Three Sigma Systems

Do you remember a few months back, when the U.S. media was busily burying Toyota’s reputation as the be-all and end-all of automotive quality? To me, the media’s myth-busting paroxysms came off more like a witch-hunt than investigative journalism. Now that their fear-mongering Toyota-bashing is no longer in the headlines comes this from NHTSA, who have been carefully investigating Toyota unintended acceleration reports.

“The early results suggest that some drivers who said their Toyotas and Lexuses surged out of control were mistakenly flooring the accelerator when they intended to jam on the brakes.”

And,

“In spite of our investigations, we have not actually been able yet to find a defect” in electronic throttle-control systems, Mr. Smith told the scientific panel, which is looking into potential causes of sudden acceleration.

In the wake of the great Toyota panic of 2010, Toyota’s senior managers have tearfully apologized in public and Toyota’s engineers have created numerous fixes for problems still not found. As of February of 2010, Toyota estimated that their cost for recalls and lost sales at about two billion dollars.

In past posts on this blog I have expressed my feeling that there was a hidden agenda designed to play on the xenophobic tendencies of a declining nation that has squandered its edge in quality manufacturing and is now trying to claw its way back, not by rededicating itself to creating great products, but by denigrating its competition.

As I have said before, Toyota is just another automaker in business to make a profit. Their products are far from prefect, but have thus far been much better than anything produced by U. S. automakers. To begin to understand why this is the case we need only study Toyota’s corporate response to the media witch-hunt. Rather than dig their heels in with denials and blame-shifting (see BP oil spill), they bowed, apologized, bent with the wind and went on about the business of improving their products. Their response reflected what has come to be known as “The Toyota Way”. Meanwhile GM, having learned nothing, is giving lip services to digging itself out of the grave it dug itself into with a taxpayer funded sham product called the Volt (see NYT “G.M.’s Electric Lemon“)

No design is perfect and the imperfect design of Toyota vehicles certainly contributed to crashes. After all, if the operator of a vehicle can accidentally apply the gas rather than the brake, the gas-pedal next to the brake-pedal design could stand improvement. But the two billion dollar rush to judgement in the media was most certainly fueled by a desire to take the number-one automaker in the world (not made in America) down a few notches rather than a legitimate concern for product safety.

This is the same con as the one being used by the Republican Party in the U.S.  Rather than earn the respect and loyalty of customer-audiences by creating great product and improving it continuously, the Republican party spends all their effort attacking the other party’s products. This method has the benefits of being cheap, requiring no thought, and by creating nothing, immunizing it perpetrators from responsibility for their (not) products.

But there’s a downside to this technique as well, and I am not defending Toyota. I am attacking the con-artistry of U.S. business interests and media lackeys and more importantly, the gullibility of American audiences who mistake creating nothing for doing something. People who are lost in the funhouse had better wake up soon. These con-artists are shoveling dirt into our grave faster than we can dig ourselves out!

Obama wants to rework G. W. Bush’s “No Child Left Behind”, which was itself a monument to stupidity. According to the NYT, Obama says that he will,

“…replace the law’s pass-fail school grading system with one that would measure individual students’ academic growth and judge schools based not on test scores alone but also on indicators like pupil attendance, graduation rates and learning climate.”

Because, said Education Secretary Arne Duncan,

“We’ve got to get accountability right this time,. For the mass of schools, we want to get rid of prescriptive interventions. We’ll leave it up to them to figure out how to make progress.”

So Obama’s “new plan” is no plan at all. It is just another way to measure outcomes being produced by unknown processes run by an anarchic cadre of do-it-yourselfers. With stupidity incarnate, the best idea Obama can up with is to try and change educational outcomes, not by working on the system and processes that produce those outcomes, but by hitting students and teachers with bigger hammers.

As a lifelong educator who spent more than a few years running a small public high school in the basement of a church and buying teaching materials using a portion of my meager salary, it seems to me that even a simpleton should be able to understand that, rather than hammering students, teachers and yes, even administrators, to produce more desirable educational outcomes by doing whatever it takes, we must work on the system and processes that produce those outcomes!

For starters, here’s what Obama’s new standards should look like. Read more…

Dick, a member of the Deming DEN List forum, forwarded me an article by Barbara Tuchman written around 1980, entitled “The Decline of Quality“.  Tuchman is the author of “The Guns of August”,  which I regard as one of the greatest books of the 20th Century, so I read the article with great enthusiasm. In her opening she says that she planned to take a holiday in Patagoniato hide from the blowback that would inevitably occur upon publication. From my standpoint, Patagonia wouldn’t have been far enough!

