In Their Own Words – Details, episodes & analysis

Is quality simply a matter of two categories: good and bad? But then how do you get to "better"? In this episode, Bill Bellows and Andrew Stotz discuss categories and continuum thinking.

TRANSCRIPT

0:00:02.4 Andrew Stotz: My name is Andrew Stotz and I'll be your host as we dive deeper into the teachings of Dr. W Edwards Deming. Today I'm continuing my discussion with Bill Bellows who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. And today is episode six, Category Thinking and Continuum Thinking. Bill, take it away.

0:00:27.9 Bill Bellows: Welcome Andrew great to see you again. All right, so in podcast five, I went back and it was just posted by The Deming Institute. And I just wanna clarify again on the topic of acceptability and desirability. Where we're going tonight is looking at acceptability and desirability in a little bit more detail, a little bit differently, but those are still the prevailing themes. And again, I just wanna reinforce that none of this is to imply that desirability is better than acceptability. What's important is to be aware of when I'm using acceptability thinking. And when I'm using desirability thinking and use the one that makes the most sense in that situation. We were talking earlier about companies whose products we enjoy using and we're loyal to them. And I mentioned that my wife and I have developed a loyalty to Toyota products.

0:01:40.4 BB: Going back to 1989 was our first Toyota product. And I knew I wanted a pickup truck. 'Cause I was borrowing a pickup truck from a number of friends and I thought, I really like a pickup truck. There's a lot you can do with a pickup truck. So, I knew I wanted a pickup truck. And I knew from having worked in my father's gas station, I had reason to believe I wanted a Japanese pickup truck and not an American pickup truck. So, I then it was a question of is it a Mazda, Toyota.

0:02:11.1 AS: Nissan.

0:02:13.2 BB: Sorry Nissan. And I looked at all of them and yeah I just all I knew is I was gonna be one of those. And I think the major reason I went with... My wife and I went with a Toyota... I don't think the prices were that different. But it just had a, it was the styling was a little bit better. But I did not... That's why I bought it.

0:02:46.5 AS: The loyalty wasn't built yet.

0:02:49.0 BB: No I knew to stay away... I knew I had seen plenty of examples of... Well, I had traded in my first car that my father, my parents got me when I was in college was a 1975 Chevy Nova. Four door Chevy Nova. And the reason four doors is important is a... If it was a two door, the door would be longer. But it was a four door. By the time I gave that car to a friend, the engine was running beautifully but the body was falling apart. And, so, by the time I sold it to get the pickup truck, in order to get out of it, I'd have to throw my shoulder into the driver's door. Why? Because the door droop was so great that when you close the door, I mean the door drooped and this is not a four door, this is a two door. So, imagine if it was a two door the door would be even heavier. So, on a four door, the door drooped. And, so, when you closed it, you'd had to lift it and then close it in order to get out you had to... Oh, it's just my wife couldn't drive. It was just a nuisance.

0:04:17.6 AS: And, that in '75 was just about when the Japanese were really starting to go after the US car makers. And but I want to tell you just a quick one. I can't remember if I've told you, but I used to have a 1963 Lincoln Continental here in beautiful Bangkok. And I owned it for 10 years. And then eventually I sold it. But what a beautiful car. And people always ask me the same thing and they said, isn't it hard to take care of? And I said, you gotta remember back in those days, cars were simple.

0:04:49.1 BB: Yeah, yeah. So, the... So, with... So, the experience of 14 years or so, with the '75 Chevy Nova. And the door was like the straw that broke the camel's back. It just done with this, all right. So, we're gonna buy Japanese, bought a Toyota. That was the first one. And I think I've mentioned in the first podcast I mentioned that we had a 1998 Toyota Sienna, which is their first, it was their Toyota third attempt at a minivan. The first one I think was underpowered, the second one... And we knew we wanted a minivan. It was time, the kids were getting a little bit bigger. It was time for minivan. And just as we were ready to go buy it, they had a... I think a competitor came out with dual sliding doors. Dual sliding doors. And, so, instead of Toyota coming out with a one sliding door, they stepped back. I think Chrysler came out with two sliding doors. And they figured we can't come to market with one sliding door. They've got two sliding doors. So, then we waited another year and they finally came out and given all of our delight with the Toyota pickup truck, boom, that's what we wanted. And then the transmission failed, six months later with 10,000 miles in the car.

0:06:18.5 BB: And I have a photo of that. Not only did the transmission fail at 10,000 miles, but it failed on Christmas morning on our way to see friends about an hour away. And this guy, people were going to see, he knew I loved Toyota. And when he drove to pick us up, we transferred everything from that to his Ford F-150. He says to me... So, then we had to have the car towed on a flatbed to his house and the next day to the dealership, what a nuisance headache. But when he showed up, he looks at me knowing that I like Toyota. And he says, how's this data point change your theory about Toyota?

0:07:06.5 AS: I thought he was gonna say, if it was me, I would've said pop in the back.

0:07:12.6 BB: And I was like, yeah, that really hurts. Well when I shared that story with students at Northwestern's Business School, the Kellogg Business School, their advice and these are students that had worked in all different industries from Coke to banking, and a number of 'em have worked in the auto industry. And their advice was, I said, Professor Bellows never buy anyone's first model year, even Toyota. Now I have a friend who he and his wife bought the same model year Toyota Sienna. They did not have a problem.  Oe did. When I met at a Deming conference, a guy who worked in Georgetown, Kentucky which is where the Sienna was made. And, so, I met him at a conference and when he said he worked for Toyota, I said, oh, my wife and I buy nothing but Toyotas. He says, oh. And I said, we have a first model...

0:08:08.6 BB: Year Sienna. And everything was good. And then I'm thinking, I'm gonna ask the guy a question. And I looked straight in his eyes. We were pretty close together. And I'm about to ask him a question. I'm looking straight in his eyes and I said, we got a Toyota Sienna. He says, how do you like it? And I looked right at him and I said, the transmission failed at 10,000 miles. And he rolled his eyes. And I said, so, you know about this. It wasn't a look of shock. It was, yeah, all right. So, I said, all right, all right. Your expression just told me that you know something about this. I said, what's up? He says, we tried. This is so cool. He says, we tried to save a few pennies on a bearing.

0:09:00.8 BB: I said, you did but what you did cost me more than you saved. So, yeah you guys saved a few pennies on a bearing and cost my wife weeks of aggravation to have it towed from where it happened to the place we were going because it Christmas Day, it broke. Everything's shut down on Christmas days. You can't have it right? And, so, we had it towed, had to get a rental car. Then they're complaining about, we had... Who authorized this rental car? We only pay... It was just headache after headache. But we still buy Toyota Andrew. We still buy Toyota. Why? Because I'm afraid to buy from anybody else. Well, part of the reason I wanted to share that with our audience is I buy Toyota products based on value. And I believe that the best value we get in transportation, personal transportation is the money we spend buying a Toyota most often brand new. We've also bought some used, got great use out of them, never had a problem, anything like what I just shared with you. And that's having owned five or six different Toyotas. I mean, right now in our family we have three of them.

0:10:16.7 AS: I think I need to correct you.

0:10:19.1 BB: Go ahead.

0:10:19.9 AS: You buy Toyotas on value and values.

0:10:25.7 BB: Yes!

0:10:28.2 AS: You're aligned with their values and therefore you're willing to look beyond the mistakes and problems that it comes with every product, every service, every company, because you're aligned with their values.

0:10:42.2 BB: Well, what's funny is when we bought the Sienna and we're talking with 'em, doing the driving and signed agree to buy it, that's the color we want. We want these seats, blah, blah, blah. And then you go talk to the closer and the closer's a guy, the gal at the dealership that wants to add on the undercoating and the this and the this and the this and the this. And he wanted to sell us at a premium price, this extended warranty and I dunno what it costs, but I said, I've done a whole lot of research. And he says to me it's so funny. He says, when these things break down, a circuit board breaks and that'll cost you this and this and this, and, so, I'm gonna sign you up for the insurance policy, the extra coverage. And I said, no, and he is going on and on. And I said, look it, I've done a lot of research into how they're made and I said, and the values of that organization. So, I said, the reason we buy Toyota is that I have an understanding, a pretty damn good understanding of how they manage the product, the pieces and how it all comes together. And he's pushing back at me. Finally, I said, I teach university courses on how Toyota operates and their quality system.

0:12:14.8 BB: So, we didn't get the extra coverage. Now it was still covered under warranty, so, it was kind of laughable that. But anyways, the reason I bring that up is that...

0:12:27.3 AS: Before you do that, I want to just say for the listeners and viewers out there, what is the messaging from a corporate strategy perspective? And that is have values that you stand for. Communicate those to the market, stay loyal to them and the customers who align with those values will stick with you through the hard times that you're gonna definitely have. There's a quote by Alexander Hamilton says, "those who stand for nothing, fall for everything." If you do not stand for a clear set of values that the market can perceive, then people are gonna fall away from you as soon as times get tough.

0:13:07.2 BB: Oh yeah. And I...I, I. It's about that and that's why I've read lots about Toyota. How they operate written by people outside of Toyota trying to explain it, people inside of Toyota and their explanations. But part of the reason I bring this up is my fascination, my interest in Dr. Deming's philosophy, is a great deal to do with his system is based on an incredible appreciation of the difference between acceptability and desirability. All other quality management systems, whether it's the quality management within Lean is acceptability based, good parts and bad parts, Operational Excellence, Six Sigma Quality. In fact, there's a quote at the end of chapter 10 in "The New Economics". And chapter 10 was the original last chapter until the third edition came out. In which case there's chapter 11 written in large part by Kelly Allen, a good friend.

0:14:15.1 BB: And when chapter 10 was the end I thought it was pretty cool that at the very end of chapter 10. The last few pages of chapter 10 of “The New Economics” are about Dr. Taguchi's loss function. And this is what turned me on to Dr. Taguchi, was finding “The New Economics" in a brick and mortar bookstore. I knew from ASQ Quality Progress that this was coming out. So, I remember when it came out, this was before Amazon, going to the bookstore. Going through it and saying what does this guy think about Taguchi? Because Taguchi was my, the one I really idolized. And I opened it up and I turned to chapter 10 and it's all about the loss function, the problem and I thought this is way cool. So, the closing quote... The closing... The last sentence in chapter 10 which again was the original last chapter until third edition came out, is the following "Conformance to specifications," that's acceptability, "zero defects," that's acceptability. "Six Sigma quality," which is acceptability "and all other specification-based nostrums all miss the point, ,stated by Donald J. Wheeler."

0:15:42.6 BB: So, then I looked up, but what is a nostrum? And Dr. Deming not Dr. Deming a nostrum is defined as “quack medicine.”  So, "Conformance to specifications, zero defect, Six Sigma quality, and all other specification-based nostrums all miss the point." And, so, I wrote an article about this, gosh, 20 years ago. I said, what's the point? And my explanation, the point is, all of them are about managing parts in isolation. Looking at things in isolation. Again that's acceptability. And as I said earlier, I'm not saying acceptability is bad, I'm just saying acceptability is not desirability. And the other thing I wanna add is, why do I... My wife and I love Toyota products. I've got reason to believe through a lot of research and talking, sharing the ideas that we talk about in these podcasts with people within Toyota. And they have a desirability focus that nobody else... That I'm not aware of anybody else has.

0:16:54.9 BB: And, that's having presented around the world doing classes, at Kellogg Business School, at university. Yeah, the Kellogg Business School Northwestern University. I teach online classes at Cal State Northridge, Southern Utah University. I've lectured at many universities. And I never had anyone come to me working in industry saying, Bill, what you're talking about, we practice where I work. No. And, so, for those that are pursuing the Toyota Production System stuff. My response is, I don't buy Toyota products because they use the Toyota Production System. Now, that may help with getting the car to market faster. But I don't believe the Toyota Production System is why people buy Toyota products. I believe Toyota's quality management system... At least I buy Toyotas because I believe their quality management system, inspired by Dr. Taguchi, inspired by Dr. Deming, is providing something that nobody else has in many industries. All right. So, I wanted to get that out.

0:18:06.7 AS: So, are you saying Toyota Production System is more of a tool that is in their toolbox of quality management system?

