Category Archives: Lean Six Sigma

Is Profit Waste?

(This post is bound to be controversial – so please, if you have an opinion, write a comment. I’m really interested in hearing what others think and feel about this concept.)

Last week, I read the Harvard Business Review’s 2011 Agenda, in which HBR reported on what projects key business and management leaders will be working on during the upcoming year. I was directed to the report by a Facebook post from Daniel Pink, author of Drive, who was a contributor. One of the subjects he touched on really moved me:

I wonder if we have reached the limits of the profit motive. It is a powerful force, of course, but perhaps it’s somehow inadequate and insufficiently inspiring for 21st century work. More and more we’re seeing that the most enduring and effective companies marry the profit motive to what we might think of as the “purpose motive”—the belief that businesses must stand for something and contribute to the world. Maybe the path out of our economic doldrums is not a tighter focus on profits, processes, or productivity but the broader awakening of a sense of purpose in our enterprises.

As someone who ponders quality and “lean thinking” all the time, this really got the little voice in my head going: Is profit waste? When we’re thinking about waste in the “traditional lean sense,” overproduction is the first sin. Isn’t profit just overproduction of revenue? Sure, but you might argue, it’s profit that helps a business expand and grow. That’s true, IF that profit is turned into investments or retained earnings that become future investments. (But how much of a company’s profit is turned into lottery-sized bonuses to executives who then pursue a personal life of overconsumption? How much of a company’s profit is the direct result of using wasteful ingredients in production, such as using packaging that clutters landfills for years? Doesn’t this equate the profit that’s generated with the waste that’s generated?)

This made me wonder whether other people have questioned whether profit is waste. I did a Google search and came up with very little… but did find two hits of interest. The first is an old article from Volume 36 of The Arena, a critical journal published from 1889-1896 and 1900-1909 and edited by a guy named Benjamin Orange Flower. It was recognized as audacious and unorthodox, and upon its demise The Arena was declared a “fearless exponent of advanced liberal thought” – so apparently, people were a little taken aback by the social mission and tone of the publication at that time as well.  The second was a blog post on the writings of the philosopher Bataille from the 1960’s, who believed that “…a series of profitable operations has absolutely no other effect that the squandering of profits” and “the fate of all profit is waste” – that is, that profit is waste.

In the Arena article, entitled “Consumption of Wealth: Individual and Collective” by C. C. Hitchcock, the author starts his article by loosely addressing the disparity of wealth in society first noted by the Italian engineer, sociologist, economist and philosopher Vilfredo Pareto, and then starts making connections with the income production of typical families of the early 20th century. He asserts that it is the profit motive in capitalism that’s responsible for the laborer (who creates value and wealth on a daily basis) earning little to nothing, while “by others who may produce nothing we see wealth approximated in sums running up into millions in a single year.”

What is Hitchcock’s solution to the inequality? He says if you want to consume more, you should create value in proportion to the level you wish to consume. Executives of multi-billion-dollar companies might argue that indeed, they are creating value for millions of people, and doesn’t that justify the consumption? At the end of his article, Hitchcock concedes that his whole argument is in place to support socialism, so that “burdened souls” can benefit from “added courage and strength to bear patiently the deprivations and disappointments of life.”

This sounds pretty incongruent with the rest of his argument to me. I tend to like the idea of socialism as a utopian concept, and completely dislike it when I think about all the able-bodied lazy people sitting around getting handouts without lifting a finger. (I know some of these people personally.)

What is Bataille’s solution to the inequality? He says that productivity itself is perhaps a myth. So what? Why pursue productivity when its end goal is just waste? His writings seem to suggest that finding meaning and enjoyment in life is superior to achieving productivity.

If that’s the case, I might stop Getting Things Done (GTD) and start Getting to Meaning (GTM). That last acronym is mine, people! 🙂

What sorts of next generation business models could we come up with if we looked at profit the same way we look at inventory holding costs, or waiting, or excessive motion in a process, or defects? Furthermore, is there a cost of profit? (I don’t know what this last question might even mean, but I’ll be thinking about it more and more in the upcoming weeks.)

