Sustaining Lean = Long-Term Leadership

Just this month, Robert B. Camp published a new book titled Sustainable Lean: The Story of a Cultural Transformation, and I talked to him about some of the topics addressed in the book. Most Lean initiatives begin with noble intentions but often plateau or fail to maintain the gains. It’s commonly known among consulting circles that 80% to 85% of all first-time attempts at a Lean transformation fail, and I asked Robert: Why does this occur? Here is his complete answer:

Lean comes from a culture, originally developed at Toyota, that understands that plotting a strategy requires taking the “Long View” -- looking for the best long-term solution, irrespective of what might be best in the short-term.

Making a decision to launch a Lean transformation is a strategic decision. It is a life-changing transformation, the equivalent of leaving the doctor’s office with the emphatic “lose weight or die.” You can’t perform a Kaizen event or two, any more than you can lose a pound or two, and declare victory. Making the decision to embark on a Lean transformation is making the decision to change life habits, and not just on the shop floor.

What most leaders don’t understand (and, frankly, most transformation experts are afraid to tell them) is that for Lean to work, leaders have to change. Leading Lean is not achieved by hiring a well-known consultancy or appointing a Continuous Improvement Coach -- It is achieved by effective leadership from the top.

Leading Lean means learning about the philosophies of Lean and the tools that issue from them. It means changing the way in which processes are measured and goals achieved. It means being transparent and living the life before you ask others to. It means holding everyone in the organization accountable for achieving expectations. It means a lot of mentoring and coaching and going to see for yourself.

Mostly, leading Lean is about a personal commitment to change.

What do you think of Robert's ideas? Have any of you been involved in a Lean transformation that has stalled or failed because key champions have left the company or the emphasis was solely on tools?

The Wall Street Journal and "The Drawbacks of Lean Manufacturing"

Back in July, an article, authored by Daisuke Wakabayashi and Jung-ah Lee appeared in The Wall Street Journal that reported such companies as Apple Inc. and Nissan are experiencing delays in production because their respective suppliers cannot fill the currently increased demand for certain parts required in popular products. The authors claim that the reason for this these shortages stem from "the drawbacks of lean manufacturing methods, which call for carrying little inventory but make supply snags tougher to offset" and generally believe that "the pitfalls of Lean manufacturing methods, a hallmark of cash-rich and efficient companies, arise when parts either prove faulty or in short supply."

Previous to this article, I had never seen Apple referred to as a Lean organization -- I've come across no other articles that have described the company as such, and I've never seen Apple reference it in its literature. Surely the authors could have provided a bit more discussion about Apple's global supply chain and how it functions before making the claim to help warrant their argument.

This article has come up quite periodically during discussions with colleagues during the past month, and I'd very much like to hear readers' opinions and thoughts about it. What was your reaction when you first read this article?

The Lean Plateau

According to this article on the Supply Chain Brain forum, which details survey results provided by Capgemini Consulting, "dissatisfaction with lean initiatives is highest one to two years after initial launch." As expected, the initial enthusiasm resulting from practical process improvements of first-time kaizen events and the application of Lean tools soon gives way to stagnation or backsliding because "long-term behavioral changes have not yet become embedded in the organization." In other words, if an organization's culture is not altered or transformed, the Lean initiative will eventually hit a sluggish plateau.

The article contends that the absence of four correctly functioning key factors -- Leadership, Recognition, Strategic Alignment, and Performance Management -- often lead to an initiative's inability to sustain. I have always maintained that there is that crucial disconnect between the application of Lean tools and and true behavioral change when participants are just "applying" but not "understanding." In your experiences, what causes Lean initiatives to stall? Can participants who expressed enthusiasm and optimism for the Lean initiative when it commenced, but are now disheartened at two-year mark, be reinvigorated?

Lean Implementation Problems: Different Cultures, Same Mistakes?

I was recently perusing an article that appeared in the March 2010 issue of Asian Social Science titled Why Most Chinese Enterprises Fail in Deploying Lean Production authored by Lixia Chen and Bo Meng . In the section that details the problems encountered when deploying lean production, the four main mistakes that Chinese enterprises commit are:

1. Solely paying attention to lean tools.
2. Hoping to achieve quick results.
3. Indiscriminately imitating and copying the practices of others.
4. Mastering the superficial knowledge without understanding the essence of lean production.

I couldn't help but smile just a bit when I read those four obstacles -- Are any of these mistakes really specific to Chinese or any Asian culture? I'd bet that if I asked you to explain the four main causes of lean implementation failures in the USA, you'd construct a list almost exactly like this one. Is it not just basic human nature to try to simplify a complex transformation and merely focus on the immediate results?

Have any readers worked for or consulted with manufacturing organizations located in China? Please share your thoughts.

