Modern organizations consist of a series of interconnected services…

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Enterprise Services Planning is a management system that uses the techniques proven by the Lean Kanban community to achieve greater coordination and alignment across multiple departments, remote offices, for internal and external customers. It enables agility without loss of management control.

Your KPIs Probably Aren’t! But What Are They?

This is the 2nd part of my post following Defining KPIs in Enterprise Services Planning. Running our classroom exercises with private clients this past 18 months has shown me that most businesses have KPIs which really aren’t Fitness Criteria Metrics. In other words, their KPIs are not indicators of performance and certainly not key indicators or indicators of key performance. What I see as KPIs are really what should be classified as general health indicators and in some cases...
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Defining KPIs in Enterprise Services Planning

All KPIs should be fitness criteria metrics. All KPIs should be recognizable by your customers and addressing aspects of how they evaluate the fitness of your product or service. If your customer doesn’t recognize or care about your KPIs then they aren’t “key”, “performance” indicators, they may indicate something else but they aren’t predictors of how well your business is performing or likely to perform in future. This blog follows my recent posts...
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Market Segmentation for Enterprise Services Planning

I realized after posting my article on Fitness For Purpose Score that it isn’t reasonable to expect readers to know the background and context that stimulated it. It isn’t reasonable that I assume readers are up-to-date with speeches I’ve given ove the last two years covering Evolutionary Change, Fitness for Purpose and Enterprise Services Planning. So I felt some explanation of how we do market segmentation for ESP was in order to provide better context for Fitness...
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Kanban Cadences

Recently, I’ve taken a new approach to teaching The Kanban Method. The new Lean Kanban “Practicing the Kanban Method” class is built around the 7 Kanban Cadences – the cyclical meetings that drive evolutionary change and “fit for purpose” service delivery. Two of these meetings are relatively new additions to the method: Risk Review added in 2014 as a response to Klaus Leopold formalizing Blocker Clustering in 2013; and Strategy Review as an...
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ESP compared to Kanban Method

I’ve been giving some careful thought to why it became necessary to create the concept of Enterprise Services Planning. At the most fundamental level, ESP was necessary to provide a container for the collection of things we were teaching that were beyond kanban systems and beyond the scope of the Kanban Method. These were the things that enabled the optimal and effective use of kanban systems – topics such as: probabilistic forecasting and statistical analysis; qualitative...
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LKNA15 Miami – Enterprise Services Planning – the Future of Kanban

Lean Kanban North America takes place in Miami, Florida 8-10 June 2015 at the Eden Roc Hotel on Miami Beach. This year we are both going “back to our roots” while “looking to the future” with a very specific Kanban practitioner event. If you are already doing Kanban and want to know how to take your practice to the next level, or you are curious how to scale the benefits to your entire organization or a business unit, or you just want to know how to apply Kanban...
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Enterprise Services Planning: Module 1 – Portfolio Management

Enterprise Services Planning is a new modular 5-day training curriculum for managing modern businesses involving lots of knowledge work and creative services. If your organization contains people who must think and make decisions for their living then Enterprise Services Planning is the management training framework that will transform your business. While ideally taken together as 5 days of intensive emersion, ESP training is offered in 4 modules. Map of the Enterprise Services...
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Enterprise Services Planning: Module 2 – Enterprise Services

Enterprise Services Planning is a new modular 5-day training curriculum for managing modern businesses involving lots of knowledge work and creative services. If your organization contains people who must think and make decisions for their living then Enterprise Services Planning is the management training framework that will transform your business. While ideally taken together as 5 days of intensive emersion, ESP training is offered in 4 modules. Map of the Enterprise Services...
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What is Enterprise Services Planning?

 

Modern businesses consist of ecosystems of interdependent services.

Often the product or service the firm provides consists of intangible goods. Governments, economists and tax authorities group all such businesses under one general umbrella – professional services.

