"America's Most Admired Companies"

Jerry Useem

Fortune

March 7, 2005, pp. 67-70

Each year, Fortune magazine gives its rankings of America's most admired companies, based on ratings made by 10,000 U.S. and 5,000 worldwide executives, directors, and securities analysts. This year's Top Ten in America were:

1. Dell Computer
2. General Electric
3. Starbucks
4. Wal-Mart Stores
5. Southwest Airlines
6. FedEx
7. Berkshire Hathaway
8. Microsoft
9. Johnson & Johnson
10. Procter & Gamble

Though there are some differences in the order of the top ten from last year, the only "newcomer" to the list is Procter & Gamble, which took over the tenth spot from IBM.

Ratings were also made for companies in the respondents' own industries on social responsibility, innovation, long-term investment value, use of corporate assets, people management, financial soundness, quality of products/services, and quality of management. The high scorers on these criteria were:

• Social responsibility—United Parcel Service, CHS, Kinder Morgan Energy Partners
• Innovation—Kinder Morgan Energy Partners, FedEx, Apple Computer
• Long-term investment value—Berkshire Hathaway, Kinder Morgan Energy Partners, CHS
• Use of corporate assets—Kinder Morgan Energy Partners, Berkshire Hathaway, Wal-Mart Stores
• People management—Kinder Morgan Energy Partners, General Electric, American Express
• Financial soundness—Kinder Morgan Energy Partners, Intel, Exxon Mobil
• Quality of products/services—Kinder Morgan Energy Partners, FedEx, American Express
• Quality of management—Kinder Morgan Energy Partners, Altria Group, Berkshire Hathaway

The top ten admired companies around the world were

1. General Electric
2. Wal-Mart Stores
3. Dell Computer
4. Microsoft
5. Toyota Motor
6. Procter & Gamble
7. Johnson & Johnson
8. FedEx
9. IBM
10. Berkshire Hathaway

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"Lean Consumption"

James Womack and Daniel Jones

Harvard Business Review

March 2005, pp. 58-68

These well-known authors on the subject of lean production turn their attention in this article to applying lean thinking to the processes of consumption: "By minimizing customers' time and effort and delivering exactly what they want when and where they want it, companies can reap huge benefits."

The article focuses on six principles of lean consumption:

• Solve the customer's problem completely by ensuring that all goods and services work, and work together—Rather than providing patches for recurring problems, the focus should be on diagnosing and changing systemic issues at their source.
• Don't waste the customer's time—By focusing on ways to get rid of non-value-added time for the customer, repeat business is much more likely and provider problems will be solved as well.
• Provide exactly what the customer wants—Instead of large orders based on centralized forecasts, the lean provider has a "rapid replenishment" system that quickly orders exactly what the customer has just pulled from the shelf.
• Provide what is wanted exactly where it is wanted—Most customers buy the same things from a variety of formats (supermarket, warehouse store, convenience store, etc.) at different times. The authors provide an example of a European retailer (Tesco) that provides local convenience stores, midsized stores in town centers, supermarkets in the suburbs, hypermarkets on the periphery, and web-based shopping. The same items from the same suppliers are available at very similar prices.
• Provide what is wanted where it's wanted exactly when it is wanted—"Most of us do plan ahead for large, durable purchases and would be willing to share our plans with the producer in return for getting exactly what we want at a future date with a discount."
• Continually aggregate solutions to reduce the customer's time and hassle—Advances in information technology will provide opportunities to connect bundled goods and services in a cost-effective manner.

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"The Optimas Awards 2005"

Workforce Management

March 2005, pp. 41-54

Workforce Management magazine has announced this year's winners of its Optimas Awards for human resource excellence:

• General Excellence Award—Wells Fargo (banking)
• Competitive Advantage Award—Herman Miller, Inc. (furniture)
• Financial Impact Award—Convergys Corp. (management of billing, payroll, benefits, and pensions)
• Global Outlook Award—Sun Microsytems (computer workstations and software)
• Innovation Award—United Parcel Service
• Managing Change Award—Bell Canada Enterprises
• Partnership Award—Saint Francis Medical Center
• Ethical Practice Award—Adolph Coors Co. (brewery)
• Service Award—Los Angeles Unified School District
• Vision Award—Progeon Ltd. (business process outsourcing)

The article includes one-page descriptions of the HR programs at each award winner.

