Volume 10, Number 3

Reflections
The SoL Journal

on Knowledge, Learning, and Change

FEATURE ARTICLESThe Lean Leap: Lean as a
Learning Accelerator

By Michael Ballé, Jacques Chaize,
Frédéric Fiancette & Eric Prévot

Reconnecting with
Customers: The Detroit
Recovery Project

By Mike Homan & Jason Schulist,
with Susan McCoy

The End of Economic
Expansion Requires
Compression Thinking
By Robert W. “Doc” Hall

Divergent Views, Shared
Vision: The Scenario Game
Board as a Tool for Building
Robust Strategy

By Michael Sales & Anika Savage© istockphoto

Published by The Society for Organizational Learningreflections.solonline.org
ISSN 1524-1734

ii

reflections | volume 1 0 , N umber 3

reflections.solonline.org

publisher ’ s N ote 1 0 . 3

As some of you know, I
ended my tenure as SoL’s
managing director in
September, in part so I canreturn to being a member of
SoL and spend more time on
the substance of creating andenhancing learning commuC. Sherry Immediato
nities. Documenting and disseminating cases of organizational and system learning
remains one of my passions and I have offered to continue to serve as the publisher of Reflections as a way
I can contribute to the community as a SoL member.
In reflecting on the past ten years, my principle observation and confession is that consistent action-learning
is rare, and that reflection remains the weak link formost of us. Therefore, I’m particularly pleased to sharea number of illustrations in this issue about how people
are using lean tools and philosophy, as well as methods
from scenario planning to embed learning in our everyday processes. They demonstrate the positive resultsthat come from a focus on bringing out the best inpeople as standard practice.
How do we make learning what we do every day? The
story of integrating lean and organizational learningfrom Danfoss Socla is a tale of experimentation and persistence. In particular, it raises the question about how
our processes build learning “muscle”. They describe aseries of methods to highlight positive results and opportunities for improvement – by physically displaying
tangible examples on the factory floor and in the warehouse. They’re hard to miss.

or others where illegal natural gas hook-ups have been
constructed with bicycle tire inner tubes. Whose “learning opportunity” is that? DTE Energy has embarked ona remarkable journey in seeing themselves as both partof the problem, and in new ways, part of the solution.
How does the larger context affect our learning orientation? Doc Hall, a long time lean scholar and advocate
describes his experience of the “vigorous learning
enterprise” – systems who are embracing what itmeans to thrive in a world beyond incessant economic expansion.
For those of us whose work is inherently more abstract,innovations such as the “Scenario Game Board” help
expose the less tangible assumptions we are making,their consistency, and implications for strategy. Michael
Sales and Anika Savage have created a simple process
where a group can use a room as game board and physically display both espoused assumptions and assumptions in use (by having people literally vote with theirfeet, and observe the resulting distribution on the“board”). The act of then moving to another spot on
the game board to understand that perspective isliving reflection.
Finally, I hope our new “Executive Digest” will make iteasy for you to select the features of interest now, andto file away others for later reference, or to recommend
to colleagues. Please do share this issue of Reflections
with others! It’s an easy way to build or reinforce yourlearning community.

With appreciation,
Similarly, DTE Energy in Detroit has redefined what employees see in the field as relevant opportunities for
improvement. Imagine an impoverished communitythat has households surviving without heat and light,

C. Sherry Immediato
Publisherpublisher ’ s note | immediatoe x ecutive digest 1 0 . 3

The Lean Leap:
Lean as a Learning Accelerator

The End of Economic Expansion Requires
Compression Thinking

By Michael Ballé, Jacques Chaize, Frédéric Fiancette,and Eric Prévot

By Robert W. “Doc” Hall

When Danfoss Socla, a French valve manufacturer, 		
first implemented lean practices, the initiative failed to
produce the desired large-scale transformation. Only
when the company integrated lean with the disciplinesof organizational learning – and built learning into
everyone’s jobs, every day – did they achieve dramatic
process and performance improvement. In this article,
Jacques Chaize, Frédéric Fiancette, and Eric Prévot fromthe Danfoss Socla executive team, along with consultant
Michael Ballé, describe how learning organization theory
has much to contribute to the lean field by clarifying
the purpose of the lean tools and spelling out for
managers what the tools are supposed to achieve:
making people before making products.

Reconnecting with Customers:
The Detroit Recovery Project
By Mike Homan and Jason Schulist, with Susan McCoy
In a tough economy, how does a company maintainprofitability while providing services to people who may
not have the resources to pay for them? In this article,
Mike Homan, manager of DTE Energy’s innovative
Detroit Recovery Project, and Jason Schulist, director
of continuous improvement for DTE Energy, tell how thecompany has employed improvement methodologies
to meet this challenge. By applying learning tools not
only within the company but to the larger community,
DTE Energy has made strides toward reestablishing thesocial compact with its lower-income customers andaddressing the root cause of deep, systemic problems
in the areas it serves.

Global crises are squeezing us from all directions, andwith or without our participation, change will occur.
To implement the sort of changes that will allow civilization to prevail rather than merely endure requires a
resourcefulness and ingenuity beyond any the world
has ever employed. In this article, Doc Hall introduces
the concept of “Compression” as an invitation to learn
more effectively both as individuals and organizations,
rethink our perpetual devotion to old ideals, and welcome the shift in thinking that must be our first andimmediate step.

Divergent Views, Shared Vision:
The Scenario Game Board as a Toolfor Building Robust Strategy
By Michael Sales and Anika Savage
How can people with strongly held, polarized positions
on a complex issue develop a robust strategy for the
future without necessarily resolving their differences?
In this article, Michael Sales and Anika Savage outline
an activity that uses a simple “Scenario Game Board” toprompt team members to listen to each other, explore
possibilities, and arrive at decisions together – even if
they don’t share the same views or values. By “residingin” a scenario that contradicts their inclinations, participants broaden their perceptions and learn to see 		a range of possible future conditions. Because thisprocess embraces multiple perspectives rather than
imposing one view of the future, it fosters mutual
respect and leads to better decisions.

iii

feature | B all é , C hai z e , F iancette , and P r é vot

feature 1 0 . 3

The Lean Leap:
Lean as a Learning Accelerator
M ichael B all é , J acq ues C hai z e , F r é d é ric F iancette , and E ric P r é vot
When Danfoss Socla, a French valve manufacturer, first implemented lean practices, the initiative failed to
produce the desired large-scale transformation. Only when the company integrated lean with the disciplinesof organizational learning – and built learning into everyone’s jobs, every day – did they achieve dramatic
process and performance improvement. In this article, Jacques Chaize, Frédéric Fiancette, and Eric Prévot
from the Danfoss Socla executive team, along with consultant Michael Ballé, describe how learning organization theory has much to contribute to the lean field by clarifying the purpose of the lean tools and spellingout for managers what the tools are supposed to achieve: making people before making products.

Michael Ballé

A

Jacques Chaize

Frédéric Fiancette

Eric Prévot

s a senior management team, we have always worked hard to create a true learning organization in our firm, Danfoss Socla, a specialized valve manufacturer
based in Chalons sur Saône, France.1 Indeed, we attribute part of our enduring
success to our efforts toward continuous learning. In 2002, our parent company
asked us to participate in a corporate lean initiative, and we did so with great curiosity. 		
Yet, after initially accomplishing positive results, we became disappointed with the projectapproach, not seeing how lean could potentially “transform” the firm. The lean tools andinitiatives showed promise, but we failed to grasp how they fit with our vision of fostering
a learning organization.
As a result, we started a dialogue with one of the authors (Michael), who had academic
and practical experience in both the fields of learning organizations and lean transformation. We then decided to “reboot” our lean approach and frame it from a learning perspective, with smaller, more frequent projects involving more people from throughout thecompany. We also committed to work together more closely to discuss and reflect on the
demands of lean implementation and its impact on the company.
The process has been taxing, to say the least, but rewarding both in terms of performanceand process improvement. A year after we started, with the onset of the global economic

Danfoss Socla is aworldwide specialized
valve manufacturer
focused mainly onwater applications.
The division has 600
employees and EUR
100 million in annual
sales. Headquarteredin Chalon sur Saône,
Burgundy, France,
the company is anaffiliate of Danfoss
A/S, a EUR 3 billion
Danish industrial
group.

1

2

reflections | volume 1 0 , N umber 3

TABLE 1 Two Approaches to Lean
A Focus on Lean

A Focus on Learning

In 2003, our parent group started
a lean program, with the support
of a renowned consulting firm. The
initiative involved projects led bystaff specialists, each lasting 16
weeks, with an additional 16 weeks
of stabilization, during which thespecialists worked closely withteams to keep the implementation
on track. We conducted 14 projects
facilitated by a full-time, four-person
continuous improvement team.
The main focus was improving
productivity. The projects delivered
significant gains, which helped
us to fight fierce cost competition
from low-cost producers. However,
although most of the projects
were beneficial, we realized thatthey remained driven by the continuous improvement team andthat frontline managers tended
to drag their feet to commit to
new projects or the upkeep of thelean tools. We concluded that weneeded to look for a more transformational approach: rather than
fix specific issues, we needed toengage managers in transforming
their own processes.

The starting point for the second
phase was to get the management
team to acknowledge and identify
the gaps between our operational
proficiency and our business model.
The group identified on-time delivery and quality as the company’s
main operational challenges. In
order to face these challenges, we
shifted from having continuous
improvement specialists lead productivity projects to having frontline managers take responsibility
for continuous improvement intheir own areas, supported by
the specialist coaches. This new
approach entails (1) regular visits
by top managers to the shop floor
to push the implementation ofa visual management system,(2) short kaizen events led by thecontinuous improvement groupto teach frontline managers how
to run their own monthly events,and (3) the creation of teamwork
platforms around the weekly
production plan and the monthly
industrial plan, involving all functions and both senior and frontline management.

crisis late in 2008, we hit the worst industrial crisis
in living memory throughout 2009, and we struggled just as much as our competitors with a sudden 15 percent plunge in demand. Still, we believethat our lean work has helped us steer true in thestorm, and as the dust settles, we have not lost too
much ground on profitability and have increased
our market share.
More surprising has been how much the leanapproach has challenged our self-image as a learning organization. We thought we learned, but wewere totally unprepared for the steepness of thelearning curve involved with lean practice. At first,
you think lean implementation is a sprint, and thenyou realize it is a marathon. Lean practice requires
not just learning, but learning how to learn. The
other surprise from the lean work is how far down
the ranks the learning needs to occur. Everyone

reflections.solonline.org

from the CEO to the janitor, every day, must go
up their own learning curve.
In reflecting on these eventful years, we asked
ourselves: What distinguished the second leanapproach from the first? We now believe that lean
has to be understood in terms of creating a learning organization, and vice versa. On the one hand,
without a commitment to learning, lean can easily
devolve into just another Taylorist project in which
specialists “fix” the people. On the other hand, trying to build a learning organization without the
rigor of the lean toolset may be hard to do. We
now believe that to dramatically improve our business performance, we need both to understandthe philosophy of the learning organization andto master lean practices through its principles
and tools.
This is the insight we will share in this article.
For each of the disciplines of organizational learning – personal mastery, mental models, systems
thinking, team learning, and shared vision2 – wewill show how we have used the lean tools toleverage those disciplines into practical action.
None of this work has been easy, and we realize
now more than ever that a vast amount remains
to be done. However, we are confident thatblending both approaches is the key to enduring success.

Personal Mastery
Personal mastery is usually defined as a personalcommitment to learning. The overall idea is that aworkforce that can learn quicker than its competitors holds a competitive advantage. Two significant
challenges exist in generalizing personal masterythroughout an organization. First, you can force
people to do many things, but you can’t force themto learn. The impulse to learn has to come frominside the individual. Second, most real learning
is incidental and occurs serendipitously in thecourse of one’s work rather than in a classroom.
As it turns out, lean practice has three specificways to generalize a commitment to learning
within an organization:

feature | B all é , C hai z e , F iancette , and P r é vot

1. Select people carefully on the basis of theirdemonstrated will to learn;
2. Create and sustain an environment of creative
tension; and3. Build a work environment with specific learning
opportunities in the course of day-to-day work.
1. Select people carefully on the basis of theirdemonstrated will to learn. Selecting people for
their personal inclination toward learning is far
from common in standard hiring practices. A key
challenge is that it is difficult to gauge someone’s
appetite for learning.
Reveal your mistakes – red tag the bad part.

