Remake: How Organizations Change, Part One

I wasn't happy with the first version of this webcast, so I reshot it. It is the same material as before, but presented a lot better. (No more 3 A.M webcasts for me.)

Two more webcasts in the same series are on the way. Feedback will be greatly appreciated.

Jack Vinson Reviews Reaching for the Goal

Jack Vinson has a review of John Rickets book Reaching for the Goal, about TOC in the service industry. I commented and wrote a bit about project constraints. (A little bit off-center, though not entirely off-topic.) Ski added a comment.

Pop over to Knowledge Jolt if you are interested.

More Favorite Books

I posted a list of books that have had a strong influence on me a couple of days ago. Here are links to some other articles by people who have done the same thing:

• Daniel Bloom posted his favorites in the CriticalChain group at Yahoo
• Tobias Fors posted a list at his blog.
• Andres Taylor of Blueplane had already made up his list, but not yet published it when he read my article.

Making up lists like this and posting links to and fro serves a couple of purposes:

• It is a way of getting to know other people. You can tell a lot about a person by looking in his/her book shelf. And reading the same books gives you something to discuss.
  
• It is a neat way to get tips about what to read next.
• It is a way of increasing the readership of all bloggers that participate.

Killing Queue Time

I had an excellent opportunity to practice eliminating muda, waste, from a process recently. My son, who is two years old, was watching a movie on my laptop. Unfortunately, I left him alone for a little too long. He got tired of the movie and decided he wanted to view another one, so he pushed another DVD into the DVD player. Unfortunately he did not know he was supposed to take the DVD already in the player out first...

Of course, both DVDs got stuck. I checked with MacForum, and found that fixing the problem would take 10 days. Obviously, most of that would be queue time, so I suggested that I should get a place in the queue immediately, but not leave my computer in the repair shop until the day there were someone available to fix the problem.

That was ten days ago. This morning I left my computer at the shop. I picked it, and two DVDs, up about four hours later. I even got a new keyboard out of the deal. There was a small crack in the old one, and the shop replaced it free of charge.

By taking the simple measure of delaying leaving the computer at the repair shop, I avoided a 10 day loss in productivity. (Granted, I could have used another of my computers, or bought a new MacBook. I always have an up to date backup, so the interruption would have been a couple of hours, no more.)

It did get me to reflect on how much you can do with simple measures.

The Best Business Books Ever

Clarke Ching kicked off a discussion about the best business books ever in the cmsig and CriticalChain mailing lists at Yahoo. 800ceoread has a poll to find the 100 best business books of all time. As I write this, The Goal by Eliyahu Goldratt is ranked number one.

This got me thinking about which business books that have influenced me the most. Not necessarily the best written business books I've read, but the ones which have had a strong influence of my life. Here they are:

• Slack, by Tom DeMarco. The first really good business book I read. Made me realize that management, when it is done right, is both sensible and fun.
• eXtreme Programming Explained, by Kent Beck. Software development is business, so I think this book qualifies. (Anyway, this is my list, so I'll add whichever book I want.) This is the book that got me interested in agile software development.
• Lean Software Development, by Tom and Mary Poppendieck. This book sparked my interest in Lean.
  
• Agile Management for Software Engineering, by David Anderson. This is the book that got me interested in the Theory of Constraints.
• The Goal, by Eliyahu Goldratt. An eye opener.
• Thinking for a Change, by Lisa J. Scheinkopf. The first TOC Thinking Process I read. I have read and practiced the Thinking Process almost every day since.
  
• The Logical Thinking Process, by William Dettmer. This book gave me the tools to significantly improve the work I did for a client recently, and it has had a strong influence on the strategic planning for my own company.
• Brainpower Networking, by William Dettmer. Crawford Slip brainstorming has become one of the most used tools in my toolkit. I use it mostly for group brainstorming sessions, and sometimes to get my own thoughts organized.
• Throughput Accounting, by Steven M. Bragg. I have found that this is one book that I often refer to while designing measurement systems for new organizations.
  
• The Heart of Change, by John P. Kotter. I have had strong reservations about most change processes I have seen, but Kotter's ideas make sense. The best thing about this book is that it has opened the door for further study and learning.

Here is a suggestion:

If you've got a blog of your own, post a list of the books that have influenced you the most. Then we'll link up. Create a backlink from this post. If you haven't got a blog, just comment on this post, and list your favorites in the comment.

