What is Intellectual Capital & Why Should You Care?

By Pascal Dennis (bio)

I left engineering & business school well versed in how to take care of two kinds of assets:

• Financial, and
• Physical

Managing these kinds of capital is necessary, of course.

But in the world of Google, Apple, Amazon and Facebook, is it sufficient?

Clearly not. Nowadays, many extremely valuable companies. Have negligible physical assets.

What they do have is Intellectual Capital -- the sum total of all the knowledge, experience, capability, creativity and urgency of all team members.

How well do we manage Intellectual Capital?

The answer is obvious, is it not?

Do we harvest this splendid resource?

Do today's organizations grasp the catastrophic effect of thoughtless layoffs, excessive exec compensation, stifling bureaucracy and all other IC killers?

There are many kinds of wealth -- financial, physical, intellectual, relational, reputation, time and so on.

These are inter-convertible. For example, my daughter Eleanor has time wealth (& Dad's wallet...), which she is transforming into capability wealth.

When she graduates, God willing, she'll translate capability wealth into financial wealth.

But Intellectual Capital differs from financial & physical capital in that,

1. It can be withheld, and
2. It can walk away,

IC is controlled by our team members.

Treating them like dirt is akin to hitting yourself in the face with a two-by-four.

How many corporations understand this?

Best,

Pascal


In case you missed our last few blogs... please feel free to have another look…

Value Stream Maps
What is a Key Thinker?
Macro Value Stream Kaizen – Zoology
Poka-Yoke – Preventing Inadvertent Errors

Amazon Enters Banking

By Pascal Dennis (bio)

Big news indeed, no?

Amazon is a marvel, and perhaps the exception that proves a rule. Big companies are supposed to be slow, and well, slow.

Yet Amazon is a colossus of intelligence, entrepreneurialism and advanced Lean thinking.

Jeff Bezos is famously customer-focused and Amazon’s management systems express a deep understanding of core Lean principles including Visual Management, Standardized Work, Andon, Flow and Pull.

And now they’re entering Banking, an ancient & fascinating industry that is ripe for ‘disruption’, to use the currently fashionable phrase.

You only understand the importance of healthy financial services and capital markets when you don’t have them.

In many parts of the world ‘simple’ retail banking services like savings accounts, loans, and insurance are life-giving to a family or a small business.

You can get the loan you need to build your home, and buy desperately needed equipment for your business (e.g. a bicycle, a better phone, more reliable internet access…).

In many countries financial services are an oligopoly run by the few, for the few. We can barely imaging the indignities that many of our fellows suffer thereby.

But give people Amazon-level service in Banking, and watch what happens.

(“You mean I no longer have to wait in line for hours, and then be told ‘sorry, we’re closing, go home’? You mean I can access all the services I need from my cell phone?”)

Amazon Web Services (AWS) has had a liberating effect on small businesses around the world. I’m hopeful that Amazon Banking will have similar effect in financial services.

I imagine that the same technology and expertise that informs AWS will inform Amazon’s banking ecosystems. (Outside of Amazon & such, have Lean principles been applied effectively in Digital?)

How will Banking respond? The industry is full of smart, hard-working people, in my experience, and in many cases they’re acutely aware of customer pain points.

The gaps in customer experience, technology, management systems and people capability are significant.

The causes include deep silos (often reinforced by legislation), creaky legacy IT systems, dysfunctional mental models, and a deep hangover from the Great Financial Crisis of 2008-09.

How do you teach an elephant to dance?

In any event, the best banks will become more nimble, smart and customer-focused, and people around the world will benefit.

Yes, I know many people worry that Amazon is too good, too big, too powerful. But in this critical industry they have the potential to change world and do much good.

Giddy-up!

Best regards,

Pascal

Reprise: Lean & the Non-Profits?

By Pascal Dennis

Charity is a fundamental virtue.

We have to help those entangled in the 'web of circumstance'.

There, but for the grace of God, go I.

More and more, I like to give of myself, my time and effort.

It's concrete, and NGOs & non-profits are in dire need of Lean support.

Are they not swimming in waste?

Over-processing, defects & delay are perhaps the most obvious.

For example, I've donated annually to a well-known children's charity.

Yet they continually send me, at high cost, the same bulk mail, even after I wrote and asked them not to.

Over-processing and defect waste, no?