Peter Drucker called those performing these professional services, knowledge workers – they are people who “think for a living” and they make decisions that affect the bottom line financial performance of their employers. Throughout the past 60 years, professional services has been an ever growing segment of the global economy, even traditional industrial companies now find that well over 50% of their costs are for professional services.

Despite their ever growing importance to the economy, professional services businesses are notoriously badly managed. And despite huge strides in technology to support such businesses, productivity hasn’t improved much in the last 50 years. People seem to be busier and busier, more and more stressed and making use of ever more technology to react faster and faster, yet productivity gains have been unremarkable.

Next: THE DRUCKER CHALLENGE

The Drucker Challenge

 

At the turn of the century, Peter Drucker laid down a challenge. Observing that manufacturing (tangible, physical goods) industries had improved productivity around 200 fold in 100 years, he challenged knowledge workers to improve their productivity by 50 times in this century. So where might those improvements come from?

Enterprise Services Planning is a system of management for modern, professional services, intangible goods industries staffed by knowledge workers that promises to deliver 10 to 20 times improvements – a substantial contribution to Drucker’s challenge.

In an era when businesses are finding that offshoring and outsourcing hasn’t delivered the savings anticipated and that time-to-market and revenues can suffer from the pursuit of cost savings. Meanwhile, the labor arbitrage advantage of offshore vendors isn’t sustainable and costs inevitably equalize. It is time to find a better way to manage and make knowledge workers much more effective. Enterprise Services Planning offers us a solution.

When looking to improve professional services, it is enticing to look at component parts – the people doing the work – and try to optimize them, just like the cost and management accountants of almost a century earlier optimized factories for efficiency. The personal productivity market is a multi-billion dollar industry. There are lots of variants of advice and guidance aimed at helping people “get things done.”

However, it turns out that just as with industrial companies, optimizing for worker utilization doesn’t produce effective results.

Next: OPTIONALITY

 

Optionality

 

It was the Japanese that discovered optimizing factories for the flow efficiency of work-in-progress and minimizing the manufacturing time was a more effective way to profitable manufacturing. Toyota’s ability to make a Corolla in 17.5 hours when it takes Ford 35 hours to make a Focus provides an advantage which goes beyond merely half the carrying cost of inventory. Making things faster, increases optionality and provides greater business agility.

Normally it costs money to buy optionality but in this case they save money by carrying less inventory. The option to switch (production) isn’t just free, it actually has a negative cost. It turns out that a similar focus in professional services provides similar results despite the fact that the “inventory” is intangible and often valued at zero for accounting purposes. Savings on inventory carrying costs are a red herring, the improved optionality and the time value of earlier delivery provide the advantage.

Vistaprint is a well known print-on-demand vendor of business cards operating in North America and Europe. Their business has sufficient scale that they have their own internal advertising agency. By focusing on faster service delivery, they cut the time to create advertising campaigns from 3 months to 2 weeks. This improvement in optionality gives them a significant business agility advantage enabling them to plan campaigns closer to when they are needed. The advantages in quality and relevance are dramatic while the faster response times reduces reliance on outside vendor for urgent  requests.

The results at Vistaprint’s ad agency are typical. Often lead time from commitment to delivery is reduced by 75-90%. Similar results have been seen for creation of pages on the BBC’s web site, post production video editing at TV Globo in Rio De Janeiro, development of firmware for HP laser printers, maintenance of Microsoft’s IT systems and upgrades to their XBox One gaming platform. So how is this done?

Next: THE SYSTEM KNOWN AS KANBAN

The System Known as Kanban

 

Toyota developed a signaling system to control inventory in their factories, signaling just-in-time arrival of parts and pulling work based on the rate of customer demand.

This system, known as Kanban, has been adapted for use in knowledge work environments. It turns out that limiting work requests in progress is a more effective way of improving efficiency in knowledge work than trying to estimate size of, or effort required to, complete tasks then managing the time available – your capacity isn’t 40 hours per week, your capacity is 3 ad campaigns in-progress at any given time.

This approach improves employee engagement and quality. It gives workers a closer connection to the requesting customer and a better understanding of their expectations, risks they are managing and what represents “fitness for purpose” for both service delivery and the finished product or service.

