Using Lean in a Baldrige Environment to Transform Organizations

Using Lean in a Baldrige Environment to Transform Organizations
Using Document Automation in HPGM for ITSA Toolkit Using Lean in a Baldrige Environment to Transform Organizations VA Conference - October 27, 2010 Tim Olson, President Lean Solutions Institute, Inc. (LSI) MBNQA, Baldrige Examiner, (760) (Office) Presentation based on NIST 2010 MBNQA Material. Used with Permission. © by Process Assets, LLC (PAL). All Rights Reserved.

Using Document Automation in HPGM for ITSA Toolkit
Lean Quotes to Live By… “Keep things as simple as possible, but no simpler” Albert Einstein “I have made this letter longer than usual because I lack the time to make it shorter” Blaise Pascal

Presentation Objectives
Using Document Automation in HPGM for ITSA Toolkit Presentation Objectives Present an overview of lean. Present latest industry trends. Summarize strengths and weaknesses of Baldrige. Summarize strengths and weaknesses of Lean. Describe how lean can strengthen Baldrige Results. Answer any questions.

Outline Introduction Baldrige Overview Lean Overview CMMI Overview Using Lean to Strengthen Baldrige World-Class Quality Summary

Who is LSI? - (1) The mission of Lean Solutions Institute, Inc. (LSI) is to help organizations to measurably: • become “best-in-class” or “world-class” leaders in their respective markets (e.g., using benchmarking) • improve quality and productivity (e.g., lower product defect rates, increased KSLOC per person month, etc.) • reduce non-value added activities and the cost of poor quality (e.g., rework, waste, scrap, etc.) • become lean and apply Lean SolutionsTM - (e.g., processes, metrics, checklists, templates, etc.)

Who is LSI? - (2) LSI is an improvement organization. LSI focuses on Lean SolutionsTM for your organization (e.g., Baldrige, CMMI, ISO, etc). • LSI uses an “ISO Approach” to improvement (i.e., separate improvement organization from certification/appraisal organization). • LSI is NOT an ISO Registrar, SEI Appraisal organization, etc. • LSI specializes in lean improvement and Lean SolutionsTM in systems engineering, software engineering, IT, service, healthcare, test engineering, manufacturing, etc.

21st Century Business Needs
Using Document Automation in HPGM for ITSA Toolkit 21st Century Business Needs The usual business needs (e.g., “time and money”): Save Money (e.g., ROI) Reduce Cycle Time Improve Performance (e.g., CPI, SPI) Improve Productivity Improve Quality New 21st Century business needs: Agility, Lean, etc. Complexity, Architectures, Models, Reuse, etc. Innovation, Diversity, etc. Special Topics: Reliability, Safety, Security, Usability, etc.

Growing Complexity Systems are getting more complex very year. Example: Software Engineering Automobiles now have over 1 million lines of code. For example, the Toyota brake problem on the Prius was due to software defects. Combines and tractors have multiple controllers and multi-millions lines of code. Many organizations (e.g., manufacturing, hardware, etc.) are becoming mostly software organizations.

Multiple Needs: Multiple Models
Using Document Automation in HPGM for ITSA Toolkit Multiple Needs: Multiple Models Organizations have many needs. “All models are wrong; some are useful”. Every quality approach has strengths and weaknesses. No one model can meet all business needs. Which models to choose? Example quality approaches: Baldrige (multi-models) CMMI® (multi-models) ISO (multi-models) ITIL® Lean (Multi-Models) Six Sigma (Multi-Models) New Maturity Models (Security; Usability) Etc. CMMI is a registered trademark in the US Copyright and Patent Office by Carnegie Melon University.

