Allen C. Ward - Visible Knowledge for Flawless Design

The year 2003 was the hundredth anniversary for the Harley-Davidson Motor Company. As the director of product development, Dantar Oosterwal faced the challenge of delivering on a promise of double-digit growth Harley-Davidson had made to the street, and he did not know how to do it. For many years, the demand for Harley-Davidson motorcycles far exceeded their ability to supply them. At the peak, customers waited nearly 24 months to buy certain models. The companys greatest focus at that time was eliminating bottlenecks in manufacturing and logistics to get motorcycles out of the factory to waiting customers. The only motorcycles on the floor of a dealership seemed to be those waiting to be picked up or used bikes from trade-in. In the 1990s, Harley-Davidson invested heavily in operations, doubling its manufacturing footprint in an effort to address the supply issue. This investment resulted in record revenue and profits every quarter as Harley-Davidson broke production constraints and shipped increasingly more motorcycles to fill demand. At first, the incredible demand seemed insatiable, and the growth promised to the street seemed sustainable. However, a deeper look behind the numbers revealed that the increased product shipments had eroded pent-up demand. By the early 2000s, the wait times for motorcycles had dropped dramatically with the wait lists virtually eliminated, reflecting a significant shift in the ratio of product demand to supply.

The demand/supply ratio is a crucial metric used for product planning and an integral part of a system dynamics model of the motorcycle industry created to evaluate various business and industry scenarios for decision-making. As the ratio dropped, the model provided a tool to evaluate ways to increase the demand/supply ratio. The alternatives evaluated ranged from reducing supply, to traditional pricing and marketing plays, to increased product innovation. The model identified several actions that could provide short-term demand/supply ratio improvements, such as pricing. The analysis also identified that the only meaningful and effective way to achieve sustainable revenue and profit growth was through increasing the introduction rate of new products. The dilemma was figuring out how to increase new product development throughput to drive the double-digit growth that had been committed.

Compounding the situation, Harley-Davidson had focused for several years on creating and instituting a systematic product development process based on Stage-Gate methods. The company implemented the approach wellso well, in fact, that the Product Development Management Association (PDMA) awarded the company the Outstanding Corporate Innovator award in 2003. Despite being identified as among the best at utilizing conventional methods, it was clear that making conventional development methods a little (or even a lot) better would not lead to the drastic increase in development throughput they needed. Dantar concluded that Harley-Davidson needed to learn a better way of developing products.

The quest for more effective approaches led them to Jim Womack who was then the CEO of the Lean Enterprise Institute and an internationally recognized expert in lean operations within companies. With the effectiveness that lean methods had demonstrated in operations improvement, the thought of using lean manufacturing methods to improve the product development system was very appealing. However, Jim was adamant that lean product development was very different from lean manufacturing, and that product development needed to be approached very differently. When asked how product development should be addressed, he did not have an answer, but suggested Dr. Allen Ward who was studying lean product development methods at the University of Michigan at the time. This was the beginning of a relationship that proved instrumental in the changes at Harley-Davidson and led to a much better way of product development.

The first contact with Allen was not encouraging. He had become reticent to work with companies out of the frustration he had endured in trying to get organizations to change the way they worked. Over a series of conversations, Allen warmed to the relationship and realized that Harley-Davidson may be different as he eventually agreed to be a mentor in the effort to change product development. The work resulted in a close relationship as Allen provided insight to the lean development methods he studied at the University of Michigan, and Harley-Davidson strived to apply this in real-world applications. Both sides learned and grew through the experience. Few people understood lean product development like Allen did. He was able to not just observe and communicate what Toyota did, but he had an infectious enthusiasm and insight into why things worked. This enabled Harley-Davidson to adapt principles to Western work practices and institute lean product development at one of the most iconic American companies.