Beyond the Lean Office: interview with author Kevin Duggan

In this PEX Network interview, Kevin Duggan, founder of the Institute for Operational Excellence and author of the best-selling book, Creating Mixed Model Value Stream, and the Shingo Award-winning book, Design for Operational Excellence, talks about applying Operational Excellence in an office environment.

PEX Network: Good afternoon and welcome to this interview with Kevin Duggan, who is founder of the Institute for Operational Excellence and author of the best-selling book, Creating Mixed Model Value Stream, and the Shingo Award-winning book, Design for Operational Excellence. Kevin’s latest book is entitled Beyond the Lean Office.

Kevin, could you kindly start by telling us a little bit about the book, please?

Duggan: Yes. The book was really written about the office, 100% the office environment and how to achieve operational excellence in the office environment. And it’s an easy read novel. It’s about people struggling with improving their office performance and how they stumbled across the principles of operational excellence, how they applied those principles and how they set a destination and a road map to achieve operational excellence in their offices alone. So it’s a little bit different.

PEX Network: It sounds interesting and useful. In your own words, can you describe what operational excellence is for you?

Duggan: Oh, sure. Now, the formal or the academic definition that we use at the Institute is when each and every employee can see the flow of value to the customer and fix that flow before it breaks down. That means whether it’s in manufacturing, the flow of a product to the customer; or if it’s in the office, the flow of service to a customer or the flow of information; or if it’s in the supply chain; or even in product development, it’s all about our employees understanding how flow works, not just in a lean value stream manner, but in a - beyond that lean value stream - where those lean value streams self heal when something goes wrong.

It also means that the value streams are autonomous, meaning they just run day in, day out, delivering a service in the office or delivering the product to the customer - key words - without any management intervention. So to sum it up, in operational excellence, we’re talking much more than a lean value stream. We’re talking about autonomous, self-healing value stream flow that does not require management intervention.

Now, without any management intervention, the key is getting our managers to be working on activities that grow the business. So the whole philosophy of operational excellence - where lean was about eliminating waste and only focus on value added and eliminate non value added - operational excellence focus is 100% focused on business growth by leveraging lean principles to achieve business growth. And it really makes that connection from trying to be efficient to how do I get top-line business growth. And that’s what operational excellence really focuses on.

PEX Network: And what brought you to write the book?

Duggan: Well, yes, that’s a little bit of a story because I was working in manufacturing. And, of course, I did Mixed Model Value Streams, which is a bit complex, and I was teaching companies how to do all that. And then I found out that the offices just couldn’t keep up. So we put this nice value stream in the factories, but to get the information to the manufacturing side, it would, it would be longer than the actual lead-time on the, on the production side.

And there was things like engineering, forgot drawings and couldn’t do engineering changes and quoting couldn't do it and scheduling and purchasing and all the things that happen in an office… All the support groups to get information to the construction floor were, kind of choking.

So we went to the offices and we realised that there are value streams in the office. And most of the typical approaches were just trying to do some continuous improvement events, how can we eliminate signatures, buy software, etc. The typical random acts of goodness were happening in the office. And so we took a value stream approach to the office and we were able to say, look, there’s value streams in production, we should tie support groups to these and implement their own value streams to do it.

So it took a little bit of work, but the success of that and the principles that we used to do that worked really well and so I decided to write the book about it and share that with people, that you can truly put value streams in the office and connect them to manufacturing. And then I, of course, discovered that there doesn’t even need to be manufacturing, that these principles will work in any office. So that’s what inspired me.

PEX Network: And what would you say makes the book unique?

Duggan: Well, after a lot of thought before I wrote it, I really wanted to make it unique by not having a manufacturing example. I didn’t want the example I used to have a factory, and they were trying to improve the factory and the office was part of it. So we chose to make the book unique by having it be in an insurance company. So it’s a complete non-manufacturing-related book.