Corporate Sigma: Making Lean Six Sigma Holistic

One of the common complaints I hear about Lean Sigma initiatives is the failure of the organization to maintain momentum. Often the initiative begins with enthusiasm and energy and important strides are accomplished, but then it encounters the "glass wall" -- the initiative plateaus and the crucial goals remain unattainable. I posed the question "Why do Lean Sigma initiatives often deliver below expectations?" to Anwar El-Homsi (author of Corporate Sigma: Optimizing the Health of Your Company with Systems Thinking). He offered this reply:

"Lean Six Sigma tools have been successful in improving processes within the corporation, and several of these successes are well documented by many the companies. However, even with the documented successes due to the application of these tools, many companies still failed to meet strategic business goals. Why these corporations failed in spite of a successful Lean Six Sigma program? What did they miss? Some of the Lean Six Sigma program success factors include the need to have the right leadership, a compelling organizational vision, a well defined business plan, projects that are truly linked to business objectives, engaged and motivated people to execute the plan, etc. But one of the most important factors that imperative for success is the utilization of systems thinking. We need to think about improving the entire company holistically - not just focus on individual processes.

Sometimes, an improvement to a process in one area of the corporation can negatively impact another area or the entire company/business. Often, this negative effect is delayed and the impact is not realized until it is too late to do anything about it. The concept of 'Corporate Sigma' eliminates this problem and it addresses all the factors listed above. It combines the power of Lean Six Sigma and Systems Thinking to assess the performance and the quality level of the entire company, assuring both Lean Six Sigma program and corporate success."

The Toyota "Crisis" -- Is it the Problem or the Response?

I’m sure all lean practitioners and advocates are quite dismayed and disappointed with the continual reports of Toyota’s problems with their accelerators and braking systems emanating from all the news outlets. Of course, unfortunately, the current situation has also provided endless fodder for sarcastic sniping throughout the blogosphere. Although I think these current woes in no way repudiate Toyota’s noted production philosophy and culture or its massive accomplishments during the past 50 years, the credibility issues cannot be ignored. When reading or watching the news coverage, one realizes that the central topics -- Toyota’s equipment failures and its supply-chain process – have been overtaken by the debate of whether Toyota’s response to the crisis has been clear, timely, and at least adequate.

I’d very much like to hear the opinions of this blog’s audience – Are you satisfied or dissatisfied with Toyota’s response to this crisis? How has this crisis been affecting Toyota’s reputation? Do you think many business leaders and pundits will co-opt this crisis as an opportunity to wrongly declare that ultimately lean methodologies are critically flawed? Most importantly, what do you think Toyota can learn from its own lauded production system during this time?

When Lean Stalls... Why?

One of the most common problems arising on any lean transformation journey is “plateauing” – the initiative loses momentum after a flurry of important waste-reducing activities. Unfortunately, this stagnation eventually results in the erosion of most gains and the collapse of the entire implementation process. I recently posed the question, “Why do so many lean initiatives fail?” to Bob Sproull, author of the book The Ultimate Improvement Cycle: Maximizing Profits through the Integration of Lean, Six Sigma, and the Theory of Constraints. He sent me a valuable response, so I decided to post it here:

“During the years, I have analyzed failed and successful initiatives and have come to this conclusion. Continuous Improvement (CI) initiatives fail because of three primary reasons:

1. They lack focus and fail to take advantage of key leverage points that exists within all businesses.
2. The typical improvement project takes too long and fails to generate meaningful return on investment (ROI).
3. Not enough thought goes into the selection of projects.

About 10 years ago, I changed my entire approach to CI, in that I stopped trying to "Lean out" the entire enterprise and began focusing on a company's leverage points. I integrated Lean, Six Sigma and the Theory of Constraints (TOC) and I now use Throughput Accounting (TA) instead of tradition Cost Accounting (CA) to measure success.

In case you aren't familiar with TA, it uses three simple financial metrics as follows:

1. Throughput (T) - New revenue minus totally variable costs (i.e. raw materials, sales commissions, etc. or those costs that are incurred as a function of sales).
2. Inventory (I) - Money invested in things a company intends to sell.
3. Operating Expense (OE) - Money spent on turning I into T.

Both Inventory and Operating Expense have functional lower limits and when exceeded can actually debilitate an organization. Throughput, on the other hand, theoretically has no upper limit, so by constantly improving T, profits improve dramatically.

So how does this work? If you recall Goldratt’s five focusing steps:

1. Identify the system constraint.
2. Decide how to exploit the constraint.
3. Subordinate everything else to the constraint.
4. If necessary, elevate the constraint.
5. Return to step 1, but beware of inertia.

I use TOC to identify the operation that is limiting T (the constraint or leverage point) and then apply Lean and Six Sigma to only the constraint to reduce waste, improve flow and reduce variation. At the same time, I subordinate all other parts of the process to the constraint. As soon as the constraint is “broken” a new one appears immediately, so I move the improvement resources to it. The cyclic nature of this methodology assures that I am always working on the right things or those things that result in maximum ROI.

Since I began doing this, the ROI on my CI initiatives has sky rocketed and the rate of return or the time to see improvements has improved dramatically. Significant ROI improvements, when properly applied, occur in weeks versus months when compared to Lean or Six Sigma or Lean Sigma initiatives. I no longer select projects in advance -- Instead, I let the constraint tell me where to focus my improvement efforts."