How the World Changes After GM Falls

Forbes automotive columnist Jerry Flint has taken a valuable step in the never-ending discussion of the woes of General Motors. He has gone beyond the debate over what GM can do to fix itself, focusing instead on what happens after GM loses the number one spot to Toyota.

            Declaring that “The General Motors era is over,” Flint suggests that the drop to number two will be permanent, or at least long-term.

            “At first GM will try to prove that it hasn't lost. We call that denial,” Flint writes. “GM people will come up with new cars that they dream will retake the leadership. I call that desperation.”

            I believe Flint is correct. The prime reason, as Kevin Meyer has aptly pointed out in the Evolving Excellence blog, is that GM remains foolishly focused on being on top rather than on being profitable.

            Flint argues that the psychological effects of GM’s fall to second place will be enormous. He draws an analogy to the 1920s, when GM stole the top spot from Ford. For too many years afterward, Ford remained obsessed with regaining its lost glory, even adopting a “Beat GM” motto in the 1950s.

It would be a mistake for GM to do something similar. But maybe the need to return to profitability will ultimately shift focus away from the obsession with market share.

Perhaps a more interesting question is: What will GM’s fall from the top mean for the lean movement? I’m not sure whether it will make a difference, but it might.

The business world is already obsessed with how Toyota does what it does. The abundance of books on the topic – many of which we publish – is evidence of that. So perhaps that obsession won’t change much once Toyota achieves what everyone knows it will.

Then again, a lot of people who only pay limited attention to Toyota and lean might begin to wake up. Flint notes that after it falls to number two, GM will not be under such a bright spotlight anymore. As he puts it, “People will stop blaming General Motors for everything that goes wrong in the world.” The spotlight on Toyota will brighten by a few notches. That can only be good for the push to become lean.

Perhaps Flint’s most surprising suggestion is that Toyota won’t reign as long as GM did.

“GM was on top for three-quarters of a century, and that's impressive. Toyota won't do that. The world moves faster now. In 15 years maybe the Koreans (Hyundai) or the Chinese (Shanghai Auto) will overtake it,” he predicts.

Is he right or wrong on that point? Let us know what you think.



Don’t Like Car Dealers? Blame Manufacturers

In the view of many consumers, auto dealerships are the dark side of the American auto industry. People don’t like shopping for cars and don’t trust auto salesmen. There is a long list of complaints about the process of buying a car or getting it serviced.

            And who is to blame? The auto manufacturers, according to one top executive.

            When it comes to dealers, the carmakers have been guilty of “terrible management and a complete lack of leadership,” Steve Wilhite said at the Automotive News World Congress recently. Wilhite is chief operating officer of Hyundai Motor America and a long-time industry veteran.

            He noted that, on average, dealers earn a paltry 1.6 percent return on sales, and that in a recent survey, fewer than 16 percent of dealers expect profits to increase. There are also 3,200 fewer dealerships than existed in 1985.

            “It never should have come to this,” Wilhite said. “We know better in this industry. This isn’t rocket science. We need to work with our dealers and engage them in the management of our business.”

            Coincidentally, an Automotive News article the same week as Wilhite’s speech (you can only access it online with a paid subscription) noted that Nissan is going to be sending lean experts from the company out on trips to its dealers, teaching them standard work and other techniques for reducing the time it takes to serve customers. (Interestingly, Wilhite was senior vice president, global marketing, for Nissan before he joined Hyundai last August.)

            According to the article, the Nissan plan (which dealers will hear about in coming weeks) falls under a new companywide quality initiative headed by Doug Betts, senior vice president for total customer satisfaction and a former Toyota factory manager. (Now how many companies have someone whose job is total customer satisfaction?)

            “Some of our dealers are restricted by capacity issues,” Betts said. “In some cases, they’re making customers unhappy by making them wait for the service they need.

            “If we can show them that, just through better practices, they can run 20 percent more cars through their service bays without spending any more money on their building and without hiring any more people, that will be attractive to them.”