So if you work in health care, or if you work in insurance companies, if you work in a bank you could relate to this book because it doesn’t use manufacturing terminology whatsoever. So it’s meant for the non-manufacturing office environment where people can just pick it up and not say, oh, that’s for manufacturing… Oh, that’s not for me. It truly is an office book.

The subject matter is really about true operational excellence. So it’s not just a continuous improvement book of how people got together and they brainstormed and ran kaizen. It’s nothing like that. It’s more about the main character eventually who comes across a mentor and the mentor is teaching him principles. And then he has to take these principles and figure out how to apply those principles to his own office environment, which means the reader is thinking, these are the principles, how could I apply them to my office environment.

So it allows that knowledge to flow through by teaching principles, not just teaching how one person solved their own problems and what they did. It’s more like, no, these were the principles, and how did they apply them, which gives the reader the insight, I could apply these principles to my office.

And then there’s actually one other thing that made this book unique. After having talked it through with the publisher, we decided that because the office can be complex and there’s many different adaptations to it, at the end of each chapter we put a from the author section. And the from the author section shares the lesson or the principle in more detail. So first you’re reading the chapter in the novel format and then at the end it says, from the author, and it talks about the principles behind that chapter and how they can be applied to other situations as well.

So we tried to write it a little bit different. No manufacturing, we tried to make it about true operational excellence, and then we tried to say, look, here’s some ways you can adapt these principles to other different offices too with a from the author section at the end of each chapter. So, yes, we took, a little different approach to a book this time, we wanted to really make it easy to read, interactive and a lot of knowledge that people could apply into their own environment.

PEX Network: That definitely comes through when reading the book.

Duggan: Yes.

PEX Network: I agree you achieved that. Businesses today experience a lot of pressures and they’re changing pressures. So what are your thoughts on some of the new pressures that you see businesses facing today?

Duggan: Yes. It’s a little bit different now because, as I just quickly mentioned before, a lot of people have done lean manufacturing on the manufacturing floor, and the office hasn’t caught up. So yet, under that same context, at least here in the United States, I'm sure it’s the same in Europe as well, there’s a lot of pressure on service. Being able to deliver answers, being able to provide quotes, being able to provide information to the customer when they want it. The phone rings, the customer really doesn’t want to hear, I'll get back to you. They want to hear, I'll get back to you in an hour. They want that instant service, they want a repeatable, dependable, reliable service from an organisation, whether it’s a bank or whether it’s a manufacturing, but they want service.

So with those kinds of pressures, it’s really about setting up an office that is responsive and having those answers and having it in a consistent, timely manner, so a customer knows when I'm going to get it. So in today’s business pressures, it’s really about the voice of the customer: how do I hear what my customers want; how do I set up my offices to respond to the voice of the customer; how do I gain market share by doing a better job of voice of the customer. Those things are what’s really important today.

And the success in those can’t be done by management pounding the fist on the table, telling the company in the office ‘we need to be more responsive.’ It just doesn’t work anymore. As we found out, you really need to design our offices to be seamless and run autonomously and provide that information to customers without management having meetings and driving change to be more responsive.

And so the pressures, really, of today’s businesses are going to fall into the service side of the business because we always provide a service whether it’s product information, warranties or any kind of service. The way we’re changing there’s a huge amount of pressure. And the one who gets the market share is the one who’s going to be competing on the service side and that’s where it’s falling to today, and that’s why the office is really so important that we re-design our offices for operational excellence and not just on the factory floor. Or if we’re in health care, or any other kind of industry where there’s an office. We are a more service-orientated society and that pressure’s falling to the business world, today and moving forward.

PEX Network: That’s definitely a trend that’s increasing. And how do you see that businesses typically try to improve their processes in the office compared to the methodologies in the book?

Duggan: Oh, yes, that’s a good question because from what I have observed and I'm sure many of the listeners have experienced is, management typically looks for poor performance. Where are we lacking? What’s going wrong? Maybe engineering’s always providing drawings late; maybe purchasing is sending POs late; maybe finance can’t get their information on time; or maybe sales isn’t getting the orders put in. There’s always something that’s lacking in performance.

