Innovations on the Decline

Innovation-Sjoo-2014

According to new research from Lund University, research and development innovations are declining and productivity within Sweden’s technology companies is slowing.

An innovation is created when a new product comes on the market and changes a particular pattern. A smartphone is an example of an innovation which changed the market for mobile phones and which is currently leading to change within many other markets. This important difference shows how an innovation isn’t the same as an invention. You might be able to say that Ericsson and Nokia invented the smartphone yet Apple was responsible for the smartphone innovation because they understood how the invention could be commercialized.

Innovations vs. Inventions

Joseph Schumpeter was responsible for defining the terms innovation and invention in the beginning of the 19th century. Innovations create new companies, new jobs and economic growth. However, an innovation isn’t solely a creative process – it is also a destructive one. For example, when Apple or Google’s Android developed smartphones, new jobs and huge profits were made for those companies. At the same time, the mobile phone industry in the Nordic countries was practically eliminated. Schumpeter referred to this phenomenon as creative destruction.

Fewer Innovations

New research from Karolin Sjöö and others at Lund University shows that Swedish industry has become less innovative since the 1980’s (as demonstrated by the red line in the graph above). Even more concerning is the fact that productivity within research and development has declined sharply within the same time period (as demonstrated by the blue line). Swedish companies invest more but get less out of it. According to Business Sweden, Sweden’s share of international exports has also declined. Researchers at Lund University have several theories for why innovations have been on the decline but none of them are completely convincing. However, there is other research that, together with our own research, points to an very important factor: projects.

Projects as Isolated Islands

At the end of the 1980’s and beginning of the 1990’s, Sweden’s industry increasingly used projects. Projects were described as the solution to every problem. There were early warning signs and many who paid attention to these signs. Companies that had started working in project form early on (such as Toyota, which started working with projects in the 1950’s), noticed an increasing degree of sub-optimization. Projects and project managers were singled out as the reason. American research in the 1980’s named autonomous projects as a problem. Even Swedish research in the 1990’s warned of this phenomena. A project can’t be seen as an isolated island, as Mats Engwall and Anna Jerbrant determined in their respective research. In all the companies we have studied there are significant problems with methods for managing research and development when using projects. All of these companies have significant problems with productivity. There are problems determining how much work is actually going on and there are complaints about the lack of resources when what is actually lacking is control and focus.

Bureaucratic Project Models

The project was promoted as a modern form of working based on cross-functional work. In reality, projects are bureaucratic monsters that create greater distance between people. Process-based development models (see stage-gate models, waterfall models), suppress creativity and, counter to their intentions, create a slightly chaotic business.

Popular definitions of projects maintain that a project has a clear goal yet reality tells us differently. Our studies shows that no one really knows the goal of the project or that there are many differing opinions about the goal of the project.

An Agile Network Organization

Road to an agile network organisation
Road to an agile network organisation

The solution to the inherent problems with projects is not to stop using them altogether. Rather, the solution is to implement a structure that allows management to prioritize and re-focus the organization. The solution is also to work with R&D at a strategic level, sometimes called a multi-project level. Toyota reformed their organization during 1991-1992 in order to have a more coordinated collaboration. These reforms were led by Takeshi Uchiyamada. As Chief Engineer within the new Pulse agile organization he developed a whole new kind of car: the Prius. He managed to accomplish this in record time – just 3 years. As Chief Engineer in the new organization he was a part of strategy-focused management. This differed from the old organization in that the different projects didn’t have to compete with each other for everything from resources to clients.

While working on the Prius, Uchiyamada continued to develop his multi-project solution by holding daily stand-up meetings in an Obeya. We call these Pulse meetings in a Pulse room. Scrum has developed a similar solution for project management that makes it possible to replace bureaucratic models with agile solutions.

As you just read, I outlined what Toyota did: they continued to develop their team-based approach while at the same time introducing a concept that made it possible to work strategically. Operations need to be decentralized when using projects yet at the same time they also need to be coordinated. In the entry “The Handlesbanken Way” you can find information about what being decentralized yet still being under the control of management entails. Thanks to agile multi-project organization, Toyota starting using a tool that enabled them to be both inventive and develop new technologies (including hybrid-drift and fuel cells), while at the same time being able to commercialize these inventions and thereby produce innovations. This might have been a more important step for Toyota than lean production. Just how important it has been is indicated by Uchiyamada’s career: after his role in the development of the Prius he has occupied several top posts, including head of development. Today he is the Chairman of the Board at Toyota Motor Corporation.