Why do our business metrics STOP at profit? Why don’t we track where the profit goes, and what it’s spent on, and whether that spending generates any true value? Follow the money… that’s the only way we will be able to test whether profit is indeed waste.

Eliminating Waste using Zombie War Analysis

If quality and continuous improvement are important to you, you should have a fundamental understanding of zombies and the role they play in quality management. Furthermore, understanding zombies might help you understand yourself better too. In fact, performing a zombie war analysis (on either yourself or your organization) could be the next great lean tool for identifying and eliminating waste from processes.

Huh??!?! Zombies… are you sure? Yeah, I’m sure. And no, I didn’t know much about zombies either until yesterday, when I read My Zombie, Myself: Why Modern Life Feels Rather Undead in the New York Times by Chuck Klosterman. (The savvy zombie thumbnail at the left by AMC is from his article.) In fact, I don’t think I’ve ever seen a zombie movie before. That might change, though, now that I see the zombie concept has a direct bearing on understanding modern work life.

Here’s why: battling the endless barrage of emails, texts, requests for your time, and sorting through the steady stream of social media chatter is like a zombie apocalypse. They just keep coming and coming, and you just keep fighting and trying to let it all not overtake you and drive you nuts. And the whole thing might never end:

Every zombie war is a war of attrition. It’s always a numbers game. And it’s more repetitive than complex. In other words, zombie killing is philosophically similar to reading and deleting 400 work e-mails on a Monday morning or filling out paperwork that only generates more paperwork, or following Twitter gossip out of obligation, or performing tedious tasks in which the only true risk is being consumed by the avalanche. The principle downside to any zombie attack is that the zombies will never stop coming; the principle downside to life is that you will be never be finished with whatever it is you do…

This is our collective fear projection: that we will be consumed. Zombies are like the Internet and the media and every conversation we don’t want to have. All of it comes at us endlessly (and thoughtlessly), and — if we surrender — we will be overtaken and absorbed. Yet this war is manageable, if not necessarily winnable. As long we keep deleting whatever’s directly in front of us, we survive. We live to eliminate the zombies of tomorrow. We are able to remain human, at least for the time being. Our enemy is relentless and colossal, but also uncreative and stupid.

Battling zombies is like battling anything … or everything.

The only way to WIN the war is to reduce the number of zombies that you have to deal with. So, my appeal to quality managers everywhere: Ask your people what processes feel like zombie wars, and brainstorm ways to reduce the number of zombies so you don’t have to shoot so much. By tapping into the highly sensitive emotional wisdom of everyone who has to work with or deal with a process, you can call out the zombies and start eliminating them.

My appeal to PEOPLE everywhere: ask yourself what aspects of your life feel like a zombie war, and brainstorm ways to reduce the number of zombies. You’ll eliminate waste from the processes that the zombies are appearing in, while saving on ammunition, reducing stress, and possibly even increasing the joy in your life.

The simple act of thinking about the “things you’ve got to deal with” in terms of which ones are zombies (and which ones are not) might be just the innovative boost you need to identify and eliminate critical packets of waste floating around your organization. Or your life.

Systems Thinking and Ships in Shanghai

shanghai-shipQuality experts and practitioners alike know that a solution should be designed for a particular context of use. The complete environment of the problem should be considered, and political, economic, social and technical ramifications should be examined before investing in a costly project.

This wasn’t the case for the $260 million construction of a cruise terminal in Shanghai along the Huangpu River which was recently opened. The building is ultra-modern, environmentally friendly and a model for sustainable development. But to get to the terminal, ships have to sail underneath the Yangpu Bridge, which has such low clearance that a third of the world’s ships can’t fit (and the trip is risky for many of the others, who have to wait until low tide to navigate it).

