World-Class Quality 1 Training Material Used with Permission and/or Licensed to Lean Solutions Institute, Inc. (LSI) Using Lean in a Baldrige Environment.

World-Class Quality

1Training Material Used with Permission and/or Licensed to Lean Solutions Institute, Inc. (LSI)

Using Lean in a Baldrige

Environmentto Transform Organizations

Tim Olson, PresidentLean Solutions Institute, Inc. (LSI)MBNQA, Baldrige Examiner, 2008-2010(760) 804-1405 (Office)[email protected]

© 1994-2010 by Process Assets, LLC (PAL). All Rights Reserved.

VA Conference - October 27, 2010

Presentation based on NIST 2010 MBNQA Material.

Used with Permission.

World-Class Quality


“I have made this letter longer than usual because I lack the time to make it

shorter”

Blaise Pascal

Lean Quotes to Live By…

“Keep things as simple as possible, but no simpler”

Albert Einstein

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Presentation Objectives

Present an overview of lean.

Present latest industry trends.

Summarize strengths and weaknesses of Baldrige.

Summarize strengths and weaknesses of Lean.

Describe how lean can strengthen Baldrige Results.

Answer any questions.

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview

Using Lean to Strengthen Baldrige World-Class Quality

Summary

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Who is LSI? - (1)The mission of Lean Solutions Institute, Inc. (LSI) is to help organizations to measurably:

• become “best-in-class” or “world-class” leaders in their respective markets (e.g., using benchmarking)

• improve quality and productivity (e.g., lower product defect rates, increased KSLOC per person month, etc.)

• reduce non-value added activities and the cost of poor quality (e.g., rework, waste, scrap, etc.)

• become lean and apply Lean SolutionsTM - (e.g., processes, metrics, checklists, templates, etc.)

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Who is LSI? - (2)

LSI is an improvement organization. LSI focuses on Lean SolutionsTM for your organization (e.g., Baldrige, CMMI, ISO, etc).

• LSI uses an “ISO Approach” to improvement (i.e., separate improvement organization from certification/appraisal organization).

• LSI is NOT an ISO Registrar, SEI Appraisal organization, etc.

• LSI specializes in lean improvement and

Lean SolutionsTM in systems engineering, software engineering, IT, service, healthcare, test engineering, manufacturing, etc.

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21st Century Business NeedsThe usual business needs (e.g., “time and money”):

• Save Money (e.g., ROI)• Reduce Cycle Time• Improve Performance (e.g., CPI, SPI)• Improve Productivity• Improve Quality

New 21st Century business needs:• Agility, Lean, etc.• Complexity, Architectures, Models, Reuse, etc.• Innovation, Diversity, etc.• Special Topics: Reliability, Safety, Security,

Usability, etc.

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Growing ComplexitySystems are getting more complex very year.

Example: Software Engineering

Automobiles now have over 1 million lines of code. For example, the Toyota brake problem on the Prius was due to software defects.

Combines and tractors have multiple controllers and multi-millions lines of code.

Many organizations (e.g., manufacturing, hardware, etc.) are becoming mostly software organizations.

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Multiple Needs: Multiple Models

Organizations have many needs.

“All models are wrong; some are useful”.

Every quality approach has strengths and weaknesses. No one model can meet all business needs. Which models to choose?

Example quality approaches:• Baldrige (multi-models)• CMMI® (multi-models)• ISO (multi-models)• ITIL®

• Lean (Multi-Models)• Six Sigma (Multi-Models)• New Maturity Models (Security; Usability)• Etc.

CMMI is a registered trademark in the US Copyright and Patent Office by Carnegie Melon University.

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The Quality Crisis

The cost of poor quality:• “In most companies the costs of poor quality

run at 20 to 40 percent... In other words, about 20 to 40 percent of the companies’ efforts are spent in redoing things that went wrong because of poor quality” (Juran on Planning for Quality, 1988, pg. 1)

• Crosby’s Quality Management Maturity Grid states that if an organization doesn’t know it’s cost of quality, it’s probably at least 20%. (Crosby, Quality is Free, 1979, pg. 38-39)

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The Quality CrisisAccording to Dr. Juran:

1. “There is a crisis in quality. The most obvious outward evidence is the loss of sales to foreign competition in quality and the huge costs of poor quality.”

