The Lean Machine: How Harley-Davidson Drove Top-Line Growth and Profitability with Revolutionary Lean Product Development

by Dantar P. Oosterwal

Overview

In this insider guide, former Harley-Davidson executive Dantar Oosterwal offers an exclusive look at how Harley-Davidson was able to adapt in an ever-changing world to stay on top and stay in existence.

From near-extinction in the early eighties, Harley-Davidson rose to worldwide recognition and is still today one of the great, iconic American motorcycle brands. In this insider guide, former Harley-Davidson executive Dantar Oosterwal offers an exclusive look at how Harley-Davidson was able to adapt in an ever-changing world to stay on top and stay in existence

In The Lean Machine, you will learn about their secret weapon and go-to formula for outstanding success as well as:

• the day-to-day transformation at Harley-Davidson
• their adapted Knowledge-Based Product Development
• identifies universal change and improvement issues so that any company can incorporate this

Rooted in Japanese productivity improvement techniques, the Knowledge-Based Product Development method helped Harley realize an unprecedented fourfold increase in throughput in half the time--powering annual growth of more than ten percent.

The Lean Machine is part business journal, part analysis, and part step-by-step toolkit that will help companies in all industries achieve predictably excellent results.

Product Details

ISBN-13:	9780814413791
Publisher:	AMACOM
Publication date:	01/13/2010
Sold by:	HarperCollins Publishing
Format:	eBook
Pages:	272
File size:	5 MB

About the Author

DANTAR P. OOSTERWAL has led global innovation improvements as Vice President of Innovation at Sara Lee, as well as Director of Product Development at Harley-Davidson.

Read an Excerpt

Introduction

Learning is not compulsory . . . neither is survival.

W. Edwards Deming

This book is written with one purpose in mind: it is intended to help you improve the effectiveness and efficiency of your product development system. The objective of this book is to provide you with the insights necessary to develop more new products of higher quality in less time with your existing organization. This is the story of my personal journey of learning and discovery and is intended to encourage you on your improvement journey, or perhaps persuade you to embark.

In 2003 Harley-Davidson was awarded the Outstanding Corporate

Innovator (OCI) award by the Product Development Management

Association (PDMA). The OCI award was won based on conventional phase gate thinking.1 Through the application of lean principles to product development, the same organization reduced their development time by half and quadrupled new product development throughput. This book provides the organizational learning practices and the knowledge-based development principles to enable your organization to achieve similar or better results.

This is a true story, not a novel. Some poetic license has been taken in the chronology of events to make the story meaningful to the reader because, as with any good road trip, the learning journey does not necessarily happen in a neat and orderly fashion. Any learning journey has its fair share of wrong turns and dead ends. To convey the message in a readable fashion our experience is abbreviated and presented more linearly than it actually happened. All of the people in the story are real people. In some cases real names have been used to recognize and acknowledge their contribution. In other cases names have been changed to protect identities.

All of the information presented in this book is actual data. If the information is discoverable through publicly available sources, then the actual numbers are presented unchanged. However, if the actual numbers are not generally available through public means, then the numbers have been modified to convey the message without providing actual values to maintain confidentiality.

Overview

The story has three parts: The current state of product development a the learning environment and organizational learning fundamentals a and the principles of knowledge-based product development. The book is structured to first allow you to see product development as an integrated system and recognize that improvement of the system is only achieved through a learning journey, then provide you with means to take the journey for yourself.

In Chapter 1 the story begins with the current state of product development, based upon firsthand experience working at a car company

I’ve chosen to call ‘‘Roaring Motors.’’ It is the way I was taught to develop products. It is the way almost everyone I know learned to develop products. It is what I see at nearly every company I visit. The current state of product development lays the foundation for frustration a and subsequent motivation to find a way to work smarter rather than harder.

Chapters 2 through 7 describe the learning environment that was present at Harley-Davidson and which allowed this journey of discovery.

These chapters present principles of organizational learning neces-sary to improve product development. They describe how system dynamics and organizational learning enable continuous improvement in product development. The foundational elements for effective product development necessary to build a knowledge-based development system are also described in these chapters.

Chapters 8 through 16 describe the learning and discovery journey in the application of lean principles, which resulted in knowledge-based product development. These chapters describe the principles necessary to make product development effective and the improvement outcome you should expect.

The Importance of Product Development

Product development is the lifeblood of our companies and it fuels the economy. Product development is the road that innovation travels on the way to market. It is the key which unlocks dreams and the spark which ignites the future. A recent survey by the Product Development

Management Association (PDMA) identified that the top performing quartile of companies in their study derive nearly 48 percent of their sales revenue from new products and nearly half of the company’s profits from new products (products in the market five years or less).2

As the effective life span of products and services in today’s market decreases, it drives the need for shorter product lifecycles. In some cases the development time for new products exceeds the life expectancy of the product in the market. The innovation rate necessary for a company to be successful is rapidly accelerating. The driver for business success is evermore becoming a company’s ability to innovate.

The Boston Consulting Group (BCG) conducts a global survey of senior business leaders annually to identify the strategic direction of firms. The results reinforce the importance of innovation; recent findings from these surveys indicate that innovation is consistently a top strategic priority. In 2007 the BCG survey polled 2,500 senior executives from fifty-eight countries across all industries and found that 66

percent of the companies identified innovation as one of their top three strategic initiatives. The study also determined that over 50 percent of the senior executives polled believed that their company did not innovate well in spite of this strategic focus. Most of the respondents indicated that their company did not receive the return on investment of innovation they expected. A similar study by the Economist Intelligence

Unit sought to understand the connection between innovation and company success.3 In this study, 87 percent of the senior executives polled identified innovation as either important or critically important to the success of their company. The study identified that the beneficial impact of innovation efforts goes far beyond corporate performance and actually drives the national economy. The development of new products and services is increasingly being identified as the engine for growth and prosperity.

