Are We Too Obsessed With Competitors?

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“The greater danger for most of us lies not in setting our aim too high and falling short; but in setting our aim too low and achieving our mark.” - Michelangelo

It is common for businesses to direct a fairly significant level of effort toward understanding the competition.  Collecting information on costs, market share, new products, and a host of other areas often drives business planning and improvement initiatives to keep a company from losing ground to others.

For a number of reasons, though, I believe we go overboard and expend far too much energy worrying about competitors.  Considering the amount of money and time spent on researching the competition, one has to wonder how much better it would be for an organization if this energy were directed toward more important areas of the business.

WHY IT’S A PROBLEM

What I used to accept as a normal business activity, I started to question as I saw little benefit – and sometimes negative effects – from the effort.  Some of the reasons for this include the following:

• Leaders Don’t Follow
  Looking to competitors to focus your efforts can guarantee that you will always be a follower.  Creating a culture of continuous improvement and innovation are what makes an organization successful – looking to others for ideas does not.  This in addition to the fact that a strategy of following is not highly energizing or motivating for team members.

• Many Competitors Are Mediocre
  A number of industries are plagued with mediocrity, and focusing on competitors who are mediocre will result in little benefit.  Leading a pack of poor or mediocre companies is not something with which to be proud.

• You’re Not in Business for CompetitorsFocusing on competitors takes resources away from a company’s most important group of stakeholders – its customers.  Companies like Marriott, Apple, Google, and Toyota have shown repeatedly that focusing on customers generates far greater returns than focusing on competitors.  A company exists to serve one or more needs, and success comes from focusing on those who have the need.

• It Puts Blinders on ImprovementBringing performance to continually higher levels cannot happen by looking at what others are doing.  Looking at the performance of industry leaders can limit what people think is possible.  Targets are set at what others have done rather than at true breakthrough levels.  As a result, “safe” targets are set and creativity is crushed.

AN EXAMPLE

Many years ago, I worked for an instrument manufacturer in a highly competitive industry that, because of lagging sales, decided to redesign its flagship product.  What was once the most accurate instrument of its type had fallen behind other producers, and we wanted to regain the lead.

It was a fairly significant effort, but we succeeded in improving the accuracy enough to once again be the best.  After announcing the new product, we even became concerned after hearing rumors that a competitor had initiated a redesign of its own product to provide an even higher level of accuracy. 

Although we were proud of our accomplishment, sales were disappointing.  As part of an effort to address the sluggish sales levels, we began to visit our customers.  Our product was used by customers to calibrate their products during production.  We quickly found out that, rather than increased accuracy, what they really wanted was the ability to perform quick changeovers from one product to another within their own process.  In contrast, in order to provide higher accuracy, our product required longer stabilization times, meaning that it provided the exact opposite of what our customers really wanted.  We wasted a significant amount of time worrying about what our competitors were doing when we should have been worrying about what our customers were doing.

STOP THE MADNESS

When suggesting that a company should stop worrying about competitors, I am often met with blank stares or comments that I don’t understand the business.  Like anything, though, the effort put into studying competitors should be questioned as to the value it provides.  People should be clear about the results they expect from the process and follow up with understanding what was actually achieved.  If results were not as expected, something related to the effort needs change or the effort needs to be stopped completely.

Improving Dashboards With The 3-Meter Rule

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Dashboards are critical for a successful continual improvement effort.  Effective dashboards can drive better coaching, faster team meetings, and more effective problem-solving.  A common problem that interferes with the effectiveness of dashboards, however, is the inclusion of charts that attempt to convey too much information and are difficult to understand.  One way to prevent this problem is to make sure that all charts on a dashboard comply with the 3-meter rule.

Simply stated, the 3-meter rule means that a chart should clearly convey its message from a distance of 3 meters.  When looking at a chart, if you need to move close or ask for explanations to understand the information displayed, you can assume that the chart is in need of improvement. 

Dashboards should drive conversations around closing gaps between current and targeted performance.  To make sure the conversations are focused and effective, however, they should be centered around data. When the problem or breakdown is not clear, people will spend time attempting to understand the intention of the chart rather than addressing the problems shown by the data.

Besides helping focus the discussion on problem-solving, a chart that meets the 3-meter rule enables more people to be involved in the conversation.  The closer someone needs to be to understand a chart, the fewer people who are able to see the information and participate in addressing the problem.  Minds wander and separate discussions begin to happen, which negatively impacts the effort.

Creating charts that are easy to understand from a distance of 3 meters sometimes requires significant reflection and effort, but the investing time upfront can greatly aid the improvement process by making objectives clear and the problems that interfere with meeting the objectives visible.

Identifying Proper Leading Metrics

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One of the areas of lean that people tend to have difficulty grasping is the relationship between leading and lagging metrics, and how to identify effective leading metrics. People spend a lot of time attempting to determine leading indicators that, in the end, are often disconnected with any of the actions being taken to improve performance. 

Leading and lagging metrics both have a role to play in improving performance and are not difficult to identify once you understand the process and how to properly connect them to the problem-solving.

