerals and Extraction, and Agriculture – Banking does not make new money, nor Insurance, nor Tourism – they take money – they might expand the UK economy but they do not create new wealth

Reference the UK, his diagnosis of our deficiencies is mainly lack of skills:

  • ‘People should be encouraged to study/ work in STEM subjects – Science, Technology, Engineering & Mathematics

  • And charging people to study them – via student loans – is short-sighted’

Overall, the UK government ‘should foster innovation, support manufacturing and ensure that the education system lubricates the flow of skills that the UK needs’

George, despite having a degree and PhD, claims he gained most of his business knowhow in the ‘School of hard knocks’ where he found out ‘what works’

Most managers, and ministers, would do well to heed what he says

 

Apr 25

EU to become USE?

April, 2017

Since the euro-based austerity crises visited on Greece, Spain, Portugal and Italy – followed by the refugee crises causing Schengen alarm bells to ring loudly across most EU states – then Brexit – and now elections in France and Germany raising increasingly important national sovereignty issues there – the likelihood is the EU, as constituted, will not last much longer

Add to this mix the sclerotic performance of most EU economies, their lack of agreement over foreign and defence policies, the niggling irritation with the power and expenses of unelected powerbrokers in Brussels or judges meddling in matters which have nothing to do with ‘level-playing-field’ markets and you have a recipe for widespread disillusion with the EU

Radical EU reform has thus become a ‘must’ for at least 50% of the overall population but no alternative visions have been proposed/ publicised to date – and most of the current top players have too much vested interest to seek major change

Hence, it’s for outsiders to propose a new acceptable-to-all EU format i.e. a USE – a United States of Europe – a federation of independent states which the majority in the UK would also be keen to join – one where each member state might:

  • Regain its national sovereignty

  • Determine its own laws, foreign and defence policies

  • Drop the euro and re-establish its own currency

  • Control its own borders and immigration levels

  • Agree new trading rules for a ‘common market’ whilst not discouraging access for undeveloped nations nor competition from the rest of the world

  • Collaborate in such public service areas as social security, health. education, defence, transport and R&D – to improve lives everywhere

It’s surely only a matter of time before such a USE is formed

And if one seems ‘on the cards’ before 2020, Brexit negotiations most probably would be halted and the UK willingly become a member state instead

 

 

Apr 15

Passports for Productivity Improvement?

Some say the ‘Productivity Puzzle’ is the result of a storm of problems affecting both supply and demand in G7 developed nations viz:

  • Supply: In the past, major technological advances (aka Schumpeter discontinuities) enabled quantum leaps in productivity levels – G7 nations would all adopt them and improve at about the same rate – now, without more significant advances (as Robert Gordon, US economist, suggests) and much of what does add value being offered for free, GDP and so national productivity levels have flattened out – most goods and services have kept on improving in quality but are being offered at the same or less unit prices

  • Demand: G7 populations have stopped growing significantly, some even falling, so demand for most goods and services has also stalled – also, most people in the G7 already have enough of the goods and services they need – they don’t want more cars, TVs or iphones but simply to replace them when better quality and latest versions are on offer – hence consumer demand has apparently stopped growing

Overall, therefore, it’s no surprise that G7 GDP and productivity growth are both suffering ‘secular stagnation’ according to Larry Summers, Harvard economics professor and ex US Treasury Secretary – and this is likely to persist for many more years

So, if G7 nations are to increase demand (i.e. GDP) as before, they must export more – sales directors and government ministers must dust down their passports and go find the extra demand needed from outside their home borders i.e. from the two thirds of the world that, so far, has been left trailing far behind

 

Apr 15

IoT – Internet of Things

“The IoT can help businesses be more productive and efficient” says Phil Goldstein, web editor for BizTech – but they need a plan to integrate disparate technologies whilst addressing protection needs against malicious actors

Steve Darrah, director of national solutions at Intel, says that “IoT can be used to improve efficiency and profitability, drive safety and increase worker productivity e.g.

  • Retailers can use radio frequency identification tags to track inventory

  • Healthcare providers can use wearables to track the vital signs of seniors in long-term care and predict if a person is going to suffer a heart attack

Link Simpson of CDW notes that IoT technologies work in combination with other systems e.g. in the event of a fire, an office with IoT sensors can call the fire service, shut down elevators, take control of digital signage in the office, turn on video cameras to find workers and feed the images to the firemen on site, and lock or unlock doors to direct traffic out of the building

However, Simpson also cautioned about one major hurdle to afflict the IT revolution ever since it began mid last century – that different technologies running on different protocols and programming languages often cannot talk to each other – but the good news is that this can now be accomplished using ‘modern network gateway technologies’

He concluded: “IoT is really no longer just about the data and the information you can pick up from sensors – it’s about transforming your business processes”

 

Apr 01

Bravo – Diageo has appointed a CPO

  • At long last, a major company has appointed a Chief Productivity Officer (CPO) – at least it’s the first one I’ve read about

  • Diageo have clearly recognised the supreme importance of productivity improvement to their long term success and elevated their previous CIO, Brian Franz, to this new position

  • IT is indeed important, but it is only one of the tools/ skills needed for productivity improvement

  • In his new role as CPO Brian says he is: “Helping to lead a targeted drive across our entire cost base and plans to save £500m by 2019, two-thirds of which will be reinvested in growth”