An architect or designer should have recognized that for the terminal to achieve “fitness for use” as defined by Juran, the traffic pattern to bring ships to the building would play an important role. The situation is a little more striking when you consider the question of siting airports – how useful would it be to build an airport in the center of a metropolis where airplanes couldn’t find a clear path to the runway? Building the terminal without consideration for traffic patterns was wasteful: the city will miss opportunities to serve many customers, blocking out the possibility to drive passenger revenue to the city, extra time will be needed for captains to successfully steer their ships in, and extra fuel will be expended in the process. (Not to mention that the only solution now would be to raise the bridge, which would cost several tens of millions more.)

These types of problems are not limited to examples in transportation. I remember several years ago I went to a meeting where a group of highly skilled, senior engineers were discussing how to deploy a sensitive piece of research equipment they’d been working on for years. It had been a long, hard road, and they were finally ready to see the fruits of their labor in use. A concrete monument had been poured to keep the instrument level, and they were discussing in excruciating detail how to get the instrument onto the pad.

“Hold on,” somebody asked. “How many pounds can that monument hold?”

Another engineer quickly replied. “We used some really high-grade concrete. It can hold up to ten thousand pounds.”

“Yeah, but our instrument is almost twice that weight!”

Ten scientists and engineers looked around the room, pensively. Some wrinkled their brows and others started furiously scribbling notes on paper, but no one said a word. After a few uncomfortable minutes, the leader of the meeting said “Well, we’ve come to the end of the hour. Let’s talk about that next time.”

I don’t think the instrument ever got deployed. Remember: think about the whole system! Quality depends on fitness for use in a particular context.

Lim, L. (2008). Some Ships Can’t Reach Shanghai’s New Terminal. NPR News, November 3.

Lean Thinking: The Many Flavors of Waste

The seven types of waste are a foundational concept in lean manufacturing, all forms of muda as described by Taichi Ohno of Toyota. Reducing waste systematically can help you achieve flow in your processes. Waste can result from:

  • Overproduction – making too much of something that goes unused, spoils, or collects dust.
  • Inventory – keeping too much of something that goes unused, and costs time or money to store.
  • Extra Processing – wasting time or effort on steps that are unnecessary.
  • Motion – exerting energy to do something that doesn’t create value.
  • Defects – products or processes that don’t conform to their specifications.
  • Waiting – time spent being unproductive could be used in other ways to create value.
  • Transportation – moving things over long distances costs time, effort and money.

In addition to muda, mura (unevenness in production) and muri (overburdening of people and equipment) are also recognized as characteristics of a process that impede flow. Overburdening either people or machines can lead to burnout, which can result in a high repair or replacement cost!

Pydzek, T. (2003). The Six Sigma Handbook: The Complete Guide for Greenbelts, Blackbelts, and Managers at All Levels, Revised and Expanded Edition.

Polls, Margins of Error, and Six Sigma Data-Driven Decision Making

One of the most critical skills that a technology manager can have – or any manager, really – is the ability to interpret data and assess whether or not it reflects reality. Why is this important? Because good managers base their decisions at least in part on data, so the quality of the decision is often related to the quality of the data on which the decision is based. (One of the tenets of Six Sigma, for example, is “data-driven decision making”.)

So what if you were basing a decision on the quality of the election polls currently being conducted? Six Sigma experts and practitioners, take note: today’s election polls offer up a really effective lesson on threats to validity which, if human subjects are ever a part of your quality improvement efforts, you need to be aware of these sorts of issues:

[Poll results and margins of error work] pretty well if you’re interested in hypothetical colored balls in hypothetical giant urns, or survival rates of plants in a controlled experiment, or defects in a batch of factory products. It may even work well if you’re interested in blind cola taste tests. But what if the thing you are studying doesn’t quite fit the balls & urns template?

  • What if 40% of the balls have personally chosen to live in an urn that you legally can’t stick your hand into?
  • What if 50% of the balls who live in the legal urn explicitly refuse to let you select them?
  • What if the balls inside the urn are constantly interacting and talking and arguing with each other, and can decide to change their color on a whim?
  • What if you have to rely on the balls to report their own color, and some unknown number are probably lying to you?
  • What if you’ve been hired to count balls by a company who has endorsed blue as their favorite color?
  • What if you have outsourced the urn-ball counting to part-time temp balls, most of whom happen to be blue?
  • What if the balls inside the urn are listening to you counting out there, and it affects whether they want to be counted, and/or which color they want to be?