LAGGING METRICS

A lagging metric measures the result of a process. Barrels of oil produced, total recordable incident rate (TRIR), warranty expenses, and production costs are all examples of lagging indicators because the activities they measure have already occurred. The result lags the activity being measured and, whether you are happy with the result or not, you can't do anything to change it. 

Lagging indicators are important because they tend to represent what's important to the area being measured. They measure a result we are ultimately trying to achieve and help us determine if our efforts were successful in meeting targets.

Other examples of lagging metrics include on-time delivery, actual capital expenditures, defect rate, and customer satisfaction. Identifying them requires a clear understanding of what the business or team is ultimately trying to achieve. 

LEADING METRICS

A leading metric is a measure of an activity that influences a lagging metric.  As a measure of an activity being performed by a team, leading metrics can be influenced by the team in an effort to improve the results of a lagging metric. 

As an example, suppose a team is trying to improve safety performance as measured by TRIR and, through a breakdown of past incidents, discovers that hand injuries represent the largest category.  After breaking down the problem, the team determines that incorrect use of tools is the most likely cause and failing to wear gloves is increasing the severity of the injuries.  As a way to reduce the number and severity of hand injuries, the team introduces regular training sessions and an audit process to help assure team members are using proper tools and gloves.

The team can now create a dashboard that measures like TRIR (lagging metric), injury type (lagging breakdown), hand injuries (lagging metric), training classes held (leading metric) and audit results (leading metric).  By following these leading metrics, the team is assuring that the activities to improve safety are happening and that they are truly reducing hand injuries. 

In the above example, the effort of identifying the leading metrics did not consist of an isolated brainstorming session attempting to identify a specific metric to follow.  It was integrated with the problem-solving process and became nothing more than identifying a measure of the actions taken to eliminate a root cause of the problem.

KEEP IT SIMPLE

The problems people have related to identifying leading metrics often result from failing to connect the effort to problem-solving.  Attempting to determine the proper leading metrics in isolation from problem-solving often leads to frustration and wasted effort in creating and maintaining the measures, and a lack of clarity in understanding how to improve performance of lagging metrics.

Lean Requires Deliberate Action

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It has been decades since we first learned about the Toyota Production System and how it contributes to the company’s quality, productivity, and competitive success.  And although some companies have done very well with lean, most have struggled.  There are many reasons for failed applications of lean, but one that gets very little attention is the notion that lean thinking has no room for generalizations when it comes to performance improvement.  Objectives must be clear and deliberate, and include appropriate plans and measures to assure success.

BEYOND THE VISION

While vision statements are sometimes directional and somewhat general, turning them into action requires clarity around expectations, including short- and long-range objectives in order to make them a reality.  In fact, one of the problems related to visions is that many lack sincerity and do not progress beyond the development of creative slogans and posters.  Within a lean thinking environment, a vision is a serious and deliberate commitment of what the organization expects to be in the future.

I once worked for an organization that determined its vision to be Clearly the Best!  This could be thought of as a general, feel-good slogan if it did not progress beyond creating the statement, but the leadership team that developed the vision spent the time to create a common understanding of what it will mean to be the best.  They rolled it out to the organization with a picture of where they needed to be ten years out, and specifically what needed to be achieved within the next 3-5 years, including:

• A Total Recordable Incident Rate (TRIR) of 0.45
• A 30% reduction in warranty claims
• On time delivery to promise date of 99%
• A 25% improvement in product development cycle time

By aligning the 3-5 year objectives with becoming clearly recognized by customers as the best, the team turned a generalization into deliberate objectives for the future.  Because competitors and customers did not remain static, the team was required to adjust its idea over the years of what it means to be the best, but it was always clear about what it meant at any given point in time.  Achievement of an objective usually meant setting the bar even higher to keep it moving even closer to the vision.  [It should be noted that the company’s mission was very clear which greatly helped the process by providing boundaries for the vision.]

ASSURING ALIGNMENT

In the above example, by creating specific long-term objectives, the team was able to quantify the milestones that needed to be achieved along the way to becoming the best.  Leaders mobilized the team around these objectives, resulting in plans and dashboards that monitored progress along the way.  Additionally, they provided opportunities for leadership development and coaching that proved invaluable for sustaining the gains.

If the vision is kept alive year-after-year by developing associated long-term objectives, it becomes much easier to assure that actions – from annual plans to daily problem-solving – are aligned and focused on continually closing the gaps between the present and the future.

Consider the following vision statements:

• To be recognized as a trusted partner by customers, communities, and suppliers in all areas we operate;
• We will be the leader in researched-based education;
• To consistently provide products that make life healthy, exciting, and rewarding

 It is easy to see why these statements were created but unless they are associated with long- and short-term objectives, they are not deliberate statements about the future.  Developing the vision is important, but it must constitute a serious commitment and be followed up with deliberate actions and measures to prevent the exercise from becoming futile.

Are We Happy With Mediocrity?

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“Nobody gives a hoot about profit.  I mean long-term profit.  We talk about it, but we don’t do anything about it.” – W. Edwards Deming

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hy do so many companies seem to be happy with mediocre performance? People generally consider the idea of having it all – perfect safety, high quality, short cycle times, low costs – as something that is impossible to achieve.  As a result, the bar is set low and everyone feels good when the low targets are achieved.