The importance of personal commitment to learning became painfully obvious in the course of ourlean work. One of the aspects of lean is to empower
managers by teaching them to solve their own problems and make better day-to-day decisions. To help
them develop these skills, they are expected tocomplete standardized exercises with their teams(called “kaizen events”), in which they look at issues of ergonomics, quality, productivity, and flow
through a set analytical framework and with given
targets. The improvement results are nice to have,but they are not the main purpose, which is teaching managers to better understand – and thus
better manage – their own processes.
As the rhythm of these exercises got established, it
became apparent that some managers were interested in improving and some were not. This lattergroup was unable to take their teams to the nextlevel of performance; they simply didn’t “get it.”Over time, this realization led to some reshufflingof the organization. It also shed light on the importance of commitment and ability to learn as
the number one selection criteria for managerial
positions.
2. Create and sustain an environment of creative tension. Even if we become better at selecting people for their ability to learn, there is no disputing that you can’t force anyone to learn – it has
to come from within. As such, managers often feelthat this characteristic is out of their control. Lean,
however, has a specific practice for sustaining thecreative tension that leads to “aha!” moments: thelean “challenge” is about expressing problems interms of what we need to do rather than what we
can do.
In our case, for instance, we have a catalogue ofseveral thousand products. Every day, external
distributors place orders through the sales organi-

We now believe that todramatically improve our business performance, we need bothto understand the philosophyof the learning organizationand to master lean practices.
zation; we need to ship the parts as quickly as
possible or risk losing the sale. Our business model
is built on maintaining a wider product catalogue
than our competitors to better serve our customers, but this strategy also creates many operational
problems. Whenever an order comes in, either wepull it from stock and ship it, or we need to manufacture it right away. In the second case, we musthave all the right component parts in inventory
and the time slot to make it during the day.
Both of these conditions pose their own logistical difficulties. In the past, we accepted that our3

4

reflections | volume 1 0 , N umber 3

on-time delivery rate fluctuated, and as long as it
didn’t become catastrophic, no one but the sales
director really worried. The lean approach changed
that attitude. We all agreed that what we needed
to do to sustain our business model was no lessthan 100 percent on-time delivery. We had no idea
how we could achieve that performance, but we

You can’t force anyone to learn,
but you can create an environment in which the gap between
where we are and where we need
to be is obvious at a glance.

reflections.solonline.org

agreed that it was a real source of competitive
advantage and additional sales.
Several years later, we still haven’t achieved ourgoal, but we have a much better understandingof how the delivery process works and what to
do about it. We started tracking on-time delivery,
committed to improve it, and refused any backsliding. Any backsliding triggered serious investigation and deep thinking. This single indicator
became the source of many management debates
about how to solve the problem and where toplace resources.
Robert Fritz has long theorized that tension seeks
resolution and that the main driver of innovation

Learning to Serve Customers on TimeOur business model revolves around offering customers what they want by keeping a large catalogue of products, while most of our competitors have reduced their offerings to a narrow list of products that they importfrom Asia. Although our approach is commercially powerful, it has own operational drawback: in one order, acustomer may ask for both products that are easily made or in stock and for less common products that require longer
lead-times. Yet, to be complete, the order must include all products. Whereas our competitors keep warehouses stockedwith a few products and thus can deliver relatively quickly, the less common items can prevent us from completing afull order in a timely manner.
For years, the company accepted this drawback, and only the sales and marketing people complained, rightly 		
arguing that every late delivery led to a lost sale, to the benefit of the competition. Consequently, when we restarted
our lean approach, the first challenge we all agreed on was on-time delivery. No one expected how much learning
we’d have to do on this issue – or how difficult it would prove to resolve.
The first step to lean – and learning – is acknowledging that you have a problem, or more to the point, that you
are the problem: you cause the problem through your own actions, regardless of the other benefits those actions
might have. This is an emotionally difficult step to take, as we all assume that the problem comes from the outside.
In lean, this first step is achieved by “cleaning the window” – making the problem visible so that all can agree on thecurrent situation. In this instance, it meant measuring on-time delivery (OTD) daily and separately tracking shipping
OTD – our ability to pick products in the warehouse and send them to our distributors – from production OTD – ourability to produce what is required on time. When it became obvious that we had two different problems wrapped inone, we decided to first solve the shipping OTD issue by conducting a number of improvement workshops with thelogistics personnel. As the global recession hit soon after we started, solving this issue took longer than expected,
but we finally managed to improve shipping OTD.
The remaining delivery problem was essentially a production issue. Following the lean logic, the second step was
to “pacify” the flow of parts. We identified the eight percent of products that represented 50 percent of our production
volume. The plant needs to make these products day in and day out. We established a “leveled pull system” on theseproducts, meaning that once a week we set a fixed daily order for these products, and then produce them according tostock-replenishment kanban. (Products are produced when they are consumed, triggered by a “production instruction”

feature | B all é , C hai z e , F iancette , and P r é vot

is the perceived gap between a vision and current
reality.3 The lean practice of setting challenging
targets and tracking progress through simple,
handwritten charts on the shop floor is a practicalway of reasserting the pull of creative tension ona daily basis. As Atul Gawande has demonstrated
in medicine, self-measurement is a significant key
to improvement; lean practice systematizes thisapproach.4 You can’t force anyone to learn, but
you can create an environment in which the gap
between where we are and where we need to be
is updated real time and obvious at a glance. Thissystem reinforces the urgency to learn. On-time
delivery is now visible real time on a large screenin the shipping area.

3. Build a work environment with specificlearning opportunities in the course of dayto-day work. Learning is incidental; it occurs in
the course of work when a specific event triggers
an “aha!” experience as we connect the dots unexpectedly. How can this serendipitous process
possibly be organized? This is probably where lean
practice differs most widely – and most counterintuitively – from the normal industrial way of
doing things. Lean processes are designed tostop when something goes wrong. If a bad part is
identified, the process stops. If the requisite work
to replenish what has been consumed is finished,
the process stops. If an employee does not follow
the standard method of doing things, the process
stops. It doesn’t stay stopped, but it does stop

card – a “kanban” – that represents one box.) Because of the surprisingly small number of products involved, we stopped handling them with a one-size-fits-all computer system. We planned them by hand with an Excel spreadsheet andscheduled them with cardboard kanban cards on the shop floor. By taking these steps, we smoothed the flow of half
the daily production volume; on these few items, OTD delivery quickly climbed.
Our original ideal was that the remaining products would be fabricated on demand only, as the orders arrived from
customers, with the understanding that we had enough instant capacity to do so for occasional orders. Unfortunately,
we discovered that customers sometimes make large one-off orders. As these were not for high-demand items, we
could not level the demand, and as the orders were quite large, we could not produce them over the course of one day.
We established a third system to manage these kinds of orders. We now carry some inventory for certain products. Whena one-off order comes in, the products are taken out of inventory, and if more items are needed, the rest are produced
the same day. The rule is that whatever has been taken out of inventory has to be quickly rescheduled for production
to bring the inventory back to normal.
We then realized that we needed to plan for yet another case: promotional product that needs to be built aheadof time. Whereas in the past we would glut production with orders just ahead of the commercial promotion, we learned
to plan ahead and build up the stock without suddenly monopolizing the production facilities. This process required yet
a fourth inventory management system. At the time of writing, we have also identified a further OTD problem with a
special set of products that require subcontracted parts.
Before we had a mediocre process (one-size-fits-all computer program) delivering mediocre results; we now havea much more detailed understanding of the situation, a more sophisticated process (four different systems), and muchbetter results. We learned by following the usual lean steps of first acknowledging that we were causing the poor OTD
through our own practices; second, by identifying the problem in the warehouse and shop floor by visualizing productstorage points, paths, and ordering processes; third, by solving the problems that emerged one by one, on an ad hoc
basis; fourth, by sharing this knowledge and building it into our management standards on how we plan and schedule
products; and fifth, accepting that this issue will never be perfectly solved and that we need to keep challenging ourselves regularly to fight backsliding and keep improving our service to customers.

5

6

reflections | volume 1 0 , N umber 3long enough for the worker to confirm what theissue is and immediately make a correction to getback to standard conditions. The next step is tostart a root-cause investigation to figure out thesource of the problem and fix it.
In a full lean system, team members are expected
to pull a cord every time they face an unexpected
situation. A team leader then has less than a minute to react and discuss with the team member
whether the situation is O.K. or not. If the problem
can’t be solved in a minute or two, the line will
stop; it will only start again with management approval. This practice formalizes incidental learning.
Stopping the process when there is a problem creates many learning opportunities every day, somesmall (quickly corrected by training), some large(a source of process improvement).

As challenges are spelled out
clearly and a system is set up to
create many learning opportunities
each day, the people who do well
are those who are happy to learn
and teach.
Lean tradition has a large library of such techniques.
In our case, we haven’t yet figured out how to get
operators to stop the process when they see something nonstandard – for one thing, establishing
the standards is no easy challenge – but we areworking consistently on confirming problems.
We’ve also started creating visual signals to showthat the process is out of normal conditions, suchas red bins for suspect parts and “marketplaces” –areas in the shop where all defective parts are
physically sorted, making visible the shortcomingsof our current processes. These techniques develop
ownership and spur learning in both operatorsand frontline managers.
Personal mastery remains an individual trait, but
we have discovered from using the lean tools how
to encourage it. As challenges are spelled out

reflections.solonline.org

clearly and a system is set up to create many learning opportunities each day, the people who dowell are those who are happy to learn and teach.
Watching these employees grow is one of the upsides of the lean journey. Conversely, lean systems
also reveal people who show fundamental difficulties in adapting to changing circumstances, emphasizing the aptitude to learn as a key recruitment
or promotion criteria. It’s management’s job todevelop environments in which learning is valued
and possible. But personal mastery does matter,and so individuals have to be carefully picked.

Mental Models
In learning organization theory, mental models
are the deep representations of reality that people
hold. These assumptions about how the world
works usually express themselves as espoused
theories (what people say they believe and intend
to follow) and theories-in-use (how people actually behave and their underlying assumptions).5
A learning organization seeks to come up withmechanisms to surface these mental models,evaluate them against reality, and change themwhen necessary.
Lean uses a different vocabulary, but essentiallytakes the same approach. The first step in the lean
process is to clarify the problem you’re trying tosolve. (Is this the right problem? Do we understandthe problem well enough? Do we agree on our
description of the problem?) A problem is definedas the gap between a standard (espoused theory)and the current situation (theory-in-use). This gap
is then explained as cause-effect relationships.
In fact, lean practice is a relentless machine for
explicating mental models and reducing the gap
between espoused theory and theory-in-use.
Habits are challenged. Pet theories are disproved.
Deeply held beliefs are questioned routinely.
For instance, in our company, we believed thatfor people to be satisfied, we had to give themflexibility to deal with their life out of work. Consequently, workers were free to choose their work
schedules as long as they completed the requisite
number of weekly hours. As we established visualfeature | B all é , C hai z e , F iancette , and P r é vot

performance and process standards, it became
obvious that such flexibility was detrimental toboth efficiency and teamwork. Although it wasconvenient for workers, it did not contribute totheir job satisfaction, as they couldn’t develop teamownership and solidarity. We repeatedly observedthat people would leave problems for somebody
else to solve. The absence of teamwork in thecompany became clear at all levels; it was apainful truth to accept.
The second lesson was no easier. As we decided
to tackle this issue, the management team settled
on two policy changes. First, to facilitate communication, operational functions would move fromtheir separate areas to one large, open space.
Second, we would institute common work hours(start time, end time, and breaks) to create stable
teams on the shop floor.
The first move was relatively easy to implement,
but it initially failed to produce the expected benefit of more communication: people sat next toeach other but didn’t actually share more information. The second move, which contradicted an oldand profoundly rooted corporate norm, generated
strong protests from employees and their representatives. We learned that no problem can besolved by arbitrarily applying across-the-board
solutions, particularly when it is not shared by all
and when individual implications are not taken
into account. We thought we had identified aglobal problem (which we had) and that we could
implement a global solution (which we couldn’t).
In the end, we still have the goal of creating
stable teams and increasing communication, but
we have chosen to compromise and attack theissue area by area, taking different circumstances
into consideration. Although the shift is now moreincremental, it is happening in a more positive
manner than our first efforts. For instance, frontline managers have a target of establishing stable
teams with the same work hours; they deal withdifficult cases with help from management asneeded. On the communication front, we havelearned that co-locating people helps but that

Jacques ChaizeMy key learning was that lean practice brought what
we were missing: a comprehensive and perennial
deployment of learning throughout the whole company. By creating small learning opportunities in day-to-day
work, lean enables us to embed into
the organization both the objective
and the methodology of learning. The
objective – implementing effective
answers both to new situations and torecurring problems – is served by theobsessive lean process of observation,
inquiry, and discovery of reality. The
Jacques Chaize
lean methodology, which focuseson conducting challenging dialogues and activities on siterather that at off-site meetings and presentations, gives reallife and practicality to the ideas of double-loop learning,systems thinking, and all the learning disciplines.

we also need to create effective platforms for
teamwork.
We prided ourselves on our learning capabilities,
but in most cases, we tended to implement simplistic, across-the-board solutions. We learned toslice situations into different cases and treat eachslice as unique. For instance, in one of our factories, the first lean challenge was to clean up theyard and get rid of the excess parts stowed there.
A related challenge on the procurement side wasto remove all parts from an external warehouseand bring them back to our own storage area. To
do so, we needed to find space in our in-houseracks, which were full. This whole process revealed
that we had a larger problem with obsolete parts
than we initially thought.
In tackling the problem of obsoletes, we started
by stapling a sheet of paper on all crates of parts
that hadn’t been used in more than a year. We
immediately saw that we had a huge number ofthese containers. We went on to investigate themat a steady rate of a few a week. This exercise led7

