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The Value Chain Transformation With Drew Paroz (MFGMonkey Episode 22)

MFG Monkey | Drew Paroz | Value Chain Transformation


Dustin chats with Drew Paroz, a seasoned manufacturing professional. Drew shares insights into his family’s manufacturing background and his passion for creating systems that empower individuals at Honda. The conversation touches on Drew’s diverse roles, emphasizing the importance of understanding the entirety of systems. Drew, now a transformation leader at Honda, discusses their value chain transformation program, highlighting objectives such as business goals, customer value, and individual empowerment.


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The Value Chain Transformation With Drew Paroz

Drew’s Journey In Manufacturing

In this episode, we have Drew Paroz. Drew is a leader who thrives at the intersection of people, tech, and strategy. Drew’s journey in manufacturing began at the young age of fifteen, where he has since progressed through diverse experiences and roles in manufacturing, purchasing, supply chain, data, and technology. Drew is currently the Transformation Leader for a value chain program at Honda. His focus, both professionally and in life, is developing comprehensive systems that not only drive value but also empower individuals to unlock their full potential. Drew also hosts a podcast called Wonder Tour, where he connects leadership lessons to your favorite movie. Welcome, Drew.

What’s up, Drew? How are you?

I’m great, Dustin. It’s always good to be recording a show. It’s good to talk about manufacturing business transformation.

That was way cheesier than what I intended it to be, but we’ll roll with it. To jump into it, tell us a little bit about yourself.

My name is Drew Paroz. I’ve been working in manufacturing since I was a kid. My dad and my grandpa started and owned a manufacturing company doing batch manufacturing, high-precision machining, and all sorts of stuff. I got a little bit of experience all over the place as a part of working there since I was a kid. I ended up figuring out that I’m all about systems and not systems for the sake of software or anything like that, or we got to optimize, even though that was what my undergrad was in.

More so, how do we create systems that empower people? How do we create systems that not only achieve our business objectives and create value for our customers, our shareholders, the world at large, and obviously ourselves as well? How do we empower people to accomplish their dreams and achieve their potential while doing this? That has taken me where I’m at now, where I work on a program where we are working on value chain transformation at Honda, where I am the Transformation Leader.

I think you hit the nail on the head. Systems empower people. Without a system, you’re just floundering. I don’t care what you’re doing. You could be fishing or running a multi-million-dollar production line. If you don’t have a good system in place, you don’t know where you’re at, and you don’t know where you’re going. I think what you’re doing over at Honda is pretty damn impressive. You’ve been there for how long? We chatted over a beer, and I can’t remember everything that we talked about, but you’ve been there for quite a while.

I’ve been there for many years now. It goes by quickly.

One of the things that impressed me about your tenure there was that you don’t stay in the same position very long. Knowing you a little bit that I do, your mind is going so quickly that you have to change it up often.

You picked up on that definitely in just one meeting. I jump around, and I have to know about all sorts of different things. I’ve jumped around between data, software, technology, business operations, new model development, and all these different areas because I want to understand the whole breadth of it, and that’s how you optimize systems. You have to understand more than just a silo.

There are so many companies that do operate in silos, and I’ve worked at those companies, and this division doesn’t even know what this other division does. If they did and worked together, people could be cross-trained, which would be much more effective and efficient. I would have to think that the culture would be way better as well.

I spoke to David Altemir, and we touched on the culture when they do implement a new ERP for a company. You can see the culture of the company come up a little bit because everyone knows what everyone is doing or should be doing. That system allows employees to hit rates or team members to hit rates. There’s just a lot of cool things around that. You and I started to talk about Deming, but neither one of us could remember what his name was. That guy is a systems freak. You guys have to implement a lot of Deming practices at Honda.

Deming has influenced everything that anybody has done for the last 30 or 40 years in manufacturing and in processes. Trust me, I’m terrible at remembering names. I’m sure I’ll drop a few quotes or anecdotes and be like, “I’m sorry. I just can’t remember who said it.” My brain does not record names well.

I’m the same way. I remember faces pretty well, but names, not so much. We’ll jump into some of the goals. I know that you can’t get into a lot of what you do at Honda, but if you could touch on it and give us a 30,000-foot view, that won’t get you fired.

This is probably a good time to say like, “Nothing that I say here represents the views of my employer.”

You work on a lot of sensitive things at Honda. I want to be sensitive of that and not pry into that a whole lot because what you’re doing now there is pretty cool.

I want to talk about something I think that’s interesting here, and it actually relates to Toyota. This is something that not everybody recognizes. If you’re in manufacturing, perhaps the most obvious thing about Toyota is the Toyota production system. Toyota was the only inventor of Lean or purveyor of Lean, but Toyota has executed on Lean and developed the systems to support Lean and all of the surrounding mindsets and principles better than anybody else has, at least to me.

One thing that I think about here is what I try to apply, not just to what I do at work but what I do everywhere. Toyota thinks about things differently than most of us. When you say system, many people will assume you’re talking about a software platform, or something like that. When Toyota talks about a system, they mean the whole thing. They mean people process data technology. That is a system. Nothing less than that can be a system.

Wherever you work, you’re thinking in terms of applications, systems or processes or systems or whatever. Over the last couple of years, I have been challenged to figure out what it means to take a step back from that and think, “The whole thing is a system.” How everyone works together with the processes and with the tech to accomplish the goal, we can never separate the technology from the people and the process.