The Quality Crisis The cost of poor quality: • “In most companies the costs of poor quality run at 20 to 40 percent... In other words, about 20 to 40 percent of the companies’ efforts are spent in redoing things that went wrong because of poor quality” (Juran on Planning for Quality, 1988, pg. 1) • Crosby’s Quality Management Maturity Grid states that if an organization doesn’t know it’s cost of quality, it’s probably at least 20%. (Crosby, Quality is Free, 1979, pg )

The Quality Crisis According to Dr. Juran: 1. “There is a crisis in quality. The most obvious outward evidence is the loss of sales to foreign competition in quality and the huge costs of poor quality.” 2. “The crisis will not go away in the foreseeable future.” 3. “Our traditional ways are not adequate to deal with the quality crisis.” 4. “To deal with the crisis requires some major breaks with tradition.” • Quoted from Juran, Joseph. “The Quality Trilogy”, Quality Progress, 1986

Major COQ Categories Cost of Quality Cost of Good Quality Cost of Poor Quality Prevention Appraisal Internal Failure External Failure • Training • Quality Planning • Defect Prevention • Inspections • Peer Reviews • Audits • Testing • Rework • Scrap • Re-Testing • Fixing Internal Defects • Warranty • Returned Products • Fixing External Defects

Some Quality Lessons Learned
Using Document Automation in HPGM for ITSA Toolkit Some Quality Lessons Learned Most organizations have about 33% in costs of poor quality (e.g., rework, waste, scrap, etc.) About 80% of all quality efforts have no measurable results. According to Dr. Juran, most failures in quality are due to a poor choice of strategy. In order to choose a quality strategy wisely, organizations need to know how to manage for quality.

Evolutionary vs. Revolutionary Quality Improvement
Using Document Automation in HPGM for ITSA Toolkit Evolutionary vs. Revolutionary Quality Improvement Time Company B Company A 30-50% 5-15% Increased Quality & Productivity • Adapted from Juran on Leadership for Quality, Juran, 1989

The Quality Chain Reaction Productivity improves Improve quality Costs decrease because of less rework, fewer mistakes, fewer delays, better designs, efficient use of resources and materials Capture the market with better quality and lower price Stay in business Provide jobs and more jobs • Adapted from Deming, W. Edwards, Out of the Crisis, MIT CAES, 1986

Raytheon - Cost of Quality
Using Document Automation in HPGM for ITSA Toolkit Raytheon - Cost of Quality 10 20 30 40 50 1987 1988 1989 1990 1991 1992 % OF TOTAL PROJECT COST Begin Improvement $16 Million Appraisal Cost Prevention Cost of Rework Reference: “Process Improvement and the Corporate Balance Sheet”, Dion, IEEE Software, July 1993

Raytheon - Productivity
Using Document Automation in HPGM for ITSA Toolkit Raytheon - Productivity 150 Productivity Increase - % 100 50 1988 1989 1990 1991 1992 Reference: “Process Improvement and the Corporate Balance Sheet”, Dion, IEEE Software, July 1993

Raytheon: Cost Performance Index
Using Document Automation in HPGM for ITSA Toolkit Raytheon: Cost Performance Index 80 100 150 1988 1989 1990 1991 On Budget Percent Over Budget Under Reference: “Measuring the ROI of Software Process Improvement”, Dion, SEI Presentation, August 1992

Learning is an essential attribute of high-performing organizations and, therefore, a critical concept in performance excellence. It is a key term used throughout the Criteria booklet and is one of the four scoring factors used to assess the maturity of an organization’s processes. Effective, well-deployed organizational learning can help an organization improve from the early stages of reacting to problems to the highest levels of organization-wide improvement, refinement, and innovation. The firefighting analogy illustrated here depicts a progression through the levels of maturity for this scoring dimension. Presentation based on NIST MBNQA 2010 Material. Used with Permission.

Steps Toward Mature Processes This graphic is an aid for assessing and scoring Process Items (Categories 1 through 6). In each case, the arrows indicate the degree of consistency and coordination among organizational units. The circular shapes shown next to the arrows depict the relative clarity or definition of an organization’s goals. The steps are as follows: Reacting to Problems. Here operations are characterized by activities rather than by processes, and they are largely responsive to immediate needs or problems. In Early Systematic Approaches, the organization is at the beginning stages of conducting operations by processes with repeatability, evaluation and improvement, and some early coordination among organizational units. Aligned Approaches occur in the third step toward a mature process. At this stage, operations are repeatable and are regularly evaluated for improvement, with learnings shared and with coordination among organizational units. Integrated Approaches occur at the final stage of a mature process. The arrows indicate the evolution of the organization into an interconnected unit. At this stage, not only are processes repeatable, but also, in collaboration with other affected units, they are regularly evaluated for change and improvement. This collaboration and interconnection help organizations achieve efficiencies across units. Presentation based on NIST MBNQA 2010 Material. Used with Permission.