8reflections | volume 1 0 , N umber 3

By giving us a way to view thebusiness as a system rather thana set of coexisting parts, systems
thinking helps us avoid boom andbust dynamics in our processes.
us to understand the different causes of obsolescence; conditions varied according to the typeof parts and where they were sourced.
Previously, our mental model was to have on hand
everything we needed to produce all parts on ajust-in-time basis. The result was that we occasionally found ourselves with huge stocks of certain
parts without a corresponding improvement in
on-time delivery to customers. As we delved moredeeply into the problem, we realized that different
parts behave differently and need to be treatedwith different systems. In the end, we reduced ourinventory by 30 percent without affecting delivery
at the production cells. For a company of our size,
this reduction has had a significant financial impact.
The key learning here is that we now try to develop
more detailed mental models and have learned to
be wary of “one-size-fits-all” solutions. Old habits
die hard, and old thinking habits die harder, sowhen time presses, we still believe it’s better to dosomething than do nothing. But we’re increasingly
aware of how the lean method is making us revise
our models of the situation and build more detailed
and explicit representations. Ultimately, we’restarting to see that the end point for the process
is having an ad hoc explanation for everything,
but we’re not there yet – in many instances, weare aware that our managerial reflex is still to lookfor global solutions to global problems, rather
than experiment locally, repeat, and then deploy.
Still, we have found that finer reasoning leads
to smarter solutions and better results.

reflections.solonline.org

a nutshell, by giving us a way to view the businessas a system rather than a set of coexisting parts,
systems thinking helps us avoid boom and bust
dynamics in our processes (as well as the Forrester
bullwhip effect, in which small variations in customer demand amplify through the supply chain
to create huge demand ups and downs for suppliers that are very hard to manage effectively). In
taking into account the interrelationships within
the system, we can avoid optimizing locally at theexpense of global performance. The just-in-time
dimension of lean essentially puts systems thinking into practice throughout the supply chain.
Manufacturing companies that do not practicelean tend to use computer-based scheduling systems that tell each production cell what to do
when. Lean uses “pull” (you only make what yourcustomer has consumed) to establish customersupplier links throughout the production process.
Each production cell becomes responsible formaintaining its own inventory of finished parts
and basically reproduces what has been consumed. Although this process requires detailed
upstream planning (a lean practice called “leveling”), it stabilizes the production flow and makes
relationships between units explicit.
The impact of establishing pull throughout the
production process is twofold. First, because thelinks of cause and effect are clear, managers better
understand how logistical decisions taken at theplanning stage can affect the entire chain. In practical terms, for instance, we have been able to significantly improve the synergy between sales promotion campaigns and production capacity. The
result is that we have enough products to respondto the increased demand created by a promotion
without frustrating customers with unfilled orders
or bloating our stocks with finished products wethen have trouble selling. This was a fundamental
shift: promotion campaigns, previously seen as
troublesome practices and not as strategic sales
tools, are now embedded in our processes.

Systems Thinking
Systems thinking is probably the aspect of organizational learning that most clearly parallels lean. In

Second, we have considerably tightened the links
between processes. The lean challenge is that nofeature | B all é , C hai z e , F iancette , and P r é vot

work-in-progress (WIP) parts should transit
through warehouse storage. All WIP is held at thestation that produced it as in a supermarket, waiting to be pulled. Making the change to this new
system required drastic reduction of batch sizes,
but in doing so, we realized how important it is to
be flexible if one’s business model rests on quick
delivery of a wide catalogue of parts.
Lean differs radically from traditional production
models inasmuch as it focuses equally on producing parts and on the information that drives thescheduling of producing parts. In fact, lean modesof production rely on clearly separating each linkof the chain and organizing the feedback mechanisms between them. In a lean system, four
elements are specified in great detail6:
1. The link’s output: how much of what gets sent
to whom and when
2. The link’s pathway: who does what for whom
3. The link’s connections: what triggers which
exchanges

Visualize yourproduction – a finishedproduct supermarket.

4. The link’s method: how the work is done bywhom
As our frontline managers learn to specify thesefour elements in detail and to manage variations,they also acquire a deeper understanding of how
different aspects of the system interact: the rela-

Frédéric FiancetteS

ince the 1980s, our business model has focused on strong marketing, a spirit of innovation, and a closeto-the-customer sales force. Production was not considered important; the make-or-buy choice regardingwhether to produce products internally or outsource them was driven by the questions, “What are the costs,
or can we afford the necessary investments?”
Today, as our vision is to remain (or to become!) an important valve manufacturer offeringa much wider range of produces to our customers with better service and quality than ourcompetitors, production is considered on par with product development and sales and marketing. Managers now regularly visit the shop floor, implementing the “go and see” principle
rather than sitting in a nice meeting room and looking at PowerPoint slides.
Having short meetings on the production line is probably my key learning point of ourlean experience. Our factories are now the place where we learn to see, share, and address
the problems together, one by one, as a team.
Frédéric Fiancette
When our assembly lines were in China, it was difficult to see and learn how to solve
problems. But after we relocated our operations back to France, managers were able to view with their own eyes 		the issues that existed. For example, one day during a management visit to the production line, as an operator tried
to assemble one of our valves, all of the quality and safety issues we had heard about popped up right in front of 		
us: poor tightness of the valve because of a non-fitting seal, wrong assembly tools, and so on. The operator was ofcourse unable to deliver the product right the first time. We started to see what we could not see when the manufacturing was in China. Together we learned how to start solving the problems and improve the product for thecustomer, as well as for the operator.

9

10

reflections | volume 1 0 , N umber 3

tionship between scheduling and production,
between maintenance and planning, between
quality and sales, etc. Here again, learning does
not occur through formal training but throughthe process of trying to tighten the link and seeing
firsthand how the system behaves. With regards
to quality, for instance, managers work with operators to spot every bad part in the process andimmediately go back to the workshop that produced it and try to solve the problem there. Interestingly, after working through assembly, paint,machining, and purchasing, we’re starting to
see the implication of design options on the
manufacturability of parts.

Team Learning
The lean definition of teamwork is “resolving
problems across functions.” Because stable teams
are the basis of lean organizations, what is known
as “team learning” in the organizational learning
framework plays an important role in lean. Indi-

reflections.solonline.org

vidual employees develop knowledge more
quickly if there are robust mechanisms for sharing
knowledge and experiencing learning together.
Furthermore, “teamwork” specifically addresses
the issues of crossing organizational boundaries
and facing difficult problems with an open mind.
One of the hardest truths we’ve had to confront
in following lean precepts is how poor we wereat actual teamwork. This revelation came as something of a shock, because we all get along reallywell in the company, and we thought we weregood at working together – which is actually thecase. Nonetheless, when lean forced us to try tosolve specific issues as a team, we found that wewere not better at doing so than anybody else.
For instance, as mentioned above, our lean initiative immediately stressed on-time delivery andquality. We were convinced that we had excellent
quality, certainly better than our competitors.
While generally true, when we started investigating

Eric Prévot

W

hen we started our first wave of improvement with the Danfoss Productivity Program (DPP), we were
following a year-long roadmap, and each workshop was managed by the continuous improvement team.
Even though the results were quite good in terms of productivity, we had built a process for experts andnot for production managers.
In our second phase of lean, we learned a lot from the field and quickly developed apowerful tool: the kaizen event. This pedagogic tool helps teams learn to understand, test,
check, and react, without fear of failure. At first, managers were afraid of this drastic change
in their local organization, but they quickly adopted the advantages of shorter initiatives
that last about a week rather than four months! These activities, decided only two months
in advance, fit better with their problems and improvements needs.
In addition, the staff has appreciated the opportunities for learning and practicing new
skills. With a clear vision of our business model and the real support of top management,
Eric Prévot
managers have learned to drive monthly kaizens by themselves. Smoothing the flow was 		
the new goal for each product family. The continuous improvement team’s role shifted from leading projects tochallenging and coaching the staff. In this way, they pushed the organization without leaving people to fall down.
With the Danfoss Productivity Program, everybody was satisfied with the productivity improvements, but thepace left people exhausted. Each new four-month-long project garnered less support than the previous one. But 		
our lean initiative really started to have a positive effect when we moved it onto the shop floor. We soon started 		a kanban loop between shipment and production. Through trials, managers gained confidence in producing
small batches according to customer demand.

feature | B all é , C hai z e , F iancette , and P r é vot

the quality issues more deeply, we were in for arude awakening. We asked the salespeople to systematically describe what complaints they heard
about us from our customers. We learned thatsales managers spent much of their time trying
to cool off unhappy customers. In a memorable
meeting, the sales and marketing vice president
read to the entire management team a blistering
letter from one of our key account customers. The
gist of the letter was that he continued to workwith us because our competitors were worse, butthat he had taken the time on a Sunday to list all
the issues he had with our products and services.
This was a wake-up call, not just on the quality
front, but on the fact that, as a management
team, we had no shared awareness of the 		
extent of the problem.
As all industrialists will tell you, quality problems
are difficult to resolve for two main reasons. First,
they tend to be non-repeatable, one-off situations
that are hard to catch in normal operations; second, they often involve several links in the chain
and can’t be fixed from one department alone. In
this respect, the lean approach taught us to create“platforms” for teamwork; that is, regular working
sessions in which members of different functions
meet to solve problems together. These gatherings are very different from the usual “status meetings,” in which each person reports to the groupwhere they’re at and what they’re doing (andnobody cares much). In these teamwork platforms,
the participants have to repeatedly solve a specificproblem, such as creating a stable plan for the
week or solving quality problems.
For instance, we established quality “marketplaces”
in each production shop. When an operator comes
across a bad part (either a supplied part or a mistake he just made), he puts the part into a red container at his station, and he calls the team’s coordinator. The coordinator conducts a quick analysis
and tries to find the cause of the problem and fix
it. She places the defective part in a central “marketplace” area. In this central place, defective parts
are regrouped by defect types. A cross-functional
management team inspects these groups ofUnless we push the questioning
process beyond what all parties
easily agree on, we are notlearning as a team.
defective parts each week and focuses on one
quality issue after the next. We’re only at the startof the process, but we’ve already seen spectacularimprovements in areas such as paint and assembly – in some instances, reducing defectives by
as much as 30 percent annually.
We created a similar platform for teamwork to
improve our capability to deliver on time everyday. Every week, a planning meeting takes place
involving all functions to establish a level plan for
the following week and to look at every potential
issue that could cause us to divert from the plan.
Such issues range from machine problems to supply concerns, such as harbor strikes and suppliers
going bust. For each potential issue, frontline
managers are expected to figure out effective
countermeasures in order to stick to the plan as
closely as possible. Once a month, we extend thisplanning session from the short term to projections for the next quarter. In these turbulent times,
the monthly sessions have become key to understanding what our market is doing, and now theentire management team attends them.
The hard lesson for us here was that getting
along doesn’t guarantee team learning. For teamlearning to happen, you have to structure specificplatforms for teamwork, where groups regularly
examine specific cross-functional issues. We arelearning that unless we push the questioning process beyond what all parties easily agree on, we
are not learning as a team. As a case in point,
when we started tagging all the “dead stock” inour warehouse, we discovered that a new productwasn’t selling as well as we had hoped. Our commercial people had anticipated that these new
products would sell like hotcakes and strong-armed
production into creating a large advance stock.

11

12

reflections | volume 1 0 , N umber 3

reflections.solonline.org

The main contribution that lean canmake to the field of organizational
learning is embeddedness: creating
learning opportunities throughout
the day-to-day production process.
We were then hit by the 2008 slump, and ourcustomers weren’t looking for new offerings. The
teamwork planning sessions forced us to face issues we had been working around. First, why isn’t
the new product selling? Second, why did we order production to make so much stock so far inadvance without a clearer understanding of what
would really happen? Sales and production don’t
like getting into these kinds of issues, because
they open a Pandora’s box of mutual recrimination. The teamwork platforms, however, serve toframe the problem and move people from discussing knowledge they already share to learning
about how neighboring functions work and makedecisions. The attitude is to be tough on the
problem, not the people.
Like with all lean work, such thorny issues areunlikely to be solved overnight, but at least we
have started establishing processes for creating
and sharing knowledge across organizational
functions. Indeed, our lean approach itself islargely built on teamwork during improvement

Accelerate
your flows –a box-by-box
picking zone
replaces large
pallets inracks.

events and during coaching visits, when the central production, logistics, and continuous improvement management team walks the shop floor to
discuss problems across functional boundaries.

Shared Vision
As you’ve probably gathered by now, lean isnever easy, because it forces you to see the practical consequences of your policies and choices. At
the executive level, we’ve shared a clear strategic
vision for years. We make money by delivering
quality products, on time, to our customers outof a large catalogue. Different from most of ourcompetitors, we have resisted the pressure to reduce the range of products and to delocalize production to Asia. Our responsiveness rests on ourability to quickly deliver a wide range of products,
which means doing final assembly close to ourcustomers. Yet as we started exploring our operational processes in greater detail, we realized thatin many areas, our business model wasn’t supported by our actual practices. Worse, when we
tried to persuade our frontline managers that theyneeded to urgently improve their quality and flexibility, we found that many of them resisted theidea as impractical, unfeasible, or both.
The lean tool for achieving shared vision is called
the “North Star”: clarifying the key dimensions weneed to make progress on, so that we do not improve one dimension at the expense of others.
The North Star is about formulating an ideal –such as 100 percent on-time delivery, zero defects,
one-by-one production in sequence, 100 percent
value-added work, low ergonomic risk, zero accidents, suggestions from every employee, andso forth – as well as the key dimensions we need
to focus on to get to this vision.
The value of trying to reach these goals became
clearly visible as we hit the 2008 crisis. During aperiod of total uncertainty and brutal retrenchingof markets, we could see when we were being
pulled away from our intended course. In manycases, we were unable to resist this momentum
in the moment, but we did learn not to lose our
focus and then to strive to come back on course.

feature | B all é , C hai z e , F iancette , and P r é vot

On the desire for on-time delivery, for instance,
the necessity to reduce any temporary work because of the free-fall crash of demand also severely
affected our capacity to deliver to our distributors
within a day. After many internal debates, we decided that our commitment to our customers wasmore important than short-term cost cutting,
and while we maintained a zero temporary staff
policy for the rest of the company, we softened
our stance for the shipping department and hired
the people necessary to continue to deliver. As wetackled these and other issues, we also discoveredthat our commitment to continuous improvement
had a reassuring impact on the staff, who not only
saw that management was not panicking but alsothat they themselves could contribute by continuing to make progress every day.
In defining our North Star, we discovered that ourshared vision at the executive level was not sharedat the frontline management and operator level.