            The article, written by Lindsay Chappell, said the plan “is sure to encounter resistance at some dealerships. Many retailers are entrepreneurs who ignore routines and permit idiosyncratic methods to flourish at their operations.”

            Yes, culture change is hard. So what else is new?

            American automakers have a well-deserved negative reputation when it comes to dealing with suppliers, whom they typically view as companies to be squeezed for price reductions rather than worked with as partners. I suspect a similar attitude prevails when it comes to dealers.

            It’s sad, but not surprising, that Wilhite, the only executive I’ve heard offer a mea culpa about this situation, is a voice from the Asian world of auto manufacturing and not North America. I just hope the American car companies are listening.



Why Audi Won’t Build Cars in the U.S.

            You make cars, and you want to sell more cars in another country around the world. You don’t have a factory in that other country. Should you build one there?

            The short answer is yes, at least from a lean standpoint. But does it ever make sense to NOT build that factory, and just keep exporting cars across the ocean?

            Audi thinks so, according to what one of its executives said at the Automotive News World Congress recently. I find that interesting, and I’m reporting on it here in hopes of sparking some discussion of this point.

            The comment came after a presentation by Johan de Nysschen, executive vice president, Audi of America.

            The key point of his speech was that even though Audi is an extremely successful luxury brand on a global basis, it sells relatively few cars in the United States – and its executives want that to change.

            “We are very Euro-centric, which is the biggest difference between Audi and our friends from Stuttgart and Munich. BMW and Mercedes-Benz are certainly more global,” de Nysschen said. “For us to execute our long-term strategy of attaining 1.4 million global sales by 2015, we have to reach out, and we’ve identified two major markets as our next areas for strategic conquest – North America and Asia.”

            Audi is already the leading premium brand in China, he added, but hopes to increase sales in Japan and India.

            And in North America, Audi plans to “stop being so understated,” de Nysschen said. The company has chosen a new advertising agency and increased its ad budget. More importantly, it is also launching 19 new products in the U.S. between 2005 and the end of this year.

            Following his talk, de Nysschen was asked the obvious question by a member of the audience: How can Audi do all this and continue to make money exporting cars from Europe? In other words, will Audi build a plant in North America?

            The answer, at least for now, was no, and de Nysschen gave several reasons. First, he said, it doesn’t pay to build a plant on this continent unless that plant will produce at least 100,000 vehicles a year – and Audi anticipates selling 90,000 here this year.

            Second, he said Audi cars feature extensive sophisticated technology produced by European suppliers, and that technology would have to be imported from Europe to any plant in North America.

            Third, he said Audi was unlikely to expand capacity through new construction anywhere “until we’ve used up more capacity from our colleagues at VW.”

            There might be some validity to de Nysschen’s first point about volume, though it certainly seems Audi will pass that 100,000-vehicle threshold within just a few years if its strategy succeeds – and it would take more than a year to build a new plant and begin operations.

            The second justification seems a bit dubious. Are there no companies in North America capable of producing the technology Audi needs? Even if there aren’t, if Audi set up a factory here, it would be perfectly logical for many of its suppliers to also set up operations here, near that factory.

            And while I understand the third point, simply having excess capacity doesn’t justify using it if it’s in the wrong place. GM and Ford are building factories in China at the same time they are closing them here (though that may also have something to do with import restrictions).

            Is Audi’s position smart or dumb? Post a comment and let us know what you think.




Using Lean for Doing Good

The best businesses try to be good citizens as well as profitable organizations. I was pleased to read this week about efforts by Xerox to help nonprofit organizations, particularly since one of those efforts involves applying the principles of continuous improvement.

            Xerox just announced that it has granted six of its employees what are called “Social Service Leaves” this year. In this program, each employee spends from six months to one year working full-time to help a nonprofit organization. The employees, who continue to receive full pay and benefits during the sabbaticals, all work on different projects, and each project was chosen and designed by the employee involved.

            The program has been in place since 1971, with sabbaticals granted to 475 employees since then. Xerox estimates that about a half-million volunteer hours have been donated through the sabbaticals.

