Velocity: Combining Lean, Six Sigma and the Theory of Constraints to Achieve Breakthrough Performance - A Business Novelby Dee Jacob, Suzan Bergland, Jeff Cox
Millions of readers remember The Goal, the landmark business novel that sets forth by way of story the essential principles of Eliyahu Goldratt's innovative methods of production. Now, from the AGI-Goldratt Institute and Jeff Cox, the same creative writer who co-authored The Goal, comes VELOCITY, the book that reveals how to achieve outstanding/i>/i>/i>… See more details below
Millions of readers remember The Goal, the landmark business novel that sets forth by way of story the essential principles of Eliyahu Goldratt's innovative methods of production. Now, from the AGI-Goldratt Institute and Jeff Cox, the same creative writer who co-authored The Goal, comes VELOCITY, the book that reveals how to achieve outstanding bottom-line results by integrating the world's three most powerful continuous improvement disciplines: Lean, Six Sigma, and Goldratt's Theory of Constraints.
Used by the United States Navy and United States Marine Corps to dramatically improve some of the most complex, logistically vast supply chains in the world, the VELOCITY APPROACH draws on the strengths of all three disciplines to deliver breakthrough performance gains. In physics, speed with direction is velocity; in business, the application of VELOCITY means your organization can achieve operational speed with strategic direction to outmaneuver competitors, gain loyalty with customers, and rapidly build sustainable earnings growth in as little as one or two business quarters.
Dee Jacob and Suzan Bergland, two princi-pals of AGI, have been teaching the concepts, techniques, and tools of VELOCITY to major corporations, including Procter & Gamble, ITT, and Northrop Grumman, for years. Now they unlock the door for you to see how to apply their insights and methods to your organization be it business, not-for-profit, manufacturing, or service based in order to shorten lead times, slash inventories, reduce production variability, and increase sales.
Writer Jeff Cox returns with the vivid, realistic style thatmade The Goal so readable yet so edifying. Thrust into the presidency of the subsidiary company where she has managed sales and marketing, Amy Cieolara is mandated by her corporate superiors to implement Lean Six Sigma (LSS) in order to appease a key customer. Assigned to help her is LSS Master Black Belt Wayne Reese, installed as her operations manager. But as time goes on and corporate pressure mounts, Amy finds she has to start thinking for herself and learning from everyone around her and she arrives at the series of steps that form the core of the VELOCITY APPROACH.
VELOCITY offers keen insight into the human and organizational factors that so often derail growth while teaching you proven, practical techniquesfor restarting and revving up the internal engines of your company to reach new levels of success. Colorful characters, believable situations, and everything from dice games to AGI's "reality tree" techniques make this business novel a vital resource for everyone seeking to deliver business improvement in these challenging economic times and far into the future.
"As we transformed the entire Naval Aviation logistics system, our leadership team decided that 'AIRSpeed,' our continuous process improvement program, would combine best business practices Lean, Six Sigma, and Theory of Constraints. This strategy not only enabled Naval Aviation to reduce turnaround times 40 percent and work in process nearly 50 percent in areas applied, but enhanced the quality of life of our sailors and marines." VADM Walter B. Massenburg, USN (Ret.), former Commander, Naval Air Systems Command; Architect and Chief Operating Officer of Naval Aviation Enterprise
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Read an Excerpt
The news spread by way of hushed murmurs in hallways, muffled conversations behind closed doors, mutterings over the tops of cubicle walls, quiet phone calls with hands covering the mouthpieces. However, one poor chump was stupid enough to broadcast it in an email – and he eventually got the blame and was canned, although he in fact had not been the one initially to leak the word. ‘In any case, within hours – and a good two days before the official announcement – practically everyone at the headquarters of Hi-T Composites knew what was only supposed to be known by certain boards of directors, key executives, and a few trusted subordinates.
Amy Cieolara, who was not one of those privileged few, had just got back to her office after her regular Wednesday meeting with her marketing and salespeople. She was a slim woman, age forty-one at the time, with sandy brown hair cut midlength that she wore either pulled back or in long, flowing curls framing her rather angular chin-line. This was a curls day, and she was having trouble keeping them out of her face as she walked briskly through the offices while thumbing a text message at the same time. Almost in lockstep behind her as she went into her office came Linda, her assistant, who closed Amy’s door and held it shut, leaning against it lest some intruder should come barging in and hear her speak of the appalling secret.
