 All right, good afternoon, everybody. Just before I get rolling here, a couple of rules of engagement. I grew up in New York City. I live in Boston. So I've been socialized my entire life never to complete a sentence or a thought. So please interrupt. On top of that, I have three teenagers at home. So I not only have socialized that way, I've been conditioned that way never to complete a thought or a sentence. And the other thing is if you're not interrupting, I can't tell if you're listening. So please interrupt. And maybe a price of the person who interrupts first. The other thing is apropos of homework. So part of the reason I sent out an assignment is I thought, if I start with a little bit of pre-read, we don't have to level up real time. Also create some animosity, so you want to interrupt again. So I think there's a pretty solid theme here of please interrupt. And to the admiral's admonition, maybe by the time we're done, you all have had at least a chance to think about one opportunity to apply what we're talking about this afternoon this evening personally in your next command. And to the point of learning, and I'll get into the high velocity elements of it. And if you go to work and wear a bow tie all the time, you think you're teaching. And you may be teaching, right? Because you're standing up and telling people what you think is right and wrong. And that kind of thing, what you think is true and false. Learning isn't evident until someone actually does something differently. If they don't do anything differently, you haven't taught, well, you may think you've taught, but you haven't learned anything at all. So to the admiral's admonition to think through how to apply this personally and in command, it's not exactly applying it. But if you walk out the door with an idea, then maybe we have actually accomplished a little bit of learning. And if you walk out the door without any ideas, all I've done is hopefully been entertaining, but not necessarily good teaching. So anyway, rules of engagement, please interrupt. And by the time we're done, have something actionable to do. In terms of theme of today, I had a chance to read through the design for maintaining maritime supremacy and it goes something like this, which is the world is increasingly varied in terms of its challenges. There's faster moving. We can use technology maybe as a necessity to do the work we do, but it's not sufficient in terms of competing and staying competitively ahead. Now that was in the CNO's design, but if you read that, that could fit in any statement by the leader of a leading industrial organization, that it is fundamentally, the world is getting more complex. The world is getting faster moving. Technology is a necessity, but it's insufficient. And what really makes the difference between good and great between those who trail in the pack and those who lead the pack and continue to lead the pack is what they do with all that technology. So I'll go into this issue of recognizing threats and opportunities, how you do that, and how you develop solutions on a continuing basis. But a little bit of personal background. So I got started into this whole field of high velocity learning because of Toyota. And for a very simple reason, Toyota was essentially a non-presence in the US auto market through the 50s and 60s. And the 70s was sort of an afterthought that if you wanted to buy a car that was small, compact, fuel efficient, you bought a Toyota. And it wasn't until the 1980s where Toyota started going off its platform of subcompacts into mid-sized cars that it had real impact on the US auto industry. And the reason it had such huge impact on the US auto industry in the 80s, not the 70s, is in the 70s, when Toyota was selling small subcompact cars. The big three, in particular, Roger Smith at General Motors, who can possibly make money selling small subcompact cars? The margins are so slim, we'll leave that to the Japanese. They can chase after the last grain of rice in the rice bowl, as it were. And we'll make money on the mid-sized stuff and the bigger stuff. Well, wouldn't you know by the 1980s, Toyota was selling a car which was more fairly priced than what the big three could do. Their reliability was somewhere between 100X and 1000X better. They were bringing major model upgrades on a two-year clip when everyone else in the world was bringing it on a four-year clip. And they started eating it to the mid-market. And so if you look at the sales of the Ford Taurus, for example, they were very good and growing when the car was introduced. It hit a very high plateau as the best-selling mid-sized car in the country. And then the Camry came out. Then the Camry came out two years later and the Ford was still the same old Ford because it was on a four-year update. And then the Ford came up, but it was again a cycle or two behind the Toyota and it sales then down, down, down. And finally, Ford had to cancel off and discontinue the Taurus as a brand because it couldn't compete with Toyota. So I got interested in what was going on with Toyota as to how in a hyper-competitive industry, they managed to come from way behind, catch up, get ahead and continue to stay ahead. And if you have questions, we can go more into the specific of staying ahead in that industry. But let me just quantify some of the advantages for those who stay ahead. So in the auto industry, again, I'll pick two industries which are about the most competitive in the world, the auto industry and the consumer electronics industry. Those are industries where if you make something, there's probably three, four, five other folks who make nearly the identical thing. They're trying to sell into exactly the same market space and they're competing everywhere. And not only are they competing everywhere with you, you can gain essentially no advantage because your suppliers will sell to them and your customers will buy from them. All that said, when Toyota goes to sell a car, they make about $2,700 per unit. Ford is number two at about $900 per unit. General Motors is somewhere up there, I guess what, about $800, $600 per unit. Again, doing exactly the same work, Toyota is getting three, four, five X return relative to their competitors. Now, when I was giving a talk earlier this week, I guess on Tuesday to a group of doctors, and we started going through the conversation about what does it mean to make more per unit than anybody else? And where we got the conversation going is why would you pay more for something? And the answer came down to the fact that when you buy it, you get more joy out of the experience of owning it and using it than if you bought and use something else. So somehow Toyota has figured out how to bring more joy to its customers than its competitors. Then we said, well, where do you get, that's the revenue side. Where do you get the other advantages in terms of profit per unit? We said, well, part of it might be revenue and part of it might be expenses. And so the doctors started saying, well, it's really about efficiency, it's about less waste, all this and that. And we kept pushing back on that proposition because efficiency is not a causal variable, it's an outcome. You can measure efficiency, right? But you can't use efficiency to cause anything, it's the result of something else. And then I said, well, it's not efficiency, it's less waste, which to me sounded like the same thing, but I'm not an English major. But again, less waste is the result of something, it's not the cause of something. And then we kept going with that. And they finally realized that if you can bring more joy to people, they'll pay more for your product. And if you can do it more efficiently, it's because when you go to do your work, and your work might involve thousands of people and tens of thousands of engineering days worth of work, that when you do your work, you're doing with more grace and more elegance than anybody else doing the same work as you. So anyway, at least with doctors, when I tell this story, I say, oh, we don't make cars. Actually, it turns out making cars really hard to do. It's easier than treating acne, but every time it's funny, you deal with doctors. They all think of their careers as the opening credits in ER and they treat acne. But if you really think about these differences, it's the ability to bring more joy into the marketplace and do it with greater grace and elegance. Now, Toyota is not the only company that can pull this off. So in the world of a consumer electronics, Apple competes head to head with its rivals much like Toyota does. And in the case of smartphones, Apple sells one-fifth the smartphones in the world. It seems like a lot. But in terms of profitability, they enjoy 92% of the world smartphone market profitability. I mean, it's a crazy difference. And that head nod you gave is exactly what I gave when I read The Wall Street Journal about that, 20% of sales and 92% of profits. Now for what it's worth, Samsung gets a 15% and for the folks in the room saying, how can a guy from MIT at 92 and 15 get more than 100? It's because everyone else who makes a smartphone actually loses money when they sell it. I'm not sure the business model, but they do. So 92% of the profit. Now you get into the conversation as to why Apple must be so much more profitable selling smartphones. And it gets back to this issue of joy again. Because when you pick up an iPhone and you turn it on, it turns on on the first button. It doesn't come with a manual. When you connect it to your computer, everything connects. All your electronic media is on your iPhone and on your computer and on your tablet and so on and so forth. And it's everywhere in the cloud. And when you pick up anything else, it doesn't have exactly the same sense of bringing joy to the user. And so when users think of buying a smartphone, when they think about an iPhone, it's like, hey honey, can we get to the Apple Store to be first in line? Well, we get there before they run out. And when you start thinking about buying an Android phone and say, honey, check eBay, are they on discount? All right, so that's the difference. That's the competitive difference in the industrial world. Now, we'll skip Intel for a second. But here's something which is quite different from your world. So recently I was watching that series Carrier about the Nimitz with my son. And in one of the opening scenes, they have the command master chief of the Nimitz. And he's saying, and when this was filmed, he said the United States has, I think at the time, 12 aircraft carriers, ten of them are nuclear. And in fact, in the entire world, there are only ten nuclear aircraft carriers. And I'm the command master chief of one of them. I'm one of ten guys in the entire world. Now, here's the thing, is that no one else has a nuclear powered aircraft carrier. I mean, that's a huge competitive advantage from my perspective. I mean, I was watching the video, I'd said