Driving Transformation and Innovation in Organizations

In this episode, Bill Bellows and host Andrew Stotz discuss seeing organizations as holograms—3D images. Holograms show all parts from different views at once. Learn how using the lens of the System of Profound Knowledge lets you see the problems and opportunities for transformation.

TRANSCRIPT

0:00:02.5 Andrew Stotz: My name is Andrew Stotz, and I'll be your host as we continue our journey into the teachings of Dr. W. Edwards Deming. Today, I'm continuing my discussion with Bill Bellows, who has spent 30 years helping people apply Dr. Deming's ideas, to become aware of how their thinking is holding them back from their biggest opportunities. The topic for today, which we call Episode 18, is, Wouldn't It Be Nice? Bill take it away.

0:00:28.9 Bill Bellows: Wouldn't it be nice if [chuckle] we were older and we wouldn't have to wait so long? Okay. So Episode 18, greetings, Andrew. So as I mentioned in the past, I like to go back and listen to the past previous podcasts and as well as hear from people and their feedback on them. And I have a few points of clarity on the last one, and then we'll get into today's feature. So the last one which we refer to as Diffusion From a Point Source. And I talked about being in a bathtub, you start off at room temperature water and, or you fill the bath and you went and got distracted and came back, and now it's not warm enough, so you crank up, let's add some more water, and you feel that heat coming towards you from the... And then the diffusion equation is about how that, all the water ends up about the same temperature, and then you turn off the water and you drop back to room temperature.

0:01:41.1 BB: But another aspect of the point source that I wanted to clarify is, is if you have in the bathtub some, a source of energy, a heat source, which is not, you know, is different than the source of the water coming out of the faucet. But imagine you've got a little generator in there pumping out heat, then the bathtub, depending on the temperature of that, the amount of energy being released, then the bathtub is going to get warmer, warmer and warmer and warmer and warmer and warmer, and what keeps it going back to room temperature is how much energy is coming out of that. And that's what I was referring to as what it takes to maintain a transformation either individually within an organization, is something which continues to churn. Else you end up by the world we're in, you're watching the news, you're hearing about some accident and people are looking for the singular source, or they're looking at two points in a row, a downturn or upturn and looking at two data points to draw a conclusion. So there's all these everyday reminders of how, of the prevailing system of management at work in terms of how people are treated, how we manage systems. And our challenge is, how do you fight that?

0:03:14.7 BB: And so even within your organization, if you're trying to get people excited by Deming's works, what you have to appreciate is when they go home, the rest of their lives, they're being immersed in a culture of blame of individuals, not the system, and that's part of what we have to deal with. So I just want to mention that what I meant by that source term is, what does it take individually that we can do within our organizations to try to keep things going and not get sucked back down, knowing you've got all this normality around us that we're trying to move beyond. So the next thing I want to talk about is transformation. [chuckle] And then as that leads into, Wouldn't It Be Nice. And I was looking at The New Economics, my Kindle version, and found out that there were 73 references to transform in The New Economics, 73. And the first one is in the forward written by our good friend Kevin Cahill, and in there Kevin references, this is in the 3rd edition of The New Economics, which is the white cover if you have it in print. And it came out 2018. In there, Kevin references Out of the Crisis. And Kevin says, "The aim of the book," again, Out of the Crisis, "was clearly stated in the preface."

0:04:48.1 BB: This from Dr. Deming now, "The aim of this book is transformation of the style of American management, transformation of American style of management is not a job of reconstruction nor is it revision, it requires a whole new structure from foundation upward. The aim of this book is to supply the direction." Okay? Now back to Kevin, then Kevin says, "Out of the Crisis supplies direction for any and all types of organizations, while many people focused on its application in manufacturing, it was a call to action for every organization from education, to healthcare, to non-profits and startups of all sizes." Okay. So now we get to the preface for The New Economics. And so this is from Dr. Deming, what I just shared with you is Kevin quoting his grandfather. So now going back to 1993, the 1st edition, Dr. Deming said, "The route to transformation is what I call Profound Knowledge. The System of Profound Knowledge is composed of four parts all related to each other, appreciation for system, knowledge about variation, theory of knowledge, psychology. The aim of this book is to start the reader on the road to knowledge and to create a yearning for more knowledge." He adds to that,