Everyone’s working together. All the different pieces of the system have to all run. Just like an engine, if there’s a missing valve or whatever, it’s just not going to run properly.

I think that the challenging part with that is we had systems that were developed for so long. There were systems developed over decades to be able to do things efficiently, to utilize our manpower and human resources efficiently, to leverage our servers and everything efficiently. It feels like over the past couple of decades, but even over the past, maybe 1 to 2, the rate of change has become so much faster than it used to be.

It’s like every day you wake up, and it’s like, “Have you seen this new generative AI pin that you’re going to put on you and it’s going to project a hologram?” You’re like, “How is this going to impact me personally? How is this going to impact my business?” What we find is that the systems that were built over the last handful of decades and even centuries for some systems aren’t able to adapt fast enough anymore.

How are you guys fixing that problem?

Challenges In Value Chain Transformation

I think at first, I just want to talk about what the problem is and what it feels like, and then we can work our way narratively towards how you can fix that problem because everybody in the world is dealing with it, no matter what industry you’re in. It’s not just manufacturing.

We talked before it’s restaurants, it’s everything. As we talked before, restaurants are the furthest behind everything because they’re still pretty archaic. You’re burning meat to serve to people. How does that change? It has been disrupted by COVID, and people are getting deliveries more, and the way we shop is different. That goes into why we are shopping for the car the exact same way. Why do we feel that we have to show up to the dealer and drive it around and do those things?

We just bought a car for Brandi’s daughter and while I like to do everything online, we still went and we drove to Indianapolis. We drove the car, and it was in horrible condition. You couldn’t tell that from the pictures. We ended up not buying the car and we drove all the way back. It does make me skeptical of Carvana, where this car just shows up in your driveway, and you’re like, “That’s not pink. It’s white.” Everything is just changing faster than we can realize.

There’s a great quote about that from John Kotter. He put out the book Accelerate. He said, “The world is now changing at a rate at which the basic systems, structures, and cultures built over the past century cannot keep up with the demands being placed on them.” It just feels like that. It feels like, oftentimes, the rate of change is just outstripping the systems.

The world is changing at a rate at which basic systems, structures, and cultures cannot keep up with the demands placed on them. Share on X

To me, this is the best way I’ve been able to describe it. It’s my organization, me personally, even my family, whatever, we are the shores of a beach, and we cannot control it the way you keep crashing down. It’s like, even if I’m on the ground, gasping for air, the waves just keep coming, it’s like, “Here’s the next thing that you’re going to have to deal with.”

We were talking about this in our Vistage meeting, and I’m sure going to screw this quote up, but the ocean has more context than anything in the world, but it says nothing. It was pretty cool. I’m a water guy. We’re on the water as much as we possibly can. You go out and you sit in the water, and nothing stays stagnant. Everything is moving. The waves are crashing. It’s eroding the shore. Much like our lives, it’s changing constantly. Nothing is ever staying stagnant.

It’s only going to get worse and worse because the rate of change is increasing at an increasing rate right now. If we don’t develop some solution for this, it’s not like things are just going to get better. It’s going to become more anxiety-inducing. It’s going to put more and more businesses out of business that aren’t able to keep up while other businesses are.

I feel like we’ve seen that as we’ve come out of the pandemic. The folks that didn’t change or refuse to do things differently. They’re not with us anymore. We were one of those companies. We had to change everything. In a matter of a year, the supply chain changed so much. Employment changed so much, employees, team leaders, all these things changed so much that for us as a company, if we didn’t change, McMillanCo wouldn’t be there.

To see these companies hanging on and not making changes or implementing systems, at some point, I feel like they’re going to be left behind. There are so many small mom-and-pop shops that still don’t operate on the ERP system, or they don’t even know what the hell an ERP system is. They’re still quoting and pushing jobs out on the floor with a spreadsheet and a paper traveler. I fear for those companies a little bit.

The Dunder Mifflin’s of the world. It’s so funny watching The Office now because you go back and you’re like, “They were literally selling paper.” That was a terrible business to be in at that time. They knew it. The creators knew that, and that was part of it. It’s even more obvious now where you’re like, “How often do I use paper?” How would Michael Scott manage this? That’s definitely not what we’re going to do.

Let’s do a whole new episode on Michael Scott and things to do and not do.

I’ve done an episode or two on Michael Scott before in podcast history. That’s not a lie.

That is an interesting point because, in your podcast, you guys talk about business and how it relates to different movies.

I do a podcast that’s unrelated to Honda called Wonder Tour, and it’s all about leadership, business, and personal application. We just take movies, TV shows like The Office, Marvel, and Star Wars, and we just try to pull out lessons that we can learn because I hate dry content. I don’t want to just sit here and hear about the seven best practices of how to run my manufacturing business or whatever. That’s fine every once in a while, but I need something that’s story-driven that actually sticks to my brain.

I’m the same way. That’s when I created this show. There are plenty of stuffy manufacturing shows out there, and I wanted this one to be a little different where it was a little more off the cuff, and you’re joking around a little bit. If we were together, maybe having a bourbon together or whatever, but there is a lot of dry content out there. I tried to listen to another one that was doctor-related. I’m like, “People listen to this for two and a half hours? It’s good content here, but it’s way too dry for me.”