Former Commerce Secretary Carlos Gutierrez has said, ‘‘Innovation is a driver of our economy.’’4 The role that innovation plays in the economy is so important that the United States Commerce Department has made the creation of a universal system of metrics to evaluate the impact of innovation on the economy their top priority. The importance of innovation is echoed in a recent Council on Competitiveness report, which identified that as manufacturing capacity becomes globally available at low cost, the competitive value of manufacturing declines.5 This global competitiveness study emphasizes that innovation is now the primary source of value for United States companies and American workers. The president of the council, Debora Wince-

Smith summarized the report by saying, ‘‘The only driver for productivity growth for the U.S. is our innovation capacity.’’

The need for innovation to drive economic growth goes well beyond the United States or the primary developed nations. China and

India have recognized the importance of innovation and are beginning to break out of their position as members of the underdeveloped world through investment in knowledge creation and innovation. These countries are embracing a culture of new product development by establishing favorable laws and regulations promoting learning and product development. China has recently become the second largest investor in R&D spending, surpassing even Japan. Only the United

States continues to outspend the rest of the world as a single nation.6

According to Dirk Pilat, head of the Organization for Economic

Co-operation and Development’s (OECD) Science and Technology

Policy division, ‘‘The rapid rise of China in both money spent and researchers employed is stunning. To keep up, OECD countries need to make their research and innovation systems more efficient and find new ways to stimulate innovation in today’s increasingly competitive global economy.’’7

Innovation has become the driver for productivity and growth for every developed nation, as well as for every company that is attempting to grow its business and control its own destiny. Whether country or company, innovation is the differentiator for success. Those who do not innovate will fall behind and will have their fate determined by those who do. This book shares lessons and principles to allow your organization to bring more innovation to market faster with fewer problems through a more effective and efficient product development system.

For more information about the principles enunciated in this book a see www.theleanmachine.org.

Table of Contents

Acknowledgments xi

Introduction xiii

1 Working Hard 1

Springtime in Paris 2

The Concurrent Product Development Process 4

A Reality Check 7

Unexpected Competition 8

Problems Late in the Development Process 10

2 The Harley-Davidson Environment 25

Harley-Davidson Was Different 27

Consensus Decision Making 30

We Fulfill Dreams 30

Lessons from the Dark Days 33

The Circle Organization 36

Consensus-Driven Organization 38

Managing Conflict 39

The Harley-Davidson Business Process 39

Organizational Learning 41

3 Harley-Davidson's Product Development Leadership Learning Team 43

The PDL²T Journey 46

Learning Organizations 47

4 The PD²T 61

Systems Thinking 64

Learning to See the Product Development System 67

Learningful Conversations 70

Creating Shared Vision 75

5 Firefighting and the Tipping Point 80

The MIT Connection 81

Firefighting 82

The Tipping Point 83

Past the Tipping Point 84

Lessons from Beyond the Brink 91

6 Cadence and Flow, Bins and Swirl 94

The Outstanding Corporate innovator 97

Product Development Flow 99

Product Development Cadence 100

The Application of Cadence and Flow 104

Bins 107

Heuristic Rules of Thumb 111

The Innovation Swirl 113

7 Supply and Demand 116

The System Dynamics Model of the Motorcycle Business 122

A Soft Landing by Reducing Shipments 126

Generating Product Demand 126

Developing New Products 128

8 A Left Turn: Implementing Lean Principles in Product Development 131

Don't Bring Lean Manufacturing Upstream 133

The Roots of Knowledge-Based Product Development 136

The Systems Approach to Flight 138

Work Smarter, Not Harder 143

9 The Product Development Limit Curve145

Haste Makes Waste 147

Bad Systems Beat Good People 150

Design Rework Loops 152

Product Development Is Predictable 153

10 Integration Points and False Positive Feasibility 158

False Positive Feasibility 162

Design Cycles and Integration Points 164

11 Learning Cycles 167

The Learning Cycle 170

Set-Based Product Development 174

12 Set-Based Design 179

A New Framework for Product Development 183

The Second Piece of the Limit Curve Puzzle 184

13 Leadership Learning and Pull Events 193

The Leadership Learning Change Model 194

Early Pull Events 199

Creating Leverage Through Pull Events 203

14 Quickening Product Development 206

Railroad Planning versus Combat Planning 207

Establishing and Using Help Chains 210

Using Visual Management 212

15 Oobeya 217

Collaboration Using the Oobeya Process 217

The Oobeya Process 221

The Wall 226

Quickening the Pace of Innovation 230

16 Knowledge-Based Product Development 234

Indications of Success 237

Creating Change 241

Notes 245

Index 249

Editorial Reviews

..".valuable insights for people interested in understanding how systematic problem solving applies to the kinds of problems that product development managers need to solve..." "-- Journal of Product Innovation Management"

."..valuable insights for people interested in understanding how systematic problem solving applies to the kinds of problems that product development managers need to solve..." "-- Journal of Product Innovation Management"

""The Lean Machine" serves best as a set of tips for the project manager, but executives can also benefit from Oosterwal's wisdom when they are trying to build a top-performing team of product developers or engineers." --"Houston Business Journal"

"[Oosterwal] gives business leaders insight on supporting innovation and shows them how their companies can consistently excel at developing innovative and profitable products and still keep employees motivated, energized and always learning." --"Biztimes Milwaukee"

"The author uses a friendly, conversational approach....The lessons provided are universal and helpful for any company needing a resurgence." --"APICS Magazine"

From the Publisher