“Have you heard?” Linda asked.
“What? About Elaine and Bill? Well, everyone said it was never going to last, and guess what, it didn’t.”
“No!” said Linda in an exclamatory whisper. “We’re getting sold to some huge company!”
Amy’s green eyes sharpened their focus on the younger woman’s worried face.
“Well? Is it true?”
“Linda, if I knew, which I don’t, I wouldn’t be allowed to say anything to anybody. By the way, who told you?”
“Nobody. There’s an email floating around. I’ll forward it to you.”
“No!” said Amy. “I don’t want it on my computer. Print a copy for me.”
Linda slipped out the door, back to her desk. When she returned a few minutes later, sheet of paper in hand, Amy took the email printout and read it quickly, then blew a soft whistle from between her lips.
“Wow, is this guy in trouble,” Amy said under her breath. Then, to Linda: “Look, it’s probably just one of those rumors that gets started. Don’t get yourself in a tizzy.”
“But Bobby just got laid off and I’m five-and-a-half-months pregnant! What if we have to go through all that downsizing stuff again?”
“If it ever happens, it’s a long way off. All right? Anyway, Bobby is smart; he’ll find something else. You’ll both be fine – I mean, all three of you, you’ll be just fine. Now, I need you to make some travel reservations for me …”
With Linda calmed down and returning to her normal high-level competency, buzzing away at task after task and all but leaping tall buildings, even in her pregnant state, Amy whisked herself down the hall. Email printout in hand, she hurried into the corner office of Hi-T Composites Company President B. Donald Williams. She shut B. Don’s door behind her and leaned her slim frame against it, almost exactly as Linda had done.
“What’s up?” asked B. Don.
“Have you heard?”
He blinked his eyes as if feigning ignorance, then relented. “Well, yes, I have heard. I have to say, I am not shocked.”
“No, I’m not.”
Amy’s mouth dropped open.
“Anyone could have seen it coming,” he said.
“Well, I couldn’t.”
“Come on, Amy! Everyone knows Bill is a jerk – and Elaine, much as I appreciate her professionally, would just be impossible to live with.”
“No! Not them. This!”
She handed the sheet of paper across the desk to B. Don and sat down in one of his well-worn, sun-faded chairs. The business unit president put on his glasses and then scrutinized the words, his eyes widening as he read.
“Oh … ! Oh snap!” he said. “Where the snappin’ hell did this come from?”
“According to Linda – who had nothing to do with this – everyone knows. Or thinks they know. Anyway, everyone is talking about it. By the way, is it true?”
B. Don leaned back, removed his glasses, and gave them a toss, such that the glasses spun across the leather blotter on his desk. He then shut his eyes and pinched the bridge of his nose with his thumb and forefinger.
“Can you tell me … or not?” Amy asked.
“You,” he said with emphasis, “cannot tell anyone.”
“But everyone knows.”
“But you cannot talk about it. Okay?”
“To anyone. Understood?”
“Well, sure. But according to Linda, it’s all over the place.”
“Most of what’s in this moron’s email is pure crap. However … and unfortunately … the basic story is true. We are being sold. That’s why I’ve been going to St. Louis so often the past few months. I’ve been at headquarters meeting with the board and the new buyer.”
B. Don leaned over his desk and whispered the name.
“Yes,” he said. “Now, what I’ve just told you could probably get me fired … or, these days, even get me sent to jail. So–”
“I won’t breathe a word, you know that.”
The president tipped back in his chair, shook his head, and exhaled, making a sound somewhere between a chuckle and a sigh.
“Amy, I hate to swear in front of you–”
“B. Don, it’s fine. I’m sure I know all the words.”
“But what really pisses me off is … we finally got it right. We got our production issues sorted out. And we nailed the Herbie.”
“We nailed the Herbie.”
“The … the bottleneck. The system constraint. We nailed it, and it’s not movin’. And these guys are going to come in and screw it up. I just know it’s going to happen. They are going to come in high and mighty and they are going to screw it all up.”
