You are on page 1of 7

See for Yourself

by Tim Laseter and Larry Laseter

11/29/07

a strategy+business exclusive

© 2007 Booz Allen Hamilton Inc. All rights reserved.


comment operating strategies

Operating Strategies
See for Yourself
Firsthand observation on the front lines can offer
the critical insights that make for inspired — and
inspiring — leadership.

by Tim Laseter and Larry Laseter

S
am Walton discovered while ignoring this relatively simple

Illustration by Lars Leetaru


the advantages of central- practice. Pick your program: Lean
ized checkout counters Six Sigma, Servant Leadership, Stra-
by taking a 500-mile tegic Sourcing, Disruptive Innova-
bus trip to visit a com- tion. This list of possible strategic
petitor in 1951. In the business initiatives has a lot in com-
1960s, Taiichi Ohno, the mon with the diet books forever
father of the Toyota pro- topping the bestseller lists. Each
duction system, trained his man- promotes itself as a silver bullet;
agers by having them stand in a most deliver benefits, but rarely to
small circle on the factory floor for the extent advertised; and few prove
eight-hour stints simply observing sustainable over the long run. Diet
the manufacturing process. Today, fads and management fads alike
Jeff Immelt, CEO of GE, spends offer recipes for success but rarely
60 percent of his typical 100-hour get at the fundamental changes
workweek on the road. needed to deliver more than tempo-
Great leaders understand some- rary improvement.
thing that is often lost in today’s In the case of weight loss, med-
world of global connectivity, where ical science has shown that exercise,
a surfeit of data is accessible not dieting, offers the key to sus-
with a few keystrokes. Computer- tained improvement. Exercise burns
generated reports certainly play an calories but, more important, it
important role in management, but builds muscle mass and fundamen-
the critical, visceral insight needed tally improves the body’s metabo-
for effective leadership can come lism. With exercise, any number of
only from firsthand contact. The diets can produce good results.
best executives get out of their of- We believe that in business
fices and away from their computer management, the analog to exercise
strategy + business issue 48

screens to observe their frontline is firsthand observation. Executives


employees, competitors, customers, and companies that have ingrained
and suppliers on the job. a culture of face-to-face, on-the-spot
Most business gurus tout clev- problem solving have a superior
erly titled management concepts “metabolism.” They create products
comment operating strategies
and services that solve real customer expanded the number of cup hold- Tim Laseter
problems, adopt ideas from others ers and storage pockets, pointless (lasetert@darden.virginia.edu) serves on
the faculty of the Darden Graduate
and make them their own, col- in the Japanese market where trips School of Business at the University of
laborate with suppliers to eliminate are shorter and riders rarely eat Virginia. He is the author of Balanced
Sourcing (Jossey-Bass, 1998) and co-
waste, and engage the hearts and in the vehicle, but popular with author, with Ron Kerber, of Strategic
minds of their entire workforce. Americans. Product Creation (McGraw-Hill, 2006).
Their new “diets” stick, and im- A culture of on-the-spot prob- Formerly a vice president with Booz Allen
Hamilton, he has more than 20 years of
provements last. lem solving dates back to the early experience in operations strategy.
To get the most out of a regi- days of Toyota and its founding
men of firsthand observation, con- family. According to company lore, Larry Laseter
(Larry@LarryLaseter.com) is an inde-
sider the following principles. Toyota founder Kiichiro Toyoda pendent consultant and entrepreneur. A
once reprimanded a factory worker graduate of the United States Military
Academy at West Point and the Harvard
Go and See who was bemoaning the failure Business School, he has held executive
No company embraces the principle of his grinding machine. Toyoda positions at FPL Group, MyHomeKey 2
of firsthand observation more than rolled up his sleeves, pulled a hand- .com, and The Home Depot. He has more
than two decades of experience helping
the Toyota Motor Corporation. A ful of sludge from the oil pan, and service businesses grow through sales,
marketing, acquisitions, and improved

What exercise is to weight


operations.

