Success Secrets: The Toyota Production Method Part 4

I am discussing the Toyota Production System, as articulated in a great article by Clayton Christensen . Earlier posts are here , here, and here. In particular, I am attempting to broaden the scope of the discussion beyond the car business, into various business and life domains.

To review, the four key principles, as defined in Christensen's article are:

1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen

Principle 4 , as articulated n Christensen’s article is is “Detect and solve problems where and when they happen using the scientific method”. The article elaborates the method later:

Analyze the current state of things
Document it
Formulate a hypothesis that includes an experiment with an expected outcome that could be measured and compared with the actual outcome

In my own experience, particularly with my trading activities, this comparison of expected with actual results led me to the greatest progress. But I was unable to make any progress until I documented my results with enough detail to be able to draw some statistical conclusions. This data opened my eyes and I was indeed able to make certain hypotheses about how to reduce my losing trades, and increase my performance. Often enough, the changes I made seemed to work.

Without adequate documentation, you can’t change your weight, your cholesterol, your finances, or any other measurable commodity in your life. Once documented, it is much easier to generate testable hypotheses for change.

I should mention that the documentation/hypothesis/solution process is not necessarily limited to numerically measurable events. I have mentioned Doug Newburg’s concept of Resonance from time to time. A simple journal of what seems to be working and what seems to be not working often has great results. If you feel lousy after eating a candy bar and great after a brisk walk, making a “Resonance Diary” can reinforce what is working and what is not working in your life. In my monthly reviews of my journal, I have a section I call “What works”. As I look at that section over time, I see patterns in behaviors that seem to work, as well as those I want to change.

Similarly to the other facets of the Toyota Production System, specifying an action is key to understanding it. Specifying a process is the key to consistency. And, in problem solving, specifying and carefully documenting the problem is the key step in the solution. Along these lines I also recommend some of the Kepner-Tregoe methods found in The Rational Manager .

Life comes at us in random order, good and bad, without any chapter headings or identifiable rhyme or reason. But we can take a lesson from Toyota in how we choose to order that experience, and also how we choose to optimize our actions in order to get the greatest rewards.

Success Secrets: Bloomberg on Jamie Dimon

Bloomberg has posted a terrific article about JP Morgan CEO Jamie Dimon . I have mentioned both Dimon, mentor, Sandy Weil (who built the Citibank Colossus) here and here. I have been fascinated with Dimon’s success ever since he was CEO of Bank One and also because of his prominence in Sandy Weil’s book The Real Deal: My Life in Business and Philanthropy .

The entire Bloomberg article is worth saving, but here are a few of the Success Secrets..

1. Stay within your “Circle of Competence. This Success Secret is deceptive in its simplicity and vast in its power. Billionaire Charlie Munger mentions it frequently. Another related Munger/ Warren Buffett hallmark: understand your business thoroughly. If this were football, the concept would be “work hard on the fundamentals”. Exotic ideas have their place, but being really good at “making the doughnuts” has a high probability of creating a winning business. There are a lot more successful accountants than Perpetual Motion Machine builders.

From the Bloomberg article:

He {Dimon} says that insurance, for instance, is an outlier for a bank. "You have to stay focused on where you can win," he says

And again…

Dimon largely steered clear of both collateralized debt obligations…and so- called structured investment vehicles”…

And again

"JP Morgan is still very interested in raising deposits the old-fashioned way," {i.e. seeking consumer deposits, credit cards, etc} …. "Dimon has access to federally insured deposits, and that's a huge advantage in the world that's developing.


2. Stay risk averse. Dimon focuses on maintaining a strong balance sheet (also mentioned often in Sandy Weil’s book),and called by Dimon, a Fortress Balance Sheet. From the Bloomberg article:

Dimon spent much of the past three years streamlining a bank he says he wants defined by efficiency, stable sources of revenue and risk management that protects assets, a concept he refers to as his "fortress balance sheet….sources of funding can disappear very quickly."

This Success Secret is as valuable in personal life as it is in business life, and as true (or truer) of small business as big business. The less debt, the better. The more ready cash, the better.

3. Intense, obsessive work ethic

From Bloomberg:
Dimon is a fanatic about details, says one former competitor, David Komansky. "Jamie has always had a full tank of gas," says Komansky, who ran Merrill Lynch from 1996 to 2002. "It's very much about having your oar in the water all the time, 24 hours a day, 7 days a week and dealing with hundreds and hundreds of unrelated issues every day. Jamie has clearly excelled at the management dimension of these jobs."

Elsewhere in the article an associate says “, that when he worked for Dimon, he rarely saw him take a break. While other executives may relax by reading about sports, "Jamie would read a 10K," he says. "It's related to his doggedness to get stuff done."