  • He adds: “Productivity savings are often wrongly associated in simply cutting costs – we want to put the consumer at the heart of what we’re doing and drive top-line growth through productivity-focused activities”

  • One can only hope all other FTSE 100 companies and, indeed, all UK Medium and Large Enterprises, follow suit

  • Then, at long last, we might see a breakout in the apparent sclerotic UK productivity growth rate

 

Mar 23

Pareto for Productivity

Pareto, a 19th century Italian economist, spotted that “80% of effects arise from only 20% of possible causes” – apply this rule to national productivity levels and just the top quintile of companies determine whether improvements are made – and it has been ever thus

In other words, the great majority of companies are doing little or nothing to improve their productivity – nt only do they lag far behind the vanguard companies but the productivity gap between them could even be widening, especially when patenting and intellectual property rights restrict the spreading of new ideas and better ways of doing things

Andy Haldane, the chief economist at the Bank of England, recently supported this view by arguing that, if UK firms in the three least productive quartiles were able to improve at the same rate as companies in the top quartile, overall UK productivity would rise by 13% – whilst we might question the veracity of the data he used to calculate this specific figure, we fully agree with his overall view that most companies have enormous scope for improvement

So, given such a distribution of companies applies to most nations, not just the UK, a two-pronged national productivity improvement effort is needed by all viz:

  1. Incentivise the 80% of companies/ organisations that lag behind leaders in their sectors to improve productivity levels:

    1. First, offer them good measures that clearly establish their current productivity levels relative to others – otherwise most will assume they’re at least average, have little to worry about and so do little about it

    2. Then provide education/ help in how to cut waste and make best use of existing costly resources – most will have the opportunity for at least a 20% improvement from these actions alone

    3. Only after successfully completing the above should they consider using latest best practices and major investment in new resources and systems

  2. At the same time, encourage the vanguard 20% of companies/ organisations to at least continue to improve as before, not least by offering more financial incentives for more ‘open research’ and ‘market creating innovations’

For too long, productivity improvement has been ignored by most organisations despite being more important than just about any other business issue – and, if and when it does appear on the national radar, the focus is usually on progress made by vanguard organisations in the manufacturing sector i.e. the 20% of a sector that comprises only some 15% of any developed nation’s GDP i.e. a mere 3% of its economy!

Is it any wonder most managers and ministers don’t ‘get it’ and national productivity improvement staggers from year to year – they’re all focussed on other areas or the on the wrong areas – they need to understand Pareto’s Rule and how it is as relevant today as ever

Mar 20

The Capitalist’s Dilemma

N.B. The following are extracts from an article published in the Harvard Business Review in June, 2014 – it remains highly relevant today

Professor Clayton Christensen and Derek van Bever of Harvard Business School have embarked on a fascinating study into what may be holding back growth in the USA and elsewhere given ‘corporations are sitting on mountains of cash but failing to invest in innovations which might foster growth’

They identify three different types of investment in innovation which have quite different impacts on the growth of jobs and prosperity:

  • Performance improving innovations which replace old products or services with new and better – these create few extra jobs as customers simply buy the new versions instead of the old

  • Efficiency innovations which help companies make and sell existing offerings at lower prices – they can even reduce jobs – they also release capital for other more-productive uses

  • Market creating innovations which create whole new classes of customers, even sectors e.g. computers – the moves from mainframes to minis to PCs to smartphones – at the start, only the rich few could afford a computer – by the end, just about everyone does – such innovations usually generates many new jobs, both internally to meet the increased demand and externally in supply chains

Key features of these market creating innovations are:

  • They have an enabling technology that drives down costs as volume grows

  • They reach many new customers who were unable to afford the first offerings e.g. Ford’s Model T

The problem is that most companies invest mostly in efficiency innovations which often eliminate jobs, some invest in performance improving innovations which tend to maintain the status quo, and very few invest in market creating innovations which generate them

Why so? – Because the financial measures and norms used to determine the attractiveness of investments are seriously flawed – RoCE, RoNA, IRR, DCF etc. all make market creating innovations appear much less attractive because they bear fruit in five to ten years and are risky whereas efficiency investments usually pay off in one or two years and shoulder much less risk

And the average shareholding period for external investors is only about 10 months, which pressurises executives to maximise short-term returns (or else!) – venture capitalists are much the same

However, one might expect longer-term investors, like Pension Funds, to press for more market creating investments to secure their longer-term returns needed

Not so – most now suffer from depressed returns, unfunded commitments and longer life expectancies – their funds are not growing fast enough to meet their obligations, so they also look for quick payoffs

Hence the capitalist’s dilemmadoing the right thing for long term prosperity is the wrong thing for most investors

The authors put forward some first suggestions on changes needed:

  • Tax financial transactions to reduce high frequency trading

  • Introduce rewards for shareholder loyalty

  • Wake up business schools to teach finance and strategy together, not separately as now

  • Establish measures/ tools to analyse innovation pipelines and identify opportunities for long-term growth creating investments

They sign off by quoting Peter Drucker: “The point of a business is to create a customer” and ask for contributions to help devise solutions to this dilemma ‘for the long-term prosperity of us all’

Over to you

 

 

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