how market leaders outdistance the competition
TRANSCRIPT
© Steven J. Spear 2008
Chasing the Rabbit:How Market Leaders Outdistance the Competitionand How Great Companies Can Catch Up and Win
Steven J. SpearSenior Lecturer, MITSenior Fellow, IHI
© Steven J. Spear 2008
World Class Competitors
Back office operational efficiencies -->management fees fraction of industry.
Vanguard
34 years of operating profit.Southwest
57,000 reactor years without a singlecausality or fatality
US Navy, NuclearReactor Division
Safest large employer in United StatesAlcoa
Quality, efficiency, product variety -->market share growth, profitability, andmarket cap.
Toyota
Cited from: Spear, Steven J. Chasing the Rabbit, McGraw-Hill, Oct. 2008, citing other sources.
© Steven J. Spear 2008
Productivity of Auto Producers in N.A.
5.5%$1,488.27.9Toyota (*)
(4.8%)$1,60329.4Nissan
0%$1,25032.0Honda
2.5%($2,231)34.3General Motors
4.2%$62037.0Ford
4.2%$18635.0DaimlerChrysler
Gain inproductivity
Profit pervehicle
Hours pervehicle
Source: Jeremy W. Peters, “U.S. Carmakers Falling Farther Behind Asians,” International Herald Tribune, Page 15-16, Sunday June 5th
,
2005.
© Steven J. Spear 2008
Achieving Great Position:High Velocity Improvement and Innovation
© Steven J. Spear 2008
Good News, Bad News
© Steven J. Spear 2008
Good News, Bad News
© Steven J. Spear 2008
Failure Examples
• Medical Errors
• Challenger and Columbia
• 9/11
© Steven J. Spear 2008
Failure Modes
• Functional Focuswithout process view
• ContinuousWorkarounds ofKnown Problems
© Steven J. Spear 2008
Failure Modes
• Functional Focuswithout process view
• ContinuousWorkarounds ofKnown Problems
Performance
Time
© Steven J. Spear 2008
Alcoa’s Pursuit ofPerfect Workplace Safety
Workplace Safety at Alcoa
1.91.5
1.2 1.1 1.00.8 0.8 0.8
0.5 0.50.5 0.40.2 0.30.3 0.1
4.44.2
3.93.5
3.3 3.22.9
2.52.4 2.32.22
0
1
2
3
4
5
1985 1990 1995 2000 2005
Year
In
cid
en
ts p
er 2
00
,00
0 h
ou
rs
wo
rked
Alcoa US Manufacturing
© Steven J. Spear 2008
Capabilities of the Market Leaders
• Manage work to see problems• Solve problems when and where they
are seen.• Share what is learned broadly.• Develop those for whom you are
responsible.
© Steven J. Spear 2008
Success Modes
• System ViewComplementsFunctional Expertise
• Continuous ProcessImprovement andInnovation
© Steven J. Spear 2008
Success Modes
• System ViewComplimentsFunctional Expertise
• ContinuousImprovement andInnovation
Performance
Time
© Steven J. Spear 2008
The Toyota Temple
© Steven J. Spear 2008
The Toyota Temple2,374 articles with “lean” keywords.
© Steven J. Spear 2008
The Toyota Temple2,374 articles with “lean” keywords.5 of (0.5%) mentioned jidoka
© Steven J. Spear 2008
The Toyota Temple2,374 articles with “lean” keywords.5 of (0.5%) mentioned jidoka
© Steven J. Spear 2008
The Leadership Imperative
• HIGHLY SPECIFIED:Output: What product or service is being provided to whom.Pathway responsibility: Who does what task in what sequence.Connections/Handoffs: How information (including requests for something),products, and services are exchanged.Methods: Work content, sequence, timing, location, and output of a task.
• Imbedded tests refute assumptions implicit in the designs.
• Problems are solvedas fast-paced, low-cost experiments.
• New knowledge is sharedsystemically by collaborativeproblem solving.
• The more senior people are, the morecapable they are at designing work,improving work, sharing knowledge, anddeveloping the capabilities of those forwhom they are responsible.
C1
C2
C3
C4
Adapted from: “Learning to Lead at Toyota,” Spear, Steven J.,Harvard Business Review, (2004)
© Steven J. Spear 2008
A Tale of Two Auto Plants
Plant can’t keep upwith demand.
