CASE STUDY – The author, who leads the CI team in a large real estate company, discusses the lean transformation of the business and role of the improvement team in it.

Words: Bruno Moura, Head of Continuous Improvement, Sonae Sierra - Portugal

Over the past 30 years, international real estate company Sonae Sierra has grown to become one of the best-known names in the shopping center business. For most of our first two decades in business, we focused on investing in, developing and managing our shopping centers. Along the way, we developed a considerable amount of know-how, opened as many as three new shopping centers per year, expanded to new markets and received hundreds of accolades worldwide.

Things couldn’t have gone better for us, until the 2008 financial crisis arrived. The downturn severely affected us: first, the value of real estate dropped, making investments in new or existent shopping centers financially riskier; secondly, customer spending went down, lowering our tenants’ sales and the amount of income we earned from leasing out space.

The “new normal” hit quickly and, forced to adapt, we started to work on shifting Sonae Sierra from a developer, owner and investor to a service provider. We had the expertise and knew the path ahead of us, but something was missing. Comparing where we were with where we wanted to be, we identified three things we’d have to ensure:

• We couldn’t continue to do things that we knew we shouldn’t do anymore. This was especially difficult because people had always worked that way and valued their routine. Change implied having the courage to challenge the status quo, which was uncomfortable to do for many people.

• We couldn’t continue to repeat mistakes and miss opportunities. We realized we had a lot of duplicate tasks across our processes, departments and the organization, which slowed down our response to our client’s needs. Additionally, best practices and lessons learned had to be efficiently spread across different teams, businesses and countries, to capitalize on our successes.

• We couldn’t automate inefficiencies, just because automation is supposed to bring quick gains. We wanted to be digital, quick and agile, but we couldn’t underestimate or overlook the huge benefits of simplifying our processes first.

We searched for a solution to effectively deal with these three issues and found it in one of our sister companies – Sonae MC, which has been using Lean Thinking in its shops and supermarkets since 2007. Their efforts were featured as a case study in the second edition of Masaaki Imai’s book Gemba Kaizen: A Common-sense Approach to a Continuous Improvement Strategy.

In October 2012, we initiated a series of pilot projects to bring kaizen and other lean practices (like visual management, 5S, huddle boards and standard work) in some of our business units. The results in the first six months were remarkable, and included:

• A 2% increase in the time spent by our Collection team on collection activities, leading to an immediate improvement of 0.1% in our overall collections rate in Portugal (corresponding to around €300k per year). This was achieved by understanding what constituted “value-adding tasks” and focusing team efforts on those.

• Lowering operational costs at NorteShopping, one of the largest shopping centers in Portugal, by €80k per year, by freeing up storage space to rent to our tenants and rethinking Maintenance and Waste management processes and teams. We were also able to influence these third-party service teams and inspire them to make their work more client focused. Their contribution continues to be key to this team’s success.

We call our transformation Improving Our Work (IOW), whose mission is to “foster practices and a culture of continuous improvement and incremental innovation towards client satisfaction and sustainable business results”. Today, Lean Thinking permeates our organizational culture.

It’s spread across Sonae Sierra is facilitated by the IOW Office, which I lead. We work alongside 120 teams across six countries to provide our people with:

• Clarity on the organization’s purpose. We regularly liaise with Senior Executives and our IOW Steering Committee to understand what the short-, medium- and long-term ambitions of the organization are, and how the IOW Office can foster additional value creation within the teams on the ground. Now that the company has transitioned to a service provider, the IOW Office is helping the operational teams to (re)define their priorities appropriately and to effectively (re)allocate the available resources to their new purpose. Asking simple questions like, “Is that what the client wants?” followed by “How do you know?” normally sets the tone of our conversations with the teams. Only after we have enough reliable data on the processes and established the appropriate success metrics do we develop improvement plans (which are necessarily aligned with the needs expressed by Top Management).