So, to review a few of the Success Secrets of Jamie Dimon

1. Read the Bloomberg article. It’s great.
2. As simple a business model as possible
3. Stay risk averse. Hone your “fortress” to withstand the inevitable chaos that surrounds life and business
4. Maintain an intense work ethic. If you’re not interested enough to work hard, it might pay to find something that will keep you fascinated.

Some related posts:

Scwheich's "Crashproof Your Life"

Obsession

Scott Young on task completion



- - - Visit the Success Books Store - - -

Success Secrets: The Toyota Production System Part 3

I am discussing the Toyota Production System, as articulated in a great article by Clayton Christensen Earlier posts are Here and Here. In particular, I am attempting to broaden the scope of the discussion beyond the car business, into various business and life domains.

To review, the four key principles are:

1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen

Today I am discussing Rule 2: Clearly Define Transfer of materials and information, and a corollary mentioned in the article is: Pathways must be simple and direct.

It is easy to see that this rule has a far wider applicability than building automobiles.

There are at least three consequences of violating this rule:

1. Diffusion or confusion of responsibility
2. Loss or degradation of information
3. The Incentive Bias

How do these consequences unfold?

If you don’t know who is going to FedEx the job to the client…it probably won’t get done.

If you don’t know who is going to take Jimmy to soccer practice, …it probably won’t get done.

Another example of paths that are not “simple and direct" comes from my experience as a trader. In the late 90’s the only way to get an order to the pit was to phone my broker. Electronic futures trading was not available at that time (at least to me). I would call the number, wait for the guy to answer, tell him my order, he would phone it into the pit, and then, sometime between 5 and 30 minutes later, I would get my fill. Sometimes the market would move hundreds of dollars away from the point I wanted to enter at, causing losses for me, but gains for a lot of the other providers in the chain. Now, since I can electronically enter the trades myself, I get filled at the price I expect, and I save a lot of money.

What does it mean when you eliminate just one person from an information path?

One fewer salary
One fewer set of benefits
One fewer person to be out sick, late, on vacation
One fewer person who forgot to listen to their voicemail, read their email, get the memo…etc

The savings of time, money, and angst are clearly huge as one pares down the path in a process.

As you pare down the people in a given process path, you also progressively eliminate what Charlie Munger calls the Incentive Bias. I have mentioned Charlie Munger’s work extensively. The Incentive Bias states that individual suppliers (salespeople, brokers, doctors, lawyers, ad infinitum) will serve you in accordance with the incentives that benefit the supplier, not necessarily the customer. I am not saying the incentive bias is 100% bad, after all, the profit motive is what creates all the services we use every day. However, as these biases accumulate, the efficiency of the process path degrades. Suppose you have five people in your process path. If each one of them just holds you up long enough to take a 15-minute coffee break, you’ve lost over an hour. And a coffee break is the smallest incentive bias I can think of. More normally, your suppliers want to make money by billing you extra hours, supplying you in ways that maximize their profits, working on their highest paying client (not you), etc. If you keep the path “simple and direct”, eliminating as much incentive bias as possible, through online purchases, auction tactics, “no haggle” pricing, careful questioning, you are actually using the Toyota Production system to your advantage.

I’ll continue my discussion of TPS in an upcoming post.

- - - Visit the Success Books Store - - -

Success Secrets: The Toyota Production System Part 2

This is Part two of my discussion of a recent article on the Toyota Production System (TPS). Part 1 is here.

Although the authors of the article applied TPS to a semiconductor plant, I feel it’s worthwhile to generalize this industrial concept to our pursuit of better outputs in all areas of our lives and work.

The Toyota system as mentioned in the article, contains four key points that combine to continuously improve productivity and output.

1. Highly Specified Activities
2 Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen


Item 1 : Highly Specified Activities

The more completely and accurately we describe our activities, the more able we are to determine which steps in those activities might be subject to improvement. If the inputs to our activities keep changing, it is difficult, if not impossible, to determine the origin of the results we are getting, much less to obtain better outputs.

The article further defines the specification process as: “all work shall be highly specified as to the content, sequence, timing, and outcome”.

But this process is applicable in far more areas of life than building cars. Consider these examples:

Who’s going to lose weight fastest?

Person A:
“I’m trying to cut back on starches and sweets”

Person B:
“I reduced my calorie intake from 1800 to 1300 per day with only n grams of fat per meal. I added an additional hour per week of exercise beyond the 3 hours I was doing. I expect to lose about 1 pound per week over the next 20 weeks, to attain my goal of X pounds”

Or …here’s another example:

Who’s going to sell more?