2. “The crisis will not go away in the foreseeable future.”

3. “Our traditional ways are not adequate to deal with the quality crisis.”

4. “To deal with the crisis requires some major breaks with tradition.”• Quoted from Juran, Joseph. “The Quality Trilogy”, Quality Progress, 1986

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Major COQ CategoriesCost of Quality

Cost of Good Quality

Cost of Poor Quality

Prevention AppraisalInternalFailure

ExternalFailure

• Training• Quality

Planning• Defect

Prevention

• Inspections• Peer

Reviews• Audits• Testing

• Rework• Scrap• Re-Testing• Fixing

InternalDefects

• Warranty• Returned Products• Fixing External Defects

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Some Quality Lessons Learned

Most organizations have about 33% in costs of poor quality (e.g., rework, waste, scrap, etc.)

About 80% of all quality efforts have no measurable results.

According to Dr. Juran, most failures in quality are due to a poor choice of strategy.

In order to choose a quality strategy wisely, organizations need to know how to manage for quality.

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Evolutionary vs. RevolutionaryQuality Improvement

Increased Quality &Productivity

Time

Company B

Company A

30-50%

5-15%

• Adapted from Juran on Leadership for Quality, Juran, 1989

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The Quality Chain Reaction

Productivity improves

Improve quality

Costs decrease because of less rework, fewer mistakes, fewer delays, better designs, efficient use of resources and materials

Capture the market with better quality and lower price

Stay in business

Provide jobs and more jobs

• Adapted from Deming, W. Edwards, Out of the Crisis, MIT CAES, 1986

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Raytheon - Cost of Quality

Reference: “Process Improvement and the Corporate Balance Sheet”, Dion, IEEE Software, July 1993

10

20

30

40

50

1987 1988 1989 1990 1991 1992

% OF TOTALPROJECTCOST

BeginImprovement

$16 Million

Appraisal Cost

Prevention Cost

Cost of Rework

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Raytheon - Productivity

50

100

150

1988 1989 1990 1991 1992

ProductivityIncrease - %

Reference: “Process Improvement and the Corporate Balance Sheet”, Dion, IEEE Software, July 1993

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Raytheon:Cost Performance Index

Reference: “Measuring the ROI of Software Process Improvement”, Dion, SEI Presentation, August 1992

80

100

150

1988 1989 1990 1991

On Budget

PercentOverBudget

PercentUnderBudget

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Baldrige National Quality Program 2008Baldr ige N ational Q uality Pr ogr am 2008

Presentation based on NIST MBNQA 2010 Material. Used with Permission.

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Steps Toward Mature Processes


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Quality Maturity

• Based on “The Eternally Successful Organization”, by Crosby, the SEI CMM, the Baldrige Award, & Dilbert Comics

• Acronyms are (COQ=Cost of Quality; BA=Baldrige Award; DCF=Dilbert Correlation Factor; SEI=SEI CMMI)

STAGE

Comatose

ProgressiveCare

Wellness

Prevention

COQ

33%

25%

18%

10%

5%

SUMMARY

“What quality problems?”

“We don’t know why we have quality problems, but they hurt.”

“Management commitment andcontinuous improvement resolve quality problems.”

“Quality planning, control, andimprovement are routine.”

“We know why we have happy customers.”

SEI

IntensiveCare

BA DCF

800

200

400

600

700

5

4

3

2

1100%

80%

60%

40%

20%

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

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Baldrige Criteria Framework: A Systems

Perspective


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Brainstorm

What are the Strengths of Baldrige?••••••••••

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Baldrige Category Point Values

1 Leadership 1202 Strategic Planning 853 Customer and Market Focus 854 Measurement, Analysis, and

Knowledge Management 905 Workforce Focus 856 Process Management 857 Results 450

TOTAL POINTS 1,000


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Core Values and Concepts

Visionary LeadershipCustomer-Driven ExcellenceOrganizational and Personal LearningValuing Workforce Members and PartnersAgilityFocus on the FutureManaging for InnovationManagement by FactSocial ResponsibilityFocus on Results and Creating ValueSystems Perspective


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BrainstormNOTE: All models are wrong; Some are useful.

