I've had visible results with lean but my corporate colleagues want to force their ERP and purchasing practices on my division. Any advice?
Dear Gemba Coach
I’m the head of a business unit and have had visible results with lean. Yet, my corporate colleagues refuse to acknowledge this and want to force their ERP and purchasing practices on my division. This is very frustrating – any advice?
I certainly understand (and share) your frustration and, unfortunately, I don’t really have useful advice. This vexing puzzle has dogged the lean movement for decades: why aren’t results more persuasive?
The standard theory is that lean thinking runs across “mainstream” management habits, such as control-and-command, management by objectives and Taylorist execution and so on, which is hard to deny. Still, I find it hard to accept that mere habits are enough of an explanation for management teams to pass on the promise of lean. There must be some deeper reason.
The lean model is fairly straightforward: in order to succeed in saturated markets, improve quality, flexibility and productivity by kaizen steps in your operations and thus (1) find out the leverage points you have to learn to succeed in the current state of the market and (2) develop your people so that they learn to achieve a higher level of performance (to be more complete: improve safety, quality, service, rework, inventory, productivity, capital use, energy performance).
A large difference with mainstream management is that, in lean we don’t seek to move from this steady state to a better one defined a priori. We choose to improve performance in specific dimensions and discover what the next state should be – guided by an ideal of zero customer complaints, zero accidents, immediate delivery, zero defects, 1x1 production in sequence, 100% value added and engagement of everybody. This ideal shines a light on where we seek performance improvement, but is not something we try to reach in one leap: 100 times 1% improvements are preferable to one time 100% improvement, because they give us 100 learning opportunities as opposed to a single one.
Sure, this shift to performance improvement from defining the vision and executing the change requires some mental adjustment, but surely not enough to explain the irrational resistance to recognition and adoption of lean results.
What is, therefore, the deeper management assumption lean thinking runs across? Why would your corporate colleagues want to force the MRP on you, or purchasing practices that, as a business unit leader, you don’t want – a common situation, but, when put on paper sounds rather extreme – I mean, why would they care this much?
My best guess is that a natural model for making money is:
Sell at a high price what you buy at low cost
It sounds like stating the obvious, but that is a sound strategy. In your particular case, it follows that:
- Using the ERP systematically across the company is the best way to control supply chain costs and keep them at their lowest.
- Putting systematic pressure on suppliers is the best way to buy at low cost.
A Political Choice
Sure, this ignores the fact that the ERP itself creates unnecessary costs or that pressuring suppliers on price alone generates poor quality, low delivery, and stifles innovation. These side-effects are considered as second order by people who think that they make such a profit in squeezing suppliers that it’s worth the effort.
And indeed, in equipment markets, this has had a lot of mileage. To a large extent the whole story of colonization was access to cheap resources by industrializing colonizing powers, who could then force their not-so-well-made products onto captive clients. More recently, after the simultaneous fall of the Berlin wall and the rise of Asian tigers, corporations found new places to move production to lower unit costs (disregarding in the process the overall cost of extended supply chains). As long as the market is growing, demand outpaces offer and there is space for all, this is perfectly sensible.
But in mature, saturated markets, the opportunities for radical differentiation on both price and cost are fewer and fewer. One example we know is the fight for number one between Toyota and VW. Volkswagen has bet the farm on high-range products and intense modularization to reduce component costs – rumor has it that a Porsche shares 70% same components as a VW. The result is that brands lose distinctiveness and the company has high overall cost nonetheless. A spot check of quarterly profit margins shows Toyota at 8% and VW at 4% - a significant difference when one considers the volumes.
In mature markets, Toyota’s lean approach turns out to be more effective: by improving performance steadily through involving people in improving their processes one gains both market share and profitability step by step, rather than by coming up with radical strategies to sell more expensive products and pressure purchasing and manufacturing costs down.
However, both these strategies make sense – both arguments are understandable. One argument trumps the other in certain circumstances, but not in others. The upshot is that the sell high, buy low strategy is a valid choice. What you have on your hands is not as simple as resistance to a new idea. It’s a bona fide political choice your executive has to make. As with all political bodies, leaders represent options to take the company, organization or country in one direction or another. This is normal.
Boardroom as Gemba
Back to lean thinking, if we frame your question in terms of: what process should I improve to convince faster my corporate colleagues? We can see that being frustrated at their lack of interest or understanding sidesteps the real issue: being better at leading corporate politics. If we frame the question thus, it becomes:
- Whom do I really need to convince?
- How can I be clearer in the path I propose?
- What allies can I gather who will support my path?
- How will these allies be rewarded individually if they chose my camp?
In that sense, the boardroom becomes a gemba as well. All human issues are both technical and political, and many lean guys I know tend to enjoy technical issues and dismiss political ones – but at corporate level we have to recognize the simple fact that political is what a corporate does. The main role for a corporate function is choosing the best path for the company and how to make the rest of the organization follow that path.
I don’t have any quick fix answer other than apply lean thinking to your problem: recognize the political nature of your challenge and kaizen your political skills. This means identifying the political performance you want to improve (is it convincing the CEO? Enrolling more allies? Getting rid of irksome enemies?) and then take a hard look at how you’re handling that process and think of the kaizen steps to do it better.
No easy answers.