Lean and the Economic Crisis

Current economic problems are shifting the lean landscape, increasing interest among certain industries, adding a new sense of urgency to reducing costs and sparking a heightened focus on innovation.

That is the impression I get after speaking with Michael Kuta, managing partner of consulting and training firm Productivity Inc. Mike, whose company deals with a wide range of clients, shared his thoughts with me in a recent conversation.

(Note: Productivity Inc. and Productivity Press used to be one company. Productivity Inc. was spun off separately a few years ago, and Productivity Press – my employer – is now part of Taylor and Francis.)

In the current economic climate, “There’s a much greater desire to talk about cost down, cost out,” Mike says. “In that discussion, where it will lead is to put a greater emphasis on getting the cost out of the operation, but trying to do so in the context of not sacrificing longer-term visions.”

In the past, “we might have spent 60 percent of the time talking about vision, and 40 percent talking about cost out. That has flipped. Companies are really tightening up the old cost belt. ‘Hold on to the cash’ has become a beat through system. There is a greater sense of urgency to use lean techniques to get waste out of the organization.”

That has led to some shifts in how Productivity Inc. might provide consulting services, Mike notes. “We put a much greater emphasis on the three-month or six-month project orientation with the company. The concern is, what can we do now to involve employees to get cost out? We would expedite the whole value stream mapping process, try to focus on improvement opportunities, do what we can do in the short term to show improvement is possible. In the past, we might have spent more time on strategic deployment. Now we’re getting out to the gemba much faster. That’s not all bad.”

In U.S. manufacturing, “80 percent of our business is in process manufacturing. There was much more of a balance in the past. There is a direct relationship there between the industries that have moved offshore and those that have stayed behind. It is difficult to move a process industry offshore. A lot of discrete manufacturers have really left the universe.”

On the opposite side of the coin, Mike notes that consulting work Productivity Inc. is doing in Asia is primarily with discrete manufacturers. And in Europe, the firm works primarily with service industries, especially financial services and healthcare.

Mike sees strong interest in lean from the financial and healthcare sectors, not just in Europe. What do they want? “In the financial sector, it’s no different from healthcare, no different from the manufacturing sector. They’re trying to find ways to collapse the amount of time it takes to provide quality services. How can we do that in an expedited way with less resources. In one particular case, we have a client into automobile leasing, looking at how to collapse the time it takes to open and close a lease – if someone leases a car, how to put them in the seat quickly. It’s all time and money to them. “

One of the most interesting insights came from Productivity Inc.’s recent annual conference. “The greatest interest at the conference was the series we put together on innovation,” Mike says. We did a four-day program on innovation. Each day built off the previous day. It was all centered around creativity and knowledge. It was very well received. I believe it’s the early innovators of maybe the next generation of lean, of process improvement – how to take something that has proven to be workable and take it to a whole other level.”

He adds, “It was attended by people at a level who can really do something about it. There was a VP for strategy and innovation. There were people from healthcare and finance institutions at a strategy level. They’re really into the whole innovation movement – How to gain a better understanding of the technologies available to us today, how to marry those technologies more closely with the cultural side of the company. There is still a deep feeling out there that we have yet to really learn how to use the interventions available to us and create new interventions that will harness the creativity of the critical mass.”

Overall attendance at the conference was down, which is not surprising in a recession. “The training budget is one of the first to shut down. That hasn’t changed,” Mike comments.

But he urges companies not to undervalue the importance of training:

“If I was in a leadership role today, I would have to look around and ask the people working for me to reach out and challenge their organizations on how to harness the energy of the critical mass – increasing their level of understanding of cause and effect, short-term building of a problem-solving culture. How to get people quickly aligned working on projects that have a direct link back to our strategic intent.

“I believe we have 60 percent of the people working on the wrong darn things. I often see poor project management and find projects that are not directly aligned to strategy. I would reach out into the employee community and increase the level of understanding of cause and effect, and provide employees with simple, easy-to-use tools that will enable them to drive to root cause. I would take that energy and learning and get it focused with good project management. People still wanted to be involved. Leverage them and get them working on the right things.”