guiding principles for implementing lean product development
TRANSCRIPT
Tony OrzechowskiDirector, R&D Quality Engineering
Abbott Diagnostics
Guiding Principles for Implementing Lean Product Development
Guiding Principles for Implementing Lean Product Development
2 © 2008 Abbott
Conclusion: Our Deployment is based upon Several Key Guiding Principles that Help Assure Consistent Sustainable Results
1. Maintain Connection to Strategic Business Objectives
2. Establish and Maintain Project Portfolio Management(Manage Demand and Capacity – 10 Projects Half Done are Zero $’s)
3. Add Activation Energy to Help Drive Projects and Change(All good ideas evolve into hard work on someone’s part)
4. Manage Improvement Projects with Flexible Structure
5. Oversee Long-term Management of Competency Development for Key People
6. Develop, Assess and Validate Financial Impact
7. Ensure Clearly Defined Project Transfers back into the Design Factory*, and
8. Monitor Reproducibility of the Results over a 1 to 2 year period … Help adjust process when needed.
* Design Factory – Reinertsen – “Managing the Design Factory”
Guiding Principles for Implementing Lean Product Development
3 © 2008 Abbott
Guiding Principle #1. All Projects should be driven by a to fulfill the Strategic Business Objectives
• Being driven by the Strategic Business Objectives projects will maintain more consistent organization and leadership engagement
• The emphasis on how we prioritize (weight) our portfolio changes over the years may change, but in doing so we maintain consistency on what is most important
– Evolving Business Drivers emphasize focus on Quality, Timeliness, or Revenue / Cost
• Management oversight authorizes project selections and rebalancing in order to assure on-going alignment with evolving business objectives
• Measures of project success against projections are reported to validate the value being delivered by the overall program
Guiding Principles for Implementing Lean Product Development
4 © 2008 Abbott
Why Focus on Lean Product Development? Improved R&D speed drives higher revenues and margins resulting in Improved company Cash Flow
Improve the Fast Flexible Flow
of Key R&D Processes
Complication-Achieve this with the Same Internal R&D $
How will this be done ?
Increase Value to Abbott Shareholder(Increase Cash Flow / Margin Growth)
What is the required outcome for the company ?
Drive Growth by Accelerating Delivery
of New ProductsWhat is to be achieved ?
Increase Capacity of the R&D Process
Guiding Principles for Implementing Lean Product Development
5 © 2008 Abbott
Guiding Principle # 2. Controlling Project Demand and Queues through Project Portfolio Management is a Key to Successfully Completing Projects
Selecting and Authorizing the right projects, with the right resources, at the right time.
• All projects are traceable to Strategic Business Objectives
• Demand Management (managing management) – Maintain the discipline to start less and finish more
– Project prioritization based on Benefit / Effort / Risk assessment (scorecard is used to define weighted benefit based upon current strategic business objectives)
– Non-discretionary projects (… and we all have these …) are accounted for
– Ability to Start Less to maintain a Fast Flexible Continuous Improvement Process is Vital … learning how to say NO or Not Now, but Later (postponement).