so. Now, here's the thing about the industrial world. No one has the equivalent of a nuclear powered aircraft carrier in strike groups and that sort of thing. When you go to make a car and buy a coil of steel, it's exactly the same coil of steel as anybody else can buy. When you go to buy aluminum ingot, the ingot you get is exactly the same as anybody else. They can buy exactly the same aluminum ingot. If you go to buy plastic pellets for injection molding, it's the same plastic pellets as anyone else can get. If you buy equipment, a CNC machine, a press, a clean room, it's exactly the same as anyone else can buy. Now here's an advantage you have over the world of some of my industrial colleagues. This whole idea of if you buy something, your competitor can get it. For us, we call that good business sense. You call it espionage and treason. You actually arrest people for doing that stuff. We pat them on the back and said, go to it, keep doing that. All right, now here's the thing about this world, though. If espionage and treason are okay and everyone has the same stuff as everybody else, then the only possible difference in terms of getting these really outsized rewards for doing exactly the same work has to be the person using the stuff. And it's these folks who are giving you the advantage. And it's not only the folks using this stuff, but when we start thinking about product, for example, and the auto companies, they advertise the car. But for instance, the person who's going to buy a BMW of this type, I was counting just before, they have about four or five different choices or alternatives when they go to look at that car. They can buy this car. They can buy the Jaguar version. They can buy the Mercedes version. They can buy the Cadillac version, the Lexus version. They got a lot of choice. And so if you want to sell a car, the focus really has to be beyond the car. It has to be the person who's going to drive the car. And understanding that person and how that person will appreciate your product and how they will define joy so that their first choice is your car and not someone else's car. So this is the industrial world, which is, it is crazy competitive. There are outsized rewards for being better than anybody else, and being better can't be purchased. It simply cannot be purchased. Because anything you can buy in the industrial world, someone else can buy it too. So the only thing left is what people do with the stuff that's bought. So anyway, the rest of my presentation is really about what people do with the stuff they buy. And I think then it connects into these initiatives in the CNO's design, both the green box of the learning piece, the high velocity learning piece, and also the gold box, which is about the leadership piece. So anyway, let me just step out of the industrial world for a second and talk about people who are good learners. And this is the world of health care. Now, health care also is one of these settings where you can get just absolutely blown away by the science and technology. But at the beginning of the day, the middle of the day, and the end of the day, it's not really the technology which is the key. It's understanding the needs of this person in a hospital bed. And when we look at clinicians and ask how they go about trying to understand the needs of the person in the hospital bed, the first thing they do is they monitor very, very closely. Because the folks in the health care community have gone to great efforts to define what they call normal, 98.6 to 120 over 70, a whole bunch of different measures for blood chemistry. They've gone to all these great efforts to define normal. And then when they're concerned about the well-being of another human being, what they do is they monitor very closely to see abnormal. And the reason they monitor very closely to see abnormal is they understand that if there's an abnormality, they want to swarm on that abnormality sooner than later so that the patient's condition doesn't deteriorate and so that the patient's condition can be restored more easily, more effectively. And we've all heard the horror stories of denial of care or delay of care where a patient had a condition which may have started as minor, both in terms of presentation and of treatment, but because it had a chance to snowball, the patient's condition got to the point it was actually very hard to contain and very hard to correct. So two key behaviors in the health care sector, one, you have to, the system you're responsible for, you have to monitor it very closely to see when it goes abnormal, and when it goes abnormal, you have to get on that system and on the problem very, very quickly, both to contain the problem and understand why the problem is occurring. So two key behaviors. And it's not surprising that if you go into a hospital setting, the doctors and nurses and pharmacists and others wear very comfortable shoes because they're often running one place to the next. Now with this seeing a problem and then swarming on it to understand from that, there's an understanding which arises, right? Because the patient who's sitting in a bed unmonitored, you don't really know what's going on. When you monitor the patient and an abnormality is indicated, you've gained some understanding into that patient's situation which you lacked before. When you swarm onto the patient and start trying to understand why they're presenting in the way they're presenting, you've generated new additional knowledge. So a third critical behavior that's trained on to clinicians is to explain to their colleagues what they've discovered either in terms of the nature of the problem's presentation or the nature of the causes that seem to cause the presentation or if they've been treating the patient the consequences of the treatments they've been using. And those become the three critical behaviors of dealing with this complex dynamic, constantly changing system of the biology of a human being. Now it turns out that the folks who are really good in the industry world, they do exactly the same thing. So I'll give you an example here. I've done a lot of work over the years going back to the late 1990s, I guess, with Alcoa. And Alcoa, you guys are in the business of harming other people when necessary and asked to do so. They're in the business of doing some stuff that also has the potential to harm other human beings. You may actually want to benchmark them and see if you're missing an angle on this one. Because they start in equatorial countries and they dig up the ground, which is dangerous in itself, and then they take all that loose stuff and load it onto trucks and drive it around. And that's dangerous. And then they have to ship this stuff to places which have cheap electricity. And the shipping is dangerous in and of itself because you've got to load and unload the boats. And then they put it in containers. They call it pots. It sounds so like you're going to make minestrone soup. But I'm trying to think of the volume of a pot. I guess if you did the volume of this stage, that would be about the volume of a pot in which you put their raw material. And then you take two things which are about the size of a telephone pole. It's popping up. It's popping up. It's about the size of a telephone pole. Pop them in and run current through it. And the purpose of that is to kick off the oxygen from the compounds that you left with molten aluminum. All right, so you got in that one little situation, you've got mass and heat and electricity. The only thing they don't have is nuclear and biological, which I think biological is illegal and nuclear you guys own. But other than that, they've got just about every form of energy by which you can dismember a human being. And then when they have this molten metal, what do they do with it? They put it out. So now you've got running molten metal, which you're trying to put into an ingot and then give it shape. And when you give it shape and for that moment where it's just a nice little happy ingot, then what you do is you start squeezing it through an anvil so that you add shape to it. But it's like toothpaste coming out of a tube, a little squeeze on one and you got a lot of velocity of something which is heavy and sharp. So anyway, that's the work environment of Alcoen. If doing what you all do is not thrilling enough, you're welcome to come to one of these plants. But anyway, with that as a setup, it's not surprising that the chance of getting hurt on the Jabba Delcoa was meaningful. And so in 1987, when they took a measure on this, the chance of getting hurt on the Jabba Delcoa was about 2% a year, which is somewhat better than most of American industry, but still significant. So in a room this large, we'd need about four or five people in this room to volunteer to get hurt in the next 12 months. Any volunteers? No, no. Never mind. You have to understand in industry at least there's a lot of accounting and you have to make your numbers. We need four volunteers. All right. Well, here's the thing. All right. So let's switch this around. If we don't get volunteers to get hurt, at least someone volunteer to make the phone call at the end of the day. The phone call goes something like this. What's your name with the red tie? Right here. Yeah. Chris. Oh, two red ties. All right. So who wants to volunteer to call? You married? I'm going to call Chris's spouse with a conversation which goes something like this. What's your spouse's name? Bota. Bota, I've got terrible news. You know, I'm really sorry but something terrible happened to Chris today. Anyone want to make that phone call? Anybody? Nobody? All right. Well, when you have a 2% chance of getting hurt on the job, someone's got to make that phone call. So anyway, y'all can sort it out later. But that's the nature of the work environment which is hazardous and the hazards actually present themselves. So here's what happened with Alcoa is that in the late 1980s they had a conversation and wouldn't you know they couldn't find any volunteers at all to get hurt? Nobody. And, you know, Chris didn't raise his hand. No one raised their hand. And no one volunteered to call Bota and say, hey, we hurt Chris today. So I started having this conversation in terms of, well, what would be ideal? And they came to this understanding, well, if no one wants to get hurt, then the ideal is perfect. And then they started having some other conversations in terms of, well, let's think about the other things that go wrong here. Hey, we missed the shipment last week. We missed the shipment last week. That's not so good. We're probably going to miss the shipment next week. Does anyone want to volunteer for that? Call the customers and see if anyone wants to volunteer for that. Anyone want to volunteer? Late shipment? Well, we had a shipment which it arrived on time but the quality was wrong. The chemistry of the aluminum was wrong. Call up our customers and see if they