Can Lean, Blockchain, and Systems Thinking Be Combined?

Back in June,  Machiel Tesser co-authored and published a book entitled Lean Blockchain Systems Thinking: Reinventing Value Streams with John Dennis. This book shows that blockchain, together with Lean and Systems Thinking, can provide multiple advantages for societies and the environment and can be used effectively to meet sustainable development goals (SDGs).

When I spoke with Machiel in July, I asked him: “What are the benefits of combining Lean, Blockchain, and Systems Thinking?" Here is his complete answer:

Blockchain and Lean: Building the Lean Internet

Blockchain and Lean are a match made for the modern era, creating a Lean Internet. Where Lean empowers us to eliminate waste and streamline value, blockchain goes a step further: it prevents waste before it even arises.

Lean lays out the philosophy and methodology, while blockchain delivers the digital toolkit: digital identities, verifiable credentials, automated rules, workflows, and consensus on standards. This makes processes instantly verifiable, compliant with regulations, and building blocks for an intention economy.

What was once theoretical is now tangible: in the U.S., the GENIUS Act is shaping a robust framework for stablecoin issuance and programmable finance. In the EU, MiCA and eIDAS 2 have come into full force (since December 2024), providing regulatory guardrails for digital assets and trusted digital identities.

Now, blockchain and crypto aren’t speculation or hype; they’re legally programmable and digitally enforceable.

Lean workflows in Real-Time

Workflows become pull-based and real-time, backed by quality proofs from the source, just like Lean Kanban: only what’s needed, when it’s needed. Smart contracts automate verification and trigger actions instantly, eliminating manual or paper processes, reducing errors, carbon emissions, and admin overhead.

Continuous, Network-Wide Improvement

Direct feedback loops and transparency cultivate a shared understanding of the network’s intent. It brings stakeholders onto the same page who are willing to improve the system rather than just their own parts. 

Identifying and solving problems together aligns perfectly with the continuous improvement ethos of Lean. By making performance and objectives visible, stakeholders can respond quickly and collaboratively, making progress proactive rather than reactive.

By targeting root causes, not just symptoms, and listening to every voice across the network, this approach shifts us from reactive fixes to proactive systems design. It’s an inclusive, holistic transformation: the true promise of a Lean, a programmable internet, reinventing value streams.

Do you agree with Machiel's perspective? Has blockchain been integrated into your Lean initiative? If so, what have been the results?

What is the Main Purpose for Combining and Implementing the Theory of Constraints, Lean, and Six Sigma?

Back in May, Bob Sproull and Matt Hutcheson published a book entitled The New Beginning: A Business Novel on How to Successfully Implement the Combination of The Theory of Constraints, Lean, and Six Sigma to Drive Profit Margins. Essentially, this book teaches the reader how to successfully combine and implement the Theory of Constraints, Lean, and Six Sigma to produce results that many companies only dream of having. It covers a variety of different company types including manufacturing and healthcare.

When I spoke with Bob in July, I asked him: "What is the main purpose for combining and implementing the Theory of Constraints, Lean, and Six Sigma?" Here is his full answer:

The main purpose for combining and implementing the Theory of Constraints, Lean, and Six Sigma is quite simply to maximize a company’s profitability.  Each of the three individual components serves a completely different purpose, but it all starts with the Theory of Constraints. The Theory of Constraints provides the needed focus and leverage point, meaning that the primary reason many improvement initiatives fail to deliver hoped-for profit levels is that many times they are focused on the wrong area of the system. It matters not whether the system is a manufacturing or service system, because each type of system has a constraining factor that encumbers the output of the system.  While the Theory of Constraints locates the correct focal point for improvement, Lean works to reduce waste, while Six Sigma reduces and controls variation. Both waste and variation encumber systems and therefore reduce the system output, which translates into less than desired profitability. By combining the Theory of Constraints, Lean, and Six Sigma, maximum profitability will be achieved.

The Theory of Constraints offers so many different tools and techniques that are completely different from many continuous improvement professionals utilize.  In the book The New Beginning, I insert these tools as part of the business novel format.  One of the tools is a different form of accounting known as Throughput Accounting.  It’s not a replacement for traditional Cost Accounting, but it is used throughout The New Beginning, as a way to make better financial decisions.  When I learned this form of accounting, it changed my entire approach to maximizing profitability.  While traditional Cost Accounting emphasizes that the key to profitability is through how much money can be saved, Throughput Accounting teaches the reader that the real key to improving profits is through how much money can be made. The difference between saving money and making money is profoundly different. In The New Beginning, I use numerous examples of how to use Throughput Accounting to drive profit margins upward.