If one or more of the above statements are true, then the formula for margin of error simplifies to:

Margin of Error = Who the hell knows?

Because, in this case, so-called scientific “sampling error” is completely meaningless, because it is utterly overwhelmed by unmeasurable non-sampling error. Under these circumstances “margin of error” is a fantasy, a numeric fiction masquerading as a pseudo-scientific fact.

Read the whole article at It’s a winner. (And thanks, Mary Pat, for posting this on Facebook.)

DMAIC Demystified

The DMAIC (Define-Measure-Analyze-Improve-Control) methodology is one of the cornerstones of a Six Sigma project. It provides a useful heuristic that can remind you how to structure your project when you apply Six Sigma. This is important for two reasons. First, by reminding you to DEFINE your project’s goals, its deliverables to external customers, its deliverables to internal customers, and most important – your definition of a defect – you establish the solid foundation for actually delivering process improvements that meet tangible goals. Second, DMAIC provides a common language for Six Sigma practitioners so that new teams can spend time solving problems instead of searching for their own standard operating procedures.

If you’re familiar with Deming’s PDCA (Plan-Do-Check-Act) cycle, DMAIC is essentially equivalent, but with a very important addition at the end:

  • Planning = Defining
  • Doing = Measuring
  • Checking = Analyzing
  • Acting = Improving
  • (Sustaining/Continually Learning) = Controlling

There’s nothing magical about DMAIC – it’s just a helpful reminder to guide you as you structure a Six Sigma project. And remember that a Six Sigma project is hopefully not the end of the improvement – ideally, a process team will leave behind a new foundation for identifying more efficiencies in the future.

Being Frugal vs. Being Lean

The October 20, 2008 issue of Business Week features an article on page 55 called “The New Age of Frugality”. The article, about “confronting the debt culture” in the U.S., describes a handful of real-life stories from people who recently overextended themselves, and were forced to learn some hard lessons about finding the natural limits of their spending capabilities.

As individuals and families find it necessary to become more frugal, it is reasonable to think that companies might also `find themselves in this situation. But what does it really mean to be frugal? According to the Random House Unabridged Dictionary, “frugal” means:

1. economical in use or expenditure; prudently saving or sparing; not wasteful: a frugal manager.
2. entailing little expense; requiring few resources; meager; scanty: a frugal meal.

So to be frugal, you must be economical; you must be cautious with your expenditures, save for a rainy day, try to get the most out of limited resources, and don’t waste. This last part reminded me of the lean philosophy – but does lean also embrace judicious investing?

What is lean? The five principles of lean, from Womack & Jones (1996), are understanding value, understanding your value streams (that is, how the value is generated), embracing the concept of flow, employing “pull” within processes, and committing to continuous improvement. By understanding value generation, we can refine a process so that every action is productive. By employing pull, we ensure that we use resources only when they are needed, and thus don’t waste. By committing to continuously improve, we agree to consciously approach each element of the process, and reflect on value and flow often to find new opportunities to improve. In other words, once we’re done improving a process, we don’t stop thinking about it and learning from it. And in learning from it, we can make it even better.

How can you confront your own attitude towards debt and spending using lean principles?

  • Understand what purchases or investments will REALLY help you add value
  • Understand how that value is generated (by you or your financial institution)
  • “Pull” from your checking accounts, savings accounts and investments just-in-time, and only when it directly contributes to adding more value
  • Commit to reflecting on your expenditures regularly, and evaluate how much value you have been able to create from what you’ve spent

These principles can also be applied in your work environment. Value is sometimes reflected in metrics like Return on Investment (ROI), but not always. For example, are you creating value in the form of goodwill? This counts. Lean principles can help you be more frugal, but being frugal will not make you lean – spending less does not necessarily mean that you are generating value more effectively.

Womack, J. & Jones, D.T. (1996). Lean thinking. New York: Simon & Schuster.

« Older Entries Recent Entries »