What is the value of value-added....

I would like to start a discussion within the shipbuilding industry, or any industry, on the value from a customer's perspective, of value-added services or products.

Our specific concern is this. As a service-firm, who offers design services to the shipbuilding industry specializing in production design, I would like to get the customers' thoughts on what is worth paying for, and what is not.

Genoa Design prides itself on adding much value through our services to our customers...value beyond the scope of work. The value is hidden within small and specialized technical processes that allow our customers to save money and time through little things we include in our deliverables. Examples are: complete check dimensions, advanced build strategy with integrated piping and structure and outfit, profile plots showing bending offsets and inverse bending information if applicable, extra details in assembly drawings, a guaranteed process-driven design sequence that automates many design steps thus improving quality, and most importantly, up-front design checks that solve problems and issues and fill in missing information up front, so that the fabricator does not have to deal with issues on the floor.

Our impression is that many competitors follow a strict protocol, that outlined bluntly, means "whatever is presented on the drawings is lofted and delivered to the shipyard". This can lead to serious problems and difficulties on the shop floor.

By investing time up-front, we usually forcast most issues, get them solved earlier in the production design process, and deliver information to the yard that is mostly issue free.

The problem for us is that we embedd this process into our quotations, but as a result, we do not win every bid competition. We have to place some value on this extra time and effort, which we know beyond certainty, is worth every penny. Although our Lean processes offset this effort, the total contract value often leads to a slightly higher price. Still competitive, but just enough higher to notice.

So... when the fabricator is faced with two quotations to complete the job, they will usually choose the lesser of two prices. Esepcially in these economic times. The lower price often does not include the "value-added" service we provide.

I have several questions....

1. Should we simply eliminate this step of advanced problem solving?
2. Should we remove our value-added features? (extra details on drawings, extra plots, extra information)
3. Should we go to the trouble of quantifying these features and presenting them as options in a quotation?
4. How aggressive should we be when awarded a project, then trying to charge for extras and changes because they were not included in our scope of work?
5. Should we just drop our prices and operate without a margin, thus winning contracts, then proving the importance of  our value-added services, hoping that we gain customer loyalty?
6. How can we make our customers aware of what we can do for them?
7. How much effort should we invest in educating our customers?
8. If customer education involves their own analysis and measures and metrics, how can we encourage customers to make this investment?
9. Should we model/design/loft the information that is presented exactly on the drawings? Then worry about changes and extras later?

I would be anxious to get some serious feedback on this.

Yes, I know the answers to some things. We cannot take the easy way out. We have to invest ourselves, in order to gain customer loyalty.

One way to achieve loyalty and impress customers is to consistently exceed expectations.

Mind you....we have done this in the past....and still we can lose a project, lose a customer, or experience the disappointment when a customer will try another vendor for some unknown reason.

Does the answer lie in a Lean Value-Chain? This is a new concept to the shipbuilding industry. How do we start this?

The bottom line is that we are all human.

When purchasing a used vehicle, and presented with two identical looking vehicles on the outside, many of us will choose the least expensive, hoping that the life-cycle cost is low. We are often willing to assume the risk. Sometimes we end up spending more down the line, in addition to the hastle of continued time-consuming maintenance, instead of making an investment up-front. Sometimes we get a great deal. No maintenance, no problems. Sometimes we buy a lemon. And man...that hurts.

When we want our van painted...and one painter will produce an excellent job with top quality paint, plus paint a dragon on the side of the van, and the other painter will produce an excellent job with top quality paint minus the dragon....many of us will opt for a dragon-less van. How about UV protection? Clear-coat? Free wash and wax? Free touch-ups for the next six months?

But in the words of a good friend...."I think the world needs more dragons".

Me...I think we all need touch-ups.

If you read this...let me know your thoughts....

Progress on Mini-Kaizens

So we have our Mini-Kaizens all ready now....and with some final input from project managers we are ready to deploy next week.

Each Mini-Kaizen can be equated to an A3. We are not using the A3 presentation exactly; we have used a written text format. But, we have followed the A3 process to define the problems, define the root causes, define our countermeasures, achieve agreement, create a plan and timetable, and build in continuous improvement. Each Mini-Kaizen, or A3, is linked directly to our Hoshin Kanri. The Hoshin Kanri is fed by our overall Lean Transformation project. Year by year, diagnostic score feeds the Hoshin Kanri and helps us measure success and achieve focus.

Back to our Mini-Kaizens.

The author of each Mini-Kaizen, our VP Operations, knows each problem and each person or team who accepts the responsibility for completing the Mini-Kaizen knows the problems. They live them each day. The problems do not need further explanation through the analysis afforded by the A3 process. We have defined the root cause. We know who owns each problem. We know the countermeasures.

Each individual problem feeds the bigger problem in our office, which is lack of documented procedure. We are in fact skipping a step, which is mapping current state, and jumping directly to future state. We have analyzed and concluded that mapping current state is no value to us, since there is no current state other than individual preferrence.