0:18:18.4 BB: Um, the Toyota Production System is classic Industrial Engineering.

0:18:26.8 AS: Right.

0:18:27.0 BB: It's how to...

0:18:28.3 AS: It's a natural.

0:18:30.5 BB: How to improve flow, how to improve throughput by minimizing number of steps, by minimizing inventory. It's highly credited to Taiichi Ohno, who was mentored by the founder of the Toyota Motor Company. And it's all about, they don't have a lot of money. So, we need minimal inventory, minimum steps. So, it's like... So, the Toyota Production System is an efficiency based system based on, we don't have a lot of money, we're not gonna buy a lot of inventory. But the quality aspect of the Toyota Production System everywhere, everything I've written, everything I've read by people describing the Toyota Production System it's all explained by acceptability. So, that they may be moving things closer together so people don't walk so far.

0:19:27.8 BB: But what I'm looking at with Dr. Deming's work inspired by Dr. Taguchi is what is it about the quality system that causes those parts to come together so well and the products to perform so well? So, it's not just having the parts when I reach out, the part is there, but those parts integrate better. I've mentioned in the first podcast series that Toyota had 100% snap-fit pickup truck in 1969 at a time when Ford was banging things together using rubber mallets to get the parts together. They took apart and assembled a Toyota pickup truck twice 'cause they didn't believe the results the first time the parts went together without mallets. That's what I'm talking about, that within that system, the ability for the parts to come together to work together cannot be explained by an acceptability based system. And, so, having spoken with people and having the opportunity to share with people within Toyota the ideas we talk about inspired by Dr. Deming, I've learned that they do desirability in a way that nobody... I'm not aware of anyone else having done.

0:20:48.5 BB: All right, so, what I want to get into, add to the discussion tonight, relative to category thinking, is this idea of category thinking, continuum thinking. Category thinking quite simply is putting things in categories. So, in acceptability we have two categories, good or bad, or maybe three categories. It's good or it's scrap or it's rework. So, category thinking is generically putting things into categories. And so, we could look at category... Categories could be... There could be two categories, three categories.

0:21:27.1 BB: It's been a while since I've gone to see a movie, but I believe they still have a rating system of PG, PG-13, R, R-17, maybe X. Those are categories. Fruits and vegetables. Those are two high level categories. Within each of those categories, we have types of, we have apples and oranges, and within them we have types of apples. That's all category thinking. You go into a supermarket and every aisle... There's the cereal aisle. That's a category. There's the canned goods, those are categories. Religions - talk about categories. So, every religion you look at is its own category. And, then within those categories they have subcategories. How about music? How many categories in music are there Andrew?

0:22:18.9 AS: Well, it gets all messed up on my iTunes where I'm like, that's not heavy metal. That's rock.

0:22:28.6 BB: Yeah. And then there's types of rock. In the beginning it was rock and roll, and then there's types of rock and roll.

0:22:34.0 AS: Progressive rock.

0:22:34.0 BB: Progressive rock. And then we have people... So, what category would we put... I think somebody asked Lucinda Williams, we're going to see her in a few weeks. So, what category? Well, she doesn't fit a category. So, that's category thinking. Category thinking is putting things in categories. We could say, where did you go to college? That's a category. These are USC grads, those are Cal State grads. And, part of the point I want to make is that we use category thinking all the time. Putting people in categories is what we do. Such as you and our daughter are Cal State graduates.

0:23:17.6 BB: And, so, what degrees do they have? Those are categories. So, I don't know what we would do if we couldn't put things in the categories. So, I don't think category, putting people in category is not a bad thing. Now, when you start to associate values with the categories, now we're getting into racism or sexism and then, okay. But this idea that putting people in categories is a bad thing, I'd say category thinking is our simple way of organizing everything around us and these little file cabinets. Now added to that is when you put four or five things into a category, then what you're implying is that they're all the same. And that gets into acceptability.

0:24:12.8 BB: So, if this is a good part, that's a good part. That's a bad part. That's a good part. So, all the good parts go into the good part category. Then we say, oh, these are all good. Then we get into the sense of, and they're interchangeable. Well, maybe not. And that has to do with what I call continuum thinking. All right, so before we get to continuum thinking, Andrew, remember the question. What do you call the person who graduates last in their class of medical school?

0:24:43.3 AS: I don't remember that.

0:24:45.2 BB: Okay, so take a wild guess, Andrew, putting the pressure on, what do you call the person that graduates last in his or her class in medical school?

0:24:55.7 AS: Surgeon general.

0:24:56.9 BB: What's cool is that's a question I've been able to ask all around the world. Now, depending on where I go, I can't talk about baseball because they don't understand baseball. Or depending on where I go, I can't say soccer or I have to say football. Then if I say football, I have to say, well, I mean your football, not American football. But what's neat about this question, what do you call the person that graduates last in their class in medical school, that's "doctor." That's also acceptability thinking. From the first in class to the last in class, they all met requirements. Andrew, you know what that is? Acceptability. So, category thinking is a form... Acceptability is a form of category thinking. All right. Now I'm gonna give you three numbers and I'm going to ask you which two of the three are closest to being the same. You ready?

0:25:58.0 AS: Yep.

0:26:01.7 BB: 5.001, 5.999 and 6.001.

0:26:11.1 AS: 5.999 and 6.001.

0:26:17.6 BB: Are close to being the same?

0:26:18.8 AS: Yeah.

0:26:20.2 S3: That's what most people think. Okay. But...

0:26:25.7 AS: One's a six and one's a five. That's a problem.

0:26:29.5 BB: All right. And, so, again, the numbers were 5.001, 5.999 and 6.001. And the question is, which two of the three are close to being the same? And, what most people will say is 5.999 and 6.001, which infers that what does same mean?

0:26:48.5 AS: The integers?

0:26:49.1 BB: If you answered.

0:26:49.9 AS: I looked at the integers at the end rather than the whole number at the beginning.

0:26:56.7 BB: But is it safe to say you chose those numbers by saying they were closest together?

0:27:01.6 AS: Correct. Yes.

0:27:03.2 BB: So, in your case you're saying, if I plot those numbers from zero to infinity. Then those two are really close together. That's one definition of same is proximity. But, same could also be, they begin with five, in which case the first two are close to being the same. 'cause they both begin with five or they're both less than six. Or, I could say 5.001 and 6.001, because they both end in .001. So, it turns out there's three answers to the question. But the answer of the last two and proximity is what category is what continuum thinking is about. On a continuum these two are closest together. All right.

0:27:51.2 AS: And I have to tell you, we're gonna be running out of time, so we gotta wrap this up.

0:27:55.4 BB: All right. So, when I asked you the question, what do you call the person who graduates last in their class of medical school? And you said doctor, that's category thinking. If you used... Well actually the thing is, if I ask, what do you call the person who graduates last in their class at the United States, US Army's Military Academy, known as West Point, one answer is Second Lieutenant. 'cause they're all Second Lieutenants. But West Point uses continuum thinking to define the very last person in their class. So, it's the last person in class is not called second lieutenant. The last person in the class is called goat, as in the animal.

0:28:43.2 BB: And a very famous goat at West Point, who from my reading, was very proud to have graduated last because there's... I think Mike Pompeo, who was Secretary of State under president Trump, was first in his class at West Point, first in his class. A very famous, I wanna be the last person in my graduating class at West Point was George Custer. You've heard of him?

0:29:14.3 AS: Yep.

0:29:15.5 BB: And, he was deliberately lazy, so he wanted to be the very last person in his class. But that's, but the idea is that category thinking says they're all Second Lieutenants, they're all doctors. Continuum thinking is when you say this is the first, this is the second, this is the third. And when you come up, when you start to order them and say, the last one is goat, that's looking at things on a continuum, which is continuum thinking. Well, given that most quality systems, including Boeing's Advanced Quality System, are based on category thinking and category thinking, you have good parts and bad parts. When I ask a question as I brought up in the podcast five. I said I go to audiences and ask, how much time do you spend discussing parts which are good, that arrive on time? And the answer is none. And I say, well why is that? 'Cause in that system they're focusing on taking things from bad to good. And then what? Stopping at good.

0:30:20.0 BB: Well, part of the thing I wanna get across in this episode is the reason we're stuck in that model of stopping at good is because the quality system is based on category thinking of bad and good. And in a world of good and bad, there is no better. In a world of short and tall, there is no taller. And, so, continuum thinking allows us to go beyond that. And, so, going back to Dr. Deming's quote, conformance requirements, which is category thinking, zero defect, Six Sigma quality, those are all category based systems, which means it's good parts and bad parts. But then I come back to how does a system which is based on good parts and bad parts deliver such incredible reliability in the products? And, I believe it's because they're using continuum thinking. Not... And again not continuum thinking everywhere, but I think they have very judiciously figured out where to use continuum thinking and that is their differentiator. In my admiration for Dr. Deming's System of Profound Knowledge is, I've not come across any other type of management theory, which has that level of fidelity to explain that. And, in order to practice continuum thinking, implement it, you have to work together.

0:31:43.9 AS: And I'm gonna wrap this up by... One of the revelations that I come upon when I listen to what you're saying is. That's also what makes Deming's teachings sometimes hard to grasp, because there is no clear category and there is no clear beginning and end. There is no certification and therefore it's just hard for us who are used to being in categories to grasp. And that's my conclusion what I draw from everything you've just said.

0:32:16.6 BB: Well and let me add to that, really appreciate you saying that. Let me add to that,much of what I was doing at Rocketdyne... When I began to appreciate that the reason I was focusing on solving problems, solving problems and the problems we didn't solve were the problems where the customer, NASA said, we're gonna take this work and take it to the company down the street because you guys can't make it happen.  And, that scared the hell out of me that we're gonna lose this work to competitors because... And when I looked at it, was why are we stuck?  And I looked at Dr. Deming's work, the reason we're stuck is we're... 'cause our quality system is based on good parts and bad parts. We're waiting for trouble to happen. And, so, but still what I found is, and when I started to focus on... I went from being 100% Taguchi to more about Dr. Deming's work and trying to come up with everyday examples to make Dr. Deming's work more accessible.

0:33:16.9 BB: So, in Dr. Deming's work, you're not gonna find category thinking, continuum thinking. So many of the concepts we talk about in this series, in the prior series are... I refer to them as InThinking Concepts, just trying to make it easier for people to begin to absorb the brilliance of Dr. Deming's work. Because, I think absent that, when he says quality, what kind of quality is he talking about? Acceptability quality, desirability quality. So, I'm with you, I think the work is brilliant. I'm just hoping through our conversations and these podcasts that we can make his work far more accessible.

0:33:56.4 AS: Yep. Well, I think we're doing that. And Bill, on behalf of everyone at The Deming Institute and the audience, I wanna thank you again for this discussion. For listeners, remember to go to deming.org to continue your journey. Of course, if you wanna keep in touch with Bill, just find him on LinkedIn. This is your host Andrew Stotz. And I'm gonna leave you with one of my favorite quotes from Dr. Deming. "People are entitled to joy in work."

Is your financial bottom line the true story of your organization? In this episode, Jacob Stoller and Andrew Stotz take on the myth of the bottom line - maybe it doesn't tell you what you think it does.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Jacob Stoller, a Shingo prize winning author of "The Lean CEO" and also "Productivity Reimagined" which explores how to apply the Lean and Deming management style at the enterprise level. The topic for today is myth number two, the Myth of the Bottom Line. Jacob, take it away.

0:00:32.7 Jacob Stoller: Thank you, Andrew. Great to be back here with you. Yeah, the myth of the bottom line, it is widely believed that if you look at the financials, that tells you everything you need to know about the productivity in your organization. And it's almost when you think what we talked about last time, so that the pyramid, the idea that the whole equals the sum of the parts, I think the myth of the bottom line is really kind of flows naturally out of that. If you believe in this pyramid that Dr. Deming was so critical of, the myth of the bottom line seems to make sense. Just that dollars flow through, you save a dollar here, it's all going to add up.

