fitness for purpose
DESCRIPTION
Fitness for purpose, aligning capability to customer expectations. How evolutionary processes reveal that the fitness for purpose of a business has both a product/service component and a service delivery component. Kanban systems have been shown to help improve service delivery. This presentation shows how to derive and use the correct metrics to guide process improvements and steer service delivery methods to be fitter for purposeTRANSCRIPT
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[email protected] @lkuceo Copyright Lean Kanban Inc.
Presents
PresenterDavid J. Anderson
Ltd WIP SocietyMunich
June 2014Release 1.0
Fitness for Purposematching capability to customer expectations
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[email protected] @lkuceo Copyright Lean Kanban Inc.
Blizzard is the largest private sector employer in the Pengau Alps region of Salzburgerland,
AustriaMittersil is a factory town with over 400 people relying on the
factory either directly or indirectly for employment
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In 2007, Blizzard, effectively bankrupt, faced closure from
parent company, Tecnica in ItalyToday Blizzard is the most effective & efficient ski
manufacturer in the world!
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What went wrong at Blizzard, a proud & leading brand in alpine
ski equipment?And what enabled a remarkable turnaround, from the brink of
extinction to a return to innovation & profitability?
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Orders & Deliveries of Skis
2006 winterskis delivered
to dealers
Timeline for manufacturing, delivery and order placement for ski industry in northern hemisphere prior to 2007
timeNov Dec Jan2006
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2007
Feb Mar Apr
Start manufacturing
2007 skis
2007 winterskis delivered
to dealers
Start manufacturing
2008 skis
Ordersplaced for 2007 winter
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2006 was a warm winter and poor snow conditions badly affected
the ski industry as people stayed home and didn’t buy new
equipment
Blizzard dealers were left holding a lot of 2006 inventory that they
would hold & later discount during the 2007 winter
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Effects of climate change in the Alps
Glacier recession is
clearly visible
1912 1933
2003
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2007 was also a warm winter as climate change began to seriously
affect the AlpsGun shy from 2 bad winters,
Blizzard dealers delayed commitment on 2008 orders until
May after the ski season had finished
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In 2006 business risks appear to be low
2006 winterskis delivered
to dealers
Changing climate conditions and its affect on ski dealers dramatically shifts the risk profile of ski manufacturing
timeNov Dec Jan2006
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2007
Feb Mar Apr
Start manufacturing
2007 skis
2007 winterskis delivered
to dealers
Start manufacturing
2008 skis
Ordersplaced for 2007 winter
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Previously lead time for delivery is 12 months
2006 winterskis delivered
to dealers
Traditionally manufacturers have had a full year to make the skis for the following winter
timeNov Dec Jan2006
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2007
Feb Mar Apr
Start manufacturing
2007 skis
2007 winterskis delivered
to dealers
Start manufacturing
2008 skis
Ordersplaced for 2007 winter Lead Time
to manufacture2007 deliveries
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By 2007 the risk profile has changed dramatically
2006 winterskis delivered
to dealers
Dealers still holding 2006 & 2007 inventory decide to wait until the end of the 2007 season to place reduced orders for 2008
timeNov Dec Jan2006
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2007
Feb Mar Apr
Start manufacturing
2007 skis
2007 winterskis delivered
to dealers
Start manufacturing
2008 skis
Ordersplaced for 2007 winter
Ordersplaced for2008 winter
Volume is low due to over-stocking of older models
The period of speculative manufacturing grows from 2
months to 6 months
Time period of building to
forecast rather than against
customer orders
Blizzard fail to anticipate falling demand and over-produce 2008
skis. Bankruptcy is a serious possibility!
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Tecnica Group & Blizzard managers turn to their business school education and seek to cut
costs by consolidation & centralization
Centralizing all order processing through Tecnica HQ adds 1 month
to order times, increasing speculative build-to-forecast. As a
result costs go up!
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Cutting costs will not make Blizzard “fit for purpose” !!!
What is required to be “fit for purpose” in a period of climate
change, is to defer manufacturing until firm orders are placed!
Blizzard need to cut the lead time to build skis!
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By 2010 the market has a new equilibrium
2010 winterskis delivered
to dealers
Traditionally manufacturers have had a full year to make the skis for the following winter
timeNov Dec Jan2010
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan2011
Feb Mar Apr
Start manufacturing
2011 skis
2011 winterskis delivered
to dealers
Start manufacturing 2012 skis
Ordersplaced for 2011 winter
Ordersplaced for2012 winter
Volume is low due to over-stocking of older models
Lead Timeto manufacture2011 deliveries
Lead time to manufacture skis to order is now 6 months. No speculative build-to-forecast
To have a viable business Blizzard need a capability to make skis
twice as fast as before!