I listen to some of those. I’m not going to lie. I listen to some. I think I mentioned that to you. Most people aren’t going to sit and listen to a theological debate for two and a half hours or whatever lecture. Sometimes, I do listen to those as well. We’re trying to reach people here in a way that’s meaningful, in a way that you actually want to engage with us. You actually want to take what we’re talking about and do something in your life with it because otherwise, what is it? It’s just distracting you from the problems. There’s a million things that can do that.

You’ve had 8 or 9 different positions with Honda. What was, by far, your favorite?

That might be a little bit too many, not quite that many. I think one of the more interesting things was launching a data analytics team in an area that hadn’t had data analytics before. That just taught me a lot about how you can navigate the change in the world because I felt like it was this uphill battle when I was launching a data analytics team.

Launching a data analytics team taught me about navigating change in the world and the importance of organizational change management. Share on X

People believed in data analytics, but they didn’t necessarily know how to act on it and create value with it. Otherwise, obviously, we already would have done so. I learned so much from doing that. A lot of it was about data governance, data analytics, and all of that area. More than that, I think what I learned was about organizational change management. To me, that’s the key takeaway here. That’s almost the thread that pulls through.

You said you had to go through a big change over COVID with McMillanCo. How do you manage that? I remember being at a conference a handful of years ago, where there was a study by Gartner. Whatever that was pulled up, I’m going to butcher this. It said, “Over half of CEOs don’t believe they can change the culture of the company.” That was astounding to me at that time. I was like, “What do they think they can do?” Controlling the culture of your company is the sustainability of your company. That is the primary driver of the sustainability of your company.

That’s a sensitive subject for me because I was brought to a company, and one of the things that the president wanted me to do was change the culture of the company. I’m like, “That sounds like a great challenge on top of business development and things like that.” It was an aging workforce. I think the average age at this company was over 55.

The company was over 100 years old and owned by the same ownership for a few decades, and the culture was horrible. People wouldn’t even show up to the Christmas party. If they did, they just bitched about everything once they were at their Christmas party. It was an interesting thing that bringing up about culture. I think one of the CEO’s main jobs is to create the culture. It starts with the CEO or with the president and everyone adapt to the culture that the leader has. For that statistic to be that high is overwhelmingly shocking to me.

It also tells you what the competition is like. In some ways, again, it’s sad, but it’s also encouraging. You’re like, “I have evidence that I can change the culture.” That was one of the things that shook me because I was like, “I can change the culture, and I’m surely not the CEO.” I can change the subcultures that I’m in. Slowly, those subcultures pervade the larger culture, and things change. I don’t do it by myself. I’m not trying to sit here, pat myself on the back, and say, “I did all this stuff.”

My actions are meaningful. If I take ownership of the change that we want to go through, you can get out of organizational inertia or a point at which where your organization becomes very inward-facing, which I’m assuming is maybe where you were a couple of years ago. Everything was focused on optimizing in the silo and just Kaizening everything to death.

Kaizen is a great thing. I love Kaizen, but if that’s all you’re about, just looking inward at yourself as a company constantly and saying, “We got to improve here. We got to improve there,” but you’re not understanding how you interact with the outside world around you and where the outside world is going, if you’re not constantly keeping your finger on the pulse of your customer or your users or both, ideally, of the products or services that you’re creating, that’s when you get stuck in organizational inertia mode. I’ve seen a lot of subcultures at different companies get stuck in organizational inertia where everybody keeps looking inward at all the problems you have, but nobody feels they can solve them.

We have seen that where one of our partners with a project that we were doing there, one of the problems they had internally was quoting, and we would get 150, 200-line items to quote, and we had 24 hours to quote it. Everyone’s like, “That’s impossible. How do you run rate on 200 different line items?” I’m like, “There’s software out there that does that now. This is what it is. You can plug everything in, and it’ll run your rate.”

I’m making it sound way more simple than what it is. Once you have it up and running, it is that simple. It allows you to quote 200 parts in hours instead of weeks. The way that we shop now, just like Amazon, we want instant gratification. We want to buy our toothpaste and go on our porch after that, or we want it later that day.

That trickles into our personal life or in our work life. If I submit a quote to somebody, I want a response the same day. I definitely want a quote within 24 hours, max. In the job shop world, there are so many companies out there that just they’re like, “No, that’s stupid. Nobody is moving that fast.” The companies that are moving that fast are going to take over those that aren’t moving that fast because that’s just how we’re going.

To your point, with some of the things that we talked about, the culture has to adapt all that. It can’t be you where you’re like, “I think we need to quote differently.” If nobody else in the company buys into that, then it’s going to derail the culture because you’re going to be pissed that nobody else has bought into it. Everyone’s just going to spiral out of control. There are twenty of those things that you need to adapt before you stagnate.

There’s more coming constantly. This is getting to part of what the solution is. The current systems or the systems that were built over the last century, as Cotterwood put it, were built to become very robust and optimized. That Kaizen was so good for optimizing those systems because you could generally just look inward, and the customer wasn’t changing all of that often, and your products weren’t changing that often. The paper industry is a perfect example. When you hear Michael Scott, there’s one episode where he’s teaching the kids about Dunder Mifflin or something. He’s like, “This is how we do it. We order the paper from the paper manufacturer, and then we distribute it to these businesses.”

One of the kids is like, “Isn’t that thievery or something?” We make a profit. It’s like that business hardly needs to exist basically, at least in the way they were operating it. The only answer to me, or the first step on the journey, if you feel stuck in organizational inertia, has to be looking at the customer and your users. I do want to differentiate that definition a little bit for anybody who’s not fully aware. A customer is somebody who pays for a product or service. A user is somebody who uses that product or service. You might sell to some company that’s your customer but their actual users of the product might be somebody else entirely after they assemble it into a sub-assembly or something like that.