0:01:23.8 JS: So the problem with that is that productivity as we've learned from Dr. Deming, is actually determined by lots of non-financial factors. And what the bottom line gives you is a kind of an oversimplified, I guess, aggregated view. So you take the total sales of a company and you divide it by the number of employees. You can call that productivity, but it's not really productivity, 'cause productivity, strictly speaking, comes from making increasing output with a set of inputs. So you go from time A to time B, are we making more while keeping all our fixed costs constant? So there are things that get in the way of measuring that and one of the big ones is something called price recovery. So if you look at profitability, it's really a combination of price recovery and productivity. But price recovery would be any change in cost, any kind of financial cost during or between the two periods that you're measuring.

0:02:45.7 JS: So if you've got say the cost of labor, cost of materials, facility costs, energy costs, all these things can change between two time periods. And at the same time, maybe your selling price changes. So it turns out that factoring all those things out is much more difficult than you would think. It doesn't come easily using ERP systems in those things. And one of the pioneers of Lean accounting [0:03:16.8] ____ explained to me how he, when he first realized this, how much work it was to actually just separate all these price recovery factors from the total that contributed to productivity. So it's not that easy to even get to productivity and really get an accurate figure on it.

0:03:39.1 AS: It's interesting. I'm a financial guy, so I look at the P&L all the time of so many companies. So I think I've got some fun stuff that we can talk about, but was there something more you were gonna wrap that up with?

0:03:51.9 JS: Well, yeah, I think what happens with that is you get a sort of a cultural divide, because executives, I'm told, typically see operations as a black box. They'll say, well, okay, someone worries about process and manufacturing process, or it could be in any field. It could be medical, it could be something else, but that's something that operations worries about, so we'll let them do that. So they're left, these executives, with only one language, and that's financial language to understand things. And that's basically the iron law there is you get what you pay for. So we wanna get better quality, okay, we invest in it, that costs money. We wanna get faster delivery times, well, we'll pay money for that. And we wanna lower cost, well, then we better get rid of some people.

0:04:51.7 JS: So these things are all looked at sort of transactionally from the outside, not inside this black box of process. But inside that black box, that's where all the magic happens. That's where the Deming chain reaction happens. The fact that when we invest in quality, costs are gonna go down, but you tell that to an accountant, they'll tell you you're nuts. So it's really, I think there's a big challenge there of getting people to understand that the laws of that really determine productivity are not purely financial. And people need to... I think a lot of people need to broaden their thinking to understand that.

0:05:43.0 AS: Maybe out having looked at the financial statements of thousands of companies and have valued thousands of companies in my life, let's look from a top down, first of all. So people organize, people give money, give capital to companies, because they expect to get some return from that capital. Some people care about what that company does, others don't care, but that's the first step. And so the company gets capital that they deploy and they organize their business however they want, and ultimately they generate revenue. Now, revenue is price times quantity. And I think the first thing that supports what you're talking about is that, if a manager of a company says, our revenue went up 20% last year, and it was all driven by increasing prices only, well, that's... If you could sustain that, that would be fantastic, but it's quite likely when you increase prices, you're gonna have a knock on effect of your demand falling as your competitors have lower prices. But then, what you could say is that that company really didn't change anything about the way it's operating, it's output, it's productivity. Would that be correct in saying that in your mind?

0:06:56.9 JS: Yeah, it would be correct, and I think that a lot of the companies that are protected from... We got stories about this that are protected price wise and are able to kind of raise their prices at will, actually get very sloppy with their operations, and they don't increase their productivity. So I would say to your clients or whoever when you're analyzing that, that what productivity growth will give you is sustainable improvement over time. Productivity is the one thing that every company has control over, and you can control it year after year, but it's long term. It's a long term prospect. So that's... If you're managing quarter by quarter, that's maybe not gonna be so attractive.

0:07:52.0 AS: Yeah. So I think that's a great point about the long-term nature of trying to improve your productivity, because anybody can be a one hit wonder and increase price, let's say, and then tell everybody, "hey, we got more revenue, or we got more profit." Now let's look at the other side. So the P&L, the profit and loss statement, or the income statement is revenue minus costs, equal profit. There's a second aspect, is that a top level executive who come in and say, "I'm slashing the marketing budget, and I'm slashing the cost related to our operations and all that," and in the end, they would get an increased... Increase in profit. But they may get that at the sacrifice of future growth of let's say the image, the brand image of the company as an example, which doesn't necessarily have to do with the black box of actually making the product, but does have to do with creating a bottom line that looks great, but sacrificing the future bottom line. What are your thoughts about that?

0:08:55.1 JS: That's a great point. Yeah, of course, Dr. Deming would tell us to look at the system. They're all interdependent, marketing, sales, production and everything. But when I said black box, I mean, yeah, it does conjure sort of an image of manufacturing, but that same black box thinking, I think needs to spread through the entire company. And some of these really mature companies, Lean companies and Deming companies too, they're thinking everything as within that operational framework. Because it's operations within that, that you have your complex adaptive system. Financial, pure finance is not really in the same way... The laws of finance are not... Don't reflect that kind of complexity.

0:09:45.0 AS: I would like to just define this black box, because what you're... When we think of it of a black box, we think, okay, people just look at it, and they don't really know what's going on inside. But you're saying that that's the way a senior executive oftentimes comes in and they don't even know what's really going on. I remember when I worked for Pepsi in the factory, that the factory manager was even out of touch with what was happening on the floor. He wasn't out there all the time. So when you're talking about black box, you're talking about kind of people looking from the outside in, but inside that black box is where all this productivity work is being done of how do we get more efficient in what we do, use less resources, and get a better outcome? How do we hit the specifications or the desire product that the customer needs. Which is one of the great things about capitalism is that you're actually trying to reduce the resources that you're putting in to create an output.

0:10:43.4 JS: Yeah, exactly. Well, I would expand the black box again. It can be anything, it can be in your accounting department. So the black box really is process. It's the whole concept of process. So it's not a physical entity at all, or a plant floor, it can be everything in the company, but yeah, you can look at... You can take same kind of principles and say, "how come it takes you 10 days to close our books at the end of the month? Can we shrink that down to three?" So we can use the same principles anywhere in the organization. And similarly, we can use these principles in healthcare and services industries and just about anything. So yeah, so the black box is a very conceptual idea.

0:11:33.4 AS: The process, the systems.

0:11:33.4 JS: Yeah.

0:11:37.0 AS: The other thing I always tell my finance students on first day, the first thing I put up on wall, on the board is, "finance adds no value." Which is a very disappointing thing for undergrads in finance. But what I try to show them is that, finance is a feedback. It's a tool for feedback. And the feedback in this case is financial feedback. And with that financial feedback, it's information that the management team can use to create value, to make better decisions, ultimately about the business and what they're doing. And so for those people that think that finance is something that creates value in a business, I always say it's a support function. And when it's done really well, it's a fantastic support function to give feedback of, here is the big picture of what we're producing, whether that's looking at the cost accounting on a production line, or whether that's looking at the overall company. So finance adds no value is one of the things I always say to kind of wake my students up to see that really, finance can be great if it's supporting the CEO and the management team at making good decisions.

0:12:47.8 JS: That's a great point, Andrew. And of course that's said often in the Lean world. When they separate out, muda, which they call waste, they have... Well, they have necessary waste and unnecessary waste. Unnecessary waste is too many steps in a process or whatever, but the necessary waste is things like finance, and it's not just finance, but it's things like having an HR department. Because HR is not actually making any products for your company. So all these support functions, administration, even executive management would be considered to be not adding value in that framework. So I think what you're saying makes perfect sense.

0:13:38.4 AS: I came across a company when I was a young analyst here in Thailand, and it's a factory. And I was looking at the financials, and I was seeing that the profitability was rising quite fast, and the cash conversion cycle basically went negative, which I've never seen a factory have negative cash conversion cycle. So I called up the company and asked if I could come out as a analyst. I went out to visit the CEO and the management team and went around and I asked him, "how did you get your cash conversion cycle to be so low?" He said, "well, we focused on reducing an inventory in our business." And I said, "how long did it take you?" He said, "it took us about five years." And he said, "but I really gave the responsibility to each team leader and each team to think about how they could reduce the inventory in their area."

0:14:27.4 AS: And that was, first of all, a lesson in focus. If you focus on one thing and it's the right thing, let's say, let's assume that was the right thing at that time, you can get there. But the reason why I'm telling you this story is 'cause he told me another thing that was interesting. He said, "we have a... Each area we have a profit and loss statement for, and we try to get people to think about that." But I said, "how do you handle the overhead of management, the cost of management?" He said, "we list out the exact cost of management and we post it on the wall, and then we calculate it per area so that everybody knows how the management cost is hitting their P&L. And then we challenged them to help push us to drive down that overhead." And I was like, that's pretty transparent, I thought, in a Thai factory.

0:15:18.2 JS: Well, that is interesting and I'd be curious. A lot of companies use standard cost accounting and what often happens is inventory actually... When they reduce inventory, that's an asset right? On the balance sheet, and they take a hit from reducing inventory. So I'd like to know how your client dealt with that, or if they had to deal with it.

0:15:42.1 AS: I am not sure how he did the accounting, but I know that many, many companies in Thailand do not use standard cost accounting, just because it's a pretty advanced thing. And I think that they're pretty simple in some of their operations. Not all, but yeah.

0:16:00.8 JS: Yeah. Okay. Well, no, standard cost accounting is just not a good way if you're interested in maximizing your productivity, because it basically hides the... It hides the true cost of inventory. It postpones them to a later year. So when you sell the product, then you're paying the carrying costs of the inventory, which is crazy. So somebody overproduces, they don't take the hit for that.

0:16:25.3 AS: Right. One last thing from me, and then maybe we'll wrap it up by thinking about the takeaway of what we want the listeners to be able to do from this discussion. But I just, since it's myth number two, the myth of the bottom line, I wanna address another myth that I always talk to about my students, and that is that the goal... This is the myth, "the goal of the management is to maximize profit." And I teach my students that if we wanna look at the financial goal of the management of a company, it is not to maximize profit. And if anybody says that, I always stop them and say that "actually, the goal of the management is to maximize value. And value is a function of profit and risk in the calculations that we use in the world of finance." So you can... A manager, two managers of different companies, but let's say competing companies, they could be, one could be getting a huge amount of future cash flows coming in, but they could be doing it through bribery, let's say.

0:17:28.8 JS: Yeah.

0:17:29.6 AS: And that is raising the risk secretly behind the scenes. And so the ultimate, the value that's being created in that company is going to disappear. Another good example is Amazon. When Amazon listed in the stock market, it went seven years with losses. So was it doing the wrong thing? No, it was creating value even though it had loss. So ultimately, the importance is to create value, maximize value, not maximize bottom line. That's kind of me from the top down finance perspective, but what are your thoughts about that?

0:18:08.6 JS: Well, value is tricky. Because it's determined by the customer. So a bunch of things. I always give the example of ballpoint pens because I scribble a lot on my calls with a ballpoint pen, but supposing I'm making 10,000 of these an hour or something, and I up that by 10%, well, that's fine. And with all my machinery, maybe I'm running it faster and I'm using all the same plant, I figured out a way to do that. But what if the productivity, or sorry, the productivity will show as an increase, but what happens if some of those pens skip? I have a quality problem as a result of picking that up. Well, if the pens are not really acceptable to my buyers anymore, then I haven't gained anything. So it shows...

0:19:01.6 JS: So you can't just do a productivity calculation based on numbers that are turning out. You have to maintain that quality and that's not that easy to do. 'Cause it might be that my quality problem is that, I have to increase by 10%, but it's only skipping one out of 10,000 pens or maybe one out of 5,000, but the customer might not care about that, or they might not... They might rather pay a little bit less and have that slight defect. So it's a tricky business, I think, with value, you have to constantly be getting customer feedback, and knowing what the customer needs, what level of quality they need, and making sure that you consistently deliver that. So value, yeah, absolutely.

0:19:55.8 AS: It's a good time to come back to point number one of Dr. Deming's 14 points, which is, "create constancy of purpose towards improvement of product and service with the aim to become competitive, and to stay in business and to provide jobs." And the idea of focusing on improving product and service is the holy grail. If every day, you are working as an organization, as teams, as groups to improve product and service, it's just amazing, and I think that that's where Toyota has been a great example of just relentlessly pursuing that. But let me ask you, how would you sum up what you want people to take away from the myth of the bottom line number one, and what action do you think that they should take as they go back and look at their business or look at their department?