Quality Maturity STAGE SUMMARY COQ BA DCF SEI “We know why we have happy customers.” Prevention 5% 800 20% 5 “Quality planning, control, and improvement are routine.” Wellness 10% 700 40% 4 “Management commitment and continuous improvement resolve quality problems.” Progressive Care 18% 600 60% 3 Intensive Care “We don’t know why we have quality problems, but they hurt.” 25% 400 80% 2 Comatose “What quality problems?” 33% 200 100% 1 • Acronyms are (COQ=Cost of Quality; BA=Baldrige Award; DCF=Dilbert Correlation Factor; SEI=SEI CMMI) • Based on “The Eternally Successful Organization”, by Crosby, the SEI CMM, the Baldrige Award, & Dilbert Comics

Baldrige Criteria Framework: A Systems Perspective
Using Document Automation in HPGM for ITSA Toolkit Baldrige Criteria Framework: A Systems Perspective The framework provides a high-level overview of the Baldrige Criteria for Performance Excellence and illustrates how the Criteria provide a systems perspective for managing your organization to achieve performance excellence. From top to bottom, the framework has three basic elements—the Organizational Profile, the system operations, and the system foundation (Measurement, Analysis, and Knowledge Management). The Organizational Profile (the umbrella at the top of the figure) sets the context for the way your organization operates. Your environment, key working relationships, and strategic challenges and advantages serve as an overarching guide for your organizational performance management system. The system operations (middle of the figure) comprise two linked triads. The leadership triad—Leadership, Strategic Planning, and Customer and Market Focus—emphasizes the importance of a leadership focus on strategy and customers. The results triad—Workforce Focus, Process Management, and Results—focuses on your workforce and key processes that accomplish the work of the organization that yields your overall performance results. ALL actions point toward Results. The horizontal, two-headed arrow in the center of the framework links the two triads—a linkage critical to organizational success—and indicates the importance of feedback in an effective performance management system. The system foundation for the performance management system (bottom of the figure) is composed of Measurement, Analysis, and Knowledge Management, which are critical to a fact-based, knowledge-driven system for improving performance and competitiveness. Presentation based on NIST MBNQA 2008 Material. Used with Permission.

Brainstorm What are the Strengths of Baldrige? •

Baldrige Category Point Values
Using Document Automation in HPGM for ITSA Toolkit Baldrige Category Point Values 1 Leadership 2 Strategic Planning 3 Customer and Market Focus 85 4 Measurement, Analysis, and Knowledge Management 5 Workforce Focus 6 Process Management 85 7 Results TOTAL POINTS ,000 All responses to the Items within the boxed Categories (1 through 6) should address Process. Responses to the Results Items should address trends, performance levels, and comparisons, as well as the breadth and importance of the results. Because the bottom line for any organization is results, almost half of the application points are for results. Results must be supported by linkages to the appropriate Process Items to show cause and effect. Results may be the bottom line, but they are accomplished through a successful performance management system that is guided from the top. Presentation based on NIST MBNQA 2008 Material. Used with Permission.

Core Values and Concepts
Using Document Automation in HPGM for ITSA Toolkit Core Values and Concepts Visionary Leadership Customer-Driven Excellence Organizational and Personal Learning Valuing Workforce Members and Partners Agility Focus on the Future Managing for Innovation Management by Fact Social Responsibility Focus on Results and Creating Value Systems Perspective Visionary Leadership: An organization’s senior leaders have a central role in setting directions and creating a customer focus. They must convey clear and visible values and high expectations. The organization’s defined values and strategies should help guide all of its activities and decisions. Senior leaders serve as role models and reinforce ethics, values, and expectations while building leadership, commitment, and initiative throughout the organization. Senior leaders should be responsible to the organization’s governance body for their actions and performance. Customer-Driven Excellence: Performance and quality are judged by an organization’s customers. Thus, your organization must take into account all product and service features and characteristics and all modes of customer access that contribute value for your customers and lead to customer acquisition, satisfaction, preference, and loyalty to positive referrals, and, ultimately, to business expansion. Customer-driven excellence has both current and future components. It demands awareness of developments in technology and competitors’ offerings, as well as rapid and flexible responses to customer and market changes. Organizational and Personal Learning: Organizational learning refers to continuous improvement of existing approaches and significant change or innovation, leading to new goals and approaches. Personal learning refers to education, training, and other opportunities for the continuous growth of your workforce, including senior leaders and volunteers. Learning is directed not only toward developing better products and services but also toward being more responsive, adaptive, innovative, and efficient—giving your organization marketplace sustainability and performance advantages. Presentation based on NIST MBNQA 2010 Material. Used with Permission.