So often, it is our experience that interferes with moving to the next level of performance. We don't set aggressive targets because we know they are impossible to achieve and, in the end, we don't want to be disappointed or suffer the consequences of missing a target. As a result, we trudge along with average results and view many problems as inevitable or out of our control. If we're lucky, our competitors operate in the same mode. If not, we fall further and further behind until we are either acquired or forced to close our doors.

Energy Can Be Created and Destroyed

A group-wide acceptance of problems as inevitable is what causes people to lose their energy and inspiration. When one views significant improvement as impossible, intrinsic motivation wanes and extrinsic motivation – e.g., compensation – dominates. And the longer this type of “it happens” mentality continues within a company and the more deeply engrained it becomes in the culture, the more difficult it becomes to change course.

Leaders can stop or prevent mental mediocrity by first realizing that their own behaviors and the systems they created may at the root of the problem. It's not necessarily easy to do, but letting go of some traditional beliefs and methods of management can begin to drive the type of change that can energize improvement efforts and give people the confidence that they can have it all.

To do this first requires that leaders believe that problems are not inevitable and that the company has the ultimate control over its own future. They must fundamentally believe that they can have it all.

Stretching Without Breaking

Leaders have to trust that the people in the organization possess the talent to successfully tackle the difficult problems facing the company. They must often develop this ability, though, by stretching people and encouraging them to accept challenging projects and targets, and coaching them in their efforts to succeed. People won't always be successful in achieving the target (if they are, they're probably not being stretched enough), but the learning and development that occurs with each project is invaluable to tackling future problems and opportunities.

A stretch target refers to a target that is difficult, but not impossible to achieve and, although you can't stretch people all the time, you've got to make sure there is enough tension within the organization to keep people developing and the company's performance improving.

Getting people to accept stretch objectives assumes that they will not be penalized for missing a target. Reward systems need to support development and participation in stretching the organization rather than merely meeting a target. If you encourage people to stretch but continue with a reward system based on meeting targets, nothing will change. People will continue to pursue safe targets and push back on any attempt to stretch. In the end, mediocrity will reign.

More often than not, organizations cause their own problems. The effects of problems caused by the external environment tend to pale in comparison to those created on the inside. Understanding and accepting this, however, often requires a shift in thinking toward the idea that mediocrity is unacceptable and that the organization can, and will, have it all.

When Lean Fails: The Common Causes

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Many companies today are jumping on the lean bandwagon and expecting huge cost reductions as a result.  Unfortunately, many of these companies will never see the type of improvements they expect from lean, and their leaders will likely become disappointed and frustrated, and eventually abandon the effort.

There are a number of reasons companies fail with lean.  What I present here are the causes I’ve seen over the years that are the most destructive and the most difficult to resolve.  It is important to understand these causes and work to prevent or address them early in the process in order to initiate the type of transformation that will lead to a more competitive and stronger organization in the long run.

1.       Underestimating the Transformation
Most leaders tend to underestimate the level of transformation required to create a lean thinking culture within the organization.  Lean is not something you “implement” or use when convenient.  In virtually all cases, it involves a dramatic shift in the culture to drive a new way of thinking and approaching work.  As such, it requires transformation in the systems for leadership, training and development, recruiting and hiring, promotions, and others before one can expect to see results that have any chance of being sustainable.

2.       Delegating the Effort
One of the major differences between lean and improvement methodologies like six-sigma is that it requires the involvement of the organization’s leaders to be successful.  As noted above, lean requires a fairly significant transformation in order to be successful and this can only be done by those at the top because they are the people who are in the position to make it happen.

3.       Humility
Arrogance is one of the biggest killers of a lean culture.  Built on the Plan-Do-Study-Act (PDSA) cycle, lean is about continual learning.  I have seen many organizations over the years that had started well with the effort but, after a few early successes, became overly confident and killed the transformation.  The saying that the man who is too big to learn will get no bigger applies to organizations as well as individuals. 

The most effective leaders I have worked with are those who accept responsibility for the organization’s problems and realize that it is they who need to change in order for the organization to change.

4.       Patience
The extent of change in systems and behaviors required to be successful with lean takes time to achieve.  Although there will undoubtedly be early successes, the ability to sustain the successes and drive others will not happen without continual effort to shift thinking.  Especially when a crisis occurs, people will go back to their comfort zone, which most likely involves how they behaved before learning about lean.

The key is to never let up by continuing to reflect and drive change through the conversations and actions that occur every day.

5.       Consistency
Lean requires clear alignment from the organization’s purpose to the work performed by people every day.  In order to achieve and maintain this alignment, the organization must have a clear and constant purpose that is motivating and well understood by everyone.  Doing this well requires a significant amount of effort by the leadership team – especially during bad times when many organizations find it easier to abandon the purpose in order to maintain profits and short-term goals.

Leaders must be enlightened enough to understand that, although success will not come easy, it is possible to transform the company into a stronger and more successful organization.  Looking out for the causes of failure can save a lot of frustration early in the process and greatly improve the chances for success.