0:20:52.1 JS: I would say stop. First of all, stop pretending that you know everything based on the financials. Go look at, go study Deming principles or learn about what actually happens and how the value is created. Go onto the front lines where value is created. Whatever your company is, study that and start to learn what some of their problems are, and how that affects value. I think there's this... They've said that... It's often said that it's much harder to unlearn things than it is to learn new things. So I don't think it's an easy... I don't think it would be an easy thing to do. It's very convenient to believe that the finances tell you everything, especially if you're outside the company. If you're an investor or you're Wall Street or whatever, and you're providing guidance on companies, telling them that they don't really understand what's driving the value of that company is not a very welcome message. So I think it's it's not easy.

0:22:05.8 AS: I was just reading a book called, "The Six Month Fix" by Gary Sutton, which is a great book about turning around companies, but he has a chapter talking about Hewlett and Packard, the two gentlemen who started Hewlett Packard, but he talked about how they just... They were constantly walking around out in the production area. They were in the maintenance area, they were on the loading dock. They did it at evenings, they did it on weekends, they did it on day... They were just constantly out there. So part of what I'm hearing from you is step back from the financials and get into the operations, see what's happening in the processes, and helping support people to work towards improving the product and service, so that you get a consistent growth in your business that's driven not by like raising prices, but by getting more efficient in what you're doing. That would be kind of how I would summarize the takeaway.

0:23:02.3 JS: Yeah. I think you have to acknowledge that there are people out there on the front lines that are creating the value in your company. And there's a lot you can do to help them as a leader. You can remove roadblocks. And if the company's been running purely on financial metrics, you can bet there are tons of roadblocks and frustrations that these people are seeing. But you can also... Eventually you can create a kind of a culture where people work together. Because as I think we see with Deming, the productivity is a team sport. You really wanna have team productivity, and people working together, not knocking each other down, as we talked about in the sort of the pyramid structure is what people do. You want them working together and leaders can do a great deal to kind of create that culture and lead by example and all those things.

0:24:03.9 AS: Well, that's inspiring. And I know for all of us, the myth of the bottom line, we can get trapped into it at times, particularly when the bottom line's not that strong and times tend to get focused in on it and maybe at the cost of other things, but this is a good reminder for everyone. I'm gonna wrap it up there.

0:24:24.9 JS: Okay.

0:24:26.3 AS: Jacob, on behalf of everyone at the Deming Institute, I wanna thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. You can find Jacob's book "Productivity Reimagined" at jacobstoller.com. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."

Where did your "quality journey" start? In this first episode of a new series on quality, Bill Bellows shares his "origin story," the evolution of his thinking, and why the Deming philosophy is unique.

TRANSCRIPT

0:00:02.3 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey in the teachings of Dr. W Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 31 years helping people apply Dr. Deming's ideas to become aware of how their thinking is holding them back from their biggest opportunities. This is a new series called Misunderstanding Quality, and the topic for today is Quality Management, what century are we in? Bill, take it away.

0:00:35.7 Bill Bellows: Thank you, Andrew. [chuckle] All right.

0:00:39.5 AS: Exciting. I'm excited to hear what you've got going on in your mind about this Misunderstanding Quality.

0:00:45.6 BB: Well, first let me say that whether you're new to quality or looking for ideas on quality and quality management, quality improvement, quality management, the aim I have in mind for this podcast series is to improve your ability to manage quality through deepening your appreciation of the Deming philosophy and how to apply it. But specifically, a focus on quality, time after time, which is where most people heard about Deming, was through Quality, Productivity and Competitive Position. For example, the title of his first book. And relative to the title, what came to mind is an anecdote shared with me by two mentors that both spent a good deal of time with Dr. Deming. The first, Gipsie Ranney, who was a professor of statistics at University of Tennessee when she met Dr. Deming, went on to become a senior statistical consultant to GM and the first president of the Deming Institute, when Dr. Deming and his family, shortly before he died, formed a nonprofit called The Deming Institute. Gipsie and I used to speak literally every day, driving to work, driving home, we... "What's up, what's up?" And we always... It was so cool. I wish I had the recordings. Anyway, she once shared that she once asked Dr. Deming, "What do they learn in your seminars? What do attendees learn in your seminars?" To which she said Dr. Deming said, "I know what I said, I don't know what they heard."

[laughter]

0:02:26.0 BB: And along those lines, in the same timeframe, Bill Cooper who just turned 90, he and my wife share a birthday. Not the same year. Bill turned 90 last November and he was senior civilian at the US Navy's aircraft overhaul facility in San Diego, known as North Island. So as aircraft carriers are coming into San Diego, which is like the... I think they call it... It's like the headquarters of the Pacific Fleet. So as aircraft carriers are coming back, planes for which the repair work cannot be done on the carriers fly off to North Island. And Bill was in charge of, he said, some 5,000 civilians. And his peer on the military side, Phil Monroe was in charge of all the military people, and they got exposed to Dr. Deming's work in the early '80s, went off, left there, became Deming consultants. Anyway, Bill said he once asked Dr. Demings, says, "What percent of the attendees of your seminars walk away really understanding what you said?" And he said... Bill said Dr. Deming said, "A small percentage."

[laughter]

0:03:44.0 BB: And so what I had in mind in this series is... One is, what makes it hard to understand what Dr. Deming is talking about? And so for the listeners, what I'm hoping we can help you understand, what might be some invisible challenges that you're having in your organizations trying to explain this to others. So maybe you think your understanding is pretty good, but like Dr. Deming, maybe people are having a hard time understanding what you're saying. And I know what it's like to be in a room, presenting to people. And I had that same experience. I had one Rocketdyne executive... Rocketdyne was sold a few times. Every time it got sold, our Deming transformation efforts got set back a few years. So when the latest management team came in six, seven years ago, I met with one of the very top people, was explaining... Trying to explain to him for the first time what we had accomplished with some, I thought, absolutely amazing work by managing variation as a system. And he said something like, "So are people rejecting what you're saying?" And I said, "No, that's not it." He says, "So they're accepting what you're saying?" I said, "Well... " he said, "What's the problem?" I said, "What they accepted is not what I said." [laughter]

0:05:19.5 BB: I said, we're not in disagreement, but what they think they heard is... And that's when I found that I've experienced that. So anyway, so I wanted to get some background. So my first exposure to quality circles, and this is like... So I was living in this parallel universe, a heat transfer engineer working on rocket engines, and Quality comes into the organization. And unbeknownst to me, there's this quality movement going on, inspired by Dr. Deming, and we're on this wave. I had no idea. All I know is all of a sudden, we got Quality Circles, quality teams, every department...

0:06:03.8 AS: What year was that, roughly?

0:06:06.1 BB: 1984.

0:06:08.9 AS: Okay.

0:06:10.5 BB: Yeah. And I remember a book I was... I remember there was a pamphlet... You mentioned that. The company was AVCO, A-V-C-O, the Aviation Corporation, which is nearly as old as the Boeing Company. So it was one of the... So, Boeing gets into airplanes, the Wright Brothers get into airplanes, people are... Investors getting in, and AVCO, A-V-C-O, was formed by someone you likely heard of, Averill Harriman, major Wall Street guy at the time. And so anyway, I remember there being an AVCO book on quality circles. As you mentioned, I remember seeing that. And I remember just going along for the ride. I'm new to corporations, I'm just a subject matter expert in gas turbine heat transfer, and we're going to the... We got these things called quality circles, whatever. And I remember our department formed... Our department was a team, we had goals, and I remember going to these quality meetings, and let's say the goal would be that we read an article about heat transfer or something. I was just kind of fumbling with this thing called quality circles.

0:07:28.6 BB: But I remember, looking over the shoulder of the department secretary with a IBM Selectric typewriter, and this is before PCs, so we're using IBM 3270, dumb terminals. And I remember being over near the secretary, Kathy, and she's typing away the weekly activity reports, Friday morning kind of thing. And on a routine basis, I'd be over there and she'd be typing along. And then on the very last page, under the title, "Quality Circles," she would type in "Quality Circles are progressing as planned." [chuckle] 'Cause then these would be distributed to people in the department. So I'm watching her now create the next original. And it dawns on me, two things. One is, it's the very last topic in the meeting, in the weekly minutes, and two is it's the same damn thing every time, "Quality Circles are on plan." And I remember saying to her, "Why don't we just have that printed into the stationary?" [laughter]

0:08:39.5 BB: This is before I knew... For me, quality was just a seven-letter word. I don't know. So this is my exposure. And I remember thinking one of the quality goals we're thinking of in our department is... I think somebody even really brought this up, is we're gonna answer the phone by the second ring. That's gonna be our quality goal. And then, I remember we're negotiating for cleaning services. The floors were a mess. Tile floors, they were just a mess. And I remember in our department, we were lobbying to get better janitorial services, have the things cleaned more often. And next thing, we're negotiating with the VP of Engineering relative to, "Well, if your quality circles are on track, then I'll think about that." And it was just like... So it's some really ugly memories [chuckle] of this whole quality thing.

0:09:34.3 BB: But then I got into... I mentioned on the very first of our previous podcast, getting involved as a problem solving decision-making facilitator. I was hanging out with the HR training people, they had some... Their director of training, our director of training was a very astute guy and he was... I'm convinced, having met many people in that role, he knew what was going on. He knew a lot of the names in quality, not so... He knew of Deming's name, he knew of De Bono's name, Kepner-Tregoe, but he seemed to know his stuff. He's a fun guy to be with. And so, that's likely where I first heard Deming's name and that first book would've been Quality, Productivity and Competitive Position, which is... It's almost impenetrable, but I can remember at some point looking at that.

0:10:29.7 BB: But anyway, but in the fall of '87, I started being assigned a taskforce as helping... 'cause now I'm a problem-solving facilitator. But I still don't know... I don't know what quality is. All I know is I get invited to help solve problems. And we were looking at a very bad wear problem, these gears wearing each other out, enormous visibility to the Pentagon, because the tank engines we were making, 120 a month, were being shipped to the tank plant. And then, these tanks with these engines were being sent... The majority of them, sent to Europe. And they were the frontline of defense in Western Europe. This is the Cold War, Andrew.

0:11:17.4 AS: Right.

0:11:19.2 BB: And so the problem that came up was that a couple of these tanks had these gears wear through each other within 50 hours. And I've never been on such a high visibility taskforce because the Generals concern was that every one of those tanks was likely to not operate. And that might be the opportunity for the "Russki's" to launch World War III, because, what a great time, the tanks... If they knew these tanks weren't working. So it was a lot of stress, a lot of pressure. And after months of slow progress, the Army said, "Hey, why don't you guys go look at this Taguchi thing. The transmission people from General Motors who make the tank transmission, anytime they have a snafu like this, they use this Taguchi stuff." So I got assigned the action to go look at that. And I remember, this is pre-internet. And somehow, I did a literature search. I remember it was through something called Nerac, N-E-R-A-C. And out comes these pages. And the thing on Taguchi was... So first of all, who is this Taguchi guy?

0:12:29.0 BB: What is this quality stuff? I don't know. I'm a problem solving guy. And then I remember the first article on reference to Taguchi says, "Quality is the minimum of loss imparted to society by a product after a shipment to the customer." And I thought, "What does that mean?" So I don't know what... I mean, minimum of... I'm thinking... And I thought, "This can't be anything." So anyway, went out to General Motors and got exposed to what they were doing, and a few years later, realized it wasn't exactly Taguchi, but it was... There's some nuances there. But anyway, they exposed me to Design of Experiments and what's known as fractional factorial testing. And coupled with shifting how we look at the measurement process, we solved this problem within weeks, a problem that had been going on for months. So then I got excited about... This Taguchi thing's kind of cool. I'm liking this. And it was a lot more exciting than what I was doing. And I thought, "I think I wanna do this." So the following year, I went to the Taguchi conference. So we had the application and I was so excited, Andrew, that I was turned down for funding. The Army would have paid for me to go to this conference, 'cause the Army, by that point, had invited me to work on at least two problems.