Brainstorm NOTE: All models are wrong; Some are useful. What are the Weaknesses of Baldrige? •

Baldrige Weaknesses - (1)
Using Document Automation in HPGM for ITSA Toolkit Baldrige Weaknesses - (1) Architectures (Product, Process, etc.) Configuration Management Decision Analysis Defect Prevention Early Defect Removal Engineering: Requirements Design Implementation Test

Baldrige Weaknesses - (2)
Using Document Automation in HPGM for ITSA Toolkit Baldrige Weaknesses - (2) Integrated Product Teams Lean Managing Technological Change Models and Simulation Process Definition and Maturity Process Tailoring Project Management Risk Management

Baldrige Summary Strengths: Based on measurable results (450/1000 points) Has become an industry standard (State Awards are also based on Baldrige) Based on performance criteria (best practices) Has a industry standard assessment method Award winners are “model organizations” Cost effective to receive valuable feedback Weaknesses Does not address engineering strongly Does not address maturity/capability levels Run by mostly by “volunteers” 80% of organizations do not receive site visits

Lean Problems Most organizations have too much waste (e.g., non-value added). Most processes have too many “non-value added” steps. How can organizations focus on “value added” and remove waste? How can organizations measure value and waste? Lean is a recent quality approach to help organizations focus on “value” and remove “non-value”.

What is Lean? Lean has its roots in quality and manufacturing, and is a recent popular movement in quality. “Lean Production” is the name for the Toyota Lean Production System. The following are major lean references (books): “The Machine That Changed The World” “Learning to See” “The Toyota Way” “The Toyota Product Development System” “Lean Thinking”

Some Lean Principles - (1)
Using Document Automation in HPGM for ITSA Toolkit Some Lean Principles - (1) Establish customer defined value (i.e., identify the “value stream”). Process = “value”. Continuously eliminate non-value added activities (e.g., waste, rework, defects). Use leadership and standardization to create a lean culture. Align your organization through visual communication. Create an optimized process flow (e.g., “Flow”, “Pull”, “Just-In-Time”, “Leveled”).

Some Lean Principles - (2)
Using Document Automation in HPGM for ITSA Toolkit Some Lean Principles - (2) Use lean metrics to manage the value stream. Front-Load the process for maximum design space. Build a learning organization to achieve lean and continuous improvement. Adapt technology to fit your people and processes. Strive for perfection through continuous improvement.

Why Lean Processes? Reduce Cost, Schedule, and Size: Lean processes are shorter, cost less, and take less time to use. Better Usability: Lean processes are more usable (require defining “chunks” and labeling them for use). Better Designs: Lean processes require good process design, definition, and writing principles. Visual Diagrams: Lean processes are “visual” (e.g., well thought out diagrams or “lean process models”). Defined Non-Linearly: Designed to find something fast. Lean process models are dynamic and concurrent.

Some Lean Success Stories
Using Document Automation in HPGM for ITSA Toolkit Some Lean Success Stories Toyota - Best lean documented success story in industry (from manufacturing - see references). Stoner Baldrige Recipient. Used lean afterwards and dramatically improved results! (Reference: 2010 Quest for Excellence Conference). Hewlett Packard - a CMMI success story for software. 25% of the size of a typical CMMI implementation!!! Lean Early Defect Detection - Averages 7:1 ROI!