want to be next. Guess what? No one volunteered. All right, so this goes on as Alcoa starts running through their list of performance metrics. Does anyone want to get hurt? Does anyone want to get hurt? No, no one wants to get hurt. Does anyone want a late shipment? No. Does anyone want a low quality shipment? No. Does anyone want an overpriced shipment? No. Does anyone want an incomplete shipment? No. So then when Alcoa is ready to go, the goal really has to be perfect because they can't find any volunteers. They can't find any volunteers. Then there's a second question they have to ask. Now that they've got a goal of perfect, they have to get into the question of why are they imperfect? And the conversation goes something like this, which is, is the aluminum conspiring to hurt us? And wouldn't you know that no matter how long they lingered around between shifts, overnight shift, they couldn't find the aluminum conspiring to hurt anybody. And then they went to the presses and they asked the presses. And the presses didn't volunteer that they were out there desirous of hurting anybody or being laid at a low quality. And they came to the appreciation that aluminum doesn't, and here's the thing. This actually is an important point. Supposed to what else I might have been saying. The important point here is that when you start having the conversation with people at Alcoa and elsewhere about perfect, the first response is, well, you have to understand. You have to understand. And you have to understand is one of those phrases which with all due respect means you don't understand, you don't deserve respect, right? And if someone says, with all due respect, you don't understand, they really think you're a fool and an idiot. So anyway, the conversation starts with the people who are advocating for perfect as the goal. They say, well, with all due respect, you don't understand. That's impossible because the aluminum is so hazardous. So that's the starting point. But then they get into the conversation. What is it inherently in the aluminum that says the aluminum wants to wake up one morning and spatter us with molten metal or cut us with the sharp edge of a door frame? And no one could find any reason that the aluminum wanted to do that. So then they get the further understanding, which is if the aluminum is hurting us, it's not inherent to the aluminum or the aluminum processes or the transportation or the logistics or anything else, is that people really didn't understand the aluminum. And that's why it's hurting them. That if they had perfect understanding of the aluminum, they'd be safe. And just imagine the situation. You're walking up to one of these vast pots. It's got molten metal and starts bubbling and it spatters on you. Whoa, I didn't see that one coming. Why didn't you see that one coming? Because I didn't know it was coming, right? So the key transition for Alcoa was to start viewing the world in a very, very different way. The world went from a place of great uncertainty because it was built to be uncertain to a place of great uncertainty because the world was not well understood. And when you go into this idea that the world is uncertain because it's misunderstood, aluminum stops being your adversary in terms of safety. The press has stopped being your adversary in terms of safety and your adversary is now the ignorance about those things. And it changes the mindset within the organization of really what we have to do is prepare ourselves to attack ignorance, not prepare ourselves to attack aluminum. So anyway, with that in mind, having defined perfect and recognizing the gaps between perfect and imperfect were due to ignorance, they realized, well, we have to recognize ignorance like elevated blood pressure in the healthcare setting. We've got to be able to recognize ignorance so we can treat it. So they set up this rule within Alcoa and it went something like this, that if someone got hurt on the job, the CEO of Alcoa, this fellow named Paul O'Neill, he wanted to know within 24 hours. Now, again, it's one of these things, which people say, well, you've got to understand, that sounds like micromanagement. And it sounds that way, but here's the deal. In 1987, for Paul O'Neill to find out in 24 hours, he insisted he hear it from the president of the business unit in which that person got hurt. Now, I tried to explain to my students that in 1987 to actually reach someone, they had to be sitting at a desk and pick up a phone. And you had to do that from a desk which also had a phone attached. Right? So you start running the cycle times on this to tell Paul O'Neill in 24 hours as a business unit president, you needed to know within 18. And for you to know within 18, your vice president had to know within 16. And the assistant to the vice president probably had to know in 14. And we once did this. We were in São Paulo, Brazil in an extrusion mill. And we started trying to figure out all the layers that separated the guy running the press all the way to Paul O'Neill. It turned out there was 26. I guess for you guys that'd be Eschelon 26. Right? Eschelon 26, Commander? Anyway. So 26. And so we started figuring out how quickly would the guy have to complain that he had gotten hurt for Paul O'Neill to find out in 24 hours. The answer was he had to complain before the pain set in. It had to be one of these like, well, I'm not really sure but I'd better raise my hand. I don't see any blood swelling discoloration but I'd better raise my hand because if I pause it off I'll never find out and I'll get very angry. Now this whole 24 hour rule was set in place to create another rule which is in 48 hours Paul O'Neill insisted on finding out insisted on finding out the initial diagnosis for the problem what had you learned by its occurrence and the initial treatment plan for the problem what you had learned about better understanding of the aluminum and the processes it was going through. And again this 48 hours thing wasn't because Paul O'Neill was the know all be all see all you know kind of the Wizard of Alcoa kind of thing it's that it was this insistence that if you had a problem and you wanted to understand it you had to get on that problem right away because let's say you had metal that was spattering people and you showed up an hour later the thing you're investigating is not the thing that was hurting people it's something else and you can come to a great understanding of that something else but you're not going to come to an understanding of the thing that was hurting people and if someone gets banged in the head by a boom if you wait an hour or two or three or the next day to find out why you got hit in the head by a boom the thing you're investigating is not the situation which caused him to get hit in the head it's something else so they set the sense of urgency the sense of urgency around if your ignorance presents itself in the form of a hazard get on it right away so you can come to some understanding of the situation and convert your ignorance as an adversary into a little bit of incremental knowledge as an ally so then the folks at Alcoa are doing this and they come to the realization that a problem experienced over here someone says oh man you know we're having the same problem over there so what they start doing is formalizing this idea that if you learn something either that a problem or hazardous situation exists or you have an even deeper understanding of why it exists and how to deal with it prevent it from recurring you know make a point of teaching somebody because that's where you get this huge multiplier because if Admiral Kelly learns something keeps him to himself that's better for him but if he learns something through his hard work and effort and all of that and shares it with all of us look at the multiplier we got you know you know one learning 200 applications and if the gentleman in the blue shirt he learns something keeps it to himself I mean it's good for him but if the rest of us somehow benefit from it one learning times 200 and so what you start seeing within Alcoa is they get this dynamic going their performance all across the board starts getting better and better and better and so in the case of safety in the case of safety and from a place where the chance of getting hurt on the job each year was about 2% and they drove that number down to 0.07% 0.07% now at 0.07% if I've done the math right in this room no one has to volunteer this year to get hurt in fact I don't think anyone has to volunteer this decade to get hurt which means that you're off the hook for having to call Chris's wife and explain that he got hurt because he didn't so that's what happens in terms of safety when you go from 2% to nearly 2 orders of magnitude decrease in the chance of getting hurt on the job and this is the point where most people interrupt and say well you have to understand with all due respect and it's like oh yeah same to you buddy right they say well with all due respect what you have to understand safety isn't free safety isn't free that's the phrase there's a cost to quality and there's a cost to safety at times you get it framed in terms of oh there's a zion triangle you know you have safety and cost and quality and you can pick two but not all three and normally you can only pick one and you have to sacrifice on the other two and you know let me dig into the logic of that a little bit the logic there is that there is inherently almost like built into the fabric of the universe trade-offs that you know sorry sorry you know you can't pull on the safety lever without giving something up on the cost lever or the quality lever if you want more quality you know it's built into the fabric of the universe that you have to give up on the other two levers and now he digging into that logic a little bit further it strikes me as having a combination of great arrogance but also great pessimism because to have a situation where you say look you know Adam I'm sorry but you know we can't get better on quality cost and safety and the question is why the answer has to be because there's nothing else that can be possibly understood about the situation that everything that is known I know about the situation now here's why that's I think we recognize that sounds pretty arrogant I know everything that's possibly can be known but it's also pessimistic because it basically says that this situation which is obviously presenting us with evidence of our own ignorance I'm too stupid to figure out how to learn alright so when you get into the situation where you say well we want to get better on safety and as opposed to safety or recognize you're running into a whole bunch of conventional wisdoms well you know with all due respect you really have to understand there's trade-offs well anyway no one told Alcoa no one told Alcoa so in the period when they went from a chance of getting hurt on the job from 2% to 0.07% 0.07% they reduced their costs