Fitness For Purpose

dja@leankanban.com @lkuceo Copyright Lean Kanban Inc.
Presents
Presenter
David J. Anderson
Ltd WIP Society
Munich
June 2014
Release 1.0
Fitness for Purpose
matching capability to customer
expectations

Blizzard Skis

Mittersil, Austria
Blizzard
Factory

Blizzard is the largest private sector
employer in the Pengau Alps region of
Salzburgerland, AustriaMittersil is a factory town with
over 400 people relying on the
factory either directly or
indirectly for employment

• Since 1945
• Hand-made by craftsman
• Innovator
• Award winner

In 2007, Blizzard, effectively
bankrupt, faced closure from parent
company, Tecnica in ItalyToday Blizzard is the most
effective & efficient ski
manufacturer in the world!

What went wrong at Blizzard, a
proud & leading brand in alpine ski
equipment?And what enabled a remarkable
turnaround, from the brink of
extinction to a return to
innovation & profitability?

Orders & Deliveries of Skis
2006 winter
skis delivered
to dealers
Timeline for manufacturing, delivery and order placement for ski
industry in northern hemisphere prior to 2007
timeNov Dec Jan
2006
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
2007
Feb Mar Apr
Start
manufacturing
2007 skis
2007 winter
skis delivered
to dealers
Start
manufacturing
2008 skis
Orders
placed for
2007 winter

2006 was a warm winter and poor
snow conditions badly affected the ski
industry as people stayed home and
didn’t buy new equipment
Blizzard dealers were left holding
a lot of 2006 inventory that they
would hold & later discount
during the 2007 winter

Effects of climate change in the Alps
Glacier
recession is
clearly visible
1912 1933
2003

2007 was also a warm winter as
climate change began to seriously
affect the Alps
Gun shy from 2 bad winters,
Blizzard dealers delayed
commitment on 2008 orders
until May after the ski season had
finished

In 2006 business risks appear to be low
2006 winter
skis delivered
to dealers
Changing climate conditions and its affect on ski dealers
dramatically shifts the risk profile of ski manufacturing
timeNov Dec Jan
2006
2007
Feb Mar Apr
Start
manufacturing
2007 skis
2007 winter
skis delivered
to dealers
Start
manufacturing
2008 skis
Orders
placed for
2007 winter

Previously lead time for delivery is 12 months
2006 winter
skis delivered
to dealers
Traditionally manufacturers have had a full year to make the skis
for the following winter
timeNov Dec Jan
2006
2007
Feb Mar Apr
Start
manufacturing
2007 skis
2007 winter
skis delivered
to dealers
Start
manufacturing
2008 skis
Orders
placed for
2007 winter Lead Time
to manufacture
2007 deliveries

By 2007 the risk profile has changed dramatically
2006 winter
skis delivered
to dealers
Dealers still holding 2006 & 2007 inventory decide to wait until
the end of the 2007 season to place reduced orders for 2008
timeNov Dec Jan
2006
2007
Feb Mar Apr
Start
manufacturing
2007 skis
2007 winter
skis delivered
to dealers
Start
manufacturing
2008 skis
Orders
placed for
2007 winter
Orders
placed for
2008 winter
Volume is low due
to over-stocking
of older models
The period of speculative
manufacturing grows from 2
months to 6 months
Time period of
building to
forecast rather
than against
customer orders
Blizzard fail to anticipate falling
demand and over-produce 2008 skis.
Bankruptcy is a serious possibility!

Tecnica Group & Blizzard managers
turn to their business school education
and seek to cut costs by consolidation
& centralization
Centralizing all order processing
through Tecnica HQ adds 1
month to order times, increasing
speculative build-to-forecast. As a
result costs go up!

Cutting costs will not make Blizzard
“fit for purpose” !!!
What is required to be “fit for
purpose” in a period of climate
change, is to defer manufacturing
until firm orders are placed!
Blizzard need to cut the lead time
to build skis!

By 2010 the market has a new equilibrium
2010 winter
skis delivered
to dealers
Traditionally manufacturers have had a full year to make the skis
for the following winter
timeNov Dec Jan
2010
2011
Feb Mar Apr
Start
manufacturing
2011 skis
2011 winter
skis delivered
to dealers
Start
manufacturing
2012 skis
Orders
placed for
2011 winter
Orders
placed for
2012 winter
Volume is low due
to over-stocking
of older models
Lead Time
to manufacture
2011 deliveries
Lead time to manufacture skis
to order is now 6 months. No
speculative build-to-forecast
To have a viable business Blizzard
need a capability to make skis twice
as fast as before!

