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 / Autumn 2007 / Issue 48(originally published by Booz & Company)


See for Yourself

Seek Out Root Causes
Some problems may suggest obvious solutions. In most cases, how­ever, solutions are not obvious, and identifying a problem’s root cause becomes a critical part of firsthand observation. Toyota, always seeking the simple but avoiding the simplistic, searches for root causes by applying the “Five Whys” principle: asking several “why” questions in order to determine a problem’s genesis. Why do people avoid long lines at Disneyworld? Because they are bored in line. Why are they bored? Because the line lasts 30 minutes with nothing to do but queue. Why does it last 30 minutes, and why is there nothing to do? And so on. By asking “why” at least five times, the observer eventually finds the problem’s origin.

Jeff Wilke, senior vice president (SVP) of North America retail for, regularly visited the company’s fulfillment centers when he served as SVP of operations for the company. He insisted that his staff spend time in the field rather than reading reports in the Seattle headquarters. On one field visit, Wilke encountered one of his analysts, a Ph.D. in operations research, working to generate a computer-optimized “picking path” for the hourly associates who were charged with gathering the items in a customer order. The analyst commented that some of the most ex­perienced “pickers” defined a more efficient picking route for themselves than the one they got from a computer program. Wilke quickly challenged him to incorporate the experience-based heuristics of the best pickers into the com­puter algorithms. During peak holiday season, well over half of Amazon’s fulfillment center associates would be inexperienced temporary em­ployees, so codifying this expert knowledge was critical to operational performance.

In an industrial company, a team developing a sourcing strategy gleaned an equally useful insight from observation during a tour of a mini-mill that produced metal bar stock — basic steel bars that can be machined or forged into finished metal products. The team noticed a chart posted in the production area of the plant, tracking the number of different steel specifications produced in the mini-mill each month divided by the number of “melts” in the cupola that fed the continuous casting machine. The team was shocked to see that the ratio varied between just 1.1 and 1.4 over the posted months, indicating that running two sequential batches of the same steel mix was rare.

By probing the supplier host, the team discovered why this metric was so important. The supplier ex­plained that molten steel fed the continuous caster by repeated pouring from multiple cupolas. When the mix changed from one cupola to the next, the resulting bar stock was a mix of the two steel specifications for a period of time. Con­sequently, this transitional output would not meet quality standards for either specification and would be rejected and recycled back into the melting process for another batch. Although the material was re­claimed in the process, the off-spec product consumed valuable capac­ity, and the material also underwent the expensive, energy-sapping pro­cess of remelting. From the standpoint of profit, this was a very wasteful situation.

Reflecting on this insight, the team identified a key opportunity to collaborate with the mini-mill supplier to rationalize steel specifications and to place orders in a way that would enable sequential runs of the same materials in the cupola. It produced a win-win for the mini-mill and ultimately for this important customer.

Teach Others to Observe
The final principle for effective observation is to teach others to observe. An anecdote from Tom Taylor, former executive vice president (EVP) of merchandising for The Home Depot stores, demonstrates how these frontline visits offer op­portunities to learn and to teach by looking for problems from a customer perspective.

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