Increase Innovations!

The pulseroom where different teams has daily stand-up meetings.
The Pulse room, where different teams hold daily stand-up meetings.

There are some very frightening statistics that the researchers at Lund University are presenting today yet they come as no surprise to us. We know what the problem is. There are solutions that work and we know how to implement these solutions. Most companies have realized that they have a problem and during the past ten years, many companies  have taken the same steps as Toyota and implemented an agile network organization. It’s high time for the latecomers to upgrade their organizations because if they don’t there is a risk that Nordic inventions, like the smartphone, will become lucrative innovations somewhere else in the world.

Pulse Meetings Are Short, Effective and Fun

Pulse meetings are short, daily standing meetings where a team plans their work with the help of a Pulse board. Pulse meetings are more interesting and more effective than standard meetings.

Pulsmöten med visuell styrning och jidoka

Pulse Meetings for Planning and Managing

Pulse meetings are a way to plan, organize and manage an organization. Instead of following traditional management philosophies, by holding Pulse meetings it’s possible to utilize the variety and uncertainty that exist in an organization. Pulse meetings are based on the lean principles of visual planning and fault tolerance (from the concept of jidoka). A Pulse board is required to hold a Pulse meeting.

Traditional planning never makes it past the planning stage in many cases and creates a lot of administrative work but doesn’t add much or any value, since you can’t predict the future. In stark contrast to traditional planning, visual management entails a dynamic planning by a team in the situation they are currently facing. When working with knowledge an activity window is used where post-its visualize the flow of “to do – in progress – done.”

Fault tolerance (jidoka) entails the inclusion of methods that enable the team to handle unexpected effects that the “butterfly effect” might cause and establish resilience and revitalization. Not making use of fault tolerance may lead to regrets about decisions, stress, conflicts and, most commonly, long lead times.

At Pulse we use goals and plans but they are open, meaning they are accessible through the network of Pulse meetings. Since the flow of decisions through the network of Pulse meetings is constant, contradictions and unexpected problems can be resolved within a few hours to a couple of days.

For strategy and development the management team, product management, resource management, task management and development projects use Pulse meetings (see example here). Pulse meetings may also be used for other areas such as sales, commission, delivery and acquisitions.

Pulse Meetings Replace Other Meetings

Pulse meetings replace many other meetings. A Pulse meeting is held standing in front of a board with visualized information and is rarely longer than 15 minutes. Despite the fact that meetings are frequent, total time spent at meetings will actually decrease dramatically.

Finally, most participants are very pleased with Pulse meetings.

Visual Management Of Multiple Development Units

Visual management is a decentralized way of working in which team and project participants plan and manage their own work. Participation is necessary but can take place in different ways.

Visualization is a powerful tool that when used correctly can coordinate the work of both a team as well as the whole operation. Visualization requires some rules for cooperation between groups to work: updating the project status should be easy, highlighting problems must be simple to do and there can’t be any delays that would cause information to become old and unreliable. Also, it’s important to be able to see when the last update was made and this information must be available to everyone involved.

The Pulse Board

By following the requirements stated above, physical boards, Pulse boards, become superior to an IT-based system. By writing down the meeting times on every board everyone can see when the information was last updated. If the group holds daily Pulse meetings at 8:45 am, the board was updated during the last Pulse meeting. Events that have taken place since then can probably not be seen on the board. By using post-its that are moved in an activity window we can see what is being worked on and what has been recently completed. You also get an understanding of how quickly the group attains results and if the group, or a person, takes on too many tasks at the same time. The board shows which activities the group’s members need to deal with next, which is necessary when assigning work. You can also see if the group has any problems that need to be dealt with. With an overarching plan you can also see their progress so far and if it’s in line with previous aims and goals of the schedule. All of this is kept updated with very little administration and is easily visible to everyone simultaneously.

Furthermore, if all Pulse boards are gathered in one Pulse room you then in just a few minutes you can get a complete picture of the organization and its current challenges. However, this assumes that everyone works under the same roof. How does Pulse work when work is spread out over several locations?