“Don, I’m sorry, but I don’t know what you’re talking about.”
“Well … you’re marketing. What I’m talking about is a supply chain issue–”
“Which does affect marketing. Not to mention sales.”
“Anyway … so be it. One does what one can do,” said Don. “Now, Amy, you’re a far better wordsmith than I am. Help me write something I can send out to the general world countering the so-called rumor, especially the piece of it that’s true. In other words, help me lie through my teeth and yet not seem to be completely evil or stupid in a few days’ time.”
Five months later, the shareholders and the various regulatory bodies gave their approvals and the deal closed. Hi-T Composites became a subsidiary of Winner, Inc., a global corporation headquartered in New York City. Meanwhile, Linda and Bobby had had a baby girl – Holly – and Bobby did find a job, though at a much lower wage than he had previously earned, and he was looking for another. And, to everyone’s amazement, Bill and Elaine patched things up and even went on a second honeymoon (their first honeymoon having been a mere two years prior), although upon her return Elaine complained that she and Bill were arguing even before they got on the plane to Costa Rica.
With the transfer of ownership accomplished, B. Donald Williams went to New York to present Hi-T’s business strategy and otherwise become better acquainted with Winner’s top management. Upon his return, B. Don conducted a series of meetings with employees talking up all the wonderful advantages of being part of the Winner family and downplaying the many concerns over what the future might hold. But Amy Cieolara, who could always read him, discerned that there was much that B. Don was not saying publicly.
Late one afternoon, after most people had left for the day, Amy was still in her office and B. Don came by, pausing in her doorway.
“You got a minute?” he asked.
“Sure. Come on in.”
He did so and closed the door behind him.
“This is in confidence.”
“Understood,” Amy said.
“There are some things I want you to know about. You and a few others. The good people. Things I can’t say to everybody.”
B. Don hesitated then. He stared out her window for a moment, collecting his thoughts, then pulled a chair next to her desk and sat down.
“Amy, this transition is going to be worse than what I first thought. These guys at Winner …” He shook his head slowly. “They’ve got a very different culture from what we’re used to. Very competitive. Way, way, way more competitive than what the St. Louis management set as the overall tone. In fact, I would go so far as to say that inside Winner it’s a survival of the fittest mentality.”
“Oh. Gee! That’s great!” she said. “In fact, this really sounds like fun!”
“Yeah. Well, it’s going to be a different ball game. For instance, every manufacturing plant will be competing with every other manufacturing plant on the same metrics. And the same goes for every function. Your marketing and sales team will be competing with every other marketing and sales team across the board inside Winner.”
“Competing for what?”
“Resources. Talent. Bonus money. Stock options. Perks. Promotions. Recognition. And there are sticks to go along with the carrots. Those who lag in performance will be weeded out. Weakness will not be tolerated.”
“Well, I’d like to think we can hold our own,” she said. “I’m not afraid of a little competition. Just tell me what the rules are, and I’ll deliver whatever is required.”
“That, Amy, is a big part of the problem.”
“What, you mean there are no rules? It’s like a bar fight or something?”
“Oh, they’ve got plenty of rules, all right!” he said with a chuckle. “Plenty of policies – both written and unwritten – and you must abide by them. Listen, Amy, I’m not afraid of a little competition either. Our team at Hi-T can go head to head with anyone, and there’s a time and place for everything.”
Amy leaned back in her chair. She could sense a “but” coming, and she was not disappointed.
“But on the other hand, I have seen the metrics that Winner uses for manufacturing, for service functions, for administrative, you name it. And I am not at all convinced that most of what they’re measuring really contributes to the bottom line. In fact, I don’t think what they’re mandating actually makes money – and I suspect a lot of it gets in the way of making money. You go read their annual reports, Amy. Not many of their divisions are actually growing their businesses – not by very much, and they’re not throwing off a lot of cash either. Some are getting the tar kicked out of them. You look at Winner’s corporate numbers – revenue growth, increasing earnings per share, and so on – and they seem impressive. But drill down and it soon becomes obvious that Winner is mostly growing only by way of acquisition. That’s why they have to keep buying businesses like ours, using leverage and driving up their debt, by the way, because what they have going internally is really not getting it done. For all their vaunting of the virtues of competition, Winner is really not very competitive!”