To take one example, machine operators andsupervisors simply did not understand why shortproduction runs are essential to our strategic success, or why a single bad part is such an issue forour sales force. Why should they? We realized that
we have never attempted to express our strategic
vision in operational terms that would makepractical sense at the shop-floor level. The leanapproach to shared vision is to express strategic
intent in the form of clear problems (such as shortproduction runs in machining, which involve quick
tool changes and frequent set-ups, somethingmachining operators are traditionally uneasy with)and to translate that intent on the shop floor bygetting people to follow their own indicators anddo regular improvement events to learn to fix
their own problems. These two basic practices
spur endless questions, and we’ve seen that asprogress (or lack of ) is discussed, the businessvision is progressively shared all the way down
to the operating level.

Michael BalléI

n most organizations I’ve come across, the decision-making process is not that strong or effective. When I firststarted talking with the Danfoss Socla management team, I was immediately impressed by their decisiveness:they had no hesitancy in making changes, and were convinced that taking actions and seeing how they pannedout was the best way to move things forward. As they have by and large excellent relationships within the company,
execution also happens fairly seamlessly. I was delighted, thinking that many problems
would be solved quickly and that lean implementation would move more rapidly than usual.
The reality turned out to be more complex than I first thought. Many of the early decisions
backfired to some extent. We all had to relearn the essential lean lesson that the workplace isa great teacher and that we learn through kaizen, not by shoot-from-the-hip policy changes.
In fact, lean practice is explicit: (1) visualize processes to reveal problems; (2) react immediately to abnormal situation; (3) solve problems one by one; and finally (4) make policychanges to improve management practice.
Michael Ballé
The key lesson for me was to reaffirm how much of lean practice is an exploratory formof management, rather than the usual decide-and-execute approach. Learning stems from rigorous adherence toPlan-Do-Check-Act; the learning process doesn’t allow for cutting corners. Making faster decisions doesn’t help if
these decisions are not supported by many kaizen cycles of drawing the right conclusions from local experiments
and involving people in inventing new ways of doing things. With hindsight, the true strength of the management
team was revealed not so much in its quick decision-making capacity, but in its openness to learn from its mistakes
and its true grit in staying with issues even when they resisted quick resolution. The real key to learning is persistence more than brilliance.

13

14

reflections | volume 1 0 , N umber 3

The Blind Spot: Embeddedness
We had been using learning organization concepts to structure our management style for many
years – so what did working with lean teach us?
Why did the steepness of the lean learning curvetake us by surprise? What was our blind spot?
To us, the main contribution that lean can make tothe field of organizational learning is embeddedness: creating learning opportunities throughout
the day-to-day production process at all levels.7 In
our previous interpretation, learning mostly occurred in two ways: first at the management level,
where we sought to draw conclusions from what
happened in our business environment and how
we reacted to it, and second at the staff level,
through a high investment in training. What didlean do differently?

Laurent Joly: Team Coordinator 		in the Inbound WarehouseOver the last several months, I’ve been involved in kaizen
activities in the preparation area for work orders. Forme, this approach has been a great change for two
main reasons: the improvement method and the results.
Before, I was sure that we could improve the way we worked,
but all we did was complain – with no change. Through kaizen,
I’ve come to deeply understand the problems and easily accept our solutions. At first, I was upset about experimenting
in kaizen. I felt that trying things, stepping back, and trying
again was a waste of time. I’ve come to realize that this method,
although sometimes frustrating (why can’t we get to the rightidea right away?), is in fact the best way to learn and shareideas, and to develop solutions that that work for everyone
on the team.
Today, we have really improved how we do our daily tasks.
Rather than use large containers and move them to the lines
with forklifts, we now deliver small boxes by a regular train. The
train runs often, so the supply flow is very smooth. No one wants
to go back to the way things were before. We have a clear
vision of our near future and are on the way to building it.

reflections.solonline.org

Lean embeds learning in the organization in threefundamental ways:
1. Lean forces a high speed of learning: The
practice of establishing challenges by drawing
a “line in the sand” (what we need to do as opposed to what we can do) considerably accelerates the need to learn. These challenges are
expressed as targets on local, self-measured
indicators, multiplying the pressure on managers to work with frontline staff to solve issues.
The rate of learning is no longer a response toenvironmental shifts, but a managed, self-imposed progress curve.
2. Lean creates many small learning opportunities in day-to-day work: Rather than restricting improvement efforts to large issues needing large solutions, lean designs processes
themselves as the source of learning. In thelean ideal, any process should stop by itself
when it is out of standard conditions. This iscounterintuitive, because stopping the line
would seemingly hinder productivity, but infact, the opposite occurs. Combined with thechallenge to improve, stopping the process
multiplies the opportunities for learning at theoperational level. It takes learning out of themeeting rooms and embeds it right where thevalue is added.
3. Lean links learning at the policy level tolearning at the detailed work level: The foundational precept of lean management is “goand see”: go into the workplace to see facts atthe source. This practice has two broad implications. First, senior managers understand thefirm’s context better than frontline employees
and can therefore recommend specific learning
topics (such as reducing the time for changing
tools). Second, by frequently going to the workplace (whether the shop floor, customer service
department, engineering, etc.), senior managers learn to see the consequences of their own
policies and figure out what to focus on next.

feature | B all é , C hai z e , F iancette , and P r é vot

These three processes explain how lean can act asa “learning accelerator.” On the one hand, we havefound that lean provides operational tools for embedding learning into everyday operations, making abstract intentions a day-to-day, hour-by-hour
reality. On the other, we have also seen that applying lean techniques without the broader frame ofestablishing a learning organization is structurally
disappointing beyond garnering the early lowhanging fruit. Without a relentless focus on individual and collective learning, lean tools can easily
be reduced to traditional productivity methods
with limited local success and the possibility ofdamaging the company’s social context.

Conclusion“Why do organizations fail to learn how to learn
and therefore remain competitively marginal?”
asked Edgar Schein in a seminal article more than
10 years ago.8 In the last few years, we have foundthat learning how to learn has given us a visible
competitive advantage: We can deliver better products, with better service, while maintaining prices,protecting our margins, and offering people employment close to where they live.
In the process, we have both gained market shareand improved our operational effectiveness. The
surprise, though, is that we didn’t learn how tolearn better through tackling problems of internal
cultural conflicts, as Schein recommends, but by
using lean practice to create down-to-earth, everyday learning processes. We found that learning
how to learn means challenging everyone in theorganization every day. The conclusion we’d like toshare is that the lean toolbox offers a pragmatic –and challenging – way to operationalize the intent
of organizational learning.

Without a relentless focus on
individual and collective learning,lean tools can easily be reduced to
traditional productivity methods.
We also learned from our first, less-than-successful attempt to implement lean that using lean
practices without infusing them with the spirit of
the learning organization delivers disappointing
results. We believe this issue is a general challenge,
as many companies adopting lean bemoan thefact that they fail to see transformation. Jeffrey
Liker, one of lean’s most renowned experts, makes
the point that these tools were invented within
Toyota as a way to explicitly foster learning leadership. “Managers must be teachers” is a core value
in the Toyota environment, and the lean tools they
pioneered don’t make much sense out of this context.9 In this respect, learning organization theory
has much to contribute to the lean field by clarifying the purpose of the lean tools and spellingout for managers what the tools are supposed toachieve: making people before making products.
Old habits die hard, and maintaining the learning
impetus day in and day out is by no means easy.
The lean approach regularly forces us to confront
our weaknesses, misunderstandings, and misalignments. Still, we believe the results are worth
the effort, in terms of creating immediate gains,developing future capabilities, involving people
in the company, and growing its human capital.
We hope this testimony will encourage moremanagers to open the same door we did, andthink deeply about how to merge the learningorganization and lean approaches for sustainable competitive advantage. n

15

16

reflections | volume 1 0 , N umber 3

reflections.solonline.org

R eso u rces
Ballé, M., & Ballé, F. (2009). The Lean Manager: A Novel of Lean Transformation. Lean Enterprise Institute.
Ballé, M., & Ballé, F. (2005). The Gold Mine: A Novel of Lean Turnaround. Lean Enterprise Institute.
Rother, M. (2009). Toyota Kata: Managing People for Improvement, Adaptiveness and Superior Results. McGraw-Hill.
Liker, J., & Hoseus, M. (2008). Toyota Culture: The Heart and Soul of the Toyota Way. McGraw-Hill.
Shook, J. (2008). Managing To Learn: Using the A3 Management Process. Lean Enterprise Institute.
The Lean Edge: http://theleanedge.org/
Lean Learning Center LinkedIn Group: http://www.linkedin.com/groups?mostPopular=&gid=2164873

ENDNOTES
1 Chaize, J. (2001). Quantum Leap: Tools for Managing Companies in the New Economy. Palgrave-Macmillan.
2 Senge, P. (2006). The Fifth Discipline: The Art and Practice of the Learning Organization. Doubleday.
(Original work published 1990)
3 Fritz, R. (1989). The Path of Least Resistance: Learning to Become the Creative Force in Your Own Life.
Ballantine Books.
4 Gawande, A. (2008). Better: A Surgeon’s Notes on Performance. Picador.
5 Argyris, C., & Schön, D. (1978). Organizational Learning: A Theory of Action Perspective. Addison Wesley.
6 Spear, S. (2008). Chasing the Rabbit: How Market Leaders Outdistance the Competition and How Great Companies
Can Catch Up and Win. McGraw-Hill.
7 We use “embeddedness” here in a different sense than defined by Granovetter to describe how economic
rationality is embedded in social relationships, although there are many parallels.
8 Schein, E. (1996). Three Cultures of Management: The Key to Organizational Learning.
Sloan Management Review, Fall.
9 Jeffrey Liker, private communication.

about the author
Michael Ballé is co-founder of the Institut Lean France and associate researcher at Télécom Paristech.
He is also co-author of The Lean Manager and The Gold Mine, two novels of lean transformation.
m.balle@orange.fr
Jacques Chaize is president of Danfoss Socla, co-founder of SoL France and author of Quantum Leap.
Frédéric Fiancette is vice president of Operations of Danfoss Socla.
Eric Prevot the continuous improvement director of Danfoss Socla.

feature | H oman and S chulist, with M c C oy

feature 1 0 . 3

Reconnecting with Customers:
The Detroit Recovery Project
M ike H oman and J ason S chulist, with S usan M cCoy
In a tough economy, how does a company maintain profitability while providing services to people who
may not have the resources to pay for them? In this article, Mike Homan, manager of DTE Energy’s innovative
Detroit Recovery Project, and Jason Schulist, director of continuous improvement for DTE Energy, tell how
the company has employed improvement methodologies to meet this challenge. By applying learning tools
not only within the company but to the larger community, DTE Energy has made strides toward reestablishing the social compact with its lower-income customers and addressing the root cause of deep, systemic
problems in the areas it serves.

D

Introduction

Mike Homan

Susan McCoy

Jason Schulist

etroit, Michigan, has been hit hard during
the recent economic downturn. Outside DTE
Energy’s corporate offices, the vacant sidewalks, empty streets, and boarded-up windows on nearby buildings signal troubled financial
times. For the company, the costs to supply the city’s
neighborhoods with gas and electricity are expected toincrease, while customers’ ability to pay for utility service has fallen precipitously. At the end of 2009, MichCon’s uncollectible expenses topped $93 million; at-riskfamilies represented more than two-thirds of that considerable financial challenge. Ninety-five percent of the76,176 gas customers whose services were terminatedin 2009 for non-payment were in Detroit, as were 90
percent of the 24,342 sites disconnected for gas theft.

When a customer does not pay his or her bills, DTE
eventually terminates services, as do all utility companies in this circumstance. But in the current economic
climate, aggressive collection activity has alienated residents, resulting in a drop in customer satisfaction ratings (Figure 1). Jerry Norcia, the president of MichCon,
looks back at the situation as it existed at the end of
2009 and candidly states, “We needed to develop a new
relationship with our customers.”

DTE Energy is one of thenation’s largest diversified
energy companies. Headquartered in Detroit, Michigan,
DTE Energy is involved in thedevelopment and management of energy-related
businesses and services nationwide. Its largest operating units
are Detroit Edison, an electricutility serving 2.1 million
customers in southeasternMichigan, and MichCon, anatural gas utility serving 1.2
million customers in Michigan.
The DTE Energy portfolio also
includes non-utility energy
businesses operating in 26
states, which focus on power
and industrial projects, coaland gas midstream, unconventional gas production,and energy trading.