Advanced Lean: Architectures
Using Document Automation in HPGM for ITSA Toolkit Advanced Lean: Architectures Architectures are very powerful because they: Are graphical (a picture is worth a 1000 words) and can be powerful communication tools. Provide a framework for how components are related (e.g., interfaces, interdependencies, relationships) and how components fit together. Promote reuse (e.g., products, components, requirements, designs, tests, interfaces, etc.) and can improve productivity and quality. Can be modeled in an automated tool.

What is an Architecture?
Using Document Automation in HPGM for ITSA Toolkit What is an Architecture? Architectures consist of: Components Interfaces, interdependencies, and other relationships among components Ordering and rules for putting components together Simple Architecture Example: Lego’s Numerous Types of Architectures: Product and Domain Specific Architectures Business, Data, Technology, etc. Architectures Discipline Specific Architectures (e.g., software) Process Architectures Documentation Architectures

Advanced Lean: Models Models are very powerful because they: Are graphical (a picture is worth a 1000 words) and can be powerful communication tools. Can scale up to complex systems and provide a tool to analyze complex relationships and dependencies. Promote reuse (e.g., products, components, requirements, designs, tests, interfaces, etc) and can improve productivity and quality. Can be represented in an automated tool, and simulated.

What are Models? Models are abstractions of reality constructed for a (useful) purpose consisting of: Formal notations and rules for representations Model components or building blocks Ways to model interfaces, interdependencies, and other relationships among the model components There are numerous modeling languages and tools. A Few Modeling Examples: Behavioral Models (e.g., timing, states) Structural Models (e.g., hierarchy, order) Functional Models (e.g., input, function, output) Process Models (e.g., the 5 W’s)

Architectures Architectures consist of: Components Interfaces, interdependencies, and other relationships among components Ordering and rules for putting components together Simple Architecture Example: Lego’s Numerous Types of Architectures: Product and Domain Specific Architectures Business, Data, Technology, etc. Architectures Discipline Specific Architectures (e.g., software) Process Architectures Documentation Architectures

Brainstorm What are the Strengths of Lean? •

Brainstorm NOTE: All models are wrong; Some are useful. What are the Weaknesses of Lean? •

Some CMMI Definitions Maturity Level: A maturity level is a set of related process areas that can be rated by a formal appraisal (e.g., CMMI SCAMPI A) and are performed collectively to achieve a set of goals. “Degree of process improvement across a predefined set of process areas in which all goals in the set are attained.” Process Area (PA): Process Area is a set of related practices that are performed collectively to achieve a set of goals. “A cluster of related practices in an area that, when implemented collectively, satisfy a set of goals considered important for making improvement in that area.” Specific Goal (SG): A high level statement of the outcome to be achieved by effective implementation of a group of practices. “A required model component that describes the unique characteristics that must be present to satisfy the process area.” . • Adapted from: “CMMI® for Development”, Version 1.2, CMU/SEI-2006-TR-008

CMMI Staged Representation
Using Document Automation in HPGM for ITSA Toolkit CMMI Staged Representation Level Focus Process Areas Quality and Productivity Continuous Process Improvement 5 Optimizing Organizational Innovation and Deployment Causal Analysis and Resolution 4 Quantitatively Managed Quantitative Management Organizational Process Performance Quantitative Project Management Requirements Development Technical Solution Product Integration Verification Validation Organizational Process Focus Organizational Process Definition Organizational Training Integrated Project Management Risk Management Decision Analysis and Resolution 3 Defined Process Standardization Requirements Management Project Planning Project Monitoring and Control Supplier Agreement Management Measurement and Analysis Process and Product Quality Assurance Configuration Management 2 Managed Basic Project Management Risk 1 Initial • Slide adapted from Process Program, Software Engineering Institute (SEI)

CMMI Results • Reference, “Performance Results of CMMI®-Based Process Improvement”, CMU/SEI-2006-TR-004

HP Lean CMMI Success Reduced Time: A small unit of HP implemented CMMI Maturity Level 3 in about 7 months (an average 4 year effort). Reduced Money: Cost of about 30-50% of typical cost. Reduced Size: The lean HP Maturity Level 3 process is about 20-25% of the size of the HP India Process (or a typical CMMI Maturity Level 3 process). • Olson, Timothy G., Kellum, Julie, and Tufail,Zia., “Rapidly Defining a Lean CMMI Maturity Level 3 Process”, Presentation, NDIA CMMI Conference, 2006.