loss, firsthand observation is


to corporate success.
philosophy of genchi genbutsu, liter- challenged the worker to solve
ally translated as “go and see,” per- his own problems by getting his
meates the organization from the hands dirty. To this day, Toyota
manufacturing floor to product managers develop deep expertise
development and even corporate over their careers and are expected
staff functions. Toyota’s executive in to be true experts of the domains
charge of real estate visited every they manage.
single property now in Toyota’s
vast global portfolio of land and Prepare to Learn
buildings before approving any of In his autobiography, Wal-Mart
the investments. founder Sam Walton commented,
The chief engineer for the 2004 “Most everything I’ve done I’ve
Sierra minivan had never designed a copied from someone else.” Walton,
vehicle specifically for the North like other great leaders, was a true
American market, so he set out to student of his industry, always seek-
drive in all 50 states and every prov- ing out new learning opportunities.
ince of Canada and Mexico. The A commitment to “go and see” is
insights he gained on his trip led merely a first step. Louis Pasteur’s
him to redesign the popular mini- comment that “fortune favors the
van, making it bigger but easier prepared mind” leads us further
to handle, at a price US$1,000 along the path of capturing the full
lower than the previous version. His value of direct observation.
observations of North American Consider the experience of a
driving conditions led to enhance- U.S. automotive supplier that ex-
ments of the turning radius and changed benchmarking visits with a
side-wind stability. The team also Japanese competitor in the late
comment operating strategies

1980s. Executives of the supplier research, which helps identify prob- rankings in Car and Driver than any
clamored for spots on the trip to lems faced by customers. other model in history.
Japan, but because they had not Disney “Imagineers,” members By observing “snacking occa-
spent sufficient time observing their of the creative group responsible sions,” the Mars Corporation found
own factories, the visit became a for developing park attractions, that kids often made a mess eating
boondoggle that yielded limited spend substantial time in the com- candies packaged in bags and boxes,
competitive intelligence. pany’s various theme parks watching like M&M’s, while riding in the car.
In contrast, the Japanese con- guests. Such observations have led Mars then introduced cup-shaped
tingent, made up of experienced to creative solutions to the inev- packaging that fit in cup holders
managers and engineers, arrived in itable problem of waiting in line. and had a resealable opening that let
the U.S. equipped with cameras and One of Disney’s latest attractions, parents parcel out the candy in
tape recorders. Though the Japanese Expedition Everest, includes a mu- smaller servings.
immediately accepted the prohibi- seum dedicated to the legend of the
3 tion against cameras, they pleaded Himalayan Yeti. The line for the Seek Out Root Causes
the case for tape recorders on the new roller coaster wanders through Some problems may suggest obvi-
grounds that their English was lim- the museum, distracting the waiting ous solutions. In most cases, how-
ited and that they’d need to review guests while providing the founda- ever, solutions are not obvious, and
the tapes to ensure that they fully tion of the story undergirding the identifying a problem’s root cause
understood the host’s commentary.

Toyota’s chief engineer for


Because the host was unable to
speak Japanese and could not con-
duct the tour in the guests’ native
tongue (the Japanese hosts had led
the 2004 Sierra minivan
their tour in English), he felt he had redesigned the vehicle after
driving across North America.
to accede to their request.
Moments into the tour, one of
the guests asked about the cycle
time and capacity of a key piece of upcoming ride, where the guests becomes a critical part of firsthand
proprietary equipment. The host will encounter a broken track and observation. Toyota, always seeking
refused to answer the question, but be forced to flee the savage Yeti. the simple but avoiding the simplis-
he realized that the Japanese would Honda engineers have also tic, searches for root causes by
capture the necessary information observed Disney’s guests to uncover applying the “Five Whys” principle:
by simply replaying their tapes and problems, but in the parking lot asking several “why” questions in
timing the sounds of the machine rather than the park. A couple of order to determine a problem’s gen-
as it cycled through its processes. decades ago, the company’s car esis. Why do people avoid long lines
Worse yet, halfway through the tour designers noted that people were at Disneyworld? Because they are
the host discovered that the tour struggling to lift awkward items bored in line. Why are they bored?
group included industrial artists such as baby strollers into and out Because the line lasts 30 minutes
who were busily sketching detailed of car trunks. Inspired to solve this with nothing to do but queue. Why
perspective drawings of key pieces problem, the team lowered the does it last 30 minutes, and why
of equipment. trunk opening to be flush with is there nothing to do? And so on.
the car bumper. The lower opening By asking “why” at least five times,
Look for Problems is now a common feature among the observer eventually finds the
Although benchmarking visits may sedans, but in 1989, innovations problem’s origin.
strategy + business issue 48