What are the Weaknesses of Baldrige?••••••••

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Baldrige Weaknesses - (1)Architectures (Product, Process, etc.)

Configuration Management

Decision Analysis

Defect Prevention

Early Defect Removal

Engineering:• Requirements• Design• Implementation• Test

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Baldrige Weaknesses - (2)Integrated Product Teams

Lean

Managing Technological Change

Models and Simulation

Process Definition and Maturity

Process Tailoring

Project Management

Risk Management

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Baldrige SummaryStrengths:• Based on measurable results (450/1000 points)• Has become an industry standard (State

Awards are also based on Baldrige)• Based on performance criteria (best practices)• Has a industry standard assessment method• Award winners are “model organizations”• Cost effective to receive valuable feedback

Weaknesses• Does not address engineering strongly• Does not address maturity/capability levels• Run by mostly by “volunteers”• 80% of organizations do not receive site visits

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

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Lean ProblemsMost organizations have too much waste (e.g., non-value added).

Most processes have too many “non-value added” steps.

How can organizations focus on “value added” and remove waste?

How can organizations measure value and waste?

Lean is a recent quality approach to help organizations focus on “value” and remove “non-value”.

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What is Lean?Lean has its roots in quality and manufacturing, and is a recent popular movement in quality.

“Lean Production” is the name for the Toyota Lean Production System.

The following are major lean references (books):• “The Machine That Changed The World”• “Learning to See”• “The Toyota Way”• “The Toyota Product Development System”• “Lean Thinking”

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Some Lean Principles - (1)

Establish customer defined value (i.e., identify the “value stream”). Process = “value”.

Continuously eliminate non-value added activities (e.g., waste, rework, defects).

Use leadership and standardization to create a lean culture.

Align your organization through visual communication.

Create an optimized process flow (e.g., “Flow”, “Pull”, “Just-In-Time”, “Leveled”).

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Some Lean Principles - (2)Use lean metrics to manage the value stream.

Front-Load the process for maximum design space.

Build a learning organization to achieve lean and continuous improvement.

Adapt technology to fit your people and processes.

Strive for perfection through continuous improvement.

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Why Lean Processes?Reduce Cost, Schedule, and Size: Lean processes are shorter, cost less, and take less time to use.

Better Usability: Lean processes are more usable (require defining “chunks” and labeling them for use).

Better Designs: Lean processes require good process design, definition, and writing principles.

Visual Diagrams: Lean processes are “visual” (e.g., well thought out diagrams or “lean process models”).

Defined Non-Linearly: Designed to find something fast. Lean process models are dynamic and concurrent.

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Some Lean Success Stories

Toyota - Best lean documented success story in industry (from manufacturing - see references).

Stoner - 2003 Baldrige Recipient. Used lean afterwards and dramatically improved results! (Reference: 2010 Quest for Excellence Conference).

Hewlett Packard - a CMMI success story for software. 25% of the size of a typical CMMI implementation!!!

Lean Early Defect Detection - Averages 7:1 ROI!

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Advanced Lean: ArchitecturesArchitectures are very powerful because they:

• Are graphical (a picture is worth a 1000 words)

and can be powerful communication tools.

• Provide a framework for how components are related (e.g., interfaces, interdependencies, relationships) and how components fit together.

• Promote reuse (e.g., products, components, requirements, designs, tests, interfaces, etc.) and can improve productivity and quality.

• Can be modeled in an automated tool.

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What is an Architecture?Architectures consist of:• Components• Interfaces, interdependencies, and other

relationships among components• Ordering and rules for putting components

together

Simple Architecture Example: Lego’s

Numerous Types of Architectures:• Product and Domain Specific Architectures• Business, Data, Technology, etc. Architectures• Discipline Specific Architectures (e.g., software)• Process Architectures• Documentation Architectures

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Advanced Lean: ModelsModels are very powerful because they:• Are graphical (a picture is worth a 1000 words)

and can be powerful communication tools.