Not manySales
FineDrug and alcohol abuseOn the job
Few grievancesRecord grievancesLabor-Mgt.
Industry leadingAbysmalProductivity
Award winningAbysmalQuality
2%-3%25%Absenteeism
UAWUAWUnion
Plant 2Plant 1
© Steven J. Spear 2008
Selected Publications• Chasing the Rabbit: Why Market Leaders Outdistance Their Competition
and What Great Companies Can Do to Catch Up, McGraw Hill, (Fall 2008)
• “A New Design for Health Care Delivery,” with Don Berwick Boston Globe op-ed (November 2007)
• “Learning from the Masters: By learning from Toyota and Alcoa how to manage complex work processes, hospitals can improveperformance,” Cerner Quarterly, (2006).
• “Fixing Healthcare from the Inside: Teaching Residents to Heal Broken Delivery Processes As They Heal Sick Patients,” AcademicMedicine. (2006).
• “Using Real-Time Problem Solving to Eliminate Central Line Infections,” with Richard Shannon and other co-authors. Joint CommissionJournal on Quality and Patient Safety, (2006)
• “Operational Failures and Interruptions in Hospital Nursing Work,” with Anita Tucker,Health Services Research, (2006).
• “The Health Factory,” New York Times [op ed], (2005).
• (#) (*) “Fixing Healthcare from the Inside, Today,” Harvard Business Review (2005).
• “Ambiguity and Workarounds as Contributors to Medical Error,” with Mark Schmidhofer,Annals of Internal Medicine (2005).
• “Medical Education as a Process Management Problem,” with Elizabeth Armstrong and Marie Mackey, Academic Medicine (2004).
• (*) “Learning to Lead at Toyota,” Harvard Business Review, (2004)
• “Driving Improvement in Patient Care,” with Debra Thompson and Gail Wolf,Journal of Nursing Administration (2003).
• (*) “The Essence of Just in Time,” Productivity, Planning, and Control, (2002).
• (x) “When Problem Solving Prevents Organizational Learning,” with Anita Tucker and Amy Edmondson, Journal of Organizational ChangeManagement, (2002).
• (*) “Decoding the DNA of the Toyota Production System,” with H. Kent Bowen,Harvard Business Review, (1999).
(#): McKinsey Award, One of top two articles in Harvard Business Review, 2005.(*): Shingo Prize winning articles.(x): Best paper proceedings, Academy of Management conference, 2001.
© Steven J. Spear 2008
Speaker ProfileSteven Spear has written extensively about how exceptional organizations create competitiveadvantage through the strength of their internal operations, managing complex design, production, andadministrative processes for unmatched performance. His first book, Chasing the Rabbit, will bepublished by McGraw Hill in Fall 2008. His articles, “Decoding the DNA of the Toyota ProductionSystem” and “Learning to Lead at Toyota” have been widely read, and Spear's “Fixing Healthcare fromthe Inside, Today,” won a McKinsey Award as one of the best Harvard Business Review articles in 2005and his fourth Shingo Prize for Excellence in Manufacturing Research. He has published in Annals ofInternal Medicine and other medical journals as well.
Spear works actively with a variety of organizations. He played an integral role in developing the AlcoaBusiness System, which has been credited with saving hundreds of millions of dollars in Alcoa's annualreport, and the Perfecting Patient Care program of the Pittsburgh Regional Healthcare Initiative, whichhelped raise quality and safety of care in area hospitals. He has worked with organizations such asLockheed Martin, John Deere, Intel, Intuit, Brigham Women's Hospital, Massachusetts General Hospital,and Memorial Sloan Kettering Cancer Center. He consulted for the MacArthur Foundation, and workswith Toyota on supplier development efforts. At MIT, he teaches a course about lean manufacturingand six sigma in the Leaders for Manufacturing Program.
Spear’s academic degrees include a doctorate from Harvard Business School, masters degrees – inmanagement and mechanical engineering – from MIT, and a bachelors degree in economics fromPrinceton. He worked for the investment bank Prudential-Bache, the US Congress Office of TechnologyAssessment, and the University of Tokyo, and he taught at Harvard Business School for six years. Heand his wife, Miriam, an architect, live in Brookline MA with their three children.