To overcome organizational inertia, focus on the customer and users. Differentiate between those who pay and those who use your product. Share on X

That’s just good practice. As a company, the more value add, you’re adding your customer, one, the longer they’re going to stick around, and two, the harder it is for them to move on. If you’re making a widget, if you’re making a bearing, but you’re not providing everything else that goes into that entire setup, that entire system, then they could find anyone to just make that bearing.

I think that we have been going down this road for a long time. You have to add value. If you’re just pushing Play-Doh out of a die and you’re selling sticks to Play-Doh, but you could be doing thirteen other things to that Play-Doh before it leaves your shop, then you’re just creating that much more value for the customer.

You’re most likely saving them money, even if they’re doing those operations in-house. Now, you’re doing it right out of the Play-Doh press. I think that people lose sight of that a lot as well. They just want a blanket or to do a mill of whatever they’re making and send it down the road. More and more companies that I go into, and I’m sure you as well, they’re doing a lot of different value add.

You have to be able to differentiate that. I think Amazon set the model for that with their flywheel concept, which is that you want to have all these different services and business elements that are all feeding each other. In the end, the customer is at the center, and you’re always focused on creating a better world for the customer. That playbook that Amazon has created is not the only thing to use going forward by no means. They’re not perfect and do many things that we probably complain about, but their obsession with the customer is their secret.

They do a lot of other things well, just like any great company does. What you said to me about if you’re just pushing Play-Doh out, you should be very concerned. I hate to be that direct, but you should be very concerned that you’re going to get disrupted, like you said, by somebody who actually has their finger to the pulse of what the customer needs.

When you work with a supplier, you want that supplier to be able to think ahead and bring new ideas to you, whether it’s for cost down, value add, next generation of your product, or whatever. Nowadays, we compete as an ecosystem. We don’t just compete as individual companies. If we compete as an ecosystem, we want everybody in the ecosystem to be playing and incentivized properly to work together to create a better world.

It just builds that rapport with the customer. We didn’t know how to handle this in the beginning, but with our warehousing services, as we call it, we would get a little bit of pushback because somebody comes, and they’re like, “We don’t see your fee sheet. What do you charge to hold onto a pallet for a month?” I’m like, “That’s one way to do it. We have a cost for that. What else are you doing to that pallet? Let’s talk about the whole picture. How does it come in? How does it need to go out? What do you do with it?” You can see somebody across the table like, “We didn’t think about that. We just thought we would send the pallet to you, and then you’d send it back to us and transaction over.”

I’m like, “We certainly can do that, but if we can do steps 1 through 101 for you before it ever gets to you guys, then let’s talk about that.” It is interesting to see people’s faces light up to say, “Now, these guys want to be a partner. They want to be part of our team. They don’t want just a transactional relationship here. It’s more than that.” It is fun for us because now we’re interacting with the customers where our team members are going there and learning from them if we’re taking things off of their plate. It just creates a better culture for us internally. When those folks come to our facility, then they’re more friends than they are customers.

That relationship is so important. Obviously, building that relationship is critical whether you’re going to be a consultant, a supplier, or a customer. That’s what makes sure that everybody gets a win. I don’t know about you, but I don’t want to be a part of transactions that are win-loss where you have a zero-sum game. I want to be a part of transactions and relationships, whether it’s a win-win or a win-win-win, if it’s a three-party transaction where everybody gets something good out of it. Those are going to drive to good things over time. Even if that line of business or product line or whatever goes away, the fact that you get those win-win situations leads you to want to work with those people in the future.

There are plenty of examples where people just win for one party and either the other party goes out of business or the other party feels taken advantage of for as long as they can be taken advantage of. Finally, they’re like, “We can’t do this anymore. We’re out.” It hurts both companies. It hurts the company that was offering the service but also the big, bad behemoth that might want cost reduction every year, even though the cost is going up. That’s definitely always an interesting conversation, especially with the big four. That’s just all about cost reduction. It’s like, “Where do we take cost out this year?” I’m curious. “We’ll take it out here. “That went up by 10%.

You have to collaborate if you want to be able to achieve costs down the sustainable long-term. I know we talked a lot about the customer here. To me, this is something that gets misconstrued in Lean in a lot of companies, not in all companies, but Lean to some people becomes less inventory and less waste. It’s not that those aren’t Lean practices, but the core of Lean is a pull from the customer. That’s it.

Customer-Centric Mindset

How do we create a pull from the customer? Once we have a pull from the customer, how do we optimize the value chain all the way through, like you said, to increase value and reduce non-value add? You put in place systems to manage that, people process data technology, and then you can operate truly Lean.

Let’s go there next. I do want to leave people with one, maybe, practical takeaway, though. I did mention Amazon. Amazon has a practice called Press Release FAQ that anybody can look up on Google. There are a million different things you can do from a design perspective to keep the customer at the center of what you’re doing.

Press release FAQ is a very simple thing. Anybody can complete it for a new product line they’re launching, a new manufacturing line, new building, even internal process improvements, a new associate recognition system, whatever. You can use this Press Release FAQ template that Amazon uses. The idea is we’re going to act like we are on launch day for whatever this new thing we’re going to be doing, and we’re going to write up a press release about the launch. We’re going to write up some frequently asked questions about the launch and answer them almost as if they were going to be published in a tabloid.

