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Reason #27 Why Your CEO Is Just Not That Into Lean

by Brent Wahba
August 5, 2013

Reason #27 Why Your CEO Is Just Not That Into Lean

by Brent Wahba
August 5, 2013 | Comments (6)

I’m a little down today. I’ve been practicing and consulting in Lean for about 20 years now and it’s getting to be a bit depressing. Problems here, waste there, and that’s all anybody ever wants to talk about! Isn’t there more to running a successful business? 

My favorite definition of Lean is this: “Principles and tools for delivering the most customer value while consuming the fewest resources.” When practiced, however, the math often gets a little fuzzy. “If we eliminate all the waste, then aren’t we just left with pure value? Isn’t that good?” Sure… but that still doesn’t guarantee that there will be enough value to attract and retain customers. We need to keep creating more value in the minds of our customers than their perceived alternatives for us. Now we’re getting somewhere.

For fear of inciting a Lean riot (one enraged sensei burning a kanban card?), I need to point out that the success rate of creating lasting change through Lean (or any improvement methodology) is alarmingly low. Some estimates are < 10%. Forums are filled with discussions about why, and one common belief is that leadership doesn’t properly embrace Lean. I can’t disagree, but I’d prefer a root cause. Why doesn’t leadership embrace lean? One hypothesis is that it’s just not that interesting to most CEOs.

Marc Miller’s book A Seat at the Table proposes that CEOs think about four major strategic decision areas: Innovation, (strategy) Implementation, Optimization, and Outsourcing. Of those, Innovation and Implementation capture much more CEO attention. Where does Lean fit? It can be part of each, but it often rests in Optimization which is relegated to those “operations folks” who don’t get to schmooze around strategy much. If we want Lean to have a seat at the table, we need to start talking more about strategies for creating value. 

Now value is a tricky thing. Our logical selves like to treat value like it is hard measurable benefits minus hard measureable costs. That may be relatively easy to do on the plant floor, but requires different scientific Market Research techniques to measure for emotional purchases like Starbucks Trenta Macchiatos, Harley Fat Bobs, or Jimmy Choo Luna Peeps (those are non-steel toe shoes by the way). Even technical B2B sales require important emotional elements like relationships and trust. Unfortunately, this leaves us in some pretty uncharted Lean waters when it comes to defining and delivering more value. But hey, we are problem solvers right? What new problems do we need to solve in both our established businesses and in the startup community?

  • How do we really measure value in ways to understand how customers make purchase and re-purchase decisions? Packaged coffee has about 100 different attributes, for example, but only six are statistically significant in driving sales. Touch time on the packaging line does not equate to brand image, and guess which one drives sales?
  • How do we create uniquely valuable products and services as perceived by our target customers? What is our development process and is continuously improving what we already have good enough? Do we need something fundamentally different if we want to attract new customers?

  • How do we deliver all the elements of value? In the Lean world we have become experts at improving value streams, but what are our Lean Product and Process Development methods for creating new ones? And how do we deliver critical emotional elements in customers’ purchasing process value streams?
  • How do we communicate value? Customers don’t know if we have something valuable unless we tell them. And sometimes we have to use seemingly wasteful promotional methods to create that influence. Of course that shouldn’t imply that we can’t also be more effective and efficient communicators in whatever means we choose to be heard over our competition.

Waste reduction will always be important in addressing our overall business challenges, but we are missing much of our competitive potential (not to mention CEO engagement) if we don’t start thinking and acting differently about value creation. Apple, Google, and Zappos take this approach and through totally different paths ended up with very high value-creating processes. They’re not doing half-bad financially either.

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
Keywords:  leadership
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Michael Ballé August 06, 2013

Hi Brent,

An interesting issue which never gets discussed enough. On a slightly tangential matter, would you know where the <10% estimate comes from? 


I understand that lean is a process, not a state, so I doubt there'll ever be a "lean" company, but I'm incrreasingly curious about the meme of low rate of success of lean efforts (and guilty of peddling the same idea without much data to back it up).

I'm sure there are degrees of success/failure, as well as satisfaction/dissatisfaction, and in many cases it's hard to disentangle the "lean" part from the "consulting", or in-hous consulting initiative part (and these are rarely aligned), but still I wondered whether we should not make a greater effort to find out ballpark facts about lean success/failure rates, and how lean is "lean" in companies, so to speak?

Otherwise: great points!

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Brent Wahba August 06, 2013
Hi Michael,

Thanks for the comments and really good question about where the 10% number keeps coming from.  There are actually multiple sources, but I will be the first to admit that we could probably use something more up to date.  Many people quote Cliff Ransom, the Wall Street researcher, who at one point estimated the success number at 2% (as in only 2% of lean initiatives achieve their objectives).  A 2007 Industry Week survey came to the same conclusion.  The latest number I've seen from the Shingo Prize Institute showed that 85% of companies either flat line their improvements or start to decline.   Some would say that is a 15% success rate.  And while probably not statistically significant of the whole lean community, easily < 10% of the companies I've visited have expanded beyond, or even maintained, their initial 2 year push.  It's pretty depressing to see 6 month old pitch board data or an empty A3 board. 

In my experience (and this was one of Cliff's points too), companies tend to overestimate how much they have really changed or how they act day-to-day.  What also confounds the measurement is that a majority of manufacturing firms do use some form of lean tools or techniques, but as we all know, that doesn't make them "lean" by any stretch.

So is it really 2%, 10%, or 15%?  Who knows, but 10% is probably in the ballpark.  But what I do know is that it is unacceptably low (would you go to a dentist with a 10% success rate?) and that we as a lean community need to solve that problem ASAP.  There are lots of reasons why that is the case, and hopefully we can use The Lean Post to learn from those who have already solved it.  

Thanks again!

Bren


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Johan Snöbohm Eklund August 16, 2013
Bhasin & Burchers "Lean viewed as a philosophy" in Journal of Manufacturing Technology Management, vol 17, no 1, pp 56-72 stat on page 56, with refrence to others that "only some 10 per cent or less of companies succeed at implementing TPS and other lean manufacturing practices".
The article can be found at:
http://www.pom.ir/wp-content/uploads/PDF/Lean%20viewed%20as%20a%20philosophy.pdf ;

Regards

Joha


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Danielle McGuiness August 06, 2013
Wahba-

the lean riot and jimmy choo references made me laugh out loud. love it!

DB   


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kevin kobett August 07, 2013
3 People AGREE with this comment

Telling stories are the best way to learn. That is why stories are told to children at bedtime. Most bedtime stories involve solving a problem; the character is in trouble yet finds a way to have a happy ending.


In his book, The Achieving Society, David McClelland theorized a society must tell stories of achievement to its children in order to advance economically.


Lean is not working. Something radical needs to happen. I suggest telling a lean story every business day. LEI should have the resources to make this happen. Instead of explaining how to do lean (a method that is not working), show how lean is working.

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Stephen March 21, 2014

Great points Brent,

Each of these keys in defining customer value is essential, in addition, my father's favorite quote regrading the essence of sales comes to mind "People make decisions emotionally and justify them rationally". He was not the first to say that, but the substance remains. Leadership in any organization pursuing lean must emotionally want what lean thinking offers. Allow me to exessively simplify for a moment and say that from a leader's standpoint lean is little more than trust and humility. Both are terribly hard to emotionally justify.





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