suggest a focus on solutions, the such as this helped propel the Jeff Wilke, senior vice president
real power of observation comes Honda Accord to first place in U.S. (SVP) of North America retail for
from finding the problems. Accord- unit sales, and similar innovations Amazon.com, regularly visited the
ingly, more and more companies derived from observation have company’s fulfillment centers when
have come to embrace ethnographic allowed it to sustain more top 10 he served as SVP of operations for
comment operating strategies
the company. He insisted that his plained that molten steel fed the The EVP of merchandising
staff spend time in the field rather continuous caster by repeated pour- has responsibility for all decisions
than reading reports in the Seattle ing from multiple cupolas. When related to merchandising products
headquarters. On one field visit, the mix changed from one cupola in Home Depot’s 2,100 retail stores.
Wilke encountered one of his to the next, the resulting bar stock These decisions include which
analysts, a Ph.D. in operations was a mix of the two steel specifica- brands to carry, prices, and how to
research, working to generate a tions for a period of time. Con- present and promote the products.
computer-optimized “picking path” sequently, this transitional output Effectiveness in Taylor’s group was
for the hourly associates who were
charged with gathering the items in
a customer order. The analyst com- By asking “why” at least five
mented that some of the most
experienced “pickers” defined a
times, the observer eventually
more efficient picking route for finds the problem’s origin. 4
themselves than the one they got
from a computer program. Wilke would not meet quality standards critical to generating the company’s
quickly challenged him to incorpo- for either specification and would sales and profitability.
rate the experience-based heuristics be rejected and recycled back into When Taylor took over the
of the best pickers into the com- the melting process for another chief merchandising role in 2005,
puter algorithms. During peak batch. Although the material was re- he began meeting with his team of
holiday season, well over half of claimed in the process, the off-spec merchants, who make buying deci-
Amazon’s fulfillment center associ- product consumed valuable capac- sions for the entire chain, to under-
ates would be inexperienced ity, and the material also underwent stand both their near-term plans
temporary employees, so codifying the expensive, energy-sapping pro- and their long-term strategies for
this expert knowledge was critical to cess of remelting. From the stand- profitably growing product lines.
operational performance. point of profit, this was a very He quickly realized that many of his
In an industrial company, a wasteful situation. team members used a considerable
team developing a sourcing strategy Reflecting on this insight, the amount of data in decision making,
gleaned an equally useful insight team identified a key opportunity to but they did not really understand
from observation during a tour of a collaborate with the mini-mill sup- how the consumers and store associ-
mini-mill that produced metal bar plier to rationalize steel specifica- ates interfaced with the products
stock — basic steel bars that can be tions and to place orders in a way inside a busy, 100,000-square-foot
machined or forged into finished that would enable sequential runs of warehouse that averaged more than
metal products. The team noticed a the same materials in the cupola. 10,000 customer transactions each
chart posted in the production area It produced a win-win for the mini- week. Taylor decided his group
of the plant, tracking the number mill and ultimately for this impor- needed to see for themselves, so he
of different steel specifications pro- tant customer. began to host weekly “store walks.”
duced in the mini-mill each month Each week, one manager had an
divided by the number of “melts” in Teach Others to Observe opportunity to discuss his or her
the cupola that fed the continuous The final principle for effective department’s product lines in the
casting machine. The team was observation is to teach others to aisles of a Home Depot store. Taylor
shocked to see that the ratio varied observe. An anecdote from Tom invited the division presidents and
between just 1.1 and 1.4 over the Taylor, former executive vice presi- other field leaders to attend these
posted months, indicating that run- dent (EVP) of merchandising for walks as well so that they could
ning two sequential batches of the The Home Depot stores, demon- bring their cross-functional perspec-
same steel mix was rare. strates how these frontline visits tives to every discussion.
By probing the supplier host, offer opportunities to learn and to Taylor had a better understand-
the team discovered why this metric teach by looking for problems from ing of the stores than anyone.
was so important. The supplier ex- a customer perspective. He was one of the longest-serving
comment operating strategies