0:06:07.3 BB: "What we need is cooperation and transformation... " there’s that transformation word again. "To a new style of management, the route to transformation is what I call Profound Knowledge. The System of Profound Knowledge is composed of four parts all related to each other." And I'll just pause here and I, just thinking of a friend a couple years ago is inviting me to go to his company and do an in-house program. And he wanted to know how I would start the program, would I open up with the System of Profound Knowledge? I said, "No." I said I would build up to that, and he says, "Well, why not just start with it?" I said, "Because it's a solution to a problem you don't know you have." I said, "I would rather first give a sense of the nature..." now, and he said, "Well, how are we going to start?" And I said, "I'm going to start with the Trip Report, having people compare the ME versus the WE or the All Straw versus the Last Straw. And then use Profound Knowledge as a means by which to understand how you go from one to the other." I said, "But without that understanding of the problem we face... " again, it's an elegant... [chuckle] Every time, the System of Profound Knowledge is an elegant solution to a problem you don't know you have. So I look at it as, let's first create a sense of the problem/opportunity. Okay.

0:07:38.0 BB: So we're going to come back to transformation, but now I want to go back to the title, Wouldn't It Be Nice. And what I'll do is, when this is posted on the institute webpage, I'll put a link to an article I wrote in September, 2015 for the Lean Management Journal, entitled, Wouldn't It be nice. And that article includes in the opening, it says, "My appreciation of Brian Wilson on the Beach Boys has grown significantly in the past month," okay, and this was written in 2015, "after viewing the Brian Wilson Biopic “Love and Mercy," which for you, Andrew, and everyone listening, it's a fascinating, fascinating film. And it got me turned on to Brian Wilson and all these things about the Beach Boys I really underestimated. All right, so then I wrote, "Through this blast from my past, I was reminded of another Beach Boys classic, Wouldn't It Be Nice. And the yearning "wouldn't it be nice if we were older then we wouldn't have to wait so long." And then I closed the opening with, "And reflecting on this adolescent wishfulness, I propose a wishfulness that organizations, public and private and even governments, improve their understanding of variation in how it impacts the systems they design, they produce and they operate."

0:09:00.7 BB: And so when I was going back and looking at that, 'cause I was thinking about transformation in this article, and I thought the transformation I talked about last time was the transformation... We talked about the transformation going from an observer, me as a professor used a student, I'm an observer of your learning versus a participant, and that's just a systems perspective. What Dr. Deming is talking about is not just how we look at systems, but the transformation involves how we look at variation. Do we move past two data points and look at variation in the context of common causes and special causes? A transformation of how we engage people, do we engage them with carrots and sticks? Do we understand when we blame them as the willing workers, what that creates in our organizations? And then the last element of Profound Knowledge, theory of knowledge. How do we know that what we know is so? And so I was just looking back at that article, and the article was written about, what if we had a better understanding of variation as one element of a transformation? And what I wanted to highlight today is talk more about transformation, but also look at transformation from not just one aspect of the System of Profound Knowledge, all of them.

0:10:32.2 BB: And it may well be, we're going to need another episode to go through this. But the next topic I want to do as we go down this path. Some time ago somebody made reference to a hologram, and I have seen holographic pictures, and so I went back and I was trying to think, why did that strike me? What about this hologram got my attention? And I started to remind myself of it. And Kevin and I were in Idaho a few months ago meeting with an audience. And I was again reminded by this hologram thing, because people were saying, "How come people in operations are so antiquated?" And I said, "Well, it's not just operations, it's more than that." So first, holograms, so what is a hologram? So I found a dictionary definition. "It's a three-dimensional image produced by a pattern of interference produced by a split coherent beam of radiation, such as a laser." That's for the physicists in the room.

