The Lean Machine

How Harley-Davidson Drove Top-Line Growth and Profitability with Revolutionary Lean Product Development

Dantar P. Oosterwal

• Publisher: AMACOM
• Year: 2010
• eBook ISBN: 9780814413791
• Topic: Business
• Subtopic: Business General
• Index: Business

In this insider guide, former Harley-Davidson executive Dantar Oosterwal offers an exclusive look at how Harley-Davidson was able to adapt in an ever-changing world to stay on top and stay in existence.

From near-extinction in the early eighties, Harley-Davidson rose to worldwide recognition and is still today one of the great, iconic American motorcycle brands. In this insider guide, former Harley-Davidson executive Dantar Oosterwal offers an exclusive look at how Harley-Davidson was able to adapt in an ever-changing world to stay on top and stay in existence

In The Lean Machine, you will learn about their secret weapon and go-to formula for outstanding success as well as:

• the day-to-day transformation at Harley-Davidson
• their adapted Knowledge-Based Product Development
• identifies universal change and improvement issues so that any company can incorporate this

Rooted in Japanese productivity improvement techniques, the Knowledge-Based Product Development method helped Harley realize an unprecedented fourfold increase in throughput in half the time--powering annual growth of more than ten percent.

The Lean Machine is part business journal, part analysis, and part step-by-step toolkit that will help companies in all industries achieve predictably excellent results.

CHAPTER 1

Working Hard

No flying machine will ever fly from New York to Paris . . . [because] no known motor can run at the requisite speed for four days without stopping.

Orville Wright

I returned to my office after lunch and noticed the message light on my phone was on. No surprise—it seemed to always take at least an hour in the morning and another hour after lunch to get through all of my messages. I picked up the receiver, punched in the password to my voicemail and settled in for what was sure to be a long review of messages. The first message was from Gene, my manager: “Guys, listen to the attached message from the boss.” Gene was passing along a message he had received about the previous year’s engineering department’s performance. After a few additional forward introductions, I finally got to the original message from Jack, the vice president of engineering. Jack had made it through all the business and budget reviews that customarily followed the closing of the fiscal year and he was diligently sharing the information with his reports. My mind drifted off somewhere in the message but I snapped back to listening as Jack got to the conclusion of his message and the performance numbers. “Well, I’m sorry to say that we missed our targets again this year. We overspent the budget by 15 percent and we didn’t even deliver what the organization expected. Overall, 26 percent of our projects were delivered late, and we ended up canceling 23 percent of the projects we started,” Jack said. “I know that this is a highly dedicated and talented group of people,” he emphatically said, but “I know that all of you can do much better. I want you to recommit yourself to doing better. We need to work harder! I need you to redouble your efforts to deliver the projects we have committed and that the organization is expecting from us …” Jack continued on with his pep talk, but my mind drifted off again as I hung up the receiver. I was already working nearly fourteen hours per day. I didn’t know how I or anyone on my team could possibly work harder, or give any more effort. Work harder or work smarter? I asked myself as I spun my chair around and propped my feet up on the windowsill of my office to contemplate the message.

Springtime in Paris

It was that time of the year when it wasn’t really winter anymore, but spring had not yet arrived. It was messy, rainy, cold, and wet. I lived in a small town on the outskirts of Paris. My office was located in a beautifully landscaped industrial park next to Charles de Gaulle airport. I was living my dream, or so I thought. For as long as I could remember I had wanted to work for a car company, designing cars. Now I was a new engineering manager for Roaring Motors. I had been sent to Paris to help set up a European technical center for the company. I had not been at the Paris office long before I learned the fitting nature of the close proximity between the office and the airport. My time was largely spent resolving production issues in plants across Europe or visiting customers to resolve development issues. My official job was to hire, train, and develop a local team of engineers to support and grow our European customer base with new products, but fixing production problems and fixing customer relationships was where I seemed to spend my time. The past year had been particularly difficult, so I was ready for the arrival of spring, with its promise of change and new beginnings.

After weeks of clouds and rain, the battle raged on between the sun and clouds for supremacy in the skies over France. Over the previous few days, the sun had begun to break through the dark gray clouds that dominated the winter months a bit more often. But on this day, the sun periodically fought its way through the grey and at the moment aligned with a small hole in the clouds. A narrow beam of sunlight found its way through my office window. The light shone brightly and splashed off my desk, filling the room with warmth.

I positioned myself in the path of the sun’s rays to soak them up. With my feet propped on the window ledge I took a momentary respite from the voice mail messages waiting for me and the phase exit review that was coming up in a few minutes.¹

As I gazed out my window, the airplanes landing at Charles de Gaulle airport caught my attention. For the first time I noticed the predictable cadence at which the airplanes landed. Initially I noticed it was the predictability of the trajectory that the planes took on final approach. Perhaps the pattern caught my attention because I was deep in thought, wrestling with the idea of working smarter rather than harder and staring into the nothingness, or perhaps it was the contrast of the bright landing lights against the darkness of the clouds, or perhaps it was just the way I was sitting. From the way my feet were propped up on the windowsill, each airplane appeared to skip across the tip of my shoe in sequence as they came in to land. At first it seemed coincidental that the planes passed this point, but as I watched a few planes go by I realized the uncanny accuracy of each airplane’s trajectory.