So usually what happens is we have that solution of having a meeting. Wherever there’s poor performance, we solve it by having a meeting. We get people in the room and try to find out what the problem is. We try to do some brainstorming, maybe we come up with some solutions, maybe we skip steps, eliminate signatures, try to look for some different software, build some spreadsheets.

It’s brainstorming, management driving change in the organisation, trying to improve performance by motivating people, creating teams, the usual problem-solving tools of root cause analysis might be used and even some lean tools could be used in that respect. However, the goal of that is to eliminate waste, try to get more value added as we get better.

But that isn’t the approach we use in operational excellence. It’s completely different. And the book, that’s one of the main points of this novel, telling people that there’s a different method to improve office performance and achieve true operational excellence. And it’s a real main point. It’s really about the methodology. And that methodology is we may map out how things currently flow through the office for a particular service family, but then we just leave it on the wall, and we don’t even look at it. We just say, yes, that’s how it is.

What we do is we learn those principles. There’s nine of them and we take these nine principles and, one at a time, we just march through these principles. And that designs the future state, not brainstorming, not meetings, not just using tools. It’s a very structured approach. And once we do that, now we have a destination of what it should look like when we finish implementing our new flow, our new value stream.

And the key here is that those principles work. Why they work is because when we finish doing this, we’ve established something called normal flow. Like, what’s the normal design to get a quote to the customer, how does that work? Well, if everything’s normal, the quote’s going to be done in eight hours every day. By defining what’s normal, we’ve also defined what’s abnormal: this thing’s backed up, quotes aren’t happening on time. And everyone in that value stream knows quoting’s not on time anymore, something is abnormal.

And the premise here is the book’s really about understanding that it’s good to have value stream design, but what’s even better is understanding what happens when things go wrong. That’s the key in operational excellence, understanding when things go wrong. And you can’t do that unless you define what normal is. Then you define what abnormal is. And once you define what abnormal is, we can teach everybody who works in the office what to do when abnormal flow occurs, without management.

So it’s an insightful look at flow in the office. In terms of defining normal flow, defining abnormal flow and teaching employees what to do when abnormal flow occurs, eliminating the need for management intervention and then let management work on growing the business. That’s all packed together in about - we kept it short - maybe 80- to 100-page novel, to make it an easy read.

So that’s what really makes the approach different. It has a whole different mindset about what the office is about, with normal, abnormal flow design principles and all that, rather than here are the tools we use to try to improve our office.

PEX Network: And the setting of this novel is a fictional insurance office, which can experience lots of expedites, missing information and errors. But do the principles of operational excellence really apply in all office environments where the biggest issues may simple be an overload of email - I'm sure we’re all familiar with - time-wasting meetings, or an unpredictable workload?

Duggan: Oh, absolutely. I mean, that’s one of the beauties of the office is it’s all about information flow and capturing knowledge. In fact, that’s the two main functions as we teach are flowing information and capturing knowledge. And that happens in insurance companies, hospitals, banks, education, and even government.

So, these principles of the book would apply in all those cases, and of course manufacturing and supply chain as well, product development, in engineering departments. So operational excellence really does apply in any office environment as well because there is a flow of information and we also want to capture knowledge as that information flows.

Now, you mentioned emails. And I like talking about this one because there’s a lot of emails going around. Everybody tells us how many emails they get every day. But when we look at emails, it’s interesting if you go through your inbox and look at your email and find out how many emails did you receive today that were just really someone chasing information. In fact, you’re going to find there’s a lot of emails coming into inboxes where people are looking for information, they’re chasing it.

And operational excellence attacks just that. It eliminates the need to chase information. By the way, chasing information is really re-work in the office. We’re re-working. Hey, I should have gotten this, I’m following up on this, following up on that. Manufacturing would never allow that. We flow physical product through the factory. We would never allow an operator to leave their station and walk upstream and say, hey, I'm looking for this. And that just wouldn’t happen.

