A Lean Practitioner


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Ken Rolfes of KDR Associates was my guest on the Business901 podcast. This is a transcription of the podcast. Our conversation centered Lean 3P, Customer Centricity and the upcoming AME Conference in San Antonio.

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A Lean Practitioner

  1. 1. Business901 Podcast TranscriptionImplementing Lean Marketing Systems A Lean Practitioner Guest was Ken Rolfes Related Podcast: A Lean Practitioner Sponsored by A Lean Practitioner Copyright Business901
  2. 2. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsKen Rolfes has spent more than 30 years in public and privatecompanies that design, manufacture, and market technicallybased products for the medical device, industrial product and computer industries. He has extensive lean enterprise experience in general management, new product development, cost management systems, turnarounds, acquisitions and divestitures, and various financial transactions including IPO, private equity and venture capital financing. He has the reputation for turning around businesses and leading companies to record profitability and growth. In 1995 as acorporate officer and VP Operations at Graphic Controls, amedical device and industrial products manufacturer, the leanoperating product and market expansion strategy developed andexecuted resulted in almost doubling the company revenues inthree years.Ken currently serves as National Board Director and WesternRegion President of the Association for Manufacturing Excellence(AME) and is contributing editor for Modern Woodworkingmagazine. He has served on economic development board inWestern New York, the advisory board for UCSD LeanManufacturing Institute and periodically serves as extendedstudies instructor for San Diego State University in the LeanEnterprise Program.Ken can be found at KDR Associates. They are located in SanDiego, CA. A Lean Practitioner Copyright Business901
  3. 3. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Transcription of PodcastJoe Dager: Welcome everyone this is Joe Dager the host of theBusiness901 Podcast. With me, today is Ken Rolfes. He has spentmore than 30 years in public and private companies that design,manufacture, and market technically based products for themedical, industrial, and computer industries.He has extensive Lean enterprise experience in management,product development, turnarounds, acquisitions, and variousfinancial transactions. Without the fanfare of social media, articlesor a new book that Im aware of, what has intrigued me aboutKen is that his name has continually surfaced in discussion withboth industry and trade people as one of the most well-respectedpeople in the Lean world.I would like to compliment you, Ken on the respect that I havefound for your work, and since it is pretty tough to find a startingpoint could you start out by telling me what about all this youenjoy the most?Ken Rolfes: Well thanks for the very nice introduction thatsvery enjoyable. Basically, what I enjoy the most is really gettingthe people energized in companies when they see the possibilitiesof what they can do themselves.Thats kind of what the heart of Lean is all about, isnt it? Itsreally engaging the people and using the talents that you haveand what you see is so many of the organizations and companiesthat you walk into use so little of the brain power in theirorganization so what I think Lean does is it helps you unlock thebrain power and use a much larger percentage of that. I think ifyoure talking about North American manufacturers or serviceproviders whether theyre in medical or industrial or any sector atthis point, you cant afford to waste the brain power of your A Lean Practitioner Copyright Business901
  4. 4. Business901 Podcast TranscriptionImplementing Lean Marketing Systemspeople.Joe Dager: I think thats a great description. Ive never reallyheard someone start it out that way before. Its really aboutknowledge creation, knowledge building, isnt it?Ken Rolfes: Thats what Enterprise Lean is all about. In mybackground, I have an engineering degree and an MBA inFinance, but my real learning was hands on in a startup companythat I did, and a leverage buy out that we did, and then taking acompany public. All those activities theres very keen elementabout that is, is that youre never rich on resources in this kind ofenvironment and so consequently the resource that you have tobe able to use is the thought and capability of your people anddevelop ways to differentiate yourself in the marketplace.Joe Dager: Your name first came up in the product developmentarea to me, in Lean 3P. Have you always practiced 3P or is 3Psomething new youre working with in product development?Ken Rolfes: Cant say that Ive always done 3P, but I guess my3P activity really started when I was with a company calledGraphic Controls. We were in the medical device industry, and avery small player and so consequently we took it through aleverage buy-out and consequently we didnt have a lot of capital,so we had to be very creative.At the time, this was in the mid-90s the group purchasingorganizations in the medical industry and the hospital supplyruled the world and so in order for you to sell your products youhad to sell through the group purchasing contracts which weredriving prices down very aggressively in their favor. Looked atone of our products lines and found that if we didnt do somethingpretty radically different we ought to just withdraw from thebusiness because, in two-years, we would not be able to make A Lean Practitioner Copyright Business901