At the root of the problem is her adoption of the idea that quality is an inherent characteristic. This is of course, Platonic nonsense. Quality is in the eye of the beholder in a given time and circumstance. She speaks from the position of an elite that scorns peasants and lesser beings as incapable of recognizing “inherent” quality.

She does touch on the idea of “intention” as a necessary precondition for realizing the creation of quality, but then she races off into the self-contained elitist world. She cites great books as more worthy of study than the television viewing assigned by the school teacher, yet Shakespeare was a producer of the soap operas of his day. A punster of unrivaled skill, he wrote immensely clever trash for his peasant audiences.

We should not be surprised if the cleverness of some television writers, producers, and performers, survives the ages as future classics. If the human race manages to survive the folly of its own making, the Internet will undoubtedly become the medium by which authors and artists, no longer beholding to moneyed gatekeepers and solicitous contemporaries, produce tomorrow’s “classics”.

I do agree with her that the ubiquity of poor quality has increased, but it does not come from our egalitarian tolerance of the mediocrity of those with lesser tastes, lazy dispositions, and peasant genes. The source of decline comes from the subordination of all intentions (aims) to our quasi-religious worship of the profit motive. When quality, by any measure, is systematically subordinated to profit, those characteristics we value in product and service, whatever they might be, must suffer, because the dictates of profit always take precedence.

All things being equal, consumers of all classes will opt for quality (what they value) as they define it, but when constrained by what is available, by economic circumstance, and by deceptive practices, they can only do what is possible. And if the evidence of their senses tells them that the quality of a person is measured solely by profit, in spite of all other measures of quality, they will subordinate their very being to actions that they believe will maximize profit — at the cost of qualities such a honor, loyalty, membership, responsibility, creativity, and diligent endeavor.

Today, this is what we teach in our schools — to profit in tests, in grades, in money, in life — by any means. The “idea” that human interaction is driven by the “profit motive” is not only false, it is doing irreparable harm. As Deming said, “economists have led us down the wrong path”.

The Huffington Post, March 3, 2010: Gun-and-latte aficionados can rest easy. Despite an outcry from advocacy groups, Starbucks says it will continue to allow customers to bring licensed firearms into their stores.

SHOWDOWN AT STARBUCKS or THE CUSTOMER’S ALWAYS RIGHT
A short play in one act
by
I.M. Intim A. Dated

SCENE
INT. STARBUCKS COFFERIA

Typical Starbucks. Subdued lighting. Muffled chatter of patrons who sit sipping 3 dollar lattes and cappuccinos. The counter queue is moderately long. CUSTOMER 1 takes his double expresso and walks to an alcove table for a few teaspoons of sweetener. As he reaches for the sugar, CUSTOMER 2 appears behind him holding a Cafe Amerciano. He reaches around, and grabs the little wooden bowl of brown organic sugar being held by CUSTOMER 1.

CUSTOMER 1
(Mildly irritated)

Hold your horses there friend, I’ll just be a second.

CUSTOMER 1 and CUSTOMER 2 both gripping the sugar bowl.

CUSTOMER 2
(Speaking with a groggy growl)

YOU look, “FRIEND”! I had a bad night and I’m late for a meeting. Just give a guy a break, huh?

CUSTOMER 1
(Turning to face CUSTOMER 2)

You’ve got your problems and I’ve got mine. What gives you the right?

CUSTOMER 2
(Stepping back a few paces, he rests his hand on a bulge beneath his jacket that vaguely resembles the shape of a licensed 357 Magnum. Speaking in a low, commanding voice.)

I suggest you show a little respect friend. A man’s gotta do what a man’s gotta do.

CUSTOMER 1
(Taking it all in. averts his eyes, releases the sugar bowl and replies haltingly)

Oh yes… err…I see now… You’re right. I’m REALLY, REALLY sorry. Please excuse me SIR.

CUSTOMER 1 steps aside, head bowed, puts the lid on his unsweetened coffee and heads for the door.

~ FIN ~

It’s not often that I agree with Charles Krauthammer, but in his recent opinion piece, “Toyota and the price of modernity“, he is on the right track when he says,

The question is: How do you distinguish the idiosyncratic failure from the systemic — for example, the single lemon that came off the auto assembly line versus an intrinsic problem inherent in that model’s engineering? How do you separate one patient’s physiology producing a drug side effect versus an intrinsic problem with a drug that makes it unacceptably dangerous?