Amy was listening closely but fidgeting, shifting in her seat, playing with her pen, which was what she did when she was nervous or unsettled.
“So,” Don continued, “it’s going to be tough.”
She flashed an uncomfortable little smile and said, “You know what they say, Don: When the going gets tough, the tough get going.”
“Yes, and that’s my plan,” said Don.
“I am going. Leaving. Bugging out. Hitting the bricks.”
“No definite date. But I’m pretty dang sure Winner does not want me for the long term. If I hang around I can probably haggle for a supergood package from them. But I don’t know if I even want to endure the aggravation. I’m fifty-nine; I’ve got enough money to retire now if I want to. And if I get tired of sailing my boat or playing golf or cruising the world, that’s what headhunters are for.”
Amy’s eyes had watered just slightly. She sighed.
“I’m really going to miss you, B. Don.”
He nodded. “Well … thanks. We’ve done a few good deeds together, haven’t we. Saved the business and got it growing again after some bad times. Kept a lot of jobs right here in Highboro. Not all of them, but we’re still a major employer. Helped keep the big ones flying with replacement parts … and that’s the truth. Made nice profits, even as we brought prices down and grew our market share. And now we’ve got new generations of composites coming on, and the wind turbine segment shows some real promise on the energy front. I’ll miss it. I’ll miss you and a lot of the others. I’ll miss the challenges. But when it’s time to go …”
Don leaned forward. Amy thought he was going to stand up and do just that, but he didn’t. Instead he looked straight at her and lowered his voice.
“Amy, this conversation, of course, never took place, but if I were you, and I hate to say it, you might want to bring your résumé up to date and have a look around yourself.”
She shook her head. “I can’t. Not unless the job is here in town or pretty close by. Not with my parents the way they are.”
“They are up there in age, aren’t they. You were the change-of-life baby, I believe,” he said with a smile.
“Yep, I was the surprise. But, Don, you know the situation. Dad’s got Alzheimer’s. If he moves to a new place, he’ll never figure it out. Mom’s finally got a good set of doctors here for all her problems. I can’t just uproot them and take them with me, and they really need somebody to look in on them every few days. Then there are my kids … they’d lose all their friends. I can’t bring myself to say the hell with everybody and go look for the perfect job. So I’m kind of stuck here.”
“I understand. But, Amy, there is one last thing I feel I need to warn you about, in case you do stay. In the past, you have complained to me privately about a perceived glass ceiling in place at the St. Louis headquarters.”
“And you always insisted it wasn’t there.”
“Well … I’m not saying it wasn’t there, but I always figured the right woman, the right anybody, could punch through it. In St. Louis. But these guys … I heard in New York a few things said, never mind what, things you yourself will never hear. And at Winner, that glass ceiling, sorry to say, is in place. Try not to be too harsh in your opinions; I think it’s just part of their competitive thing.”
Amy sat stoically for a second, then snapped her lips together to form a happy idiot’s grin.
“Well … B. Don! You sure have cheered me up! I am so glad you stopped by!”
He laughed and stood to leave her. He extended his hand. Amy shook his hand, but then came around the corner of her desk and hugged him.
“Amy,” he said, “you take care of yourself, you hear?”
Within months B. Don was gone, retired. He and his wife, Daisy, soon booked a year-long world cruise and sailed off from Miami into the sunrise.
Taking B. Don’s place was a man said to be one of Winner’s up-and-comers, a man on the fast track to the top: Randal Tourandos, more colorfully known behind his back as Random Tornado. Indeed, he was a whirling dervish of managerial energy, often arriving at Hi-T’s downtown Highboro offices at four thirty in the morning to review in detail the metrics from the previous day, which had been prepared by his own dedicated IT squad – soon unofficially called the Microbursts – who worked in shifts to compile the latest data for him. Before long, it became common for Amy and everyone else to arrive at work to find as many as five or six emails demanding immediate attention to whatever the Tornado had happened to notice in the metrics that morning. Even worse was to walk in and find one of Randal’s outsize Post-it notes adhered to the seat of one’s chair, the messages almost unreadable in Randal’s speed-written scrawl. But if you got one, all other responsibilities had to be postponed until you had addressed the Tornado’s concerns – and correctly discerning what those were was often the biggest challenge.