• Can scale up to complex systems and provide a tool to analyze complex relationships and dependencies.

• Promote reuse (e.g., products, components, requirements, designs, tests, interfaces, etc) and can improve productivity and quality.

• Can be represented in an automated tool, and simulated.

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What are Models?Models are abstractions of reality constructed for a (useful) purpose consisting of:• Formal notations and rules for representations• Model components or building blocks• Ways to model interfaces, interdependencies,

and other relationships among the model components

There are numerous modeling languages and tools.

A Few Modeling Examples:• Behavioral Models (e.g., timing, states)• Structural Models (e.g., hierarchy, order)• Functional Models (e.g., input, function, output)• Process Models (e.g., the 5 W’s)

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ArchitecturesArchitectures consist of:• Components• Interfaces, interdependencies, and other

relationships among components• Ordering and rules for putting components

together

Simple Architecture Example: Lego’s

Numerous Types of Architectures:• Product and Domain Specific Architectures• Business, Data, Technology, etc. Architectures• Discipline Specific Architectures (e.g., software)• Process Architectures• Documentation Architectures

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Brainstorm

What are the Strengths of Lean?••••••••••

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BrainstormNOTE: All models are wrong; Some are useful.

What are the Weaknesses of Lean?••••••••

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

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Some CMMI Definitions Maturity Level: A maturity level is a set of related process areas that can be rated by a formal appraisal (e.g., CMMI SCAMPI A) and are performed collectively to achieve a set of goals. “Degree of process improvement across a predefined set of process areas in which all goals in the set are attained.”

Process Area (PA): Process Area is a set of related practices that are performed collectively to achieve a set of goals. “A cluster of related practices in an area that, when implemented collectively, satisfy a set of goals considered important for making improvement in that area.”

Specific Goal (SG): A high level statement of the outcome to be achieved by effective implementation of a group of practices. “A required model component that describes the unique characteristics that must be present to satisfy the process area.”

.

• Adapted from: “CMMI® for Development”, Version 1.2, CMU/SEI-2006-TR-008

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CMMI Staged Representation

LevelLevel FocusFocus

Organizational Innovation and DeploymentCausal Analysis and Resolution

Organizational Process PerformanceQuantitative Project Management

Requirements DevelopmentTechnical SolutionProduct IntegrationVerificationValidationOrganizational Process FocusOrganizational Process DefinitionOrganizational Training Integrated Project ManagementRisk ManagementDecision Analysis and Resolution

Requirements Management Project PlanningProject Monitoring and ControlSupplier Agreement ManagementMeasurement and AnalysisProcess and Product Quality AssuranceConfiguration Management

Process AreasProcess Areas

5 Optimizing

4 Quantitatively Managed

3 Defined

2 Managed

ContinuousProcess Improvement

QuantitativeManagement

ProcessStandardization

BasicProjectManagement

1 Initial

Quality andProductivity

Risk

• Slide adapted from Process Program, Software Engineering Institute (SEI)

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CMMI Results

• Reference, “Performance Results of CMMI®-Based Process Improvement”, CMU/SEI-2006-TR-004

QuickTime™ and aTIFF (Uncompressed) decompressor

are needed to see this picture.

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HP Lean CMMI Success

Reduced Time: A small unit of HP implemented CMMI Maturity Level 3 in about 7 months (an average 4 year effort).

Reduced Money: Cost of about 30-50% of typical cost.

Reduced Size: The lean HP Maturity Level 3 process is about 20-25% of the size of the HP India Process (or a typical CMMI Maturity Level 3 process).

• Olson, Timothy G., Kellum, Julie, and Tufail,Zia., “Rapidly Defining a Lean CMMI Maturity Level 3 Process”, Presentation, NDIA CMMI Conference, 2006.

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More Lean CMMI SuccessesAccording to LSI data, the number one compliant from CMMI Maturity Level 3-5 companies is that their process is “not lean”.