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In 2010 a Lean initiative was started in the factory. This was followed later with a Kanban
initiative in IT and Quality Assurance
Blizzard becomes the first Lean ski manufacturer in the world!
CIO, Eric-Jan Kaak wins Austrian CIO of the Year 2013
and is promoted within Tecnica Group
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Meanwhile, Major Ski Resorts Deploy Snow Cannon to Reduce Risk for Warm Winters
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Blizzard initially made a bad decision because they didn’t
understand the dynamics of their external environment
Once they realized that only manufacturing skis faster &
deferred commitment would make them “fit for purpose” did they
focus improvement efforts where they could be most effective
Ski craftsmen are now “idle” for 6 months per year. They use this
time to improve the factory processes
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What makes a pizza delivery service“fit for purpose” ?
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Meet Neeta - a project manager• Delivery time =
approximately 1 hour• Non-functional quality =
tasty & hot• Functional quality (order accuracy) =
doesn’t matter if small mistakes are made, geeks will eat any flavor of pizza
• Predictability =+/- 30 minutes is acceptable
• Safety =so long as health & safety in food preparation is good, it’s fine
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Neeta is also a working mom!
• Delivery time =20 minutes
• Non-functional quality =doesn’t matter too much, it’s pizza!!!
• Functional quality (order accuracy) =it must be cheese pizza! No other flavor is acceptable! (even if you take the pepperoni off)
• Predictability =+/- 5 minutes maximum!!!
• Safety =only mommy worries about that stuff!
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To be “fit for purpose” there is a product component & a
service delivery componentWe need to offer a selection of
different recipes which are tasty & popular. However, we must also
deliver with speed & predictability
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Modern creative & knowledge worker businesses often
obsess with product definition & strategy
Operational excellence and service delivery excellence are often overlooked or treated as
inferior management skills
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Neeta has 2 identities –Mother and Project ManagerEach of Neeta’s identities
represents a different market segment for the pizza delivery
service
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We need a different set of thresholds for our fitness criteria for each market
segment
Our business needs the ability to “sense” changing customer tastes. As time goes by the
criteria & thresholds for a given market segment may change
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Our pizza delivery service can be “fitter for purpose”
by offering different classes of service for each market
segmentBut, do we have the capability to
deliver on customer expectations?
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Understanding & improving service delivery capability with Kanban
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TestReady
FF
FFF
F F
Commitment Frequency
H
E
C A
I
G
D
Replenishment
Discarded
I
Pull
IdeasDev
Ready
5Ongoing
Development Testing
Done3 35
UATReleaseReady
∞ ∞
The frequency of system replenishment should reflect
arrival rate of new information and the transaction &
coordination costs of holding a meeting
Frequent replenishment & commitment is more
agile.
On-demand commitment is most agile!
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TestReady
FF
FFF
F F
Defining Kanban System Lead Time
H
E
C A
I
G
D
Pull
System Lead Time
Discarded
I
IdeasDev
Ready
5Ongoing
Development Testing
Done3 35
UATReleaseReady
∞ ∞
The clock starts ticking when we accept the customers order, not
when it is placed!
Until then customer orders are merely available options
Kanban system lead time ends when the
item reaches
the first ∞ queue
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TestReady
FF
FFF
F F
Delivery Frequency
H
E
C A
I
G
D
Delivery
Discarded
I
Pull
The frequency of delivery should reflect the transaction &
coordination costs of deployment plus costs &
tolerance of customer to take delivery
IdeasDev
Ready
5Ongoing
Development Testing
Done3 35
UATReleaseReady
∞ ∞
Frequent delivery is more agile.
On-demand delivery is most agile!
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Service Delivery Agility
Service Agility
Commitment frequencyLead TimeDelivery
Frequency Lead T
ime
Short
Long
Deliv
ery
Service Agility
Com
mit
ment
Frequent
Seldom
Frequent
Seldom
MoreAgile
LessAgile
Kanban system dynamics
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Fitness criteria are metrics that measure observable external outcomes
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Evolutionary change works when fitness is continually evaluated
EvolvingProcess
Rollforward
Rollback
InitialProcess
Future process is emergent
EvaluateFitness
EvaluateFitness
EvaluateFitness
EvaluateFitness
EvaluateFitness
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Fitness
Capability fo
r Change
Time
Evolutionary improvement should result in gradually rising fitness for purpose
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Which system is fitter?