0:13:54.4 BB: Once we solved the first one, when problems came up, the Army literally turned to the program management people at Lycoming and said, "Do a Taguchi study, get Bill Bellows involved." So I was walking on water. I thought it was kind of cool. So I wanted to go to this Taguchi conference, and it was turned down. And they said, "It's not your job." So I told my boss when they told me it was gonna be turned down, I said, "I'm going to this conference." I said, "Whether the company pays for it or not, I am going." So I drove 14 hours each way to Detroit. And in the room are all the US experts on Taguchi's ideas at the time. I didn't know who Deming was at the time. I still didn't know what quality was, but I walked outta there thinking, "This is what I wanna do." And then, where I'm getting to is, a few months later, I was gonna go out on medical I had surgery planned.

0:14:53.1 BB: I was gonna be out for about two months. So my wife and I lived in New Haven, maybe 10 miles north of Yale. And I remember going to the... Again, this is pre-Amazon. I mean, talk about dating ourselves. What century are we in? So I remember going with my wife to the Yale bookstore, the Yale co-op bookstore, and every book they had on quality, I bought. And I'm gonna sit home for two months and read all these books. And I remember buying books. I'm pretty sure I got books about Deming, some about Taguchi, some by Phil Crosby about Zero Defects. Six Sigma Quality entry was a year away.

0:15:35.7 BB: And so I sat down... I got out of the hospital, I'm resting at home, sitting on the couch every day and reading, and also calling the Taguchi people that I had met, I think, at the previous conference. I met some big names. So I'm reading the books, calling them up. And again, these are like my personal professors. And I remember saying to a few of them... What blew me away, and I don't... It somehow dawned on me, I was naive. In the world of engineering, we use... Most of my exposure, at least in heat transfer, we use the same terms the same way. We talk about radiation heat transfer, conduction heat transfer, convection heat transfer. So many of the terms are the same terms, so we can have a conversation. So I'm thinking the same thing applies in quality, that we're all like the heat transfer people. It's easy to communicate 'cause we got the same models. We're using the same words the same way. Then I started thinking, I'm no longer... And this is a real shock. I'm no longer thinking we're using the same words the same way, hence my introduction to misunderstanding quality, [laughter] or I would say, the beginning of a journey to better understand the... I think there are incredible opportunities for people in quality organizations, or people that wanna get into quality.

0:17:08.3 BB: I think it's an ideal opportunity to introduce Deming's ideas. And I say that because everybody else is doing their own thing. Engineering's off designing, Manufacturing's off producing, and Quality has an incredible opportunity to bring together Deming's sense of a systems view of quality. Nobody else has that charter. So my hope is in our conversations, we can help people that are trying to do some things, whether it's jumpstart their continuous improvement program or get their quality program out of what it currently is. In fact...

0:17:52.4 AS: By the way, I wanna...

0:17:55.9 BB: Go ahead, go ahead.

0:17:56.0 AS: I wanna ask a question about that, because what you've mentioned is interesting, that the systems aspect... Is that unique? Would you say that's unique to Deming? I mean, if we think about Taguchi and I think about the Taguchi Method, I'm thinking about a really powerful tool for understanding variation. But explain what you mean by that.

0:18:24.0 BB: A couple of things come to mind when you ask that question. One is the predominant explanation of quality. And if we have time, I wanna talk about that. The term quality, "qualitas," comes from Cicero, a Roman in ancient times. But by and large, in manufacturing, in corporate quality, in corporations, the operational definition, what do we mean by quality? This thing is... What are Quality organizations doing? And what I find they're doing is calling balls and strikes. They're looking at a given quality characteristics, whether it's the fuel economy of an engine, of a gas turbine engine, the performance, the thrust level of a rocket engine, the diameter of a hole, and asking, "Does that characteristic of surface roughness diameter, does it meet a set of requirements?"

0:19:30.4 BB: And the requirements are typically set... There's a lower one and an upper one. We don't say the meeting is gonna start at 10 o'clock, because if you understand variation, we can't get exactly 10. We can't get exactly 1.00 inch thickness for the plate, for the hole diameter. So then, we define quality. Typically, this is what people do in organizations. This is what I... I didn't know anything about this until I started... Well, what are quality people doing? They're asking, "Does this thing meet requirements?"

0:20:07.4 BB: And even towards that end, I remember asking a... I had a coworker who's a quality engineer, I've got many friends who are quality engineers, and this one guy came into a class one day that I was doing, and he's just beating his head against the wall over... I said, "What's...what have you been doing lately." He says, "All I'm doing Bill is dispositioning hardware, dispositioning hardware," which translates to trying to find out why something doesn't meet requirements and coming up with a corrective action, or buying it as is. So either changing the requirements or explaining why we can use it as is. But he's just like, "That's all I'm doing lately. I'm just getting overwhelmed with all this." So I said, "Well, what if overnight, by some miracle, you were to come in, and beginning first thing tomorrow morning, everything meets requirements." And that's the goal of quality in most organizations, is that everything meets requirements. So I said, "If everything beginning tomorrow morning, through some overnight miracle, meets requirements, hence forth, how would your life change?" He says, "I wouldn't have a job." [laughter]

0:21:26.9 BB: I said, "What other changes would you begin to see throughout the day, the coming days?" He says, "My boss's job wouldn't exist." I said, "Okay, keep going, keep going." He says, "Well, the whole organization will have no reason to exist." [laughter] And that's not farfetched. And I throw that out, the challenge to our listeners is, seriously, if everything in the organization beginning tomorrow morning met requirements through some... Dr. Deming would say as you know, by what method? Let's say the method exists, what would change? Now, I'm not saying these people necessarily get laid off. Maybe they get moved elsewhere. Maybe we set our sights higher and try to do things we've never done before, 'cause now everything's gonna be a home run. But that's what I find in corporations, I think, a very extremely commonplace 21st century Andrew explanation of quality is, "Does it meet requirements?" And that goes... And this whole idea of setting requirements, setting a lower and an upper, allowing for variation, that goes back to the early 1700s. And I've also read that it might go back even longer in China. We were talking earlier about China.

0:22:58.2 BB: And so if it goes back longer, all the better. And the point being, fast forward to today, that's largely where we are today, in this early 1700s. Does it meet requirements? Yes or no? And what Dr. Deming is talking about is not acceptability. First of all, he would say there's a place for acceptability. There's a place for meeting requirements, maybe based on the circumstances, all that matters is that it meets requirements. So if you're a pitcher and you're throwing a ball and the batter can't hit the ball, and as long as it's somewhere in the strike zone, or if you're kicking the ball into the net in a football match or otherwise known as soccer in the States, maybe the goalkeeper's so bad, all you gotta do is... They'll jump out of the way.

0:23:49.7 BB: Now, on the other hand, there may be a different batter or a different goalkeeper where you've gotta go where they aren't. And that gets into understanding variation and where we are in meeting requirements matters. And what I find is most organizations I've ever interacted with, and this is through Rocketdyne, as owned by Boeing, going to many different divisions of Boeing around the country, doing seminars across England, across New Zealand, university classes and university lectures, hundreds of them. I've never come across... With rare exception have I ever come across anyone who says, "Bill, in our organization, quality is more like what Dr. Deming is talking about." Meaning, "We are doing more than meeting requirements, we are focusing on where the ball is placed in the strike zone, where the ball is placed in the net, and we specialize in that because we have seen great advantage." Most people I present this to don't even know that's a possibility, don't even know it's anything to lobby for.

0:25:12.0 BB: And so to that I'd say, whether you're looking at Operational Excellence, which is kind of a hybrid of Lean and Six Sigma or Six Sigma alone, or Lean alone, everything I've studied in all of those go back to the question of quality being... Quality's defined Phil Crosby-wise, which is striving for zero defects, striving for everything meeting requirements, and then we're done. And when I joined The Deming Institute, part of my excitement was helping the organization differentiate Dr. Deming's ideas over these other quality management ideas and other management ideas as uniquely positioned to differentiate, to understand that there's an opport... There are incredible opportunities for realizing that everything that meets requirements is not the same. And how do we put a value on that? And one is, the better we understand that, the better we can minimize scrap and rework problems if we're paying attention to where we are, if the process is in control, if we can use that concept from variation. And then simultaneously, another...

0:26:35.7 BB: There's two opportunities. One is, I think the better we manage variation, the less likely we're gonna have scrap and rework. Wouldn't that be great? And two is that that buys us time to think about... 'cause now that we're not in that constant firefighting mode, now we can start to think about how to manage variation of the system and to improve how things integrate. And we did both of those at Rocketdyne. But I've yet to find many organizations who say, "Been there, done that. Been there, done that."

0:27:12.1 AS: So, if we think about the takeaways for someone listening or watching this, you've talked about Misunderstanding Quality, you've talked about everything meet requirements, you've talked about, what century are we in? So, what should they take back to their business from this discussion that can give them a foundation of a starting point of this series and what you're saying on this point? What do you want them to take away?

0:27:40.3 BB: First, I would say I wouldn't necessarily go tell anybody about this yet. [laughter] I'd say, "Hmm, this Deming stuff. There's something to this. What I'm hearing from Bill is there's something here that I can't get elsewhere." You can listen to our prior sessions. There's 22 of them. We're gonna be adding new aspects to that...

0:28:07.9 AS: Okay. So, let's talk about that for a second. So, learn on your own first. Maybe it's a personal transformation. Start with that?

0:28:09.9 BB: Yes.

0:28:14.8 AS: Okay.

0:28:16.1 BB: Absolutely... Yes, absolutely...

0:28:18.1 AS: What would be number two that you want them to get away from this?

0:28:22.9 BB: Well, my advice is, you're not crazy that there's things about the Deming philosophy that are unique, that are... I think so much... There's a lot of people excited by what Dr. Deming's offering. I think there's more than meets the eye. I mean...

0:28:46.1 AS: Okay, so let's talk about that for a second. So, there's unique things about Deming, and one of them that you talked about is the systems thinking?

0:28:54.6 BB: Yeah. I mean, imagine... What I liken it to, instead of zero defects being the goal, which is what most organizations are striving for, and their quality systems are about, "We wanna get zero defects over here, over here, over here." We're juggling all these places, trying to get to zero defects all over the place. What if they saw zero defects as not the destination, but the starting point? That, to really understand continual improvement, zero defects is not the goal. Imagine that as the starting point. At least, imagine the ability to go across that apparent finish line and realize... Or the analogy I would use is, go through the door called "zero defects is the end," and realize there's a lot more, there's so much more to do when you start to look at things with a Deming view. And so, instead of thinking, we're striving for zero defects and then we're done, to me, that's the starting point to really begin to appreciate what it means to look at systems.

0:30:07.7 AS: Okay. So we've got, start with your own personal transformation and learn the material, and understand that there's some unique things about the Deming teachings, in particular, systems. And understand that... I kind of visualized while you were talking, a person walking along with no knowledge of many things, but they're inquisitive, and what they find is a wrench. And then they start to find that there's ways to use this wrench in their daily life. And then later, they find that there's other tools like a screwdriver. And all of a sudden, they found this world of tools, and now they have this amazing toolbox. But then all of a sudden, they meet someone that's taking those tools and creating a car, or a this, or a that. And then they realize, maybe the tool has gotta be the starting point, or is a starting point. But what the tools can create and what additional tools can create is so much bigger than just that first wrench that you picked up.

0:31:14.2 BB: It's the appreciation. And I'm glad you brought those points up. Dr. Deming talks about tools and techniques. A control chart is a tool. A run chart is a tool. Design of Experiments are... These are tools. And so that's a tool. A technique is, how do we create a control chart? That's a technique. What I try to do with audiences, whether it's clients or university classes or whatever, is help them differentiate. Tools and techniques are about improving efficiency, doing things well. Doing something faster or cheaper... What's unique to Dr. Deming is not the tools you'll find him talking about, but the concepts he's talking about, and the idea of looking at things as a system. Dr. Deming defines quality, and it can be obtuse for people. I find it fascinating. He says, "Product or service possesses quality if it helps someone and enjoys a sustainable market." So, traditional quality is me throwing the ball to you, Andrew, or passing a football or basketball, whatever it is, and judging the quality of the pass when the ball leaves my hand. And we say, "That was a good pass."

