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Ask Art: Is Lean a Strategy?

by Art Byrne
May 17, 2017

Ask Art: Is Lean a Strategy?

by Art Byrne
May 17, 2017 | Comments (16)

The answer is…yes. In fact, the lean approach is the greatest strategic weapon in running any type of business that you will ever see. The strategy for any business starts with the conditions it is facing in its marketplace, and looks at the best approach on how to overcome these issues in order to be successful. When Taiichi Ohno was helping to create the Toyota Production System as we know it today, Toyota faced the challenge of how to produce a high variety of models with short runs at low cost without having access to big capital spending. Your company will have other issues. Perhaps you have quality or customer service issues;  you might be lagging behind the competition in new product introductions. Whatever the situation you need a strategy that enables you to deliver more value to your customers than your competitors over long periods of time.

How lean fits with this is very simple. All we are trying to do is to teach our people how to see and remove the waste from all our processes, in order to deliver more value to our customers. The focus of a lean company is always on the customer. The daily work of the lean company is all about removing the waste that exists in every one of its processes. As waste is removed the time and cost required to do any type of value adding work is reduced. At the same time, the quality of what is produced is vastly improved and creates a noticeable strategic advantage versus the competition. As a result, the lean company also competes on time.

For example, as waste is removed, lead times that used to be 6-8 weeks, and still are for the competitors, can be reduced to 1-2 days. This allows the lean company to conform to the wants of the customer as opposed to having to come up with ways, often through some form of price concession, to get the customer to put up with the 6-8 week lead times. Whenever the competitor stumbles and is out of stock, the lean company can respond instantly and grab the business and do it without having to discount. In addition, as more waste is removed the lean company will be able to introduce more new products faster than the competition. Over time the lean company can put itself in the position where its competitors are forced to follow its product introductions but can never quite keep up. This product leadership will be noted by the customers and the lean company will gain market share.

So, when I say lean is the strategy it doesn’t mean that you have to give up all the things that you see as strategic now. You can still open new markets, introduce new products, improve your quality and customer service in order to be easier to do business with, or pursue selected acquisitions. None of that changes. It is just that by focusing on lean, i.e. removing the waste on a daily basis, as the core strategic approach, all of the things you consider strategic now will just become a whole lot easier to do. In addition, new opportunities that you can’t even conceive of now, like having a 1-2 day lead time vs. your current 6-8 weeks will open up for you.

Unfortunately, most companies still see lean as primarily a cost reduction program and not something strategic. As a result they will suboptimize their lean efforts. It is easy to see where this thinking comes from as removing the waste from all of your processes and focusing on delivering value to your customers has the big side benefit of delivering significant cost reduction. Even so, it is just that, a side benefit, you need to think of lean as strategic. 

Let me give you an example. Two companies—A and B—buy the same equipment from an outside vendor. The only difference is that company B has used its lean approach to cut the setup time on the machine to 1 minute while its competitor, company A, takes one hour to change over the machines. Now say that each company can only allow one hour per day of downtime for set up. Who has the lower cost: A or B? And who has the better customer service (keep in mind that A can only make two different products per day while B can make 61)? Now, if B has the lowest cost and best customer service is this a strategic advantage or just some manufacturing thing? After all we are only talking about setup here yet we created significant strategic advantage.

Think about it. I think you can start to see lean in a much more strategic light.

The views expressed in this post do not necessarily represent the views or policies of The Lean Enterprise Institute.
Keywords:  strategy,  Transformation
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16 Comments | Post a Comment
Mark Graban May 17, 2017
3 People AGREE with this comment

"Unfortunately, most companies still see lean as primarily a cost reduction program and not something strategic."

The same thing happens, unfortunately, in healthcare.

The traditional healthcare executive mindset is focused on cost cutting. When introduced to Lean, they naturally view it as a new way to cust costs... but they're seeing Lean wrong.

It doesn't help that one consulting group runs around telling executives that Lean is just a cost cutting strategy. That's criminally bad advice that's harming hospitals.

They should be listening to you, Art.



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Dennis May 17, 2017
3 People AGREE with this reply

I was taught by my Sensei that Cost is a outcome of everything we do. So focus on all of the things we do in detail and eliminate the waste - you will reduce the cost. If you just focus on cost - once you reach your target you are done and then move on to anther cost reduction only, not working or focusing on the whole picture.



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art byrne May 18, 2017
1 Person AGREES with this reply

Dennis, Thanks for your comments. You had a very wise Sensei. To bad most CEO's don't quite get this. Art.



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art byrne May 18, 2017
1 Person AGREES with this reply

Mark, thanks for your comments. Yes healthcare is no different than running any other business [except I guess that the raw material they are working on can walk and talk].I guess that the fact that removing the waste to deliver more value to the customer hapens to create large cost savings as a side benifit gets everyone confused. If we fliped this around and asked what are the financial benefits of delivering the most value to your customer [like short lead times, best quality, most innovative new products, most responsive and reliable company to do business with etc.] do the financial results maybe we could get more people to understand. To me these type of things create far more value than the cost reductions you get as a side benefit with lean. Art.



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Francis May 18, 2017

Thanks Art for another great, thought provoking post!

It reminds me very much of the confusion around the word "monozukuri". So (too?) many firms in my industry have been using that word to indeed name their latest cost reduction program. They might be better off with a sound strategy rather than just a name that sounds good...



