1. May 2010 Rapid Transformation Making Change Happen Fast Larry W Dyer Director, Process Improvement Master Black Belt Coventry Health Care

2. Agenda

Lean and Six Sigma Overview

What is Kaizen?

How to execute a Kaizen

Kaizen examples

Where to start with Kaizen

Top 10 reasons projects fail

Rapid Transformation WC Process & Strategy 3. Assumptions

You have some exposure to Six Sigma and Lean

You understand what the project charter is

You understand that projects with a high return on investment and moderate to low effort are executed first

Rapid Transformation WC Process & Strategy 4. Every Firm Is Driven to Improve Quality, and Reduce Cost and Lead Time

Customer loyalty and retention

Shorter customer lead time demands

Downward price pressure: lower costs

Lower invested capital

Capacity expansion

Rapid Transformation WC Process & Strategy 5. Why Do These Goals RequireBoth Lean and Six Sigma?

In a value stream, thework often spends up to 95% of its time waiting

Poor quality increases the lead time to customer

• 10% defect rate can increase lead time by 40% and reduces available capacity

Capacity problems can be masked by slow cycle times

Lean tools accelerate lead time reduction

Six sigma brings a process under control

Rapid Transformation WC Process & Strategy 6. 95% of Time Waiting, For What? Customer Value Added Time Business Value Added Time Non-Value Added Time Wait Time

Findings indicate:

• Long process time

• Process Cycle Efficiency Poor - 0.069%(World Class Standard = 50%)

• Wait times are extremely long

Rapid Transformation WC Process & Strategy 7. What is Lean Six Sigma?

Lean Six Sigmais a combination of two process improvement methodologies Lean and Six Sigma

Leanis all about speed.

• Pioneered by Ford and perfected by Toyota

• Focuses on eliminating waste and finding better ways to do things

• Helps eliminate steps that add no value

Six Sigmais all about quality and repeatability.

• Started by Motorola in the 80s; improved by GE

• Focuses on reducing defects and variation and incorporates powerful statistical tools to control a process

• Six Sigma Quality literally means 3.4 defects per 1 million parts

• It is the origin of the DMAIC process

Rapid Transformation WC Process & Strategy 8. Greatest Challenges to Successful Deployment From ASQ, Quality Progress, August 2009 Why? Why? Rapid Transformation WC Process & Strategy 77 of 5,000 hospitals Confidence level 95% Confidence interval +-11% 9. Why Lean Six Sigma?

Why use them together?

• Because Lean cannot bring a process under statistical control, and Six Sigma alone cannot dramatically improve process speed.

Six Sigma is the Unifying Framework

• It provides the improvement infrastructure (role definitions, deployment model, etc.) and the overriding methodology (DMAIC).

Lean provides additional improvement tools to turbo charge improvement efforts.

Rapid Transformation WC Process & Strategy 10. When to Use LSS for Process Improvement

When to Use:

• You have a challenging goal to reach or issue to solve

• • Driven by the business strategy

• • Issues that are valuable for the business to resolve

• • Problems that have stood the test of time

• • Solution is not known

• You are willing to commit people to identify and resolve the issue

• You want a more robust solution than traditional methods can provide

• You want group ownership of a course of action

When NOT to Use:

• You dont have a specific challenge or clear issue to solve

• You already have a solution and course of action

• You dont have a process to improve

Rapid Transformation WC Process & Strategy 11. Rapid Transformation

Relies heavily on:

• Lean techniques

• Statistical Process Control

Uses Kaizen Format

Focuses on a subset of Six Sigma Tools

• Stakeholder Analysis

• FMEA

• Value Stream Mapping

• Non-Value Added Analysis

• Root Cause Analysis

• Quick Improvement Techniques

Rapid Transformation WC Process & Strategy Lean Is Cool! 12. What is Kaizen?

Kai = to take apart

Zen = to make good

Kai + zen = taking something apart to make it better

Team activity

Rapid improvement within a short time

Well planned and highly structured

Essentially an accelerated DMAIC project

Rapid Transformation WC Process & Strategy 13. When to Kaizen

When obvious waste sources have been identified

When the scope and boundaries ofa problem are clearly defined and understood

When implementation risk is minimal

When results are needed immediately - i.e., capacity constraints, setup reduction, acute quality problems, safety/ergonomic issues

In the early stages of a project to gain momentum and build credibility

Rapid Transformation WC Process & Strategy 14. When to Use Kaizen Project Idea Incremental Improvement? Re-engineer Project Small Project? Large Project Process Speed? Process Quality Project Kaizen Perform Value Stream Mapping Break into Small Projects Yes No Yes Yes No No Use Inter-Ocular analysis Rapid Transformation WC Process & Strategy 15. Kaizen Goal