I have made a follow-up post with links to everyone that responded to my suggestion above. There is some good reading to be found in those lists.

New Goldratt Webcasts

Eliyahu Goldratt is kicking off a new series of webcasts. The introduction is here.

Increase Customer satisfaction with Net Promoter Score

Net Promoter Score is a quick and easy way to measure customer satisfaction. Originally, the method was based on asking a single question. In this article I'll show how the original method works, and how it can be enhanced by adding two more questions. I'll also discuss some of the claims and counter claims about how useful the method really is.

The original method is easy to use:

1. Ask your customers a single question: "On a scale of 0-10, how likely are you to recommend us to a colleague or friend?"
2. Count the number of 0-6 answers. These are your detractors.
3. Count the number of 7-8 answers. These are your passives.
4. Count the number of 9-10 answers. These are your promoters.
5. Calculate the percentage of promoters and detractors.
6. Subtract your detractors from your promoters to get your Net Promoter Score.
   

The power comes from asking people how likely they are to make a recommendation. In other words, how likely is the customer to bet some of her own reputation in order to promote you and your product.

The result can be shown in a graph like the one above. A score by itself means little. The important thing is to track trends over time.

The following table shows (made up) raw NPS data:
I like to set up the spreadsheet so that the data is automatically color coded. It gives me a sense of where things are going while I enter the data.

Here is how my spreadsheet handles the conversion from raw data to NPS score:
The Net Promoter Score tells you how satisfied your customers are, but it does not tell you what to do to increase customer satisfaction. Let's fix that!

It would be interesting to know the distribution of our three customer categories. The table above tells us that, but it is better to visualize the data:
If we only knew what to do, we could use the staple diagram above to evaluate our actions. Let's add a second question to our survey:

What is the main reason for giving the score you did?

Now we can figure out why we get the score we do. I'd recommend doing some serious analysis and synthesis here, because you cannot take customer responses at face value. You have to put them in context. For example, remember Apple´s Time Machine that I wrote about awhile ago. If you did a survey on the time machine, and asked only professional system administrators, the score is likely to be low, but in this case, that only indicates you are targeting the wrong user segment.

Based on the replies to the second question, and the NPS Breakdown table, you can decide whether to focus on moving detractors into the passives category, or moving passives into the promoters category, and how to do it.

It is also possible to find out other things. For example, you might have a product which the users love, but still does not sell. In that case, your constraint is not in customer satisfaction, but somewhere else. You might even have a product which people really don't like, but which sells anyway. Information like this can be extremely valuable.

For example, the Southland Corporation embarked on a costly program to improve customer service at its chain of 7-Eleven stores. The goal was that every customer should be greeted with a smile, eye contact, and thanks. They succeeded in increasing courtesy, but afterwards they discovered that the service improvements had little effect on profitability. (From Hard Facts, Dangerous Half-Truths & Total Nonsense, by Jeffrey Pfeffer and Robert Sutton.)

If the Southland Corporation had bothered to analyze the situation before acting, they could have avoided a costly mistake. An NPS survey would have revealed the same thing the Pfeffer-Sutton study did, that 7-Eleven customers want fast service, not insincere greetings.

Oh, and you may want to tack on a third question:

May we contact you again?

This is not possible in all situations, but it is useful if you have a steady control group, so that you don't get hit by random variation in small samples. The thing to watch out for, of course, is that if you have a steady control group, you may get more and more positive answers over time just because you keep asking people what they think. But I know you already knew that.

Before using it, you should know that there is some controversy surrounding Net Promoter Score. Fred Reichheld, who invented the technique, claimed to have found a strong correlation between NPS and corporate growth. His claim was affirmed by some researchers, and refuted by others. (There is a Wikipedia article that references material from both camps.)

From a Theory Of Constraints perspective, if customer satisfaction is the system constraint, then you will benefit from improving it. If customer satisfaction is not the constraint, improving it will yield little benefit.

In either case, tracking it to know whether it is the constraint or not, is useful.

The Knowing-Doing Gap

I just finished The Knowing-Doing Gap by Jeffrey Pfeffer and Robert Sutton. Excellent book. I do not have time to write a full review right now, but I plan to to discuss the book in a series of articles about change management. The book is certainly worth reading.