  5. 5. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsany money.I had heard a little bit about this 3P stuff at that time and it was ahuge learning for me and the team, and we knew we didreasonably well, but when we were acquired some years later ouracquisition company competed with us in their product line so wewouldnt show them the products until we had a definitiveagreement.Well I was walking the guy into our plant, and he says, "Youbetter be glad we bought you," and I said, "Oh, whys that?" Andhe says, "Well these products here we just spent 4 million dollarsin the last few years here were building a product production linethats going to make all these products." I said, "Oh wow, well isit up and running?" And he said, "No, nope. Its about 6 monthsoff." I said, "Whats your unit cost going to be?" And he told me.My response was, "Well you better be glad you bought us," I said,"because Im going to walk you into this plant and Im going toshow you two lines that are currently running and operating andwere operating at that cost. And oh, by the way, each line costus a quarter of a million dollars."That taught me the power of 3P which is really the power ofrapidly learning and developing alternatives and using thecapabilities and such of your people from a broad spectrum andbackgrounds. That was my kick off, and my learning and Imsticking to it.Joe Dager: Well I think its interesting. 3P has always interestedme because it seems it can be used outside of productdevelopment also, really as a change method. Can it be?Ken Rolfes: Basically what 3P is a very physical modeling of anitem and you can do this as a process or a product. I suppose you A Lean Practitioner Copyright Business901
  6. 6. Business901 Podcast TranscriptionImplementing Lean Marketing Systemscould consider it to be done for a service. It might be a littledifficult to think of it in that way, but basically what youre doingis youre creating ideas, and youre trying them very rapidly. Youcan use these and people do use 3P whether youre designing aproduct or designing process and its best used when you dothem both somewhat together as we did with our productbecause thats what is really effective.That was one of the reasons why I recommend looking at TargetMagazine in mid-2012; I think the mid-year one and the Fall one.We featured a subject on the squeeze machine which is TempleGrandins design of a piece of equipment to hug an individual,specifically an autistic person, to relax them. And it works. Itsbeen working for 25 years, but the cost of it has escalated.We thought here is a product thats free of intellectual propertyissues because Temple owns the intellectual property and shesgiven it to anybody. She was willing to give it a try, so we usedthat as a model to bring people together to understand how doyou use and unleash part of the capability of a broad spectrum ofpeople and use it in your organization. Use this as examples.So we had 12 people from 12 different companies. We had anautistic person, we had people from the autistic researchinstitute, the Easter Seals Foundation, the manufacturer and suchall came together for first a couple days of just exploring what isthe requirement of this device. What are the needs, whats thecustomer looking for, and then we came back a few months laterand did a three day 3P event.The articles pretty interesting. There are two of them. What youcan see is we radically redesigned the product and cut more than50% of the cost out of that product.Joe Dager: You did this in a regulatory environment or in the A Lean Practitioner Copyright Business901
  7. 7. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsmedical device field. Does that restrict you in using 3P does that,or in any product development maybe, a great deal?Ken Rolfes: Well the regulatory doesnt really restrict you inthat regard. What it restricts you with is the path that you haveto follow to release. Most of the products in the medical deviceindustry follow, unless youre really getting into invasiveproducts, a [510(k)] route which is a little less regulatory. As youget into the higher Class 3, which is the life-sustaining or veryinvasive products, you have to follow the path in the devicehistory records to be able to release your product.3P actually can help that because, in that process, you candocument what youre doing and document the trials. You have ahistory record as to why you chose a design and prove that thedesign works.Joe Dager: One of the things that you really specialize in isCustomer-Centricity. In connecting companies closer to theircustomers. How does Lean help that?Ken Rolfes: Lets take a step back and talk about howcompanies connect with their customers. I dont know what yourexperience has been, but mine has been as I got into thisconsulting world if you will and got into visiting companies,people really dont understand what their real mission is as acompany. Connect with their customers. I call it; refer to it as lineof sight.Think about it this way. Can you look at your customerthroughout your entire business? Can you see? Can the people inyour organization see what theyre doing for their customer? Youmight say; "Why is that important?" Jim Womack wrote his bookon Lean thinking. He came up with these five principles. Thenumber one principle was the principle of value. The customer A Lean Practitioner Copyright Business901