What you end up doing as a part of that process is focusing on what is the value proposition. Who is that value proposition for? What are people going to say about the solution that we’re implementing here? What questions might people have once we go to implement that solution? It’s just a simple tool anybody can use that I like to use in certain circumstances to help people focus on the customer.

Focus on the value proposition and who it's for. Anticipate what people will say and ask about your solution. Share on X

That is interesting because Amazon’s obviously figured out, especially in terms of inventory. That can sink a company. You either have too much or too little, and there are definitely people out there who have figured out how to have just the right amount and something changes. Having all those systems and, like you said, getting what are people going to say when we’re implementing this system? That’s part of culture, getting everyone’s buy-in.

I think, in order to get everyone’s buy-in, they have to understand the system that you’re putting in for the bigger systems, regardless of what it’s supporting, if it’s cybersecurity or an AI, any ERP, any warehouse management system, people, you have to have that buy-in. I do think it’s important, like you said, to listen to what people have to say.

If you’re not listening to your people and understanding their concerns and just brush over them, then I feel you alienate, and you probably sabotage the entire program. The people that are working in the system to implement are going to find bugs and errors and things that need to be fixed or changed or tweaked to match whatever company you’re in.

Step one, to me, is all about the customer and the user. Who is my customer? Who is my user? How well am I following them? Look at yourself in the mirror and be honest with yourself. How well do I know my user? How well do I know my customer? To me, step two is if I do know my user and my customer, how do I execute on that actually?

It’s great. I know what my customer wants. I know where I think they’re going to be next year and three years from now or whatever. How do I sustainably execute on that? A lot of people reading might think, “If I had five of me, I could execute, but I have to delegate to other people. I have to get everybody working in a certain direction.” That comes back to what we were saying about. Do you believe you can actually change your culture and that you can change your systems?

To me, the starting point of that is do you provide clarity on where you want to go. If you’re a leader and you can lead up, you can lead down, and you can lead horizontally. Are you providing clarity of vision just because you know where the customer is going? Does everyone know where the customer is going? As soon as that falls off at a middle management layer or the layer below you or whatever, nobody’s going in that direction anymore. Everybody’s just going to sub-optimally optimize for whatever metric they have instituted in their local area that’s going to get them a good bonus or something.

If somebody is operating narcissistically for self-preservation or self-reward, that project’s dead from the beginning. I don’t ever see that ever being successful. It may be successful for a little while, but as soon as the people that you’re leading with, whether you’re leading up, down, or horizontally, once they start feeling that way, I think everything’s ruined.

It can be, and it can also be salvaged because I want to encourage people who might be reading and thinking, “Honestly, they might’ve said identity statements like I can’t change. I just can’t change anymore. I’ve been around for too long. I’ve seen too many cycles. I’m too hardened and jaded and whatever else.” They might look at their direct reports and be like, “I have this CFO, and this guy is never going to change. He does a decent enough job, but until he changes, I don’t know how we’re going to be able to fix the problems that we keep complaining about that everybody keeps reporting on the yearly survey or whatever that we just can’t get better at.” I just want to encourage people that you can change. I have seen it done, and I’ve seen people that many thought would never change, change. It happens.

I think you bring up a valid point where if you’re always complaining about a problem, then somebody is going to stop listening to you complaining about the problem. I’m going to be the first one. I just don’t want to listen to somebody complain about a problem. It’s like, “We have a problem. I may not know what the solution is. Do you know what the solution is?” If you come to me with a problem, come with a solution or an idea. It doesn’t even have to be perfect. I think that even with our customers, if we just go to the customer with a problem but don’t offer any solutions, we’re just whining. Stop whining. Figure out a solution. That will help somebody change.

If you want your CFO that is never going to change, we’ll bring some solutions. Even if the five solutions get shot down, at some point, you’re going to bring a solution that he’s going to go, “Let’s give that a go. Maybe that’ll help.” He or she could just be so burned out if they’ve been a CFO for that long, where they just glass over, and they’re just like, “We’ve tried everything, but nothing has worked.” A fresh new mind could bring a new idea to fix that. Whatever that problem is.

I would say that what comes to me with clarity, so you have to provide clarity of vision. You have to provide clarity of narrative. Especially if you’re leading upward and you’re trying to convince someone in the C-suite or the company or something to do something, there has to be a clear narrative. Otherwise, don’t even waste your time trying to sell it to somebody.

If you do have a clear narrative about where you want to go and why it’s valuable to go there, and you think it’s aligned with what should be happening, then how do you actually start doing it? Selling it as one thing, but we’ve all had days when we thought, “I’ll go do this great thing. I’ll eat healthier. I’ll start this.” Actually, practicing it is a completely other thing.

I think there are some good examples in Atomic Habits and other books and self-development resources. The answer is ever so simple. You have to start practicing, and the practice has to be small at first because you don’t transform overnight, but you have to start practicing. In the example that you just gave, if we have somebody who’s always bringing problems but never bringing solutions, then start a practice of bringing solutions.

Be the first person to show up every single time and say, “We’re going to have this hour where we move from problem to solution, and we’re going to start with this backlog of ideas or problems that we’re going to work through. Here, we’ll pull different diverse perspectives into the room, and we’re just going to do this, and we’re just going to see how it works.”