0:11:38.5 AS: I'm not sure if that helped me but...

0:11:40.6 BB: [laughter] But I also found on a website, the Institute for the Advancement of Service, and the website is, www.showanotherway.org. And there I found something I think it's a little bit easier to digest. And the text says, if you turn a photograph over and you see a blank white surface," so far so good. "A photograph shows the image only on the front, thus only from one side, a hologram is a three-dimensional image created by interacting light sources, it shows the same image from all angles regardless of how it's being viewed. When a hologram is divided into pieces, the text says, each part still contains the entire image within it, although each new image is from a slightly different perspective." And then, again, from this website, and this leads us into the transformation piece, is "how does a concept of a hologram apply to organizational structures?" And I thought, "Okay. Now we're getting some place." "Because when people come together, share a vision for an organization, each person has his or her own unique perspective of the whole." I said, "Okay." "Each shares responsibility for the whole, not just his or her piece, but the component pieces aren't identical, each represents the whole picture from a different point of view.”

0:13:08.0 BB: “When we add up the pieces, the image of the whole does not change fundamentally, but rather the image becomes more intense. When more people share the common vision, the vision may not change fundamentally, but it becomes more alive, more real in a sense of the mental reality that people can truly imagine achieving." And to me, what I say is, the role of the ME/WE Trip Report is in part to create a common mental model, a common 3D view of an organization. But depending on who you're talking with in an organization, they see only one aspect of it, they see what it means in finance, they see what it means in HR, they see what it means in, from engineering. And the beauty of, what I have found is, is when you look at organizations from Dr. Deming's perspective, we're able to appreciate that these views are different, but it is the same thing we're looking at. So the next thing I want to get into of the work we're doing at Rocketdyne, working harder in a ME organization at a non-Deming company, working harder is the mantra, working smarter, as you and I have talked about, is what does that mean? Think about things from a Deming perspective. What does that mean? So what you get is a lot of working harder. And in which case, you have KPIs and we're working harder to achieve these KPIs.

0:14:46.9 BB: Well, I was very fortunate, Rocketdyne in the mid '90s, the Air Force came up with a brand new program for a next generation rocket with a set of KPIs that a few of us believed were impossible. Now what's the relevance of that? As long as, my theory is, as long as a non-Deming organization can achieve the KPI in how it currently operates, then just get out of the way. And they will work harder, a lot of brute force will be done to meet those KPIs. And Dr. Deming would remind us, anyone can accomplish anything if they don't count the cost. So, I mean, it will destroy people's lives and marriages and all that, but as long as those KPIs are met, just get out of the way. Well, what I loved about the Air Force requirement, was I was convinced that it couldn't be met. And part of the challenge was to convince executives at Rocketdyne that we can't get there from here. And that then, what I thought was, "This is our moment." We, so again, if you're in an organization and everything can be done, how the organization currently operates, then I say try to find something that can't be done with the current system. It can't be done in the schedule, it can't be done at the cost, but if it can be done by the current system, then that's not your opening. But for us, it was the opening. So the Air Force in the mid '90s had a couple billion dollars to develop a next generation series of rockets.

0:16:30.7 BB: And so we're, nowadays we think of SpaceX launching rockets. Well, this is the mid '90s, which is 20 years or so before SpaceX. And so the requirement was, that everything in the entire rocket, everything in the entire rocket, that's a lot of parts including the engine. Everything had to meet requirements, everything had to be a White Bead, no Red Beads. In the past, if there were Red Beads, which the Air Force accepted, and we know you get Red Beads, we know how you get Red Beads. And if they have Red Beads, then you would get paid to repair them, extra. And a friend of mine who was the brainchild of the effort within the Air Force to eliminate the purchase of Red Beads, he said, "The entire rocket will not have Red Beads." And when I heard of that I thought, "ME organizations don't know how to do that." They just, all they know how to do is create Red Beads. And the strategy we had already developed was, if we look at the variation in the White Beads, as you and I have talked about, then that's a great means to prevent White Beads, Red Beads in the first place, let alone improve integration. So we started getting senior management on board with things we have done to explain to them, here's a strategy, as we heard this flow down from the Air Force.