I'm passionate about helping people with disabilities, and have offered to help half a dozen agencies involved in such work.

Only one has bothered to respond and the message was, 'Thanks, but no thanks.'

Are NGO's and Non-Profits not interested in running better?

Sadly, the message seems to be: "Just send us your money. We'll figure out how to spend it."

Sorry, you'll figure out how to waste it...

(Am I becoming cynical?)

Like any organization, NGO's and Non-Profits have a purpose, customers and processes.

Why shouldn't they be as effective as Apple, Amazon, Toyota, GE or any great organization?

Best,

Pascal

Pascal Dennis Bio

How Will You Motivate People? - Part 2

By Pascal Dennis

Me again, continuing our road 'to the interior'.

So how does a leader motivate people to do extraordinary things?

(Change is hard, transformation hurts. By contrast, doing nothing is easy.)

Here's what I have found.

Safety & Security are Job One

If people don't feel secure in their jobs, forget it.

Great companies live the 'Safety first' mantra -- and that means both physical & psychological safety.

Immature organizations may pooh-pooh such ideas.

'Human capital' -- morale, ingenuity, flexibility, problem solving -- have little value for them.

Does that make sense in the world of Apple, Facebook, Amazon and Google?

Noble Goals

People want to be involved in something bigger than themselves.

No man is an island, said the poet John Donne. People will die for a noble idea, a just cause.

So leadership is story-telling, narrative.

How to frame our activities so that our team members feel they 'building a cathedral', and not simply cutting stone?

Then, how to deploy our goals so that each front line team is engaged?

Simple Decency and the Great Virtues

The Great Virtues are enduring standards of behavior. As in manufacturing, ethical standards make problems visible.

People will not follow swine, at least not for long. Safety plus noble goals plus simple decency allows people to relax.

'I'm okay here. These are good people & they'll do the right thing...' -- which unleashes commitment & creativity.

Brain imaging technology reinforces these observations. Under stress, the Pre-frontal Cortex, the brain's managerial centre, shuts down.

The limbic and sub-cortical, fight or flight, parts of the brain light up.

Fear makes us stupid. Deming intuited this decades ago: "Drive fear out of the organization!"

Safety, Noble Goals and Simple Decency are simply good business.

Great organizations, those that have prospered for generations, understand this in their marrow.

(For more on the Great Virtues, see here)

Best,

Pascal

How Good are our Processes? - Jeff Bezos' Approach

By Pascal Dennis

Fine piece in this week's BusinessWeek on Amazon.

Many fine insights including one that offers a window into how Jeff Bezos thinks.

Mr. Bezos, famously, has a very public email address & encourages customers to contact him directly.

Some customer complaints generate his famous '?' emails, which trigger intense review & problem solving in the affected departments.

Some question this seemingly random approach. 'How can an organization for focused & data-driven react so strongly to 'random' emails?', they ask.

In my view, Bezos, a profound process thinker, sees his customer email as a window on Amazon's processes.

Each ? email allows him to test different sections of the 'spider web' of Amazon's management system.

My guess is he's asking himself questions such as:

How robust are this group's processes? How sound is their connection to their customers? How well do they understand their various market segments?

How quickly do they respond to issues? How articulate is this team?

Do they have integrity? Do they fess up to problems and stick together, or do they turn on one another?

Each is an excellent embedded test of Amazon's system & people.

I'm reminded of my Toyota senseis, on supplier qualification visits. They'd ignore the glitzy PPT presentation, and the 'guided tour', in favor of 'random walks' in the gemba.

During these walks, we'd do 'odd' stuff, like reviewing forklift and fire extinguisher maintenance records in detail.

Our hosts were invariably confused by our attention to such 'minutiae'.

But such 'minutiae' offered us a window on the prospective supplier's processes.

If they can't manage forklift & fire extinguisher maintenance, how are they going to supply these volumes & mixes at this level of quality & lead time?

Make sense?

Well done, Mr. Bezos!

Best,

Pascal

What is Intellectual Capital & Why Should You Care?

By Pascal Dennis

I left engineering & business school well versed in how to take care of two kinds of assets:

• Financial, and
• Physical

Managing these kinds of capital is necessary, of course.

But in the world of Google, Apple, Amazon and Facebook, is it sufficient?

Clearly not. Nowadays, many extremely valuable companies. Have negligible physical assets.