© Steven J. Spear 2008
Good News, Bad News
© Steven J. Spear 2008
Good News, Bad News
© Steven J. Spear 2008
Good News, Bad News
© Steven J. Spear 2008
Simple Science,Simple Processes
© Steven J. Spear 2008
Complex Science,Complex Processes
© Steven J. Spear 2008
Success Examples• Allegheny General Hospital
Eliminating Central Line Infections• South Side Pharmacy
Medication Administration• Massachusetts General Hospital
Primary care• Shadyside Hospital
Patient Falls• Virginia Mason Medical Center
Institution wide transformation
© Steven J. Spear 2008
Why Doesn’t Healthcare Get it Right?
• Organized by discipline, without process ownership.• Training centered around discipline without systems training.
© Steven J. Spear 2008
Why Can’t Healthcare Get it Right?• Organized by discipline, without process ownership.• Training centered around discipline without systems training.
© Steven J. Spear 2008
Patient Flow—West Penn Allegheny
07 out of 42patients
Incomplete lab results
010 to 11per day
Unnecessary blood bankreports
070 minutesTime reworking charts
2 1/4 hoursper day
9 hours perday
Chart assembly
3 minutes12 to 60minutes
Registration
0Up to twohours
From sign-in toregistration
AfterBefore
Cited from: “Using Real-Time Problem Solving to Eliminate Central Line Infections,” RShannon and co-authors. Jnt Comm J on Qual and Pt. Safety, (2006)
© Steven J. Spear 2008
© Steven J. Spear 2008
© Steven J. Spear 2008
© Steven J. Spear 2008
© Steven J. Spear 2008
© Steven J. Spear 2008
Central Line Infections at Allegheny General
FY 03
(Baseline)
FY 04
Year 1
FY 05
Year 2
FY 06
Year 3
(10 months)
Intensive care unit
admissions
1,753 1,798 1,829 1,832
Central lines employed 1,110 1,321 1,487 1,898
Line day s 4,687 5,052 6,705 7,716
Infections 4 9 6 1 1 3
Patients infected 3 7 6 1 1 3
Rates (infections per
1,000 line days)
10.5 1.2 1.6 0.39
Deaths 19 (51%)
1 (16%)
2 (18%)
0 (0%)
Cited from: “Using Real-Time Problem Solving to Eliminate Central Line Infections,” RShannon and co-authors. Jnt Comm J on Qual and Pt. Safety, (2006)
© Steven J. Spear 2008
Central Line Infections atAllegheny General Hospital
Problems
• Femoral lines left in place rather than being relocated.
• Procedure breaks in line placement and maintenance.
© Steven J. Spear 2008
PLACE FEMORAL LINE
MOVE FEMORAL LINE
NIGHT SHIFT
DAY SHIFT
????
Resident
Goal: No femoral lines
Goal (short term): Femoral lines removed next day
© Steven J. Spear 2008
© Steven J. Spear 2008
Goal: No femoral lines Goal (short term): Femoral lines removed next day Who is responsible for what task (Pathway):
• Resident places femoral line. • Fellow moves line.
Handoffs and Exchanges (Connections): • Signals from resident to fellow to move line.
PLACE FEMORAL LINE
MOVE FEMORAL LINE
NIGHT SHIFT
DAY SHIFT
Fellow
Tag on patient,
Tag on chart
Resident
Tag on patient,
Tag on chart
© Steven J. Spear 2008
PLACE FEMORAL LINE
MOVE FEMORAL LINE
NIGHT SHIFT
DAY SHIFT
Fellow
Tag on patient,
Tag on chart Resident
Tag on patient,
Tag on chart
Goal: No femoral lines Goal (short term): Femoral lines removed next day Who is responsible for what task (Pathway):
• Resident places femoral line • Fellow moves line Handoffs and Exchanges (Connections): • Signals from resident to fellow to move line How to do individual tasks (Methods):
• Changes in materials (kits, fast vaporizing cleaners, etc.) and methods.
Nurse
© Steven J. Spear 2008
MGH Revere Flu Clinic
30.214.26.1Flu Shots per Hourof Staff Time
2.52.53.5Clinical Support StaffFTEs Involved
1517143Flu Shots Administered
222Hours/Session
Session3
Session2
Session1