Perfection is not an option. The question that any manufacturer must ask is if the causes of a problem observed are “assignable” or “common”. If something assignable is going on, for example, a bad batch of gas pedals, they can “fix” the problem and move on. But if the problem is systematic — if for example, the design process discounts safety issues in favor of volume production — the system must be changed as a whole or similar problems will keep reoccurring in various ways.

One method that can help determine if a problem cause is “assignable” or “common” is to chart the events over time and look to see if they fall outside of 3-sigma limits (assignable) or inside those limits (common). This will not provide a certain answer, but it can provide a good indication of the nature of the problem’s cause and how to best address it.

In the case of Toyota, the incidence of sudden acceleration is almost certainly outside 3-sigma. In other words, it is very rare. Toyota has attempted to assign the source of the problem and fix it — dangerous floor mats and bad batches of accelerator assemblies. But in his testimony before the U.S. congress, the leader of Toyota, Aiko Toyoda, takes the position that the problem is common (i.e. systemic) in his company. He says his company became focused on volume at the expense of safety and quality. This is a very interesting twist for a Japanese company that is expert in the use of SPC (Statistical Process Control.)

It is almost certain that Toyoda has internal company data that indicate systematic problems to which we are not privy. Perfection is never an option. But I suspect that the recent problems that have garnered so much attention, are most likely not systemic in nature. The reason Toyoda addresses them as systemic is because  American audiences, who have no understanding of the nature of variability, have seized upon a very rare but dramatic event, and erroneously extrapolated from that rare event the conclusion that Toyota products are unsafe and that Toyota is a negligent company. Aiko Toyoda cannot hope nor dare to teach American audiences about the nature of variation. His only option in the face of American hysteria, is to take full responsibility and hopefully move forward.

Are systemic changes needed at Toyota? Toyota is one of the few companies that has the knowledge and methodology necessary to answer that question. But if systemic changes are not indicated, making such changes will likely do more harm than good. In other words, shaking up the whole company as a response to assignable causes may hurt the company, its members, and the consumer in unpredictable ways.

Krauthammer does a pretty good job of pointing out how American audiences consistently confuse common and assignable cause and, one way or another, make decisions that do more harm than good.

Americans habitually confuse common cause with assignable causes, and as a consequence they are constantly looking for, and finding, someone to blame (assign) for their troubles. In America, finding bad guys is pretty easy because we have a system the reliably and predictably produces bad guys — crooks, cons, greedy actors, corrupt politicians, Republicans, Democrats, preachers, atheists, Socialists, Capitalists, and my next door neighbor, Fred.

Once you begin to understand the nature of variation, the cause of the problems that plague us the most, become pretty obvious. Generally speaking, they are COMMON. This tells us that we need to stop looking for bad guys and start working to improve or maybe even transform, our system.

In the October 29, 2009 New York Times, financial commentator Floyd Norris offers up a solution to excessive executive compensation and the bubbles that plague our free enterprise system. In his article, ”To Rein In Pay, Rein In Wall St”, he suggests that Wall Street profits need to be dampened through regulatory intervention that increases transparency, limits risk, and breaks up “to big to fail” institutions, to make them more competitive. His analysis of Wall Street money churning is excellent, but  is his tangled web of regulations a auseful approach?

WILLIAM OF OCKHAM (1280 - 1349)

The wisdom called Occam’s Razor asserts the principle that, all things being equal, the simplest theory or solution to a problem should be favored. If we really do believe that market demand is driven by consumers seeking the “best” return for their dollar, and that competing for the customer’s dollar will drive companies to compete with one another to create product and service that customers desire, then we should abide by that theory. We should remove the obstacles and let the market fundamentals work.

How can we do this?

King's X?

The solution is as simple as Occam’s Razor itself. There need be one and only one rule in conducting transactions. TELL NO LIES!

All we need to do is require that every purveyor disclose, to the best of their ability, all of the details about the product or service they deliver in exchange for the customer’s dollar. If we make deception by inclusion or omission a crime, the consumer will be able to rationally compare and choose between products and services. Let the best supplier win!

For example, require that automakers disclose vehicle specs, safety data, environmental impact, failure records over time, customer satisfaction data over time, AND actual cost of production, marketing, distribution, and sales. If the customer has a question that is not on the disclosure list, then require the seller to answer honestly or find the answer or confess ignorance.

