Digital transformation for chiefs and owners. Volume 2. Systems thinking. Dzhimsher Chelidze

managers focus on measurable metrics of major economic activity. And productivity is excellent, and revenue is rising, and in a good case, even profits continue to rise. As a result, they calm down, forget about building the system, work with the team and its motivation, the need to adapt to new conditions after growth. As a result, they see the problem even when all this is reflected in the figures, and begin to sound the alarm, when already half the company in chaos and extinguish the fire expensive and ineffective. You always need a system view and «helicopter vision» on work processes and product: the more areas of restrictions monitor, the better, and for this it is useful to know what are the limitations.

      Chapter Summary 2

      System constraint theory is an independent management tool. However, its use in digitalization projects allows you to set priorities and determine where to run and what to do first in order to obtain resources for further development. Combined with other instruments, it has a synergistic effect.

      Is it necessary to use all the complex tools described above: building trees of current reality, future and so on? No. If you can look at business as a system, understand all the relationships, build a control system, it can be avoided, you will know your bottlenecks and where to direct resources as a priority. But gradually, the better your situation, the more unobvious will be the restrictions, and then you will have to dive into the work with diagrams.

      At the same time, as practice shows, the main limitations are buried in the thinking of leaders. Remember the second practical example where changes were made, including changes to the operating modes of production? What do you think happened after I left and the end of crisis management? I think you’ve guessed. Managers decided that everything is fine, you can again fully include sales, without taking into account production capacity and adding «urgent orders» to the daily schedule, neglecting tactical and operational planning. In the end, three months later, everything came back: the delay started to grow, people began to complain. That is why the same Toyota warns in its thrifty production that one cannot focus on formal tools, one needs complex work, including with people. And I totally agree with that.

      A detailed article with illustrations and videos is available on QR code and link below.

      Theory of systems limitation

      Chapter 3. Lean Production and 6 Sigma

      Now let’s talk about lean manufacturing, a tool that allows you to build tactics and understand how to make the most of digital technology.

      Lean production (lean manufacturing) is a management approach based on a constant commitment to excellence and loss management. Developed this Toyota approach more than 40 years ago, and it was one of the keys to its success and global leadership. In the 1990s, frugal production saved Porsche from bankruptcy, and now it lies at the heart of the production system of any global corporation.

      In recent decades the essence of the concept was superimposed on «6 sigma» and it resulted «lean+6 sigma».

      For a deeper dive, I recommend reading «Dao Toyota. 14 principles of management of the world’s leading company» Jeffrey Licker. All necessary links you will find in the article by QR-code.

      Lean Production. Part 1

      Before we get to the theory, I’ll give you three practical examples of how this tool can be used in digitalization.

      Example 1

      Toyota will use video cameras and neural networks to analyze employee performance and identify losses, continuously optimizing work operations.

      Example 2

      By standardizing the report form and automating the calculations of the required coefficients, the cost of the report in one company decreased from 3000 to 300 rubles. How? By eliminating the losses for over-processing.

      Example 3

      Back in the first book, I was talking about a system for evaluating knowledge. With the understanding of the principles of lean production a week after the use of the system there were recommendations to optimize its work to reduce labor costs by 70—80%! And this is an annual savings of up to 500 thousand rubles, because you no longer need a separate person who is engaged in only one system. Additionally, that’s often how big corporate IT solutions work. For example, in another case it was also necessary to hire an individual to give him a job in 1C, otherwise the production manager and the master could only do that wiring. That is why it is essential in automation, digitalization (analysis of the difference between these concepts is in the first book) and business process optimization to actively use thrifty production.

      Now that you understand what this is all about, let’s go deeper and look at the key tools.

      4 principles

      Thrift production is based on four principles.

      1. Determine the cost of a specific product to the consumer

      In general, Japanese people love a value-oriented approach in both projects and work. Customer satisfaction with them almost turns into a cult. This is also reflected in the P2M project management standard.

      Additionally, in part, that was one of the keys to their success, despite resource constraints after the Second World War. They simply cannot be wasteful because the price of error is too high. Now, under strict sanctions, for us their path and philosophy can become a kind of cheat sheet.

      This approach is more than relevant in digital projects, including domestic ones.

      It is always necessary to remember who the consumer is (intermediate, finite), in what value for him. Additionally, the most important benchmark in digital projects – what losses for people can we eliminate? We will talk about what is loss through the section.

      Without it, we risk introducing changes and systems that no one wants to use, and they become just expensive toys.

      2. Determine the value creation flow for this product (from raw material to finished product, from order to delivery, from concept to production)

      Here you need to know the whole production chain. For this there are a number of tools. In the modelling of business processes there are the designations VAD, SIPOC. Product management includes CJM (client path map) and CX (user experience). We will also talk about these tools later.

      This principle allows you to understand where you have problems, where you kill the client’s desire to cooperate, where you spend resources (time and money) in vain.

      Well, what is the point of introducing robotics into production if the customer has to wait a week to confirm the order and answer 100 additional questions, while the production itself takes 1—2 days?

      3. Ensure continuous flow of product value creation

      This is where the work begins with the processes and the elimination of all expectations, superfluous agreements.

      4. Strive for excellence

      Here we talk about the fact that it is impossible to once optimize everything / automate / digitize and finish. We need to come back and improve our processes and services time and time again. People, conditions, technologies, and therefore, processes need to change.

      This is at the heart of, for example, Kaizen, where people on the ground themselves eliminate all unnecessary actions, improve their working conditions.

      14 DAO

      14 Tao