Creating the Agile Organization April 2013 Rich Gildersleeve and Jerry Wright

1. Creating the Agile OrganizationApril 2013Rich Gildersleeve and Jerry Wright Never Stop Getting Better®

2. Agenda Brief overview of DJO Global The need for speed and agility Agile/Lean characteristics, the top 8 list Agile/Lean exercise – Lean NPD Agile characteristics (continued) Exercise: Making Your NPD More Agile

3. DJO Global Statistics: • $1.13 Billion in Sales for 2012 • Approximately 5,370 employees • Products sold in more than 80 countries • Over 140,000 units manufactured daily • More than 35,000 sellable products • More than 1 million square feet of operating space • More than 12,000 orders shipped per day • The largest orthopedic rehabilitation company in the world • 8thlargest orthopedic company in the world • Largest privately held company in San Diego

4. DJO Global Locations Malmo Arden Hills, Shoreview Mequon Guildford Herentals Mississauga Clear Lake Freiburg Indianapolis Ecublens Vista Mouguerre Asheboro Shanghai Barcelona Milan Sfax Hong Kong Austin Tijuana Sydney Cape Town

5. Best Practice / Benchmark Operations

6. The Need for Speed

7. Every Day on the Serengeti Plain! …It’s not the big that (b)eat the small, but the fast that (b)eat the slow.

8. Need for Change? “It is not necessary to change. Survival is not mandatory.” Dr. W. Edwards Deming 

9. Lean/Agile Characteristics Continuous improvement culture Learning organization Strategic and operational portfolio planning Appropriate use of technologies Metrics used to reward appropriate behaviors Decisions made quickly Bureaucracy minimization Suppliers and vendors moving fast

10. Company Culture

11. Continuous Improvement Culture A continuous improvement culture is much more important than any agile or lean tool or technique we will be discussing today. Such a culture allows limitless potential to unfold. Without it, as new tools are implemented, success rates will be reduced and improved processes may regress. • Visual and interactive methods • Engagement throughout organization • Walk the talk with metrics • Reward appropriate behavior

12. What is the Culture of Your Company? Choose 3-5 key words that describe your company’s culture. Do you think it is a good culture that should be emulated by other companies? Or do you think it needs work? • Open / Accepting –OR- Closed / Confidential? • Fast-paced / nimble –OR- methodical / steady? • Very power-oriented –OR- independent / free? • Easy to change –OR- difficult to change? • Innovative / try things –OR- Keep to yourself?

13. Continuous Improvement How does your company handle a business process that is too slow, costly or error prone? Who points out problems that need to be fixed? Who fixes the problems?

14. Analysis Team Analyze Analyze Analysis Team Recommend Run Trials Blitz Team 3 DAYS Decide MONTHS Make Change Management Implementation Team Implement Implement Change Employees Problem Solving KAIZEN BLITZ MSH! TRADITIONAL METHOD Slow and Unsure

16. Continuous Improvement Culture • KAI • To break apart • Tochange • ZEN • Study • Makebetter KAIZEN • Continuous Improvement • Reduce waste aggressively, methodically and continuously • Involve everyone in solution BLITZ =Lightning Fast!

17. Tasks that transform information and raw materials into products that meet customer needs are value-added Everything else is waste and must be reduced or eliminated Fundamental Principle of Kaizen

18. Value-adding or Not? Financial analysis Project prioritization Customer values Project planning Design Capital requests ECOs Testing Design loops • Waiting in line (queuing) • Patents • Labor routings • BOMs • Innovation • Sample production • Tooling • Post-release follow-up • Sign-offs and reviews Incorporating ‘Lean’ leaves more time for innovation and risk taking

19. What is Lead Time? The best way to describe lead time is to press a start button when a project starts and then press the stop button when it is finally released for sale. Lead Time is the total elapsed time that it takes that product to make it from to idea to realization and ready for sale/shipping to customers.

20. Lean/Agile NPD (Reduce Lead Time) 1 Month - 10% 12 Months - 80% 14 Months - 93% Typical ratio of value-adding NPD activity If focus is only on reducing NPD value-add activities Non Value Adding NVA VA Non Value Adding NVA VA Decrease lead time radically by focusing first on reducing non value-adding activity! NVA VA Project Lead Time 0 3 6 9 12 15 Months

21. Holistic Product Development Company Vision and Mission Industrial Immersion for Tech Awareness Internal Offering Strategies & Structure Customer Immersion for Market Awareness Strategic Portfolio Planning Technology Advancement Product Development Sustaining Engineering Well-received Offerings Continual Post-release Learning Updated: 05/08/12