In 2010 a Lean initiative was started
in the factory. This was followed later
with a Kanban initiative in IT and
Quality Assurance
Blizzard becomes the first Lean
ski manufacturer in the world!
CIO, Eric-Jan Kaak wins Austrian
CIO of the Year 2013
and is promoted within Tecnica
Group

Meanwhile, Major Ski Resorts Deploy Snow
Cannon to Reduce Risk for Warm Winters

Lesson 1

Blizzard initially made a bad decision
because they didn’t understand the
dynamics of their external
environment
Once they realized that only
manufacturing skis faster &
deferred commitment would
make them “fit for purpose” did
they focus improvement efforts
where they could be most
effective
Ski craftsmen are now “idle” for 6
months per year. They use this time
to improve the factory processes

Understanding
“fitness for purpose”

What makes a pizza delivery service
“fit for purpose” ?
• Fitness criteria are metrics
that measure things
customers value when
selecting a service again &
again
• Delivery time
• Quality
• Predictability
• Safety (or conformance to
regulatory requirements)

Meet Neeta - a project manager
• Neeta’s team are working
late (again)
• Neeta needs to feed them
with pizza
• What attributes do her team
care about in a pizza delivery
service?
• Delivery time =
approximately 1 hour
• Non-functional quality =
tasty & hot
• Functional quality (order accuracy) =
doesn’t matter if small mistakes are
made, geeks will eat any flavor of pizza
• Predictability =
+/- 30 minutes is acceptable
• Safety =
so long as health & safety in food
preparation is good, it’s fine

Neeta is also a working mom!
• Neeta gets home late.
Her kids are really
hungry and even
though she shouldn’t
she decides to order
pizza for them
• What makes a pizza
delivery service
acceptable to her kids
age 4, 6, 9 & 11 years?
• Delivery time =
20 minutes
• Non-functional quality =
doesn’t matter too much, it’s pizza!!!
• Functional quality (order accuracy) =
it must be cheese pizza! No other flavor is
acceptable! (even if you take the pepperoni
off)
• Predictability =
+/- 5 minutes maximum!!!
• Safety =
only mommy worries about that stuff!

Lesson 2

To be “fit for purpose” there is a
product component & a service
delivery component
We need to offer a selection of
different recipes which are tasty
& popular. However, we must
also deliver with speed &
predictability

Modern creative & knowledge
worker businesses often obsess
with product definition & strategy
Operational excellence and service
delivery excellence are often
overlooked or treated as inferior
management skills

Lesson 3

Neeta has 2 identities –
Mother and Project Manager
Each of Neeta’s identities
represents a different market
segment for the pizza delivery
service

We need a different set of
thresholds for our fitness criteria
for each market segment
Our business needs the ability to
“sense” changing customer tastes.
As time goes by the criteria &
thresholds for a given market
segment may change

Our pizza delivery service can be
“fitter for purpose”
by offering different classes of
service for each market segmentBut, do we have the capability to
deliver on customer expectations?

Understanding & improving service
delivery capability with Kanban

Test
Ready
F
F
FF
F
F F
Commitment Frequency
E
I
G
D
Replenishment
Discarded
I
Pull
Ideas
Dev
Ready
5
Ongoing
Development Testing
Done
3 35
UAT
Release
Ready
∞ ∞
The frequency of system
replenishment should reflect
arrival rate of new information
and the transaction &
coordination costs of holding a
meeting
Frequent replenishment &
commitment is more agile.
On-demand commitment is
most agile!

Test
Ready
F
F
FF
F
F F
Defining Kanban System Lead Time
E
I
G
D
Pull
System Lead Time
Discarded
I
Ideas
Dev
Ready
5
Ongoing
Development Testing
Done
3 35
UAT
Release
Ready
∞ ∞
The clock starts ticking when we
accept the customers order, not
when it is placed!
Until then customer orders are
merely available options
Kanban
system lead
time ends
when the
item reaches
the first ∞
queue

Test
Ready
F
F
FF
F
F F
Delivery Frequency
E
I
G
D
Delivery
Discarded
I
Pull
The frequency of delivery should
reflect the transaction &
coordination costs of
deployment plus costs &
tolerance of customer to take
delivery
Ideas
Dev
Ready
5
Ongoing
Development Testing
Done
3 35
UAT
Release
Ready
∞ ∞
Frequent delivery is more
agile.
On-demand delivery is most
agile!

Service Delivery Agility
Service Agility
Commitment
frequency
Lead Time
Delivery
Frequency
LeadTime
Short
Long
Delivery
Service Agility
Commitment
Frequent
Seldom
Frequent
Seldom
More
Agile
Less
Agile
Kanban system dynamics

Guiding Evolutionary Change

Start with what you do now
• With Kanban you start with what you do now,
and "kanbanize" it, catalyzing the evolutionary
process into action. Changes to processes in
use will occur
• Evaluating whether a change is truly an
improvement is done using fitness criteria
metrics that evaluate an external outcome

Fitness criteria are metrics that measure
observable external outcomes
• Fitness criteria are metrics that
measure things customers or
other external stakeholders value
• Delivery time
• Quality
• Predictability
• Safety (conformance to regulatory
requirements)
• or metrics that qualitatively
assess actual outcomes such as
• customer satisfaction
• employee satisfaction

