[Off-Topic] Standards, Commodities, and Innovations

Apple recently updated its entire MacBook Pro line so the batteries are no longer removable. They’re internal now, they last 7 to 8 hours, double the rest of the industry, and in theory they should last up to 5 times longer.

In terms of customer value, I imagine Apple asked itself something like: “why do people need removable batteries?” The answers vary, but I only see two reasons. Since normal batteries last around 3 or 4 hours, working a full day means carrying at least two of them, especially when you’re traveling or stuck at all-day conferences. The second reason is the poor quality of today’s batteries, which “wear out” fast: one that used to last 3 hours starts lasting 2 or less.

Apple solved this on several fronts. They rethought the whole battery construction process, with engineers and scientists who specialize in battery chemistry and assembly. They started building the batteries in custom shapes that use the available space as efficiently as possible. Making them non-removable cuts the waste of moving parts, bays, and latches, which frees up a much larger area. On top of that, they put intelligence into chips that adjust the charging voltage dynamically, keeping the battery from aging too early.

It’s the kind of detail that can slip by unnoticed, but I wanted to point it out, and I recommend watching their video. What they did was smart. They killed off waste that everyone treated as “normal” in any notebook, and they rethought something already considered mature. They broke a common-sense assumption, the “obviously batteries have to be removable” one, and built a product that delivers more value to the customer. To me, that’s very Lean thinking.

I like to think of Lean as a philosophy and a culture, the same way I think of Agile. It’s not a process, even though plenty of people treat it as one. At the center is continuous flow, and one way to get there is to eliminate waste. Alongside that come other ideas, like Kaizen, continuous improvement. The ultimate goal is to deliver the most value to the customer and strip out whatever doesn’t benefit them directly.

That’s exactly what I see in everything Apple does. Innovation is the result of this kind of thinking, which at the same time produces a leaner, more efficient process. It’s the same logic behind MagSafe, the MultiTouch trackpad, the backlit keyboard, and the tight integration between operating system and hardware, which matters far more than most people realize. 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 higher.

Zara

This kind of thinking reminds me of James Womack’s books. I’m not sure whether it was in Lean Thinking that I read about the Zara case, which I later saw again in a talk on leadership by Mary Poppendieck at Agile 2007. I like this case because, by coincidence, Zara is one of the stores I most enjoy shopping at.

Zara is a big clothing chain. In 2007 at least, they had more than 990 stores worldwide, mostly in Europe, with revenue of 5 billion euros. Nothing small. And they can go from designing a garment to putting it on the shelf in two weeks, that’s their production cycle.

Their premise is simple and obvious: they don’t know what customers want. So they rely on store managers reporting back to headquarters, all the time, what customers are asking for. In one city, say, people might want more red clothing because red is the color of the local team that just won a championship. Zara’s answer is to deliver that as fast as possible, and they pull it off in two days.

To do that, they make small quantities of each item instead of big batches. And, against what most people would call “common sense,” they don’t outsource mass manufacturing to China or other Asian countries: the logistics of fast delivery would cost too much and wouldn’t pay off against the cheaper labor. So they keep factories in Eastern Europe.

As a result, Zara makes around 11,000 items a year, against an industry average of just 3,000. And it sells roughly 85% of everything it produces at full price, while the rest of the industry sells 60%, 70% at most. The difference is the waste of making too much, because forecasts don’t work. You see it all the time in the “clearance sales,” “liquidations,” and “outlets.” Zara ends up with less than 10% of unsold stock, against at least 20% for the competition.

That makes it clear where Zara’s profit comes from: a more efficient production process. Cutting costs on Asian labor doesn’t even enter the equation. It’s one more example of Lean thinking. (Note: unfortunately I don’t think Zara in Brazil follows the same process, lately it’s been all old pieces and little that’s new.)

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 there is. “Delivering value to the customer” sounds obvious, and most companies think they’re doing it when they really aren’t. Focusing on fast delivery to the customer is genuinely hard, and it’s not something we’re used to.

Standards

That leads me to another thing I picked up from Mary’s talk and Womack’s books. Most companies have “standards,” “policies,” or simply “rules.” The word doesn’t matter; I’ll use “standard” for all of them.

For most managers, “standards” exist so any new employee works just like everyone else. They were made to be followed to the letter.

That’s the dumbest way to think about standards. For Taiichi Ohno, father of the TPS, a standard is something else. A standard is the “as-is”: how things work today. It’s a faithful description of how work is done and produced in the present, whether that’s right or wrong. It captures the current reality without inventing an ideal.

A Lean production leader’s job is to make sure standards don’t stay fixed for too long. If a month later the standard hasn’t changed, your boss could reasonably ask: “did you do any work last month? because the standards haven’t moved.” In a culture of continuous improvement, the team is always hunting for better ways to do the same thing. Standards are “baselines,” starting points meant to be questioned and improved constantly. Today’s standard has to beat yesterday’s.

The moment you think “this is how we’ve always done it, so this is how I’ll do it today and tomorrow,” you’ve created a stagnant, unmotivated, complacent employee, and worse, one who hasn’t grown. An employee who doesn’t grow means a company that doesn’t grow.

Companies that keep departments cranking out standards, processes, and policies to shove down the throats of everyone else are, to me, “dumb,” or at least “blind.” They ignore their own eyes: their employees. At the same time, they signal a culture where nobody should stand out, everyone has to be the same, dress the same, clock in at the same time, eat lunch at the same time, even hit the bathroom on a fixed schedule. It’s a company that prizes the average, my old enemies, the Gaussian curves, the “normal” distributions. A company that prizes, by definition, “mediocrity.”

Lean companies, by contrast, prize meritocracy. They value room for error which, through the proper process of Hansei and Kaizen, leads to continuous improvement. And that, in turn, raises the standards cumulatively.

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