     The one this year that caught my eye is a project involving an employee named Cyndi Quan-Trotter (that’s her picture) – who is listed as a Lean Six Sigma Master Black Belt. She will spend a year with Antioch Adoptions in Redmond, Washington, which serves adoptive families, orphans and birth parents in the state of Washington. She will help improve administrative processes, manage the audit process and coordinate fundraising efforts to help the agency expand to multiple locations.

            As a parent who has been through the adoption process (though not with Antioch Adoptions), let me say that it typically involves administrative processes badly in need of improvement.

            One particular aspect of Quan-Trotter's project: To improve the communication processes between the agency and parents going through the adoption process, so with a touch of a button, the agency will know the status of any individual adoption without making multiple calls.

            My congratulations to Xerox.



Are Trade Barriers Why Toyota Succeeds?

Buzz Hargrove, president of the Canadian Auto Workers Union, delivered a passionate speech to the Automotive News World Congress last week, arguing that trade barriers are the primary cause of the auto industry problems in North America.

            While Hargrove presented some impressive facts and made some valid points, I don’t agree with his overall conclusion. I believe he chooses to ignore key realities.

            The facts: North America, and the U.S. in particular, have the most open automotive market in the world. Car imports in other countries are a tiny fraction of the percentage they are here, primarily because other governments restrict imports. Exports account for a significant percentage of sales for Japanese and European automakers, much more so than for U.S. automakers.

            “The way to level the playing field is by putting in place some clear rules,” Hargrove said. “There needs to be market access in exchange for market access – the one-way street has to end.”

            No argument from me on that point. I’m all in favor of eliminating barriers to free trade.

            But Hargrove goes further, arguing that trade and other barriers are what Japanese success is all about.

            Japan’s success has not arisen from a low-wage strategy, or even a low-cost strategy, but from the aggressive use of trade, currency manipulation and exploiting a uniquely open market in North America,” he claimed.

            Really? So it has nothing to do with the Japanese producing high-quality products that customers want to buy?

            Hargrove said American automakers are constructing plants in China to build the same kinds of cars being made at plants here that are being closed due to lack of demand. His clear implication was that the automakers would be exporting the cars from here to China, rather than building plants there, if the exports were permitted.

            But is he right? The one thing Hargrove did NOT talk about is that shipping cars across the ocean takes a lot of time and costs a lot of money. Even if GM and Ford had an unlimited ability to export cars to China, I doubt it would make much difference. They would still be building Chinese plants. You gain a great deal in time and money by making cars near your customers. That’s why Toyota keeps building plants in the U.S.

            Currently, Toyota’s North American plants produce about 60 percent of its vehicles that are sold here, with the rest imported. While Toyota will be building more American plants in the years ahead, it is unlikely imports will disappear. In fact, I’m not even sure the ratio will change much.

            I don’t know all the reasons for that. Undoubtedly, one is that Toyota simply can’t build plants fast enough to keep up with growing American demand for its vehicles. It could also be that Toyota wants to keep producing a sizable number of cars in Japan for export, since producing exports is a significant part of what those Japanese plants do.

            However, my key contention is that eliminating trade barriers and currency manipulations wouldn’t do much to reverse the erosion of market share and the decline of operations of the U.S. automakers in North America. The market here is mature and no longer growing rapidly. And more to the point, the landscape has changed permanently because, for too many years, the U.S. companies failed to respond to the superior design, superior quality and superior operating systems and strategies of their Japanese competitors.

            I support Hargrove’s call for a more level global marketplace, and I hope he continues his efforts to make it a reality. But he needs to be more realistic about what can be achieved.



Trends in the Automotive Industry

I’ve just returned from the Automotive News World Congress in Dearborn, Michigan, an annual gathering of several hundred high-level industry executives discussing their current and future states.

            It was a good opportunity to feel the pulse of this industry. I’ll be writing a variety of postings based on what I heard and learned there. I’d like to begin with my overall sense of where this industry stands, and where lean stands within the industry.