Slowly, you layer on top of that. If you have the clarity and you’re giving people new principles, new operating principles, like, “We’re going to work across the silos now, everybody,” I’m going to keep repeating that. There’s no business in IT. Stop making a wall between business and IT. There’s no business in IT. Everybody comes in the room to solve the problem, and you keep repeating it, then you instill it and design it into your weekly, daily and monthly practices. That’s how, over time, stuff just starts to change. I don’t know what to tell you. It’s just moving granules of sand from one sand pile to another.

That’s such a good vision or visual because I think so many people are like, “We have this problem.” I think there could be five different solutions, and then they get paralysis by analysis. They just keep reanalyzing everything, and they don’t necessarily say, “We’re picking this one. I don’t care if it’s paper, rock, scissors. We’re going to pick this solution, and we’re just going to start, even if it is one piece of sand at a time.” People just get so they’re anxious. What if it’s not right? It’s not right. You change. If you start going down this path and you’re like, “We should have done this instead of that.” Do that. It’s not too late to shift a little bit.

People are just afraid to do anything. Not all people, obviously, but if you’re in an organization and people are afraid to change, it’s just because they’re afraid of failing and the fear of what if this doesn’t work? What if I have this idea, and we’re going down this path, and it’s wrong? I’m the one that gave the solution to the CFO. That could happen. If you have a good enough leader, he’s going to shift with you to help make it successful.

There’s a great Simon Sinek quote about that where he says, “Try, fail, try again, change the world.” That’s a paraphrase of it, but people are probably familiar with it. We have to be willing to put ourselves out there. If you want to change, you will fail. You will absolutely fail if you want to change. That’s okay. Failure is a piece of the process, and we should reward ourselves for the effort we took to do something different, even when it fell flat.

In that first ideation meeting or whatever you hold where you’re like, “We’re not going to bring problems. We’re going to bring solutions,” there’s probably going to be two people who show up, and maybe some onlookers who are very skeptical who show up because you tell them to show up or whatever.

At the end of the first meeting, there are going to be points where it was painful and where nobody talked, and people didn’t participate on the whiteboard or using the sticky notes or whatever virtual whiteboarding tool you’re using. They didn’t want to, but you have to keep going even despite that because you reward yourself. This is a whole another thing, but you can reprogram your brain a little bit to stop giving you a dopamine reward for doing something you feel got a good result, but instead give yourself a dopamine reward for doing the thing you’re supposed to be doing. Some people say, “Trust the process.”

I think that the fear of failure is ingrained in us from a very young age because of how we’re taught in this country, and we don’t get rewarded for failures. You get rewarded for only succeeding. If you don’t get an A on your test and you get an F, you’re shunned because you failed that. Let’s go back a little bit and say, “It’s okay you failed that test.” How do we learn from the failure of that test?

There are a lot of things about our education system. We could go down a whole another rabbit hole here, but we’re just programmed that it’s not okay to fail. There are so many people around entrepreneurs that when they do fail, because every entrepreneur fails at some point, and people are poking fun out on the toilet and saying, “I told you so.”

That’s why old entrepreneurs are callous and weather burnt, and they look like cowboys because they’re like, “You’re negative. Stay away from me.” Same thing in companies where if you have a couple of naysayers, listen to them, take their input, but decide what you’re going to ingrain just because they disagree with what you’re trying to do. Be a leader, step up, have conviction in it, and give a clear path, as you put it. Paint a clear picture of here’s where we’re at, this is where we’re going, and this is why. Help bring those naysayers along. If those naysayers don’t want to fall in line, then maybe you have to find somebody else to sit in that seat on the bus.

Over time, that will sort itself out. Basically, if you create a culture that’s different from the culture five years ago, certain people will get spit out by that new culture. As long as the culture is moving in the right direction, it’s probably a good thing.

You see that a lot with acquisitions. If one company buys another company, the people at the company that they’re buying, a lot of those people don’t last very long if they don’t buy into that new culture. The new company bought your company because something was off, or maybe the owner just wanted to sell or retire, but in order to be a good leader, you have to be a good follower. If you find yourself on a team that you may not 100% agree with what’s going on buy-in, give your input, but buy-in, and take your marching orders, and help that leader get to the end line. Even if you disagree with them, do it well.

You got to stick it through. You have to follow the process. That’s what it’s going to take once you figure out what the vision is, where you want to go for the customer, for the user, for the world, for your team members, for yourself, whatever. That’s step two for me here. This is a model we’re mostly coming up with on the fly. This isn’t a model that I’ve written a book about or anything, but it’s what I’ve seen, and it’s the correlation of my experiences.

How do you take this and scale it, though? What we’re talking about here is great for a team, a smaller organization, or something like that, where you have much more authority or influence over what’s going on. How do you scale this? That’s where I want to introduce an evolution of Lean that may be new to a lot of people, but there is a movement for Lean Agile.

Lean Agile Framework

Basically, taking the principles of Lean and applying and mashing it up with, for lack of a better term, the software development flow called Agile that has been built over the last 30 or more years now. What Lean Agile does is it basically takes the mindsets and the principles of Lean and it melds them with the practices of Agile, where Agile is all about quick iteration.

Agile is all about the team working very closely together to be able to solve problems autonomously, decentralizing decision-making to the level that the information is at. When you apply a combination of Lean and Agile, you end up taking us back to where we were at the beginning, a pull mechanism from the customer where you define what value we provide to the customer.