Person A:
“I called up a bunch of purchasing managers to see if they needed any aluminum”

Person B:
“This month I am targeting purchasing managers in the machine tools field within 150 miles of our main plant who have returned my questionnaire about the tradeoffs between fast turnaround aluminum products vs. cost. My goal is to increase sales to this market by 15% by the end of Q2”.

I would bet on Person B in both of the foregoing instances. Surely, there are people who can “wing it”, or, perhaps have a highly developed intuition, or a great situational sense of what actions to take at the moment, but for the broad sweep of humanity, I would bet on detailed specifications to achieve repeatable outputs.

And, there is another reason why highly specified activities are desirable. What do you do if your program is not working? How do you change your diet if all you wrote down is “I am trying to cut back”? On the other hand, If you know the content of your meal plan, as well as your exercise regimen, as well as your weight on each day, you have a measurable set of inputs and outputs; a stationary series of data points , enabling you to measure the effect on each “moving part” if you decide to change it. In other words, you can’t go to “Plan B” if you don’t even know what “Plan A” was.

Thomas Edison’s 10,000 attempts to come up with a filament for the electric light bulb is a well-known story, but consider this: unless he had kept meticulous (“highly specified”) records of the failures, i.e. the materials that didn't work, we’d still be living by candlelight!! In other words, careful specification procedures vastly improve the net effect of the experiment. So much so, that Edison may have not been able to give us the electric light without carefully documenting what did not work.

This point reminds us that all the careful specifying in the world will not substitute for the creative input necessary to create a processes, and for the drive necessary to sustain a process. Far from turning us into a bunch of robots, the process of specification is merely the enabler of creativity. But only when the creative process is allowed to be specified, can the results turn into repeatable outputs. You might be able to bake a chocolate cake without specifying, but not 10,000 chocolate cakes, due in 24 hours. The specification process thus leverages creativity.

We’ll discuss the other three TPS processes in upcoming posts.


- - - Visit the Success Books Store - - -

Success Secrets: The Toyota Production System Part 1

A wonderful post at Next Big Future led me to a fascinating article by Harvard Business School guru Clayton M. Christenson and associates, “The New Economics of Semiconductor Manufacturing”. The article tells of their experiments applying the Toyota Production System (TPS) to a semiconductor fab. The results were astounding. Christensen's team writes:

"In just seven months, the organization was able to reduce the manufacturing cost per wafer by 12 percent and the cycle time—the time it takes to turn a blank silicon wafer into a finished wafer, full of logic chips—by 67 percent. It did all this without investing in new equipment or changing the product design or technical specifications. And this short experiment has exposed only the tip of the iceberg."

My first thought (after removing my jaw from the floor) was: “Heavens! This is a major plant run by a major manufacturer (Christensen won’t say who). I thought this kind of plant was already ruthlessly efficient. You mean they don’t even know how many wafers they have in the fab (yes, that is one of the questions the team suggests asking!!) ??? Apparently, that is only one of a litany of seemingly obvious data points that are not routinely tracked in such environments. But the miracle is that such amazing improvements can be wring out of such granular, simple, straightforward and relatively easy-to-obtain data. This is not he first time this blog has explored the astounding results that flow from some fairly simple "specifying" procedures.

Elsewhere in this blog I have mentioned a magnificent article on checklists , and how such lists have drastically cut infection rates in hospitals, where it was assumed that the highly trained staff already knew the processes well. But it was discovered that , to use a quote from Christensen, “memory fades quickly”. The more detailed and concrete the specifications in the hospital, the more patients were saved. It’s that simple. Christensen’s article mines a similar vein. If you don't know exactly what you're doing, you won;t be able to measure it properly, and you will have absolutely no chance of improving it. In short, highly specified procedures are the key to vast improvements in output, no matter what the area of inquiry.

In upcoming posts I will discuss the four key Toyota Production System (TPS) principles outlined in Christensen’s article, and I’ll attempt to broaden their application to personal and business success . The principles are:

1. Highly Specified Activities
2. Clearly define the transfer of material and information
3. Keep the pathway for every product and service simple and direct
4. Detect and solve problems when and where they happen using the scientific method.

As I continue this blog, I am always fascinated at how much one can “cross-pollinate” best practices, even from such seemingly disparate worlds as a semiconductor fab, to a hospital room, to our own lives as individuals, single practitioners, or just running a Saturday errand. Stay tuned.