            It’s often useful to start with the big – in this case, global – picture. And globally, the auto industry is doing fine. Growth in many parts of the world, particularly China and India, is phenomenal, and the future in those areas is rosy if not downright glowing.

            The problem, of course, is North America (at least as far as the U.S. automakers are concerned). We all see the daily news reports on what is happening.

            My impression from the conference is that there is a greater sense of realism among industry executives. In similar conversations last year, auto executives seemed to view their problems as being just outside the door. That was probably naïve, but they are naïve no longer. Now everyone seems to accept that restructurings, mergers and acquisitions, bankruptcies and a thoroughly changed global marketplace are all facts of life today, and you better deal with them or plan on going out of business.

            No one seems worried about the survival of companies like GM and Ford, but everyone – including their own executives - seems to recognize that they will continue with smaller operations and smaller market share.

            The situation is worse when it comes to suppliers. Many major suppliers are in bankruptcy, the overall number of suppliers is dwindling rapidly, and the private equity funds are circling, ready to swoop in and snap up those struggling companies that may still contain some value. That situation is going to get worse before it gets better.

            But there are opportunities, and there are some positive signs. I learned that the U.S. automakers are making some real progress in adopting common platforms and common parts on a global basis, although they are still far behind the Japanese. Leaders are genuinely starting to understand what it means to be a global company.

            The latest buzzword seems to be innovation – not just the need to come up with exciting products that offer value to the consumer, but also the need to develop skills and processes that make it possible to be innovative in an ongoing, sustainable way. Not everyone will succeed at doing that, and it’s too early to say who will remain standing once the dust clears.

            I also sense a greater understanding and appreciation of lean. Virtually everyone has at least a basic understanding of what lean is all about and knows how valuable it can be. The number of companies actually implementing lean strategies – and doing so successfully – remains small, but awareness is reaching new levels.

            The current industry turmoil reflects true structural changes taking place. We are in a period that is exciting on the one hand, but also a time of brutal and bloody change. As several speakers pointed out, this is not a time for sissies.

            What’s your take on the current situation?



A Congressman’s Blind Spot

I’m a little concerned about a recent statement by a congressman that seems to indicate a rather negative attitude toward Toyota.

            The comment appeared in an article on Bloomberg.com, which reported that Toyota may build as many as five North American assembly plants in the next 10 years.

            That’s impressive, though really not surprising. The article also did a nice job of providing perspective on what that means, by including plant figures of Toyota, Ford and GM.

            Five more plants would give Toyota 12 in North America, about the same number Ford will have after its current round of closings. GM will have 24 North American plants after it completes shutdowns planned through 2008. (That must still be too many; how can GM possibly need twice as many plants as either Toyota or Ford?)

            What concerns me was a quote in the article from Rep. John Dingell, a Michigan Democrat who is the new chairman of the House Energy and Commerce committee. He issued a statement last month saying Toyota has advantages over GM because of Japan’s state-run healthcare and pension systems. He also said Toyota benefits from a Japanese government that “manipulates the yen for strategic advantage.”

            Dingell may be right about the healthcare and pension systems, but that misses a couple of key points. First, GM has major costs in those areas because it agreed, in contracts going back many years, to pay them. Second, Toyota is not poised to surpass GM primarily because of healthcare and pension costs; it will do so because of a superior manufacturing strategy.

            Regarding the second point, I don’t know whether the Japanese government manipulates the yen. But even if it does, since most of the cars Toyota sells in the U.S. are built in the U.S., currency issues are largely irrelevant.

            As a Michigan congressman, Dingell undoubtedly wants to make statements that he believes will sound good to the Michigan automakers and their employees. And as far as I know, he’s not proposing any federal legislation to attack Toyota or bail out GM.

            However, this kind of negative attitude toward Toyota, which completely misses the truth behind its success, cannot be a good thing. I only hope Dingell and others who share his views are in the minority in Congress, so that nothing will come of that attitude.

            What do you think?



Lean and IT – Is the Cold War Ending?

