INTRODUCTION

Solving the Problem with Lean

MORE THAN a decade and a half ago, I began my quest to understand what it takes for companies to succeed in going lean. After researching and demonstrating different applications for making its methods work, I became increasingly convinced that lean business practices offer a solution to the serious challenges so many corporations and institutions face today. I simply assumed that those engaged in implementation activities had grown in this belief as well and were solidly on board.

And then reality struck.

As I traveled the country following the release of Going Lean, I was astounded by reactions from people familiar with this term—that many who had been involved with it expressed outright disdain for anything termed lean. While I had previously understood that some misunderstanding likely existed, these frank discussions served as a rude awakening to the extent of their frustration.

How could this be? What was it that led so many people to stand so deeply against an approach that should instead inspire pride and optimism?

As I dug deeper, I ran across an interesting phenomenon. Despite lean’s enormous popularity among executives and practitioners, I found that a tremendous divide often exists between them and those in the workforce and even within the ranks of middle management—with the former often completely unaware of the feelings of the latter. I began to study this disconnect; it seemed clear that overcoming it would be critical to fostering advancement of a system so dependent on those very people for its success.

Then it hit me. For years I had been closely following and contributing to the advancements in understanding lean as a principle-based approach founded on solid theory and a rigorous structure for implementation. What I had missed was that its implementation had very often taken a different course altogether.

Too many firms and institutions seem to be chasing the latest fads rather than implementing rigorous programs founded on the accumulation of decades of knowledge. Attention goes to the individual tools and techniques—often without much focus on the deeper, transformational aspects that lean methods were intended to advance. And the result has become all too clear: serious inconsistencies in how lean is being approached—and, along with this, an alarmingly high level of frustration.

Moreover, I found that the term lean no longer brings to mind a single approach; companies and institutions have flocked to its growing number of variants (sometimes as a way to escape its Japanese jargon and unyielding production-based structure). Depending on which of these a business or an institution begins with, lean might assume a very different structure and methodology. These varying interpretations of what lean is all about appear to have contributed to confusion and frustration, and to the very different levels of understanding, maturity, and plateaus in performance that corporations and institutions seem to attain.

So what, then, is lean?

On the surface, the answer seems quite obvious. Lean implies the opposite of bloated; going lean therefore suggests cutting out the fat—taking direct aim at operational waste in all its forms and thereby slashing corporations’ cost of doing business. Companies focus on removing excess inventories, unneeded movement, and unnecessary processing steps. They apply it alongside technology solutions for improving information, and couple it with Six Sigma for driving down defects. In all, lean has become synonymous with cutting down the time, materials, and effort it takes to get things done.

Yet, within today’s complex, dynamic business world, this is not nearly enough.

Why is this? While the term lean is powerfully descriptive of the outcomes this approach represents, implementing improvement in a way that directly targets these outcomes is not the answer. Doing so leaves the foundation supporting how a firm or an institution should roll out its efforts largely unaddressed. Worse still, most charge ahead without first acknowledging their dynamic conditions—those shifts in customer demands or changing business circumstances that cause disruption and drive this “waste” to accumulate in the first place. In doing so, organizations risk trivializing what lean is really all about and falling seriously short of attaining lasting improvement.¹

The Dynamic Basis for Lean

Eliminating operational excess has long been the Holy Grail of American business. Henry Ford’s Model T was perhaps the clearest example of its application—a powerful demonstration of the cost reduction made possible by precisely honing work steps. But how this is done is of critical importance. History shows that Henry Ford optimized his methods for the largely stable environment in which he operated at the time.² However, such stability could not last. When Ford’s business was ultimately forced to adapt to customers’ increasing demands for variety, the company’s fortunes precipitously declined.³

Many of today’s corporations maintain a similar focus. Founded on management principles that were honed during the industrial boom throughout the early part of the twentieth century, many companies operate largely on a presumption of stability—a belief that customer’s demands will remain consistent and predictable; that conditions will remain inherently reliable. This belief in strong, consistent demand broken infrequently by short periods of adjustment has driven the widespread practices of optimizing for economies of scale and managing-by-outcomes that still dominate businesses of all types. Manufacturers, airlines, retailers, medical providers, educational institutions, and others align their operations, organize their departments, structure their information systems, and plan the introduction of new products and services within a mindset of optimizing for the specific range of conditions they currently face.

Such a mindset, however, can leave them largely unprepared for the longer, more dramatic shifts that today have become the norm. Economic downturns, spikes in oil prices, and fallout from catastrophic events can quickly erode any gains from “leaning” out activities; companies might see their cost savings quickly erode, their “wastes” reemerge, and their hard-earned quality and efficiencies wane (a result that recent events have so broadly demonstrated). Moreover, many of the changes that companies make to optimize their processes during stable times can instead increase the turmoil and waste that result when uncertainty spikes and conditions suddenly change.