by about $100 million on an ongoing basis their on time delivery skyrocketed and delighted their customers their profitability went off the chart and I forget it was like a 10x increase in profitability over about a decade long period remember profitability is not just sort of being counters it's joy to the customer and being rewarded for that and in terms of and linking this really directly back to this whole thing about learning and converting ignorance into knowledge it was real interesting through the late 1980s and probably into the early 1990s if you looked at the stock price of Alcoa it followed nearly identically the spot price for aluminum Alcoa owned a lot of aluminum it'd be like if I had a bag full of cougarans you know what's my net worth well let's check the price of gold by the way I don't you know wish I did but I don't so anyway aluminum goes up the stock price of Alcoa goes up aluminum goes down and you see exactly the same thing if you were looking at Exxon or British Petroleum Mobile price of oil goes up their stock price goes up the price of that petroleum goes down the stock price goes down well what happens with Alcoa is around 1993 and 1994 there's a split where the stock price of aluminum continues to go up and down as the price of natural resources always goes up and down and the stock price of Alcoa just goes up and up and up like a dot-com and you start thinking why does the price of a dot-com or any high-tech venture capital startup go up and up and up they're not being rewarded for the things they own the physical stuff they're being rewarded in price based on the stuff they know so anything that has a dot-com after its name back in the 90s and even today it's not by the scarce resources they have because the resources the physical resources are not scarce it's by their knowledge of what to do with those resources to put them to good use that bring joy to others and so in the case of Alcoa the marketplace started looking at Alcoa not as the holder of vast amounts of raw material but as people who incidentally owned a lot of raw material but knew a whole lot more about what to do with it than anybody else in the world and so while the Dow Jones Industrial you know crept up and crept up Alcoa started to look like a Silicon Valley startup because it became a knowledge company and not a natural resources company at least is how it was perceived in the marketplace so there was one more one more rule that they instilled within Alcoa is when they started to realize that the way they competed was not by the stuff they had but their knowledge of how to use that stuff and put it to good use and they realized that the way to cultivate this knowledge to grow this knowledge was to discipline everyone everywhere to do work in such a way as you could see what was wrong with what you were doing when you did your work and saw something wrong swarm on it to find out why you were wrong and then when you learn something from being wrong or being slightly less wrong a little bit righter that you taught someone they realized that fundamentally this is what the leadership objective had to be the leadership priority had to be was to build these capabilities into everyone everywhere and this is in part why it resonated so strongly with the CNO statement about the world getting more complex and dynamic because in the case of Alcoa they've got 200 facilities and 30 some odd countries and tens of thousands of employees so they're not quite as geographically spread out as all of you but it's sort of same order of magnitude problem and here's the other thing you know by and large you have American sailors on board your vessels and in your stations and the time that Alcoa was figuring out how to be such an aggressive learner across the full range of its operations it bought the aluminum industry in Italy and it bought the aluminum industry in the eastern block now if you start thinking about cliches or stereotypes of folks who are really concerned about precision and learning and excellence maybe the Swiss come to mind and probably the Germans come to mind and perhaps the Japanese for sure the Japanese come to mind but when you start on the list of companies which are known for productivity, quality and operational excellence I mean I'm not sure Italy is on that list no offense to Italians in the room but that's who Alcoa is proving out their ability it's not just with kind of the stereotypical nations and cultures where we think of course as everyone knows with all due respect they do that well anyway they're doing it in countries where no one has done it before so anyway this becomes the rules set for Alcoa over this period from 1987 through about 2000 where not only do they become impeccably safe and in fact they become the safest employer in the country and again let me just qualify or quantify that they're safer than any hospital for staff they're safer than any major in terms of staff when I try to tell my friends who go into blue collar work like consulting that if they decide to do a reorganization of their office and in the course of moving a desk from one part of the office to the next they pick up a box of paper and pull out their back and miss work the next day their consulting firm is about 10x more dangerous than an Alcoa mill so Alcoa goes through this transition by applying these four very simple ideas which is perfect is the goal the adversary is ignorance we discover adversary by looking for it by seeking out problems when we find a problem we try to identify the problem understand the problem and resolve the problem and as we go through that we have to teach someone else and we have to make sure we accomplish this everywhere all the time by making sure this is what leaders do in terms of developing the skills of other people now here's the follow up on this this all occurred under the tenure of Paul O'Neill he's 87 through about 2,000 and one might think well with all due respect everyone with all due respect everyone knows that with all due respect you don't understand that this is really about charismatic leadership that's the other kickback you always get oh that's fine for Apple you know Steve Jobs that's fine for Alcoa Paul O'Neill but Paul O'Neill left in 2000 or up to 2016 I checked with Paul the other day and said hey Paul what's the injury risk at Alcoa today you know what it is 0.08 it hasn't budged and he's had he's had two successors in that time maybe three in the 15 years he's been gone I'm pretty sure he doesn't go into Alcoa facilities I mean I call him he's never there so he asked the question what happened well the thing is in the period that he was CEO he inculcated a certain set of values about behavior within his organization and it was very strong values which is if you're more conspired to perfect than when you do it see any imperfection get on it and when you get on it and you've learned something teach somebody else so it's only three things and then the fourth one is kind of the mettle of just teach someone else to do this but he inculcated these very very strong principles taught them through his fellow leadership cascaded it out into the organization to the point that it became the organizational norm and so there was a new CEO and a new CEO after that this union president and new employees came and some employees left and they added new product and new process but they are coming back to what is fundamental to them which is this dynamic of seeing problems and solving them to convert ignorance into knowledge and then teaching somebody else and because he came up with such a simple rule set and was absolutely adamant about inculcating it Alcoa took the situation of sprawling processes sprawling products sprawling markets and made this very very dynamic environment stable or at least with the appearance of stability and reliability and agility that no one else in their sector could achieve now anyway I'll pause here because the rest of my story builds off of exactly the same script so we could talk about Apple or Intel or Toyota or anyone else and say well how do they get so far ahead and stay so far ahead and yeah the costuming is different it's cars instead of aluminum ingots or it's phones instead of cars the costuming is different and the cast may have different names but the storyline is exactly the same so anyway let me stop here because you haven't interrupted yet so I'm feeling somewhat insulted so alright alright so you got it there's gotta be questions there's gotta be questions gotta be questions yes sir sir colonel Randy White US Army great talk I think it's very applicable to the military one of the questions I have I've worked a little bit in the lessons learned industry in the Army and I think we try to do this probably nowhere near as well as Alcoa or Toyota but we try to find things that we can learn and take it and spread it out one of the problems that I've noticed is that we have so many lessons coming from so many different places that it's hard to figure out what is the key lesson how to get that what lessons we need to get out to the different units you have a suggestion for how you can handle that on a large scale that you would have with something like the Army or the Joint Force and military as a whole yes so the the short answer is to your question yes I do next one no no but here's what it is so first of all this is sort of the punchline to the presentation but I'll give it now because I'm going to keep coming back to it it's about see, solve and share and everything else is just detail around that and the storyline goes something like this is well anyway I'll say I'll say that story for the end so sharing so here's the thing I've seen this in industry all the time people say oh we got to share knowledge got to share knowledge right and say how are we going to share knowledge we're going to create a knowledge base and the knowledge base is a big electronic thing but it's sort of the metaphor sort of is like this giant cauldron which if you learn something you throw it in and then I have to you know sip through it looking for it when I actually need it now of course that never works and if you've ever been in an environment where they have these empty and whatever in there you wouldn't want to take out anyway so the knowledge base becomes this huge sort of monument to futility now there are forgetting about knowledge bases for a second there are communities which are really really good at sharing and so let me give you a particular example first so I have a buddy I was working with this guy Chris Kyoto is an orthopedic surgeon so if you go into Chris's office which he shares and he's got to practice other orthopedic surgeons in the waiting area they've got old copies of People Magazine and us not surprising glossy copies of New England Journal of Medicine which no one has read because no one really understands it but here's the funny part the doctors don't read it