Visual Management of Multiple Development Units

It’s common nowadays that product development takes place in many locations around the world and there is a need to coordinate efforts in projects and strategy work. This is also true for many businesses that utilize the Pulse guide. I’ve noted that the better the visualization and interaction works in one location the easier it is to coordinate with other locations. The internal interaction furthers a common understanding of plans, problems, expectations and opportunities. This is of great use when coordinating work with other development units. This leads to the conclusion that cooperation between development units works better when more units use the Pulse method.

If a company’s suppliers and clients also use Pulse it’s even better. If so it’s possible to easily coordinate in the same way with the as between development units.

A good video-link (meaning a clear picture and a minimal time-delay between image and sound) eases communication between units. Remember that it’s more important to film the participants of the meetings rather than the Pulse board. The information shown on the board and the one that groups wish to share between locations already exists digitally since it’s part of overarching shared plans and not small details on post-its.

As I mentioned previously, each group member will not participate in every Pulse meeting. However, since the meetings are frequent (daily to weekly) it’s not that important if a meeting or two is missed. It’s quick and easy  to be updated on what happened in the last meeting by studying the Pulse board. Since the teams are self-organized the meetings will be held even if the project leader or chairperson is absent.

To sum it up, visualized management between several development units is easy with Pulse.

Sociotechnology and Lean Have a Lot in Common

Visuell styrning sänker osäkerheten.

Lean is a method of working that relies on decentralized and self-organized teams. Sociotechnology and lean are closely related.

A lot of criticism has been levied at lean for causing stress and contributing to a negative working environment. Some Swedish researchers link lean with a reborn form of Taylorism. One reason for this criticism is that a lot of what is marketed under the label lean in reality comes from Taylorism and bureaucratic traditions. The result of this is documented in the book Lean i Arbetslivet (translation: Lean At Work).

Lean is Daily Management and Decentralization

As I wrote in previous entries, lean consists of two principles: visual management and “deal with problems as they appear” (fault tolerance).

Visual governance means the use of visual signals to coordinate work rather than forecasts and plans. These signals create a real-time management that is based on the current situation and plan for the next couple of hours. There is considerable less uncertainty in visual governance when compared to traditional large-scale planning. Less uncertainty at work means less interruptions, which leads to higher productivity.

Fault tolerance refers to the implementation of mechanisms to catch and deal with problems and troubles that appear without pausing operations. The problems should be taken care of by the people closest to them. In production the people closest are the operators and within projects it’s project participants. When problem-solving is distributed within the organization, decision-making is given greater “bandwidth” regardless of whether decision-making and problem-solving is done by management, project leaders or experts.

Visual governance and fault tolerance are principles that need to be converted into appropriate methods that suit the organization with implemented together with lean.

Misconceptions About Lean

There are many misconceptions about lean and one reason for this is because the uncertainty that’s present in long-term forecasts only becomes apparent many years later. One common misconception is that lean requires the invention of standardized processes in production and constant improvements. However, this has been known since the 18th century. Some people also believe that standardized processes are vital for lean to work but that isn’t true. On the contrary, a rigid thought process in a social organization creates large problems, as demonstrated by sociotechnology research.

Sociotechnology

Sociotechnology was born at the Tavlstock Institute following World War II. In sociotechnological system theory, the organization is divided into two systems: technical and social. The technical system consists of equipment, machines, tools and methods. The social system consists of people, interactions and knowledge. The technical structure affects the social organization.

Concept for a sociotechnical system

Research conducted by the Tavlstock Institute demonstrated the negative consequences of Taylorist solutions, including problems with unclear work duties, individually designed tasks, top-down management, constricted thinking with clearly defined roles and standardized working methods.

Sociotechnology proposes self-organized teams where tasks and responsibility are determined by the work that is accomplished. Research shows that sociotechnology leads to higher productivity compared to Taylorist solutions and the explanation for this is found within the human equation: people working in teams were more motivated.

Today, thanks to complexity theory and systemized thinking, we have a slightly different explanation. Taylorist solutions don’t lead to high productivity as was thought; on the contrary they lead to inefficiency. The reason for this is that in a social system, standardized processes with little room for freedom lead to chaos. In order to create order in whole systems and keep up high productivity, a large degree of freedom at the individual level is necessary. That is one needs a multidimensional system for both management and workers.