I would equate our engineering environment to a manufacturing plant where the manager asks the employees to build the widgets, and each employee uses their own preferred method of building the widget. Did I just define chaos? Well....we are not quite there anymore. We were....but not presently. We have defined process equivalent to setting up individual work tables, in a specified sequence. Now....we are working on individual cell process.

I'll reiterate.. in an engineering environment, the tendency is for each designer (engineer) to use their own methodology to complete any given engineering task. This methodology is learned in school and through experience on the job, and often under the mentorship of more experienced engineers and designers.

Our goal is to combine the best practices and arrive at a procedure, and value stream map, that represents our best shot at defining a future state. By bringing teams together, we can establish a set of Genoa acceptable procedures to complete engineering and design tasks.

These Mini-Kaizens are our attempt to organize which work cells we map and improve first.

We have many work cells complete...and we are missing many more.

As each work cell (individual engineering task) is mapped and the procedure is set, the documentation and SOP is catalogued, then disseminated to staff via document distribution and training.

Continuous improvement is addressed in year 5 of our plan....and we are presently in year 3. Refer to the chart.

I'll post further once we have deployed these Mini-Kaizens and start to see deliverables and outcomes.

Using Mini-Kaizens to maintain momentum

So times are tough and we are concentrating on earning money. This means that we are trying hard to reduce tasks to billable tasks only. In a projectized environment, this means that if we work for an hour, we want to be able to charge for that hour.

Isn't this Lean anyway?

But there is an obvious missing component...and that missing component is the investment in continual improvement.

Here at Genoa, we normally have dedicated time each week for working on Lean projects. But in a projectized company, during times when every single dollar in the cashflow equation counts, the last thing we want is to be working on non-billable work. We want to work for an hour, be paid for that hour, deposit the money in the bank account, pay bills, make payroll, and climb back out of the debt we have built up over the last year, trying to keep the team together and stay alive during the down-turn in the industry and economy.

But then we miss the most important part of our transformation to a World-Class Lean company, and that is the continual effort to get better.

And one of the more difficult parts of being a projectized company is managing resources so that they perfectly coincide and balance with project work-level requirements. Projects suddenly slow down due to external (client) circumstances. Projects often come to a stand-still for short periods of time. Then all of a sudden...the heat is on and there are not enough hours and not enough people to get the job done in time for the client's needs.

So how do you juggle short bursts of unexpected availability?

We have started the Mini-Kaizen.

Basically, a "job-jar" with specific personel assigned (based on expertise) with a mini-budget, scope of work, specific deliverables, and a time limit.

So now when people have a short wait for some unexpected reason beyond our control, we have the "job-jar" ready.

Yes, in these times, it can be difficult for the culture of the office to accept and understand the importance of investing time in the continual improvement program. Some may think it is better to stay on the project, and forge ahead, albeit a bit slow and with an inefficiency you may be willing to swallow in the interest of keeping busy....but we have learned this leads to nothing but disaster and loss. I'll cover that topic some other blog....

Right now, we are ready to start our "job-jar".

I'll let you know how it works out.

Time to focus again...

In the midst of economic struggles, fighting to bring work into the office, staying flexible when seeking and choosing work, making difficult decisions to downsize or modify the team, one cannot lose sight of the continual pursuit of perfection. I don't think we can afford to lose sight of Lean principles.


Lean is what can makes the difference between me and my competition. In the present and in the future. There has never been a time when this is more important to the life of my company.

I find it is not necessary to have achieved a specific level of Lean business practice. People do not look for that from me. But it is necessary to be dedicated to Lean. People do look for that. It is necessary to be dedicated to the fifth and most important Lean Principle. Continual pursuit of perfection.

Continual pursuit of perfection. Continual means continuing indefinitely over time, without interruption. Quite simply, this means we can never stop.

So in times of difficulty, I do what I have to do. I change focus, I place emphasis on doing the work. But I do not stop making notes in the background. I do not stop analyzing. I focus on the work at hand, but I keep my eyes open. I use all that we have developed to get our work done faster, of better quality with the reliability of our defined process. But I take the time to make a few notes. I continually take a look at what is going right and what may be going wrong. I save these notes.

The time will come very soon to bring out the notes and make some more improvements. The time will come when those notes will help us make up the next A3 and help us to discover the root cause just a little bit quicker than we expected.

I think I have to fous on the driving, but I cannot take my eyes completely off the dashboard.

Yes, I just talked circles around the time at hand at Genoa. We are focused on the work. We don't have a spare dime to invest in a well-needed improvement at this time.... but we are still making notes.

We all need to be taking notes.

The Lean Entrepreneur

A blog for Entrepreneurs...and especially Lean Entrepreneurs.