0:32:49.9 BB: What Dr. Deming's talking about is, it's a good pass, just as if it's a good conversation, if you can hear what I say, we can go back and forth. And so, Deming's perspective on quality is not what's good for me, the producer, but it's how well does it fit you that I'm delivering something that matches... That we're synchronous, that... It has to be good for you, not just me checking off and saying, "This is good, this is good, this is good. Boom." That it's not good until you say it's good. That's a different view. It's the same thing as, "Well, I told you." Then you say, "Well, I didn't hear it." I says, "Well, then why don't you have your ears checked?" [laughter] Dr. Deming's talking about, it's not a conversation if you can't hear it. And so, when he's explaining to Bill Cooper and Gipsie that people are having a hard time, he was struggling to improve that 'cause he knew that when you begin to understand that what you're saying is not heard, Deming understood it was his obligation to try harder. And part of the Deming philosophy is understanding that it's not just me throwing it and saying, "There it is." It's listening for the feedback as to, "Did it make sense?" So, quality in that arena is a mutual phenomenon, not unilaterally my thing.

0:34:16.7 AS: Okay.

0:34:17.8 BB: And I would welcome anyone, as we've done in the past, to reach out if there are questions, comments, observation you'd like to share, and we can use that feedback in future sessions.

0:34:30.6 AS: Fantastic. Well, that's an excellent kickoff. And let's end with the idea that quality is a mutual phenomenon. I think that's a good statement. So Bill, on behalf of everyone at The Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And if you want to keep in touch with Bill, just find him on LinkedIn. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming, "People are entitled to joy in work."

In our 6th Interview episode, Plant Manager Dan Vermeesch and Quality Manager Brain Hoff discuss their Deming Journey. Topics include a discussion on variation and getting the Deming Philosophy into the education.

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Deming Institute Podcast Interview

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Micron Manufacturing

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History of Micron Manufacturing

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Dan Vermeesch

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Brian Hoff

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Dr. Deming at Micron

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Variation

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Eliminating Performance Reviews at Micron

[00:11:07]
Struggles of Working with the Deming Philosophy

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Micron Gives Advice on Adopting the Deming Philosophy

[00:23:46]
Shingo Silver Medallion

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Variation a Key to Micron Improvement

[00:31:33]
Deming Needed in Education

Tripp: [00:00:12] In this Deming Institute interview, I speak with Dan Vermeesch and Brian Hoff of Μ Manufacturing in Grand Rapids, Michigan. We discuss the history of Μicron, their improvement journey and how the Dunning philosophy is affecting this journey today.

Tripp: [00:00:35] Hi, I'm Tripp Babbitt, host of the Deming Institute podcast. Our guests today are a couple of gentlemen from Micron Manufacturing, Dan Veermsch and Bryan Hoff. Welcome, gentlemen.

Dan: [00:00:48] Hi, Tripp. Thanks for having us.

Tripp: [00:00:50] Very good. So first of all, micro manufacturing I'm not familiar with it. Won't want to share a little bit about what Micron Manufacturing does and a little bit about both your gentlemans role in Micron churn, Micron manufacturing as it was using machine products company in Grand Rapids, Michigan.

Dan: [00:01:10] It's been in business since 1952, Ed and Jackie Preston founded it back then and until just a few months ago, Jackie Preston still came in every day, five days a week. She just turned ninety one a couple of weeks ago and she hasn't been in in a few months. But she was here every day until then. And it was great because her son currently is the president at Micron. And we have a niece and nephew that work here. And the nephew has a 5 year old daughter that comes in on Saturday and plays on a computer. So one of the best parts of the story of Micron is we have four generations in this building every week.

Dan: [00:01:51] And it really is part of the story that's important because there's a lot of family focus here at Micron that that's important to us. So I am the plant manager, have been the plant managers since 97 and also the lean champion that has tried to be the architect of some of the various improvements systems that we have had since the year 2000 is when we really begin implementing our transformational change. So I'll let Brian introduce you.

Tripp: [00:02:26] Okay.

Brian: [00:02:27] I'm Brian Hoff. I'm a quality manager at Micron. This would be my twenty second year with Micron. And as Dan said, it's around 2001. We began to be to transform our journey from kind of an old school business model to trying to adapt what is the best way to make change and improvement. And it's been an amazing journey. And lately we seem to have encountered Mr. Deming once again. And I guess I'm mature enough to understand it better than I did 20 years ago. And I'm using him almost daily to try to influence the decisions I make each day.

Tripp: [00:03:13] Very good. And where are you guys located?

Dan: [00:03:17] Grand Rapids, Michigan. OK. We're on a dead end street in the northwest corner of Grand Rapids, Michigan. So that's that's always part of my favorite part of the story here is we're kind of located on the edge to nothing. And despite all that, our folks here have made so many great changes over the years that we've had thousands of people from, I think, 26 states and eight countries that have come to visit us to see the systems that have been put into place over the years. And we're only a 40 person company. Twenty eight thousand square feet. So we're just a small about on the map that that over the years have made a big ripple in the pond. The precision machining industry. And it is exciting that we've got such a great group of folks that have not only made change, but we've made a lot of improvements over the years. But part of our story that we'll get into and will allow is we're making a lot of change, but we kind of lost sight of whether or not some of that was improvement. So we could see a lot of change around here. But the dials stopped moving after awhile. And so we had to go back to the drawing board. And that drawing board was Dr. Demings work.

Dan: [00:04:35] Okay, very good. Well, let's pick it up from there. So how did you guys come across Dr. Demings work? It sounds like maybe you initially knew Dr. Deming then kind of got away from it. So once you share a little bit about your journey there.

Brian: [00:04:52] So this, Brian, and back when I was a young 20 some year old, I happened to go to a statistics course, and during that course the instructor had mentioned Juran and Deming. So I began with Juran and in Juran Zone books, he mentioned Dr. Deming, so once I completed listening to the doctor, Mr. Grant, I read out of the crisis and.

Brian: [00:05:18] I don't know that it made complete sense to me at the time, but it did. The thing that got me was the study of variation. But so I spent five or six years diving kind of deep into statistics and I made some headway that wasn't I wasn't at Micron at that time. I was I was in the plastics industry. So when I joined my Mike Brown back in ninety one and.

Brian: [00:05:46] We were able to use some of the statistical tools so that in a way I was holding on to some old blood. Dr. Deming talked about variation. But I wasn't I wasn't truly knowledgeable about profound knowledge and the way to think of all of that. And then I admit to somehow I lost track of Dr. Deming for a decade or more. And then later, when Μicron started doing its deep transformation, Dr. Deming started coming to my mind more often. So I re-read the books again. And since then, it seems as though. There was a trajectory of adopting a little more of Dr. Deming, and then recently we seem to have found a new gear in regards to appreciating what he said.

Dan: [00:06:41] So a number of years ago, maybe the early 2000s. Brian and I have had a lot of conversations over our years of transformation. We always called it our lean journey. And that's that's how we knew it. But he would bring up regularly his views on variation. And then I asked, would you come up with all this? And we mentioned Dr. Deming and I need to learn more about this.

Dan: [00:07:07] Never, never really put forth the effort to do so. Until I was at a conference in Columbus, Ohio, I think about eight or nine years ago, and the speaker talked about the 14 points. It seems like I've heard of those in the past. Any you talk further about the doing performance evaluations and the disrespect that came from it. It just so happened to be the high end and pushing performance reviews here created a very in depth system. We're doing them quarterly. We're doing all this stuff and I hated every minute of it. And I couldn't put my finger on what was it that I felt that was wrong with it until I heard the speaker say just how disrespectful Dr. Deming felt that they were and why that day.

Dan: [00:07:58] I decided before I left that meeting, we were never doing another one. And I came back and I told our management team it's called team strategy. I apologize for pushing it so hard for so many years and shoved it down everybody's throat. And today we stop. I. I wish I would have gotten a picture of the room on that day, because I think the shock phase, after pushing it so hard that doing a complete 180, but it truly was like like seeing the sun come up because it put words to the feeling that was growing in me, that this is just wrong because half the people were walking out of the room feeling they were below average. Right. Who do you want to feel that way? And that was the day that I thought, I need to learn more about this guy.

Tripp: [00:08:46] Very interesting. So. So, yeah, go ahead.

Dan: [00:08:50] Oh, I'm sorry. So I was a few years after that that I don't and I can't recall right now how I caught wind of the Deming research conference in Fordham University in New York. And we've done a lot of presentations, like I mentioned earlier, sharing our lead story. And so I thought I'll submit and see us there is interested in her interest in hearing our story at the research conference. And then I was honored to be selected to do that. And.

Dan: [00:09:23] It was then that I met Dr. Demings, daughter and grandson, great grandson, and and heard everybody else that was speaking there, it truly became inspired by what I heard. And and Brian joined me on that trip and I brought my 15 year old daughter at the time and I thought because the story was about this whole story of Μicron. And I just wanted. I thought she needs to hear what grandpa and grandma created because I didn't mention earlier, I'm the son in law of the founders, but so I brought her with me.

Dan: [00:09:58] And it turns out she was the youngest attendee at a DME conference, I think, in the history of the den. And so Kevin and his wife is her name's Judy, I think, right? Yep. Yep. So they embraced her so much. I was really touched by that. So when the conference came to Michigan State University, where my daughter attends now at the conference, we walked in and she was just going to visit and say hi and whatever. And they made her so welcome. And got her a badge and invited her to attend a conference and everything. And it was really touching that they had a remembered her and they have really embraced a young person. And she's brought it up so many times. And and it's just that to me, that whole story just adds flavor to what I believe is the Deming community that I'm beginning to learn more about. So it's not just about the things he taught, but it's I'm beginning to see that the people that truly understand them are beginning to it. It's a group that we need to hang out with more. Right.

Tripp: [00:11:06] Very good..

Tripp: [00:11:07] So so let me ask you guys, when you started in to the Deming philosophy or as you've worked with with it, what things have you either personally struggle with or maybe even the organization has struggled with?

Dan: [00:11:23] So for me, I mentioned it again today in our strategy meeting to Brian and others that my 2019 transformation that came earlier this year when Dennis Sergent was the instructor of our Deming CQ Academy is what he calls it. And there was so much reference to improve it. So I love the statement. All premier requires change. Not all change results in improvement. So that was great to hear her have heard that before. But. I am a numbers guy. True and true on the facts and figures and dates and deadlines, you gotta go. You know, maybe that's part of being a plant manager. I don't know, but I begin to understand that.

Dan: [00:12:18] And then we've done a great job recently with our team strategy meetings. We are going to take a step in the right direction every day. And we we don't hold our feet to the fire like we used to about by this date. This thing has, you know, those kinds of things that the made up numbers of.

Dan: [00:12:35] You got to hit this goal by this day. We still have some of that. But there's far less focus on that than there was coming into 2019. And I struggle with it every day, every day that I bite my tongue and say, don't kick a no, don't create a no, don't push a number. Push the improvement and true change towards what we are looking to accomplish.

Dan: [00:13:01] And it's it's liberating, to say the very least. And again, it's humbling. It's almost like that day came back and say and said, when I do another performance evaluations offered me by longshot that because it's such a one idea who I am.

Tripp: [00:13:18] Interesting. Brian. Brian, how about you?

Brian: [00:13:22] Well, first, I want to attest to watching Dan's struggle with Martin.

Tripp: [00:13:28] Okay, so you've witnessed it. Okay, I got it. I think me.

Brian: [00:13:36] Oh, recently I encountered a. A customer had a problem, and normally if if we have material here that we asked to re-inspect, we learn how to do it. And we show another person how. And we call that a training system.

Brian: [00:13:53] And for some reason, and this particular incident, I decided instead of training the way I always have, I'm going to do it different. Because Mr. Deming said you should look harder at your training systems. There are likely problems there. And so I decided what would be a better way. And when I was done, it literally opened my mind to the amount of variation in a training system.

Brian: [00:14:22] Either doesn't pay attention to or creates all by itself, and so that would be a thing that recently happened to me in regards to understanding better, something that Mr. Deming talked about.

Tripp: [00:14:39] Very good. So here's a question for both of you. And it does matter what order that you respond. But if you were if you're a manufacturer, it's, say, listening to this podcast episode and you were thinking about this. What are some of the maybe, I don't know, pointers that you might give them about going to this philosophy, Will? What are the steps that you think they might go through or what advice might you have?