If an automaker feels that this data places him at a competitive disadvantage, then let him change the product so that the data will be more advantageous.

Complete honesty and transparency underly the fundamental thesis of free market fundamentals. Competition for consumer dollars only works if the customer has the information needed to choose. Only with complete and transparent information can the customer compare products and serivces in order to decide just how much extra to pay based on the value he or she assigns. In the automaker example, the price the customer is willing to pay under these conditions will contain the profit to be realized and distributed among the automotive supply chain players.

When it comes to financial investemnt, sellers should be required to fully disclose the statistical data that quantifies the risk of an investment. This is no different than disclosing the data that is readily available for various games of chance played at gambling casinos around the world. If a Wall Street investment wizard feels an investment risk is to complex to quantify, he or she must simply say, ”I   H A V E   N O   I D E A”.

Adam Smith and the "Invisible Hand"

In other words, let free market work!

Does this sound naive? Won’t people fudge the truth anyway, you say?

Sometimes sellers will lie. They will make false claims or claim a truth for which there is no evidence. But when they do this, the truth will come out at some point down the line. Their crimes of irresponsibility will be detected and punishment and compensation will be extracted. They can either do better, or pay the price for their deception and ignorance.

———————-

If you conclude that “tell no lies”  cannot work, then there is a fundamental problem with Adman Smith’s theory of the market’s “invisible hand” that is guided by rational self-interest.

So what’s the big deal about 3-sigma? Is it just 6-Sigma for under-achievers? Is it only for statistical geeks? Why should anyone give a hoot?

As with all powerful ideas, 3-sigma is simple, yet difficult to get your head around. Although there is no short explanation, here’s the shortest answer I can provide.  It goes like this…

——–Sticky Post——–

Read more…

PDSA = HAMMER
PROBLEM SOLVING = SAW

PDSA is a method that drives forward by constructing new knowledge. It begins with theory. Corrective action is a problem solving method that a is reactive, rear view mirror process. The method begins with something deemed “wrong”.

The first is a method of discovery. The second is a method that tries to shove the world back into some box we have created.

These methods differ in aim, structure, and efficacy. Both methods have their place in a tool kit. A hammer is good for nailing things together. A saw is good for cutting things apart.

Confusing a hammer with a saw tends to mess things up.

As an interesting exercise, I decided to draft a letter to Obama offering some Deming inspired advice. I just wanted to see what I would come up with.

First, I carefully acknowledged his accomplishments as a candidate and his undeniable leadership abilities. Next, with the utmost respect, I explained that he might find Dr. Deming’s ideas useful and suggested he look into Deming’s work. I concluded with some quotes and brief explanations of their importance. I included things like aiming, constancy of purpose, operational definitions, systems, variation, optimization and suboptimization, and perverse incentives.

As I was finishing my draft, Obama started his inauguration speech. I stopped writing and sat down to listen. By the time he had finished I realized that this guy really does GET IT! At this point, he doesn’t need my advice, he needs my support. Obama is so far out of the ideological box, that colleagues and media pundits haven’t got a clue about where he is coming from. First they call him “left”, then “centrist”, then “Clintonian”, then “bipartisan”, then “post-partisan”, and now “post-ideological”. They keep trying to figure his angle for gaming the system, but he sheds their labels like water from a duck’s back. He is steadfast in a vision of a better world and talks about a method that sounds to me like PDSA at its best. He understands diversity and variation. He understands systems and aims. He understand theory and methods. He knows how to plan and how to use method. He knows that sometimes plans and methods will fail the test of doing and both will need to be improved continuously.

In his speech Obama used the phrase “We are in a new age” and added that “the ground is moving out from under” those who continue to think “ideologically” (his word). He warned friends and foes alike that they would be working within a new paradigm. His message is that he has no interest in debating “right ideas”. He is interested in right aims and useful methods.

The great battles before him will not be due to the economy or Islamic fundamentalists. They will be the battles to overcome the resistance of reactionaries, ideologues, and even good-willed traditionalists who just don’t get what he’s talking about. Will he win those battles? I have no idea. But I have no doubt that this guy GETS IT!

I’ll save my “letter to Obama” as a humbling reminder of the courage, boldness, skill, and vision of this young man. I’m glad I was around to witness his rise to leadership. Here’s hoping he can survive the nay-sayers who will be looking to pick him to pieces based on nonsensical short-term measures of success and failure. That drum beat has already begun.