Focus on each step in the process

Reduce the Non-Value Added Steps

Minimize the Business Value Added Steps

Streamline the Customer Value Added Steps

Eliminate All Waste

Product Lead Time Customer Value Added Non-Value Added Start Finish Business Value Added Rapid Transformation WC Process & Strategy 16. Kaizen Benefits

Provides momentum for the project

Drives value ($) early, thus improving ROI

Helps the Company

• Eliminate hidden costs of waste

• Ensure work provides value

• Allows major improvements quickly

Helps You

• Eliminate waste and interruptions

• Influence the work you do every day

• Be part of the solution

Reduces stress on project team to Get Something Done!

Rapid Transformation WC Process & Strategy 17. Kaizen VS Traditional DMAIC Project

Team is 5 Days Full Time vs. 4 Mo Part Time

• Actual team hours may be close

Resources Dedicated

• 100% Dedicated for 5 days

Scope Completed/Problem Identified Going In

• Team does not have time for scope assessment

Basic Data Gathered

May use Tribal Knowledge vs. Detail Analysis

• Solution may be known but historically not listened to

30-Day Follow Up Action Items

• Items that cannot be finished that week

Rapid Transformation WC Process & Strategy 18. Kaizen Structure Team Training Rapid Transformation WC Process & Strategy Issue List Area Discovery Cause & Effect GoalBrainstormed Ideas Final Presentation Effort Benefit .5 1.5 1.0 2.0 2.5 .5 3.0 3.5 4.0 4.5 5.0 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 1 2 3 4 5 8 9 10 7 6 Action Items What Who When Status Implementation 19. Kaizen Preparation

Begin preparation 2 weeks before start of the Kaizen event

• Collect necessary data

• Notify participants of their involvement

• Create introductory training for participants

• Share the project charter

• Collect preliminary process maps

• Complete any meeting logistic issues

• Hold Kaizen

• • Meet for one week

• • No interruptions

• • No cell phones

Kaizen! Timeline(Maximum of 45 Days from Start of Event Prep, Through Event, to Final Follow-up) Pre-Event Prep (3-10 days) Kaizen! Event (3-5 days) Event Follow-up (30-35 days) Rapid Transformation WC Process & Strategy Meeting Logistics Order lunch Soft drinks Ice Tea Coffee Etc. 20. Facilitation Keys

Keep Team On Track!

• No emails or blackberrys

Event will be stressful

Drive them to success

Be a part of scope and team selection if possible

Plant seeds but dont overpower the team with your ideas

Rapid Transformation WC Process & Strategy 21. Kaizen Team Rules

Throw out all of your fixed ideas about how to do things.

• That is the way it has always worked!

• It has to be that way!It wont work any other way!

Maintain a positive attitude (how will it work, not how it wont).

Practice mutual respect.Treat others as you want to be treated. Never leave disagreements unspoken.

The only stupid questions are the ones not asked.

Ask Why? at least five times until you find the ultimate cause.

Were not interested in assigning blame - only in creating solutions!

One person, one vote position doesnt matter.

Have fun!

Understand the process, and JUST DO IT!

Rapid Transformation WC Process & Strategy 22. Toolset Used During Kaizen

Any tool may be used to aid the team during a Kaizen event from a Process Map to a Designed Experiment.

Bottom line is you use any tool that is needed!

• Pareto

• Fishbone

• Process map

• Spaghetti Diagram

• Cycle Time/Takt Time

• NVA Analysis

• Time Studies

Rapid Transformation WC Process & Strategy 23. Kaizen Toolset: Resource Flow Layout

The Spaghetti Chart

Indicates an in-box or outbox where work (forms/information) waits to be worked on or transferred Lines indicate paper/information travel: - No set path - Lots of rework 230 yards Rapid Transformation WC Process & Strategy 24. Kaizen Schedule Rapid Transformation WC Process & Strategy 25. Weeks Activities

Monday

Team Training

• What is a Kaizen?

• Project and Goal Background

• Present Data/Burning Platform

• Specialized Training Geared Toward Project Goal

Discovery

• Team Spends Afternoon in Project Area

• Map the Existing Process

• Gather Insights from Personnel

• Observe Issues/Conduct Studies

• Evaluate Risk

• Keep Detailed Notes

Rapid Transformation WC Process & Strategy 26. Failure Mode Effects Analysis

Document

• What will happen if our project fails?

• What will happen if the implementation fails?

