I’m finally getting around to posting my presentation on lean that I gave at the 2010 BYU Chemical Engineering Alumni Association Dinner, held in Provo, Utah, October 8, 2010.

The title is Stories from the Dojo: How One Japanese Company is Improving Everything from Your Consumer Products to Your Health Care. The purpose was to provide an introduction to Lean to the alumni association. The video is 23 minutes long, and I’ve provided the full transcript below.

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The title of my talk is “Stories from the Dojo: How One Japanese Company is Improving Everything from Our Consumer Products to Our Health Care.”

For those of you who don’t speak Japanese, which I’m guessing is probably more than half of the room, the term “Dojo” is a Japanese word that literally means “place of the way” and is typically used in reference to a martial arts school. In the dojo, you learn by doing. And what I’ll share today is something that I’ve learned by doing.

When I was studying chemical engineering as an undergraduate, I had no desire to work in what we might consider traditional industries. That motivated me to earn a master’s degree from BYU studying coal char oxidation with Dr. Hecker, and then on to Penn State to earn a PhD studying turbulent two-phase flow.

That, I thought, should set me up for a fast-paced job doing research on the cutting edge of science.

Unfortunately, my first job out of school was slightly off plan. I became Dr. Walter Reade, The Cardboard Drying Expert.

After the thrill of drying cardboard for a living wore off, I found my way over to the consumer products industry, where I have been ever since. I work for a company you may be familiar with: Kimberly-Clark Corporation. It is a Fortune 500 company with about $17 billion in sales of various personal care, business-to-business, and health care products. If you haven’t heard of the company, you’ve most certainly heard of our brands – Huggies, Kotex, Viva, Scott, Depend, as well as many others brands across the globe. I understand that Utah generates more per-capita sales of Huggies diapers than anywhere else in the country. We thank you for that! And keep up the good work!!

I’m going to get back to Kimberly-Clark a little later, but, in case you’re wondering, after I started working on Huggies my family lovingly referred to me as Dr. Diaper.

I want to share a story that I find absolutely fascinating, and present some ideas that I suspect may resonate with this audience.

It is difficult for us, in this day of iphones and Amazon.com to appreciate or even imagine, what type of experience it would be purchasing an automobile at the turn of the 20th century.

In 1885, Karl Benz of Germany was granted a patent for an automobile powered by a gasoline engine, and over a 5 year period was able to make and sell 25 vehicles.

Why so few?

These early automobiles were, of course, built by craftsmen, which meant they were hand assembled after each part had been individually created. The first large-scale production line for automobiles was not by Ford, but rather in the factory of Ransom Olds in 1902.

It wasn’t until 1914 that Henry Ford took this concept and expanded it considerably. Previously, it required 12.5 man-hours to produce a car. Henry Ford’s methods got this down to approximately an hour and half.

In fact, productivity was so high that the painting process became a bottleneck. Can you guess what color was the only paint that dried fast enough to keep up with production speeds? Black. This is the source of Ford’s remark, “any color as long as it’s black.”

The change to mass production was met with mixed results. Many did not enjoy the long hours of repetitive work, but never-the-less stayed since their pay was almost DOUBLE that of comparable jobs to $5 per day. Didn’t like it, but hey, I’ll take the money.

While Henry Ford was cranking out model T’s and his assembly lines, which, by the way, produced over 15 million automobiles, other started to take a different approach. Alfred Sloan of General Motors established the idea of different makes of cars produced so buyers could move up as they became more wealthy. You could start with a Chevrolet and then move to Pontiac, Buick, and finally Cadillac.

Personally, I’m still saving for the Chevrolet.

GM’s ability to meet this new market demand propelled them to sales leadership by the 1930s and that was a position they retained for over 70 years.

So far . . . so good, except . . .

In 1933 Toyota, which was in the textile business before that time, began producing automobiles. And in 1957 Toyota entered the US automobile market with the Toyopet Crown.

Out of curiosity, has anyone here ever owned one?

It was a terrible car!

When Toyota came to the US they observed the vestiges of the Old Ford system. They took these concepts back to Japan, and with the help of other legendary individuals from the US, such as Dr. Deming, put them into practice and relentlessly refined them. Over the course of 3 decades, Toyota continued to improve and gain incredible momentum culminating in them becoming the most profitable and most productive automaker in the world, with 40 straight years of increased sales growth.

Before I talk any more about Toyota, I need to get a few things out of the way . . .