Although you can do your best in choosing, you cannot choose “the best”. There is no way to determine who is best. Bestness can only be determined in the context of the system in which people act. That system is your creation and your responsibility.

Teams made up of superstars based on some arbitrary measure of performance will fail because every member will seek to outdo the others in order to be labeled “the best”. Bestness is best realized when everyone is working as a unit toward some shared aim, without fear of being outdone or tricked by his or her teammates. To realize and retain “the best”, the system must be organized to bring out the best in all the players working as a team.

When people are enabled and allowed to be at their best, they will stay, so long as they perceive that they are being treated fairly. Use widely available compensations studies to set pay levels at parity. Deliver perks and bonuses to the team as a whole to prevent creating a perverse incentive for them to cheat each other and cheat the system as a whole. This is a method for creating and retaining “the best”. Study hard and do your best to create and constantly improve a system that does this very, very, well.

The Kingdom of Wan was obsessive about studying the heavens. Over centuries they contemplated the motions of the celestial bodies and came up with many theories about the rules governing these seemingly unvarying motions. As their theories about celestial mechanics improved, they were able to predict the cycles of the sun, moon, and seasons, which allowed them to create some very useful calendars. As the years passed, their predictions got better and better, though never perfect.

Read more…

I have always been fascinated by Deming’s adoption of an SOPK model — an interactive system which, as a whole, embraces an appreciation of systems, understanding variation, theory of knowledge, and psychology.  His work propelled him toward new ways of seeing and understanding that overflowed the boundaries of traditional academic inquiry. He was not alone in struggling with the underlying contradictions of human knowing. As a young man he stood at ringside, watching the great debates of early 20th century physics during which the very existence of “true facts” was convincingly called into question (Heisenberg Uncertainty, etc.). Of course, Shewhart spoke to this very issue. Einstein went to his grave lamenting the very idea that our ability to know was inherently limited.

Read more…

3-sigma is a statistical boundary representing plus or minus three standard deviations from a measure of central tendency (i.e. mean or median) for a group of values. Walter Shewhart, W. E. Deming’s teacher and mentor in the field of statistics, determined that when a group of measurements comes from a system of “common” causes, also referred to as a “stable system”, they will vary in predictable ways. Virtually of that variation will fall within +/- 3sigma, indicating that the events represented by the data vary in a random fashion. In other words, this variation is a product of the system as a whole.  Systems of causes that do not show this predictability are unstable and therefore, unpredictable.

In stable systems, data depicting events outside of 3-sigma provide a reliable signal that the system is being influenced by ”special” causes that can be identified. These special causes can then be dealt with in order to re-establish predictability in the system of causes.

This simple idea about the nature of variation provides a foundation for the systematic design, management, and continuous improvement of work processes.

(Read a more extended discussion of 3-sigma in my sticky post, “What’s so Special about 3-Sigma?“)

Suggested Reading

Your enterprise is the system of knowledge shared by your organization’s members. Facilities, tools, equipment, materials, and capital are only useful to the extent that your enterprise’s leaders, managers, and workers know and apply theories and methods that put these resources to work to create value in the eyes of your customers.

The people and the processes that guide their interactions are an organization’s most important assets. The sustainability and success of any enterprise is ultimately determined by participants’ shared vision, theory, aims, and methods.

1.  Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.

2. Adopt a new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.

3. Cease dependence on inspection to achieve quality. Eliminate the need for inspection on a mass basis by building quality into the product in the first place.

4. End the practice of awarding business on the basis of price tag. Instead, minimize total cost. Move toward a single supplier for any one item, based on a long-term relationship of loyalty and trust.

5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.

6. Institute training on the job.

7. Institute leadership (see point 12). The aim of leadership should be to help people and machines and gadgets to do a better job. Leadership of management is in need of overhaul, as well as leadership of production workers.

8. Drive out fear, so that everyone may work effectively for the company.

9. Break down barriers between departments. People in research, design, sales, and production must work as a team to foresee problems of production in use that may be encountered with the product or services.

10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity.

11a. Eliminate work standards (quotas) on the factory floor; substitute leadership.

11b. Eliminate management by objective. Eliminate management by numbers, numerical goals. Substitute leadership.

12a. Remove barriers that rob the hourly worker of his right to pride in workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.

12b. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objective, management by the numbers.

13.  Institute a vigorous program of education and self-improvement.

14.  Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.