Lean Transformations Group

The “First Principles” of Extraordinary Organizational Performance

Every now and then, someone decides to look at things very differently.

Elon Musk, CEO of Tesla and SpaceX, provided some of this “out of the box” thinking with a recent SpaceX product development process using the concept of “First Principles.” Most product designs are done by “Analogy”. This is where organizations approach the design of a new product by starting from a previous design. Engineers look at what needs to change, keep most of the design the same, and add in changes. This approach is not necessarily bad, but, in cases when the desired outcome is particularly challenging, teams need an entirely new development process.

At SpaceX, Musk recognized this and challenged the team to design a new rocket based on a “First Principles” approach, which basically means, “Boil it down to the most fundamental truths and then build it up into a system using these First Principles.” They broke down the parts of a rocket, looked at the fundamentals of physics of each subsystem and subcomponent, and then defined the factors that influenced cost, quality, and performance. They recombined the parts into a new system to create a better rocket design than they would have been able to otherwise. The real advantage of the SpaceX rocket is the capability of very fast reuse of the rocket for the next mission (with up to 5 times lower cost than the rockets used in the Space Shuttle Program).

What does this have to teach those of us who aren’t building rockets? I believe this same bold and unconventional thinking is needed in organizations today to design much more effective work processes… the kind of processes that help organizations reach the kind of performance levels that make them capable of excelling in today’s marketplace.

What might the “First Principles” for creating an exceptional organization be? 

1) Worldview – The worldview of the organization’s leadership team members has profound effect over the actions they take (and ask others to take) to solve problems. The worldview that is necessary for achieving extraordinary performance, I believe, is based on the concepts of Neuroscience. The Brain is a “complex adaptive system,” not a machine. Likewise, your organization is a complex adaptive system just like that of the brain, and for this reason, it is not like the simple mechanisms of a mechanical clock. Some of the core concepts of complex adaptive systems include:

  • Emergence – patterns emerge as a result of individual connections
  • Communications – communications between the parts enable the growth and emergence
  • Adaptation and Learning – both happen as a result of new information entering the system

2) Purpose  Deliver Value to the Customer. As so many of us in the lean community have learned from Toyota, the purpose of the organization should be to deliver value to the customer. If this is done well, the result is much improved performance and significantly greater profits.

3) Problem Solving – How do you build an energized, truly aligned team? You engage the entire organization in problem solving that contributes to improving the delivery of value to the customer. When the primary activity is problem solving and as a leader, you can manage the work to address the right problem, at the right place, at the right time, everything improves. The idea is to create a common, effective problem-solving process used by everybody. Then you want to use Value Stream Thinking to create alignment and help identify the next set of problems you and your team want to address.

4) Social System Development – To engage people in effective, system-level problem solving, you need to create a social system based on respect and trust. In my experience, this almost always involves:

  • “Psychological Safety” (Amy Edmondson): This concept is about how to drive fear out of the organization so that your team members feel safe to work with others and offer their own ideas for change.
  • Trust through Dialogue Communication (Judith Glaser): Judith informs us that dialogue is truly the only form of communication that builds trust. The other forms of communication are dictate and debate. While these other two are the more common forms of communication, they do not build trust.
  • Humble Inquiry (Edgar Schein): This concept requires practice and helps to build the culture of respect that’s necessary for employees to take personal responsibility for improving their work and hence, the work of the organization as a whole.
  • Flow State: The Psychology of the Optimal Experience (Mihaly Csikszentmihalyi): When people are in a “Flow State”, they lose track of time. Csikszentmihalyi discovered that people are also happiest when they are in this state. Leaders can take proactive steps to encourage getting every employee to this level of experience through thoughtful process design.
  • Respect - A leader’s role in creating healthy social systems is to practice the art of respectful communication for problem solving as she engages with problem-solving teams in daily visits.

5) Passion for Learning – A leader demonstrates passion for learning every time he/she interacts with anyone in the organization. Having curiosity about the business or performance problem, the social situation, and the learning process is key. All of this is reinforced through setting expectations that every individual, team, and function has adopted regular, nested learning cycles. The organization improves dramatically when everyone is continuously improving their ability to learn better and faster each week.

With these simple “First Principles,” you can lead your organization through a significant business transformation. Instead of thinking of this as a step-by-step “how to” plan, I suggest adopting these “First Principles” by using a mental model for culture change that helps you build a problem solving culture. Next, I describe such a mental model that I co-developed with my team at Lean Transformations Group.

The “Learn by Doing” Mental Model

Remember, a mental model is just a thought process about how something works in the real world. It helps us to provide guidance on creating change. For leaders, mental models are important because leaders create the culture. People copy people, especially leaders. Over time, the thinking and behaviors of the organization mirror the leader’s own thinking and behaviors.

