Palmer attends a leadership meeting, with McKee, Davis, Reid, Allers, and Masters. Masters opens the meeting by apologizing to everyone, specifically Palmer, revealing that Reid taught him an important lesson. He explains that the CEO and CIO function like a dysfunctional marriage, with both sides feeling hindered by the other. Referencing Patrick Lencioni’s Five Dysfunctions of a Team, he explains that the best part of his career has been working in excellent teams and says he wants to build a team with trust and dedication. After explaining a bit about his life, he offers everyone the chance to join him in building a smoothly operating, skilled team, declaring that IT is a competency that Parts Unlimited needs to hone.

Masters asks everyone to share something about themselves, and after they do he thanks them for participating, emphasizing the importance of teamwork. Palmer, Allers, and Davis acknowledge that Development usually meets its deadlines but does not leave IT Operations enough time to ensure everything functions. This pattern results in backlogs for both Development and IT Operations, leaving them unable to complete tasks. Pesche joins the meeting at Palmer’s request.

Palmer explains Reid’s analogy of the manufacturing plant, in which work is planned based on the available resources. IT Operations accepts too much work and ends up taking shortcuts, missing deadlines, and piling up more tasks. Reid calls this pattern “technical debt,” which, like financial debt, accrues until it is eliminated. At Palmer’s request, Masters encourages IT Operations to turn down tasks and projects they cannot complete. Palmer proposes a plan to halt all work except Phoenix for both Development and IT Operations, allowing them to catch up on their technical debt.

Pesche notes the seeming contradiction of the freeze: If IT Operations stops taking new work, they will have more idle time. However, Reid explains the concept of “technical debt,” stressing the importance of reducing WIP. The freeze will allow IT Operations, as well as Development, QA, and IS, to catch up on the unplanned work that has been created by skipping processes, making unauthorized changes, and working on unofficial projects, all of which are inevitable in a high-intensity, high-pressure environment. At the same time, the team can whittle down its existing workload to catch up and get back on the right path. Allers says that he cannot halt development, but he can delay releases to IT Operations for two weeks. Everyone agrees that IT Operations and Development will focus on Phoenix, avoiding new work and delaying releases. Masters agrees to stop other managers from making individual IT requests.

Palmer notes that he needs a better laptop replacement, but he is delighted to get an email from Fingle complimenting IT for its work on Phoenix this week. Palmer meets with McKee, Davis, and Pesche, who are discussing how to prevent unauthorized changes that cause outages. He shows them the email, and everyone is pleased. However, they note that managers are upset their projects are being refused, and McKee worries that there will be a large backlog when the project freeze is lifted. Palmer says they cannot lift the freeze until they can prioritize work effectively.

Palmer meets Reid on the factory floor, where Reid tells Palmer that Brent is a constraint because so many work centers need him; he is not a work center himself. As a result, when the project freeze is lifted, IT Operations should only accept projects that do not require Brent. Palmer’s monitoring project preventing unauthorized changes and his plan to have senior engineers learn and document Brent’s methods will help alleviate pressure on Brent. Reid compares this plan to a bill of resources, which lists the materials and processes needed to complete work. Reid also emphasizes the Three Ways, noting that the Second Way, making wait times visible, helps ensure shorter wait times for resources. He compares Palmer’s monitoring project to Total Productive Maintenance, a concept that reinforces the need to constantly elevate resources and availability. He also reiterates the Third Way, which asserts that constant improvement is required to ward off entropy. Palmer worries about Pesche’s projects, which include audit compliance. However, Reid points out that Pesche’s projects do not help IT, so IT should not accept them.

Palmer joins Landry, Davis, Reid, Pesche, and representatives of a variety of departments at the audit meeting. The auditors scrutinize the business for accidental or malicious fraud vulnerabilities, and Landry assures them that, though the IT controls are not reliable, Finance regularly monitors for fraud. After five hours, the auditors are satisfied. Pesche asks to talk with Palmer, and Palmer notes how terrible Pesche looks. Pesche complains that the auditors did not criticize the company’s total disregard for IS, noting that no one even acknowledges his role in the company. Reid interrupts, saying that Pesche’s work is irrelevant. Reid suggests that Pesche focus on meaningfully impacting processes and trying to reduce IT’s overall workloads. Reid adds that the factory security team might be able to help him. After Reid leaves, Palmer tries to console Pesche, who drops his black binder and leaves.