either but if you go into Chris's office he's got copies stacked piled of the something like the journal of foot and ankle surgery and those foot and ankle surgery journals man those things will leaf through sometimes it's highlighted and it's marked up with pen and he's got post it notes in it and occasionally he'll have an article ripped out and stuck on the board and he's starting asking the question why does he have such an intense interest in that journal well of course he's a foot and ankle surgeon and so to stay on the cutting edge pun not intended he's a surgeon but anyway to stay on the edge of what he does he's got to know what the latest and greatest is in terms of foot and ankle surgery he's got to read that journal there's another piece to it which is occasionally you'll check in with Chris or other guys like him how things going he says oh great I learned a lot from the last 50 surgeries I did I wrote an article and guess what it's in the journal foot and ankle surgery all right so Chris is working in this environment in which he has both incentive to extract from the journal and also incentive to put in the journal but there's another element and this is I think is they figure out you know if I build it they will come work fine in a movie but as I have to tell my kids sometimes the movies are fantasy right if you build it they won't come what you have to do is design it and operate it and manage it so the thing about journal and the reason that particular journal is so well read is because it has an editor and the editor every single day gets out of bed and says oh my gosh what's the community what are the boundaries on that community so I have enough focus to get interest in the critical mass so you have someone who worries about that then you have someone else who worries about the medium do we stay in print do we go online do we have online and in print what's our refereeing process alright so you have someone who worries constantly about this journal as a mechanism for sharing knowledge and continuing with the example of my friend this guy Chris Kyoto right so he's got journals now for other stuff which is not yet journal ready maybe there's a conference he goes to and again there's incentives to go to the conference to hear what's even further on the cutting edge and to have an opportunity to get whatever benefit there's from presenting but again with the conference not like a bunch of people just happen to show up and meanders hey what are you working on backs don't care right he goes to the conference about feet and ankle and how does that occur because there's a conference organizer who has a job almost identical to that of an editor a community of common interests how do I get the community big enough that we have critical mass of new ideas how do I keep the community small enough that we don't get diluted with extraneous topics what's the medium where do we meet when do we meet do we have post-percessions do we have plenaries right so there's someone who sweats those details about who to connect and how to connect all right so and then in the case of Chris you know he's got his journal he's got his conference he's got his seminars for something that's really really out there and I'm actually performing the surgery because there's nuance and subtlety which couldn't yet be captured in printed word but again there's someone who's managing that process of who gets invited who doesn't get invited what are the topics where do they sit they worry about the medium so that's the case of the medical community and how they share knowledge and the scientific community engineering community is exactly the same you've got this series of seminars and conferences and demonstrations and journals in which someone really what does the community talk about and how does the community talk to each other with incentives and time to both contribute to and extract from the community's discussion and let me continue this is that when we think of other social institutions which are very very effective at the sharing of knowledge they have exactly the same properties of someone who worries about the community its boundaries its content and its medium so libraries right you know and every town has a small library but there's a library in there who decides what books go in and what books don't go in the library and then if you go to a university you might have multiple libraries and there's someone who has to decide what goes in the science library versus the engineering library versus the arts library so on and so forth and how is it presented how is it catalogued what are the hours right because they have to worry about the community the community's needs and how the community communicates museums work exactly the same way it's not like you know a museum is just you throw all your junk right there's some a curator worries very much about who do we want to bring into the museum who do we want to appeal through the museum what's the medium how do we present the collection do we just put the stuff up there do we put it up there with explanation on the wall do we do audio tours do we have something online they really sweat those details alright and you can go on whether it's open source software or Wikipedia you have those roles played in all those situations of the community boundary definer the community having incentive to contribute and to extract and someone worrying really with great passion about the media of exchange so anyway in terms of armies and lesson learned let me kick it back to you in terms of oh we get so many lessons and we feel overwhelmed and we have trouble sharing it out what part does it have of those features and what part does it lack well from the army perspective we have the center for army lessons learned which is supposed to do the functions that you're describing collate the lessons and try to put them together in different reports push them back out to the community the joint force also has a similar program the joint staff where you have the joint lessons learned program and they try to collate lessons and they push out to the force to try to make changes but both organizations also have this huge lessons learned database and you go in and you try to find a lesson because you may not be privy to the reports that are going on or I think kind of more to your point you have before reports may get sent out but I don't know that they're necessarily organized in a fashion so I know as an armor officer these are the reports that I need to read you just get a blanket push on here stuff out there so that's probably something that could be improved but if you go to the database you've got a database that has hundreds of thousands of entries and trying to pull from that and get information could be challenging so in the printed age the editor worried about who subscribed who didn't subscribe they'd occasionally check and did you subscribe and did you read the articles maybe they put in a promotion there or at the bottom they said if you want to learn more write a letter to this address now in the electronic age they track that even more closely in terms of who opens who closes who reads how long did they dwell what did they download that sort of thing they're constantly monitoring that and again without knowing your world I guess at all what I would offer is the filter or the criteria of for all this categorization and labeling is there anyone actually managing through feedback and actually it took me a long time to get to it but it's the same logic right which is we design something for the purpose of being useful if we follow Paul O'Neill's rules you know about Alcoa we should design it in such a way that we can see where it's being used but even more precisely where it's not and when it's not find out why so if we push something out to the field we find people don't use it do we follow that thing into the field and say hey why didn't you use that thing and the answer is because it's about horses and we don't have horses anymore right and that's a gross exaggeration it's a gross exaggeration but it's this question of the starting point of I've designed something and I have to assume the thing I designed won't work the way I hope so what I have to do is find out when it doesn't work the way I want the way I hope so I can then recognize the ignorance I inserted not deliberately but inadvertently recognize the ignorance I inserted into that situation so I can address that ignorance and convert it into something useful so if these databases really had this dynamic of constant update you know constant self-checking constant self-correcting what you would see on the receiving end is a change in the profile of the stuff you got you need to say hey wait a second hey isn't that good I don't get any more horse articles I'm seeing I'm getting more armor articles and not only armor articles I'm getting the armor articles that I need whatever that happens to be as opposed to the armor articles which aren't terribly relevant to me so anyways let me just offer this is that I suspect right now you're thinking oh that'd be really nice and good but I don't control the Army Lessons Learn Center but here's the thing you know back to the admiral's challenge is that you all are going back to some type of command and maybe it's not command of all the entire United States Army I mean obviously for most of you that's not the case right it's a smaller operating unit within this larger thing called the U.S. military you still have the issue of people constantly discovering things which are difficult which you hadn't known would be difficult before you tried them and you have people who are figuring out why those things are difficult and they're learning something and so when you go back into a command and say wait a second you know I have soldiers sailors and Marines or Ammon recognizing things as indications of ignorance I have to build up a platform for them to share what they've learned so everyone benefits from that experience when I say platform I want to be very clear I'm not talking about an IT platform oh you know go get this ERP system or whatever else it might be a chalkboard if that's the right mechanism if that's the right medium it might be a whiteboard it might be a PowerPoint whatever it is but I have to have someone who's managing the mechanisms for sharing just like have people who are managing the well-being of the tanks and the ships and the planes for which we're responsible and I'll stop here but the mechanisms by which we share which include the boundaries the media the incentives those things are designed objects they're not as designed as let's say this clicker or that phone but they are designed objects and they're designed to be used by someone else by the fact that they're designed by us to be used by somebody else for sure we got something wrong in the design and even if the design works in the moment it'll stop working