A Brief Visit to the Six Sigma Camp

Larry Leach has an interesting article about the effects of combining the Theory Of Constraints with Lean and Six Sigma. The article is based on a study published in APICS Magazine May 2006.

I intended to do a writeup of the study of my own, but I plumb forgot, until Jack Vinson reminded me with his article. In his article, Jack links to an interesting article by Tom Davenport, Why Six Sigma is On the Downslope by Tom Davenport, but you will have to visit Jack's site to get the link.

Oh, there is one thing. While you are reading the article, consider this: what evidence does Tom Davenport present that Six Sigma is on the downslope? What assumptions about Six sigma popularity are readers likely to make after reading the article? Do these assumptions have a basis in fact?

As for Jack's comments on Davenport's article, I agree with them.

Cost Cutting Nightmare

Frank Patrick, who writes the Focused Performance Blog, published a link to an Associated Press article about how Circuit City Stores, Inc. is killing itself with a cost cutting scheme.

The article is worth reading, and so is Frank's blog.

How Organizations Change, Part 1, step 1: Setting Goals

This article provides background and more detail on how to change organizations. It is a supplement to the webcast How Organizations Change. I suggest you watch the webcast first, then read this article.

Obviously, the first thing you need in order to change an organization, is a problem. Luckily, there is no shortage there. Let's begin by perking ourselves up a bit: substitute challenge for problem. So much more satisfying, isn't it? Everyone needs a challenge now and then.

So, there is something in your organization that limits its ability to achieve its goals. The challenge is to neutralize the obstacle. The best thing is to remove it entirely, but that is not always possible.

To achieve our goal of changing the organization, we first need to paint a picture of what the organization should be like. The best way I know to do that is with an Intermediate Objective map (IO map).

IO maps are part of The Logical Thinking Process tool set (TLTP). TLTP is a revised version of The Theory Of Constraints Thinking Process. If you want to get good at TLTP, I recommend you buy William Dettmer's book on the subject.

An IO map is a diagram depicting an organization's goal, the Critical Success Factors (CSF) necessary to reach the goal, and the Necessary Conditions (NC) necessary to achieve the CSFs.

You can make IO maps for all kinds of organizations, like a family, a union, political organization, government body, hospital, etc.

Putting together an IO map won't take more than an hour or so, provided that you know what the company wants to achieve. If you are the boss, drawing an IO map should be pretty easy. If you are not the boss, sit down with the boss and draw it together. If you can't do that, reverse-engineer the map from strategy documents, then get the boss to review and revise.

Here is the IO map for my company.



You may be surprised that that I've included "happy family life" as a Critical Success Factor. It isn't that strange. I am running a one man company. My family keeps me motivated.

Since I am building my company the Theory Of Constraints way, I am using the IO map as direct input to a Future Reality Tree (FRT). The FRT serves as a broad plan, showing me what I have to accomplish in order to reach my objectives.

An IO map isn't static. It evolves, partly because an organization changes over time, partly because understanding of the organization evolves.

The IO map is important in many respects. When you analyze the current situation in an organization, the IO map is used to find the factors that cause problems, and the factors that work especially well. When reengineering an organization, even if the change is small, one does not want to throw the baby out with the bath water.

I also use IO maps when I design measurement systems. Having an IO map allows me to construct measurement systems that tell if the company is moving towards its goal or not. This is a pretty big deal, because most organizations have measurement systems that drive them away from their stated goals.

New webcast - How To Change an Organization

This webcast describes how to effect change in an organization. The change model is based on John P. Kotter's 8 step model, adapted to make use of the Theory Of Constraint's Logical Thinking Process.

I'll write more on change management. For now, I hope you enjoy the webcast.

Elevating the Time Constraint

In a comment to a previous posting Tobias Fors suggested that I should do something about the time constraint that keeps me from blogging and making webcasts. As you can see, I am working on elevating the constraint. It is a long term project...

More than 2000 webcast downloads

I checked my Theory Of Constraints webcast on Youtube. 2010 downloads, and a five star rating. I had decided to celebrate when I reached 2000, so I'm taking my son to Universeum today.

I am working on two more, and have plans for several more. The constraint is of course my time. The past three months have been extremely busy, but it looks as if I'll be able to do a bit of blogging and web cast work the next couple of weeks. I have an article backlog you would not believe. (I take notes whenever I get an idea, and store it for future use.)

I'll be back.