associates in the company, having associate and customer would find allowed for some last-minute tacti-
been with Home Depot since competing claims made by the cal adjustments that stopped the
shortly after its founding in 1978. product manufacturers with no Union Army’s campaign to take
He had risen from part-time associ- supporting evidence. All of those the Confederate capital of Rich-
ate to executive vice president of present thus recognized that they mond in 1862.
all U.S. stores prior to his appoint- needed to rationalize stock keeping This approach gave Jackson a
ment as merchandising EVP. So units (SKUs) toward a better cus- visceral understanding of the mean-
when Taylor began to host the tomer experience. No set of data ing of war. As he explained, “War
new store walks, he was in a com- could have made that point so well means fighting. The business of the
fortable environment. inside the sterile confines of a meet- soldier is to fight. Armies are not
On one of the early walks, the ing room. called out to dig trenches, to throw
merchant responsible for vacuum Go to a Home Depot store up breastworks, to live in camps,
cleaners was given the opportunity today and you will find only 12 but to find the enemy and strike
5 him; to invade his country, and

Home Depot’s merchandising


do him all possible damage in
the shortest possible time.” This
group goes to the front lines commitment to results, in turn,
made him an inspiration to his
to think about decisions from troops, who trusted him, literally,

a customer’s perspective.
with their lives.
Few executives today inspire
their followers that way. The well-
to talk about his category. After a carpet cleaners, and each of these is meaning leader who considers man-
thorough discussion of the “Good, clearly positioned as the one best agement an art equally applicable
Better, Best” positioning of the nine suited to a particular deep-cleaning across any industry, be it aircraft
models of vacuum cleaners carried vacuum machine. And that’s just engines or banking, can never
in the stores, Taylor turned his one product. The Home Depot match the leader who truly under-
attention to a complementary prod- merchandising group no longer sits stands the business at hand and con-
uct — carpet stain remover. Taylor at headquarters making decisions far tinually invests the time to learn
asked a simple question of the from the action. They now go to the more about it.
unsuspecting merchant: “If you front lines to see what is happening Given the unpopularity of
were a new hourly associate here on and think about their decisions observation, it’s no wonder that
a busy Saturday afternoon and a from a customer’s perspective. many employees view executives as
customer asked you which carpet Dilbert cartoon characters: clueless
cleaner she should use to remove a Making It Personal autocrats anxious to implement the
pet stain from her carpet, what Thomas Jonathan “Stonewall” next management fad as a “strategic
would you recommend and why?” Jackson, a general of the Confeder- initiative.” And in such an environ-
The merchant looked down the ate Army in the U.S. Civil War, ment, the odds of success probably
aisle and saw 26 products to remove ranks among the most gifted tactical match those of a fad diet. Embrac-
carpet stains, seven of which specifi- commanders in American military ing firsthand observation as an
cally claimed to be best at removing history. Though he fought on the integral part of your personal man-
pet stains. Some of these products losing side, his reputation was such agement style and embedding it in a
carried the same brand as the vacu- that, almost 150 years later, West company’s culture can break the fad
um cleaners being displayed, others Point cadets still study the brilliant cycle. It connects everyone to reality
strategy + business issue 48

carried the brands of some of the leadership of this alumnus. Stories and forces a collaborative, problem-
top cleaning products of the stores, of Jackson portray a personal com- solving mind-set that can produce
and the remainder consisted of mitment to firsthand observation. enduring results rather than just
brands specializing in carpet clean- Jackson’s visit to the front lines be- temporary improvement. +
ing. Reading the product labels, the fore the Battle of Fredericksburg
strategy+business magazine
is published by Booz Allen Hamilton.
To subscribe, visit www.strategy-business.com
or call 1-877-829-9108.