The opening of GE’s new GeoSpring Hybrid Electric Water Heater plant in Kentucky isn’t just a great endorsement for American Manufacturing but an affirmation of Lean’s ability to help improve a company’s competitive edge in today’s global marketplace. The events that have taken place at GE and GE’s Appliance Park in Louisville read like a case study straight out of a Lean handbook.
In the 1980s America was in an industrial decline and when the GE facility could no longer compete with production costs in Asia, for reasons such as an increase in wages and a decrease in the selling price of products, GE began moving production to the Asian plants. As expected GE was able to reduce labor cost and save on materials, but over time the cost savings from outsourcing was outweighed by the negative impact on GE’s competitiveness. The following examples are just a few problems GE encountered:
What did GE do to address these problems? They invested millions of dollars in Appliance Park. In addition to the problems brought on by outsourcing, two major events helped initiate the investment. The first was the availability of job-creation incentives from the state and federal governments and the second was a competitive labor costs as a result of the 2009 Competitive Wage Agreement between GE and IUE-CWA Local 761. But according to GE the company had not invested in Appliance Park because the culture “wasn’t right to invest”. How did GE address the culture problem? They embarked on a lean initiative that “maximizes customer value while minimizing waste and identifies employees as the most valuable resource a company has”, said a GE spokesperson.
GE’s upper management is showing their commitment to changing the company’s manufacturing culture by investing not just in the building with a multimillion dollar renovation but in their people. Investment in the people has been done through lean training and employee empowerment. The empowerment has removed barriers that would keep any employee from taking positive action that would lead to better quality and/or performance. According to GE’s Appliance Lean Leaders and employees, the way of thinking and the way things are done at Appliance Park have changed:
Using lean practices and tools, GE has reported cutting cycle time by 50%, eliminated 20% of the parts included in the GeoSpring final assembly, and reduced equipment investment by 30%. GE’s lean journey is demonstrating that Global competitiveness can be accomplished when the right tools are used in the right way.
According to a report by Boston Consulting Group (BCG), labor cost in China have risen dramatically and shipping and fuel costs have skyrocketed, this means China is not as cheap as it used to be and the United States is poised to bring back jobs from China. The report also points out that by 2015, it will only be about 10% cheaper to manufacture in China. If the BCG report is correct then the question for the United States will not be what company’s want the jobs but what companies have the capability (structure and culture) to compete in a global market.
With the freedom that a consumer has, in today’s global market, to go almost anyplace for a product that meets their quality and price requirements companies must be agile enough to meet consumers changing needs. As GE is showing us, the place can be the United States and the way to get it done can be through American Manufacturing.
Manufacturing is an exceedingly important industry sector in our state – maintaining our strength is a key economic driver. We’ve rewritten the rules regarding ROI on conferences. Gone are the days when you spent three days out of the office only to return with fragments of useful information. Join us this coming February for an informative day of learning that impacts every facet of your business!
So, you have a new product idea that will revolutionize the world, now what?
I have been there many times myself, “Man, I wish there was something that does this…”. Many believe that the next steps are prototyping, manufacturing, and ultimately a house in the Bahamas. The problem is, just having an idea does not make it commercially successful, nor does it warrant the expense in time and money to bring the idea to the market. I remember when I was 12 years old thinking how cool it would be if there was an interactive map in the car. Fast forward many years, now you have GPS in cars, heck, even cell phones. Really, the first step starts with pencil and paper.
Before you go too far, there are five simple questions to answer: If the answer to the last question is money, then stop here, as the money is at the end of a long painful road. Answering these question will help to communicate the idea to others, as well as potential partners, investors, etc.
PROBLEM: What caused you to have the idea?
My reasoning for the interactive map is that we used to drive from Michigan to Wisconsin once a year to visit my dad’s family. He wouldn’t let anyone else drive; he wouldn’t tell anyone else the route, because we would get lost. We came close to hitting a few ditches along the way, since he wouldn’t sleep, and we would make the trip at night after a long day of work.
PROMISE: What is it that your solution will do? You do not have to have the technical schematics all figured out, but at a high level, how would this work, ‘A widget would cause X to do Y’ is fine, as long as you know what Y, and it is going to take something that does X to do it.
I had no idea how to track the car, or how to take the data and figure out how to map it, but hey – satellites sounded cool! So, if a satellite could track the car, at least that part is sorted out. And, well, if the car knew where we were going, and how to get there, it would cut down on the getting lost part, right?