because the conditions and the situations change so we need someone who's responsible for the not only the design but monitoring the design and correcting the design all the time and let me just offer one more piece I didn't expect to give quite as long an answer I started off with yes but again I'm speaking way out of turn because I know your world minuscule amount but my impression of what I know of your world is that you never take for granted that a situation you created is now stable forever that you create a situation and then you monitor that situation to see where that situation is changing in different ways due to internal dynamics external dynamics you're constantly on guard as it were to see when the situation is changing and when it changes ideally you know sooner than later and react quicker than slower because of all these things that if you react quicker than and sooner you'll have a chance to control the situation and prevent it from snowballing into a chaotic situation was the same thing with a knowledge sharing device it's a constructed artifact and it's subject to all the disturbances of the world in which we live and it's subject to all those disturbances it will stop working well and so better to find out sooner and quicker than slower than later anyway, did that help? I think we got at least part of your homework done what do I do when I get back to command knowledge sharing with those criteria alright so some other question I'll try to answer it just a few more words yes ma'am commander Emily Bassett with Alcoa did they have this concept of C solve share inculcated at every level and the reason I asked that question is you know when you look at our military there are some portions where we might be more like the professions that you described and some portions of the military that are more bureaucratic and I don't necessarily want everyone at every level finding, creating some solutions to what they see as a problem and in the more bureaucratic sense of the military there are times where I want people just doing what they're told and not always trying to solve what they insist to be a problem so I just want to make sure I heard you say there are people you want to see inculcated problems and other people you don't want or again so my question is sort of the bureaucratic nature some portions of the military that are more bureaucratic in nature and the organizations that you gave examples were more professional organizations so again we are talking people who make 70 pound rims for SUV wheels and stamping plants in Cleveland I don't know it's not white shoe law firm in Manhattan these are my people we're talking about here right so I mean I may look professional how I dress but the reason I wear a bow tie is not because I don't get stuck in things that spin I mean so I mean really I'm trying to find where's my professional community here that's you know I'm thinking you know T with the pinky off I mean that's not who we're talking about here we're talking to people who work in the line so so that's my question is at every level did that happen at even the most junior I mean I don't know if you could say junior to senior level yeah I'm going to tease you right now but all right so understand what I'm about to say is not really Mendelssohn I'm just pretending but with all due respect you don't understand but think about that and you're being a good sport on this but think about what you're channeling which is the assumption that there are those of us in the world who are thinkers and you know smart and creative and those are the doers and said that way thinkers do is really it says those are smart and those are dumb and actually the thing you're saying let me just rant on this for a little bit there's actually a long history on that right so Edward not Frederick Taylor he was the father of scientific management you know what he said was about 50% right what he said was look if you have a situation which is not behaving well then you study it and he had time and motion studies and clipboard and stopwatch and closely like a doctor looking at a patient in an intensive care unit you'll come to a better understanding and if you come to a better understanding you can manage the situation better than if you lack that better understanding brilliant absolutely brilliant but the other problem was that Frederick Taylor was a racist I mean the guy was discussing and if you read any of his testimony his testimony always talks he always personalized about the person who's doing the time motion study and the person who's shoveling the coal ash and the person turning Worthington Huffington this kind of thing and the guy doing the shoveling is a guy named Schmidt it's always Schmidt and Schmidt and because where he happened and if he were working somewhere else it would be Pergola or Schwartz but it's always Schmidt who's doing the shoveling and if you read through this stuff Taylor's basic assumption is that guys like me you know guys like me with you know T. and the Pinky you know we're good thinkers which is good because guys like Schmidt who's a rock alright and so that's that's the attitude Taylor brought into this and I think you know half of it is brilliant and half is absolutely disgusting and I think completely undemocratic and un-American I mean every now and again I read the Declaration of Independence we hold these truths all men are created equal Taylor didn't read that part he didn't read that part now let's take this a step further in terms of who can do this so an answer to your quick answer to your question you know did everyone in Alcoa do this the answer yes answer is that yes that that if you start with the assumption that problems reflect ignorance and that the way to deal with problems is convert ignorance into knowledge then you have to also get over this other assumption which some people can solve problems and other people can't alright and again I know when we say it's like oh yeah of course I believe that to be true I read the Declaration of Independence all men are created equal but we don't always actually practice that now the folks who do they get great results so shifting it from Alcoa to a very tangible example with Toyota so back in in 1983 General Motors running a plant out in California near Oakland Fremont, California this plant was terrible they set records they had what was it they had the worst quality in the country the worst productivity in the country their epithetism was 25% they had recorded drug and alcohol abuse in the plant they had prostitution practiced in the parking lot and first line supervisors carried weapons into the plant for personal protection alright not surprisingly General Motors closed the plant down alright about a year or two later they opened up the plant and the deal was it was going to be a joint venture with Toyota and so they opened it up and they make I think it was the Selec at the time and within about a year's time within about a year's time that plant starts setting records again so you might be thinking oh man absenteeism no no their absenteeism was about 3% the rate of the common cold and and their quality is so good they start winning all these JD power awards and their productivity is simply off the charts and they become arguably the most productive auto plant final assembly plant in the entire country now here's the punchline of the people who worked in that plant which was this beacon of resurgent manufacturing excellence in North America in the United States 98% of them worked for General Motors it was rehab now let's start thinking through what the difference is when you went to work for General Motors what was your daily experience you were being asked to make a product no one wanted no one wanted and even if you could somehow convince yourself that someone actually wanted that product when you went to make that product you knew for sure that you would have difficulty and when you called out the problem about your difficulty you knew no one and actually let me qualify this so I had a buddy who interned it for the summer his job was final inspection and when the cars came by he inspected them and his job was to put a sticker on the rear window to say hey this car passed quality is job one or whatever so anyway the cars are going by and he doesn't put stickers on all of them so his boss says to him where's the sticker he said well you know you told me all about this quality thing we should inspect all the cars if they pass they get a sticker and if they don't pass the sticker and the superintendent starts wagging his finger says don't be a wise ass college boy so then he realizes he's supposed to put stickers on the car and not really inspect for quality so a couple of days go by and his boss comes by and says hey where's the sticker on that car he said well what am I supposed to do with the sticker again he says you know you inspect the car inspect and sort of air cause and then put the sticker on the rear window and he takes the guy says where's the window no window you know don't be a wise ass college boy so then this fellow realized that his job was not to inspect for quality and call out aberrations his job was to put stickers on windows so he got the roll of stickers and he just started stickering the windows on the cars all the way back to where windows were installed and then he'd sit down and read his textbook for college and then one day he had a genius insight he walked back and he found in receiving where the windows came in and he's like sticker sticker sticker sticker sticker and 30 minutes later he had done a day's worth of work a sticker ring right so anyway that was the GM setting now remember the transition that was how things were operated to this change of this sort of thing which is you inspected the car and it has a blemish on it oh my gosh it's terrible what did we do how did we create a situation like that let's find out or putting a seat in a car and you realize oh man I'm supposed to have four bolts I only have three call for help what's the matter I can only grab three bolts not four oh my gosh I'm sorry did we not train you well are we presenting the bolts in a bad fashion the glove on your hand to prevent cuts does it make your dexterity compromised let's figure that at the end of the shift let's have a conversation about that do some experiments and convert that ignorance we had about the design of your work into something more reflecting deeper knowledge now so that's the transition right which is you know you're going to fail every day to and if you don't if you don't you'll correct on it so tomorrow you're even more likely to succeed so on that theme of what's the environment in which people are working so I'll just tell one so a woman comes up this guy Gary Conviss Gary was site president at this joint venture and there's like a company barbecue or cook out or what and she comes up at the end of the day and says are you