But in the office, it runs rampant. So re-work runs rampant in the office. Chasing information runs rampant in the office. And so operational excellence, by having pre-set times when information will flow and pre-set pathways when information will flow, everyone knows when they’re going to get their answer and where the information is and where the knowledge is. So the first thing is it eliminates a ton of email by having the flow designed so we don’t have to chase information. So that’s one good thing.

You also mentioned meetings. Now, meetings, I have a little fun with this one because if I define a meeting, and in this context, I'll define a meeting where we all get in a room, we arm-twist, we cajole, we try to get our way, we try to influence, we try to set priorities, we try to get everybody on the same page. That’s what meetings are for.

Those kind of meetings usually happen because somewhere in the office the flow of information is broken. And the way we fix broken flow, broken information flow in the office, is by having a meeting. If we have robust information flows, and information moving at pre-set times, pre-set pathways, everybody knows when it’s going to do and they can see when it’s normal or abnormal and they fix it, guess what we don’t need? Meetings to fix broken flows.

And even meetings that are just ‘let’s have a status meeting every morning at 8:30 and see where we are and another meeting at 3 o’clock to see where we are,’ those status meetings, they all go away, because everybody can tell flow is normal. There’s no need to have a meeting. And if we’re not going to all these meetings, we just get a lot more productive, you get a lot more work done in it. So, therefore, we really do eliminate a lot of these meetings that fix broken flow.

Now, we’ll still see meetings for a good reason, that means people getting in a room to talk about customers and business growth and new orders, which are the good meetings.

And I think you mentioned workloads, unpredictable workloads. And that’s true. Most of the people in an office are a shared resource. They do multi-tasking, multiple things, workloads are unpredictable. So some of the concepts that you’ve heard about manufacturing like takt time, which means customer demand, manufacturing, we just say, oh, that’s the takt time and we bounce at workstations. It doesn’t work in the office. I'm just going to start with that. Takt time doesn’t work in the office. It’s too unpredictable, too much high variation. We don’t know what’s going to come into that office, but what we do know is what the office can deliver in terms of mix and volume, which means the types of services they provide and the amount that they provide.

We can define that and we can set different stages of that and toggle between those stages, and these are called takt capabilities, and this is something we learn in the novel: it talks about it’s impossible to determine how often something has to happen in the office and the mentor says, yeah, you’re right, it is, because most people want to argue that. No, no, you’re right, so therefore, don’t try.

Instead, determine what you can do and as orders, as events flow in, see which capability you need to use to match those. So it’s one of the concepts that we use to mange unpredictable workloads and to be able to react to the customer and have that repeatable, predictable service come out of the office day in and day out.

So, yes, any office has its challenges, but from what I’ve seen, these principles about creating flow in any of these environments, certainly OpEx applies and it’s great at eliminating meetings, it’s wonderful at eliminating emails, and it really manages unpredictable workloads with some of the newer concepts of just accepting that workloads are going to be unpredictable and set up your offices to match the different changes in it. It’s really good at applying in many different businesses in their offices.

PEX Network: What tips do you have for someone applying operational excellence principles in the office?

Duggan: Well, some of the tips I would say is really to take a step back for a minute and don’t go down the usual path of trying to eliminate waste and making improvements, but instead, try to think of what’s the destination of all your efforts. Build a road map to that destination and use the design guidelines to get you there. Don’t brainstorm, because the guidelines are really key to be able to create something called normal flow, because everybody’s trying to apply a principle rather than people coming up with different ideas, so that’s a game changer.

For example, one of the guidelines might be that implementing something called ‘where can we use what’s called a workflow cycle?’ A workflow cycle means where can we have information flow down a pre-set pathway at a present time? What this is really doing is it’s establishing something called a guaranteed turnaround time for information.