“Stop Starting Stuff … Start Finishing Stuff !” – Reinertsen 2006
Guiding Principles for Implementing Lean Product Development
6 © 2008 Abbott
Guiding Principle # 2. Controlling Project Demand and Queues through Project Portfolio Management is a Key to Successfully Completing Projects
• Resource Management
– Managing Capacity (Utilization of Key Skilled Resources),
– Managing Long-term Competencies Flexibility to flow competent resources to project bottlenecks
• Portfolio Diversification (Gaming Strategy - How to place your bets)
– Managing the % Layout of “Game Changers” (monster projects with massive payback) vs. sure-thing quick-wins with small incremental paybacks
Idea GenerationDeveloping a project pipeline – Both Top-Down and Bottom-up
Guiding Principles for Implementing Lean Product Development
7 © 2008 Abbott
Guiding Principle # 2. Controlling Project Demand and Queues through Project Portfolio Management is a Key to Successfully Completing Projects
Project Portfolio Management Plot - PICK ChartPrioritization (Benefit - Effort - Risk)
50
49
47
46
45
44
4140
5 4-1
1-4
2 3
32
34
*35
36
39
*42
43
7-4
8-5
9
10
11-4
*12
13*16
14
17-18
18-1720
21
24
25
26*27
28
29
30
31
33
-
1.0
2.0
3.0
4.0
5.0
- 1.0 2.0 3.0 4.0 5.0Effort
Be
ne
fit
Implement Zone
Kill Zone Possible Zone (Quick Wins)
Challenge Zone
Project Portfolio Management Plot - PICK ChartPrioritization (Benefit - Effort - Risk)
50
49
47
46
45
44
4140
5 4-1
1-4
2 3
32
34
*35
36
39
*42
43
7-4
8-5
9
10
11-4
*12
13*16
14
17-18
18-1720
21
24
25
26*27
28
29
30
31
33
-
1.0
2.0
3.0
4.0
5.0
- 1.0 2.0 3.0 4.0 5.0Effort
Be
ne
fit
Implement Zone
Kill Zone Possible Zone (Quick Wins)
Challenge Zone
Benefit• Revenue Growth• Cost Reduction
(including Cost of Delay)• Strategic Fit• Quality / Customer Satisfaction• Compliance
Effort• Length of Project• Resource Impact• Costs (One-Time and On-going)
Risk• Project• Technical• Organizational / Cultural
Possible (Quick Wins)Implement (Clear Value)
Challenge
Kill (Low Value)
Guiding Principles for Implementing Lean Product Development
8 © 2008 Abbott
Clear ConsistentDefinitions ofBenefit, Effort and Risk for Fast Accurate Project Selection and Authorization
Business Impact: For each category below, indicate the relative benefit that the project will have by clicking on corresponding box and use "Fill Color" to mark the box. Benefits guidelines are annualized.
Criteria Wgt. Description N/A
Revenue GrowthRevenue growth (based on % increase in revenue)
$0
Cost Reduction
Reduction of product and/or operating costs without eroding quality, functionality and/or service (based on % improvement in EBITDA)
$0
Strategic FitThe extent to which a project supports the strategic goals. ( how many goals, how strongly)
Does not directly support any
current site goal.
Customer Satisfaction
The extent to which a project will increase customer satisfaction (i.e. increase the likelihood of retention of incremental purchases).
Customer does not "see" this
issue.
Compliance Improvement
Improves compiance with prescribed laws, regulations, policies and procedures.
Does not impact compliance or
quality of product.
0%
Project Effort:
Criteria Wgt. Description No Effort
Length of ProjectThe duration of the project overall (i.e. the amount of time a Black Belt is dedicated to the problem)
< 1 day
Number of FTENumber of experienced headcount required to implement the project (excluding contract HC- see One Time Costs).
< 0.1
One-Time CostsAny incremental expense (capital outlay, contract HC or any other expenses incurred) required to implement the project.
< $10,000
0%
Risk of Project: For each category below, indicate the relative risk of the project by clicking on the corresponding box and use "Fill Color" to mark the box.
Criteria Wgt. Description N/A
Project RisksProbability of not succeeding due to issues with respect to schedule, budget, union / contractual / regulatory barriers, etc.
Do Not Use
Technical Risks
Probability of not succeeding due to customer requirements, difficulty collecting data, difficulty in identifying or developing the solution.
Do Not Use
Cultural / Change Risks
Probability of not succeeding due to issues with respect to the sustainability and acceptability of the project. This includes the risk due to lack of sponsorship and cultural / change resistance.
Do Not Use
> 4 mos
0.1 - < 1.0
High Effort
Some customers may defect if this is not addressed OR only poor customers will
defect. Levels of improvement are moderate.
Project will help to prevent Field Actions / complaints or to a compliance related
gap.
>$100,000
$100,000 - $1,000,000
Medium Benefit High Benefit
$25,000 - $100,000
Significant risks identified, barrier resolution difficult,
project not well-understood -OR- Re-design required
Low Risk Medium Risk
Project is well-understood with no significant barriers
identified
Med Risk - project has some risk attached to it, barriers identified have
possible resolutions, and/or some gaps in understanding of project
High Risk
Significant risks identified, barrier resolution difficult,
project not well-understood -OR- Re-design required
Project is well-understood with no significant barriers
identified
Med Risk - project has some risk attached to it, barriers identified have
possible resolutions, and/or some gaps in understanding of project
Low Benefit
$10,000 - $100,000
Project may help to prevent Field Actions /
complaints or to a compliance related gap.