0:18:04.6 BB: Well, the existing system, how bad it was, was... And I learned this from the brain, this Lieutenant Colonel in the Air Force who pushed this incredible KPI, which was, everything must meet requirements. And it translated to something called "No Material Review Board, where a material review board in the industry, in the aerospace industry, is a situation where you've got a Red Bead that may be a very expensive Red Bead that the contractor wants to sell the Air Force, but it doesn't meet requirements. And then the contractor gets together with the Air Force and they schmooze over it, and what Lieutenant Colonel Ciscel explained is, you've got the contractor that really wants to sell that, even though something is not quite right. And what makes it work for the Air Force is when the contractor says, "Well, the bad thing about not using this is, it's going to take a couple of months to have a new one." And that time delay starts to bug the Air Force. Next thing you know that white, that Red Bead starts to look pretty good. But worse than that, what Dave explained is, he said, it's like going to the car dealership and finding that beautiful car you want. Then I, the sales person, tell you, "Andrew, okay, we're going to have it for you tomorrow, all ready to go."

0:19:36.0 BB: And then you come back the next day and I say... And you say, "Well, where's my new car?" And I say, "Well, Andrew, I told you we were going to wash it and wax it. Yeah, well, when we put it through the car wash we scratched it." And you're like, "You scratched it." And I say, "Well, yeah but we buffed out that and we're only going to charge you a little bit more for that. We're going to charge you for this and this and this." And they said, "That's what the Air Force does." And so what he was pushing for in the mid '90s was to get rid of all of that inspired by, you're ready Andrew? Inspired by his undergraduate education that the Air Force paid for when he was an officer, and he learned about Dr. Deming's work on control charts. And so when I heard that I thought, "We've got a requirement that can't be met." This is the, this is our means, our opening for initiating a transformation. 'Cause working harder, convincing the executives was, we can't get there from here. But boy, if you can get there from here, get out of the way. So now I'm going to go back to chapter two of The New Economics. Dr. Deming says, "Somehow the theory for transformation that's been mostly applied in the shop floor, everyone knows about statistical control of quality, this is important, but the shop floor is only a small part of the total. Anyone could be a 100% successful."

0:20:54.1 BB: Well, what I want to share there in terms of the situation we were dealing with in the mid '90s, if we started to talk to the executives about statistical control of quality, control charts, common causes and special causes. Well, as soon as we started to talk about the process being "in control," to the majority of our executives that translated to "everything met requirements." And so our starting point was just for that, just what does "in control" mean? And it was just so amazing how that got translated to meets requirements. And we're like, "No, no, no. We need to have the process in control, understand common cause variation and control charts and, let alone being on target." But that was our starting point, was just trying to get these ideas across on the shop floor. And chapter three... I've got a couple of things from each chapter, at least from some of the opening chapters. We'll cover the rest later. Dr. Deming says in chapter three, "We saw in the last chapter that we are living under the tyranny of the revealing style of management. Most people imagine that this style has always existed, it is a fixture. Actually, it is a modern invention, a trap that has led us into decline. Transformation is required. Education and government, along with industry, are also in need of transformation. The System of Profound Knowledge to be introduced in the next chapter is a theory for transformation."

0:22:25.5 BB: And this is what we're trying to do with this NO MRB initiative, we are just trying to get executives to realize that if we keep doing what we're doing, we're not going to be able to achieve this goal. What I'll also say is, there was such a commercial demand for space at that time, that the Air Force didn't have to pay for the entire program. So they came in with a couple billion dollars. They asked the contractors to bring their money with the idea that these rockets would be used, like Elon Musk is using, for launching all these commercial satellites. So the Air Force excitement was, we can lay out these requirements of no Red Beads, but the reason we're going to make it work is, there's such a commercial demand for a military product. And so Dave referred to this, his push for everything must meet requirements. He called it a $2 billion ambush. And I said, "What do you mean by that?" He said, "I knew they couldn't achieve what we wanted without a transformation. And I knew they wouldn't... We knew they wanted the money. But we knew they couldn't do it without a transformation." And I was like, "Oh, that's ingenious. That is just ingenious." And he so loved what we were doing at Rocketdyne, when he retired from the Air Force, as the program was transitioning from one phase to another, he retired and came to work at Rocketdyne. And he became a huge asset for our efforts to initiate a transformation.