17

18

reflections | volume 1 0 , N umber 3

reflections.solonline.org

Figure 1 Background
The Detroit
Market…

…Presents
Challenges…

…That Impact
Our Business• > 25% Poverty
level drives “Either/Or” customer
decision• High vacancy rateand increasing
number of renters• > 40% Illiteracy
rate makes it
difficult to communicate effectively• Our product is
Neither affordable
Nor discretionary• Customers canmove and nameswitch (often withlandlord help)• DTE technology
and communication
channels assume
that customers
are literate• 95% of all arrears
are in Detroit• 90% of all energy
theft is in Detroit• Resulting collection
activity drives– Low customer
satisfaction– High levelof MPSC
complaints

To meet this challenge, we are testing a new business model:
Detroit Recovery Program (DRP)
Slides prepared by Mike Homan, DRP Project Manager, and Anita Ashford, Community Outreach Coordinator –February 23, 2010.

In response to these challenges, in 2009, DTE
Energy launched the Detroit Recovery Project (DRP).
DRP was assigned two major goals: improve cash
flow and improve customer satisfaction. The initiative is based on the premise that by engaging
customers and developing a systematic approachfor understanding specific communities, the company can reduce uncollectible expenses more
effectively than by an aggressive collections policy. Throughout the past year, DRP has worked
to determine what questions need to be asked
and who needs to be involved, and to keep thediscussion fact-based.
The Detroit Recovery Project is an experiment inreturning to a time when DTE Energy employees

The Detroit Recovery Project is anexperiment in returning to a time
when DTE Energy employees knew
their customers and worked withthem to create a better lifestyle.

knew their customers and worked with them tocreate a better lifestyle. As such, it is an example
of balancing financial, environmental, and social
responsibility to achieve a true triple bottom line.
At the same time, this project can serve as an example to any organization seeking to understand
why a particular part of its business or market isunderperforming, and how to begin to addressthat challenge through targeted pilot programs.

Downward Spiral in Detroit
For poor people in Detroit, energy is neither affordable nor discretionary. When renters cannot pay
their utility bills, they leave their residence to
avoid collection activity. The current high vacancy
rate allows people to move to new homes and establish utility service using different names. The
resulting breakdown in community increases thefinancial risk for DTE Energy and negatively affects
the social compact between the company and its
Detroit customers. Bob Richard, senior vice president of gas operations, has questioned what itmeans to be a utility provider in a city where atypical resident cannot even afford to buy a
new appliance.
Adding to this disconnect, all customer communication from DTE Energy assumes that customers
are literate, putting us at arm’s length from theroughly 40 percent of Detroit residents who can’t
read and write. This high illiteracy rate makes
seeking energy assistance complicated: How cana person fill out an application for aid when he or
she can’t read? Similarly, technological advancements have not always taken into account theneeds of all customers; for instance, accessing
a website for help doesn’t work if the customer
does not own a computer.

Expanding the Scope of Continuous
Improvement
j as o n schu l ist

Once a few key leaders recognized the patternsof customer and company behavior that were influencing our ability to do business effectively andrelate to customers, we began a dialogue within
the company about the social issues unique to thefeature | H oman and S chulist, with M c C oy

Detroit community. The dialogue led to a set of
rapid, low-cost experiments in 2008 and 2009that intertwined continuous improvement andorganizational learning concepts. These efforts
were led by members of my continuous improvement (CI) team. For example, we teamed with
the Detroit Public Schools to understand how theschool could be a center of community transformation. We partnered with a local urban farmer
to develop a community-supported agriculturebusiness model that produced local food for DTE
Energy employees and income for local residents.
We also converted DTE Energy substation property
into arable land for volunteers to farm and provide
vegetables to support local food banks, which
reduced our maintenance costs and provided
needed local food.
But these initiatives didn’t always produce thedesired results. Many were small experiments on
the fringe of DTE Energy’s attention and did not
approach the problem in a holistic way aroundcustomers’ real needs. We knew we could do more.
As Bob Richard articulated, it was a moral issue
and a matter of principle for the company tohelp seek financial remedies for customers who

19“We have customers who can’t
pay their bills. . . . If you are standing in a rainstorm with an umbrella,people will gather underneath.”
couldn’t afford energy. “We have customers who
can’t pay their bills,” he said. “Many of them qualify
for assistance, but they don’t ask for help. If you
are standing in a rainstorm with an umbrella,people will gather underneath.”
In response to this community and corporate need,
Richard and others knowledgeable in continuous
improvement launched the Detroit Recovery Project (DRP). It was intended to be an “umbrella” andan example of applying continuous improvement
learning not only within the company but withincommunity. As a first step, we defined the DRP
pilot program as a small, integrated, profit-andloss–driven business that draws resources fromall over DTE Energy. This initial phase focused onproviding an improved level of service to residents
in one section of Detroit. Mike Homan transferred© thinkstock20

reflections | volume 1 0 , N umber 3

reflections.solonline.org

from DTE Energy’s finance division to manage theproject. His role was to assemble and motivate ateam of DTE employees from different functional
areas to work proactively with at-risk families tomatch their consumption of electricity and natural
gas with available state aid.

We designed DRP as an alternative
business model in response to thequestion: What is the most efficient
way to provide heat and light to
low-income families?
An Alternative Business ModelM i k e H o ma n

As MichCon’s manager of budget and forecast, I
was involved in setting up the initial budget andinternal controls for DRP. On the finance side, it
was obvious that we needed to improve the Detroit market to make MichCon a stronger company. As I learned about the DRP effort, I saw thepotential to address a challenging business problem that was critical to MichCon, DTE, and Detroit.
Bob Richard’s passion around the low-income issue and our need to build a better business model
were simply irresistible. I joined a cross-functionalteam that included field operations supervisor
Figure 2 Pilot Problem Statement
Observation: DTE Energy’s productis not affordable for > 25% ofOsborn residents. (We believe
this to be a proxy for Detroit)

88%
Built
BEFORE
1960

Home
Weatherization

FamilyIncome Level
52%
QUALIFY
for aid

Are Final
Arrears + Theft
ACTIVELY
seeking
help?

Assistanceand Education

Safe
Affordable
Energy!

Hypothesis: DTE Energy can lower
arrears and avoid theft by leveraging
case management, weatherization,and conservation to better match
consumption to available state aid.

Robert Crudder along with a supervisor of customer
operations, a financial analyst, two case managers,
an office administrator, a billing specialist, twotheft investigators, a planning specialist, a distribution crew member, three field service technicians, and a continuous improvement expert.
We designed DRP as an alternative businessmodel in response to the question: What is themost efficient way to provide heat and light to
low-income families? From the initial experimentsof the continuous improvement group, we learned
that we couldn’t tackle the entire city of Detroit atonce. Instead, we decided to concentrate positiveefforts in a small region, with the ultimate objective of kick-starting a functioning economy anddeveloping a sense of community by encouraging
people to stay in one place. We chose the Osbornneighborhood as the site for an experimental pilot
program. For one thing, our product is not affordable for more than a quarter of the Osborn residents. Fifty-two percent of the families qualify
for state aid ($27,465 or less for the average familyof three); outside of Detroit, the rate is closer to25 percent. Another factor is that 88 percent ofOsborn homes were built before 1960, when
weatherization technologies were not as efficientas they are today. The result is that residents pay
more to heat and cool these homes and apartments than may be the case for people who live
in newer homes (see Figure 2).
Another reason our team selected the Osborncommunity is that it is home to more than 14,000
children. Children are put in danger by energy
theft; they suffer when the utilities are turned off
because of non-payment. By finding ways to reducefamilies’ utility costs, we hoped to keep children
in their homes and avoid the disruption causedby frequent moves. Our hypothesis was that one
positive result of the DRP intervention would bethat children might stay in the same school for
longer and have more continuity in their education,
which could increase their academic success.
Helping Osborn’s children also indirectly builds
DTE’s future customers.

feature | H oman and S chulist, with M c C oy

21

The Theft Division in ActionO

How DRP handles Theft in Osborn
When theft is discovered in Osborn, the team makes the site safe and invites the residents to work honestly withDTE Energy, with the intention of creating engaged and responsible consumers. If a customer agrees to work with
DRP to find a solution, the company will not disconnect their energy.
Field crews continue to learn how to approach and listen to residents; a decision made in a conference room
without hearing from the residents is not acceptable. This strategy changes the mode of operation from disconnecting energy to working with families to find ways to legitimately pay their bills. A case worker educates consumers
on how they can manage their account without resorting to energy theft.

© istockphotoutside the Osborn experiment, energy
theft continues to be a problem. On
a typical morning DTE Energy Theft Division field manager, Joe Musallam canvasses
Detroit streets with his field team to learn together in the neighborhood where the worktakes place; he holds street-side meetings in the
middle of a severely run-down neighborhoodin front of a purported crack house, with his
flipchart and his crew. On this particular day,Joe documents team member’s comments to
use in a procedure’s manual for safely disconnecting service.
As he explains the work, his phone beeps;
his scout reports a potentially dangerous illegal
utility hook-up. Once at the location, as he makes
his way up to the house, he sidestepping toddler toys. Two young men are maneuvering a used washing machine
to the side door.
“DTE,” Joe identifies himself in a friendly tone. “I need to check the meter.”At the back of the house, a gaping hole in the window opens to the outside elements. The back entrance ishaphazardly covered with plywood; the door that once covered the entry lies on the ground. Residents who areillegally using gas and electricity likely feel no stake in conserving energy.
Joe pinpoints where the meter was; in its place, two door hinges are jammed into the box. Attached to thesebrass conduits are two heavy-duty grips, similar to jumper cable clamps. From each junction in the power box,
thick wires are twisted in place; they run from the door hinges swinging low across the backyard to run freely up 		the electric pole. Someone – obviously not a DTE Energy employee – had to shin up the pole to attach these wires.
On the side of the house, Joe directs his attention to the gas hook-up – a bicycle inner tube, one end stuck overthe pipe protruding from the ground, with black tape wrapped tightly over the seam. From the ground, the rubber
hose curves up, with the other end jammed on the pipeline entering the house. While a person was rigging this 		
up, Joe explains, gas fumes would have spewed into the air. The pilot light in this house is probably eight inches 		tall; this set-up is a bomb waiting to explode. Joe makes clear that, “We can’t walk away from this; this is not safe.” 		
His team dismantles the illegal utility hook-ups and caps the gas pipe.

22reflections | volume 1 0 , N umber 3

reflections.solonline.org© istockpohto

Finally, we also chose Osborn because it has afunctioning community framework, including
block clubs, churches, and schools. This infrastructure, with its existing networks, could be tapped
to improve the way we supported our customers.
In our first initiative in the Osborn community,
called Osborn Energy Savers, we teamed with the
Skillman Foundation, an organization devoted
solely to helping children in Detroit. We offered
250 energy-efficient appliances at no cost to residents in an attempt to lower their energy bills.
To our surprise, it was difficult to find people toaccept this gift. The failed experiment was eyeopening. Customer trust had eroded to the pointthat residents were reluctant to accept free appliances from us. We realized that we did not havea good understanding of the community that
we were attempting to serve.

Mapping Osborn for Understanding
To learn more about the Osborn community,
we first developed a hypothesis: DTE Energy canlower arrears and avoid theft by leveraging casemanagement, weatherization, and conservation

to better match residents’ consumption to 		
available state aid (see Figure 2).
Step one was to gather information to create aprofile of the typical Osborn customer, identify
where energy theft was taking place, find what
governmental energy assistance was available, andresearch methods to make the homes in that area
more energy efficient. In a unique public-private
partnership with the city of Detroit and several
nonprofits, we mapped the community house byhouse. We used Environmental Systems ResearchInstitute, Inc., a GIS mapping company, to visually
represent the characteristics that interested us,
such as active arrears, leaks, open theft events,
vacant lots, and non-active services. We then used
the pictures to help make decisions about where
to concentrate our efforts first.
Mapping proved that some areas in Osborn had
fewer problems than others. Theft, vacancies, andarrears were concentrated in particularly run-downparts of the neighborhood. “Poor” families in wellkept areas also had high active arrears. We foundthat “higher” low-income families effectively

feature | H oman and S chulist, with M c C oy

navigate the aid system while the poorest
families fail and are subject to repeated collection
efforts. From our findings, we considered that
there might be different solutions for different
types of customers.
Based on the lean principle of gemba, we used –and we continue to use – a “go and see” approach,in which we go and observe the real condition in
the real context with the intention of solving thereal problem. After assessing the results of thefact-finding mission in Osborn, our team came tounderstand that the current company communication was passive and ineffective at reaching residents there. DTE Energy relies heavily on bill inserts and an internet website, with little televisionand radio advertising. The most economically disadvantaged families often don’t have a way to access the company’s web-based customer support.
Several business office service centers in the city
had been closed. If residents phoned customer
service, they encountered pre-packaged options
that generally did not meet their needs. Using billinserts to communicate with customers did notwork because people tended to ignore them andthrow them away with the shut-off notice. All ofthese facts confirmed that a high-touch solution
was needed in Osborn.