Looking to my left in the sky, I could see a series of airplanes silhouetted against the gray clouds. The landing lights revealed a pattern of six airplanes lined up on a trajectory for final approach. As the formation of airplanes approached, each one in sequence followed a course that skipped across the tip of my shoe as the plane came closer to the ground, and then passed through a point where the roofline of the building across the street intersected with a poplar tree in the park. Each airplane passed through these points at an even time interval. It dawned on me that each airplane, regardless of size, distance traveled, country of origin, nationality of the pilot, experience of the crew, or any other attribute, followed exactly the same identical, predictable pattern when it came in for a landing. Even when the supersonic Concorde occasionally interrupted the pattern of conventional airplanes, its engines growling low and nose tilting, it also followed the same trajectory, adopting the same flow, interval, and cadence as every other airplane when it came in for a landing.

The high-pitched whine of a motorcycle engine and the sight of a sport bike streaking across my window abruptly brought me back to reality. All thoughts of airplanes with their rhythmic cadence and notions of working harder or smarter were all gone in that instant as I dropped my feet from the window ledge and turned my attention back to the Gantt chart on the wall of my office. The Gantt chart represented the most recent improvements to the corporate development process established by headquarters. The chart described the sequence and timing for the proper method for developing products.

Several years before, someone at headquarters had convened a team of experts from each of the divisions to create a common corporate product development process. This initiative had been our answer to address the widening gap in competitiveness the company faced in developing new products. The effort was well intentioned and seemed like the right thing to do. I remembered my enthusiasm for the initiative when I had first learned about it.

As a staff engineer, I led a team of engineers responsible for designing and developing products for a variety of customers. I applauded a uniform process that laid out the requirements for a project in advance. When I had been a project engineer, one of the most challenging aspects of my job was figuring out what needed to be done and planning out the work to bring products to market. A manual describing specific steps to follow to develop products more effectively would be a great tool to give to my development teams.

The Concurrent Product Development Process

The Concurrent Corporate Product Development Process (CCPDP) initiative had been prompted by our failure to win new business that we should have won easily. At first, not winning contracts was a business inconvenience, but the inconvenience quickly became a problem as more and more of our traditional customers went elsewhere. It became increasingly more difficult to get new business. Our products had become expensive and outdated. It took us too long to develop new products, and we were establishing a reputation for being unreliable. When we did win a contract we often missed our commitments. We missed internal project commitments, we missed our cost projection commitments, we missed our timing commitments, our test commitments, and we missed key customer project milestones. We were forced to go back to our customers with cost increases and requests for time extensions because we were unable to meet our performance objectives.

In an attempt to stem the tide, company leadership decided that each division of the company would send their best and most experienced project leaders to headquarters for a special assignment. These experts would collaborate and improve the current corporate research activity process with a new phase gate-based concurrent development process. With their deep knowledge of product development, they would include the latest techniques of cross-functional concurrent product development methodology, stating exactly what, when, and how everything required to successfully develop a product was to be done. The issues with the existing development process were well known. Product development took too long and the output was unpredictable. When products launched, they were expensive and quality was poor. Because the process took so long, the market often changed by the time products were introduced, resulting in lackluster sales and poor returns on investment. The new concurrent corporate development process would incorporate the latest phase gate methods, and we would finally be able to win back the business that had eroded so quickly and was now cutting into the bottom line performance of the company.

The objective of this new development process was to drastically cut the development time of new products to just over four years. This would be a phenomenal improvement since it was not long ago that our development lead time was eight years. We had all heard rumors that Japanese manufacturers at the time managed to develop a new car in just over two years, but experts at Roaring Motors knew this was impossible. Experienced engineers at Roaring Motors knew that new cars required four seasons of design validation testing to ensure quality before they could be launched. By definition, four-seasons testing took a year to complete. Four-seasons validation testing could not begin until the designs were completed and prototypes built, otherwise the final products were not really being validated. It was unthinkable for the design and prototype build as well as any evaluation testing and design iterations to be completed in twelve months. Just the competitive bid process to identify suppliers took months to complete. Our internal experts advised us that by definition, two years to develop a vehicle was impossible. The rumor of a two-year development process was an obvious ploy planted to lure us into creating a process that would rush the development process resulting in inferior designs and poor-quality products. Roaring Motors was too smart and too experienced to fall into a trap like that. The leadership was perfectly happy with the prospect of developing vehicles in four years rather than eight or ten years, so the team set an aggressive target to cut development time in half for the new CCPDP process.

A year earlier when my package had arrived from the special product development process task team, I had opened the package with great anticipation. My sleepless nights worrying about project deadlines and quality problems would finally be gone. I admired the wisdom of Roaring Motors’ leadership. It had been a grand plan.