Toyota has had its fair share of news recently. I want to make a few points. Not to excuse Toyota, but to provide a bit of perspective.

Earlier this year, Toyota was forced to recall and repair a large number of cars. It would have been hard to have missed because of the media circus. Now that the dust has settled, it looks like the issue was much smaller in scope than it was made out to be.

In June Chrysler announced they are recalling nearly 700,000 Jeep Wrangler’s and minivans because of problems with brake linings and doors. This was on top of the announcement the week before that Chrysler is recalling 35,000 Dodge caliber and Jeep compass cars for – you guessed it – faulty accelerator pedals. And, the day after that announcement, GM announced it is recalling over 1.5 million vehicles because of a glitch in the windshield wiper system, that can cause the car to catch fire. This makes 3 million cars and trucks GM has recalled this year, which beats last year’s total of 2.2 million.

If you had a picture in your mind of a total meltdown of quality at Toyota, that’s simply not the case. Although, clearly, they stumbled.

So, back to the message. What’s the big deal with Toyota? And more importantly, why should we care?

Here’s a something I find completely amazing.

In 1984, General Motors and Toyota struck a bold joint venture at the NUMMI plant in Fredmont, CA. The facility had been a GM plant since 1962. It was GM worst facility for quality, productivity, absenteeism, and worker safety. Before the joint venture, daily absenteeism routinely ran over 20%. Imagine, at your job, 1 out of every 5 employees didn’t show up for work on any given day. And there was a backlog of over 5,000 grievances from the union. Obviously, not a happy place.

In 1984, at the start of the joint venture, how would you have predicted the outcome? The worst plant in the company, with a hostile workforce, to be co-managed by Japanese? Clearly, a train wreck waiting to happen. The chorus was that perhaps the Japanese culture was what let Toyota progress so well. This wouldn’t work in the good old U S of A.

Just two years later, though, the NUMMI plant transformed itself into GMs best plant in terms of both quality and productivity, and remember that daily absenteeism of 20%? It dropped to 3%. Keep in mind, this was with the same equipment and the same workforce.

What had Toyota done?

What would you have guessed they did? Break up the union? Increase worker pay? Threats of layoffs?

What they did was unbelievably simple yet incredibly profound.

Here are some of the observable changes they made.

They reduced over 100 job descriptions at the facility to only 1 – Team Members. They reduced 14 levels of management to only 3. They implemented a no lay-off policy and created job rotation. Employees were given responsibility and authority for product and process at their place on the production line, and they were given the power and responsibility to shut down the line when things went wrong.

That’s it? Yeah. Seems too good to be true. But the key was what was not observable.

This new Toyota way of managing tapped into a powerful source of adult motivation. When we are given meaningful work, it begets a desire for excellence. Excellence means always looking for a way to improve. When you respect your workforce, empowered people, and give them meaningful work, they tend to seek excellence in what they do, and do NOT need to be managed. The level of engagement at the NUMMI plant was tremendous. During any given year, 90% of employees contributed an innovative idea. 10,000 ideas implemented.

This should give us pause for thought. The potential for excellence was already in the 4 walls of the facility. Toyota’s management system, which is based on respect for people, unlocked that potential.

What differentiates Toyota from its rivals is its view of the factory worker as more than a pair of hands on the assembly line. When you come to work with your hands, you also bring your heart and mind. Why not use those to their fullest potential? In that regard, Toyota sees all of their workforce as knowledge workers.

As the NUMMI experiment continued, more research was done on Toyota and their methods and more was published. Other automobile manufacturing companies attempted to use what was observed at Toyota.

Toyota has always had an open door policy to its competitors and researchers. Come! See what we are doing. We Americans called what we saw “Lean Manufacturing.” In hindsight, this was unfortunate, since many companies have used the cover of Lean to cut head count. This isn’t Lean. It’s Lame.
Most who tried the Toyota system had limited success. Maybe this was only a Japanese auto manufacturing thing.

But in almost all cases, failed attempt were a result of applying the tools of Lean, rather than the thinking. Thinking such as “Leader as Teacher” and “Problems are Gold”. If you boss has told you to mark where your stapler should be on your desk with a tape outline, you may be a victim of tool implementation.

Then some other manufacturing companies began to have success. And the Lean continued to spread.

Each and every time these concepts were applied to a new circumstance or industry, the same thing was said, “this doesn’t apply to us.” But, it turns out it does. Who would have through that these principles could improve the way we get diapers to our customers? Or how software projects are managed? Or improve patient care in hospitals. One of the most recognized hospitals in the US is located in Wisconsin, that they have a very solid Lean program.

