Tag Archives: Decision Making

The Problems of Cost Accounting with Lean

Calculator and MoneyAccounting is one of the cornerstones of the modern economy. Cost accounting in particular helps in decision making with the goal to maximize profit. Many decisions are based on these numbers. Unfortunately, cost accounting usually does a really poor job of capturing the essence of manufacturing in general and lean manufacturing in particular. Continue reading The Problems of Cost Accounting with Lean

American Automotive Market Strategy of Toyota and Others

Major Car MakersThe largest ten car makers sell over 200 different car models on the US market. Without vans, SUVs, and sport cars, there are still 100 consumer cars left. Toyota has the largest number with a total of 14 models, yet they still have an excellent market strategy and very little self cannibalization. BMW has much fewer models, yet still manages to cannibalize itself. GM has 13 models and also steps on its own toes, while completely missing another market segment. This post is based on a master’s thesis of one of my students, Amir Javanshir, and the detailed source is at the end of the article. Continue reading American Automotive Market Strategy of Toyota and Others

Lies, Damned Lies, and KPI – Part 3 Countermeasures

Kid with Glasses
How to measure good KPIs

There is an inflation of key performance indicators (KPIs) in industry. In my last posts I have explained how KPIs are often wrong, and why bad and fudged KPIs are a huge waste. Yet, you cannot really run a larger corporation without KPI. In this post I will finally give some advice on (1) what you need to do to measure good KPI, and (2) how to avoid fudged KPI. Continue reading Lies, Damned Lies, and KPI – Part 3 Countermeasures

Lies, Damned Lies, and KPI – Part 2: Effects of Fudging

Business fraud
About the ills of number fudging

Modern manufacturing works with a lot of performance measures, often called key performance indicators (KPIs). Unfortunately, they are rarely accurate, and often even intentionally misleading. In my previous post I described some examples of commonly manipulated KPIs. In this post I would like to explain the ugly consequences of incorrect or manipulated KPIs. In a final post I will also show some ways that you can reduce this negative effect. But first, how do bad KPIs (and hence most KPIs) hurt your company? Continue reading Lies, Damned Lies, and KPI – Part 2: Effects of Fudging

Lies, Damned Lies, and KPI – Part 1: Examples of Fudging

Upward Trend
Don’t get too excited about your numbers!

Statistical measurements, usually called key performance indicators (KPIs) are found on pretty much every shop floor and in every company. Many management decisions are made based on KPI. Unfortunately, these numbers often are not reliable at all.

Mark Twain popularized the phrase “Lies, damned lies, and statistics.” Winston Churchill famously said, “I only believe in statistics that I doctored myself.” Hence, both men were wary of trusting numbers. You should be too! Continue reading Lies, Damned Lies, and KPI – Part 1: Examples of Fudging

Common Mistakes of Top Executives – A look at “Undercover Boss”

Undercover BossI occasionally watch the reality show Undercover Boss, where top executives work undercover in their own companies. Over and over again I see these managers making the same mistake: They have no understanding whatsoever of what is really happening on the front lines. It is a typical case of not going to the shop floor often enough, or in lean speak, no genchi genbutsu (Japanese for “go and see”).  So, <dramatic voice> Why do bosses all make the same mistake? Will they ever learn? Will you enjoy this post? See for yourself in the post below! </dramatic voice>. Continue reading Common Mistakes of Top Executives – A look at “Undercover Boss”

Eight Rules for Total Gridlock in the Organization (Video)

Prof. Dr. Peter Kruse
Prof. Dr. Peter Kruse

There is an excellent and highly sarcastic video around by Prof. Dr. Peter Kruse, professor of organizational psychology at the University of Bremen. In this, he describes his Eight Rules for Total Gridlock in the Organization (8 Regeln für den totalen Stillstand). Since these eight rules are quite relevant to the lean change process, I have transcribed, translated, and subtitled the German video for you into English. Continue reading Eight Rules for Total Gridlock in the Organization (Video)

Visual Management during World War II – A Visit to the Lascaris War Rooms in Malta

Royal Air Force Operations in Malta, Gibraltar and the Mediterranean, 1939-1945.For larger improvement projects with a dedicated project team, there is frequently a “war room,” a conference room where all the project-related information and performance measures are kept. The name sounds cool and gives a certain air of focus to the project.

The name, however, comes from war rooms for real wars. Recently I had the chance to visit the Lascaris War Rooms in Malta, where I was able to see many tools and practices that are still common nowadays in manufacturing and project management. Continue reading Visual Management during World War II – A Visit to the Lascaris War Rooms in Malta