So this principle teaches us, hey, we should have a guaranteed turnaround time of how often information is going to flow through this area. So if a workflow cycle’s going to happen Monday, Wednesday, Friday at two o’clock for producing medium quotes for customers, sales knows Monday, Wednesday, Friday I’m going to get that information. So when the customer says, when can I get it, you say, I’m going to call you Monday at three o’clock, or if this customer calls him Tuesday, say I'll call you Wednesday at three o’clock, and he will, day in, day out, he’ll call that customer at three o’clock and here’s your information because we’ve applied that principle.

So, the tips I have is really take a step back, design a future state using the nine principles and these guidelines, learn those, use those and then build a roadmap to achieve that because that really will accelerate office performance. And using those kinds of principles and this approach, where manufacturing might take, lean’s been with us for a long time since 1996 when Jim Womack wrote the book Lean Thinking, and people have been doing it in their factories, the office moves quick. We’re talking a month, three to four weeks we can redesign all our flows in the office and implement them and see significant changes, and within three months we get really good performance changes in the office so it’s not a long time.

My tip is if you’re on a long continuous improvement in the office, I’d take another look at that and say wait a minute, we just need to go from point A to point B; let’s set a destination and do that, rather than a never-ending journey of continuous improvement.

PEX Network: What would you say is fundamental when applying operational excellence to an office environment?

Duggan: A fundamental aspect, since this is all about flow, all the people who work in the office environment and are going to do this should understand what flow in the office means. In the book, the mentor talks to the main character and says, let’s talk about what flow is in the office, and he teaches him the five questions for flow, and this is really fundamental. How in your office will everyone know what to work on next? If I’m here at my desk, how do I know what to work on next? And if I’m here at this desk, where am I going to get my work from. And how long should it take me to do this work? And where do I send it when I’m completed? And when I send it – this is a really important question – when I send my work, is flow still normal?
It means is everything still going smoothly when I send my work. So these five questions are really fundamental, how do I know what to work on next, where do I get my work from, how long should it take me to do my work, where do I send it when I finish, and when I send it, is flow still normal? If everyone in the office could answer those questions about their job and their task, what they do day in and day out in the office, that would be a really good understanding of what we’re trying to achieve and that would be a really seamless flow in the office. So that’s a really good fundamental understanding, we call them the five questions for office flow. That is one of the baseline fundamental things that we try to install within everybody who works in an office.

PEX Network: And there’re a number of lessons in the book, which were gathered. How was this done?

Duggan: Well, I guess it came from earlier in my career when I really took a look at mixed model production. I was working at aerospace companies and I was working in high tech companies and places that weren’t automotive and they were complex so mixed model was able to handle manufacturing and, of course, the offices were slowing them down, and basically the lessons came from learning what they were doing in their offices, what we were doing in manufacturing, and saying, ‘Manufacturing’s going pretty good,’ and we broke the manufacturing side into its DNA elements.

Manufacturing really works because when parts come out of a process, there’s a signal to send it, there’s a physical pathway to flow down, it has to be received at the next process, not in a real form but the operators had to know what to work on next, they had to know how long it would take. I said, boy, we need to do those same elements in the office.

So the struggle was how do you do this in the office when it’s completely different. You just can’t take the concepts of the value stream and put them in the office. It’s not the same. You can’t put takt time in the office, you really can’t do a finished good strategy in the office, it doesn’t really apply straightforward when you try to put Kanban or supermarkets in the office.

So all those concepts had to be looked at. What are those concepts trying to accomplish? What are the DNA elements of those? How are they supposed to work in manufacturing? And then how can you get those some results with different techniques in the office and that spawned the thought of workflow cycles.

It’s about takt capability rather than just using takt time so we had to really adapt the different techniques we used in manufacturing and the lessons here are a summary of that. Applying those different concepts in the office, I learned, every time I did it, every time I tried to apply these concepts, I learned the struggles of corporation, how much variation was in the office, how everybody was shared in the office, and straightening out all that spaghetti. When I learned this I said, okay, these techniques have addressed the high variation in the office and the spaghetti flow that’s in the office and they work.