  8. 8. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsreally defines the value.If thats case, isnt it important for people to know what thecustomers value? I thought I was just going into companies thatwere unique if you will in that they werent very well organized,and they didnt really see.The Gallup Business Journal last year, and I dont remember whatmonth it was, had an article on some survey that they did. Theywent into companies and asked questions of executives, themanagement, and employees. And one of them that kind of stoodout, it says; "I know what my company stands for and whatmakes our brands different for our customers." Interestinglyenough, only 60% of the senior executives strongly agreed thatthey knew that answer. It went down to somewhere about lessthan a third of the employees could answer that question.I know this is kind of a long answer to this thing but the key hereis, unless you can create clarity in your organization as to whyyoure there and what are you doing for your customer its reallyhard to do Lean throughout your organization.Consequently what Lean has been focused on primarily is in theoperational and what we call the fulfillment value stream in theorganizations. When we get to the demand generation or thesales side or product development, Lean has a tough time. Yougo to AMEs conferences there are few sales people, and theresgetting to be a few more product development but pretty heavilyfocused on the fulfillment side.The metrics that you have in the fulfillment side is fairly simple.Theyre process metrics. Quality, delivery, cost, and safety arethe ones that you generally measure. Now get outside of thefulfillment side and the value definition becomes a little bit morecomplex. Now quality becomes more than just adherence to a A Lean Practitioner Copyright Business901
  9. 9. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsspec. Cost becomes more than just price. Delivery is more thanjust being on time.So work with and use Lean tools with demand generation side is avalue stream map of your demand generation process can be apretty eye opening type of thing. Im working in the B to B rangethats the realm that Im working with Im not really working withthe B to C. What Im looking at here is how the companies worktogether.An example, a retail services company that I work with wasstruggling because basically the retail services were looked at bythe customer base. The customer world was simply just howmany bodies, whats the rate per hour that youre going to chargeme to do this job. I said, well lets go look at what are the goalsthat the customer is really trying to solve. Whats the problem thecustomer is trying to solve? When we look at that in that way itchanges your whole dynamics.If you take your value stream map and you map the process.What you find is most of what youre doing today is moretransactional. Companies dont have a whole lot of control overthe process. In other words, a customer decides to send arequest for a quote in and a company looks at it and says, "Oh isthis something I do? Oh, okay. All right, heres a quote." Younegotiate it a little bit. The customer selects a vendor, issues acontract. Okay, “what percentage of business are we getting?"So, they manage the implementation. Its all highly contractual,or transactional.In each of the cases that were working with is, in the B to Brealm what is the ultimately customer, what are the goals thatthe customer is looking to achieve? We create a discussionaround shared goals and creating solutions. Such that now youvegot instead of your sales guy dropping off a line card and saying, A Lean Practitioner Copyright Business901
  10. 10. Business901 Podcast TranscriptionImplementing Lean Marketing Systems"Hey if you need any of this give me a call." Now were reallytalking about how do we manage the mutual cost of doingbusiness together?At the end of the day, you need the same fundamental metricsresolved that you have to have; the quality in the broad sense ofthe term in how they work together. The cost has to become thetotal cost of doing business together. The delivery has to beexactly when its needed for your customer to be able to satisfytheir customer.Consequently, Lean tools apply so radically and can be soengaging between you and your customer. I had a few examplesof that at AME but not very many. I would like to see more.Joe Dager: Clayton Christensen used the words "jobs to done".You got to look at what jobs need to be done for the customerand how your product or service plays the role in getting that jobdone.Ken Rolfes: Exactly. 