The most dedicated lean believers have traditionally been pretty skeptical about information technology. But if Doug Gregory is right, that may be starting to change.

            Doug is COO of Plexus Online, which produces on-demand manufacturing software. The company was founded by former members of the IT department of a manufacturer that went through a lean transformation, so they designed the software to support lean manufacturing, Doug says.

            For example, they offer an electronic kanban system, as well as a system for electronically tracking bar-coded physical kanban cards, called Scanban.

            (Personally, I have no experience using Plexus Online or any other manufacturing software, and I haven’t discussed this with people who have, so I can’t speak to how well it supports lean operations.)

            Apparently Doug and his colleagues were ahead of their time. When Plexus was first hawking its modules back in the early 90s, he says, people weren’t looking for lean software. “Somebody who’s fully embraced the Toyota Production System tends to not want information systems,” he comments.

            That certainly fits what I’ve heard from a variety of manufacturing executives over the past few years. As part of going lean, they talk about “turning off” their MRP systems, meaning they stop using them to schedule production. That’s because most MRP systems use a demand forecast, push system to plan production, rather than a lean pull system.

            And on the shop floor, lean tends to be about visual controls rather than IT.

            Doug notes that Plexus holds a patent on Scanban, and “I have never had to exercise or use the patent because nobody was really interested in it until the last three to four years.”

The people who did want software in the early days of Plexus wanted traditional manufacturing modules – so Plexus developed those for its product line. As Doug notes, “we aren’t able to sell someone into lean. Instead, we have to meet them at their point in the lean process.”

            Doug’s experience has been that those few companies who are furthest down the road of a lean journey are most willing to investigate what technology can do for them.

            However, he also sees a trend of greater interest in the lean aspects of the Plexus offerings. “The increasing curve, from my perspective, in the last six months to one year has probably been 10 times the number of people actually implementing a kanban rack or kaizen program or something like it,” he states. “In the past, they would buy it, but they would never really utilize it.”

            He adds, “I think there has been more talk than there has been reality. It’s only in the last few years that people are taking notice of the Freudenbergs of the world that have made their name through the lean technologies.”

            I hope Doug is right. (About greater interest in lean, that is. Whether Plexus and other technology companies sell more software is not my concern.) If we want to see rejuvenation of the manufacturing sector after years of job losses, lean is essential to achieving that. The more companies that embrace lean, the better.



Lean Success Breeds Political Influence

One of the more unusual stories I’ve read about the automotive industry appeared this week in The New York Times. The article reported that Bob Lutz, vice chairman of General Motors, says GM has fallen behind Toyota when it comes to influence on Capitol Hill.

            “One of the sad things is, Toyota is so profitable and has plants in so many states that, frankly, they’ve got more congressmen and senators than General Motors does,” Lutz said.

            The article notes that, while both GM and Toyota spend millions on lobbying, GM spends more and has four times the number of registered lobbyists that Toyota does.

            And Lutz indicated that, at least for now, its lobbying efforts aren’t achieving much for GM.

            “It was, ‘Tough luck, guys. You made the deal with the unions decades ago, now live with your mistakes of the past,’” Lutz said, referring to a meeting the Detroit automakers had with President Bush in November. “There was zero sympathy.”

            I’m glad to hear it. Don’t get me wrong, I don’t enjoy seeing the U.S. companies in trouble. I’m originally from Detroit, and I’d love to see them succeeding.

            But their troubles don’t stem from government policies or unfair trade practices. They are the result of Toyota becoming a better competitor than GM through a lean strategy, eschewing the wasteful manufacturing practices that now have come home to roost in Detroit.

            Further, whatever increased respect Toyota is getting from Washington is not primarily the result of its lobbying efforts. It’s because Toyota has invested $18 billion in American factories in the last 20 years.

            David Cole, chairman of the Center for Automotive Research, is quoted in the story on this point. “When you’re talking about adding new plants,” he said, “you get significant clout, with the possibility that if I’m nice to you, you’ll give me a plant.”

