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Why Lean Remains A Superior Business Model and Way of Thinking

by Dan Jones
March 13, 2020

Why Lean Remains A Superior Business Model and Way of Thinking

by Dan Jones
March 13, 2020 | Comments (3)

From the time that lean production and the Toyota Production System (TPS) were recognized globally, it was clear that lean/TPS was only one part of Toyota’s successful business system. The Machine that Changed the World, written by James Womack, Dan Roos, and me, described the superior performance of this production system, including the supply chain, product development system and selling system, brought together in a very different approach to corporate strategy. Lean production should therefore be seen as part of a wider lean business system—a perspective that Jeff Liker introduced in his 2004 The Toyota Way, and other subsequent books.

Over time it also became clear that seeing lean or TPS solely as a new set of tools and principles for use by experts to design more efficient, integrated horizontal processes misses the real potential of lean. Lean challenges the assumption that processes are designed, maintained and improved only by experts; and that the job of line management is to ensure compliance by operatives. It also challenges the focus on asset utilization and point optimization that come from the vertical, functional deployment of knowledge and resources in big organizations. And it challenges the Western assumption that the only way to integrate the sequence of work to design, make and deliver a product is through technology. Toyota achieved this integration well before such IT technology became available.

Lean is not about defining a new “best practice” or about system, rather than point, optimization. Instead it is about seeking accelerating, dynamic economies through engaging everyone - shop floor and management – in using scientific problem solving to define and continually improve their work, supported by engineers and technology—an argument presented by Michael Balle and three co-authors in the 2017 book The Lean Strategy. The tools and principles of lean are in fact learning frames to develop the capabilities of individuals and teams to solve the next set of problems. These capabilities also feed into the development of the next generation product and production system and into future innovations.

It is these capabilities that make it possible to integrate value streams without relying on batches, queues and buffers. In other words it is capable teams that make streamlined horizontal value streams work in changing circumstances. Lean is in fact a people-centric learning system requiring a very different management system, described by Michael Balle and colleagues in 2006 in their article on The Thinking Production System.

Value stream analysis is a powerful way of visualizing the potential gains from lean. But building the capabilities to realize these gains has to be built bottom-up, one step at a time. Otherwise line managers will again resort to compliance with systems devised by experts. Moreover, building these capabilities challenges the traditional assumption that strategy can be separated from execution. Lean leaders must lead this execution themselves, rather than relying on experts to do it for them.

Lessons from Dissemination

Today we can draw some conclusions from research and experimentation over the past 30 years.

The first conclusion is that lean production practices work in all kinds of activities – well beyond high-volume manufacturing. But although most of the tools and practices are relevant, the starting points and sequence in which they are used to unlock lean are very different. While high volume automotive starts with standard work and flow, producing consumer goods begins by separating the tail from high-volume products. Retailing starts with basket fulfilment and rapid replenishment whereas service and repair begins by turning unpredictable into predictable work. Healthcare starts by unblocking discharge and making the plan of work visible, and so on.

The second conclusion is that things are changing as we move from the era of stable technologies, economies of scale, long supply lines and big systems. Lean was initially seen as a way of improving the performance of these “legacies of mass production”- big factories, big warehouses, big supermarkets, big airports, big hospitals etc. Hence the focus on lean production.

But big factories are beginning to be challenged by distributed production closer to customers, big warehouses are becoming hubs for rapid replenishment, big supermarkets are being replaced by convenience stores and home shopping, hub airports are being bypassed by point-to-point flights and overloaded district hospitals are likely to give way to local treatment centers and medical support in the home, described in Lean Solutions.

This shifts the focus from production to distribution and customer service activities on the one hand and to engineering, development and the rapid scaling up of new products and services on the other. Lean is central to rapid replenishment and managing all kinds of service delivery. From the beginning, Toyota created an incremental four-year development cycle, which has evolved into a superior process for rapidly scaling up new technologies, rather than depending on making the occasional big leap, described in Designing the Future. Both are of course needed in a rapidly changing world.