<$100,000
2 - 4 mos1 day - 2 mos
1.0 - 3.0
Project is well-understood with no significant barriers
identified
Med Risk - project has some risk attached to it, barriers identified have
possible resolutions, and/or some gaps in understanding of project
Significant risks identified, barrier resolution difficult,
project not well-understood -OR- Re-design required
> 3.0
$100,000 - $500,000 >$500,000
Low Effort
For each category below, indicate the relative effort required to meet the project’s requirements by clicking on the corresponding box and use "Fill Color" to mark the box.
Medium Effort
Project is directly related to prevention of Field Action / high
level of complaints or is to a significant compliance related
gap.
Customers occassionally see this
issue, but do not change their buying behavior
because of it
Customers will defect if this is not addressed AND these are "key" customers (large and/or
profitable).
Supports multiple goals, and/or will have a significant impact on
1 or more.
>$1,000,000
<$25,000
Supports just 1 goalSupports multiple goals, or will have a
significant impact on 1.
Guiding Principles for Implementing Lean Product Development
9 © 2008 Abbott
Guiding Principle # 3. Adding Activation Energy Helps to Drive Successful Projects and Change
Activation Energy – Experienced Resources
• 1-2% - Full-time dedicated catalysts with capacity to drive projects
• Used to establish and drive momentum “over the top of the hill”
Organization• Collocate and embed organization
• Manage group through measures / rewards on strategic outcomes:
– avoid identifying too strongly with their own work group rather than with the company as a whole.
– avoid looking inwards at what they do and how it is measured / rewarded and look more at the strategic level outcomes.
Example: Some teams can focus too heavily upon cycle-time reductions as an end outcome rather than improvement to product launch times (lead times). - Ask the question … “Do our products launch sooner now or do we launch more products with the same resources.”
Guiding Principles for Implementing Lean Product Development
10 © 2008 Abbott
Guiding Principle # 4. Keep Project Structures as Simple and Flexible as Possible
Key Themes for a Lean Product Development Project
1. Understand the Project Economics
2. Focus on the Queues
3. Create Flexibility
4. Drive Behavior of Fast Learning
5. Utilize Real-time Planning
6. Understand the Value Stream
Always keep it as Simple as Possible – Find the Queues !
Guiding Principles for Implementing Lean Product Development
11 © 2008 Abbott
One Project’s Example: How was a Lean R&D Process achieved …
Category Actual ImprovementsImproved CapacityBetter Tools, Increased Support of Key Resources and Reduction of non-value added activity
• Better Tools - New Data Management System
• ELN Reduction(Precision: From: 300 To: 2)
• Testing Error Reduction
• Protocol Simplification and Robustness
• Capacity Level Loading thru VSM
Demand ManagementStop Starting Stuff, Start Finishing Stuff
• Small batches with WIP-Caps
• Pull-System
Fast Learning and Feedback
• Daily Stand-up meetings
• Visual Mgmt Board
• Co-location of functional groups
FlexibilityReduce the Impact of Variation
• Cross-training
• Protocols now allow for extra reps
Standardization Reduce Sources of Variation
• Further Standardization of Statistical Outputs
• ELN Standardization
Employee Ownership • Clear process ownership of individual protocols
• Clear expectations of functional groups
Guiding Principles for Implementing Lean Product Development
12 © 2008 Abbott
When Structure is needed … There is a Basic Process to Reduce Lead Time
ConstrainedResources and Time
these causes ?
Identify Solutions and Establish
Magnitude of Benefit
How will we prevent
Key Solutions - Trace Map of Potential Solutions to Causes
Balance Benefit against Effort to
Prioritize and Select Key Solutions
Where is our biggest bang for our dollar ?
Benefit / Effort Matrix - Prioritization and Selection of Key Improvements
Identify Key Areas of Lost Time
What and Where is the Lost Time ?
Key Areas of Lost Time - Map the Process - Find the Biggest Queues
Lost Time ?Brainstorm Causes and
Key DriversWhat causes this
Key Causes - Trace Map of Causes to Process WasteIdentify
Guiding Principles for Implementing Lean Product Development
13 © 2008 Abbott
Guiding Principle # 5. Overseeing Long-term Management of Competency of Key Resources is a key to Building Flexibility to Meet Future Business Needs
Competency Management
• Growth Plans are integrated with Business Objectives based upon Current-state and Projected Future-state capacity requirements
• Skillset cross-training / redundancy built-upon to maintain flexibility
Example:
• The types and quantity of skillsets necessary to meet business needs are listed and defined.