            To Lutz’s credit, he also said that GM is now – finally – going to focus on profits more than market share, and will avoid using incentives to increase sales.

            “It’s got to be honestly acquired market share,” he said. “The only way to get market share is to get 25 percent of American citizens, day in, day out, going to General Motors dealerships and saying, ‘I want that car.’”

            The Times contacted Toyota for a response to the comments by Lutz. A spokeswoman, Martha Voss, said what you would expect her to say, but I’m sure she meant it.

            “We don’t really keep score (when it comes to political influence),” she said. “Our goal is to become No. 1 with the customer, not in Washington.”



Lean Railroading, Part 2

I came across another encouraging example of how railroads are using lean principles to increase capacity.

            For railroads, capacity is critical. Railroads are increasingly in demand for freight transportation, but building new track is rarely an option – it’s costly and time-consuming.

            I previously wrote about application of lean principles at a rail classification terminal, where trains arriving from ports, for example, are uncoupled and coupled so the cars are directed to their correct ultimate destinations. Lean initiatives speed up the process.

            It seems lean principles are also being used to reduce the time trains spend being refueled, inspected and maintained.

            Union Pacific says its workers have developed their own version of NASCAR pit crews for so-called run-through trains, which have no scheduled stops and no cars being added or removed.

            “We can’t easily build new track, so we’re leveraging lean methodologies to find effective ways to increase our velocity and train through-put,” said Cameron Scott, general superintendent of train services at the company’s North Platte, Nebraska, rail yard.

            Specifically, the number of trains serviced at the yard has increased from 55-60 per day to a recent high of 72. The “dwell” time for each train, which had been from four to eight hours, is now three to 6.5 hours. The long-term goal is the ability to handle an average of 80 trains per day.

            The Union Pacific news release describing this effort did not go into detail on exactly what lean methodologies are being applied. Randy Blackburn, regional vice president, said they involved “standardizing each step of the run-through process,” so it seems that standard work is key (not surprisingly).

            And another news release noted that wireless technology is being used to monitor the health of locomotives remotely to determine and plan for unscheduled repairs or maintenance. This means crews can plan maintenance 24 hours before the locomotives arrive at the yard.

            One encouraging aspect of the effort, according to Union Pacific, is that it was generated the way lean ideas should be generated – by a team of workers. The pit-crew concept was “a result of input from employees in our run-through operations and extensive analysis by members of our continuous improvement team,” Scott said.

            Incidentally, Union Pacific added an unrelated paragraph you don’t normally see in this type of corporate news release: a mention that the company currently has job openings at many locations in 23 states. I guess good rail yard workers are hard to find.



Which Lean Book is Right for My Boss?

It’s a common question: Is there something you can give someone to read that will turn on the light bulb above their head and make them say “Aha! So that’s what lean is all about!”?

            A version of that question appeared in a recent comment on the blog. BENJER writes:


            Senior management talks up lean thinking but after I've invested a lot of effort and convinced our union to create a production cell where people can move to where the work is at any time of the day, senior management (VP level) insists that the operation be separated into rigid boxes that don't allow people to work across the lines. I need to find some reference authority to try to persuade him that this is regressing. Any suggestions?


            Publishers always like being asked for suggestions on what to read. In this case, it seems the senior managers lack a fundamental understanding of what lean involves. So after consultation with our senior acquisitions editor, Mike Sinocchi, I suggest one of the classic lean texts such as Becoming Lean or Inside the Mind of Toyota.

            For a different approach, consider Lean Production Simplified. There’s a section in that book that discusses the most functional plan layouts.

            Of course, no book will be of value unless management is willing to read it. It’s the classic conundrum: Those who most need to learn are often those who are least willing to learn.

            One approach might be to focus with management on the waste in a silo-mentality layout, and the benefits to be achieved by eliminating that waste.

            Good luck.



IT Executives are Taking Notice of Lean

It seems that IT people are becoming more concerned about lean concepts.