3M was notorious, and I hope they still arefor this in that they used to say, We dont go ask the customerwhat he wants we go look and walk in his shoes and see the jobhes trying to get done. And thats how we create our solutions.Joe Dager: I think its interesting that you bring that up Kenbecause so many times when we look at a value stream, or welook at some process flow thing the customer is all the way overthere on the right side where youve run out of paper. He reallyshould be over in the center of the paper shouldnt he?Ken Rolfes: Weve gotten tool happy if you will in this and Ithink thats part of the problem. Were always in search oranother tool if you will. For a while, we were doing Kaizen eventsand that sort of thing, and then we decided that maybe we ought A Lean Practitioner Copyright Business901
  11. 11. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsto map the process and do some value stream mapping. Easyways to do this stuff by saying well okay whats the value?When were doing the fulfillment side, youve got a lot of thingsthat are defined. When youre out there trying to develop acustomer and develop some business its not nearly as defined.Its much more complex, and its harder to do. It’s harder todefine value and you cant do it in a conference room youve gotto go out there to the customer.Thats why what you see on a map is all the way on the right-hand side. They probably spend 2% of the time talking about thatand the rest of the time wanting to put post-it notes up for theprocess. I think you got to talk, do a lot more time around thatcustomer value.Joe Dager: How can we get our sales people or leadership? Is itjust visiting the customer or can we talk to the customer and say,"Hey can we help you and value stream your process?" So, wecan see what problems they have getting their job done? Howcan we get involved or how have you gotten companies involved?Ken Rolfes: The way to get involved is to first start internally.Understand what youre doing as an organization. Ill give you anexample. A company that Im working with was clearly anexample of this. They do a good job, but each of the departmentswas very siloed, none of the managers of those departmentscould really look at the whole picture. The first thing we did is wegot them to look at, number one how connected they are andhow important it is that theyre connected for their customers.Then secondly, we said look at your customer base. Everycompany has a tier of customers. We had them take their topcustomers and say okay guys lets sort this stuff out and letscreate a customer team, a cross-functional customer team. This A Lean Practitioner Copyright Business901
  12. 12. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsreally took the owner of the companys buy-in because typicallysales people dont want to let anybody, but themselves own thecustomers.We took a cross-functional customer team and created what wecalled, this was a service company, and we created client serviceteams having each team do business reviews of their topcustomers. They first started internally, you know they could feelcomfortable with it, and then by the second quarter went out tovisit with customers and started talking about what theyre doing.The customer got pretty interested, so thats kind of neat.Then the third quarter brought the team to the customer. Theydid a complete walk-through and business review with thosecustomers. Obviously, the outcome of all this is you have someactions and things youre going to work on.The outset of the whole thing is they finally over the last twoyears theyve developed where client teams cover all their keycustomers and their new customers and since the last two yearstheyve grown over 20% in this environment here because ofthat. When you talk to their customers their customers say,"Geez, most of what we knew of you before was the bill we goteach month for your service,” kind of like the electric company?Today, what they know of them is how theyre helping themimprove their business. And thats the difference. You have tobuild your own internal confidence and then go out. Anothercompany that Im working with is a product company. Theyrestarting their business review, and part of the discussion is werehaving what is called innovation reviews. What do they need?What do they need?Its open, not just in to the product itself but also to what the enduse of that product is and how they get that product there. So its A Lean Practitioner Copyright Business901