• We then assess our current state of competency against these future needs, identify gaps, and begin making investments for reducing these gaps in competency / capacity.
Guiding Principles for Implementing Lean Product Development
14 © 2008 Abbott
Lean Product Development PrinciplesKey Drivers of Fast Flow
Basic Queuing Theory: Little’s Law* applies to any process
Lean is a set of tools to reduce the “Number of Things in Process” without reducing the completion rate
* First proven by Dr. John D.C. Little, MIT, 1961
How to Control the Number of Things in Process?
How to Control the Number of Things in Process?
IncreaseCapacityIncreaseCapacity
Manage DemandManage Demand
Reduce VariabilityReduce
VariabilityUse Control
SystemsUse Control
Systems
>90% of Opportunity
is here.
Guiding Principles for Implementing Lean Product Development
15 © 2008 Abbott
Lean Product Development PrinciplesKey Drivers of Fast Flow are Capacity and Demand
Plan Utilization of Key Resources < 70%
Do Work into Small Iterative Batch Size
Eliminate Non-value Added Activities
Maximize Reuse
Level Loading Capacity
Cross-training
Co-location
Task Simplification and Standardization
Identify Alternative Pathways for Work to get done
Control Queue Size (WIP-Caps)
New Work Enters at the Pace that Old Work Leaves the Process
Release Work in Small Batches
Fast Flexible
Flow
Capac ity
Demand
(Rate and Amount of Work)
Example: We do not cross-train to create more efficient resources,
we do it to deal with bottlenecks. A small change in capacity can
have a large change in cycle time.
Guiding Principles for Implementing Lean Product Development
16 © 2008 Abbott
Guiding Principle # 6. Developing, Assessing and Validating Financial Impact isn’t Easy, but it is Essential for Sustaining Leadership Engagement
• By establishing the financial impact of these improvement activities we are better able to sustain leadership engagement and drive change
• Key Steps include:
– Understand the economics of the development project (e.g. Optimizing the Cost of Capacity versus the Cost of Delay)
– Establish a process, with the Finance organization, to Quantify and Certify these results
– Integrate this process with the Portfolio Management Process
Guiding Principles for Implementing Lean Product Development
17 © 2008 Abbott
Guiding Principle # 7. Ensuring clearly defined Project Transfers back into the Design Factory is Essential for Long-term Sustainability of Improvements
• Poor project transfer (by the project lead or the process owner) is the primary risk factor to sustaining long-term improvements
• To prevent this key risk factor, we currently:1. Establish a formal transfer of improvements from “project” status to on-going
R&D operations (the Design Factory)
2. Core team assesses risks associated with sustaining improvements once activation energy and project focus is removed
3. Agree to control plans as part of project transfer aimed at mitigating these risks
4. Process Owner personally accepts transfer and responsibility to sustain improvements
Guiding Principles for Implementing Lean Product Development
18 © 2008 Abbott
Guiding Principle # 8. Continuing to Monitor Reproducibility is an Important Action to Maintaining or Improving Sustainability
• Continue to Monitor Reproducibility of the Results over a 1 to 2 year period …
• Be prepared to help adjust process performance when needed
Guiding Principles for Implementing Lean Product Development
19 © 2008 Abbott
Conclusion: Our Deployment is based upon Several Key Guiding Principles that Help Assure Consistent Sustainable Results
1. Maintain Connection to Strategic Business Objectives
2. Establish and Maintain Project Portfolio Management(Manage Demand and Capacity – 10 Projects Half Done are Zero $’s)
3. Add Activation Energy to Help Drive Projects and Change(All good ideas evolve into hard work on someone’s part)
4. Manage Improvement Projects with Flexible Structure
5. Oversee Long-term Management of Competency Development for Key People
6. Develop, Assess and Validate Financial Impact
7. Ensure Clearly Defined Project Transfers back into the Design Factory*, and
8. Monitor Reproducibility of the Results over a 1 to 2 year period … Help adjust process when needed.
* Design Factory – Reinertsen – “Managing the Design Factory”
Guiding Principles for Implementing Lean Product Development
20 © 2008 Abbott