I've been thinking about Michael Gerber's book, E-Myth Revisited. I also listened to him speak in St. John's, Newfoundland, last week. His overriding message is "work on the business, not for the business".

In other words, work on developing the business, do not immerse yourself in the day-to-day activities of the business. The bottom line is that every successful business contains as much value in the process as in the people. As the entrepreneur, you create the team, you lead the team, and you guide the team to create the process.

Of course without the right people, it is next to impossible to accomplish this. The staff and the culture play as important a role as any other aspect of the company's personality. In the end, the team owns the process as much as anybody. So we are not robots....but...

The truly successful business is defined by the ability for any staff member to be able to do their job exactly the same way that the previous staff member completed the same job...same as the person on holiday, or the person out sick, or the person on the other shift. Who completes the work and when should be of no consequence or concern to the customer.

So according to Michael Gerber, a successful entrepreneur is one who creates a business and creates a process for the business to run predictably, in a repeatable and reliable fashion. The successful entrepreneur is one who will spend the majority of time developing the system, and less time working within the system.

Well I say that the successful entrepreneur is a Lean Entrepreneur. And I do not necessarily mean that a successful entrepreneur uses Lean techniques throughout their day....I mean that the successful entrepreneur is focused on Lean. A successful entrepreneur creates a business that lives and breathes the 5 principles of Lean.
1. Identify the value.
2. Map the value (process).
3. Create flow (smooth and reliable, predictable, repeatable).
4. Create pull (don't over-produce).
5. Continually improve.

Any great Lean company does excactly what Michael Gerber recommends...and more...but let's keep to what Michael Gerber is talking about.

Let's think about what Mr. Gerber says to focus on. Focus on process. Focus on repeatability, predictability, reliability. Do not work within the system, work on the system. Yes...go to Gemba...but give the "doers" the power to help create, control and maintain the system.

Everything within Genoa Design, my company, is centered around an engineering process. All designers doing the engineering tasks exactly the same way every time. Sit two people side-by-side and what will you see? Identical process.

This is what makes a company valuable from an entrepreneur's perspective. Once you know the staff are doing their jobs every time, exactly the way they said they would do it, then you, as the entrepreneur, have the freedom to focus your energy on other things business.

Like getting more business, like continually improving, like creating more processes, like growing the business, like planning the next party for the staff!

What can separate you from the competition? How about the other 4 Lean principles?

Is there much difference between Michael Gerber's smart entrepreneur (one who get's it) compared to a Lean Entrepreneur? Well... the Lean Enterpreneur has another toolbox full of tools that can be used to continually improve the business. But the start point is the same.

Funny how all these cutting-edge thinkers are all singing the same song....maybe it is because they are right?

If you are an entrepreneur, visit Michael Gerber's website http://www.e-myth.com/

If you are further interested in Lean, start with http://www.lean.org/

Hoshin Kanri vs. Leverage Your Best

I just finished reading "Leverage Your Best, Ditch The Rest" by Scott Blanchard and Madeleine Homan. The book is subtitled "The Coaching Secrets Top Executives Depend On". What I found was a Hoshin Kanri approach to personal coaching. This is not a negative comment in any way...this is a very positive remark. I think the application is perfect for us Lean Champions.

The authors use a system we have been using at Genoa to monitor and move our Lean transformation forward. At Genoa, we use a Lean diagnostic to evaluate our progress within 16 categories of Lean implementation. We use the results to guide us and tell us where we need improvement...in which categories. We use the items on the diagnostic, which we have not completed, as an indication what needs to be done next. We prioritize according to our business goals, and then proceed.

This is exactly what the authors of the book have done for a personal coaching approach. The authors encourage the reader to complete a self-analysis that covers what they call "The Seven Leverage Points". These seven points outline areas of self-discipline and personal management, that if you master two or three of then at least, your life will improve drastically. As you analyze yourself according to these points, you focus in on specific ways to master elements within each area, and understand the benefits that you will realize once you have mastered an area, or gotten it under control.

They use the Hoshin Kanri method of getting life under control. Strategic Planning for your life. Strategic Management for your life. If you are inclined toward Lean Principles in your work-life, you will be inclined toward this approach toward personal life. Get the book and read it. www.leverageyourbest.com.

Lean Engineering on the Shipyard Production Floor

A brief discussion with a shipyard today. Their vision is to have a virtual product model of the vessel available for the fitters, welders and shipwrights on the floor so that they can rotate, zoom in, zoom out, pan and analyze areas of the product model that will help them assemble the vessel. This will be combined with isometric assembly drawings with minimal annotation and dimensions. Makes for clean and low effort production drawings, increases the responsibility on the production floor to look carefully at the product model and see what the intent to build is. The care and guidance is focused on the sequence and Lean process. The waste in this case is the duplication of providing dimensions on coded and computer-cut parts.
The product model can be started at concept, and matured throughout the design spiral.
This is the way of the future as I see it.