But if going lean is not about “cutting the fat,” what is it? Answering this requires that we first understand the driving reasons behind why the widely regarded benchmark for lean manufacturing, the Toyota Motor Corporation, began its journey toward lean.

A Foundation in Crisis

Toyota began its foray into lean manufacturing soon after the end of World War II as a means for overcoming what must have seemed to be overwhelming constraints. Struggling to gain a foothold despite low, volatile demand for its products (the worst possible mix for a manufacturer), Toyota had to compete with the likes of Detroit, which was thriving amid predictable, expanding mass markets. Moreover, Toyota had to deal with a labor revolt that forced it to make unprecedented agreements to get the workforce back into its factories—including the guarantee of lifelong employment.⁴

What could the company do? Traditional methods clearly could not overcome these challenges, which were far more severe than its competitors had to deal with. Hiring and firing its people to adjust for changes in demand were no longer the answer. Instead, Toyota applied a new way of thinking, shifting everything from how it performed work to the way it shared information and made decisions—even how it rolled out innovation. And in doing so, it created the means for turning what had now become its most valuable asset—its work-force—into a powerful competitive advantage.

The company broke from the traditional practice of separating work into repetitive processing steps and then synchronizing these using top-down controls. Instead, it created autonomous teams with sufficient skills and equipment to turn out product families (groups of items sharing similar processing characteristics)—producing entire parts or components from beginning to end. This made it possible to more precisely synchronize each of its activities with the actual needs of its customers—pulling just what was needed to match their rate of consumption at each step rather than pushing materials along to meet preset schedules.

Toyota factories no longer produced and stored enormous batches of identical items with the objective of optimizing for a narrow range of anticipated conditions to attain large economies of scale. Instead, they turned out smaller quantities that much more closely represented actual customer demand at each step of production. This created the powerful effect of leveling out uncertainty and disruption across the supply chain and, in doing so, generating a different kind of efficiency that more than offset the great economies of scale that traditional practices could produce.

Toyota developed a range of tools and techniques to make this work, supporting such advancements as rapid changeovers for shifting from producing one configuration to the next (a key to gaining the benefits needed from its product family approach, as described in Chapter 6). The result is a system of management that is much better suited to the dynamic business conditions that have today become the norm.

But it is important to understand that Toyota does not stand alone. Airlines like Southwest Airlines, other manufacturers, and even Walmart adopted this very different way of managing their business as they, too, grew facing tremendous challenges. And, like Toyota, they go far beyond targeting the visible outcomes of speedier operations and reduced “waste” so commonly seen as the reasons for their success. By applying a common set of principles, or lean dynamics, their lessons point to a powerful means for overcoming the forces of uncertainty and change and, in doing so, achieving excellence across a broad range of conditions.

Structuring for Lean Dynamics

Going Lean first described the concept of lean dynamics, introducing a clear way to identify those who have succeeded in applying the tools and practices of lean manufacturing to flexibly respond to changes in customer demand, environmental shifts, and other factors. By pinpointing which firms stand above the rest in responding to the shifting conditions and changing demands of today’s dynamic business environment, and identifying their shared characteristics, it isolated the principles key to their strong, sustained performances over time.

How is it possible to identify such firms? By using the value curve—a graphical tool that illustrates how well an organization creates value within an environment of change. Lean dynamics firms display a stark, distinct difference from traditionally managed companies. They yield stronger, steadier, tangible value even across the most severe market conditions.

Consider the implications. Despite facing serious challenges—from the aftermath of September 11, 2001, to hurricane Katrina, and later when oil prices spiked to near historic levels—these companies continued to advance. Not only did they demonstrate the capability to seamlessly shift their activities and deliberately respond to changing business needs, their much greater flexibility made it less disruptive to roll out new innovations. Their results made it clear that they had gone well beyond the traditional objective of increasing efficiency; instead they demonstrated a dynamic capability to apply business strategies suited to anticipating and responding to changing conditions—even transforming customers’ expectations in a way that promoted their own ability to respond.

This fundamentally different way of viewing lean points to a very different starting point. A lean dynamics program does not directly target waste elimination; rather, it focuses on the underlying reasons why waste accumulates in the first place—identifying and addressing disconnects across the business that cause the need for buffers, delays, and workarounds, which amplify internal disruption, create lag, and increase loss when conditions change. This focus is critical to structuring a program for improvement that goes beyond trimming operational costs and, instead, builds stability and sustained excellence. Without first addressing major disconnects, localized improvements might simply fade away over time, displaced by disruption, workarounds, and waste that reemerges once conditions inevitably shift.