Mr. Conviss yes I am what's the facility why I do what can I do for you what'd you do with my husband what what'd you do with my husband where is he and he looks around and says I don't know who's your husband he says no he's not here I haven't seen him for six months and he says what so why are you telling me about your husband has been missing for six months and she says I want to tell you something about my husband who I haven't seen in six months when that guy plopped down in his lounge chair and he turned on the TV and he's saying some very insulting offensive way to get him beer out of the refrigerator and he'd drink a six pack a two six pack of beer and pass out in front of the TV and maybe he made it to bed night that night maybe he didn't make it to bed that night but the next morning he just sort of grumbled out of the door and went back to the factory and the cycle kept repeating every day every day every day and you can imagine Gary Conviss looking at her still wondering what he's supposed to do about the husband has been missing six months so he asked her what am I supposed to do about this she says well let me tell you there's a new guy coming home and it looks pretty much like my husband but it's a remarkable difference when he comes in he says hey honey oh did you get a haircut today and what are you cooking it smells wonderful can I help oh you're done I'll do the dishes so we can go out for a walk later and Gary is still staring at her wondering what he's supposed to do with this situation so he asked her what am I supposed to do she says oh nothing keep the old guy I like the new one and then to your question is this everyone everywhere the answer is yes right because nothing had changed in that facility except for how those senior treated those junior so in the old days it was about command control compliance audit and if things went wrong the person who experienced the problem who was sort of the nerve ending of this very large system that person got punished for detecting something about the system which was wrong it would be like this you touch something hot smacking your bad finger for detecting heat bad finger for detecting sharp that would be ridiculous but that's what's happening in that kind of environment command control audit compliance and what have they done they said all right well we have this very complex system it's tens of thousands of parts and you know who knows how many dozens and dozens of suppliers spread all over the country we're subject to weather and union grievances and the local ports and things are going to go wrong all the time what we want to do is actually reward people for calling out problems and ask them oh thank goodness because you know that thing we didn't know about now at least we learn that there's something we don't know about now we can start dealing with that now we can start dealing with that we're going to engage you with this and again I just want to play against what's sort of a conventional wisdom which is oh you need to empower the workforce because they know the answers and he started really building it out it's like all right empower the workforce they know the answers so if they know the answers it's like yeah I know how to do this easy but I really like the carpal tunnel right no I know how to do this easy but the rotator cuff I really want to get one of those cool things because when I have my arm propped up like that I get disability and I can put a beer in it I mean no one I mean no one says that I have a friend he just got appointed as social security judge disability I asked him Alex does anyone ever come in he says no so I got it on the authority right no one ever says that all right so here's the thing it's not that people doing the work know the answer but people doing the work know the problem and people doing the work can validate the answer so yeah you know what that's easier oh that's faster that's simpler and guess what your customers can do the same thing in the industrial world which is they can say yeah you know what I'm telling you what's wrong with your product and I'm actually validating or refuting your new design now so you start thinking about the situation of these wildly complex sprawling dynamic of course you want to engage the people out on the you know in the industrial world you know by the patient bedside or you know at the customer you know at the tactical ledges you know how I learned from army friends you know at the tactical ledges of course you want to listen to that because that's the first indication of something's going wrong why would you not listen to that because that's the sooner faster more frequent indication of an abnormality it'd be like you know that picture of the ICU I showed you before we just don't listen to that alarm you know I mean really the elevated heart rate the depressed heart rate how serious it's going to possibly be right you know kick the alarm you know it's interrupting our conversation I don't want to listen to that monitor beeping well you don't do that right and so in this situation also again the short answer to your question is that everyone everywhere yes but not in these ridiculous fashions but in this coming tonight had a question how did Alcoa balance having standard procedures from localized procedures across such a large bureaucratic organization right so let me let me connect your question about standardized procedures with his question about lessons learned and I'll I'll give you a very particular example but applies to Alcoa also so I mentioned installing seats and cars the reason for that is before I got to work somewhere else I worked on a line putting seats in cars and you know I got to understand how difficult that work was and what made it easier what made it harder so anytime I went into a Toyota facility and I look at stuff and it'd be interesting oh yeah it's kind of interesting how you put the door on and how you put in the wiring but the only job I really had an appreciation for was seat installation so I'd go up to people and say hey can you show me how you put a seat in a car they'd show me how you put the seat in the car and they'd take the seat off the hoist and put it down and then get the four bolts and tighten them up and then put on some trim and I knew Toyota was famous for standard work so I'd say oh can you show me the standard work for that and they'd take out and just imagine this exaggerate they'd take out a loose leaf binder which is about three inches and they'd take out a loose leaf binder which is about three inches thick and like 100, 150 pages and I'm like you gotta be kidding me 150 pages to put a seat in the car I mean how many steps is it it's like 21 steps 15 steps I mean really how can you get and the guy said oh no no no this page is how we do the standard work to put a seat in the car I said well why 150 pages he said because this is how we were doing it yesterday but it didn't work so well because over here it really was difficult to change from yesterday to today that's what we're doing and I said well the other page oh this is the day before and the day before that it was like this and as he went through and I said well what's all the way at the bottom oh here this is how we did it on the first day but man that's stuck we only did it for 20 minutes then we found that we had to figure out a better way from that alright so in terms of the standard work the thing I want to emphasize because again it's not static and dictated and that sort of thing but in the folks who do this well standard work is not standard forever I think it's more appropriate to call it the temporary standard and the temporary standard is a declaration of what you think will work and you use it until you find out it doesn't and when you find out it doesn't why keep using it modify it and so in the case of Toyota or Alcoa or these other great enough belief I believe if I do my work this way it will easy and I will bring joy to somebody else and if I find out that if I do my work this way and I don't it's not easy or I don't bring joy to someone else I better find out why and improve on it and so the standard work within Toyota was 150 pages and if you wanted to understand how they got to the way they're doing it in that facility you could leaf through and say oh yeah I guess they tried it that way oh look at that on and on now connecting this to a big organization so I think sometimes people think in terms of standard work and knowledge sharing and all of that is that the way you do your work has to be the way I do my work but the thing is when you go buy a car you don't actually care how the work was done I mean it could have been a leprechaun riding a unicorn you simply don't care you want the final result to be consistent so that when you buy a camera you get a camera you know Steve's camera or your camera or Jamie's camera with whatever that means in terms of quality and cost and features and functionality so if we have a starting point of this is how I put a seat in a car which says hey you know what and again back to this issue we've created a community of seat installation and so I'm going to give you my best known approach for putting a seat in a car and the point here is not that you do it my way but you use it as a starting point and modify it for yourself now let me just step out of this world back into healthcare so I like sitting named Terry Clemer and Terry is famous for the quality of care and his intensive care units and the causality is these protocols he's developed he's got tons of protocols how do you control blood sugar levels you've got a protocol how do you control body temperature he's got protocols for everything kind of like standard work kind of like procedure maybe in your world so Terry stands up and he's giving a talk and he says well here's the thing about the protocols really well our mortality rates are one-tenth for similar conditions as to other intensive care units they work great and he says and here's the other thing is that our protocols they're not private we put them up on the internet and if you want to read our protocols you can if you want to use our protocols feel free and then after this whole build up about the power of the protocols as a guide towards getting really good patient outcomes he says we don't have protocols and use them but they won't work they'll be a disaster for you so anyway the audience is like huh what's Terry talking about he just told me the whole key is the protocols he said well yeah the whole key is the protocols but here's the thing our protocols fit us because we've been tailoring them and we started off with what we thought was our best possible understanding based on what the scientific literature told us about controlling the protocol and wouldn't you know the protocol was really difficult so we changed it and then we tried the protocol again and it didn't work so we changed and we tried the protocol again and we