DRP’s Pilot Project: A High-Touch Approach
As we designed our pilot project, we understoodthat improving communication would be key toaccomplishing the DRP’s pilot project’s three mainpriorities:
1. Assess every site by completing a neighborhood sweep.
2. Put in place one-on-one case manager help
to assist our customers through the aid application process.
3. Complete a “one hundred home” effort toinstall $3,500 of weatherization in 100 homes,saving customers an average of $650 per year
in energy use – a 27 percent reduction on anaverage annual bill of $2,450.
Our next steps were to assess every site, ensure
100-percent metered usage by Osborn residents,and minimize arrears. Anita Ashford, Community
Outreach Coordinator, made connections withblock club leaders and church groups to introduce
them to the idea that DTE Energy wanted to help
residents. Field crews then went into neighborhoods to reestablish customer relationships, help
families with account management, check homes
for proper gas maintenance, and investigate
possible energy theft.
With the program in place, our team now screenscustomers to identify low-income families in needof support and connects qualified residents witha DRP case worker. The case worker visits consumers’ homes to review what type of energy aid isavailable to them and explain how energy conservation can decrease their bills. The DRP team offers
to assist residents in qualifying for energy aid programs. With customers’ permission, our field crew
weatherizes their homes free of charge – an initiative that can immediately lower utility costs byconserving energy.

We have found that 80 percent
of families in arrears are eligible
for aid. Transportation, limited
literacy, a cash-based lifestyle,and physical disabilities arecommon reasons for households
failing to get the aid for whichcustomers are eligible.
During this process, our field staff back-bills theft
and works out payment plans for accounts thatare in arrears. The method engages and develops
responsible consumers by actively helping them
manage their accounts and guiding them throughthe bureaucracy to get energy aid.
In the recent past, a DTE Energy representative ona resident’s porch meant energy shut-off. No one
in that circumstance wanted to talk to DTE Energy.
But now, the DRP team will halt the collection

23

24

reflections | volume 1 0 , N umber 3

reflections.solonline.org

process and take the time to address the situation
in a way that will help residents, if the residents
wish to partner with us in that way. We have foundthat 80 percent of families in arrears are eligible
for aid yet often have not applied or have notapplied correctly. Transportation, limited literacy,a cash-based lifestyle, and physical disabilities arecommon reasons for households failing to get
the aid for which customers are eligible.
Because DTE Energy’s rate structure passes uncollectible expenses to all ratepayers, an aid delivery
structure that engages our most at-risk customers
helps all stakeholders. At-risk families can maintaina working relationship with DTE that avoids service
interruptions and theft, and ratepayers see a potential reduction in rates. By leveraging available aid,conservation, and weatherization, customers areable to afford their bills, and DTE Energy can movetheir accounts from “Uncollectible Expense” to“Revenue” (see Figure 3).

Progress to Date
As a numbers guy, I expect measurable success.
We established several leading indicators were
established in support of our overall goals of
improving cash flow and improving customer
satisfaction:• Reduce uncollectible expense by 80 percent
from the 2010 budget
Figure 3 Pilot Methodology

Assess Every Site

100% Metered Usage

Minimize Arrears

Field crews sweep
the neighborhood
1. Re-establish customer relationship2. Accountmanagement
3. Gas Maintenance4. Theft
Investigation

Convert theft andarrears to meteredusage
1. Make everysite SAFE
2. Offer uniquechance to workwith DTE
3. Back-bill all Theft
4. Update bill for
Arrears

Create an engaged andresponsible consumer
1. Actively manage
EO / DHS / THAW
activity
2. Drive average
consumption down
through home
weatherization (DTE /DHS) and education(THAW / WARM)• Reduce lost gas expense by 80 percent fromthe 2010 budget• Reduce operations and maintenance expenseby 20 percent from the 2010 budget• Reduce Michigan Public Service Commission
complaints by 25 percent for field service andtheft investigation
We will evaluate our progress against these goals
at the end of 2010 and set new targets for 2011.
In addition, our team has clearly expressed that
we need to allow the unique characteristics of
the Osborn consumer to emerge within the DRP
experiment. The Detroit market is different fromthe balance of our service territory. Median household income in the city is only $28,000 (making
about half eligible for utility aid); 40 percent of the
population is illiterate; citizens are transient; andmany households face social and economic problems such as substance abuse and unemployment.
Utility arrears are just one problem a resident may
be juggling. Thus, our first milestone was for theteam to personally contact the 2,200 households
in the Osborn neighborhood that we identified as
eligible for aid and walk these residents throughthe social assistance maze. As of November 2010,
we have engaged 1,045 families. Of these, 347
completed applications for assistance. We havebeen able to help them receive $862,000 in
utility assistance.
In a presentation of six-month data and analysis,
I was able to report to the Detroit Recovery Projectboard of directors that we have achieved favorable
financial performance. The 10-percent increased
margin is a direct result of improved energy aid
retrieved for customers plus savings derived
through weatherization efforts. In addition, oneof the take-aways from the DRP pilot is that an
integrated DTE team plus strategic partnerships
equal an improved business model.
Customer satisfaction has been harder to influence(see Figure 4). Although complaints are down 50
percent over this time last year, we have not beenable to distinguish a higher level of satisfaction
than that experienced by the rest of Detroit. Ourfeature | H oman and S chulist, with M c C oy

Figure 4 Customer Satisfaction
Purpose: Measure and report customer satisfactionin Osborn relative to our benchmark territory(Wayne County excluding Detroit).

Help Save Energy

Help with Bills
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

86%
72%

64%

63%

YE 2009

61%

61%

YTD 2010

Comments: Sample size is significant => identifies needfor DRP (DTE) to work with families that are current or
only slightly in arrears.

Caring & Trustworthy
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

70%

63%

60%

YE 2009

63%

YTD 2010

Comments: Osborn still sitting in same position relativeto Detroit as it did in 2009. Will run a 5% LI Pilot in 4th qtr
to demonstrate ability to provide an "affordable" product.
BenchmarkOsborn

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

60%

60%

55%

YE 2009

62%

55%

57%

YTD 2010

Comments: MSI found only 5 of the 943 customers that DRP
engaged => again most are still in arrears. Points to need fora truly creative solution for these families that gets them outof arrears => DTE Energy Center.
Overall Satisfaction

74%
61%

Summary: Osborn is in the same position as 2009 =>team is creating an affordable product, a comprehensive
marketing campaign, and a vibrant retail presence.

Detroitfourth-quarter initiative, “One Stop Shop,” focuseson helping customers navigate the application
process for state financial aid. In these shops locatedin the neighborhood, representatives from the
Department of Human Services, The Heat And
Warmth Fund, the WARM Training Center, andDTE Energy will all be available to see customers
in one place and at one time.
We have had some disappointments. Positive
engagement needs to improve with Osborn

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

79%
!"#$

63%

69%

71%
49%

!!"#

YE 200957%

YTD 2010

Comments: Customer Research has exhausted all samples
in the Osborn area and did not run a survey in August.
Investigation showed only 200 Detroit responses overall andzero in 48234 or 48205. Will use focus groups + entry / exit
surveys in LI Pilot.

families whose services have been shut off due
to non-payment or theft. Going forward, DRP will
work to establish helpful interactions with newcustomers and with families that are early in thearrears process, in the hope of creating positive,
long-term relationships. Our intent is to connect
them with third parties that can help them.
Another area of concern is that Osborn residents
only completed 34 percent of the recommended
energy aid assistance applications. The average

25

26

reflections | volume 1 0 , N umber 3

reflections.solonline.org

Figure 5 Key Take-Aways

Integrated
DTE Team+

Strategic
Partnerships

Leadwith CaseManagement

Serve as aLens to Focus
EffortIntegrated
Delivery ofServices

DHS
THAW
WARM
Skillman
Block Clubs
City of Detroit
SEMCOG

Hold onto
SystemicallyPoor=

Improved
Business

Match
Consumption
to Available
Aid
Lower Arrears
and Lost Gas
Improved
Customer
Satisfaction

aid award of $2,400 pays for nearly an entire season of energy usage. Our goal is that by investing
more effort in following applications to completion, DRP will increase the number of families thatsuccessfully navigate the aid process. We are interested in understanding why a family that qualifies
does not pursue obtainable aid, even when a casemanager is available to help them. By creating“One Stop Shops” in the community, we hope todiscover and overcome the reasons for this resistance. We want to redefine the aid delivery systemand complete applications for 100 percent ofeligible families.

We are interested in understanding why a family that qualifies
does not pursue obtainable aid,
even when a case manager isavailable to help them.
Even with these concerns, we have noticed withinterest that 145 families moved into Osborn sinceAugust of 2009 – a net increase – while the balanceof the Detroit housing market is stagnant at best.
The team of case managers, field service workers,
technicians, and meter readers will maintain acontinuous presence in Osborn. Over the longterm, we envision satisfied Osborn customers withfewer complaints. Establishing a partnership withresidents will help the community build a base ofpeople willing to take action to support a visionof a viable Detroit. On the financial side, DTE Energy will have a reliable cash flow (see Figure 5).

DRP Next StepsDRP is leveraging the project management expertise of DTE Energy’s Major Enterprise Projects
group (they also build billion-dollar wind farms
and coal scrubbers) to complete the “one hundredhome” weatherization pilot mentioned above.
Launched in May 2010, this pilot-within-a-pilot
provides a consistent level of whole-home weatherization technology to a contiguous group of
mixed-income homes. The pilot will measure
uptake, home condition, and estimated energy
savings versus actual energy savings over the
next heating season.
Another positive development was the additionof several full-time field service personnel who
were assigned to DRP to work in Osborn in May
2010. We want to engage at-risk families during
turn-on restore events and engage qualified
families in the aid process before they begin
to consume gas again.
The next steps include leveraging CI problemsolving methods, such as the “Swarm Event.” This
practice usually consists of several small, rapid
experiments or countermeasures to address a
set of problems or abnormalities in a process. A
group of stakeholders will work together to solvea specific issue using a scientific approach toproblem solving. For us, the Swarm Event will
involve designing a process that eliminates thecommunication barriers between DTE Energy andour partners that prevent the delivery of aid. Also,
we will test a low-income utility rate to create anaffordable price point for qualifying customers,
something we have not offered to date.
In addition, I am partnering with the DTE Energy
revenue management and protection team tofeature | H oman and S chulist, with M c C oy

develop a procedure to proactively manage longterm case relationships. The goal is to achieve
zero theft or unresolved leaks. We’re also looking
to partner with the city of Detroit government to
identify abandoned homes and cut the energy
infrastructure to all uninhabitable buildings.
Throughout this project, DTE Energy as a whole
has tapped into the unrealized potential of ourfield operations employees by giving them an opportunity to use their leadership skills. Senior leaders have observed an increase in pride and a senseof ownership in the work being done. Supervisors,
field personnel, and technicians are proactively
saying, “Hey, I think we’ve got a problem here.
Could someone look at this?”

One Customer at a TimeM i k e a n d Jas o n ref l ect

Our company is in a strong position to innovatesocial change. We are literally tied to our community via wires and pipes; our services are intrinsic
to modern life. DRP has indeed taken a step toward change. Here is what the transformation
looks like from the street in Osborn. Field opera-

tions supervisor Robert Crudder arrives at a location where a meter is scheduled for disconnect.
On the block where his crew is working, every
other house is boarded up or abandoned. In thedriveway, a dog runs loose, barking at the utility
truck. After determining that the dog is not aggressive, case manager Latricia Cranford knocks on thedoor. A minute or two passes with no response.
The team decides to remove the meter.

Our company is in a strong
position to innovate social change.
We are literally tied to our community via wires and pipes.
While the DTE Energy field operations workers
are discussing their next appointment, an elderly
woman opens the door. Another woman in her
early twenties is with her. They beckon to Latricia,
who gathers some energy-efficient lightbulbs anda brochure. She meets them on the porch with awarm smile and asks, “Is there something DTE
Energy can do to help?” After some discussion,27© istockpohto

28

reflections | volume 1 0 , N umber 3

DRP is an example of taking
our continuous improvement
approaches into unfamiliar
territory – solving deep, systemic
problems within the communitythat DTE Energy serves.
Cranford enters the house. Inside, she assesses theneed, checks other information, and 15 minutes
later, goes back outside to make the necessary
phone calls. She recommends reconnecting themeter. The utility worker who just spent half anhour disconnecting it hesitates. Latricia hands him
the phone; the utility worker listens. Within anhour, the removed meter is reconnected.
DRP is making a promise to residents: If you
commit to work with us, we’ll make sure that,when we leave your home, you are legitimately
and safely connected. This is innovation by people
doing the work; this is caring on a deep level –something that Bob Richard contends, “Is on thereflections.solonline.org

right side of history.” Enacting positive change
within the culture of poverty is indeed complex.
But Detroit Recovery Project field workers did
alter the reality for one elderly woman in Osborn,
and we are determined to help others – one
customer at a time.