The IT team jokes about Pesche, speculating on whether he quit or had a breakdown. Palmer stops the gossip and gathers Davis and McKee to discuss Reid’s bill of resources idea. When Davis expresses uncertainty, McKee illustrates Reid’s work center concept, which consists of a machine, workers, methods, and measures. She describes how server setup works like manufacturing, but Davis insists that IT cannot be standardized. McKee wants to experiment with creating lanes of work and bills of resources with incoming tasks.

McKee’s experiment uses kanban boards, a method she learned from the factory managers. Her experimental kanban board, which tracks tasks as WIP, greatly improves efficiency. She also wants to institute an Improvement Kata, which uses a PDCA, or Plan, Do, Check, Act structure, to consistently improve the department. McKee also shows Palmer how they color-coded the CAB to track which changes are most important and for which type of work. Palmer is impressed but unsure whether McKee’s promises of greater efficiency can be achieved.

Later, McKee shows Palmer the projects the team has arranged for release when the freeze is lifted. Five business projects take priority, and Brent is needed on four of them. Palmer tells McKee to arrange the remaining 70 projects, which McKee’s team has struggled to rank, into three lists: projects that do not need Brent, projects that can increase Brent’s productivity, and everything else. Davis says they should prioritize preventive work, but McKee reminds him that any improvement outside the constraint is an illusion. They joke that Davis sounds like Pesche, and Palmer wonders how Pesche is doing.

Because of McKee’s kanban scheduling, Palmer receives his new laptop two days earlier than expected.

McKee calls Palmer to a meeting to discuss an email from Fingle claiming that Brent is a week behind on a task he said would take an hour. She explains that the task requires multiple teams, each with its own busy schedules. Palmer remembers Reid’s wait time equation: estimated wait time equals the utilization percentage for each resource divided by the remainder. For example, a resource at 90% utilization divided by the remaining 10% idle time, results in nine units of waiting time for the task. For Brent’s task, each team is adding wait time.

Palmer realizes that the same issue affected Phoenix, and he notes that cooperation between IT Operations and Development increases wait times. McKee suggests a new kanban board, and Palmer suggests standardizing recurring tasks to prevent new constraints. They plan to discuss Fingle’s work breakdown structure (WBS), and McKee suggests hiring a “water spider,” a person whose job is to hand off completed tasks to the next team.

Palmer and Paige spend a day with their children, and Paige notes how relaxed Palmer has become. Palmer compares his job to the process of replacing his laptop, which was difficult but resulted in a new laptop that works great, like his team. That night, Palmer misses calls from Pesche while watching a movie. When he calls Pesche back, a drunk Pesche asks him to meet at a bar. Worried that Pesche is contemplating dying by suicide, Palmer meets him. Drunk and disheveled, Pesche asks if he has ever done anything useful for Palmer, and Palmer says he has not. He arranges a cab for Pesche, who does not answer calls the next morning.

When Palmer finally hears from him, Pesche cheerfully informs him that he arranged a meeting for them with Landry. This makes Palmer nervous. Landry is a powerful executive who could fire both of them. Pesche explains that he has to learn what Landry needs so he can make himself useful.

When they meet with Landry, Palmer notices that Pesche, who is clean and well-dressed, has a sleek, black notebook instead of his binder. Pesche leads the meeting, asking Landry to describe his objectives. Landry says his primary role is in the Finance department, but Finance does not control the company. Many of his objectives are linked to overall company performance, and both Pesche and Palmer see a link to IT. Landry says IT often holds him back, and he urges Pesche and Palmer to focus on Phoenix. After the meeting, Pesche and Palmer agree to discuss how Landry’s goals overlap with IT.

Palmer calls Reid, who notes that Palmer and Pesche discovered a critical part of the First Way: understanding the business environment in which IT operates. Reid compares IT to a trucking company, which needs to focus on deliverables, preventive maintenance, and risk assessment. Reid says Palmer and Pesche should meet with the owners of Landry’s objectives to discover where IT is under or over-scoped. In addition, Pesche should meet with the audit team to learn why he was irrelevant to the SOX-404 audit findings.

Palmer and McKee investigate the ownership of Landry’s objectives while Pesche looks into the SOX-404 audit findings. Palmer and McKee meet first with Ron Johnson, VP of Manufacturing Sales, who explains that Masters and Landry set unreasonable expectations for the sales team, which can rarely meet their quotas. However, he says that the biggest issue is between inventory management and IT Operations, which often leads to communication gaps with customers and missing inventory. Palmer understands how IT can address these gaps, and he and McKee plan to organize a list of the systems they can use to support Johnson. Johnson says he will also fight to secure more funding for IT Operations’s preventive projects.