Another valuable addition that can be realized by using the Theory of Constraints is the method used to order parts and raw materials. While most companies use something referred to as the Min/Max System, the Theory of Constraints utilizes something referred to as the TOC Replenishment Method, and the results are dramatically different!  In The New Beginning, I go to great lengths to explain this methodology and the results are dramatically different when compared to the Min/Max System.  By using the TOC Replenishment Method, companies can reduce their inventory by about fifty percent while virtually eliminating stock-outs!  Imagine a company being able to reduce their on-hand inventory by fifty percent and not worrying about stock-outs of needed parts and/or raw materials. Think about what that would do to a company’s profitability!

Another Theory of Constraints tool brought forth in The New Beginning is a logic tool known as The Goal Tree.  The Goal Tree is an important tool that can be used to develop a company’s improvement plan. In The New Beginning, I have provided examples from two distinctly different companies.  One company is a manufacturing company while the other one is oriented in healthcare. That is a series of completely different hospital types. It matters not what type of company attempts to use The Goal Tree, because of the logical method it uses to construct it. The method developed in this book is first, the creation of The Goal Tree which has an overall Goal at the top, followed by critical success factors need to achieve the company’s goal, and finally necessary conditions needed to achieve each of the critical success factors. When the Goal Tree is completed, it can then be used to assess the status of each of the Goal Tree entities. When the assessment is complete, The Goal Tree is then used to develop an improvement plan. As is demonstrated in The New Beginning, The Goal Tree is an important tool used to develop a company’s improvement plan.

The New Beginning was written as a sequel to another business novel I wrote entitled The Secret to Maximizing Profitability and both have been well received by the readers. The good news is, both books are centered on completely different company types, but in both books, I go into great detail on how to combine the three initiatives, namely Theory of Constraint, Lean, and Six Sigma.  It is my hope that both books will be enjoyed by all readers, but not only enjoyed, but also used to maximize your company’s profitability. I co-authored this book with Matt Hutcheson who is such a valuable contributor to the book’s success!

What do you think of Bob's perspective? Have you tried to combine Theory of Constraints, Lean, and Six Sigma in your organization? If so, what results did you expect and what did you receive? 

Those Who Facilitate Improvement Workshops... and the Mistakes They Make.

During this past May, Sheilah O'Brien published a very useful and practical book entitled Facilitating Rapid Process Improvement Workshops: The Self-Study Guide for Lean Leaders. The intent of the book is to help professionals who feel they are not truly gaining the full results of improvement initiatives and kaizen events. In the book, Sheilah speaks to the facilitator through coaching notes and actual workshop documents and techniques so the reader can fully understand how greater results are achieved. 

When I spoke with Sheilah last week about her book, I asked her: "What are the common mistakes facilitators make when overseeing rapid process improvement (RPI) workshops?" Here is her complete answer:

The common mistakes of facilitators of RPI workshops are:

1. Not understanding the facilitator role before you start. The RPI team is made up of workers who know about the problem to be analyzed.  They are dedicated. Facilitate with respect and inclusion. By passing on lessons and what you know to the team, you are working your way out of a job. 

• “Team, please look at this flipchart. Do any of you want to change or add to them? Does everyone agree?” 

• The facilitator's role should be to get the exercise started. Once it gets going, the volunteer facilitator (from the team) can carry it to its fruition. 

• The facilitator lets the RPI team have their lead. The team knew what to do next.  

2. Not assuring that there is a monitoring system in place after the RPI ends: 

• The end of the RPI means a shift in roles.  You, as the facilitator, no longer facilitate the workshop. Now you take on an advisory role to the process sponsor and responsible managers on how to track the implementation of improvements.

3. Not knowing that you need to keep two steps ahead of the team:

• The facilitator, proud of the development of an improved process with all its steps, forgets about all the process supports (to those steps) that need to be improved too, such as forms, materials for the job, etc. 

• The facilitator gets midway into the workshop and realizes he/she does not have a mechanism “to pull it all together”-- the risk is the team’s good work can go missing.

4. The facilitator hasn’t considered the “what if’s?”:

• What if the organization doesn’t have data available? 

• What if no one is available to take the team through the workplace (i.e., GEMBA)? 

• What if you discover there is a backlog?  

• What if there are many "products" that come out of the process?  There isn’t time to flowchart them all. 

What do you think about Sheilah's perspective on common mistakes facilitators make? Do you see these same mistakes in your organization? Are there others that are not listed here that you feel are common?

Lean Initiatives in the Construction Industry -- Can they succeed?