realized it worked great for the attending physician whose experience and maybe for the fellow but boy the new residents they couldn't follow those protocols also so we had to make another protocol and had to train on the protocol and Terry's point was he had all these protocols but like the Toyota had to install a seat obviously a very different situation versus you know the vital the well-being of a human being the protocols were temporary protocols and in terms of what is the source of Terry's success managing his intensive care unit really it's not the protocols it's the discipline to develop them in the first place as a declaration of what you think will work the discipline to recognize when they're not working and the discipline to continually modify them and that's it that's his success so now you tie it back to how do you share it across a community so Terry puts up his protocols right and it's not because he expects other people to use it identically but he puts up his protocols and explains how they were developed well you know we tried this on the first day but we ran into this difficulty so we made a modification we tried this on the second day but ran into another difficulties and we went back to that one and we went forward again and he takes people through the whole process of discovery leading to the protocol now along that way there's some very important science and very important human factor stuff that's discovered but really when Terry shares what he's really modeling is not the temporary solution what he's modeling is the behavior to arrive at a continuing set of solutions that get better and better even as the situations change did that help? cool alright so I'll stop he nodded in such a way that it was both a yes and a yes and shut up already alright yes sir over there good evening sir Lieutenant Commander Rob Hamilton US Navy so I'm trying to think of this as kind of a process where say for instance you have an input an input where a problem is identified and the output is let's say you know some some form of a of a practice that's put in place or a journal article and an ankle surgery journal but not all inputs are created the same there are going to be some that just don't cut it so how do you separate the week from the chat that thresholds for what actually makes it into the process and gets kicked out in product and all the while not disenchant the folks who are providing input and don't end up with a journal article or the end process right right so the question is given that the world is filled with a lot of variation on what comes into a process how do you manage the process in such a way that it behaves in a way that seems consistent and so it's got to be you add process right which is if you discover a problem which is I've got a way of screening and selecting people but wouldn't you know people actually get through those screens and then they arrive whether it's at a university a college training whatever else it happens to be and they're really not ready oh I got to go back and figure out how did I recruit how did I attract how did I screen initially because I'm getting the wrong people into that situation let's say you think you're getting the right people into the process you take a check and some people have acquired certain skills to a certain level and other people haven't what do you do then son of a gun you know what I've got one form of training for different types of people I need to have some adaptation on that so long and short is that the common theme all the time is this issue of do something to generate feedback the feedback is I don't know what I'm doing and when I recognize I don't know what I'm doing try to at least feed that forward to the next cycle and just keep an eye on the time I just want to emphasize because all the examples I think most of the examples we've had are things which sound like fairly low variety high volume repetitive kind of stuff and here's the one thing I just want to offer is that stuff that's repeatable and low variety that you can figure out by trial and error when I started putting seats in cars I wasn't very good at it actually I was pretty awful at it but I eventually got it I could put a seat in a car and pretty competently because I had enough practice it was like every minute into a car came by and if you do that for eight hours a day you got 450 chances to get it wrong and 450 chances to figure out how to do it right the places where trial and error is really going to fail you is where you get very few shots at it and the thing you're trying to do is very, very complex and there's a lot of different parameters and that's where the discipline is even greater required and this is like everyone knows with all due respect kind of thing is that everyone knows that this sort of discipline around declaring what you think is going to happen when you act and then quick feedback oh that applies for discrete part manufacturing and things which happen all the time like blood draws in a hospital but I do really complex work but the thing about the complex work is that you only get one shot at it sometimes you only get to do whipple surgery on a patient with pancreatic cancer one time so you really want to know exactly whether you're progressing in the right direction or the wrong direction well how do you find that out well you go through an elaborate process of declaring what you think is going to happen in the course of the surgery and figure out how you're going to detect aberration very, very quickly so you can contain and course correct immediately because you don't get another shot on that patient who's very, very sick you're building something like a new building in advance what do I think we're going to do today and can I see something going wrong because this is not the kind of thing where through trial and error it's fairly if things go wrong what's the big deal I'll just put a window in the car later on I don't have that opportunity so it's actually the stuff which is complex the stuff which is idiosyncratic the stuff which is unique the stuff which is one shot that's where you have to have this discipline even more because in the cases like that if you don't have knowing what you expect to happen and the discipline to find out when you're wrong quickly then what you end up having is the leaning tower of Pisa because by the end it's too little too late do we have time for one more or should I say sure one more all right yes sir Amy sir my name is Steve Cornax it seems to me that the most important aspect of the methodology you have up there is actually number four the leadership part one two and three almost seem to be a methodology four is you know my understanding here is a you know developing a culture of top-down leadership involved leadership that that it sets metrics and it makes this whole thing work the question is did you find in your case studies that this was a top-down driven thing that caused this success or was it yes so it's a great question on which to end particularly with this audience so again the answer is yes I'll elaborate I'll do it with some sensitivity to the time this time so here's the thing is that you get people say oh well you know it's all about empowering the frontline workers and yeah there's actually a lot of value to that and what we have to do is let them be to their own creative devices but here's the thing and you all know this is that the young people are not the ones because they're in an environment where there's punishment, reward and incentives and models and examples and all that sort of thing they don't set the culture they adapt to the culture and they internalize the culture and eventually they can propagate the culture and continue the culture but they certainly don't set it who sets the culture it's a senior person it's a senior person by their daily interaction with other people they establish what the values of the organization are I got into a huge argument the other day you get a sense I get into a lot of arguments with doctors on this because they were saying oh what we have to do is change the culture so we can change the behavior and I was like are you an idiot I mean whoever's heard of that that you change the culture hey let's sit down and have a discussion around culture you know how do you feel about the culture well you know I feel this way about the culture how do you feel about the culture well let me tell you how I feel about the culture the way you change culture is you act you know you act and then people say oh look how he's acting oh he's done it again and again and again oh now I get a sense of his values and if I want to get along then I should act and I'm acting oh what did you know this is starting to reflect my values because I act this way all the time and I keep going and what did you know now we've got everyone linked all the way down so let me just tie this up with a very tangible example so when we got involved with alcoa and they were trying to take this issue around safety to everything there was a rule in alcoa that people would teach other people how to do this but they would only teach through the leader they wouldn't go to the shop floor because if they went to the shop floor yeah they could move machinery around and they could come with a new version of standard work and all that but they couldn't change the fundamental belief system the culture and the behaviors so the deal was if you wanted help from their subject matter experts you had to have a buy-in from at least six layers away from the shop floor and the client all the time was that guy typically that guy occasionally a gal but that guy and at first it was that guy and the people to whom he provided support and the people who felt that they had to answer to him so definitely it was around a very small footprint but a very long leg and the reason for that is you wanted to give people this chance for very very frequent reinforcement of a new set of behaviors to express a new set of values and then once you got that going you created this incubator you get some critical mass going then you could get this infectious effect but it had to start from the top and it was a pretty good prediction for us which is where will this work tell us how high we can go in the organization and what their span of authority responsibility control was and it will work up to those boundaries and it will work no further so it is top down and again there's the element of the bottom up because you again you need that collective cognition going on error detection solution validation you know collaborative input and all that but if the senior leader doesn't do this no one else will despite and this is why I didn't work in general motors because yeah we're going to do this we're going to do that but they didn't themselves and because they didn't do it themselves 25% absenteeism and all the other horrors there anyway I guess I'm done so thank you