Our company might provide a couple of different value propositions. I see a lot of software firms out there nowadays that used to be consulting firms. One of their main value propositions is they might consult on technical architecture, data strategy, business strategy, or whatever. Now, these companies are starting to also have a value stream around selling the web-based software tools that they build. They build them internally in order to run their consulting operations. Now, they sell these web-based tools because they’ve already proven them out internally. They solve a problem. The users adopt them. They’re good. How do we sell them to somebody else?

I think what you want to look at is the value streams of my business. If you’re an individual contributor or whatever, what value stream are you a part of? Is somebody clearly telling you what value stream you are a part of? What drives value end to end from supplier to consumer, basically? From there, figuring out how to optimize at the value stream level.

It seems inherent to Lean that we would want to do that, but we must do it at the value stream level because what becomes so easy to do is to optimize for a piece of the value stream, a silo, if you will. We’ll make this more efficient. It even happens in like, “Our company’s more efficient, but everybody outside now has to ship everything in twice as many trucks because we became more efficient.”

Now, we have the environmental issues that we’re creating. Now, we have cost up, and we’re just not optimizing for the whole value stream. I see this in so many different places. Everybody I talked to has a story about siloed optimization. I think if you know who the customer is and you’re empowering your people to be able to start practicing a customer-centric mindset, Lean mindset, now, it’s time to actually substantiate a system underneath of that that says, “This is our value streams that our company is going after. We will fund these value streams.” You can almost budget based on value stream. How much money do we want to put into this value stream? It might be aligned to a product line, something like that, or some services you provide.

Empower your people with a customer-centric, Lean mindset, and fund value streams aligned with product lines or services. Share on X

What you end up building is a system by which you can constantly prioritize the customer because you’re focused on pulling end-to-end value to the customer. I’ll give you an example because this might be very esoteric. We’ll use software development because everybody’s familiar with the apps on their phone. Let’s say you have an app. This could be a physical product that you make as well. That app probably has a couple of different pieces that make it up. It might have a login function and a database that tracks the user’s information. It might have like a cart if it’s a shopping app. Let’s just say we’re shopping for books on this app. I don’t know. Early-stage Amazon.

It’s going to have a cart. It’s going to have search functionality. It might have integration into different data sources to pull in reviews or data about the books. That is your value stream. You’re delivering books, or you’re delivering eBooks or whatever to a customer. Looking at the end-to-end value stream, how do we get the books? How do we present the books to the customer? How do we procure the books? How does the customer provide feedback on the process?

If we look at the whole thing as an end-to-end value stream, we want to optimize off of one backlog. There should be one backlog of things to work on for that value stream. That’s tough for most people to get their head around because they’re used to saying, “We have six projects, and they all need this one engineer to work on them so that they can move the ball forward.” How it all comes together in a business environment is you got to have one freaking priority system for a value stream? I always tell people, if you tell me one A, one B, one C, one D when I ask you what your priorities are, you have no priority system.

Especially a company as large as what you work for, and there are plenty of $100 million companies out there that they do. They’re very siloed out. If there are multiple business sectors under the same company, and they’re not treating each other like a customer, and the squeaky wheel always gets the grease type of management, then it’s going to turn into a disaster at some point. You have to have a system with one priority. If there’s one engineer bouncing back and forth between 2 or 3 divisions, everyone’s got to be on the same page. It is interesting, especially if they have separate P&Ls and all these things. They’re out for their own.

We’ve seen a couple of companies here in the last couple of years that they’ve changed that entire mindset. If they had four different divisions, they now operate under one P&L. We’re doing this because I have to hit my bonus. It may not be the best thing for the customer, but it’s the best thing for Jim. He’s got to get back on the bus.

This is the hardest part because the first two are like Atomic Habits type things that you can do where you, it’s like, “We can implement rituals where we check in on the customer and the users, and we bring everybody closer to what the customer and the user thinks.” We can implement practices, slowly stacking them on top of each other, moving the granules of sand from the old way to the new way.

This is the kicker. If you want that to not just be a one-time transformation where we create this new image of the customer, put it all over the walls, and implement all these new weekly and monthly rituals and stuff. We have a new quality management process. We got all this stuff. It’s great. If you don’t want to have to do that every 5 to 10 years and stop and be like, “We lost the customer again,” that picture on the wall that’s five years old isn’t it.

You have to create an operating system. Even for small companies, I would argue. An operating system is very relevant. You already have an operating system, in fact. Every company has an operating system. It’s the bundle of processes and practices you use to manage everything from your spend to your products, your employees, and all of it. There’s a system that everything else gets built on top of.

Importance Of Operating Systems

If you don’t think about that base system, that operating system your company runs on, and you don’t even know that it consciously exists, it will not be aligned. What is the purpose of an operating system on your computer or on your phone? The purpose is to create alignment between all of these diverse apps and processes and sensors and everything that’s going to get connected together.

Something has to be consistent there and say, “This is how this sensor data is going to be read. This is how it’s going to get displayed to the user.” You need to use standard protocols to do that. If your organization does not have those things standardized, it’s not the end of the world if you don’t. Most companies don’t. If you end up with a bundle of practices that are generally causing discomfort for people and pain as they go, like, “The budgeting cycle isn’t right again. We should have been able to follow the customer, but we weren’t because of X, Y, and Z,” this is an opportunity to just take a look at your operating system, lay out all the different practices, strategy and tactics and stuff that you do and figure out how do they align.