Dan: [00:15:10] That's a very good question. I think that as in most things, learning has to take place. And for me and for Brian, that fact he's got out of the crisis in his hands now, I've got some sticky notes in it.

Dan: [00:15:25] I get it. I always give Ryan a little ribbing because I call his Brian Dowling Bible here because he carries with him everywhere. I don't think I'd recognize him if he came to work about the thing in his hands. I think you have to start there. And I didn't start there. I just read the New Economics. In fact, I just got done with it in recent ago. First book I ever read.

Dan: [00:15:52] And then I have a long time ago, before I went to the Research Council that I read online, I learned more. I loved the history. I loved the fact that he grew up in a farming area and studied. How should it be? Because I grew up on of farm in Michigan here. So that really all resonated with me. And as I began to learn his story and his half life begins to patch together a lot of thoughts about how this may have all developed for him. And I want the history part of it. That's great. So I would suggest people be read about him and listen to these podcasts for sure.

Dan: [00:16:33] Look online if the educational beginning. But it was instrumental earlier this year. After all this time, haven't taken the Dennis Surgeons CGI Academy that really gave us this. It's what we did, guys. And I have to believe these types of sessions are all over the United States for people to be able to learn more and participate in groups. Exactly. And implement exactly what he's what he's trying to implement. And so through that, one of the things that's occurred to me this year is I began to have a greater recognition and appreciation for. Let's go back to our founders, Ed and Jackie Preston. You know, back in 1952, they they started this business.

Dan: [00:17:18] And so when I came on board in '96. There was a a few things that stood out to me. A phone never rang more than three times because it was disrespectful to the customer to make them have to listen to the ring on the phone more than three times. It was just a thing. Everybody here still knows by the time that there is a fourth ring, everybody in the plant is running for a form because it shouldn't ring more than three times. That system still by Mr President from the beginning.

Dan: [00:17:46] The other thing is when we have meetings here and we have a lot of meals at this company, the first an Ed or Jackie Ed's passed away now. And anytime we had a meal, they always eat last. They always insisted everybody else. You go first. We go laugh. Simon Sinek wrote a book. Leaders eat last. And when I read that, I saw Jackie. But I still believe it's all part of what Deming. His respect that he had for people. And and I saw so much of that and have seen so much in adding Jackie over the years that respect for people to make sure that the people in this company are taken care of first.

Dan: [00:18:30] And how so? So I would read, learn and then recognize and appreciate what already exists around you. And then I would start, I think, trying to implement the things that you were there.

Tripp: [00:18:43] Brian -do you have something to add.

Brian: [00:18:46] Not really know that.

Tripp: [00:18:50] No, that's fine. So let me ask you. Just kind of a broader question. I guess it looked like you guys sell globally, correct?

Dan: [00:19:00] Mostly in the United States. OK. If something goes outside of the United States and through our customers, not not directly from us to a customer outside the United States.

Tripp: [00:19:12] Ok. So has the environment changed much? I mean, there's a lot going on economically for your company. Is it gotten a lot better or is it kind of been stable all along or what's it like out there as far as manufacturing goes?

Dan: [00:19:28] So this year there's been a softening in general across pretty much all of the industries that we serve.

Dan: [00:19:37] And we we serve a number of them. Most of our business is relatively local. About 70 to 73 percent is in Michigan and the rest is either in southern Indiana or Texas. Shooting down that quarter in general have softened. And I just saw the numbers today that manufacturing in the third quarter actually went up a touch, which surprised me because we haven't seen it and I haven't heard that from our suppliers, to be quite honest with you. But one of the things that we've tried to do over the years, as we called our lean journey or on our shifting gears and to we actually trademarked a year or two ago the term system, Micron, because the reason people come here, the reason three thousand people visited are to see our systems. We had fire departments, health care, the company that created the resistor. And A we've had people from all over the world come to see how we schedule production.

Dan: [00:20:39] We have no mid-level management, how we have total flex time. People can decide which days they work, what hours they work. The whole nine yards. And and so people have come from all over to see how well how can we manage a company to where there are no bosses. There's a movie that tells people what to do. Brian, are the managers of quality in manufacturing and there's there's an engineering manager. We're responsible for the systems and making sure the people, the resources are there, of course. But it's it's really there's so much autonomy that people have. And and this year, really, over the last three or four years that we've been using the Toyota car, it really began to teach us a better understanding of the kind of calls PDCA.

Dan: [00:21:31] And that PDSA. So we use that language mostly because of that. But because of that, we began to emphasize every conversation. What did we learn? What did we learn? I think if I were to look back in the three last three years, the number one question that we ask yourself is what did we learn? Fill in the blank on whatever the heck it is that we're talking about. So I would I would dare say that the Deming philosophy is all about what have you learned? And we've embraced that.

Tripp: [00:22:04] And you guys have mentioned the lean journey that you kind of started on before you kind of got into Deming. What do you see as kind of the differences between them or or how did they maybe synergistically and engage with each other as you work through this or or what's happened with this this lean journey still continuing that as the Deming philosophy, enhance it. What's your view?

Dan: [00:22:34] So. I think that. Like most things in life, it's the perspective you choose. And I think that you can and perhaps many companies have chosen the perspective of Lean as the elimination of waste. And of course, that's an element of it.

Dan: [00:23:00] But I believe and we've used that language here a lot, but I believe truly that what we've tried to do with our lean journey is to best use our resources. So Dr. Deming talks about optimization of processes, right? We haven't used that language exactly a lot, but that's what our journey has been about. How do we optimize what we do? How do we create standards, stick to improve the standard and make things the lives of our people better?

Dan: [00:23:28] And that from day one, when we are first meeting about why are we going to take this lean journey? Way back in August of 2000, our management team said it is for one reason and that it is to make the lives of our people better and.

Dan: [00:23:46] From that day on, I felt as long as we have that focus. We're on the right path. And and so as we went through our lean journey, we were. Awarded the Shingo Silver Medallion for operational excellence back in 2008 93. And it's referred to as the Nobel Prize of Business or Manufacturing by Business Week. And that was nice to get. It was kind of a confirmation that we're on a good path, but the best thing about us told us all things we could do better. And so we tried to embrace them. And so on. As we learned more about the teachings of Dr. Deming, here's a thing that we weren't using properly our entire lean during that we're only now starting to learn and use much better.

Dan: [00:24:39] And that is the understanding of variation that Brian mentioned earlier or in control charts and we hadn't used. I don't know if we used a control Chart. Fifteen years probably that are 20 0 0 0. And now we really are. We're embracing the heck out of that. And we're beginning to understand where we have to measure data and where you continue on.

Dan: [00:25:02] Probably the greatest weakness, though, for us, the difference between how we treated women and what we're learning from Dr. Deming, though, is we are making a lot of change and we're necessarily tracking whether or not that change was an improvement towards the saying we needed improvement on. Right. Yeah. In that corner of the planet might look better now, but is it truly improving anything that's going to help the customer? And we lost sight of that for a while, I believe. And I think we're getting on back, Brian, to everything else then was pretty good a.

Brian: [00:25:37] The appreciation of a system as as we did the room. I think we learned more about systems because you have to diagram them out and understand the interactions between them. And so that kind of opened our eyes and just happened to fit in with a kind of reconfirms that Dr. Deming needs says. You should understand your system as good as you can. I think it also psychology. You know, in the beginning there are resistors because change is scary. And I'm sure some people wonder if you truly mean it. Or is that just the passing thing this month? And so you understand as you push that journey through and you get the buy in from people that that were once resistors. OK, that's cool. You get to watch and growth in your own people. You learn how to achieve that growth faster. Either by learning from your mistakes or the occasional times we we somehow did it right. So I thought all of that. There is a consistency between Lean and Dr. Deming. I think I can see that.

Tripp: [00:26:50] Okay. And Brian, you have to ask, because you mentioned that you kind of got into variation, you know, years ago or maybe even a couple of decades ago. And we're using it, you know, in what's different today, what it what it sounds like. You started into it kind of got away from it and then went back to it. What would take me a little bit on that journey?

Brian: [00:27:13] Long ago when I was when I first was introduced to it, we were trying to everything classic's and we wanted to learn how to build Dai's better. So is there a way to design a dye with more success by the time you're done, by the time you're finished? And I couldn't believe how much statistics help you in design. So that was kind of low hanging fruit and. So it's fun to play with.

Brian: [00:27:43] But we didn't necessarily use it in day to day production at that facility I worked with.

Tripp: [00:27:49] OK,.

Brian: [00:27:50] So then I. I moved on to Micron and that was my first attempt. OK. We don't use it to design our process, but we do use it to monitor our process. And back then, it was sort of driven by customers. They were requiring statistical data. And that's fine. But what's more, fighing are more fun to actually learn that you can predict your process. But I find that fascinating every day.

Brian: [00:28:19] So we're into that pretty deep for about four or five years. And for some reason, the customers decided to let those requirements go. And somehow that that seemed to be it took the wind out of the sails of that process.

Brian: [00:28:37] And so for some time, we didn't use statistics for quite some time. And then I would say in the last five or six years. We are doing more and more statistical studies and realizing once again the benefits of doing so. And now we're actually applying it to management processes rather than just parts or machines. And we're finding that. That is even more fascinating than than going out new in capability studies out next to a fancy.

Dan: [00:29:10] I think though, one of the stark differences between then and now is we did it because the customer demanded it and the sooner they stop demanding it, we stop doing it tells you how mature where I am right now.

Dan: [00:29:27] Now we go this beginning. We realize, as Brian said, it's helping us understand our management systems in ways we never would have dreamt before. And we're doing it because it's the right thing to do and you're learning from it. And we're the kind of company that there's no doubt in my mind that sometime very nearly down the road, we're going to be pushing this to our customers to try to do the same thing as we did that with our lean systems. When when we first started Dileep Journey by time 2003 rolled around, we had made a lot of changes and we realized that one of our customers had any idea what lean was. And we we began to bump up into. We can only improve our systems so well if we can't tie it to where our customers are demanding or needing from us. So we went on this magical mystery tour out to our customers for three years to try to see how can we link what we're doing to what you might need. And pretty soon, all of our customers want to delinked their systems to ours. And we went from like 16 percent of what we built was on some kind of pulse system to 68 percent within those three years. And it was an amazing thing because when they began to recognize what it could do for them and it helped us help them, it was great. So we were still and we began then to take what we've learned and what we knew and share it with the customer. So here's just another thing that as we learn more, I can see that we're going to share it with the customers because it will help them help us.

Tripp: [00:31:07] Very cool. So my last question for you guys is, is my typical one, which is. Is there anything that we've talked about or that you've responded to that you'd like to make a clarification of? Or is there any question I didn't ask that you wish I would have?

Dan: [00:31:28] That's really that's a great question.

Dan: [00:31:33] I know that they're the Deming Institute is reaching out to educational organizations across the country. I'm not aware of any of that in Michigan. There are individuals, like I mentioned Dennis a few times now that is trying to help industry. But it's important that we believe that the school systems are help. Few years ago, Mike Rather, the author of The Toyota Kata, was gracious enough to stop that. Mike Brown wandered through the plant. And then I was so bold as to invite him to teach the school that my kids went to grade school or how to do the participate in the Kata, which of course, as I mentioned, includes the whole PDCA cycle of improvements. And he did so and I thought it was a fantastic session. And it began the thinking, how can we get more AUTHERS? How can we get more people helping teach the schools that teach students how to be more critical thinkers? So I think that that would be something of. All certain interests of manufacturers all over the country. Here, as we try to help, you know, he knows the skills gap all the time, right?

Dan: [00:32:53] Mostly is a critical thinking gap in our opinion. We can teach the skill. So anything like that. We would love to see and hear more about it as time goes by.

Tripp: [00:33:03] Very cool, Brian. Thoughts? Last thoughts.

Brian: [00:33:07] Yeah, I don't remember who you were talking to and one of your podcasts, but your guest. You ask the question of them and I'm going to paraphrase. Do you think the Deming Philosophy is growing or shrinking or remaining the same. And he said he did not believe it to be growing.