22. Company Vision and Mission Industrial Immersion for Tech Awareness Internal Offering Strategies & Structure Customer Immersion for Market Awareness Strategic Portfolio Planning Technology Advancement Product Development Sustaining Engineering Well-received Offerings Continual Post-release Learning Updated: 05/08/12

23. Holistic PD and Key Processes Critical customer interests Company Vision and Mission Customer Orientation Ethnography Customerstorming Industrial Immersion for Tech Awareness Internal Offering Strategies & Structure Customer Immersion for Market Awareness VOC Technology Leverage Technology mapping Field testing Strategic Portfolio Planning New materials and techs Advanced conceptualization Kaizen blitzes Prototyping Vendor and Univ partnerships Value stream mapping Technology Advancement Product Development Sustaining Engineering Intellectual property Knowledge gaps-capture LAMDA problem solving Resource KanBans Set-based design Well-received Offerings Value-add Optimization Protostorming learning cycles Stage-Gate Innovation Enhancement Project management A3s, processes Scrum-sprints Continual Post-release Learning Metrics Updated: 05/08/12

24. Holistic PD and Key Processes Company Vision and Mission Customer Orientation Ethnography Industrial Immersion for Tech Awareness Internal Offering Strategies & Structure Customer Immersion for Market Awareness Technology Leverage Technology mapping Customerstorming Strategic Portfolio Planning mature working process Critical customer interests newer or needs tuning Intellectual property Resource KanBans Vendor and Univ partnerships Advanced conceptualization difficulties, likely need a blitz Knowledge gaps-capture VOC Technology Advancement Product Development Sustaining Engineering Field testing Prototyping Stage-Gate Set-based design Protostorming learning cycles Project management A3s, processes Scrum-sprints New materials and techs Well-received Offerings Metrics Value-add Optimization Value stream mapping LAMDA problem solving Innovation Enhancement Continual Post-release Learning Kaizen blitzes Updated: 05/08/12

25. “The only real mistake is the one from which we learn nothing.” John Powell Learning

26. Learning and innovating: some ironies Uncover true root cause for lasting change (LAMDA). Explore many options for optimal innovation Innovation enhancement Get VOC completed so we can start design! No Problems here! Broad specs are OK to start, but don’t waste time developing refined specs. Instead learn first VOC is a journey, not a one-stop visit Celebrate the discovery of problems Resist jumping to conclusions, acting too soon Many VOC checkpoints throughout cycle, single feature feedback, trade-offs Root cause/learning, countermeasures Test to specs! I have the solution!

27. Learning: Filling Knowledge Gaps A few of the many unknowns in developing a new product Marketing: Which features are important to our customers?, value proposition?, volume?, pricing? Engineering: Optimal component and/or assembly design?, manufacturing methods? Manufacturing: Cell design?, PM schedules?, training?, VWIs?, root cause analysis of low FPY and/or field failures? Some tools to facilitate learning and to fill these knowledge gaps A3 thinking, often employing LAMDA Set-based thinking 5 whys Fishbone diagrams Problem analysis trees Strategy canvases

28. What is GEMBA? GEMBA is a Japanese word that means the actual place or where things are happening. For most of us this is where the work takes place. The “Ohno” Circle TaiichiOhno was a founder of the Toyota Production System. He used the “Ohno” circle to force going to GEMBA and observing. Why is this important for R&D?

29. What is an A3? • Crisp, objective, visual and interactive general purpose tool developed by Toyota • So named because they fit an A3 size of paper • The processes used to develop specific A3s are as important as the A3 itself • Engender a style of… …thinking that is rigorous and thorough …communication that focuses on hard data and vital information …problem solving that is collaborative and objective

30. Types of DJO A3s • Knowledge capture • Problem solving with LAMDA • Voice of the Customer (VOC) • Project Management • Vendor background and capabilities • New concepts • Technology mapping • And so much more….

31. COMPANY CONFIDENTIAL

32. LAMDA Problem Solving: The Cycle of Knowledge Creation LAMDA: Look, Ask, Model, Discuss, Act Gemba visits, go see! Expert input, asking “why?” and “who?” Modeling to fill knowledge gaps and uncover true root cause(s) Discussions regarding LAM phases to discuss root cause(s) and appropriate countermeasures Implementation and follow-up check lists Similar to PDCA: Plan, Do, Check, Act Did we visit the Gemba and talk to the many stakeholders? Did we start Doing well before understanding root cause and effectiveness of countermeasures? Somewhat similar to DMAIC: Define, Measure, Analyze, Improve, Control Did we quickly get to the Gemba and gather expert input? Appropriate for “simple” issues?