Just as important is mitigating the severe impact this disruption can have on innovation—a critical force for inspiring customers to buy in the first place. For traditionally managed companies, the challenge is clear. Introducing the latest technology into fresh new products or services can force significant changes in a company’s activities—everything from factory layout, work procedures, equipment, and even suppliers—amplifying variation and potentially driving widespread disruption and loss to lagging operations. Mitigating this lag is important to overcoming what can become a deep-seated resistance to introducing new value—a reluctance to press forward with new products and services because of the disruption this would cause, even when there exists a clear demand.

Yet the most immediate focus must be on identifying and correcting those disconnects that act as barriers to engaging the work-force in a meaningful way, thus eliminating a cause for alienation that frequently occurs early in a transformation. The answer cannot come from slogans or management dictates; these cannot impart the genuine enthusiasm that has proven so important for success. Only through restructuring activities so that individuals across the business can become meaningfully involved will they come to understand not only the compelling need for change but develop a deep appreciation of how they must contribute.

Driving a Shared Sense of Purpose

While Going Lean comprehensively described the what—the principles, tools, and practices of lean dynamics—there remains considerable disagreement on how to best apply them. Still, leaders of major improvement activities of all sorts do seem to agree on one point: There exists a critical need for gaining broad-based understanding and buy-in by the workforce.

One widely recognized method for building such support is to pursue low-hanging fruit by beginning with the most straightforward targets in order to demonstrate rapid gains. Such a mindset seems particularly prominent within organizations set on going lean; individuals who become trained in uncovering hidden wastes naturally seek to drive out as much inefficiency as possible and thus demonstrate quick savings.

And, as a result, many have missed the mark.

I have often listened in frustration to managers who proudly tout case after case of waste reduction success—while appearing painfully unaware of the widespread disdain for their efforts that has grown among the workforce. Despite participating in continuous improvement activities deliberately structured to promote employee inclusion, many workers continue to feel alienated from what they regard as a top-down directive. I am often astounded by the number of people who have come to regard going lean as a real problem; people from various levels across a wide range of corporations and institutions have bluntly shared with me their distaste for this “fad.” How can this be, particularly with so much effort and attention aimed at the workforce?

Much of the problem, it seems, boils down to a context for implementation that trivializes its intent, causing many to misinterpret lean as “something we should have been doing anyway,” or as nothing more than a repackaging of “failed techniques of the past.” And companies too often reinforce this perception by bypassing critical steps in their eagerness to quickly engage their workforce.

For instance, within large, complex, diverse businesses, lean efforts frequently seem to begin with targeted exercises that seek to create quick wins. Often these consist of facilitated exercises using “sticky notes” with which teams tag wasteful steps or identify changes to improve the cleanliness and orderliness of their work areas. While each of these do have a place, their stand-alone application seems to promote an oversimplified perception of lean, perhaps causing more harm than good.

Engaging the workforce in improvement initiatives requires adequately preparing workers and then including them in meaningful activities for building a solid foundation for their success. However, workers should not be asked to identify improvements affecting the progression of complex activities spanning vast corporations when they possess only a fragmented understanding of the business. Corporations must first create a framework that substantially broadens workers’, managers’, and even suppliers’ span of insight, expanding their understanding of how their work fits into the business’s broader objectives and constraints.

For most organizations, this requires some degree of restructuring—dismantling the compartmentalization that has for so long caused departments, workstations, and individuals to optimize for the purpose of their own disparate objectives. This takes structuring improvements by breaking down traditional functional barriers, decentralizing authority, and sharing information to create greater insight into the bottom-line meaning and impact of each step along the way (described in Chapter 6). All must gain a clearer, shared understanding of what goes into creating value from end to end across the business—how each step they perform will create direct value to the customer and contribute to well understood objectives.

Overcoming the challenges that have undermined so many efforts comes not only from learning from those who have long since attained sustainable excellence but from piecing together the best lessons of those still working toward this goal. Perhaps most important is studying their progress as organizations face the challenges of a severe, uncertain business environment—conditions that today are not hard to find.

Lean as a Means for Conquering Crisis

Going Lean was published in 2008, when one of the largest business crises this country has ever experienced began to unfold. An economic tsunami hit companies large and small, sweeping indiscriminately across industries of all types. Corporations quickly found themselves caught in its wake, with many succumbing to what soon became regarded as the most challenging environment in nearly a century.

As the downturn progressed, a simple question came to mind: What lessons can be learned about lean dynamics in the midst of this extraordinary environment?

As it turned out, firms described or identified in Going Lean for their sustained excellence (including Southwest Airlines, Walmart, Hibbett Sports) continued to perform strongly, even advancing as competitors struggled. Almost all sustained a profit (with the notable exception of Toyota, which sustained less of a financial loss compared to major competitors that required tens of billions of dollars in government bailouts—although it struggled through serious quality problems, apparently the result of an unfortunate shift from its former focus, discussed in Chapter 10). Most continued to press forward, operating largely as they had done before, sustaining their businesses in a way that seems to position them to surge forward when business conditions eventually improve.