The third conclusion is that on the one hand we achieved widespread awareness of lean across the world, but on the other lean programs have often been difficult to sustain over time. Very often this was because they were driven by external consultants or internal lean teams rolling out lean training, redesigning the work and the value streams and telling front-line teams what to do. Initial success did not last after the experts had left. (This is also what happened after the roll-out of Six Sigma programs.) As a consequence many lean teams end up being used as cost-cutters or firefighters.

What was lacking was building a daily management system in which line management learns to help teams to define their own standard work as a baseline for improvement, makes plan-versus-actual visible and engages everyone in using problem solving to respond to deviations and to make improvements. Learning-by-doing involves using PDCA, through a mentored dialogue in building an A3 report and is aligned with corporate objectives using a hoshin framework. Learning is very specific but the cumulative experience of repeated cycles of learning enhances the organization’s ability to formulate insightful hypotheses and possible counter-measures rather than jumping to solutions in tackling the next problem.

But even lean programs that do include building a daily management system sometimes fail when top management is distracted by other matters. This is exactly what happened at Tesco after 2011. Sir Terry Leahy headed a top team who all had experience of running stores and distribution centers and all the directors spent one day a week every week out in Tesco’s operations. They could quickly understand the potential of the operational improvements revealed by pilot projects for the rest of the business.

As Tesco grew, the next Chief Executive, Philip Clarke, chose to focus on the expansion of Tesco’s newly acquired operations across the world and to rely on bigger IT systems to improve its operations. When these failed to deliver, it took a change of leadership in 2014 to recover by going back to basics and refocusing on the UK market.

Successful lean leaders have often come to realize they have to lead it themselves, after witnessing a lean program run into the sand. They also recognize the value of having an experienced lean sensei as a dialogue partner in doing so, described in The Lean Sensei.

Future Challenges

The shareholder-first business model is increasingly being questioned today. It is no longer credible to ignore the externalities like the impact of the organization on the environment and the challenges from climate change and to rely on workforce compliance from an increasingly skilled workforce that does not share in the profits from dominating markets. At an operational level it is full of wasted time, effort and costs and is slow to respond to change.

The lean business model offers an alternative. It achieves a premium price by being better at helping customers to meet their needs and retaining them, rather than dominating markets and controlling customers. It is better and quicker at developing and scaling-up new product technologies that meet the changing needs of our time. Toyota was the first to commit to replacing the internal-combustion engine and now to transform itself into a mobility provider. It also has one of the most comprehensive environmental assessment systems guiding its progress to making its products and operations carbon neutral.

The lean approach to operations is also not driven by the desire to replace people by technology and systems. It sees the smart use of technology as enhancing rather than replacing human decision making. Toyota’s operations continue to evolve - most recently by replacing some robots in assembly with humans, developing very simple physical assist measures instead of powered devices and by creating a completely new and highly flexible modular production line, Takaoka Line 2. We still have a lot to learn from the Toyota example.

This article is adapted from Dan’s chapter, “Disseminating Lean across the UK: A Personal Reflection”, in the forthcoming publication, The International Handbook of Lean Production, edited by Thomas Janoski and Darina Lepadatu, published by Cambridge University Press.

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3 Comments | Post a Comment
Levent Turk March 14, 2020
1 Person AGREES with this comment

Great article! Thank you for sharing Mr.Jones.

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David Rasmusson March 15, 2020

This article reminds me of Myron Tribus's article, Deming's Way, wherein he describes these two managerial approaches as played out in a trucking transportation company.

Thanks for the reminder!

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Matthew McSharry June 01, 2020

Really enjoyed this piece Daniel.  Lean is a great business model, and as your piece makes clear, it starts with people and only continues to work by keeping people engaged and supported.  Take either the people aspect, engagement or support away and this is when it stops working - simply said but easily overlooked.

This is why Toyota do so well.  Lean is culturally ingrained and if any 'person' unit is changed, the new person fully understands their role not just in terms of direct job activities, but of the lean characteristcs and skills which are needed - I do not believe they would be hired otherwise.

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By Michael Balle, Nicolas Chartier, et. al.
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