Limiting work-in-progress it seems, improves both delivery time and customer satisfaction. Faster and better! The result is dramatically improved economic performance, happier workers and happier customers.

Next: SEEING SERVICES

Seeing Services

 

This concept can be scaled to the whole enterprise by taking a service-oriented view of the business.

This doesn’t mean reorganizing but simply learning to see services wherever they exist in the organization. Some services are obvious, they are externally facing – customers place orders and take delivery, e.g. Advertising campaigns. Other services are internal – some are less obvious, for example, a senior executive who provides a sign-off or authorization is providing a governance service.

Services exist from small to large. Sometimes a service is provided by a single individual and can be as simple as a single decision, other services may span functions and business units with multiple handoffs and collaborations between specialists in order to create a finished product. Once you learn to see services, you simply provide a kanban system for each service. You start to piece together a just-in-time system for creative, knowledge worker activities.

Next: SCHEDULING SERVICE DELIVERY

Scheduling Service Delivery

 

For any service delivery problem, the critical factor is knowing when the customer needs to take delivery and the impact of delay on the economic outcome. So the critical questions become, if I know when I need to take delivery, when must the item be started? This is a scheduling question. And, if earlier is better, but not everything can be delivered immediately, then in what order should I start items to produce the best economic outcome? This is a sequencing problem.

And finally, if our portfolio of work carries different risks, how can I hedge risk appropriately? This is a capacity allocation problem. The rubber hits the road when we have a kanban signal telling us we have capacity to start something new – a selection problem influenced by scheduling, sequencing and capacity allocation information.

Next: PREDICTABILITY

Predictability

 

It doesnt take long or many data points to acquire an understanding of how long requests of a given type take to flow through a service from order commitment to delivery.

We can develop a probabilistic understanding of the distribution of lead times through a service delivery workflow. How long does it take to develop an ad campaign? 5 days to 6 weeks with a median (50%ile) of 2 weeks. If we know this information then we know when we must start work – 6 weeks prior to launch of the campaign if we are to avoid any risk and opportunity cost from delay. However, if we expedite the request it may be possible to deliver within a single week.

This introduces the concept of classes of service – policies that enable items of sufficient risk or value to jump queues and be delivered much faster than normal. Of course, everything can’t be urgent. If all work in a system is urgent then nothing is. Providing faster service for a small percentage, perhaps up to 20% of requests, can provide economic advantage, but it comes at the cost of making everything else take a little longer.

Next: THE FLOW FACTOR

The Flow Factor

 

How is it possible to make things flow faster?

It turns out that knowledge work is notoriously inefficient. The so called flow efficiency, the ratio of how much time was spent working on an item versus how long it actually took to deliver, is typically very low – 5% isn’t unusual. If we expedite an item, we might improve that ratio up to 90%.

Low flow efficiency also explains why kanban systems produce such dramatic improvements in productivity – much of the inefficiency is delay when items are waiting.

When you limit the work-in-progress to a small quantity, you remove a lot of waiting. In the case of Hewlett-Packard, lead time on printer firmware was reduced from 21 months to 3.5 months by reducing work-in-progress from ~900 items to ~90.

The enabler for this is an ability to schedule, sequence and select items intelligently and with confidence that economic outcomes and risk exposure have been adequately considered.

Next: ESP ALGORITHMS

ESP Algorithms

 

The key to enterprise services planning is knowing how to schedule, sequence and select items appropriately.

To do this we need some risk assessment of the requests. This will usually include an understanding of the cost of delay, business and market impact, whether an item is strategic, operational or tactical, whether it is table stakes, regulatory, differentiating or playing a “catch up” role and so forth.

Risk is assessed using easily established facts. These facts can be used in a series of algorithms and combined with lead time data to produce a recommended schedule and sequence of work.

