Breaking new ground in product development
Roberto Priolo: You have had an impressive career at Caterpillar. Could you walk us through it, mentioning some of the main milestones in the company's LPPD (Lean Product and Process Development) journey?
Steve Shoemaker: I spent 33 years at Caterpillar and, for the first decade or so, I thought lean was something done only in the factories. I didn't appreciate the opportunities that existed beyond the shop floor. It was only in 2003 that I began to develop a proper understanding of Lean Thinking.
A turning point for me was reading Michael Kennedy's book Product Development for the Lean Enterprise - we called it the "blue book." It talked about how you could get four times more productivity out of your engineers. As a manager, who wouldn't want that?! I credit that book with making me really think about lean, along with The Machine That Changed the World, by Daniel Roos, Daniel Jones and Jim Womack, and Lean Product and Process Developmentby Dr. Allen Ward.
From that moment on, there were four main phases in my career. First, I was Technical Manager at Cat Electronics, where we developed the computers and control panels that controlled the engines, machines and transmissions. Everything that could have software was controlled by our division. We collaborated a lot with product suppliers, and that was when I discovered the importance of a solid supply chain for a company like ours.
Later, as I began to explore the Toyota Way, as described by Jeff Liker, I moved from the world of components (I grew up in engines and was now in electronics) to the machine-building side. In the Building Construction Products division, where smaller machines are made, we faced enormous business challenges. I joined the division in 2006 and a few years later the financial crisis hit us hard, which was a big problem for a business so dependent on the housing market. We had to turn things around. At the time, I was leading the engineering organization, but Caterpillar, on a broader scale, was already working with Dr. Liker to implement the Toyota Way in our plants. We looked for ways to get involved in the lean work too, and I soon started working with John Drogosz, who now leads the product element of LPPD (Lean Product and Process Development) at the Lean Enterprise Institute.
Next, I went to our plant in Akashi, Japan, and became Chief Engineer of the Excavation Division. Living in Japan in that role was when I began to truly understand what lean is. After all, I was living in the society where the methodology had originated! Over the years, I visited Toyota and its suppliers several times, which allowed me to "connect the dots" and understand what made Akashi's product development so effective. During my time there, we modernized our product line and developed a new portfolio of excavators. Looking back, I realize the most important lesson I learned there is how critical people development and respect for people are.
After five years in Akashi, I was asked to return to the United States and lead engineering in the Earthmoving Division, which was the core of Caterpillar's machine business and designed tractors, loaders, pipelayers, paving equipment and motor graders. That was my last role before retiring from the company. The division was very expensive, our quality was not where it needed to be, and the perception in the rest of the organization was that “we needed to be fixed”. Over time, we made great progress, improving our quality by 50% and reducing our spending to add another US$ 200 million to our bottom line. Critically, we reinvented the belief that the company is the best place in the world to be an engineer, and we did it through many of the lean principles. Around 2018, when Jim Morgan's Designing the Future came out, we began working much more closely with LEI (Lean Enterprise Institute) and achieved amazing results.
RP: When you started, there wasn't much information available about LPPD out there. There weren't many books, besides Michael Kennedy's. Where did you get your inspiration?
SS: The "blue book" was what we used as the basis for many of our activities. We held book clubs in every division I went to, and I gave the books to all my bosses. But yes, at that time there wasn't much material available. There were elements of LPPD in Liker's book The Toyota Way, but it wasn't until the publication of Jim Morgan's bookThe Toyota Product Development System that we finally got our "textbook." It really became our playbook.
RP: Lean teaches us the importance of making work visible. How difficult is that in an LPPD environment?
SS: If you have one program, it is easy to grasp - you set up an "obeya", you create a Value Stream Mapping, etc. However, in my last role at Caterpillar, I was leading the engineering organization of a US$ 7 billion business, with hundreds of programs under way at the same time, 400 product improvement activities happening simultaneously and hundreds of millions of dollars in research and development. In a scenario like that, identifying bottlenecks is extremely difficult (especially in an environment that has moved to digital), and that is why we created the concept of the Design Factory. It allowed us to see the flow of work - something easy to do in a factory, but very hard to do in the world of design. You walk into a design office and you cannot immediately tell whether we are behind, which engineers are overloaded, and so on. The Design Factory helped us understand the process, making sure it is stable so that it can be improved.
Let me give you an example. Shortly after I arrived at the Earthmoving division, one of our teams called and asked for five more engineers. They said they were behind and needed to release drawings. "Are purchasing and manufacturing ready to receive the drawings when you release them?" I asked. They didn't know, but insisted they were behind and needed extra help. They didn't get the engineers - and they were angry about it - but I was trying to show them that it makes no sense to pile up work if there is no one ready to receive it. In the knowledge world, this kind of situation is very common, precisely because flow is so hard to see.
RP: When you look back on your career at Caterpillar, what was the biggest challenge you faced?
SS: One of the hardest things I had to do was convince our engineers that the suppliers who made the components we needed and the plant that assembled the machines were really our customers. People thought the customer was the person driving the tractor. That is true, of course, but it is also true of the next person or process in the value chain. Identifying your customer is, without a doubt, one of the most important elements of lean thinking applied to knowledge creation.
In that sense, my years in Akashi were absolutely eye-opening. There, we had international simultaneous product and process development teams, whose goal was to get manufacturing, engineering and supply management to tackle problems together (whether a cost or quality problem, or when approaching the development of a new product). It sounds so simple and basic, but it is very complicated, because all these functions have a different focus.
RP: What would you say LPPD means for Caterpillar?
SS: In my last division, Earthmoving, we certainly gained a better understanding of process management. As I mentioned, we achieved great results there, including a 50% improvement in quality, but I believe the greatest benefit LPPD brought us was the understanding of how important collaboration is. We began to consider it a defect when a supplier requested a change or when the plant could not assemble a product correctly. The impact of that shift in perception was monumental and opened up a whole new set of opportunities.
RP: From a leadership standpoint, what behaviors enable this kind of system?
SS: There is an equation Jim Morgan refers to that I love: the management system equals leadership behaviors multiplied by the operating system. This means that when leadership behaviors are good, results compound and things get better. On the other hand, when behaviors are bad, they can harm the business. In most companies, traditional management behaviors are rewarded, and it is very common to give engineers unrealistic goals and tell them to work harder. We would never do that on the shop floor, so why do we do it to engineers and knowledge workers? Because we don't see their work!
The lean approach is completely different. It encourages you to listen to the people doing the work, understand what they need to get the work done and then support them. As a lean leader, you must develop people so that they have the knowledge to do the right things and the time to do those things right the first time. The time aspect is very important; otherwise, you will find people cutting corners to meet deadlines.
In fact, being a lean leader is much easier than being a traditional manager. Lean managers rely on people and support them, while traditional managers think they need to have all the answers. The lean approach simply makes more sense and, if there still aren't many lean leaders, it is because lean is still somehow considered an unconventional approach. Over the years, I had very uncomfortable discussions with my bosses, trying to help them understand that it takes time for lean to work, that patience is needed to manage change until we see the results of our work.