Lessons for Solving Deep, Systemic Problems
The DRP initiative is an example of taking our continuous improvement approaches into unfamiliar
territory – solving deep, systemic problems within
the community that DTE Energy serves. The further
we dig into the issues and understand the system
as a whole, the closer we get to the root cause of
the problem. This work allows our leaders to ask
fundamental questions: “How does the corporation address social issues that are symbioticallyrelated to DTE Energy’s own health? How do weas stewards in the community work on a broad,systemic level in ways that engage our employees
and redefine our role in customer satisfaction?”
As we learn from these experiences and questions,
we see ourselves on the forefront of a type ofthinking that will lead corporations in general toreflect upon their roles in our greater society. nabout the authors
Michael Homan was selected to lead DTE’s Detroit Recovery Project in July 2009. Since 2007, Mr.
Homan had served as Finance Manager (Budget & Analysis), supporting the Michigan Consolidated
Gas Company. Mike joined DTE in 2005 as a member of its Advanced Degree Development Program,where he served in progressive finance functions supporting the Detroit Edison Company.
Jason Schulist currently serves as Director of Continuous Improvement at DTE Energy, where heoversees the deployment of DTE’s Lean Six Sigma continuous improvement methods. Jason helps
guide DTE’s executives and over 90 full-time continuous improvement personnel in capturingbottom-line savings and improving safety, customer satisfaction, and quality performance.
Susan McCoy is a Michigan-based writer, speaker, and author. A former teacher, she is an advocateand student of sustainable practices. smccoy68@yahoo.com

feature | H A L L

feature 1 0 . 3

The End of Economic Expansion
Requires Compression Thinking
R obert W. “ D oc ” H all
Global crises are squeezing us from all directions, and with or without our participation, change will occur.
To implement the sort of changes that will allow civilization to prevail rather than merely endure requires a
resourcefulness and ingenuity beyond any the world has ever employed. In this article, Doc Hall introduces
the concept of “Compression” as an invitation to learn more effectively both as individuals and organizations,
rethink our perpetual devotion to old ideals, and welcome the shift in thinking that must be our first andimmediate step.

The term “Compression” refers to the end of economic expansion as wecurrently know it, that is, ongoing growth enabled by the practices of
the Industrial Revolution and powered mostly by fossil fuels. High-consumption industrial societies created many benefits we’d like to keep,
but also huge problems that we cannot put off dealing with. To respond effectively to the “squeeze” we’ve put on the Earth’s resources and ecological viability,
we also need to “compress” our work processes and products to make them lesswasteful of human and natural resources. To meet these challenges, our organizaRobert W. Hall
tions will need to engage in high rates of learning and achieve unprecedented
levels of performance. The key to this major revolution is within each of us.

Our 21st-Century Challenges
In an age of Compression, all of these forces act at once. To get our minds around the enormity of thisfact, not only do we need systems thinking, we need a system for systems thinking. This kind of thinking
is not normal in today’s organizations. We have to learn it, and to learn it, we have to practice it.
figure 1 Our 21st Century Challenges
The figure shows an arbitrary classification of our 21st-century challenges:
Finite Resources, Precarious Environment, Excessive Consumption, Pushback from the Have-Nots, the inability to address the foregoing complex
challenges without Self-Learning Work Organizations, and Complexity.
These challenges are all interconnected. Each covers more sub-categories
than anyone can fathom.
The circle at the center represents self-learning organizations, needed
to cope with the big global challenges imperiling us and arbitrarily
categorized in the other four circles. Black – Impending global shortagesof petroleum, water, rare earths, phosphorus, maybe even arable soil.
Green – An environment made precarious by a long list of threats fromcoral reef bleaching to endocrine disruptors; climate change is only one.
aspect. Yellow – An economic system in industrial societies that fosters
excess consumption of resources. Red – Pushback from people displacedor left out of the current system for using global resources (resource
wars, crowded third world slums, etc.).

FiniteResources

Precarious
Environment

Self-Learning
Work
Organization
Pushbackon theSystemExcessive
Consumption

29

30

reflections | volume 1 0 , N umber 3

Without taking a systems approach, well-intentioned, intelligent people grab for magic solutions
to our environmental messes, such as seeding theoceans with iron to sequester carbon, creating
sulfuric clouds in the sky to reflect solar heat, or
pumping CO2 into the ground for storage. Because
they have faith in technology, they jump on theseideas, seemingly unaware that the unintended
consequences of such actions could be catastrophic.
But it’s easy to see how each of these actions
could backfire. Most of our messes today are theunintended consequences of past “solutions.”

Global Objective in Compression
To begin to approach this confluence of issues
more systemically, we propose setting a measurable baseline objective:

G lo b a l O b j e c t i v e i n Co m p r e s s i o n

By the year 2040, create a quality of life around the globe
that is equivalent to that of today’s industrial societies
while consuming less than half the energy and less thanhalf the virgin raw materials as were consumed in theyear 2000, with near-zero toxic releases.

reflections.solonline.org

By the year 2040, create a quality of life around theglobe that is equivalent to that of today’s industrial
societies while consuming less than half the energy
and less than half the virgin raw materials as wereconsumed in the year 2000, with near-zero toxic
releases.
To achieve this objective, people in both advanced
and less-advanced economies must learn to makemuch better use (and reuse) of resources. The truthis, though, that these standards can’t be uniformly
applied to every part of the world. Those barely
surviving can hardly consume less than they currently do. Because industrial economies consume
significantly more materials and energy than othereconomies, the cuts in those regions need to be
deeper. Fortunately, they also have more innovative technological research with which to meetthis tough goal. These kinds of initiatives are starting to become reality, not vague hope. For example, two years ago, the British Parliament enacted
the Climate Change Act of 2008, setting timetables
toward an 80 percent reduction of greenhousegas emissions by 2050.
Of course, to achieve these goals, we need to
go beyond basics like reduce, reuse, recycle. We
currently have too few inventive, innovative organizations with business models that allow them
to be viable while processing less material andenergy, not more. A transformation is unlikely tooccur by gradually raising performance bars
through regulation, with governments coercing
the reluctant to meet minimum standards. Instead, we need to create what I call “Vigorous
Learning Enterprises.”

Vigorous Learning Enterprises
What is a Vigorous Learning Enterprise? Vigorous
implies that an organization “does” something. It’s
not strictly academic or social. Those most criticalare in mining, agriculture, food processing, manufacturing, utilities, healthcare, police, fire, justice,and so on. They either process large amounts ofenergy and material (and are thus gatekeepers of
our consumption), or they provide services thatare crucial to the quality of life. A rough estimate isfeature | H A L L

that 30-40 percent of the American workforce isengaged in such work – a high percentage, but
not everyone.
Learning is the act, process, or experience ofgaining knowledge or skill. In an organizationalsetting, it includes process learning, innovation,and organizational learning.
Enterprise is used in many senses, but the intent
here is analogous to the supply chain: several tiersof customer organizations going out and several
tiers of suppliers feeding in, plus feeder educational institutions, consultants, advisors, banks,
auditors, and the like.
Here are some principles and practices for
Vigorous Learning Enterprises (see Figure 2):
1. They are mission-driven. Serving a social
need or mission has to trump all other objectives,
including growth, profit maximization, job creation,and personal aggrandizement. The turning point
for leaders is realizing that their organization must
support nature; nature does not exist to support
or enrich them. That shift changes the emphasis
from what we get to what we do. The actions by
BP and other companies involved in the Gulf oil
blowout illustrate why this change in focus isimportant. Attempting to limit liability – the basisof corporate charters – is a dysfunctional way of
dealing with such problems.
2. They look at their physical processes. When
we move away from focusing on what we get, we
can more objectively look at physical processes:
how our customers act, what our workers do, andhow our business models operate. When we identify our primary customers’ real needs, we recognize that anything else is waste. Lean thinking
identifies waste as what a customer will not pay
for. In Compression Thinking, we go a step further
and identify waste as any unnecessary use or destruction of resources, things that nature should
not have to “pay for.”figure 2 A Vigorous Learning EnterpriseMeta-Vision
Servant
Leadership

Behavior

What and Why;
Mission not
StatusSystems
Thinking;
Holism“Meta”—ability
to see a picture as
if looking from outside in; including
seeing yourself asothers see you.

CommonMission and
Goals

Rigorous
Learning
ScientificMethod“Culture” must be reinforced every day
Vigorous Learning Enterprise features are an amalgam of best practices
seen in real organizations over a 20-year period.
• Meta-Vision, or keen, broad system insight, especially by leaders.
• Common mission and goals related to Compression, that unifies effort.
• Systems and structure for rigorous learning built into regular work foreveryone, not for just a few people.
• Behavior for learning; ability to subdue personal infighting to concentrateon problems and issues.
• Servant leadership, putting the mission, organization, and developmentof it people before personal gain or ego.
All this is possible, but so contrary to instinct that this culture needsa built-in mechanism that reinforces behavior almost daily.

3. They expand their cognition (meta-vision).
By expanding our view, we can both improve local
processes and anticipate effects far removed intime and distance.
4. They extend the concept of “waste.” The concepts of eliminating waste that are a part of lean
today are typically confined to a few elementsof operations and never applied to full life cycles.
By expanding the definition of “waste” to include
materials, energy, space, and unproductive behaviors, we can define elimination of waste as doing
whatever is necessary by the lowest energy process we can devise. Low energy use is usuallyassociated with low use of all resources.

31

32

reflections | volume 1 0 , N umber 3

5. They value quality over quantity. This new
kind of organization values quality over quantity;
provides service, not promotions to buy more
“stuff”; does it right the first time; and emphasizes
prevention over remediation. As Yogi Berra might
say it, “Fix it before it happens.”
6. They avoid “model myopia.” We need to learn
to look at what really goes on in our organizations
without the prejudice of model blinders, including
all the financial ones. We’ve hitched our guidancesystems to obsolete measurement models. Evencustomer-centered lean operations typically conflict with accounting models. Physical measurements of what we do are far from perfect, butthey beat self-referencing measures based only onhuman valuations, which is what market-derived
dollar measures have been.
7. They develop rigorous structures for learning.
Systems structured on the basics of the quality
movement are a good start, but few manage tospread throughout the entire organization. Also,
sustaining the behavior is challenging, especiallywhen issues are “wicked,” meaning that people
perceive them from different tunnel visions or
conflicting spheres of interest. To make a new culture “stick,” the organization needs codes of conduct with daily reinforcement built in, or humannature will take over and undermine the system.
In this sense, we’re really trying to elevate ourlevel of civility, at least in our work settings.
8. They create “tribal cohesion.” We must createa sense of cohesion – trust and confidence –across work enterprises, including suppliers andcustomers, while minimizing “tribal rivalries.” These
arise from more than ethnic and religious differences. They include functional silos, intellectual
property divides, and races for reward and recognition. Rivalry and competition are instinctive, butcohesion is vital for true information sharing tooccur. Everyone has to be confident that all share
a common allegiance to a universal mission.
No working organization today functions at thelevel of a vigorous learning enterprise, but someof our best organizations have mastered big

reflections.solonline.org

chunks of the skills and culture required. Theserigorous organizational cultures demand the highest levels of professionalism. Is this impossible?
No. Is it difficult? Yes.

New Business Model
One of the most counterintuitive aspects of coping with Compression is the need to rethink thebusiness model so that an organization can be
viable without focusing on selling more, more,
more. DTE Energy (Detroit) is one of the more aggressive utilities in helping customers reduce theirenergy usage. By doing so, the company reduces
costs for its clients, many of whom are struggling
financially, and eliminates the need to expand its
energy capacity. An overview of how DTE helps
customers save energy is available at http://www.
dteenergy.com/businessCustomers/saveEnergy.
PortionPac Chemical in Chicago also has a business model that foreshadows those of the future.
PortionPac primarily produces cleaning chemicals,
but it sells few of these products directly. Instead,
it provides service contracts, so customers pay
for clean buildings, not cleaning products per se.
After signing on a customer, PortionPac trains theclient’s cleaning personnel in methods that aredesigned to minimize the use of detergents andother chemicals. (Excess cleaning chemicals are amajor source of problems for sewage plants andof pollution in waterways.) Over six months or so,a new client’s use of cleaning chemicals usually
drops by 40-50 percent. The less product PortionPac ships, the higher the margin it earns on theservice contract.
This approach makes conventional businesssense, but PortionPac is also on a mission to increase the respect given to cleaning personnel,
who are usually poorly paid and whose role inan organization is often ignored. The goal is forcleaning personnel to contribute to reducing or
eliminating the pollution a company generates,
and thereby reducing the pollution of wholecities or regions. Cleaners see what others don’t,
so PortionPac can help clients examine theirwaste streams to see ways to reduce waste 		of materials and toxic releases.

feature | H A L L

DTE Energy and PortionPac are on the way to becoming Vigorous Learning Enterprises. By placing
a strong emphasis on developing people and, inturn, expecting extraordinary performance, theseorganizations clash with current assumptions
both for business and government.

Mission First
Think of the organization’s primary purpose as
performance to mission, not maximizing profit,soaking up employment, serving as an owner’s
personal fiefdom, or other ulterior motives. Making
this shift is obviously the big hurdle. However,transforming working organizations, as wild asthat idea may seem, has more promise than trying
to shift public policy. Working organizations are
not democracies, with everyone doing as theyplease. For good or bad, companies, nonprofit
hospitals, and military units are disciplined 		
organizations.
People’s behavior changes when the environment in which they function changes. If companies change what they do and how they do it, theworking culture slowly changes with it. No otheravenue of social change seems to offer thispossibility.
But to spearhead such a change, leaders of aworking organization must absorb the thinking
and work on a sequence of change that moves
the company in a direction that can deal with
Compression. Leaders start with themselves,
becoming role models of the discipline and behavior they expect from others. That’s servant

leadership, not status-based leadership. Probably
the most succinct description of servant leadership comes from the military: Mission first. Troops
second. Me third.