This means that a certain lack of order at the individual level leads to order within the organization as a whole. This is far from intuitive but the results of complexity theory are convincing and backed up by empirical organization research.

The problem with the sociotechnological system school is the lack of suitable methods. This is where lean enters the picture.

Implementation of Sociotechnology and Lean

A correct implementation of Lean can be characterized by the following:

    • Duties are broken down into manageable sections since that facilitates the distribution of the workload. In Taylorism, duties are separated.
    • With Pulse, we use manageable sections with larger, related duties.
    • Work is done in groups, teams and projects to complete the sections. In Taylorism, work is done individually.
    • Within FoE we work in projects and teams. At Pulse these are self-organized.
    • That the people who work in groups, teams and projects are encouraged to be able to take care of several different duties since that makes it easier to distribute work and problem-solving. Taylorism requires maximum specialization.
    • With Pulse, there are few roles. Cooperation is the key. No activities are dedicated to a specific role or position. People choose what to work on.
    • There are few permanent roles. In Talyorism, the defining of different roles is very important. Within Pulse, there are just a few permanent roles.
    • Increase individuals’ and groups’ ability to act so that everyone can adjust their actions to the current situation and unforeseen events. The goal of Taylorism is to decrease the ability to act through standardization and optimization of processes.
    • With Pulse there is no standard way to work or process thinking. Pulse is a part of the technological structure and it is within this structure that visual management is used.

The above list, which details the components necessary for a successful implementation of Lean stands in contrast to Taylorism and bureaucracy. Instead, it aligns with sociotechnical systems. When correctly implemented, lean is a way to realize the ideas behind sociotechnology.

Socioteknik och lean - produktion
Within production, the system is shaped to facilitate teamwork. Visual management and distributed problem-solving are utilized.

 

In production, the kanban is used for visual management within the technical structure.

Socioteknik och lean - FoU
Within strategy and development a network of Pulse meetings are used to facilitate teamwork. The Pulse meetings use visual management.

Within strategy and development, the physical spaces in the form of the team room, Pulse room and Pulse boards make up the technological structure. The Pulse meetings form a network that we call an agile network organization.

Sociotechnology was created in the 1960’s and is based on the knowledge available then. The past decades have seen a fast development within organizational theory based around complexity research. The main tenants of sociotechnology, including self-organized teams, have strengthened in recent years while the explanation models have changed considerably.

Today there are methods to implement sociotechnology with the help of Pulse.

Lean in Practice for Projects

Lean in practice means self-organization with visual management and jidoka. When you’re more organized, it’s more likely that your work will have greater value.

In a previous post I defined lean as a concept for creating self-organization. This means visual management and a “take-things-as-they-come” attitude (jidoka). When a system becomes more organized, you’ll be more likely to see valuable work being created.

Lean In Practice – Visual Management and Jidoka

Visual management and “take things as they come” (jidoka) are two principles. A principle is something that will be achieved. A method tells us how to achieve a principle. Many descriptions of lean are based on methods and not the fundamental principles and this can lead to confusion.
In production, workcells are defined by the flow of material. The workcells can be linked together with a method called Kanban. When the different parts become more linked to each other, the system as a whole becomes more organized. Here is a short clip (1m20s) that demonstrates how Kanban works in production.

Methods are very valuable tools but methods that work well in one context might not work at all in a different one. For example, production methods can seldom be transferred to strategy and development, since there are no recurring repetitive flows. This is why we use other methods in strategy and development that link together actors and allow them to be more self-organized. For example, when working on projects, daily stand-up meetings in front of a Pulse board may be used for visual management.

Lean In Action – Pulse Methods

activity-window-postits

In the picture above you can see an activity window on a Pulse board. The window is divided into three parts: to do, in progress and done. The project group meets every day and discusses what they will work on based on what is on the board. This way of working is called pull. With pull, a demand for results is created in the same way Kanban is used for production. In classic project management, a plan which describes who and what should be done at what time is needed. To work based on such a plan is called push. The problem with the push principle is that we can’t predict the future. Plans that go far into the future have a high level of insecurity and lead to interference and wastefulness. Management and staff spend their days putting out fires. Pull only plans for a few hours at a time, which leads to less interruptions.