            That’s my conclusion after hearing the results of a survey by AMR Research, described in a recent Industry Week webcast. The survey was conducted in September of about 200 corporate executives. (I believe they were IT executives, though the AMR presentation was not precise on that point.)

            The presentation never mentioned lean. But the results were striking in describing what the executives cited as key concerns – and how those concerns have changed.
            The executives were asked what business initiative was most important to them in terms of the impact it would have on IT investment decisions over the next 12 months.

            The top issue, mentioned by 19 percent of those responding, was organizational transformation. That’s up from a figure of 9 percent a year ago.

            Transformation, of course, may have everything or nothing to do with lean. More interesting to me were the next three issues on the list, each cited as the top issue by 11 percent of those responding.

            One was more effective new product development and launch. The percentage of people mentioning that issue hasn’t changed much in the past year.

            But consider the two other issues tied for second place: Focus employees on more value-added/strategic activities (up from 0 percent a year ago), and manufacturing and operational process improvements (up from 2 percent a year ago).

            Lean is fundamental to both of these areas. And if IT executives are more concerned about these areas, they are more concerned about lean.

            By the way, two other issues stood out for the drop in the percentages of executives who cited either as the top issue. One was improving business and IT alignment through better IT governance, which fell from 12 percent to 4 percent. The other was complying with government rules and regulations, down from 12 percent to 1 percent. On that last point, the drop is at least partly because “Sarbanes-Oxley has played itself out,” according to the presenter, AMR SVP Kevin O’Marah.



Fixing Healthcare: Commoditizing Expertise and Viewing the Whole

In an interview published in The New York Times this week, Clayton Christensen, a Harvard business professor and the author of several books on innovation, offers some interesting ideas about fixing healthcare in the U.S.  Some of those ideas reflect lean thinking.

            Christensen talks about the need to “commoditize the expertise of doctors,” meaning make it possible for less-costly diagnosis and treatment of illnesses. He notes that while diagnosis of some diseases is clear-cut, others are not well-diagnosed.

            As an example of what can be achieved, he points to Minnesota, where nurse practitioners are allowed to write prescriptions. The result is a growing number of clinics in drugstores, staffed by nurse practitioners. Christensen comments,


            “There’s a big sign on the door that says ‘we treat these 16 rules-based disorders.’ They include strep throat, pink eye, urinary tract infection, earaches and sinus infections.

            These are things for which very unambiguous, ‘go, no-go’ tests exist. You’re in and out in 15 minutes or it’s free, and it’s a $39 flat fee. These things are just booming because high-quality health care at that level is defined by convenience and accessibility. That’s a commoditization of the expertise. To have those same disorders treated in Massachusetts, you’ve got to go to a regular doctor, go through a long wait in their office, you go in and see the doctor for two minutes. He says, ‘You have an earache,’ which you knew already, and then they charge you $150.”


            Commoditizing expertise is one key issue here. That perhaps has some relationship to the lean concept of empowering floor-level workers and providing cross-training.

            However, what I believe is equally important in this example is the clear focus on the customer, which is fundamental to lean and which is too often lacking in healthcare processes.

            Christensen also discusses the structure of healthcare organizations today:


            “The current healthcare system is divided into buckets. You have the insurers, the employers who put up the money, the providers such as doctors and nurses, and the hospitals. Because they exist as independent companies, they can each improve themselves, but they can’t re-architect the system in the way that it needs to be changed.

            “There are two health care systems in the West, Intermountain Health Care in Utah and Kaiser Permanente in California, that are in fact integrated across each of those pieces of the system. They are far ahead of the rest of the world in bringing rules-based diagnosis and therapy in cost-effective business models to their patients.”


            The words may be different, but Christensen is clearly talking about looking at processes end-to-end and eliminating the silos that exist within both organizations and supply chains – and that is unquestionably a lean approach.

            Christensen is involved in research, and in efforts to educate high-level healthcare executives to about ways to achieve change.

            I don’t know how many years it will take to get to a tipping point, where we truly see significant change in healthcare. But people like Christensen can help us get there.