33. LAMDA by itself is just a nice tool, an instrument It takes a trained and proficient user to make the tool sing… ….and a conductor, or mentor, to achieve optimal effect COMPANY CONFIDENTIAL

34. Recent Knowledge Generation Example: Iceman Foam Filling Problem solving with start to finish story telling A3 structure with LAMDA integration clarifies thinking Mentoring, drafts, reviews Multiple reviews No speculation or guessing allowed Show what didn’t work, as well as what worked

36. 5 You visit a clubhouse one afternoon and book a tee time for early the next morning. Are you prepared for our one hole course? Look: Gemba visit 2 1 Wind: In face 10mph (+10 yds) Grain: Left to right (+5 yds) 3 4 5 6 Slope: Back to front (+20 yds) 7 5 8 9 10 11 Ask: Expert input (local pro) Dew: Reduces slope effect by 50% Knowns Distance to hole: 150 yards Distance for irons: 13 12 14 15 Model: Play 5: 180 yds 6: 170 yds Best score yet, but noticed cold morning air (+5 yds) 16 17 7: 150 yds 8: 135 yds Start here

37. Exercise #1: LAMDA problem solving • Past problem • Name an instance where ‘solution’ was less than ideal? • Did you jump to conclusions? • Would LAMDA process have helped? • Current problem • What difficult problem are you now facing at work? • Are there knowledge gaps? • If so, will LAMDA help you avoid the common traps?

38. Technical knowledge capture A3 example

39. New Concept A3 example Company Confidential

40. Many companies launch product or service design efforts based on whatever knowledge they already have about customer needs from questionnaires, focus groups, the opinions of marketing staff and senior engineers … and sometimes the CEO. Often this information is more opinion than data. Teams read through this existing customer information, whether it is relevant to the current project or not, then dive directly into design work. Then, the company has little or no further contact with customers until the product or service is released into the marketplace In this model, customers are not engaged in the initial development of the ideas or prototyping efforts. The risks of this non-data-driven approach are evident. This pattern provides just one feedback cycle from the market – and it comes after all development costs have been spent and change is extremely expensive. At this juncture company officials say things like, "The customers do not understand all our features." "They treat us like a commodity." "They do not recognize the value of our differentiation." Yet the fault lies with the company, not with customers.

41. Companies that have advanced their voice of the customer (VOC) methods to the next level have dozens, if not hundreds, of VOC cycles built into their development processes. They do a lot of quick back-and-forth cycles with customers throughout the design phases, incorporating detailed customer preference information in analysis of trade-off decisions. To get a deeper understanding of customer needs, innovative companies have explored two ideas – rapid prototyping and tools for making design trade-off decisions.

42. GEMBA and VOC For most companies, customer interaction takes place over dinner or in a meeting room between Sales and Marketing and the actual customer. When it comes to VOC where is GEMBA? What might most companies be doing incorrectly? Key takeaway: Bad process – no customer interaction except at beginning and end of project. Little Gemba interaction. Good process – interaction with customer throughout the development cycle. Frequent Gemba visits.

43. VOC Tracking A3 example Company Confidential

44. Project Tracking A3 example

45. Interactive A3 posting boards

46. Innovating Cherish your visions and your dreams as they are the children of your soul, the blueprints of your ultimate achievements. -Napoleon Hill

47. Set-based Design Moves us from thinking in instances to thinking in spaces Needed when there are knowledge gaps Convergence: long lead first, short lead last

48. ProtoStorming™ AKA set-based design, learning cycles etc. Investigating more alternatives early on to optimize the ultimate design and mitigate design loops and risk Later design freezes now OK, and don’t hurt development cycle times Helps eliminate false starts as well as the product developer’s all too common lament: “if marketing could only get the design specs correct at the beginning of the project, we could do our jobs and deliver a great product” DJO has used protostorming for large scope and technically challenging projects since the early 2000s.

49. ProtoStorming™ Details Gather about 10-20 motivated people Brainstorm product or issue for about two hours Break group into three or four teams Have each team select one or two brainstorm ideas for development, exploring business issues as well as developing tangible prototypes Regroup and report out after about four to eight hours of work Plan next four to eight hours of work (plan, design, build, test, review) Final report out Winning ideas move into pipeline, or have accelerated concept development phase

50. ProtoStorming™: Accelerating the concept development phase Brainstorming combined with rapid prototyping in a blitz-like atmosphere Small, passionate teams Outsiders involved More ideas investigated in a shorter time period Reduced dependence on design specs Technology helps