[Off-Topic] Standards, Commodities, and Innovations

Recently Apple updated its entire MacBook Pro notebook line to no longer have removable batteries. The batteries are now internal and last 7 to 8 hours — double the rest of the industry — and are theoretically designed to last up to 5 times longer.

Looking at this in terms of customer value, I imagine Apple might have thought: “Why do people need removable batteries?” The answers vary, but I personally imagine there are really only two reasons: since normal batteries last around 3 or 4 hours, to work a full day you need at least 2 batteries, especially if you’re traveling or at all-day conferences. The second reason is that the poor quality of current batteries causes them to lose capacity very quickly, so a battery that used to last 3 hours starts lasting 2 or less.

http://www.youtube.com/embed/HOIANlQDlL8

Apple solved this in several ways. They rethought the entire battery construction process, employing engineers and scientists specialized in battery chemistry and assembly. They build them in custom shapes that use the space as efficiently as possible. Making them non-removable eliminates the waste of moving mechanisms, bays, locking mechanisms, opening mechanisms, and so on. This allows a much larger area. Beyond all that, they embedded intelligence in the form of chips that dynamically adjust the charging voltage, preventing the battery from losing capacity prematurely.

It’s something that might go unnoticed, but I wanted to comment on it here — and I recommend you watch their video. What they did was smart. They eliminated waste that was considered “normal” in any notebook. They rethought something that was already considered mature. They broke paradigms considered common sense like “obviously batteries have to be removable” and in doing so created a product that delivers more value to the customer. Personally, I think this is a very Lean way of thinking.

I like to think of Lean not as a process — because it isn’t one. Lean is a philosophy and a culture — just like Agility. At its center is the idea of continuous flow, and one of the ways to achieve that is to eliminate waste. On the other hand, there are other philosophies involved, one of which is Kaizen — continuous improvement — and as the ultimate goal of it all, delivering maximum value to the customer and removing everything that doesn’t directly benefit the customer. In everything Apple does, that’s exactly what I see: innovation is the result of this kind of thinking, while simultaneously achieving a leaner, more efficient process that delivers maximum value directly to the customer.

It’s the same thing that leads to innovations like MagSafe, the MultiTouch trackpad, the backlit keyboard, the intimate integration between the operating system and the hardware — which is far more important than most people think — and so on. It’s what justifies the superior build quality of Apple notebooks. And that’s not fanboyism — it’s fact. The value of an Apple notebook is indisputably superior.

Zara

This kind of thinking reminds me of James Womack’s books. I don’t remember if it was in Lean Thinking where I read about the Zara case, which I later saw again in a talk by Mary Poppendieck at Agile 2007, about Leadership — the same case. I like this case because, by coincidence, Zara is one of the stores I most enjoy shopping at.

Zara is a large chain of clothing stores — at least in 2007 they had over 990 stores worldwide, mainly in Europe, with revenue of 5 billion euros, which is nothing small. They have the ability to go from garment design to store shelf in 2 weeks — that’s their production time.

Their premise is simple — and obvious — that they don’t know what customers want. Therefore they depend on store managers constantly reporting back to headquarters what customers are looking for most. For example, in a given city, locals might want more red clothing because red is the color of the local baseball team that just won a championship. Zara’s response is to deliver what they want as quickly as possible, and they can do that in 2 days. For this they manufacture small quantities of each item rather than large batches. More than that — and going against what many would consider “common sense” — they don’t outsource mass manufacturing to China or other Asian countries because the logistics for rapid deliveries would be far more expensive and doesn’t compensate for the cheaper labor. So they have factories in Eastern Europe.

As a result, Zara manufactures around 11,000 items per year, compared to the industry average of only 3,000 pieces. Zara manages to sell around 85% of everything they manufacture at full price, while the rest of the industry sells 60%, at most 70%, at full price. This is because of the waste from manufacturing too much — again, forecasts don’t work. We see this all the time in “clearance sales,” “liquidations,” “outlets.” Zara is left with less than 10% of unsold items, while others are left with at least 20%. You can see where Zara’s profit comes from — not from cutting corners and outsourcing to Asia for cheap labor, but from having a more efficient production process. That’s another example of Lean thinking. (Note: Unfortunately I think Zara in Brazil doesn’t follow the same process — there are lots of old pieces and little novelty these days.)

Zara and Apple didn’t discover any magic formula. Neither did Toyota when it created the famous Toyota Production System — the best example of Lean thinking. “Delivering value to the customer” sounds obvious and most companies think they’re doing it, when in reality they’re not. Focusing on rapid customer delivery is quite difficult and is not something we’re accustomed to doing.

Standards

This leads me to something else I saw in Mary’s talk and in Womack’s books. In most companies we have things like “standards” or “policies” or simply “rules.” Regardless of the word, I’ll use “standard” to mean the same thing.

For most managers, “standards” are made so that any new employee can work like everyone else. Standards were made to be followed, not questioned.

That is the most idiotic way to think about standards. For Taiichi Ohno, father of the TPS, standards are something else entirely. Standards are the “as-is” — in other words, how things work today. They’re not visions of how things should be, but a faithful description of how work is performed and produced in the present, whether correctly or incorrectly.

The work of a lean production leader is to ensure that standards don’t stay fixed for too long. If after a month the standard is still the same, your boss could legitimately ask you: “Did you do any work last month? Because the standards haven’t changed.” In a culture of continuous improvement, the team should be constantly looking for better ways to do the same thing — not just mindlessly following what the standard says. Standards are “baselines,” starting points that must be constantly questioned and improved. Today’s standard has to be better than yesterday’s.

The moment you have in your head “this is how we’ve always done it and therefore this is how I’ll do it today and this is how I’ll do it tomorrow” you’ve created a stagnant, unmotivated, conformist employee — and worse, one who has not evolved. Employees who don’t evolve means a company that doesn’t evolve.

Companies that have departments whose job is to create new standards, processes, or policies to shove down the throats of the rest of the company are companies I consider “dumb” — or at least “blind” — because they’re ignoring their real eyes: their employees. At the same time it signals a culture where no one should try to stand out, everyone must be equal, dress the same, arrive at the same hours, have lunch at the same time, even go to the bathroom on a fixed schedule. It’s a company that values the average — my old enemies, the Gaussian curves, or “normal” distributions — a company that values, by definition, “mediocrity.”

Lean companies, on the other hand, value meritocracy. They value space for mistakes which, in the correct process of Hansei and Kaizen, lead to continuous improvement. In turn, this cumulatively raises standards.

This post follows the line of the previous one, Advice for Managers — I suggest reading that one too.