- - - Visit the Success Books Store - - -

Success Secrets: Secrets of the VC's

Do the superstars of the VC world have any success secrets that the rest of us can use? What could we possibly have in common with John Doerr and Michael Moritz, who bankrolled the likes of Amazon and Google? Actually in this keynote presentation at the National Venture Capital Association, these men reveal a few gems that reflect actions that all of us can take to achieve success. Would you believe that John Doerr went for Dale Carnegie sales training, spending his own money to do so? What of the fact that Michael Moritz, a very well-known person indeed, still chooses to wear unique styles of socks to create memorability and stand out a bit? Many coaches recommend the same techniques for all of us to be noticed. Also, both men, at various times in their professional lives, learned the virtues of using rigorous quantitative techniques to aid productivity and avoid mistakes due to emotional judgements, not unlike Charlie Munger, whose name appears int his blog a lot. Here's the whole podcast:



PodTech.net: Technology and Entertainment Network - - Keynote Podcast: John Doerr and Michael Moritz, Live at the National Venture Capital Association








- - - Visit the Success Books Store - - -

Success Secrets: DARPA and Success

I have been downloading a couple dozen PDFs from Darpatech, a symposium where DARPA (the government’s futuristic science arm) meets with and presents ideas to outside scientists and companies.

These PDFs are actual speeches given at Darpatech that both explain what DARPA’s current objectives are, and are also clearly intended to inspire and excite scientists and engineers to join in the work they are conducting.

The DARPA programs of the past and present are awe-inspiring. DARPA has literally re-invented our world since is inception in 1958. The Saturn rocket, the Internet, Stealth, night vision, cell phone and gps components, and UAVs are just a few of the extraordinary results of DARPA research. In the amazing PDFs available on the symposium site, new ideas are described that will continue to revolutionize all of our lives: a 90% reduction in the cost of Titanium, autonomous vehicles that drive as well or better than you or I (especially “I’), and even “programmable matter”.

The PDFs are an incredible read, but there is another reason I am mentioning DARPA on this blog: DARPA deliberately makes the impossible possible. And that is, at its core, what this blog is all about. Darpa has proven time and time again that imagination routinely becomes reality. DARPA is not a motivational organization. Darpatech is not a “feel good” seminar. DARPA creates new realities, out of “thin air”, every day. And not only that, their mandate is to go for “new concepts and systems whose feasibility is still unknown and risky”, in the words of Dr. Tony Teather the current DARPA director. He goes on to say that “We search for those ideas world-wide that may make a tremendous difference, and whose time has come to bring them to the near side as fast as possible”. In short, they aim to make the impossible possible.

So here is the paradox. In most of our daily lives, we aim for reasonably achievable goals (career advancement, recognition, financial security, the solution of various home, family, career, or life-logistics problems). We work at these problems every day. We probably get reasonable success, and, through reading and studying books, tapes, websites, etc we can measurably improve or output.

But DARPA has chosen much more challenging problems, has an incredible batting average, and has changed the world, not by selecting easy problems, but by selecting the hardest problems that exist!!! We’re scrambling to get a home business started, or get 10% in our IRA, and they’re trying to invent tele-robotic surgery!!! And succeeding better than us!!!

There are deep lessons to be learned from the “idea” of DARPA. Lessons that impact our personal success.

1. It is crucial to remember in a world of discouragement, often filled with dream-killing people and heart-breaking setbacks, that far more ambitions goals than ours are being routinely accomplished on a day-to-day basis.

2. An ambitious, “outside the envelope” – type goal attracts higher quality minds, organizations, and solutions than an incremental , current-technology goal. Just reading the speeches of the DARPA directors makes it clear that they are utilizing the inspiring quality of a revolutionary project to bootstrap the project itself from fantasy to reality.

3. When viewed as a problem of “personal leverage”, if we really though about it, we might only work on high-risk/high-reward projects!! Clearly the results of 2 years spent on a 2X goal would be vastly less significant than 2 years spent on a 100X goal. The same two years goes by. But if the goal is even partly attained, the outputs of even a failed 100x might dwarf those of the 2X goal.

4. Even if the 100x goal is not specifically achieved, there is an overwhelming possibility that new connections (human, technological, conceptual, methodological, and more) will more than repay the time spent on the 100x goal.

5. The DARPA method works incredibly well. Its results have been so outstanding that we may well question ourselves as to why we spend even a minute on any incremental, uninspiring, humdrum project. The DARPA method may work better than any other goal-setting method in the history of mankind. By consciously focusing on inspiring outcomes that could create vast and profound effects, and yet have no known methods of achievement, DARPA has arguably instantiated more positive change in our world in the last 50 years than in the previous 5,000.

I am going to end this post with a theorem. Perhaps I will call it the Task Magnitude Theorem. It states: Achievement is more dependent on task selection than ability. I repeat: Achievement is more dependent on task selection than ability. I will be returning to this topic. It is the essence of what DARPA does, and what we all can do. I am not saying it is true. But what would be the personal implications if it were true?

- - - Visit the Success Books Store - - -