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art byrne May 21, 2017

Francis, thanks for your comments. I'm glad you enjoyed the post. Monozukuri means "making things" in Japanese  but sometimes we forget why we are making them and as a result put all the focus on making them cheaper. Thus the focus on lean as a cost reduction program. We forget the fact that what we really are doing is trying to deliver more value to the customer than our competitors can. We do this by removing waste from our processes. The customer is always the focus of a lean turnaround and thus we need to see and understand lean as a strategy, not some cost reduction program. Art.



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Owen Berkeley-Hill May 22, 2017

The situation as I see it is a small band of Lean thinkers trying to change the course of a 500,000 ton ship by head-butting it.

We've know about Lean for over a quarter of a century. At first it was the Toyota toolbox: don't tell me why, just how. Then it was seen as an improvement/cost-cutting methodology, competing with Six Sigma and needing some sort of propping up by in an amalgam called Lean Sigma.

We are still not anywhere near regarding Lean as the most significant advance in our understanding of how a good leader (OK, manager, supervisor) thinks, believes, acts and behaves. Why is this?

The main culprits, I accuse, are the B-schools who have ignored or are frightened of Lean when it comes to theri cash cow, the MBA. The grumpy brothers, Kenneth & William Hopper wrote a book, The Puritain Gift in 2010 (I B Taurus) which describes the gift and how it enabled the USA to become the "workshop of the world". It then tells of how the USA generously gave the gidt to the Japanese after WWII, but flushed it down the toilet when the B-schools seduced industry into believeing you could develop better managers faster by the largely academic route.

If the B-schools continue to churn out future leaders of the Command & Control variety, Lean will continue to be a mildly interesting minority occupation like Morris Dancing or Macrame.



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Robert Edward Cenek May 22, 2017
1 Person AGREES with this reply

Lean is a strategy to the extent that you using it to not only determiine HOW you are going to compete, but also WHERE you are going to compete - products, markets, geographies and the like, or am I missing something?



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Owen Berkeley-Hill May 22, 2017

I'd go further and say it is a radically different leadership philosophy which has had difficulties taking hold because of the B-schools. Perhaps also because most leader will have problems letting go of the intoxicating effects of power.

Lean includes Hoshin which helps develop strategies and plans which have the whole organisation singing off the same page. 



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art byrne May 22, 2017

Owen, head butting a 500,000 ton ship? Ouch.I don't think I would use that analogy or that I would put a lot of blame on the business schools for the lack of lean progress to date. It is not that I would not like to see more business schools teaching lean. It is just that you should never stop learning and the lean leader will learn the most after business school when confronted by real problems and massive waste created by practices often taught in business schools.I think that the lack of lean leadership is in part due to the "command and control" approach to running a business and the fact that many CEO's are very insecure and as a result are unwilling to take risks. As lean is nothing but a contiuous string of "leaps of faith" into the unknown in a quest to remove the waste and get better both of these approaches are unwilling to take any risks at all and therefore can't become lean. Art.



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Owen Berkeley-Hill May 26, 2017

Hi Art,

I agree with you that one should never stop learning, but I would go further and suggest that a leadership cannot be serious about Lean if they cannot create a Learning Organisation.  I had the privilege of meeting a Toyota Master coach who said that at his plant everyone was expected to tackle around 20 improvements each year. This was not a "target" but encouraged everyone (including those nice people with titles beginning with "chief") to get involved in kaizen. Sometime back, while I was browsing the TWI website I came across their suggestion that this number should be around 10. Ten or 20, how many organisations actually encourage their workforce to get involved to this extent in improving the product, the processes that make that product and, by doing so, improving themselves?  How many organisations see this as a useful KPI?

It is difficult to estimate the number of B-Schools globally and the number of MBAs they mint every year. I guess the latter is in the region of 1-3 million, but I would bow to a better estimate. How many of those MBAs coming of those relentless production lines are grounded in Lean which is so radically different to the more usual Command & Control?  I am sorry, but I cannot accept that the B-Schools have not been negligent in accepting Lean for what it is: arguably the most significant advance in our understanding of how a good leader should think, believe, act and behave.

As for being rough on the B-Schools, you might want to take a look at what Jim Womack had to say in a recent newsletter:

http://planet-lean.com/womack-business-school-education-should-be-gemba-based?utm_source=Lean+Enterprise+Academy+Community&utm_campaign=7b66a371ea-L.E.A+Newsletter+-+Thinking+Differently&utm_medium=email&utm_term=0_ee5224a839-7b66a371ea-150101949&mc_cid=7b66a371ea&mc_eid=471bbe8c19. In it Jim Womack refers to an interesting article by Henry Mintzberg about MBAs as CEOs. You might want to browse it here: http://www.mintzberg.org/blog/mbas-as-ceos.  And please don’t get John Shook started on this subject unless you are wearing a hard hat! ??

 



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harry May 23, 2017

Organizations are political, just like Washington DC. It's easier to blame others than to do a good job, especially since the boss received his job via political activity. Lean has as much chance as a bipartisan health plan.



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Mark Paggioli May 25, 2017

All I will add is this simple consideration - if we believe this perception of Lean exists, what has been our role in creating it?



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art byrne May 25, 2017
1 Person AGREES with this reply

Mark,I think there are a couple of reasons. First, most of the books written about lean tend to be "tool" books, i.e. how to do kanban, how to create a valuestream map, how to create an A3, how to reduce set up time, etc. This gives people the idea that lean is just a bunch of tools that you can use based on what you think will benefit your company. Secondly because a proper lean implementation has the side benefit of reducing costs most companies that get interested see lean as just a cost cutting exercise. This is a much easier sell for consulting firms in the lean space so they perpetuate the idea of looking at lean as a cost reduction program. Getting people to see it as the strategic weapon that it is is therefore very difficult. Art.



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