Just this month, Gary Santorella published a new edition of his forward-thinking book, Lean Culture for the Construction Industry: Building Responsible and Committed Project Teams. Much has changed in the construction industry since Gary published the first edition of his book back in 2010, so I contacted him to discuss what he has observed and learned working with professionals in this industry during the past seven years. One of the questions I asked was:“What are the main obstacles to a Lean initiative in a construction environment?” Here is his very candid and insightful answer:

The main obstacle is not an intellectual one, but psychological. In an industry that relies heavily on a multitude of personalities and companies, all of whom have competing interests, there is a natural tendency to resist tools that were developed in a controlled manufacturing environment. When you allow people to talk freely, there is a sense of skepticism that Lean practitioners “just don’t get us or what we do.” And, in many ways, they are right. Many of those trying to implement Lean in the construction industry are a bit tone deaf. They hear resistance as an intellectual challenge, and therefore counter it by generating copious amounts of data, imposing weighty (and sometimes faulty) measurements, and implementing Lean tools in such a way that is cumbersome – all of which only serves to justify the divide.

Given that most Lean practitioners are engineers by training, I understand the inclination to go straight for the analytics rather than attend to interpersonal struggles and issues influencing workplace culture, but in doing so, they ignore the realities of our industry. On any given day, the average Project Manager interacts with scores of individuals, each of whom comes from a variety of different backgrounds. From owners, architects, and city planners, to inspectors, workers and various employees and departments within their own company,  managers in construction, more than any other industry, have to be able to navigate the murky waters of human dynamics and interpersonal politics. That’s not to say that there aren’t ample opportunities for measurement and Lean tool implementation. Pull-planning, Value Stream Mapping, 5S and Kanbans have literally transformed businesses that were bleeding money in the form of waste. We know the flow stoppages that are the result of people choosing to store information idiosyncratically on their personal hard drives rather than using the standard practice of uploading to a common share drive. But when we emphasize data, and measurement, and tools we are taking Lean out of its proper context and missing the most transformative element of Lean – it’s ability to transform a culture.

The construction industry is, unfortunately, fraught with blame, finger-pointing, and self-protective cover-your-butt behaviors. The average Owner-Architect-Contractor meeting is more of an exercise of the fine art of attack and counter attack than productive waste identification and problem solving. Teaching people to use Lean tools in the context of their interactional realities is far more productive than measuring everything. When all of the competing parties understand that there is far more to be gained – financially and psychologically - by viewing problems as opportunities to improve, rather than as weapons, that’s when people start to understand the true power of Lean.

As Lean practitioners, we need be as interested in helping people to embrace the concerns of all of the parties, as we are in implementing the tools. To me, this is the true power of Lean. I love the framework because if implemented properly, it melds process and measurement with the psychological realities of human interest, and embodies the true meaning of the word teamwork by empowering people to change their working environment for the better. It’s exciting and humbling to see people come to the realization that they are far better off as a united whole, than a bunch of separate competing interests who are resigned to doing battle with each other. To me, this is the true power of Lean. The tools should be a means to get there, rather than the end result. 

What do you think of Gary's comments? For those working in the construction industry, do you agree with his observation of behaviors and habits?

The Best Candidates for a Kanban System?

I had the pleasure of speaking with Steve Cimorelli this month. He recently published a second edition of his book Kanban for the Supply Chain: Fundamental Practices for Manufacturing Management, and I had a lively discussion with him about materials requirements planning (MRP) versus kanban pull techniques and the importance of synchronization.

One general question I asked him was: "Which component parts or products are the best candidates for a kanban system?" Here is his answer:

Kanban works best when applied to parts with stable and repeatable demand. An effective way to quantify stability is to determine the mean (average) and standard deviation of daily or weekly demand for all parts under consideration, then calculate a “coefficient of variability” or CoV (CoV = Standard Deviation / Mean) for each part. Parts with a small CoV have more stable demand patterns than those with large CoV values. Another useful criteria is frequency of usage because frequently used parts tend to be more stable than infrequently used parts. Creating a scatter diagram of these two values on a simple Excel chart, can help you visualize where to "draw the line" on CoV and frequency rules. Finally, ABC class codes, which allow parts to be categorized according to both cost and demand, can add additional perspective to the equation. Many companies find it useful to set CoV, frequency, or other criteria differently by ABC code because A-items have a much higher impact on inventory investment than do B-items or C-items.

What do you think of Steve's advice? What type of parts or products have worked best for you in a kanban replenishment system?

The Kanban Business is Thriving

With the risk of sounding like an advertisement for a particular company, I was happy to read this article detailing the 2009 successes of web-based kanban tool provider Ultriva. It appears that this slow economic environment hasn't hindered the company's growth. Essentially, I appreciated the implication of this article: even this tough economy has not distracted many manufacturers' with complex and intricate global supply chains from focusing on reducing the massive waste and improving efficiency.

Any company that expands it operations into culturally and technologically diverse regions introduce a whole range of new procurement, distribution, time, security, and scalability problems. In addition, one of the most common roadblocks I hear about is the integration of a kanban methodology into an existing enterprise resource planning (ERP) system because lean is action-oriented while ERP is data-driven. Have you addressed and overcome these problems? Has your company reconciled the use of lean principles and scheduling software?