Rapid Transformation WC Process & Strategy 27. Weeks Activities (Cont.)

Tuesday

Area Discovery (Cont.)

• Review Monday Activities

• Process Map

• Gather Insights from Personnel

• Document Problems Found

• Analyze Problems to Determine Root Causes

• Begin to Define Future Metrics

Our ability to assess the performance of a process we wish to improve is only as good as our ability to measure it. Rapid Transformation WC Process & Strategy 28. There are usually three views of a process: Process Mapping Rapid Transformation WC Process & Strategy What youTHINKit is.. 1 What itACTUALLYis.. 2 3 What itSHOULDbe.. 29. The Hidden Operation Rapid Transformation WC Process & Strategy Work Arounds Op i Op i + 1 Analysis Scrap Off-Line Correction Correctable ? Verified ? No Yes Quick Fixes Inspections Scrap Rework Extra Equipment Increased Inventory Increased Cycle Time Frustration Defects Customer Dissatisfaction Cost 30. Example: High-level Swim Lane Process Map Rapid Transformation WC Process & Strategy 31. Example: High-level Swim Lane Process Map Rapid Transformation WC Process & Strategy 32. Identify Waste

• Each process activity can be tested for its value-add contribution

• Ask the following two questions to identify non-value added activity:

• • Is the form, fit or function of the work item changed as a result of this activity?

• • Is the customer willing to pay for this activity?

NVA NVA NVA NVA NVA NVA NVA Rapid Transformation WC Process & Strategy Call for an Order Answer phone Asks for more? Greetings and mention specials Calculate price Rewrite Order Order still OK? Gets address & phone # Add to Order Give order to Cook Rewrite order Yes Yes No No Request order from customer Writes on scratch pad Asks cook for time estimate Inform customer of price/time No Thanks customer & hangs up Completes order from from note pad Another call waiting Writes time on scratch pad Writes time on scratch pad Confirm order Yes 1 1 New order? No No Verify with notes Yes 2 2 OK Not OK 3 3 33. Get to the Root Cause

Ask Why 5 times

• The follow-up time with clients is inconsistent.Why?

• Client follow-up expectations vary.Why?

• The Account Managers set unrealistic expectations with the clients.Why?

• Account Managers are not trained on what expectations to set. Why?

• No training has been developed about setting expectations.Why?

• Each client has a unique service level agreement and that information has never been published.

34. Weeks Activities (Cont.)

Wednesday

Brainstorm Issues

• Capture Ideas/Solutions

• Evaluate Studies

Reduce and Prioritize Ideas

• Affinitize Ideas/Solutions

• Multivoting

• Rank using Benefit/Effort Matrix

Midweek Status Meeting

Brainstorm Improvements

2. Multivoting 3.Rank by Benefit/ Effort/Cost 135 93 33 Rapid Transformation WC Process & Strategy 35. Mid-Kaizen Review

Mid-Week Status Meeting:

Purpose:

• Review team successes with management team

• Review proposed Kaizen activities for implementation

• Address any obstacles impacting implementation

• Gain agreement from Management to proceed

Responsibility for Conducting the Meeting:Kaizen Team and Project Sponsor

Frequency:End of third day

Duration:30-45 Minutes

Attendees:Kaizen Team, Project Sponsor ,Management

Rapid Transformation WC Process & Strategy 36. Weeks Activities (Cont.)

Thursday-Friday

Improve

• Build the new process

• DocumentAction Items

• Develop plan to pilot the new process

Control

• Train in the new process

• Pilot the process

• Create/Update Company Procedures to document and sustain improvements

• Finalize metrics to measure new process

• Present results to Management Team, complete follow-up, monitor results over time

Rapid Transformation WC Process & Strategy 37. More on Process Mapping 38. Process Mapping Hints

If your process handles or creates a work product or thing, then use this as part of your map indicating the information that is added, used, or changed.

• Header sheets are a good example

Include samples of all information referenced as a part of the process .

• If you use a chart, graph, report, or other information as part of your task, include a physical copy on the map.

This can not be done as separate parts pasted together.

• It is a group activity where each person teaches the others what their role is and what work they perform.

It ALWAYS takes longer than you think

Rapid Transformation WC Process & Strategy 39. Example: Simple Process Map Rapid Transformation WC Process & Strategy 40. Example: Moderately Complex Process Map Rapid Transformation WC Process & Strategy 41. Example: Complex Process Map Rapid Transformation WC Process & Strategy 42. Example: Value Stream Map Rapid Transformation WC Process & Strategy 43. Why is it Important to Complete Projects Fast?