I consider myself hugely fortunate to be working in a company that has been implementing our version of what we’ve learned from Toyota. We were fortunate enough to have some leaders at our manufacturing facilities that were both visionary and brave with where they thought they needed to go. They introduced Lean to Kimberly-Clark and receive some buy-in conduct pilots. I was on the periphery of that and when it started getting momentum had the opportunity to be involved with this work full time, in both manufacturing and Research and Engineering at Kimberly-Clark. I say without hesitation that it has given me more career satisfaction than any other thing I have done up to this point in time. (And that INCLUDES my graduate thermodynamics class with Dr. Wilding.) That’s a strong statement.

But our transformation has focused us on creating better value for our customers. That is very simple to do, although we tend to make it overly complicated. Value, is what your customer is willing to pay for in terms of product or service. You may be willing to pay more for a black iPod the white iPod that setting value to you. You probably don’t care how much they spend on the packaging. you’re willing to pay your dentist to make your mouth healthy. You gain no value by sitting in a waiting room.. Value in an educational setting is educating students and creating new usable knowledge from research.

Then we map the flow of value through your organization. That’s not the same as mapping your process. What that means is saying what are the steps of that provide the value.

And then you want to remove all of the waste as much is the non-value adding steps as possible.

And then you constantly seek perfection in your processes that add value.

The only way you can do that is with flexible, motivates employees.

Treating them with the respect they deserve.

That’s everything of what lean manufacturing and Toyota has done. Now there’s many tools that the use but ultimately it’s to create the value net can be applied in any industry yes even though home.

So it simple but extremely difficult. It’s difficult because we tend to organize ourselves in terms of functions. We then tend to optimize our silo, instead of value.

We also are terrible at applying the same scientific method we so cherish and love in science to the way we do work. We fail to get to root cause.

This is a true example from healthcare. It’s a case where a woman was receiving routine surgery and suddenly develop seizure seizures. Her blood sugar level crashed, she lapsed into a coma and unfortunately died. What happened was, a nurse had responded to an alarm indicating that an artery line had been blocked by a blood clot. She meant to flush the line with the anticoagulant heparin. What happened though, was that late at night in a dark room she grabbed a vial of insulin. What many of us have experienced I’m sure of is we blame the person and demand that more training be done to by the staff so that they don’t repeat that same mistake. Getting true cause would ask questions such as why was there even insulin in the room and was not needed. Why do the bottles of heparin and insulin look the same. And so forth. That allows you to prevent future incidents from occurring.

We know that for every incident like this that happens there were multiple instances where there was a near miss. Were somebody almost made the same mistake.

As Kimberly-Clark has implemented Lean principles, the only way you are sure to get in trouble, is by not raising problems. We believe that our only competitive advantage is to be able to raise awareness to and solve problems faster than our competitors. That is an exhilarating refresh and satisfying environment to work in.

When an employee such as myself fails to deliver on time or at the required quality of the deliverable, the first question I would be asked by my team leader is, “what needs to be strengthened in your processes so that that doesn’t happen again.” This does not in any way mean that the work is not demanding. It is very much so. But the focus in on process, not the person.

Let me wrap up with some closing words . . .

I believe that the principles that I’ve expressed, respect for humanity, teaching people correct principles, allowing people to have autonomy within a framework, and the obligations and to improve that framework, allowing people to work to their full potential and to increase their potential is something we all should learn about and understand.

If you have an opportunity, learn more about Toyota’s management system and Lean.

If it sounded like I’m worshiping Toyota, I want to make it clear that I’m not.

I have a deep appreciation for Toyota not because of the cars they produce – I’ve never actually purchased or a Toyota car… Of course I might, if I had a car purchasing decision rights and my family.

It’s not because they’ve been such a profitable and successful company over the last 40 years, although that is something certainly to admire, and it’s not even for inventing what so many people call Lean, because really those principles were rooted in early 1900s before Toyota.

The reason I admire Toyota so much is because they rediscovered, rekindled, and kept alive and strong a philosophy of managing – no not managing – of appreciating and developing people’s ability and skills to the fullest potential.

I believe our job is to try and understand what that is and how we can apply it to our corporations, our companies, our teams, the people we manage, our families, and our own lives, so that we may increase our understanding what we do that provides provide value, and constantly strengthening and doing things a better way, thus making the world a better place in the continuous pursuit of excellence.