Leaders become teachers, mentors,
and role models – rather thancentral decision makers who standin the way of learning – to create
a top-performance organization.
Sometimes control-oriented leaders of no-nonsense organizations regard concepts and methods
for open dialogue and self-initiative as “permissive
management.” But a Vigorous Learning Enterpriseis the opposite. Leaders demand that all employees develop themselves, individually and collectively, into the very best of what they are capable.
Leaders become teachers, mentors, and rolemodels – rather than central decision makers
who stand in the way of learning – to create
a top-performance organization.
The human challenge – rapidly changing ourselves and our organizations – is the greatest
one we face, but it’s the key to meeting all otherchallenges. Compression compels us to have same
spirit of the race to put a man on the moon, butwith a lot more of us actively participating inthis common mission. This time, the stakes areeven higher. nabout the author
Robert W. “Doc” Hall is the author of Compression: Meeting the Challenges of Sustainability ThroughVigorous Learning Enterprises (Productivity Press, 2010), Professor Emeritus, Indiana University, andone of the founding members of the Association for Manufacturing Excellence. To learn more about
Compression, visit www.compression.org.

33

34

reflections | volume 1 0 , N umber 3

reflections.solonline.org

feature 1 0 . 3

Divergent Views, Shared Vision:
The Scenario Game Board as aTool for Building Robust Strategy
M ichael S ales and A nika S avage
How can people with strongly held, polarized positions on a complex issue develop a robust strategy forthe future without necessarily resolving their differences? In this article, Michael Sales and Anika Savage
outline an activity that uses a simple “Scenario Game Board” to prompt team members to listen to each other,
explore possibilities, and arrive at decisions together – even if they don’t share the same views or values.
By “residing in” a scenario that contradicts their inclinations, participants broaden their perceptions andlearn to see a range of possible future conditions. Because this process embraces multiple perspectives
rather than imposing one view of the future, it fosters mutual respect and leads to better decisions.

O

Michael Salesn Monday morning, as ABChem’s executive team gathered for its weekly
meeting, Robert Townsend, SVP of Finance, expressed his annoyancethat his daughter’s high school was requiring students to watch An Inconvenient Truth. “Why should she be subjected to political propaganda
in school?” he asked. Perturbed by the comment, Paula Lyons, VP of Human Resources,
asserted, “Environmentalism isn’t up for debate by most of our employees, particularly
the younger ones. If they heard you describing climate change as political propaganda,
they’d be appalled.” Soon, all seven executives were weighing in on the matter. The
fractious, impromptu conversation upset everyone.
Climate change is one of many “big-picture” issues around which intelligent,well-informed people polarize. Whether these topics are hotly debated or swept
under the carpet, antagonisms are likely to grow. People cling to their own wellestablished positions, seldom allowing themselves to consider other points ofview. Organizational learning suffers.

Anika Savage

Shared vision, as described in The Fifth Discipline Fieldbook, is grounded in the ideathat an organization has its own unique purpose and destiny. A vision statement articulates that purpose
and provides a beacon of clarity for strategic action. However, a shared vision is frequently built on topof unexplored, unarticulated assumptions about the present and the future. If members of an organization can’t agree on current reality, how can they move toward a desired future?

feature | sales and savage

The Scenario Game Board is designed to indicate the dynamic interplay possible between thearchetypal scenarios. In a workshop that introduces
the game board and the Structural Dynamics process, we place a critical uncertainty in the center.
Participants position themselves on the game board
according to their beliefs regarding two dimensions of change:

Abruptfigure 1 Scenario Game Board

RE

AP

W

SE

NE
AL
IT
Y

Impact ofAtmospheric
CO2

Reactive

LI
N
IP
DI

Gradual

UO

Q

SC

S

What follows is a description of a tool called the“Scenario Game Board” as it is used in a workshop
setting. We then provide a high-level descriptionof our approach to strategy development and implementation. The Scenario Game Board is theheart of the Structural Dynamics process.

Creative

E

U
AT
ST

A shared vision that comes from an explorationof multiple, divergent views of the future is much
more robust than one based on little thought,a discomfort with ambiguity, and/or a desire toreach closure. The organization that anticipates arange of possibilities can move forward with confidence while its competitors are confused and anxious when events seem to come out of nowhere.
To develop a truly strategic shared vision, people
need to listen to each other, explore possibilities,
and arrive at decisions together – even if (or maybe
especially if) they don’t share the same views orvalues. We use a method with organizations that
we call “Structural Dynamics,” in which members
explore big, thorny issues by sharing their thoughts,
feelings, and impressions in a structured discussion around four archetypal scenarios. By legitimating a range of possibilities, this approach encourages vigorous conversations and deep listening regarding the facts and causal connections
associated with the matter. Because the processembraces multiple perspectives rather than imposing any one view of the future, it fosters insightand mutual respect, and leads to better, more
resilient decisions.

To focus the discussion regarding a complex issue,
we start by looking at the most critical and themost uncertain variables. In the case of climatechange, the impact of rising levels of atmosphericcarbon dioxide is a “critical uncertainty.” It is criticalbecause its impact could be enormous. And, while
few would disagree that CO2 is accumulating in
the atmosphere at unprecedented levels, this variable is uncertain because people vociferously disagree about the implications and how any impact
might be experienced.

LL

When discussions of highly critical, highly uncertain issues such as climate change take place
among people who agree with each other, theirview of the future tends to be myopic. In one company we’ve worked with, the staff easily came toconsensus on a vision of a bright new world justaround the corner – one that, in reality, keeps
receding into the distance. When based on a single
image of the future, organizational strategy isvulnerable to unanticipated occurrences. The vision
may be compelling, but it doesn’t mean much if
the reality turns out to be a complete surprise.

The Scenario Game Board

CO

Structural Dynamics andOrganizational Resilience

35

36

reflections | volume 1 0 , N umber 3• Vertical axis: “Will the impact be abrupt or
gradual?” Some may believe that parts of New
York City will suddenly be under water as themelting of the polar ice caps accelerates. Others may contend that ocean temperatures will
only rise slightly over the course of a century,causing no reason for concern.
• Horizontal axis: “Will the impact elicit reactive
or creative actions?” Some may expect people
to respond to the threat of rising levels of CO2
with paralyzing, divisive fear, while others may
see this as an opportunity for engaged, collaborative action leading to much-needed change.
The dimensions create a two-by-two matrix thataligns with four archetypal scenarios – images ofthe future identified by Jim Dator and his associates at the University of Hawaii’s Center for FutureStudies that transcend the specifics of history andculture. Briefly stated, these scenarios are:
1. Discipline: Investing in the future by making
disciplined choices
2. Status Quo: Attempting to preserve establishedvalues and lifestyles
3. New Reality: Breakthrough to a dramaticallynew set of conditions
4. Collapse: Breakdown of social, economic,
and/or political systems
Based on where they position themselves along
the dimensions, participants find themselvesaligned with one of these archetypes or straddlinga couple of them. We ask the people associatedwith each scenario to briefly describe their positions. They then move to the diagonally opposite
quadrant, the scenario diametrically opposed totheir current view. Imagining themselves in that
future, participants spend some time creating asvivid an image of life in that setting as possible.

reflections.solonline.org

Divergent Views, Shared Vision
The descriptions of the scenario worlds are nearly
always multilayered, surprising, and provocative.
Our experience indicates that when people “reside”
in a scenario that contradicts their inclinations,even for a brief time, they inevitably broaden theirperceptions. Learning to see and accept a rangeof possible future conditions is a powerful step
forward in the analysis of strategic options andthe design of effective actions.
The future is not predictable, and expectations are
frequently way off the mark. Understanding why
there are so many legitimate views of the future
helps organizations develop plans that work wellin a broad spectrum of conditions. They are able
to develop robust strategies that are effective
across the scenarios and contingent strategies
that work in one or several scenarios. In one case,an organization found that the strategy they hadplanned to implement didn’t work in any of the
futures they envisioned.

The Structural Dynamics Strategic
Leadership Process
The Scenario Game Board is an integral part of theStructural Dynamics strategic leadership process.
Executives at the company introduced at the beginning of this article, ABChem, applied Structural
Dynamics to help them articulate a shared visionof reducing their company’s greenhouse gas emissions in its products and operations. One robust
strategy that the group identified was enablingits employees to work remotely.
• In Discipline, remote work encourages the development and application of new non-polluting
technologies by accelerating the demand forvideoconferencing, voice recognition, languagetranslation software, holographic imagery,touch screen technology, and other meansof improving distance collaboration andproductivity.
• In Status Quo, remote work connects dispersed
workers, improves communication, and reduces
conflict.

feature | sales and savage• In New Reality, the very nature of work andworkplace shifts to become integral with otheraspects of life and leisure.
• In Collapse, the ability to work from a large
number of locations enables operations tocontinue, even in the event of a catastrophe
in one region.
The participants identified the installation of solar
panels on the roofs of their facilities as a contingent strategy. It works well in most scenarios, but
might be a poor investment in New Reality andeven in Discipline, as manufacturing processes
and work styles change.
ABChem learned that it is not necessary to agree
on global warming or climate change to careabout the natural environment. Group members
strongly supported improving water, air, and soil
quality. And they identified actions they could
take as a company that would make a positive
contribution, regardless of how the future 		plays out.
The type of organization applying Structural
Dynamics doesn’t matter. We’ve worked with
Fortune-500 multinationals, healthcare systems,
university think tanks, municipalities, government
agencies, and nonprofits. What does matter isthat people are confronting complex, missioncritical issues that are subject to forces beyond
their control.
In the full Structural Dynamics process, strategic
thinkers from all parts and levels of their organization participate in eight sessions spaced over a
period of several weeks or months. Together, theteam members:·	Explore the critical uncertainties that affectthe issues under consideration, their patterns,
and their structures;· Discover future possibilities using the 		
Scenario Game Board and create a sharedvision;· Embody the vision throughout the 		organization;

figure 2 The Structural Dynamics Process

S U S TA I N I N GResults

Actions

E
X
P
L
O
R
I
N
G

E
M
B
O
D
Y
I
N
G

Results

Options
DISCOVERING·	Sustain the organizational learning derived
from the process by monitoring signposts, indicators, and warnings; deepening the analysis;
and remaining ready to change course asneeded.

Back to the Future
As with climate change, many big-picture 		issues (for example, off-shoring jobs, tax policy,
healthcare, women’s rights, international trade
agreements, and arms control) arouse intensely
polarizing emotions and strategic paralysis. Thinking of the future as a single trajectory is a sure
way to drive disagreement underground andgenerate powerful resistance to any action. The
approach we have described stimulates dialogue
about the nature and implications of present reality and offers a way forward that respects all viewpoints. We have found that thoughtful, heartfelt
consideration of a broad range of possibilities canform the basis of a profound shared vision, built
on the knowledge that the future is much more
dynamic, intricate, and complex than any single
image can portray.

37

38

reflections | volume 1 0 , N umber 3

reflections.solonline.org

reso u rces
The Fifth Discipline Fieldbook: Strategies and Tools for Building a Learning Organization (Currency/Doubleday, 1994),
sections on shared vision and scenario planning
Life-Sustaining Organizations: A Design Guide by Michael Sales and Anika Ellison Savage (CreateSpace, 2011)
Art of the Future website http://www.artofthefuture.com
Climate Interactive website http://www.climateinteractive.org
Sustainability by Design website http://www.johnehrenfeld.com

about the author
Michael Sales is co-founder of Art of the Future, a strategic leadership consultancy. He is co-authorof the forthcoming book, Life-Sustaining Organizations: A Designer’s Guide, which applies Structural
Dynamics to help organizations realize their potential as living systems.
michael@artofthefuture.com
Anika Savage, formerly Audrey Schriefer, is co-founder of Art of the Future and co-author of LifeSustaining Organizations: A Designer’s Guide. Anika is a recognized authority on scenario analysis.
anika@artofthefuture.com

Reflections
The SoL Journal

on Knowledge, Learning, and Change
Volume 10, Number 3

E d i to r i al T eam
Contributing Editors
Janice Malloy and Deborah E. Wallace, Ed.D.
Publisher
Claire Sherry Immediato

S u bsc r i pt i o n O pt i o n s
To order online and for a full descriptionof subscription options, visit our website:reflections.solonline.org.
Receive Reflections as a SoL Connections
member:• USD$125 U.S. (electronic edition only)
One year individual subscription:• USD$75 U.S. (electronic edition only)
University/Non-profit Institution• USD$175 United States• USD$195 International
For-profit Institution• USD$275 United States• USD$295 International© thinkstock

ISSN 1524-1734
EISSN 1536-0148© 2010 by the Society for Organizational Learning.
SoL is a registered trademark of the Society for Organizational Learning.
Design & Production: DG Communications (NonprofitDesign.com)

Reflections: The SoL Journal is published quarterly inelectronic format and once per year as a hard copy
compilation by the Society for Organizational Learning.
Inquiries regarding subscriptions, address changes,
back issues, reprints, and permission requests should
be directed to:reflections@solonline.org
Reflections: The SoL Journal
PO Box 425005
Cambridge, MA 02142-0001+1.617.300.9515 (phone)+1.617.812.1257 (fax)E-mail: reflections@solonline.org
reflections.solonline.org