Next, McKee and Palmer meet with Maggie Lee, the Senior Director of Retail Program Management, who describes similar problems to Johnson, including the need for better inventory management. Her main concern is reporting, and she notes that Phoenix was intended to provide reports on customer satisfaction, interests, and product performance, but those features were cut to streamline Phoenix’s deployment. Lee says the Marketing and Research & Development (R&D) teams are excellent but must get new products to market in six to nine months to remain viable. She complains that IT needs more resources to keep up with the demand for business projects, and Palmer notes that her complaints align with the First and Second Ways, including reducing cycle times and amplifying feedback from customers. Ultimately, McKee and Palmer conclude that Phoenix should not have been approved.

Palmer gathers McKee, Davis, Allers, and Pesche to discuss their findings, and Palmer shows them a table outlining the different departments, their goals, and several IT-related factors. The group decides to devise control measures to prevent problems and enhance other departments’ processes. They present their plan to Landry and Reid. Landry complains that they did not integrate business objectives into their processes sooner, and Reid criticizes Landry for omitting IT from his decision-making. Palmer proposes meeting with the other management teams to integrate IT risks into business risks, allowing IT to track issues in advance and assist the teams in meeting their goals. He also wants to meet to discuss Phoenix with Landry and Allers. Landry agrees. Reid tells Palmer that he has accomplished the First Way and will need Pesche for the Second Way.

Pesche meets with Palmer, McKee, and Davis to share his findings from the SOX-404 audit, noting that manual reconciliation each week removed IT from the audit’s scope. Palmer realizes that Pesche, too, has mastered the First Way, reaching a better understanding of how the business operates altogether. As such, Pesche wants to drastically reduce the security workload, outsource certain transactional systems, and focus entirely on strengthening Phoenix to eliminate risk. Impressed, McKee, Davis, and Palmer arrange to have members of several teams work together to integrate security into daily Development and IT work, removing the need for security updates after deployment.

Palmer reflects on how his new laptop represents the success of his team, with project work flowing smoothly and ticket and task backlogs addressed. The team is working on the Third Way, practicing team exercises for crisis management and routine processes. By working around Brent, they are preparing to take on more projects and work, and they are happier, knowing that everything they do is important to the business. Palmer happily compares how other IT departments function to the IT department at Parts Unlimited.

Pesche calls Palmer to tell him that Moulton is circumventing the project freeze. He reveals that Moulton’s team has outsourced four projects. Two do not impact major systems, but the other two violate company and state privacy and data policies. Pesche agrees to review the outsourced company’s policies. Palmer asks McKee and Pesche for advice on handling Moulton. McKee reveals that Masters favors Moulton because he sees her as a strategic asset, and Moulton will do anything to avoid responsibility that could jeopardize her position. Masters is grooming Moulton as the next CEO.

The new Phoenix deployment consists largely of fixes and runs more smoothly than the initial release, but the Development, QA, and IT teams hit a block when a database issue grinds progress to a halt. They discover that weeks earlier, at Moulton’s request, Brent made a change that created a discrepancy between the IT environment and the expectations of Development and QA. The team devises a plan to resolve the issue by 6 am, allowing stores to open normally, but Davis and Palmer wonder what to do about Brent, who has again caused a problem. This validates Palmer’s suspicion that Brent largely fixes problems that he himself created. The release is completed at 5:42 am, but staff remains on call to handle any issues. Palmer wonders how to make future Phoenix releases easier.

Palmer, Allers, Davis, McKee, and Pesche meet with Masters and Reid, who compliment them on the Phoenix release, despite its issues. He also compliments them on helping the other departments meet their objectives. When Moulton arrives, Masters criticizes her for her unauthorized IT projects. Palmer explains that outsourcing does not reduce workload and can create unforeseen risks. Moulton reluctantly agrees to meet with Palmer and Allers to discuss her plans but threatens Masters, citing Strauss’s desire to split up the company.

Moulton leaves, and Masters asks Reid for his insight. Reid says that work should only go in one direction: forward. Part of the Second Way is amplifying feedback, which requires more frequent releases. While Allers wants to slow Phoenix releases to check for errors, Masters wants to increase releases to provide a return on investment. Reid advocates faster releases, saying that Brent should be involved from the earliest developmental stages, working to imbue quality from the beginning. Palmer devises a compromise: Phoenix releases will slow for Allers, but a separate team will work on developing niche features to allow Marketing to increase sales through Phoenix. The team agrees.