Evolutionary change works when fitness is
continually evaluated
Evolving
Process
Roll
forward
Roll
back
Initial
Process
Future process is
emergent
Evaluate
Fitness
Evaluate
Fitness
Evaluate
Fitness
Evaluate
Fitness
Evalua
Fitnes

Fitness
Time
Evolutionary improvement should result in
gradually rising fitness for purpose

Which system is fitter?
We don’t know!
System B is faster but without understanding
customer expectations, both may be fit enough
0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
Mean 17 days Mean 12 days

Measuring delivery against expectation
0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
2
4
6
8
10
12
Lead Time Expectation Spread (Days)
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10 15 20 More
System B
Frequency
System B is clearly fitter!
System B delivers 5/7 within expectations
System A only delivers 3/7 within expectations

0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
2
4
6
8
10
12
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10 15 20 More
System B
Frequency
Lesson 4

0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
2
4
6
8
10
12
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10 15 20 More
System B
Frequency
With coaching & incremental If
we don’t know what the
customer values we will struggle
to be “fit for purpose”
Fitness for purpose can only be
assessed relative to established
customer-valued fitness criteria

Business Risks, Fitness Criteria & Classes of
Service should all align
• If your kanban system is designed properly the
classes of service you are offering should align
with the true business risks in the domain
• The metrics being used to evaluate system
capability should be fitness criteria that are
derived from the business risk being managed
• For example, cost of delay requires us to
measure lead time and understand sensitivity to
delivery times

Know why you are using a metric!
• Is your metric a fitness criteria that assesses
system capability and indicates fitness for
purpose and likelihood of surviving and thriving
by satisfying customers?
• Or, is your metric evaluating and guiding a
specific change to improve fitness of the
system?
• If neither, you don’t need it!

0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
2
4
6
8
10
12
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10 15 20 More
System B
Frequency
Lesson 5

0
2
4
6
8
10
12
14
Lead Time (Days)
System A
Frequency
0
2
4
6
8
10
12
System A
Frequency
0
5
10
15
20
25
30
5 10 15 20 25 30 More
Lead Time in Days
System B
Frequency
0
5
10
15
20
25
30
35
40
45
-15 -10 -5 0 5 10 15 20 More
System B
Frequency
There are only two types of
metrics that matter: fitness
criteria; and metrics guiding
improvements!
Metrics for improvements should
be temporary and removed when
the change is completed unless
there is a risk of regression

Aligning goals with capability

Go on, you can lift it!

Kanban system
dynamics
Shelf-life
(of business opportunities)
Is your service delivery fit for purpose?
Short
(days, weeks,
months)
Medium
(months,
quarters,
1-2 years)
Long
(years,
decades)
LeadTime
Short
Long
Delivery
Service Delivery Agility
Replenishment
Frequent
Seldom
Frequent
Seldom
Predictability
High
Low
Is your service delivery
predictability & agility
fit enough for your
business strategy?
If you plan to pursue short shelf-life opportunities,
you must measure predictability, lead time,
replenishment & delivery frequency as fitness criteria.
Does the capability exist to pursue the chosen
strategy effectively?

Lesson 6

Improve your capabilities before
pursuing market segments or
strategies that require levels of
service delivery beyond your reach
With coaching & incremental
development a child can grow to
dead lift a large bar bell.
Impatience & over-reaching is
likely to end in tears!
With patience, education and a
focus on evolutionary change, your
organization can grow its service
delivery capability

Conclusions

1. Understand your external
environment before deciding what
to change
2. “Fitness for Purpose” has both a
product component & a service
delivery component
3. Each market segment will have its
own fitness criteria and threshold
values

4. Fitness for purpose & whether
improvement is needed can only be
measured relative to customer-
oriented fitness criteria
5. Metrics should be fitness criteria or
guiding specific improvements in
which case their use is temporary until
the improvement is completed
6. Improve your capabilities before
pursuing market segments or
strategies that require service delivery
you currently cannot achieve

Thank you!

About
David Anderson is a thought leader
in managing effective 21st Century
businesses that employ creative
people who “think for a living” . He
leads a training, consulting,
publishing and event planning
business dedicated to developing,
promoting and implementing new
management thinking & methods…
He has 30 years experience in the high technology industry
starting with computer games in the early 1980’s. He has
led software teams delivering superior productivity and
quality using innovative agile methods at large companies
such as Sprint and Motorola.
David is the pioneer of the Kanban Method an agile and
evolutionary approach to change. His latest book, published in
June 2012, is, Lessons in Agile Management – On the Road
to Kanban.
David is a founder of the Lean Kanban Inc., a business
dedicated to assuring quality of training in the Lean Kanban
Method for managers of those who must “think for a living.”

I’d like to thank Eric-Jan Kaak and the staff at Blizzard for providing access to
produce the story of their Lean transformation.
System maintenance lead time data courtesy of CME Group.
Acknowledgements

Fitness For Purpose

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