When I had first opened the CCPDP manual, I thought it was beautiful. It clearly identified 863 statements of work necessary according to the new corporate standard for the development of new products. The team had thought of everything. At first, 863 specific tasks seemed a bit excessive, but since they were built within the four-year time scale, it really didn’t matter. The manual was thought to be a competitive advantage. It defined and scheduled the tasks necessary to successfully develop a new vehicle or a new component in advance, greatly reducing project risk, while also reducing development time.

The CCPDP intended to provide management oversight and improve delivery success by incorporating the latest thinking for phase gate methodology. The entire four-year development process was divided into six phases. At the end of each phase, the development team scheduled a meeting with senior executives for a review of the project, and requested approval to exit the current phase and enter the next phase. To reduce risk, the project team would present the status of their project according to a checklist defined in the CCPDP manual. The executive committee then compared what the team presented against the manual and subsequently determined if the project could proceed through the gate to the next phase of development. The check sheets for phase gate reviews made their job much easier. When a project came to a gate review, leadership simply needed to see that the tasks identified for the phase were completed, and the project could progress through the gate.

A Reality Check

My thoughts returned—somewhat despairingly—to the Gantt chart on my office wall with the list of the 863 statements of work representing the CCPDP development process. At that moment, the enthusiasm and the hopes I had for the new process were shattered. I had been sent to Paris to help create a technical center in support of our European customers. I supported plants located in England, Spain, and Italy with customers and potential customers spread across all of Europe. Our plant in England was teetering on the brink of extinction after losing some business we had enjoyed with a longstanding customer. We just had been notified that the new contract was awarded to a small upstart company from Germany that had been more creative, more nimble, and more responsive to the customer’s needs than we had been. This product line represented the single largest component of business in the plant and without it the remaining products could not absorb the overhead. We would have to raise prices on the remaining products. Raising prices would certainly kill the remainder of the business.

I was expecting a call from Stephan. Stephan was one of those guys you just could not help but like. He was a young engineer who understood the products well and was enthusiastic about everything he did; his attitude was contagious. Earlier in the day Stephan had called me from the German sales office. He told me that he had gone over to make some final arrangements for the weekend’s mountain biking trip with one of his engineering friends who worked for the customer, and his buddy hinted that not everything was going well with the new supplier. Before long Stephan’s conversation with his friend changed from biking to development issues with the new product. His friend let it slip that the new supplier was having difficulty delivering on the project commitments. After a while a few more engineers joined in the conversation, and then their managers joined in. By the time Stephan left the development center, he had been asked “confidentially” if we could step in again and supply the product for the new vehicle. The catch was that the new vehicle was completely redesigned, and to meet production we would need to develop the new product in thirty weeks. This opportunity could be the saving grace we needed for our plant in England. At that moment reality hit and somehow the new CCPDP process was not nearly as attractive to me anymore. I had asked Stephan to give me until the end of the day to figure out how we might pull off this request and my time was running out. I anticipated a call at any minute from Stephan looking for my answer and I had still not figured out how to fit our 863 statements of work into a thirty-week development program.

Unexpected Competition

Fulle was a small family-owned metal tube manufacturing company located in northern Germany that had won the business. The company was known for fabricating simple tubing products such as railings, overhead luggage racks, and a variety of other items for the German railroad. They had seen an opportunity several years earlier to expand their business into the high-volume automotive industry by producing simple tubular components as a tier two or tier three supplier. Fulle supported this effort with a small product engineering and test department, so they had extremely low overhead. When the opportunity to expand their business by reaching further up the value stream came along, they bid on the business. Due to their low cost structure and flexibility in working with the customer, they presented a very attractive proposal to the customer. We had never seen them as a threat to our business. Now they had developed a prototype and taken our business—a business that had been very lucrative for us. It was a business that we counted on, but that we spent very little effort on maintaining. The product design hadn’t changed much over the years and we were certainly in no hurry to drive change. The products worked relatively well (most of the time) and the customer bought them. In hindsight, it was a business we had taken for granted.

Fulle had little experience in the new products, but the design seemed simple enough, so they won the business based on a very attractively priced proposal and an aggressive development plan. They had produced a few sample prototypes for the customer. Initial testing by the customer ...

Table of contents

• Cover
• Half title
• Title
• Contents
• Acknowledgments
• Introduction
• 1 Working Hard
• 2 The Harley-Davidson Environment
• 3 Harley-Davidson’s Product Development Leadership Learning Team
• 4 The PDL2T
• 5 Firefighting and the Tipping Point
• 6 Cadence and Flow, Bins and Swirl
• 7 Supply and Demand
• 8 A Left Turn: Implementing Lean Principles in Product Development
• 9 The Product Development Limit Curve
• 10 Integration Points and False Positive Feasibility
• 11 Learning Cycles
• 12 Set-Based Design
• 13 Leadership Learning and Pull Events
• 14 Quickening Product Development
• 15 Oobeya
• 16 Knowledge-Based Product Development
• Notes
• Index
• Copyright