The “Learn By Doing” mental model that builds high performance teams is intentionally action-oriented to honor the experiential nature of changing organizational cultures. It keeps teams focused on what matters, in this case, the problem solving thinking going on during the organizational transformation. This mental model is also a systems model where three interdependent “learn by doing components” are integrated and must be worked on together. How do teams do it? First, by focusing on real business problems with real people working in effective problem-solving teams. All three components utilize the First Principles described above.

The first component of this model is technical: Build the Framework for Problem Solving (First Principles 1, 2, 3). This creates the structure to enable people to be focused on real business problems using Value Stream thinking. The second component, Grow Respectful Social Connections, provides the trust and communications practices so people can learn together while they solve systems problems (First Principle 4). The third component is Accelerate Organizational Learning (First Principle 5). Remember, practice these concurrently.

Technical Component: Build the Framework for Problem Solving

This component can be initiated by you, the leader. Transforming from one paradigm to another takes deep thinking and acting. I have found the best way to begin the change process is to consciously create a way of getting a small group, a slice of your organization, to "see" problems instead of goals. Goals can be fragmented and disconnected, but if you begin by defining business problems as they are tied to the interface between the company and the customer, then your team members can start working together to solve problems.

The framework for problem solving includes these efforts:

  1. Define the problem gap at the delivery point to the customer. What product or service that you deliver has a gap to close in terms of quality, or time to deliver (e.g. either it takes too long or the delivery date is missed). Quality can be about problems of the product delivered or problems in application and or degradation over time.
  2. Break down the problem gap and determine where the problem is the greatest - Which plant, which product, which line, and in what timeframe is the problem most pronounced? Engage the owner of the value stream that delivers that product to customers to lead the problem solving work.
  3. Define and build a team with the help of the value stream owner. Select people who work in this value stream and/or the contributing processes that relate to the delivery gap. Use an effective problem solving process to identify root causes and run experiments to prove irreversible corrective actions.
  4. Use the PDCA (Plan, Do, Check, Adjust) learning process to continue making improvements.
  5. Allow the value stream to tell you the next problem area to address so that your team members are continuing to improve and refine their value stream

This value stream and problem-solving approach is the way that you embed the new paradigm of problem solving into just one part of your organization. Let it grow and take root there before attempting to spread it to other areas. Work together and help your team members practice thinking and acting with a problem solving mindset. Think of this as your first experiment.

Social Component: Grow Respectful Social Connections

The social system is an important part of teams being able to problem solve together. Your interaction with the team is the most significant factor in creating trust so that people willingly take on responsibility for their part of the problem. When interacting with team members, demonstrate the virtue of curiosity. You might think to yourself, "I wonder how that person is thinking about the problem?" Try to not put your thinking into the business problem in front of you and make recommendations. Instead, ask about where your team members are using the problem solving process. Keep the conversation focused on exposing and breaking down problems.

To grow respect and trust, you’ll want to do truly everything you can to practice respectful listening and humble inquiry in your daily interactions. Pay attention to maximizing dialogue while minimizing dictation and debate. You’ll recognize dialogue when people share individual points of view, open up about potential alternatives, and show each other respect. Your long-term goal? Get each person into their own Flow State where they lose track of time and feel engaged, and enthusiastic.

Learning Component: Accelerate Organizational Learning

Speed of learning is key to improving performance. The best way to improve this is to have small teams create cycles of learning (using the Plan Do Check Adjust process) through weekly plans. Every day, teams can gather for short meetings to keep things on track and decide which problem solving experiments to run. A weekly plan might look like this:

Friday - The team leads have a reflection meeting that includes these three parts of PDCA

Check - Reflect on the plan, what has worked and not worked, what the team learned.

Adjust - Make change to the next week's plan based on the analysis of Check

Plan - Create a weekly plan - actions for each day, person by person

Every Day - Do - Daily 15 minute check-ins - every day the team assesses what was done yesterday and commits to the plan for the day. Each member should have some responsibility to the action plan.

As a leader, your job is to periodically check in to see how teams are performing, but your even more important role? Put a PDCA learning cycle around this PDCA process itself. What you’re trying to do is learn how to learn faster. What worked or didn't work last week? What did you learn about the learning process itself? What adjustments can you make next week to learn faster? Once you answer these questions, create a plan for improving learning next week. Then do it again.

Talk to us at Lean Transformations Group if you can use some help building this “Learn by Doing” mental model into your current organizational plan. This article is 2 of a 3 articles series. Read article 1, “The Modern Leader Creates the Conditions for a Problem Solving Culture, and 2, "Putting New Leadership (AKA Problem Solving) Principles Into Practice." You can also pick up my book, Transforming Leader Paradigms.

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