  13. 13. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbeginning to change the view of how theyre working together. Soits a proactive activity where goals are shared, and solutions aredeveloped in a collaborative mutual way.Joe Dager: You know I buy in to this, I agree. I mean I agreewith you anybody thats read my blog will know that youresigning my tune. Theyll know that. I think what preventscompanies from doing this a little bit, one, its a scary thought,one you need what I call Lean engagement teams versus a salesguy out there covering a customer. One of the things is it seemslike theres a lot of upfront investment to get this without a surebet that you got rewards at the end. Youre not sure you got apot at the end of the rainbow here. Is that a fair question to ask?Ken Rolfes: Well Im not sure I follow the alternative. What elsewould you invest in? I mean Peter Drucker so wisely said, "Thefirst order of business is to create a customer." Where else areyou going to invest?Joe Dager: Youre saying its got to go deeper in an organizationthan just one guy out there owning a customer anymore.Ken Rolfes: Basically, what it has done is created clarity ofpurpose throughout the organization. Its not unusual in acompany to see the internal conflict between finance and salesand operations and such that the operations guy says, "Well youknow those guys will sell anything, doesnt matter whether wemake it or not." Finance guys will say, "Oh those guys will sellanything no matter whether well make any money on it or not."The sales guys are out here saying, "Geez, you know Im outhere, its hard developing customers. Its hard work out here, andI dont get the damn support from the whole office I just getcriticized." That doesnt have to happen.Joe Dager: Part of it is building that, like you talked about, A Lean Practitioner Copyright Business901
  14. 14. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbuilding that clarity within internally first so that there are somecommunication channels inside first, right?Ken Rolfes: You have to first work within your four walls. Youknow in the operation side when they start working on their Leanprocesses you start in your four walls and then go out to yoursupply base so that you can create some connection with yoursuppliers and relate to them well. Well same thing goes with yourcustomers.Joe Dager: Just touch base here on AME and the ConsortiaProgram that youre doing. Can you tell me about that?Ken Rolfes: The Consortia Program at AME has been kind of indevelopment for a few years, and, in fact, weve had I guess ourfirst one started in 2009, I guess it is. The whole purpose of it is,is that AME as we see and particularly the biggest thing thatpeople recognize is the annual conference and you get peoplefrom all over the world. We have regional events, and we getthose regional events we get people coming in from all over theplace to.What were known for is innovative thinking and openness andability for people to come see and learn. What we havent had isa mechanism for people in their local area to work and share andlearn and grow together, and thats what the Consortia are reallyall about.It is taking the capabilities that AME has on a global and nationalbasis, bringing those capabilities into the local area. Wherecompanies that are physically located less than an hours drive ofeach other can get together and share and learn and grow andhelp each other overcome obstacles. What this is really doing isthat, AME the way were structured right now is fairly broad, butwe cant get very deep into an organization. A Lean Practitioner Copyright Business901
  15. 15. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsWith the Consortia, it can create the ability for the local groups toget deeper in their organization, get more of their people to goback and forth and help each other and learn and really focus onthe things that they need in their organization. Were on a roll-out. I guess we have about 6 or 7 of them running right now andby the end of the year we hope to see about 10 more.Joe Dager: What do you have upcoming for yourself?Ken Rolfes: I guess right now on AME Im working on the SanAntonio conference. Im the flight leader for the presentations,and its our whole theme there is the revitalization of NorthAmerican manufacturing. Weve got three flights. One is onpeople. One is on supply chain, and the other is on innovation.Weve got pretty neat programs set up for that conference. Imconcentrating on that at the moment.Joe Dager: Whats the best way for someone to get a hold ofyou or contact you?Ken Rolfes: Get my website at KDR-Associates.com, or on theAME website my email is there. You can get me through AME.Joe Dager: I would like to thank you very much its veryappreciative and very informative. This podcast will be availableon the Business 901 iTunes store and the Business901 blog siteso thanks again Ken.Ken Rolfes: Well thank you for having the time to chat with youhere. It was great. A Lean Practitioner Copyright Business901
  16. 16. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Business901 Phone: 260-918-0438 Skype: Biz901 Fax: 260-818-2022 Email: jtdager@business901.com Website: http://www.business901.com Twitter: @business901Joe Dager is president of Business901, a firm specializing in bringing thecontinuous improvement process to the sales and marketing arena. Hetakes his process thinking of over thirty years in marketing within a widevariety of industries and applies it through Lean Marketing and Lean ServiceDesign.Visit the Lean Marketing Lab: Being part of this community will allow you tointeract with like-minded individuals and organizations, purchase relatedtools, use some free ones and receive feedback from your peers. Marketing with Lean Book Series included in membership Lean Sales and Marketing Workshop Lean Service Design Workshop A Lean Practitioner Copyright Business901