So I took those lessons and summarised them into a nice easy read where they’re concise and they work, but they were gathered, to answer your question briefly, they were gathered from the school of hard knocks, day in and day out of trying to implement the concepts of mixed model production in the office. So I guess it’s all from experience. This book wasn’t written from the academic world; this book was written from the implementation world after years and years of implementing and trying to synthesize that so I guess the short answer is from the school of hard knocks.

PEX Network: So not easily replicated then. Pretty unique. And what practical benefits can the book offer?

Duggan: Well, the good thing is, we really thought about it because the office was a new subject for many of the readers, there wasn’t really too many books out there on operational excellence in the office, and the intent was I can pick this up and maybe read it on aeroplane or in a short period of time and have a wealth of knowledge. Whether somebody works for a bank and they’ve never heard of lean before, or if somebody’s been in manufacturing, they’ve heard, they have a strong lean program, it’s for either one of those audiences. So it’s meant for anybody. It has enough depth in it for the experienced veteran reader of lean, yet it has a nice flavour to it so if you’ve never read lean or operational excellence books before, it will lead you into it rather quickly and get you to understand the concepts. So it really is meant for that.

PEX Network: In your own words could you sum up why you think operational excellence principles are fundamental for sustained business growth?

Duggan: Well, yes. The whole design of OpEx is for business growth and it is a design, it’s a way to design a business, whether it’s the office and manufacturing, for business growth, and why I say that is because the whole key here is to eliminate the need for management intervention to run the office or the factory day in and day out. So we’re not trying to eliminate waste, we’re not trying to get rid of non-value added activities; we will do those along the way. That’s not the goal. So the goal is business growth and we do that by creating self-healing, autonomous value stream flow in the office or in manufacturing, that doesn’t require management intervention. So what we’ve done, and the nth degree here is we focused on freeing up management’s time to grow the business.

Now, I often get asked, ‘we might free up some time but how does that lead to business growth?’ Companies who have done this have actually grown their top line business growth by changing, really understanding the voice of the customer and instead of providing parts to a customer, they provide a solution to a customer. That solution goes along with, not only the product but the service that comes behind it, and so instead of maybe somebody supplying springs to a customer, they apply a module that provides tension to a part so it’s springs, it’s mechanisms and the information on how that, maybe that mechanism is controlled by programable, logical controller and they have the information on how to program it, how to do that, how to service it. So they provide a complete part and service rather than just being a spring provider.

So what they’ve done is the management time that’s freed up has gone out and talked to customers: how do you use our parts, and customers say, well, you’ve got good delivery. By the way, you can’t do any of this until you have really good, operational excellence in your factory and your offices because you have to earn the right to innovate with your customer, but once you earn that right to innovate with your customer by having seamless delivery every day and the customer likes you, go talk to him and say how do you use our parts. And then we start talking about becoming a solution provider to customers.

Or we take our time and we invent new technology, we do game changing technology shifts that allow us to capture market share. So really the design for operational excellence here is all about eliminating management intervention, becoming a solution provider rather than a parts provider, or investing in technology to do a paradigm shift and the types of technology we use to accomplish things and having breakthrough technologies, and really going out and capturing market share that way. So it’s really not a cost-cutting, lower our prices and, try to be more cost-effective; it’s quite the opposite. It’s let’s up the service, let’s give the customer more and let’s be predictable, repeatable, reliable, day in and day out. Let’s earn the right to innovate with our customers. So it truly is totally focused on a business growth strategy that will just perpetuate on and on as the business grows.

PEX Network: And finally, in one sentence could you sum up why the PEX Network community should read the book?

Duggan: The PEX network are all about improving their processes and this book is totally about improving processes, from delivery to the customer level, right down to what everybody does day in and day out in the office, how to improve that total performance of the office.

PEX Network: Thank you so much, Kevin, for your time today. It definitely is an insightful and valuable read. If anyone would like to read the book, it is available through the Institute for Operational Excellence via their website, which is www.instituteopex.org.