0:24:06.1 BB: Then Dr. Deming says, "The transformation affects family life. Parents who will not rank their children nor show special favors or rewards. Would parents wish for one child to be a loser? Would his brothers and sisters be happy to have a loser in the family? Transform the family will be a living demonstration of cooperation in the form of mutual support, love and respect." At home, Andrew, at home. All right, "The prevailing style of management must undergo a transformation, the system cannot understand itself. The transformation requires an outside view." This is chapter four. And then "The aim of this chapter is to provide a lens, an outside view, a lens that I call a System of Profound Knowledge." Well, here I want to get into the hologram. And this, so I was... Kevin and I were at a Idaho Manufacturing Alliance conference right after Thanksgiving. And we had a session with some people. And in one group I was working with, they said, "Why is that engineering just doesn't get it? It always seems to be engineering. It's always engineering." And I said, "No." I said, "Each part of the organization has their own... " And I tried to explain to them, they each fall into a different trap, but the traps are very similar.

0:25:27.6 BB: I said, "So engineering sets the requirements on each part, they create the silos. Manufacturing then runs off with those instructions and produces the parts as if they're separate, quality then inspects them, finance adds up the savings, adds up the cost." And I don't know to what degree we've discussed this yet, but addition is the belief, adding up the savings comes from a belief that these elements are separate, that if we save $10 here, save $10 here and $10 there, then as an organization we save $30. No, the savings only happen... You only get a $30 savings if those activities don't interfere with one another. So I explained to them, finance has issues. And then HR, they're the ones behind performance appraisals. And that's where this hologram thing came to mind, is that each of them might think, as they get exposed to Deming's work, that we got this figured out. But it's all of them required to tie together to transform the organization. And then more from chapter 4, the transformation. "The first step is transformation of the individual. Transformation is discontinuous. It comes from understanding of the System of Profound Knowledge. The individual transformed will perceive new meaning to his life, through numerous interactions between people. Once the individual understands the System of Profound Knowledge, he'll apply its principles in every kind of relationship." There's Siri.

[chuckle]

0:27:13.6 BB: "Once the individual understands the System of Profound Knowledge, he'll apply its principles in every kind of relationship with others. He'll have a basis for judging his own decisions and transformation of the organizations that he belongs to. The individual, once transformed," this is what we talked about last time. I said, "No. The individual, once the transformation begins...will set an example, be a good listener, but not compromise. Continually teach others, help people pull away from their current practice and beliefs and move into the new philosophy without guilt about the past." And here I just want to add. A person I was mentoring three or four years ago, and she went through a one-day program I was leading, and I then started to mentor her on a regular basis. And one of the first calls we had, she was distraught over looking at herself as being incredibly selfish. She said, "The way I treated my siblings, the way I treated my classmates when I was in college." she said, "It was all about me." And I said, so I showed her this, I said, "You have to move into the new philosophy without guilt about the past." I said, "I used to think I caused the grades all by myself," I said, "We each go through this transformation differently with this bit of... " I mean 'cause we're brought up in a world thinking that we caused the grades and all these other things, and I said, "You got to move past that." And I'm not saying it's easy.

0:28:41.5 AS: Well, we did the best we could with what we had at the time, I always like to remind myself...

0:28:45.1 BB: That's right.

0:28:45.4 AS: Myself that.