What they do have is Intellectual Capital -- the sum total of all the knowledge, experience, capability, creativity and urgency of all team members.

How well do we manage Intellectual Capital?

The answer is obvious, is it not?

Do we harvest this splendid resource?

Do today's organizations grasp the catastrophic effect of thoughtless layoffs, excessive exec compensation, stifling bureaucracy and all other IC killers?

There are many kinds of wealth -- financial, physical, intellectual, relational, reputation, time and so on.

These are inter-convertible. For example, my daughter Eleanor has time wealth (& Dad's wallet...), which she is transforming into capability wealth.

When she graduates, God willing, she'll translate capability wealth into financial wealth.

But Intellectual Capital differs from financial & physical capital in that,

1. It can be withheld, and
2. It can walk away,

IC is controlled by our team members.

Treating them like dirt is akin to hitting yourself in the face with a two-by-four.

How many corporations understand this?

Best,

Pascal

Building Intellectual Capital

By Pascal Dennis

What's the proper role of the Kaizen/Continuous Improvement Office?

I was taught that it was three-fold:

1. To create capability
2. To share learning
3. To create kaizen spirit

More and more though, I think about the great Taiichi Ohno.

"I am not just building cars - I am building people!"

A splendid concept from a true revolutionary.

I am building people!

Underlying this sentiment was Ohno's remarkable respect for people - expressed by challenging them to do their very best!

Tough love indeed.

I've been privileged to have such senseis, both at Toyota and in Aikido.

But how does this help the corporation? Where does this show up on the Balance Sheet?

Sadly, it doesn't - for now.

But I am hopeful that before too long Intellectual Capital will begin to appear on Balance Sheets

Intellectual Capital means people - and their capability, creativity, flexibility, sense of urgency, knowledge, relationships and camaraderie.

At companies like Google, Apple, Amazon, Facebook, Intellectual Capital dwarfs financial and physical assets.

So how can we continue to ignore it?

So, let me suggest that in the next decade, the Kaizen/CI Office needs to think as follows:

Our job is to create Intellectual Capital - by growing people.

Best,

Pascal

Economies I & II

By Pascal Dennis

Great piece in the NY Times recently by John Brooks.

Brooks comes up with a helpful formulation: Economy I & II

The former comprises private sector companies like Apple, Amazon, Toyota and GE.

These companies face withering competition every day.

As a result, they're wonderful at creating value, but not so good at creating jobs.

Economy II, by contrast, comprises government and quasi-government organizations like schools, universities and hospitals.

These organizations face comparatively little competition (or in the case of government agencies, none at all.)

As a result, they're wasteful and inefficient -- but good at creating 'jobs', of a sort.

Lean thinkers will argue that a job by definition is an activity that creates value for a customer.

Seen in this light, is a job in a suffocating bureaucracy that serves no one, truly a job?

I don't want to be misunderstood. Economy II is full of smart dedicated people who work hard and want to do the right thing.

They deserve what Deming called the 'pride of workman ship'.

They deserve to be involved in managing and designing their work. Given the opportunity, I've found they're very good at it.

The bigger problem is that Economy I organizations are no longer able to pay for Economy II.

As a result Economy II is bankrupting the state. Seen in this light, Greece is the proverbial canary in the coal mine.

Wither thou goest, go I.

Most western economies will hit the same wall before long.

What to do?

More next time.

Best,

Pascal

Lean & the Non-Profits?

By Pascal Dennis

Charity is a fundamental virtue.

We have to help those entangled in the 'web of circumstance'.

There, but for the grace of God, go I.

More and more, I like to give of myself, my time and effort.

It's concrete, and NGOs & non-profits are in dire need of Lean support.

Are they not swimming in waste?

Over-processing, defects & delay are perhaps the most obvious.

For example, I've donated annually to a well-known children's charity.

Yet they continually send me, at high cost, the same bulk mail, even after I wrote and asked them not to.

Over-processing and defect waste, no?

I'm passionate about helping people with disabilities, and have offered to help half a dozen agencies involved in such work.

Only one has bothered to respond and the message was, 'Thanks, but no thanks.'

Are NGO's and Non-Profits not interested in running better?

Sadly, the message seems to be: "Just send us your money. We'll figure out how to spend it."

Sorry, you'll figure out how to waste it...

(Am I becoming cynical?)

Like any organization, NGO's and Non-Profits have a purpose, customers and processes.