• Training and coaching to support the adoption of lean principles and the sustainability of lean behaviors. In 2013, we created an internal team of Continuous Improvement facilitators who are continuously learning new tools, ideas and frameworks (from Agile to BPM) to always be prepared to respond to a wide variety of internal client requests. It is important to note that these IOW Experts are rarely directly responsible for the development of improvement projects within the organization, because we want to make people more accountable of a project’s results and autonomous when it comes to their lean skills set. Every new hire at Sonae Sierra receives IOW training. First, they complete an induction E-Learning during their first month at the company and, secondly, they attend a two-day off-site workshop, in a game format that simulates a real-life retail scenario in which attendees are called to improve using lean tools. These training sessions have significantly improved the perception of IOW’s usefulness in the daily problems our people face. If they are interested, people can also request further training to the IOW Office in specific lean tools or even pursue a career as an IOW Expert. All they need to do is ask for it!

• Information on lean initiatives, best practices and results. We are implementing a simple but effective communication plan focused on sharing learnings with a strong personal perspective and reinforcing the message of employee ownership of IOW efforts. We also encourage teams to measure the costs and benefits of the improvements they make, whether they are direct benefits (for example, a third-party service cost reduction or additional revenue) or indirect benefits (like, less time to perform a certain task). Once again, this is intended to reinforce lean behaviors and help the IOW Office to communicate the impact of Lean Thinking and IOW using numbers and case studies. To make it easier for anybody to find, manage and track their continuous improvements efforts, we also created our own IOW Portal. This tailor-made platform: centralizes all starting, follow-up and final A3 reports, and allows for their fast sharing via e-mail; provides real-time information on IOW project results (for instance, the money saved or earned by an initiative, or the amount of hours reallocated from non-value creating activities); communicates where Sonae Sierra’s best examples of Lean Thinking are; prepares quick reports on team performance according to established improvement plans; and allows any employee to register an improvement opportunity for his team, even from their smartphone. The IOW Portal is a fundamental tool for us: providing employees with accurate and up-to-date information greatly contributes to creating trust across the organization. This year we will also focus the IOW Office’s activity on ensuring that business best practices are consistently spread across the entire organization.

• Involvement and recognition, to engage everybody in IOW. We want everybody at Sonae Sierra to feel empowered to implement changes and be a part of the IOW effort. To further boost and consolidate our continuous improvement culture, senior executives celebrate successes with their teams on a regular basis. We also give away small presents to the leaders of improvement projects, like notepads or cell phone charging cables with the IOW logo on them. We know how important it is to recognize a team’s effort.

WHAT WE HAVE ACHIEVED

This approach seems to be paying off. To date, we have 4,200 registered improvements in our IOW Portal, worth over €15 million (just counting the first 12 months following the conclusion of the improvement project). Overall, we calculate that we have reallocated almost 10% our time to more value-adding activities. All of this has been achieved without any external help for the past five years, because we have grown to understand that we are the specialists when it comes to solving our problems.

This is particularly visible in our management of the Covid-19 pandemic, during which we were required to substantially reduce the activity in our centers and offices and dealt with a tremendous amount of uncertainty and concerns. Among the hundreds of  initiatives we developed internally in the past two months, I would highlight two: launching e-comm platforms within the websites of the shopping centers we own or manage on behalf of others in a very short time, thus creating an additional revenue stream for tenants that were quite often exclusively dependent on their in-person sales; and, supporting our tenants with the setup of their home delivery schemes and drive-thrus, to ensure that their clients received their parcels as soon as possible.

TO CONCLUDE

Eight years into our lean transformation, and after implementing these initial improvements, our challenge is to continue to look forward and think outside of the box to find more and more opportunities to create value and provide new services for our customers.

Sonae Sierra’s Improving Our Work program was designed for those who want to change things and realize the ball is in their court and no one else’s. We truly believe it’s our job to give every person working at Sonae Sierra the tools and knowledge they need to make a different every day. And that means making continuous improvement as natural as breathing for us all.

_{THE AUTHOR}