Using Lean in a Baldrige Environment to Transform Organizations

1. Using Lean in a Baldrige Environmentto Transform Organizations VA Conference - October 27, 2010 Tim Olson, President Lean Solutions Institute, Inc. (LSI) MBNQA, Baldrige Examiner, 2008-2010 (760) 804-1405 (Office) Tim.Olson@lsi-inc.com www.lsi-inc.com Presentation based on NIST 2010 MBNQA Material. Used with Permission. © 1994-2010 by Process Assets, LLC (PAL). All Rights Reserved.

2. “I have made this letter longer than usual because I lack the time to make it shorter” Blaise Pascal Lean Quotes to Live By… “Keep things as simple as possible, but no simpler” Albert Einstein

3. 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.

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

5. 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.)

6. 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.

7. 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.

8. 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.

9. 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.

10. 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. 38-39)

11. 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

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

13. 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.

14. 30-50% 5-15% Company A Company B Time Evolutionary vs. RevolutionaryQuality Improvement Increased Quality & Productivity • Adapted from Juran on Leadership for Quality, Juran, 1989

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

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

17. Raytheon - Productivity 150 Productivity Increase - % 100 50 1988 1990 1989 1991 1992 Reference: “Process Improvement and the Corporate Balance Sheet”, Dion, IEEE Software, July 1993

18. Percent Over Budget 150 On Budget 100 Percent Under Budget 80 1988 1989 1990 1991 Raytheon:Cost Performance Index Reference: “Measuring the ROI of Software Process Improvement”, Dion, SEI Presentation, August 1992

19. Presentation based on NIST MBNQA 2010 Material. Used with Permission.

20. Steps Toward Mature Processes Presentation based on NIST MBNQA 2010 Material. Used with Permission.

21. 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

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

23. Baldrige Criteria Framework: A Systems Perspective Presentation based on NIST MBNQA 2008 Material. Used with Permission.

24. Brainstorm • What are the Strengths of Baldrige? • • • • • • • • • • • • • • • • • • • •

25. Baldrige Category Point Values • 1 Leadership 120 • 2 Strategic Planning 85 • 3 Customer and Market Focus 85 • 4 Measurement, Analysis, and • Knowledge Management 90 • 5 Workforce Focus 85 • 6 Process Management 85 • 7 Results 450 • TOTAL POINTS 1,000 Presentation based on NIST MBNQA 2008 Material. Used with Permission.

26. 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 Presentation based on NIST MBNQA 2010 Material. Used with Permission.

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

28. Baldrige Weaknesses - (1) • Architectures (Product, Process, etc.) • Configuration Management • Decision Analysis • Defect Prevention • Early Defect Removal • Engineering: • Requirements • Design • Implementation • Test

29. Baldrige Weaknesses - (2) • Integrated Product Teams • Lean • Managing Technological Change • Models and Simulation • Process Definition and Maturity • Process Tailoring • Project Management • Risk Management

30. 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

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

32. 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”.

33. 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”

34. 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”).

35. 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.

36. 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.

37. Some Lean Success Stories • Toyota - Best lean documented success story in industry (from manufacturing - see references). • Stoner - 2003 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!

38. 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.

39. 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

40. 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.

41. 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)

42. 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

43. Brainstorm • What are the Strengths of Lean? • • • • • • • • • • • • • • • • • • • •

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

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

46. 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

47. Continuous Process Improvement 2 Managed CMMI Staged Representation Quality and Productivity Focus Level Process Areas Organizational Innovation and Deployment Causal Analysis and Resolution 5 Optimizing Organizational Process Performance Quantitative Project Management Quantitative Management 4 Quantitatively Managed 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 Process Standardization 3 Defined Requirements Management Project Planning Project Monitoring and Control Supplier Agreement Management Measurement and Analysis Process and Product Quality Assurance Configuration Management Basic Project Management Risk 1 Initial • • Slide adapted from Process Program, Software Engineering Institute (SEI)

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

49. 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.

50. 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.