Why shouldn't they be as effective as Apple, Amazon, Toyota, GE or any great organization?

Best,

Pascal

In Praise of Depth

By Pascal Dennis

Our cell phones, pads etc. are miracles.

They bring the world to our fingertips -- and project our nervous systems around the world.

But Marshal McLuhan taught us that new media have a corrosive effect on existing structures and mental models.

We've already seen the new media's effect on structures: Eastman Kodak is only one of many famous names that have been obsolesced.

But are the new media affecting how we think? In particular, are we in danger of losing important thinking patterns?

Yes and yes.

The biggest potential casualty, in my view, is depth.

Depth of feeling, depth of understanding, depth of experience.

I love my cell phone and pad. I use them to connect with people, places and ideas.

But then I turn the damned things off.

I want to be present for that chat with my daughter.

I want to feel, sense, intuit, and test what my guitar teacher is teaching.

I want to experience Homer, Cervantes, and Tolstoy as completely as I can. I want to be as deep in their world as I can be.

That's why I believe books will always have a place in our world.

Because that's all they are -- books.

When bored or distracted, I can't suddenly check my email or go surfing on Amazon, or check out the hockey scores.

Lean, too, is about depth -- depth of understanding, commitment, reflection, and practice.

If we're serious, we'll turn off the damned screen, so we can have a chance at what some people call deep practice.

Best,

Pascal

The Biggest Weakness is Contemporary Business Culture?

By Pascal Dennis,

Last time I talked about Big Heart.

In my view, the biggest weakness in contemporary business culture is just that -- an absence of heart.

McKinsey-Gupta scandal exemplifies it -- "achievatrons" at the trough, gorging themselves at the expense of the public.

I wouldn't go as far Barry Ritholtz.  But I'd agree with CNBC -- it could be bigger than Madoff.

If Gupta did tip off his hedge fund manager friend, it was something darker than greed. Was it sociopathic narcissism?

Did Gupta, like Madoff, believe he was somehow above the law, immune to the rules that govern the rest of us?

By contrast, the sensei who taught me about big heart spent hours with me and my chums -- at no cost.

He had dedicated his life to teaching Aikido -- the "way of harmony of the spirit".

And Big Heart was its foundation.

For more, please feel free to read chapter 13 of Andy & Me, or its sequel, The Remedy.

When Will The Remedy Be Available & How Do I Get a Copy?

By Pascal Dennis

On Receiving 1st Copy of The Remedy

I was blown away! 

Wiley & Sons have outdone themselves.  The cover, content, drawings etc are everything I'd hoped they'd be.

All the hard work & heart ache, the endless hours researching & writing faded away.

I'm proud of my  Lean Pathways team, who have taught me so much.

Finally, a deep bow to Dianne Caton, artist extraordinaire, who turned my chicken scratch drawings into magic.

What Inspired Me to Write The Remedy --   a book about Lean outside the factory?

Because that’s where the opportunity lies.  Upstream  -- in marketing, design, and engineering.  Downstream  -- in distribution, sales, and customer service. 

These, together with health care, service, and government, are Lean’s frontier.  I am less and less a factory rat.

Every core lean principle applies outside the factory.  But business processes are harder to fix. 

Why a sequel to Andy & Me? 

The characters of Tom Papas and Andy Saito seemed a natural vehicle.  Readers seem to like them, and I do too.

We’re emerging from an economic catastrophe, which claimed many great companies and put millions of people out of work. 

Lean has the potential to reduce human misery and increase human happiness by doing more with less, while providing meaningful work.

That’s enough for me.

Why Should People Read The Remedy?

It's a straight up book from the heart -- and the head.

No bull, no false & easy answers. Just  a good honest story about how real people try to apply Lean thinking to make things better.

I've lived The Remedy  -- and know many of you have too.

The Remedy   shows what Lean looks like outside the factory -- and why this is the undiscovered country.

Big Company Disease is real -- and The Remedy comes to terms with it.

When Will The Remedy Be Available & How Do I Get a Copy?



The Remedy will be available June 21 and the first copies should arrive 2 weeks after that.


The easiest way to get a copy is to order on-line through any of the following:

Amazon  www.amazon.com,

Barnes & Noble  www.barnesandnoble.com

Books-a-Million  www.booksamillion.com

or Borders  www.borders.com