CUSTOMER: Who are people having the same problem? Many people just assume that the customer will be a percentage of the population. This is not correct, because out of those, you have the ones that just live with the problem, have their own way to deal with it, don’t care, and / or have never experienced the issue. Essentially, think of your demographic, and rewrite the problem statement and promise in a way that would get you excited. Don’t worry about the number of people at this point because if you can get them excited, they will come.
In my example, I figured there was probably a lot of families with someone who did not want to stop for directions, nor let someone else drive because they ‘knew the way’. Notice, the problem and promise are written so that someone growing up in the US and went on family road trips can relate.
PROOF: Why will your solution work / why should I believe you? This you can essentially make up, but use yourself, family and friends as a sounding board: what would make you and others believe it works? Maybe there is a test, testimonial, standard, etc. that can be used to give the idea credibility.
In my example, many movies show the military tracking the bad guy, so I figured a cool testimonial would be the FBI’s most wanted tracked down by the use of this device. If the FBI trusts it, shouldn’t you? Tests could be done where someone is given a challenge, drive from point A to point B without a map, only using this device, and vice-versa: who gets there first, less frazzled, etc. The classic example of this is the blind taste tests ran by Coke and Pepsi, 4 out of 5 prefer X.
WHY DO YOU LOVE THE IDEA: Why do you want to see this in the market? If money is the only reason, you might as well stop, because that will not happen for a while. I was once told by some doctors that part of the residency program is to weed out those there for a paycheck versus those there for the patients. Those for the paycheck will not stay around because of the long hours and little pay. There will be long, thankless hours involved with taking a product from idea to commercialization.
In my example, I would have loved to have this so that my mother could drive for part of the trip, so that those not driving could rest, as well as know where the heck we were at 2 am. Those trips were long because it was hard to sleep when the car would make sudden jerks when my dad woke back up. However, this love was not strong enough for me to do all the leg work to fully develop the idea. Trust me, I kick myself every day, but it goes to show the point, you really have to want to see your idea commercialized, otherwise, it will be the anecdote to a blog post.
I wish I could take credit for the above, but I cannot. The above is a small portion of what is called a Jump Start (shameless plug: offered by TMAC) developed by Doug Hall at Eureka Ranch. This is a one day idea generation, filtration, and communication workshop, followed by 30 days of follow-on coaching. The goal of a Jump Start is to determine significant hurdles that would keep an idea from being viable, or conversely prove the idea is worth pursuing, with facts, not just gut instincts. This process works best for companies that want to bring something meaningfully unique to the market, which customers are willing to pay for. I am not talking a tweak, or a me-too, but something totally new for your company and / or market.
So, when is the last time you introduced a new product to the market? When you did it, did you look at the above questions? Tell us about your new product / service experience.
21st Century entrepreneurs and business owners are writing smaller business plans but doing more business planning. Verbs are becoming more important than nouns.
The founder of a new company recently received $6 million venture capital without providing investors the traditional 40-page business plan document. She instead used a 12-slide PowerPoint to communicate the case for her venture followed by a Q&A where she very capably answered all of the investor’s questions to their satisfaction.
She had no plan (noun), but she had done the planning (verb).
Rhonda Abrams, who shared this story with me, has sold more than a million books on business planning. On September 7, 2011, she shared what has and has not changed in business planning.
What has changed?
Rhonda said, “Writing is no longer as important as the planning process and activities.” Very few people take time to read a 35-page business plan. Instead, they read the 1-page executive summary.
What has stayed the same?
What improvements have you implemented to your organization’s business planning process?
If you do, then enter a Greenovation Contest, a competition that encourages companies to pursue the development of green product concepts. This Greenovation Contest offers DFW area companies an opportunity to win a grand prize package of services that will help winners take a green product idea and turn it into a real product.
More information about the contest visit http://greenovationcontest.com/.
Dates and prize package information coming soon! Stay tuned!
Dr. Raul Fernandez and his TMAC team were invited to collaborate with the Neiman Marcus’ downtown Dallas Flagship visual display team for the 2010 Holiday Windows. Located at the Automation & Robotics Research Institute at UT Arlington, the team worked on the interactive parts of the display. In 2007, the main display window featured UT Arlington robots in a futuristic display.