0:28:48.2 BB: So a couple of other things, then I'm going to... Then I'll just pause, we can close. But what I would tell the executives early, early on, we had from the Air Force this major program, a whole lot of money at Rocketdyne, we were developing the engines. McDonnell Douglas was acquired by Boeing. They got the contract for the vehicle. So eventually we were all under Boeing, and it was really, really cool to be able to get the engine people smart about all the things we're talking about in these calls, and then the vehicle people excited. And then there was a production schedule. We're going to ship the first vehicle X years out, and then it's going to go from a couple a month to a lot a month on and on. And one of the things I would tell the executives, if you want to know every day, how are we doing every day. So you want to know if we're making progress as an organization. So I just gave them a couple of visuals. And I said, "One thing you get... " 'Cause there's one thing, "Well, how are we doing, how are we doing?" I said, "Well, let me tell you what you can measure." I said, "Every time you walk into the restroom, count how many paper towels are on the floor next to the trash can, that can't quite get into the trash can, and let that be a measure of how we're doing on the shop floor in our ability to not deliver Red Beads."

0:30:15.7 BB: And that then becomes an everyday reminder within our respective organizations is, we can't get the trash into the trash can, we can't leave the conference room as we found it, we can't get rid of the science experiments in the refrigerators. And I don't know if I mentioned it to you, but one experiment I would have people do when they would come to class at Rocketdyne, visitors and whatnot. During a break, they need an escort to walk to the restroom a few minutes away, and I'd say to them, "Here, run an experiment to how we're doing as an organization." I said, "Take your empty cup of coffee and put it on top of a file cabinet somewhere between here and the restroom, and then see if it's still there during the next break. Or crumble a piece of paper, put it on the floor, and see how many people walk past that." And I just throw that out as everyday things people can do to get kind of a finger of the pulse. As you're trying to transform your organization one person at a time, what are the things you can look for in the organization, long before we're focusing on common causes versus special causes. What are we doing with performance appraisals? Are we looking at things in the system? There's a bunch of everyday indicators you could start to look at with a sense of, this is a hologram.

0:31:51.8 AS: So we started this off with wouldn't it be nice? And we've been through a lot of different topics in relation to that, how would you summarize the key takeaway that someone can now bring to their business or their life in relation to this topic?

0:32:08.4 BB: Well, let me, and I got some bullet points on the holograms and then the close from the article that I wrote for the Lean Management Journal. And from the hologram, holographic model from the showanotherway.org website, it says, "What do we need to be mindful of when working with this holographic model?" It said "in this model, we need to be aware of the whole, with the parts, their relationships, and the context." Okay? So that's, part of this transformation is keep looking at things and try to imagine what's the greater context for these decisions. That one part of the organization reflects the philosophy of the whole organization. So the idea that, stop thinking that it's just those people in operations that don't get it. Each part of the organization has taken the prevailing system of management and put it into their DNA. So it's everywhere, that members of the organization reflect the whole of the organization and their behaviors. And the idea is, how do we get them to think about the whole? And I think a lot of progress can be made just by sharing with people a common... Having them reveal their appreciation of the contrast between ME and WE organizations, and they'll be pretty obvious where they'd rather work.

0:33:41.3 BB: And then the, what I closed the Brian Wilson article for the Lean Management Journal with is, "wouldn't it be nice if we manage the variation in the parts as being the parts of a system. In the spirit of Brian Wilson's adolescent wishfulness, wouldn't it be nice if the great illusion of independent parts and components modules was replaced by the realism of unity and interconnectedness in amazing prospects for teamwork within any organization." And I think that's a nice way of talking about transformation, not just looking at systems, but understanding people, psychology, and the theory of knowledge.

0:34:25.1 AS: Well, that's a great place to wrap. Bill on behalf of everyone at the Deming Institute, I want to thank you again for this discussion. And for listeners, remember to go to deming.org to continue your journey. And if you want to keep in touch with Bill, just find him on LinkedIn. This is your host, Andrew Stotz, and I'll leave you with one of my favorite quotes from Dr. Deming. And people wonder, why do I repeat the same quote over and over again. Try to get it through our thick heads that people are entitled to joy in work.