Push is also an example of how an exterior actor prevents self-organization. This doesn’t mean that planning is unnecessary nor impossible – only detailed plans are impossible. Comprehensive planning is possible as long as you are aware that there will always be faults in these plans. Comprehensive plans are necessary in order to know what should be on the To Do list. With Scrum, a prioritizing backlog is used. With Pulse we work with a comprehensive synchronization plan. However, management of daily work isn’t based off of this plan. Instead, it’s based off of the current needs that are visualized on the Pulse board that’s used during Pulse meetings.

Yellow and Red Post-Its

Planning determines which yellow post-its will be used in the activity window. The red post-it illustrates a way to handle unexpected problems that come up, jidoka. These problems must be handled quickly and efficiently.

When using lean, oftentimes the project members themselves plan and manage their work. They do this through putting up post-its in the activity window and through moving the notes on the board as the work progresses. The appearance of the board tells the group about its current needs and what they have to do in order to move the project forward. By moving the post-its on the board, it’s possible to see lean in action.

Unbalanced Workloads

Workloads within strategy and development are always uneven and need to be balanced. In order to handle this issue, the activities posted in the To Do section are not assigned to any single individual. Matchmaking between individual and task takes place at the Pulse meeting. Distribution is done by the individuals themselves in the form of taking notes. The role of the project leader is to make sure that no one is overloaded and this can be done by making sure that no one takes more than 1-3 post-its.

Lean In Action Depends on the Context

To summarize, lean in practice can look different depending on the context yet the underlying principles are always the same. When it comes to lean for strategy and development we have defined what we see as the foundation of lean in product development.

What is Lean?

What is lean? I would like to answer that question with an explanation based on the description given by the inventor of lean, Taiichi Ohno.

Pull and push

Hopp and Spearman define pull in their work Factory Physics based on Little’s law. It’s a good definition that states that pull sets limits on any current workload while push doesn’t. However, there’s more to lean than pull.

What is Lean?

The inventor of the concept of lean is Taiichi Ohno. Ohno has written two books in which he summarizes the results of decades of experiments. These experiments and results are both comprehensive and have been tested by others. Ohno condenses the results into two principles: Just-In-Time (JIT) and jidoka (autonomation). Just-In-Time is the result that Ohno would like to achieve and the solution is Kanban (visual management). Kanban makes it possible for different actors to work together without the intervention of management or other planners. Besides these principles, Ohno also discusses 5S and wastefulness; however, his main focus is the challenge of getting people to work together.

Lean is Self-Organization

People who interact without the interference of outside actors practice self-organization. The term was defined in complexity research and is based on Claude Shannon’s information theory. When a number of actors, such as the participants of a group, have more interactions (more organization), the probability collaborating behavior (value-creating work) increases. This is called self-organization. An important prerequisite for self-organization is that the interactions are initiated by the actors themselves. There can’t be any outside actors (bosses, project leaders, etc.) that hinder or block interaction. However, the group does need information and feedback in order to deal with events appropriately.

Within a company, individuals will be a part of a greater whole (an infrastructure) that sets prerequisites for the groups to function well. In production, the production facility is this infrastructure. Within strategy and development we build an infrastructure through a network of Pulse boards and Pulse meetings.

Lean is Networks

With self-organization, the group has an opportunity to act more coordinated. Work that has previously been waiting for the contribution of another actor can now be done. However, with increased action there are also more problems that need to be solved in order for work to progress. The probability of problems appearing increases the greater organized the organization is. Therefore there is both a positive and a negative side. We can turn this into an equation:

Self-organizing (the ability to do things) = the degree of organization - problems that appear

With the help of visual management (such as Kanban, Pulse or Scum), increased organization is made possible. With the help of Jidoka (“pull the string” and other “take-care-of-problems-now methods”) you learn to deal with the problems that come up. When the “ability to do things” increases it’s a measure of increased productivity and quality. Productivity and quality improvements emerge from the interactions that come from self-organization. In theory, lean is therefore a concept that makes self-organization possible.

From Large-Scale to Networks

The time before lean was dominated by large-scale thinking. Nowadays we think in terms of networks. This has changed the duties of management. Previously, management lead and distributed work while in today’s world they build networks.

 

Read a blog entry about lean in action here.

Visual Management

Visuell styrning sänker osäkerheten.A lot of people who have worked with projects have experienced the same thing: downtime. You have to wait for people to get back to you, wait for results and wait for decisions to be made. On top of that other actors are waiting for you to finish your task that you can’t finish because you’re waiting for something or someone.