LSI has many lean success stories. What are typical Lean CMMI Results?• Processes are 20-25% of the size, and are

more visual and usable.

• CMMI Maturity Levels reached in half of the average time (average 1 year instead of 2 years per level).

• 33-50% of the average cost.

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CMMI Strengths & Weaknesses

Strengths:• Has become an industry standard• Based on industry best practices• Based on maturity and capability models• Has a industry standard appraisal method

Weaknesses• Measurable results are not required (way too

much focus on “levels” and “ratings”, and not enough on measurable results)

• Leadership requirements are weak• CMMI model is not lean (too large)• SCAMPI is especially not lean (takes too much

time and is too expensive)

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

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Lean Strengthens Baldrige

Lean is not required for Baldrige. Baldrige mentions “Lean” one time in the notes.

Stoner - 2003 Baldrige Recipient. Used lean afterwards and dramatically improved results! (Reference: 2010 Quest for Excellence Conference).

Baldrige award winners may not be lean!

One measure of “lean” is “cost of poor quality”.

Advanced “lean”: Architectures and Models.

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Reference: Quest for Excellence Conference, Washington D.C., 2010.

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Advanced Lean

Architectures:• Promote “reuse” at the highest level (e.g.,

requirements, design, implementation).• Promote useful “views” of the product,

service, or system (e.g., behavior, structure, data, etc.)

Models:• Promote “lean” processes and procedures• Promote clear communication

Both: Are visual and scale up to complexity

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

World-Class Quality


Quality Maturity

• Based on “The Eternally Successful Organization”, by Crosby, the SEI CMM, the Baldrige Award, & Dilbert Comics

• Acronyms are (COQ=Cost of Quality; BA=Baldrige Award; DCF=Dilbert Correlation Factor; SEI=SEI CMMI)

STAGE

Comatose

ProgressiveCare

Wellness

Prevention

COQ

33%

25%

18%

10%

5%

SUMMARY

“What quality problems?”

“We don’t know why we have quality problems, but they hurt.”

“Management commitment andcontinuous improvement resolve quality problems.”

“Quality planning, control, andimprovement are routine.”

“We know why we have happy customers.”

SEI

IntensiveCare

BA DCF

800

200

400

600

700

5

4

3

2

1100%

80%

60%

40%

20%

World-Class Quality


Vision of “World-Class” Quality results that are planned and measured:• Strong leadership for quality• Processes are “lean” and “value added”• Cost of Poor Quality (COPQ) is 5-10%• 80 - 90% of all defects are removed early• Lean Metrics: Cycle Times, Performance,

Productivity, Quality, ROI, etc., are continuously improving• Customers are satisfied; even delighted• Employees are happy and proud of their work• Processes are mature: Supported by Technology• Most defects are prevented; Strong prevention• Award winning world-class quality (e.g., Deming

Award, Baldrige Award, etc.)

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OutlineIntroduction

Baldrige Overview

Lean Overview

CMMI Overview


Summary

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SummaryBaldrige and Lean work well together (synergistic).

“All models are wrong; Some are useful.”

The Baldrige Model has strengths and weaknesses; Know the weaknesses of Baldrige.

All quality models have strengths and weaknesses; Know the weaknesses of the quality models you use or are going to use.

Winning the Baldrige Award is just the beginning! Congratulations! But challenge yourself to keep improving!

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Apply to Serve as a Baldrige Examiner

• Evaluate Award applicants using the Criteria for Performance Excellence.

• Earn professional development CEUs (accredited by IACET).

• Network with other senior-level professionals from all sectors.

• Learn how organizations improve processes and get world-class results.

• Attend the annual Award Ceremony given by the President of the United States.

• Apply November 5 - January 6 at www.baldrige.nist.gov or call 877-237-9064.


World-Class Quality 1 Training Material Used with Permission and/or Licensed to Lean Solutions Institute, Inc. (LSI) Using Lean in a Baldrige Environment.

Documents

overview of lean

lean improvement

lean solutions tm

cost of quality

quality crisis

weaknesses of lean

quality new

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