Minimize the number of active projects

Maximize the allocation of resources (intellectual capital) to the projects with the greatest return on investment

Black Belt with 8 Simultaneous Projects AndNo Prioritization :Black Belt focused on 2 Projects at a time ofHighest Priority :WC Process & Strategy 44. October 13, 2009 Three Project Examples 45.

Problem

It takes too long to load software on new servers for customers

Services and licenses are not billed to the customer until the customer takes the server live (60-120 days)

Hardware Conversion Cycle Time Reduction

Background

Healthcare company upgrades/optimizes servers for customers to enable their products to run efficiently and effectively

Results

HW revenue billed in 15 days

80% of services revenue billed in 30 days

A $125,000 one time revenue increase was achieved by accelerating the billing of inventoried hardware

A $137,000 cost avoidance was achieved by reducing project hours and interest on inventory.

1 staff member was redeployed to fix a bottleneck in the Systems Integration Group

Approach

The DMAIC methodology was used in this Lean project to reduce cycle time and hours

Process mapping identified non-value added work in the existing processes

• SMEs accelerated parallel tasks to the front of the process

• Finance compressed the revenue recognition to the front of the life cycle

46. University Hiring Process

Background

There is a mix of centralized and decentralized (automated and manual) hiring processes with no clear process ownership, resulting in different hiring processes for different types of employees

Problem

• 4 manual hiring processes

• No clear process ownership

• 30% of the hiring forms have multiple defects

• Many workarounds and shadow systems

Approach

• Process mapped all four systems

• Identified the sources of defects

• Removed reliance on Cat Card

• Accelerated other activities

• Automated new process in PeopleSoft

Results

• Centralized HR process

• Virtual and in-person services

• Removed Cat Card as a requirement

• Accelerated hiring dramatically

• Reduced department workload

Root Causes

• No forms tracking

• Lost/incomplete forms

• Process redundancies

• No hiring process training

• Needed services require Cat Card

Rapid Transformation WC Process & Strategy 47. Sales to Project Scheduling Process

Problem

Interfaces were not scheduled

Staff had inconsistent workload

Forecasting revenue was impossible

Background

The time required to schedule interfaceswas highly variable with a mean of 30 days from the receipt of the Purchase Order.This variability made it difficult to predict revenue on a monthly basis.

Results

A new scheduling process was developed, trained and validated.

The sample mean of the time to schedule was reduced by 90% from 30 days to 3 days.

Statistical control achieved, weekly monitoring confirms compliance to process SOPs.

Approach

A Kaizen was used to quickly understand the problem and the data.

The DMAIC methodology was used to redesign the scheduling process.

Process mapping identified non-value added work in the existing processes and highlighted areas for improvement.

New tools were developed to accurately track call events

New procedures were written and employees were trained in the new process.

Sample Mean reduced by 82% from 37 to 7. Rapid Transformation WC Process & Strategy 48. Where to Deploy Kaizen in the Hospital 49. Lean Deployment Locations and Success From ASQ, Quality Progress, August 2009 Rapid Transformation WC Process & Strategy 50. Six Sigma Deployment Locations and Success From ASQ, Quality Progress, August 2009 Rapid Transformation WC Process & Strategy 51. Greatest Challenges to Successful Deployment From ASQ, Quality Progress, August 2009 Why? Why? Rapid Transformation WC Process & Strategy 77 of 5,000 hospitals Confidence level 95% Confidence interval +-11% 52. To 10 Reasons for Less Than Successful Projects

Project Sponsor not active

Project not linked to corporate strategy

Poorly defined Charter Team has to spend time to get the charter right

Scope too large or scope creep

Poor understanding of requirements

• Process

• Customer

• Business

• No organizational buy-in stakeholders not involved

This is not a lean or six sigma project to begin with

Team focus

• Not honoring time commitment

• Trying to do too much (boil the ocean)

Jumping from Define to Improve

Rapid Transformation WC Process & Strategy 53. References

Six Sigma

• Thomas Pyzdek (2004).TheSix Sigma Handbook.New York: McGraw-Hill

Lean (Kaizen)

• Jeffrey K. Liker(2004).The Toyota Way , New York: McGraw-Hill

• James P. Womack and Daniel T. Jones,Lean Thinking , New York: McGraw-Hill

Lean/Six Sigma

• George, M. L. (2002).Lean six sigma: Combining six sigma quality with lean speed . New York: McGraw-Hill

• George, M. Rowlands, D. & Kastle, B.(2003).What is lean six sigma? New York: McGraw-Hill.

Rapid Transformation WC Process & Strategy