Just as important was what this crisis revealed about companies that had been in the midst of their lean journeys. In researching this book, I reached out to a range of organizations and gathered available information on others to better understand what they had done. Some had established techniques to overcome specific challenges; others had built powerful enabling tools. Many offered compelling lessons in implementing different aspects of the concepts that had been identified in Going Lean. Still others had shown evidence of what not to do; for instance, that conducting widespread but unguided improvement exercises could undermine workforce support—a key challenge to progressing toward sustainable results.

This book serves to pull these findings together. It captures the powerful lessons of companies of varying sizes and types across different industries in their advancement toward lean maturity; in doing so, it provides a means for distinguishing between initiatives offering only temporary improvement and those important to progressing toward sustainable excellence.

What do these lessons show? This book explains that advancement begins by learning to see the gaps in traditional methods, but that the path to lean does not directly target the problem. Rather than first addressing the processes where waste is observed, firms and institutions need to take a step back and reassess the way they have chosen to assemble value. Moreover, they need to shift from a mindset of unguided continuous improvement to instead identifying and successively addressing focal points for structuring their transformation—a shift that holds potential to dramatically impact their effectiveness in advancing within the complexities of a dynamic environment.

A lean dynamics solution seeks to prioritize action in these areas as part of a broad methodology for increasing capabilities and progressively advancing in lean maturity. Doing so serves as a means for extending the workforce’s insight and involvement, putting them in the driver’s seat for addressing pressing customer and business needs, while paving the way for new opportunities to meet the emerging needs of the future.

How to Use This Book

The Going Lean Fieldbook offers a structure for gauging an organization’s starting point and for assessing where it should begin, from wherever it currently stands in its lean journey. Illustrated by real cases and practical examples, this book identifies a series of levels that mark organizations’ journey to lean maturity, providing the broader context needed for setting a winning course while preventing the misunderstandings that can lead to false starts. Corporations can begin down this path by setting the comprehensive, dynamic, and specific strategy that is critical, yet missing from so many efforts today, which integrates the following core elements:

Insight: Create and sustain a shared sense of purpose, a clear and compelling case for change, and objectives and metrics that are understood and embraced at all levels and across the enterprise.

Inclusion: Shift from a system driven by top-down control and outcome-based measures to one that draws on increasing insights, capabilities, and authority of the workforce, enabling direct accountability and visibility of value creation at each step in its buildup.

Action: Relentlessly eliminate lag as a critical means to driving down waste and attaining strong, steady customer and corporate value across a broad range of conditions.

Integration: Build a structure for organizing, guiding, tracking, and synchronizing transformation activities across the enterprise.

This book is not intended to serve as a replacement for case studies or textbooks that hone in with greater detail on individual tools and practices. Instead, it should act as a guide for implementing the underlying principles they describe. It offers a framework for evaluating organizations’ current vision and assessing their dynamic value creation—important steps for creating their own lean dynamics roadmap to success. Perhaps most importantly, it points the way to gaining workforce buy-in—often the single greatest challenge and most important element to its successful implementation.

The book is organized into three parts. The first describes how lean dynamics is different and why its philosophy and principles are critical to gaining a competitive edge in today’s business world. The second presents core elements that define its application, describing different ways of applying widely recognized lean tools and techniques to develop powerful capabilities that support sustainable results. The third completes the picture, presenting a methodology for constructing a lean dynamics solution and insights derived from a range of complex industries whose efforts offer lessons on individual elements.

Each chapter highlights one or more of three types of supporting information for applying its contents, as follows:

Key Point: Emphasizes specific aspects of points within a chapter considered important to understanding a concept central to implementation

Caution: Identifies critical challenges that might derail lean dynamics efforts

Case Example: Provides insights into how concepts described within a chapter were applied in a specific situation to deepen understanding into how they might relate to other circumstances

The book concludes with appendices that describe a framework for two central concepts within the lean dynamics transformation. Appendix A discusses steps for conducting the dynamic value assessment and summarizes supporting portions of the book; it is envisioned as both an executive summary and a resource for practitioners to refer back to while implementing lean dynamics projects. Appendix B describes the construction of the value curve—a central tool that supports the shift to lean dynamics—and the application of its elements as part of a lean dynamics program.

By suggesting a framework and strategy to proceed, supported by these key points, cautions, and cases, The Going Lean Fieldbook is intended to help corporations and institutions of all types through the most critical and challenging part of their lean journeys: the starting point. Moreover, it is hoped that showing how all lean efforts are not alike will help firms and institutions adopt a deliberate methodology for advancing toward the ultimate level of lean maturity, creating strong, sustainable corporate and customer value that can withstand the test of time.