Key to everything, as far as Randal was concerned, was WING3.2 – or Winner Information Network, Generation 3.2 – sometimes just called “WING.” This network was used throughout the corporation, and it had software designed to monitor every function in every business unit at a level of detail that was mind-boggling. Well, it was mind-boggling to many, but not to the Tornado, who was a computer whiz. In fact, as Randal himself was proud to tell everyone, he had been one of the software engineers on WING1.0, the first generation of the network. He had written some of the original code back in the day. And he still tinkered with it, adding or refining drill-down techniques and data-comparison features whenever the network was not doing something he thought it ought to do. He boasted that WING3.2 could tell you how many boxes of paper clips and pens were supposed to be in the supply closet at any location, based on purchases and estimated consumption rates. Future generations of WING, he claimed, would add what he termed “robust artificial intelligence” with queries and alerts to individual workers regarding what each one was supposed to be doing at any given moment. Amy Cieolara found it all to be rather Orwellian, but Randal was the boss and there was nothing she could do except go along.
Although full implementation of WING would take years, Randal and his IT techies, with the help of platoons of consultants, was able to get an essential implementation up and running in a matter of months. Almost as soon as it was in place, the Tornado began making his moves.
He started by mandating a 10 percent across-the-board staff cut in all functions, no exceptions. Amy almost lost Linda, who was one of the higher-paid assistants, but was able to save her in the end by firing two other assistants who were caught stealing laptops and toner cartridges. Even with such a legitimate excuse for termination, the whole process was exceedingly painful – for everyone.
Next, the Tornado closed and sold off what he called a “job shop” in northern Virginia that did small-lot and single-piece custom work, mostly for Hi-T’s Formulation & Design unit, which was based in Rockville, Maryland. He consolidated all production at the Oakton plant, located about twenty miles outside Highboro. He then introduced incentive pay at Oakton – over the protests of plant manager Murphy Maguire – in order to increase productivity. And there were a multitude of new policies and work rules, such as the directive that each and every function at Oakton would only process its work in the batch sizes that WING had calculated to be economically optimum.
Then there were the rather screwy and mean-spirited new policies upon which he insisted. For instance, he banned all coffeemakers from company offices and got rid of the little refrigerators where employees could keep soft drinks and store their lunches, claiming that it was not the company’s responsibility to provide space or electricity for these. More seriously, he began pressuring managers to keep coming up with new ways to reduce expenses in every conceivable way.
In his first year, Random Tornado reported to Winner’s corporate management an 11 percent increase in Hi-T’s net income, and a 17 percent increase in productivity. Amy, for one, was not sure how “productivity” was calculated, but that was the number that WING printed and so it was taken as gospel. For this marvelous first-year performance, the Tornado was given a tremendous bonus, rumored to be in the range of millions of dollars. He then put himself and all the Highboro managers on one of Winner’s corporate jets and flew them to a resort in Jamaica for three days of work, surf, and frolic.
On a personal level, Randal could actually be a fun guy to be around. He was very work-hard, play-hard. Amy, almost against her will, found herself liking the Tornado in Jamaica. When she returned, nicely tanned, to the office, she showed Linda pictures of Randal wearing a dreadlocks wig, doing a cannonball dive into the resort pool, and pretending to bite the dorsal fin off a shark he had hooked on an afternoon fishing charter.
“And, Linda, you should see him dance,” Amy said. “He just needs a couple of Cuba libres to get him going. You’d never know he was the same … well, you-know-what from here in the office.”
Then, eighteen months after he arrived, the Tornado was gone. He was hired away from Winner to run a semiconductor company in Silicon Valley that had survived the tech-bubble crash only to stagnate and decline in the marketplace. The Tornado was certain that he could turn the company around in a matter of a few years, and that disciplined cost-cutting was the foundation on which he would build. For accomplishing this, his total take from the company – mostly in stock options – was said to be potentially enormous, perhaps even beyond millions.