Enterprise services planning is at its heart a set of algorithms that provide insight into the hard problems of when to start items, in which order, and how to hedge risk by allocating capacity across different types of work with different classes of service. Some software can help as reference class forecasting and Monte Carlo simulation are preferred techniques and computationally intensive.

Next: DEPENDENCIES

The Problem of Dependencies

 

Next, there is the problem of dependencies between services. How are these resolved?

Often delays are caused when an item blocks waiting on a dependent service. Knowing when to start something can be tricky if there is some risk of it blocking for an unduly long period of time.

There are several approaches available to us: Services can speculatively allocate capacity based on historical patterns of demand from requesters; and we can use a dynamic booking system for known dependencies. For example, our ad campaign will need copy writing and graphic design. These shared services receive regular demand from ad campaigns and the need can be determined early in the lifecycle of the work. As a result, capacity can be booked a few days or weeks in advance.

If we understand the average throughput of these services, we can anticipate how many open slots we will have and book some of this demand in advance. This is like a restaurant that takes bookings but will leave some capacity spare for walk-ins. It is always good to maintain some optionality.

On the other hand, our ad campaign may need custom photography but this cannot be determined until the creatives agree a strategy with the client. So we cannot deterministically book capacity on our photography service. Instead our photography service should allocate some speculative capacity for ad campaign shoots. If this capacity goes unused by ad campaigns it can be dynamically reassigned for other purposes, perhaps with a lower class of service, such as shooting work for stock use later.

Next: VISUALIZATION

Visualization

 

 Finally, to easily enable all of this, we need to be able to see the work and its workflows.

Knowledge work produces intangible goods and it is notoriously invisible. Walk around any cubicle farm office and it is almost impossible to know what is going on. Work has traditionally been tracked in spreadsheets by project managers who act as task dispatchers playing the role of dating agents matching workers to suitable tasks.

The consequences of this invisibility are a lack of engagement, poor collaboration, and the inability to leverage the collective knowledge of the workforce to improve the way of working and the resultant service delivery. This is the antithesis of Toyota’s culture of “kaizen”, continuous improvement, where the workforce is engaged and empowered to improve the way of working, with the consequence that on average every worker has at least one process improvement implemented every year.

The solution to this problem of invisible work has proven to be remarkably simple as to seem trivial and unremarkable and yet it is not. Enter the humble white board and sticky note: By using boards to visualize workflows and sticky notes to represent work requests, the invisible becomes visible, the intangible, tangible and the virtual, physical.

By assembling the workers engaged in a service around what has come to be known as the “kanban board” we engage our workforce in a social collaborative understanding of our portfolio of work, its nature, our customers, the risks we and they are managing, and our way of working. Workers can see whether tickets are “flowing” or whether they are “blocked” and which source is at the root of delay.

Next: A MODERN METHOD

A Modern Method

 

In the arts, the term “modern” refers to a discontinuous technical innovation which causes the form to change. The emergence of photography caused the reaction of modern art initially with impressionism and gradually with greater and greater abstract forms.

In this case, we have a modern system of management, Enterprise Services Planning, which takes a new form from that which preceded it, by utilizing the humble sticky note and white board in ways that were not originally envisioned for these “technologies”. Together with work tracking software and some mathematics, they deliver dramatic improvements in knowledge worker productivity.

Enterprise Services Planning enables more relevant, valuable work to be delivered up to 10 times faster, while providing improved optionality and business agility. The ability to plan while maintaining optionality and agility insures firms against the impact of turbulent, volatile, unpredictable, and uncertain market conditions.

Enterprise Services Planning promises tremendous gains in managing modern enterprises and takes us a significant step on the way to delivering Drucker’s Challenge of a 50-fold productivity improvement early in this century.

Modern organizations consist of a series of interconnected services.

Enterprise Services Planning is a management system that uses the techniques proven by the Lean Kanban community to achieve greater coordination and alignment across multiple departments, remote offices, and internal and external customers. It enables agility without loss of management control.

Next: LEARN MORE

Lean Kanban is collaborating with Digité on Enterprise Software

Introducing Swift Kanban ESP edition

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