More Lean CMMI Successes
Using Document Automation in HPGM for ITSA Toolkit More Lean CMMI Successes According to LSI data, the number one compliant from CMMI Maturity Level 3-5 companies is that their process is “not lean”. LSI has many lean success stories. What are typical Lean CMMI Results? Processes are 20-25% of the size, and are more visual and usable. CMMI Maturity Levels reached in half of the average time (average 1 year instead of 2 years per level). 33-50% of the average cost.

CMMI Strengths & Weaknesses
Using Document Automation in HPGM for ITSA Toolkit CMMI Strengths & Weaknesses Strengths: Has become an industry standard Based on industry best practices Based on maturity and capability models Has a industry standard appraisal method Weaknesses Measurable results are not required (way too much focus on “levels” and “ratings”, and not enough on measurable results) Leadership requirements are weak CMMI model is not lean (too large) SCAMPI is especially not lean (takes too much time and is too expensive)

Lean Strengthens Baldrige
Using Document Automation in HPGM for ITSA Toolkit Lean Strengthens Baldrige Lean is not required for Baldrige. Baldrige mentions “Lean” one time in the notes. Stoner Baldrige Recipient. Used lean afterwards and dramatically improved results! (Reference: 2010 Quest for Excellence Conference). Baldrige award winners may not be lean! One measure of “lean” is “cost of poor quality”. Advanced “lean”: Architectures and Models.

Reference: Quest for Excellence Conference, Washington D.C., 2010.

Advanced Lean Architectures: Promote “reuse” at the highest level (e.g., requirements, design, implementation). Promote useful “views” of the product, service, or system (e.g., behavior, structure, data, etc.) Models: Promote “lean” processes and procedures Promote clear communication Both: Are visual and scale up to complexity

Quality Maturity STAGE SUMMARY COQ BA DCF SEI “We know why we have happy customers.” Prevention 5% 800 20% 5 “Quality planning, control, and improvement are routine.” Wellness 10% 700 40% 4 “Management commitment and continuous improvement resolve quality problems.” Progressive Care 18% 600 60% 3 Intensive Care “We don’t know why we have quality problems, but they hurt.” 25% 400 80% 2 Comatose “What quality problems?” 33% 200 100% 1 • Acronyms are (COQ=Cost of Quality; BA=Baldrige Award; DCF=Dilbert Correlation Factor; SEI=SEI CMMI) • Based on “The Eternally Successful Organization”, by Crosby, the SEI CMM, the Baldrige Award, & Dilbert Comics

Vision of “World-Class”
Using Document Automation in HPGM for ITSA Toolkit Vision of “World-Class” Quality results that are planned and measured: Strong leadership for quality Processes are “lean” and “value added” Cost of Poor Quality (COPQ) is 5-10% % of all defects are removed early Lean Metrics: Cycle Times, Performance, Productivity, Quality, ROI, etc., are continuously improving Customers are satisfied; even delighted Employees are happy and proud of their work Processes are mature: Supported by Technology Most defects are prevented; Strong prevention Award winning world-class quality (e.g., Deming Award, Baldrige Award, etc.)

Summary Baldrige and Lean work well together (synergistic). “All models are wrong; Some are useful.” The Baldrige Model has strengths and weaknesses; Know the weaknesses of Baldrige. All quality models have strengths and weaknesses; Know the weaknesses of the quality models you use or are going to use. Winning the Baldrige Award is just the beginning! Congratulations! But challenge yourself to keep improving!

Apply to Serve as a Baldrige Examiner
Using Document Automation in HPGM for ITSA Toolkit Apply to Serve as a Baldrige Examiner Evaluate Award applicants using the Criteria for Performance Excellence. Earn professional development CEUs (accredited by IACET). Network with other senior-level professionals from all sectors. Learn how organizations improve processes and get world-class results. Attend the annual Award Ceremony given by the President of the United States. Apply November 5 - January 6 at or call Presentation based on NIST MBNQA 2010 Material. Used with Permission.

Using Lean in a Baldrige Environment to Transform Organizations

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