The Microbursts threw a wild good-bye party for the Tornado. Oddly, no one else was invited to attend. Amy got Randal a bottle of good champagne and attached ribbons and a card wishing him well. But the first morning after the Tornado’s departure, when she arrived at her office and found no emails on what WING had ferreted out of the metrics and no Post-it note on her chair, she breathed a deep sigh of relief. Within days, the coffeepots reappeared.
That relief, however, was short-lived. Well before the Tornado went off to California, even before he had collected his enormous first-year bonus at Hi-T, Amy could sense that things were not going as swimmingly as a 17 percent jump in productivity suggested.
In the beginning, right after Winner acquired Hi-T, Amy had tried to make the best of it. She had some slick presentations and brochures created to cast the best light on the change of ownership. She briefed the sales force. She herself met with key customers and spoke to them reassuringly of the exciting times that lay ahead. Yet as WING3.2 came online and Randal mandated his changes, Amy had a feeling that maybe she should have been less enthusiastic in her assurances to everybody.
There was a vague sense in the air of Hi-T losing altitude, of a loss of momentum, of a rudderless yaw. The decay in performance was gradual and hardly detectable at first. Amy first noticed it in the faces of her fellow managers, the frowns when the Winner policy changes were handed down, the faces filled with stress as the Tornado turned up the pressure. There were several good managers who, like B. Don, either retired or moved on during this time. Amy herself, for a brief period, had her résumé out, but the only position in the Highboro area that she found even slightly appealing would have entailed a precipitous drop in pay. So, like everyone else who stayed, she hung on.
As the end of Randal’s first year had approached, Elaine – Hi-T finance manager, also the Elaine of Bill and Elaine – began making noises about dwindling cash and dramatically increasing inventories at Oakton. The Tornado had told her that as WING continued to optimize all functions and to reduce costs, these issues would melt away. Anyway, Elaine often made noise about lots of things. It was her nature to fuss and complain and predict dire consequences if her warnings were ignored. Under B. Don, her drama-queen theatrics often were ignored or played down, and nothing very bad ever happened.
Then Amy noticed an increase in service-related complaints. When she spoke of these matters to Randal, he told her much the same thing he told Elaine, that these were “teething problems” that were somewhat inevitable with changes going on, and that as WING became more fully implemented, these would go away over time. When the teething problems then began to grow fangs, the Tornado threw it all right back at her, insisting that the service complaints were Amy’s to solve. At one point he accused her salespeople of promising unrealistic delivery dates, when in fact the lead times being quoted were exactly what Hi-T had been working within for quite some time.
There were quality problems as well. The Tornado first said they didn’t exist, then asserted that they must be the result of the aforementioned unrealistic delivery dates – again, Amy’s fault – which rushed suppliers and workers so much that they could not always get it right the first time. In any case, he told her, the most important objective was to boost productivity, and to bring down costs.
“Quality,” he actually told her, “is secondary.”
The Tornado had said that about a month before announcing that he was leaving Winner. He left, but WING stayed. So did the problems that WING was supposed to solve.
© 2010 The Avraham Y. Goldratt Institute, a Limited Partnership, and Jeff Cox
Meet the Author
Dee Jacob is the president of AGI—Goldratt Institute, which is based in New Haven, CT. She is a key innovator in the development of the Theory of Constraints and of the velocity approach. Jacob teaches at the AGI Jonah Program and Thinking Process courses. Before joining AGI, Jacob was a manager with Procter & Gamble where she integrated TOC and LSS techniques.
Suzan Bergland is a partner of AGI and president of its North American Group. She is an expert in the velocity approach integrating TOC and LSS. She is a founder and member of The Theory of Constraints International Certification Organization (TOCICO), and also holds membership to the Association for Operations Management and the American Society for Quality.
Jeff Cox is the co-author or author of seven works of business fiction, which include The Goal, Zapp, The Quadrant Solution, Heroz, The Venture, Selling the Wheel and The Cure. Both Zapp and The Goal ranked first and second, respectively, on a list of bestselling business books from the 1990s. Jeff and his family live near Pittsburgh, PA.
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