Forecasts are made to coordinate work in a businesses and projects. These forecasts tend to be wrong, which has led to the acquisition of more advanced, and expensive, forecasting tools, often in the form of some sort of IT solution. However, the forecasts are almost always wrong and thus we wait.

When you make detailed plans you make a future forecast. It’s just as easy or hard to forecast what will happen in four weeks within a project as it is to forecast the weather at the same time. In practice it’s impossible; the same laws that govern the weather apply to an organization.

However, there is an alternative to forecasting: visual management (also referred to as pull, lean or kanban).

Visual Management

Visual management was invented within production to solve the problems of wait time for materials due to errors in forecasts. When using outdated methods, if production cell A produces materials that are used by B a forecast is made of this use and A is allowed to produce according to the forecast. When there are many active production cells complex forecasts are created. In practice it’s impossible to make these kind of forecasts (see the book Chaos for an explanation as to why this is so). The forecast will lead to a lot of disruptions which forces management and workers to constantly run around, putting out fires. All this extra work is called waste.
On the other hand, visual management is based on how A can see by himself/herself how much material is used by B and produce more as needed (and not more). One example of this using boxes is when the material in one box is used, B sends the empty box to A to be refilled. Often a so-called kanban is used, so that when the material is down to a certain level B sends a kanban to A who produces the required materials.

Visual Management and Pulse

Pulse-activity-window

Visual management within strategy and development follows the same principles as production. A job’s current status is made visible using a whiteboard (a Pulse board) so that A and B can see the current situation. The status on the board tells A and B what they need to do in order for work to progress without wait times. The meeting where visual management is used is called a Pulse meeting. These Pulse meetings form a network and we refer to this as an agile network organization.

Workload Limits

A good system for visual management also needs to set limits for how much work can be done concurrently. The aim of setting such limits to keep the operation from overloading in order to keep the lead times short. Appropriate workload limits can be calculated using Little’s Law.

Leveling Workflow

Leveling workflow means that a limit is set for the number of tasks being done concurrently and that everyone helps each other out.

It’s common knowledge that traffic jams and congestion appear when there are more cars on a road than it’s been built for. In the same vein, having more work without the capacity to handle it leads to a kind of traffic jam within an operation. Overloading causes long lead times and a low throughput. It also causes disruptions that hinder cooperation, causes stress, puts quality at risk and generates waste. To avoid overloading a system it’s necessary to consider the current inflow and adjust it to the capacity and equalize the workflow over time and between individuals to avoid local overload. Equalizing the workflow is not trivial when there is a mix of different kinds of work to take care of. Even if measures are taken to balance the inflow there will still be tasks that are more time-consuming and may stop workflow in different areas.

Leveling Workflow – Helping Each Other Out

In the clip below an example of leveling  the workflow is demonstrated using a simulated product assembly that has been divided up into different steps. The clip features students from the  Technological University of Pereira, Colombia.

How did the equalization take place? The assemblers moved up along the assembly line every time they were a bit ahead. By doing this they could help assemblers’ upstreams and take over earlier stages when the product became more advanced and demanded more time. This way of working assumes that the workers know several stages of the production. They can enter the flow earlier and help out.

What relation does this have to projects? Projects usually involve collaboration between people from different professions. In product development there are designers, testers, purchasers, product technicians, people in logistics and marketers. In order to reach the goals of the project they need to collaborate. In practice some of the participants are always overloaded. Who they are varies over the project’s life cycle, which makes the total available resources in theory correct. The problem is that the resources aren’t used optimally when a large part of the project group is waiting for one member to finish their tasks. For the staff with extra time it’s often natural to start with the next stage of the project. The consequence of this is that interaction within the group is reduced which leads to an increase in waste.

Working Together Within a Project

So what should be done to equalize the workflow within a project? Firstly, don’t jump ahead and start working on stages later in the flow. Instead, make sure to finish the current stages. This means helping each other out. For example, if the designer is stuck on a design problem then other engineers and technicians in the project group should help out. This type of collaboration within a project assumes that a person is able to and ready to learn several stages/parts of the project. People need to let go of the idea of specialization and defined roles since it inhibits collaboration, learning and efficient use of resources.