Brian: [00:33:29] My guess, I was disappointed. Whoever your guest was, it seemed like a person that would probably know that answer better than I did. And that made me sad to think. And so I am curious, as Dan just said, you know, not only getting to the local school systems, but also the business schools. What is what is coming out of the business schools now? The people that we're going to hire soon?

Brian: [00:33:56] And then how do we get even further ahead, as Dan said? And get this all the way down to how do you teach young people to think in a better way? And.

Dan: [00:34:08] It's important for us. So earlier this year, Ryan and I both referred to CQI Academy that we had taken to learn more about Dr. Demings work, and I had coordinated through an organization called Discover Manufacturing here in West Michigan.

Dan: [00:34:26] They coordinated and I see it an industry led collaborative where four of our companies, 19 different people or 20, went to this class and one was in carbon composites, another one furniture, and there another machining company like ours.

Dan: [00:34:45] And it didn't matter that we were basically different industries and different walks of life. It was somebody from shipping to, you know, my position, brines as managers and everything in between. And it was a fantastic way to learn these collaboratives of different companies. So we're intending to do it again this next spring. I'm signed up as the co-lead for Discovery Manufacturing and make sure you do. And that's that's our contribution to try to make sure that we're spreading the teachings of Dr. Demings in West Michigan here, because regardless, I'm not sure what else we can do other than it here. We have tours every two or three weeks and people who come see it and we're trying to help this. I'll see more companies learn about it. So I hope that your listeners and companies that are getting involved open the doors and bring people in and show what they're learning. It doesn't matter how minor it is. Teach what you're learning and then try to get other companies together to do the same.

Tripp: [00:35:53] And that's sage advice. We appreciate it. Well, Dan and Bryan, we certainly appreciate you being part of the Deming Institute podcast.

Dan: [00:36:04] Well, thank you, Tripp. Greatly appreciate it.

Tripp: [00:36:08] Thank you for listening to the Deming Institute podcast. Stay updated on the latest blogs, podcasts, programs and other activities at Deming dot org.

In our 5th interview podcast of 2019, Alan Winlow, MBE, former Managing Director of Yorkshire Brick Company, Continuous Improvement Director at Marshalls PLC, and 2019 ASQ Deming Medal Recipient, offers insights on his efforts to lead a Deming transformation.

(This is Tripp's first interview with Alan)

Highlights include:

• Opening quote from Myron Tribus, “If you continue to do what you’ve always done, you will continue to get what you’ve always got”
• In the late 1980s, while serving as Managing Director of the Yorkshire Brick Company (YBC), employment in the UK brick industry plunged from 14K to 8K employees and plants were closing
• Question at hand, "How to survive in a labor-intensive business?"
• How had the Japanese captured critical UK business segments?
• Started to read about Dr. Deming and attend British Deming Association conferences
• Discovered sources of variation and PDSA, plus the importance of data
• Found the majority of variation came from manufacturing equipment and raw materials for the bricks
• Discovered how to change the brick manufacturing process to improve brick uniformity
• Began to meet regularly with YBC's production team to continue to improve brick uniformity, savings in water use, energy use, and discarded bricks
• Discovered mental models, including the Taguchi Loss Function
• Explored how to remove barriers within workforce, everyone came on staff
• Began to understand what his job was, including reading books and seeking new learning
• Alan led consulting visits to China in 1987 to assist in developing the Land Fill Gas business.  The Chinese were extremely interested in the landfill gas abstraction at YBC and sent no less than 8 delegations to visit the Yorkshire site. Alan was invited to visit by the Mayor of the city of Anshan.
• Teaming with local schools and universities, a local jail, and a county council to share lessons learned within YBC, including environmental projects
• Yorkshire Brick was honored in 1991 for contributions to environmental causes
• In 2000, Alan was honored by Queen Elizabeth as a Member of the British Empire for his leadership within YBC
• Never met Dr. Deming at BDA events; met Myron Tribus on many occasions
• Comments on challenges in implementing the Deming Philosophy
• Continued relevance of the Deming Philosophy today  

In our 4th interview podcast of 2019, Donald Berwick, co-founder and former President and CEO of IHI, the Institute for Healthcare Improvement, shares his Deming Journey.  Dr. Berwick, who presented at The Deming Institute's 2018 Conference, is one of the nation's leading authorities on healthcare quality and improvement. 

(This is Tripp's first interview with Dr. Berwick)

Highlights include:

• His training as a pediatrician
• His efforts to apply quality management, before his introduction to the Deming Philosophy
• Co-Founded IHI in 1989 as a non-profit organization
• Appointed by President Obama, in July 2010, to the position of Administrator of the Centers for Medicare and Medicaid Services (CMS), which he held until December, 2011
• Ran for governor of Massachusetts in 2014
• 4 children and 7 grandchildren
• Attended a Four-day Seminar with Dr. Deming in 1986, leaving early and then returning
• Prior to meeting Dr. Deming, serving as "VP of Inspection"
• In the world of inspection, everything stayed the same
• Waiting times of 2 minutes for x-rays were reported to him (with falsification) by the radiology department 
• "Do something about it"
• Question: What is the pushback that you see today in healthcare?
• The Red Bead Experiment was "electrifying," including triggering a vicious cycle of blame by management and withdrawal by willing workers.
• The workforce (willing workers) wants to do well
• The influence of Dr. Deming, and others, on IHI
• Prescriptions for fixing healthcare - "It takes leadership"
• General tone of healthcare today; "measure enough, yell enough, things get better"
• Continued focus today (backsliding) on measurement for inspection
• Question: What are physicians learning today about management? Answer: "Heroism as the route to excellence"

In our 3rd interview podcast of 2019, Wendi Middleton, Director of Continual Quality Improvement, from the Aging Adult Services Agency within the State of Michigan’s Department of Health and Human Services, and Dennis Sergent, President, Sergent Results Group, share reflections on the "Challenges and Opportunities in Applying the Deming Philosophy in Government."

(This is Tripp's first interview with Wendi and Dennis)

Highlights include:

• A 5-year history of applying the Deming Philosophy within the State of Michigan's Department of Health and Human Services (HHS)
• The development of Aging and Disability Resource Centers
• Learning "Who are our partners?"
• Where to start? / Who does what to whom?
• Family services and a cat
• First exposure to the Deming Red Bead Experiment
• Getting to know each other better within Michigan's HHS
• Creation of the BOLD ("Building Options for Long Term Decision-Making") Council
• Acronyms as an art-form
• Detailing the processes - Where to start and where to integrate?
• Exposure to control charts within the Bell Telephone System
• Education and steps to move forward
• Creation of the BOLD ("Be OLD") Councils
• Acronyms as an art-form
• Grant funding provided consulting help
• Process steps, including road blocks and issues
• Subject Matter Experts (SME) and Design Teams
• A focus on quality improvement, not change
• Policy changes, with improvements
• Living at home, using improvements in non-emergency transportation services
• Weekly Stand-and-Deliver meetings to review ongoing PDSA efforts
• Continual Improvement efforts are not always “linear,” with forward improvement (sometimes they go backwards)
• State government is a culture all by itself
• People sometimes become their job (position)
• Getting people on board with improvement; not always happy fits, some move on to other positions
• Managing “Level-of-Care Determinations”
• When facing system obstacles, take inspiration from Eleanor Roosevelt, Don’t take a “No” (answer) from someone without the authority to say “Yes”
• Setting new standards for working with state vendors
• New skills by Design Team members
• “Everything is designed around getting money from the federal government”
• Design Team roles are about improving access to state services, not finding sources of funding
• Effectiveness (doing the right thing), before efficiency (faster, better, cheaper)
• Cost savings have been measured, yet the bigger impact is serving more people for a given budget allocation
• Reducing the waiting list for services
• Instead of asking for more money, ask if the existing process can be improved to provide better service
• Discovering a mindset that if some don’t have a problem with a given process, others won't as well (meaning, the process is deemed to be OK as is, while it may well need improvement) 
• Impact on Design Teams after attending The Deming Institute’s “Me vs We workshop” 
• Getting over self-interest issues
• T-Shirt idea, “The Status Quo is Not an Option”
• Avoiding doing better what needs not be done
• Design Teams need ongoing support, including starting with on-boarding and ground rules
• Emergence of self-respect and respect for others

In our 2nd interview podcast of 2019, Steven Haedrich, President of New York Label & Box Works (NYLBW), shared reflections on his continued admiration and application of the Deming Philosophy.

(This is Tripp's second interview with Steven.  Link here for the first interview.)

Highlights include:

• Update on NYLBW
• Immersed in the Deming Philosophy every day
• Everything is moving much faster; quality has been a selling/differentiator
• Also, a focus on innovation
• Deming Chain Reaction, less rework/fewer mistakes/creating good paying jobs; the ONLY way to survive!
• Continual improvement on a daily basis
• Impact of a Total Cost focus?  NO!   Lowest price still gets the bid
• Interaction with your peers in sharing the Deming Philosophy; sharing it every day with both private and public companies – explaining the old ways of sale commissions, performance appraisals, etc.
• Other obstacles; clients and vendors adverse to partnering
• Steven’s 2014 podcast – Deming is it!
• Wonderful opportunity to join the board of directors of The Deming Institute
• Deming Online – worldwide access to online learning with the potential to reach millions of students of the Deming Philosophy
• How to get the word out on the Deming Philosophy
• Steven’s speaking engagements – Graduate School USA, Conestoga College, upcoming printing conference
• People are beginning to realize the limits of the prevailing system of management
• People are beginning to see the prospects of a changing world and the need to be more effective with management systems
• Where to start – The New Economics, 3rd edition, with Chapter 11 by Kelly Allen
• The world is finally realizing that the old ways that we have accepted as the standards of thinking are no longer going to prepare us for the complexities, for the challenges, for the true globalization of the world.  
• The Deming Philosophy captures the essence of collaboration and cooperation and teamwork and systems thinking and continual improvement; including joy in work!
• The Deming Philosophy allows for a different end of the day experience; allowing us to make the world a better place!

In our January 2019 interview podcast, his 8th session with Tripp, Superintendent David Langford reflects on the state of education, the system, and how its set up, including various ways in how schools are working to move from “theory to practice” in their understanding and application of the Deming philosophy.

Highlights include:

• The short term thinking which Dr. Deming warned us of, whether looking at profit or test scores
• Longer term strategies are sacrificed for short term results
• People get creative when driven to “show the numbers”
• Myths about charter schools being able to select their students
• Lack of a level playing field
• The strength and will power required to absorb the impact of a special cause being treated as a  common cause
• Rare to find Profound Knowledge
• Fear manifests itself in many ways
• Dr. Deming encouraged David to consult for education systems
• The right to joy in work and joy in learning
• Blaming the individuals vs. the system in which they operate
• How to change the system to all for joy in learning
• The role of rewards in narrowing one’s focus
• The fears and motivations of a school board
• Possible agendas of school board members
• An onboarding process for board members
• There are pockets of excellence in education systems

For more information about David's current work with Ingenium Schools, please visit ingeniumfoundation.org

In our second interview podcast of November 2018, Doug Hall provides an overview of his latest book, “Driving Eureka!: Problem-Solving with Data-Driven Methods & the Innovation Engineering System”

(This is Tripp's third interview with Doug.  Link here for the first interview and here for the second.)

Highlights include:

• Inventing “big ideas” for clients, as they entered the “Killing Zone”
• Applied innovation, using the Deming Philosophy
• How to “Find, Filter, and Fast-Track” big ideas
• Happy clients, paying big money, but the ideas did not happen
• Half the potential value of the big ideas is lost in internal development efforts
• The independent parts of organizations work to promote their own silo
• The average new product idea has a 95% failure rate in the market place
• What’s wrong with project management?
• Innovation projects have uncertainty
• Problem solving with data-driven methods
• Big ideas are easy – making them real is hard
• A major obstacle is a reliance on opinions vs data
• Shifting innovation from an art to a science
• What to take away from this book?
• All products follow a life cycle, from birth to death
• Innovation for extending product life
• How to create an innovation culture
• Innovate or die
• Obstacles to innovation – Lack of Leadership and Lack of a Process
• Brain Brew Whiskeys for mass customization
• Don't feel you need to do "all" of the Deming Philosophy
• Just get started!
• How to receive a special gift from Doug - go to gift