5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
Mean 17 days Mean 12 days
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Measuring delivery against expectation
5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
-25 -20 -5 0 5 10 20 30 35 40 More0
2
4
6
8
10
12
System A
Frequency
Lead Time Expectation Spread (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
-15 -10 -5 0 5 10 15 20 More05
1015202530354045
System B
Frequency
Lead Time Expectation Spread (Days)
Mean 17 days Mean 12 days
System B is clearly fitter!
System B delivers 5/7 within expectationsSystem A only delivers 3/7 within expectations
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5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
-25 -20 -5 0 5 10 20 30 35 40 More0
2
4
6
8
10
12
System A
Frequency
Lead Time Expectation Spread (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
-15 -10 -5 0 5 10 15 20 More05
1015202530354045
System B
Frequency
Lead Time Expectation Spread (Days)
Mean 17 days Mean 12 days
Lesson 4
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5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
-25 -20 -5 0 5 10 20 30 35 40 More0
2
4
6
8
10
12
System A
Frequency
Lead Time Expectation Spread (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
-15 -10 -5 0 5 10 15 20 More05
1015202530354045
System B
Frequency
Lead Time Expectation Spread (Days)
Mean 17 days Mean 12 days
With coaching & incremental If we don’t know what the customer
values we will struggle to be “fit for purpose”
Fitness for purpose can only be assessed relative to
established customer-valued fitness criteria
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Business Risks, Fitness Criteria & Classes of Service should all align
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5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
-25 -20 -5 0 5 10 20 30 35 40 More0
2
4
6
8
10
12
System A
Frequency
Lead Time Expectation Spread (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
-15 -10 -5 0 5 10 15 20 More05
1015202530354045
System B
Frequency
Lead Time Expectation Spread (Days)
Mean 17 days Mean 12 days
Lesson 5
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5 10 15 20 25 30 40 45 55 65 More02468
101214
System A
Frequency
Lead Time (Days)
-25 -20 -5 0 5 10 20 30 35 40 More0
2
4
6
8
10
12
System A
Frequency
Lead Time Expectation Spread (Days)
5 10 15 20 25 30 More0
5
10
15
20
25
30
System B
Frequency
Lead Time in Days
-15 -10 -5 0 5 10 15 20 More05
1015202530354045
System B
Frequency
Lead Time Expectation Spread (Days)
Mean 17 days Mean 12 days
There are only two types of metrics that matter: fitness criteria; and metrics guiding
improvements!
Metrics for improvements should be temporary and
removed when the change is completed unless there is a
risk of regression
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Kanban system dynamics
Shelf-life(of business opportunities)
Is your service delivery fit for purpose?
Short(days, weeks,
months)
Medium(months,quarters,1-2 years)
Long(years,
decades)
Lead T
ime
Short
Long
Deliv
ery
Service Delivery Agility
Reple
nis
hm
en
t
Frequent
Seldom
Frequent
Seldom
Pre
dic
tabili
ty
High
Low
Is your service delivery
predictability & agility fit enough for
your business strategy?
If you plan to pursue short shelf-life opportunities, you must measure predictability, lead time, replenishment
& delivery frequency as fitness criteria. Does the capability exist to pursue the chosen strategy
effectively?
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Improve your capabilities before pursuing market
segments or strategies that require levels of service
delivery beyond your reach
With coaching & incremental development a child can grow to
dead lift a large bar bell. Impatience & over-reaching is
likely to end in tears!
With patience, education and a focus on evolutionary
change, your organization can grow its service delivery
capability
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1. Understand your external environment before deciding what to change
2. “Fitness for Purpose” has both a product component & a service delivery component
3. Each market segment will have its own fitness criteria and threshold values
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4. Fitness for purpose & whether improvement is needed can only be measured relative to customer-oriented fitness criteria
5. Metrics should be fitness criteria or guiding specific improvements in which case their use is temporary until the improvement is completed
6. Improve your capabilities before pursuing market segments or strategies that require service delivery you currently cannot achieve
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About
David Anderson is a thought leader in managing effective 21st Century businesses that employ creative people who “think for a living” . He leads a training, consulting, publishing and event planning business dedicated to developing, promoting and implementing new management thinking & methods…He has 30 years experience in the high technology industry starting with computer games in the early 1980’s. He has led software teams delivering superior productivity and quality using innovative agile methods at large companies such as Sprint and Motorola.
David is the pioneer of the Kanban Method an agile and evolutionary approach to change. His latest book, published in June 2012, is, Lessons in Agile Management – On the Road to Kanban.
David is a founder of the Lean Kanban Inc., a business dedicated to assuring quality of training in the Lean Kanban Method for managers of those who must “think for a living.”
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I’d like to thank Eric-Jan Kaak and the staff at Blizzard for providing access to produce the story of their Lean transformation.
System maintenance lead time data courtesy of CME Group.
Acknowledgements