Standardize your organization's practices to create alignment, just like an operating system on your computer or phone. Share on X

If you’re looking for an example of an open-source operating system that can work on anything from a small business to a huge enterprise, I am not at all sponsored by this company. I just happen to know about it. It’s an open-source framework, but it’s called the Scaled Agile framework. It’s a Lean Agile framework that will help you do these things.

There are many different Scaled Agile frameworks out there. I would say looking at a Scaled Agile framework, if your company is only building 1 product line, has 1 value stream, basically all the way up to, if your company has 100 value streams, then you need to figure out how to follow the customer in perpetuity so that you’re not constantly having to do these transformation initiatives for your business.

That’s definitely something that I have not heard before and it completely makes sense. I think that for me, I’ve always thought we have HubSpot for sales, and we have this program for our ERP, and we have this program for warehouse management, and we have this for that, and you end up with 4 or 5 different systems, and they’re not on the same operating system as you put it. They’re not all talking to each other and working together. That’s where people end up managing things in spreadsheets, I think, where your inventory gets out of whack because they’re not using the system. They’re like, “Jim, our inventory and the system says that we have 1,000 of these.” He’s like, “No, that’s wrong. Look at my spreadsheet.”

It’s like, “Why isn’t it right in the system? Whoever’s in charge of taking things off the shelf or putting things on the shelf, why aren’t they doing that in the system instead of you doing it on a spreadsheet? Now, only what’s going on.” It shouldn’t be like that. Not one person should know what’s going on with inventory, for example.

You want to lay it all out clearly for people. That’s a perfect example. If you just have a software system, if all we were thinking was just a software platform to run your whole business on, you’re right. Look at all the problems you have with all these different software platforms that don’t properly talk to each other. That probably causes you so much non-value add in your business that these things don’t talk. Now, think about your business processes and how they’re loosely connected together. One person owns this, and another person owns that. How much falls through the cracks, and how many meetings that are non-value added are required to try to rectify? Why aren’t we achieving our strategic objectives again?

Somebody launched six other things off of that, and we’re not tracking them all the way back up to see how we’re achieving that strategic objective. We have so many people managing them, and they do not talk to each other. That’s what happens when you don’t have a cohesive operating system for your company.

At the end of the day, the only thing that matters is the customer, getting whatever widget from dock to door. If none of these systems are in place or broken, then the person hurting is the customer. The company could lose the customer, but I think that that’s secondary. We want to keep the customer, but the main objective should be serving that customer to the best of your ability, whatever that means. If you can do it on a spreadsheet, then by all means, do it on a spreadsheet.

The scale of your business and things like that, if you have a small two-person weld shop, then you could probably manage everything on a spreadsheet. To serve more than two customers, you do have to change. As we talked earlier, with the ocean constantly changing, it’s going to change everything. Just what you’re doing for cybersecurity right now is not going to be what you’re doing for cybersecurity in five years. That is the same for everything in your business. You have to evolve.

It’ll keep on changing. That’s why the operating system is so key. We don’t know what waves are coming at the end of 2024, much less than 2030. Building out a system that’s not just about end-to-end manufacturing or whatever, but that’s actually something you can run your business on, that’s going to enable you to be able to respond faster and more directionally to the changes that are coming versus, “We started this, and now we’ve got to focus on this.”

In the end, it’s going to drive a better experience for your customers. As you said, that’s what matters because what your customer doesn’t want is a business that’s slow to respond, doesn’t have access to data, doesn’t know what the priority of that customer’s order is right now, and can’t figure that out what the ETA is or something. The customer just wants to feel like you want to feel. Building a system that your company runs on is how you’re going to be able to have Dustin take some time off and say, “It’s going to be fine. Everything’s going to be fine. I’m not relying on people. I’m relying on a system.”

The people are a huge part of it. I don’t want to minimize that because the junk in, junk out, you could have the best Oracle system in the world, but if the people aren’t putting the right number in the right spot, then you have an expensive thing that doesn’t work. Going back to any of these systems, it is about culture. In my opinion, the most important part of all of this is the culture that you have in your facility. If people aren’t bought in, then the systems are going to suck. I’m sure that with the teams that you’ve been on, you’ve probably stepped into the middle of people not being happy and not believing in the project and things like that.

The culture is the key. You’re right there at the end. You don’t want to fight things at an instance level. If you have a bad culture or a culture that’s not aligned with the company’s vision, you’re going to always fight things at an instance level. You’re going to always have to go into HR. You’re going to always have to go down and renegotiate how contracts and processes work and stuff like that. If you can create a culture where everyone values the customer, everyone is valued in this system. Now, you have something to build on because

I would be remiss to miss this opportunity to pitch a book because people love books. Most people who read this probably also like to read or at least listen to audiobooks. There’s a great book. If people haven’t read it, Team of Teams, New Rules of Engagement for a Complex World by General Stanley McChrystal.

It is such a well-done piece explaining why the change is happening faster than it’s ever happened. How different US military operations responded to the fact that the world was changing faster than they understood that it was basically, and how that resulted in unsatisfactory results for a time. They had to learn how to build an organization that was resilient to that change, even anti-fragile, where they were able to respond better when there was change.

They were able to be a first mover when the change happened where the change actually was to their advantage at that point. That’s the type of organization that I think we want to be. I’m not going to be able to say nearly as well as General McChrystal can say it, but Team of Teams is a great book. It’s not that long of a read, and it’s a good audiobook as well.

Thank you so much for coming on.


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