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"Metrics for Innovation: Guidelines for Developing a Customized Suite of Innovation Metrics"

Amy Muller, Liisa Vaikangas, and Paul Merlyn

Strategy & Leadership

January 2005, pp 37-45

Stating that current metrics used for new product development are too limited to accurately track organizational innovation, the authors provide a set of metrics from three views on innovation:

• Resource View—This approach emphasizes balancing optimization (tactical investment in the existing business) and innovation (strategic investment in new businesses). Some metrics for inputs (capital, talent, time) in this approach are:
  • Percentage of capital that is invested in innovation activities
  • Number of entrepreneurs (who have started a business) within the company
  • Percentage of workforce time that is currently dedicated to innovation projects
  Some metrics for outputs (ROI) in this approach are:
  • Number of new products, services, and businesses launched in the past year
  • Percentage of revenue from products or services introduced in the past three years
  • Share of wealth (increase in company market value vs. total industry market value)
• Capability View—This approach emphasizes the extent to which organizational competencies support converting innovation resources to opportunities for business renewal. Some metrics for inputs (preconditions) are:
  • Percentage of employees for whom innovation is a key performance goal
  • Percentage of employees who have received training in innovation
  • Number of innovation tools and methodologies available to employees
  Some metrics for outputs (renewal) in this approach are:
  • Number of new competencies that spawn innovation
  • Number of new strategic options to advance a business
  • Number of new markets entered in the past year
• Leadership View—This approach emphasizes the extent to which a company's leadership supports innovation. Some metrics for this view are:
  • Percentage of executives' time spent on strategic innovation
  • Percentage of managers with training in the tools and concepts of innovation
  • Number of times during the past 5, 10, and 20 years in which senior management has redefined the company's core business

The authors of this article also offer guidelines on selecting metrics for companies that are beginners in innovation measurement.

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"Six Sigma's Seven Deadly Sins"

James Zimmerman and Jamie Weiss

Quality

January 2005, pp. 62-67

Although many organizations have had great success with Six Sigma, others have not. The authors of this article identify seven conditions likely to be present in the situations where Six Sigma had not delivered expected results:

1. Inadequate information—The authors recommend that Six Sigma initiatives should use a consistent set of questions to gather, sort, organize, and analyze information.
2. Selecting the wrong projects—Some common reasons for selecting the "wrong" project include:
   • Picking easy projects instead of ones that are strategically important
   • Avoiding important projects because they appear to be too difficult
   • Attempting to solve a marketing problem with a manufacturing solution
3. Creating solution-caused problems—Always include an analysis of potential problems and how to prevent them from occurring during implementation.
4. Serving the wrong customer—Some projects confuse the voice of the customer with the voice of accounting or some other internal voice that may not be looking primarily towards serving the customer.
5. Leaping to the fix—Project teams should spend sufficient time understanding the root cause of the problem before trying to solve it.
6. Faulty implementation—Clear project scope and deliverables, potential problem analysis at each step, monitoring, and reviews all are crucial for effective implementation.
7. Failing to consider the human side of change—The situation, performer, response, consequences, and feedback must all be aligned. Technically "right" solutions do not work otherwise. The situation refers to the job context and expectations. The performer aspect concerns appropriate skills and knowledge. The response is the clear, desired behavior from the performer. The consequences refers to making sure the results of performance are positive for the performer. Feedback is needed so the performer knows if they are on target or need to make adjustments in their performance.

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Further Lean Lessons

John McNeil, GP Deltapoint
 

Womack and Jones have produced another seminal article on Lean Supply. In this case, the title may be a little confusing; it will not teach us how to consume leanly, but rather how to change the process of providing customers what they want, where it's wanted and exactly when it's wanted. To improve, Womack and Jones have applied their important Value Stream Mapping tool to the steps between the beginning of the search for a product and service and its successful or otherwise conclusion. As with internal processes, waste is often rife and the ability of an organization to deliver what, where and when is found to be sorely lacking.

In order to create the capabilities required to remedy these gaps, a typical supplying organization will have to change. Its people must learn new ways of doing things: they must be retrained. The lessons from Toyota are clear here and they contradict many standard practices. At Toyota, training is not the job of training professionals; it is the job of mangers and leaders. Training is pushed out of the conference room and on to the office or factory floor where it is conducted with sketches and dialogue. This in turn requires a remarkably consistent set of knowledge among managers and leaders who must also be able to absorb and teach evolving new methods. Consistency is difficult to achieve when managers turn over rapidly or when organizations are coalescing or laying off layers of knowledge workers. In these cases, a heroic effort at knowledge management is necessary.

Another lesson is that the amount of time spent learning is prodigious. Much of this is on the job (direct OJT typically lasts 6 to 8 weeks at Toyota, with ongoing learning continuing thereafter). Toyota hires motivated, energetic people. For organizations populated by average people, motivation and improvement will require a heroic management effort in personal learning, training, leadership and business process improvement. Of course Toyota believes deeply in standardized work at every level, so these efforts are made easier there by common practices for leaders, managers and associates.

A final lesson from Toyota: implementation of change cannot be delegated to one individual or function: everyone must be accountable for successful change. If not, even heroic efforts will fail and the organization will start to look for excuses and victims, the first of whom will be customers who won't get what they want.

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