A Lean Dream…

John Shook
12/11/2008
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…wouldn’t it be great to see some lean Practical Problem Solving brought to the Detroit 3 “bailout” debate in Washington? Asking simply: What is the problem and how do all the “solutions” that are being bandied about match up?

Forgive me for quoting from my own book, but (page 32 of Managing to Learn) “First, what is a problem? Organizations spend enormous amounts of time and energy debating, exploring, and trying solutions -- yet, how often is it clearly asked and answered, ‘Just what problem is it that we are trying to solve?’”

Choose your favorite problem-solving scientist and somewhere in his or her writing you will find a quote something like, “a problem defined is a problem solved”. Dewey might have been the first -- I often quote Boss Kettering.

Now, I may get as angry with Rick Wagoner as much as the next guy for the many mistakes GM has made over the years as well as for failure to develop more effective long-term strategy and execution. But, is “he” (of course I don’t mean Mr. Wagoner really, we’ll just use him as the symbol for all that has gone wrong with Detroit management) the problem? Recognize that from a short-term perspective, the Detroit 3 do have -- agree with it or not -- an argument. That argument is that they need short-term cash -- cash that they can’t get through conventional means due to frozen financial markets -- because without it: (1) they can’t run their day-to-day business operations and (2 ) customers can’t buy cars. Those things combined with the precipitous fall in vehicle sales volumes was far more than their cash reserves could bear. Note that not only the Detroit 3 but every mainstream auto manufacturer is in dire straights. Toyota will be okay, proving its resilience as it has during every previous economic crisis: economic downturns, you know, are always our opportunity to distinguish real lean wheat from fake lean chaff. Globally, many of the auto companies may go under, each of them asking their respective governments for a “bailout” as they go down. It would be interesting if the U.S. turns be the only government that won’t offer major assistance.

That’s the Detroit 3 argument anyway. You decide for yourself whether or not you want to loan them money -- just weigh the risks. It’s just a business proposition -- do you think the value gained is worth the risk that you won’t get paid back? Once you decide, write your congressman. But, let’s at least recognize their argument.

But, good luck hearing that argument amidst the cacophony. Rather, the sight of the Detroit 3 CEOs, especially GM’s, sitting before them hat in hand (and with TV cameras) was just too good of a target for the lawmakers to pass up. Dogs to a bone (notice, by the way, how the most vociferous critics happen to be from states that have direct foreign auto investment?).

So, what problem is it they’re trying to solve?

The longer-term failure of the Detroit 3 to adapt to changing circumstances (high costs, poor products, wrong products, environmental indifference)?
If that’s the problem, the solution(s) will also be longer term (a $25 billion loan won’t go very far, won’t solve the underlying problems).

Excesses of Detroit 3 executives (corporate jets) and UAW members (job banks, restrictive practices, etc.)?
If that’s the problem, there must be a lot of companies in the same boat (yacht?).

The fact that credit is so tight the Detroit 3 can’t run their day-to-day business and consumers can’t buy cars?
If that’s the problem, wasn’t freeing up capital markets the purpose of the $700 billion Wall Street bailout??

The likelihood that -- whatever your personal view of the causes of the situation -- a $25 billion loan will be “cheaper” than the cost of Detroit 3 total failure, both short term (thousands of failed businesses, millions of unemployed workers, lost taxes for communities…) and long term (no national auto industry -- the industry that has proved in most countries to be the most powerful engine for economic growth)?
If that’s the problem, you can make a strong argument for bridge loans.

The fact that the Detroit 3 haven’t fully transformed themselves and adopted a new (lean) business model?
If that’s the problem, we need to ask why (maybe more than five times) that hasn’t happened.

Of course, the above “problems” interrelate. And they each have multiple causes. But, the cat-and-mouse sparring and scoring of points for viewers back home by politicians just adds confusion on top of bewilderment. Does anyone truly understand what happened on Wall Street? The answer to that question appears to be no, or certainly no one in Washington, but that didn’t stop them from throwing solutions at it. True, toss enough spaghetti and something may stick. But, if we’ve ever needed lean thinking, it’s now. Or if the Lean Community ever had an opportune time to share with others the power of lean thinking, that time is also now. Which relates to…

Last week’s column…

…received a lot of response, some of which you can see here, some of which came from other sources.

That column was written in response to a specific question that I often hear -- “Why hasn’t GM learned from Toyota?” That’s not exactly the same question as “Why is GM failing?” They are related questions, or questions with overlapping answers, but they are very different. I certainly was not intending for those 1,500 words to be the final word on what went wrong at GM.

The reasons for GM being in its current boat are many, complex, and intertwined. There are some good articles in journals right now (Fortune’s cover story by Alex Taylor for one) and no doubt MANY more on the way over the coming months. After all, everybody has their take on the car industry -- we all drive one, and most of us either love them or hate them. My own love affair with cars goes back to auto mechanic school in the 1960s (not really much else to do growing up in the small-town south). In addition to all the recent articles, books have been written about GM’s deep problems going back many years now. One of my early favorites was Brock Yates’ The Decline and Fall of the American Auto Industry. Many if not most if not all of Yates’ observations still hold true today and he wrote that book in, let’s see now, that would have been the same year I joined Toyota …1983!!

Ouch.

So, a lot of people in Detroit, including many smart folks inside GM, have known the company had serious -- life-threatening serious -- problems for a very long time. All this railing from Washington and elsewhere about Detroit managers simply being stupid misses the point and distracts from the deeper questions. If smart people saw what was going on, took action to try to change course (for example NUMMI, where I played a small role, and Saturn and many other attempts) yet couldn’t, what does that say about transformation of large organizations?

Before you answer, note this: that failure to transform isn’t just because no one in Detroit read John Kotter’s eight steps to successful change or Peter Senge’s description of the learning organization. Or whoever your favorite is.

So what…

…I won’t claim to know all the answers, or even all the questions. And we will continue to explore both of those in this space. But, while I don’t know the questions or answers today, one thing I DO know is that both will emerge ONLY from further effort to clarify the problem(s) and understand the reasons behind them -- the “why?”

See you next week.

John Shook
Senior Advisor, Lean Enterprise Institute
9 Comments | Post a Comment
Anonymous December 12, 2008
John the answer is simple in that it has to do with govt intervention in the free market. Automakers look to Washington to protectionist legislation and bailouts instead of looking to the customer for solutions.
Lean is free market economics in its purest form. Govt is a big MRP system that tries to control everthing and in the end destroys the client customer relationship. All Govt can do is reallocate resources to protect special interests. Govt can not solve the economic problem, it can only make it worse. As you can see that is exactly what they are doing.
John Podlasek
Anonymous December 14, 2008
John it's not about the big 3 and it's not about the worker. It's about saving the UAW. Every member of congress has a stake in keeping the money coming in from the UAW. If the union was for the worker it would be pushing Lean more that the company. People making product of value is what will keep the company and the worker alive.

Don Grimley
Anonymous December 18, 2008
Gm has a problem since 30 years. The have spent billions of dollars in improvement without results. This indicates that either the process is not well thought of or not executed properly or there is no process of of sustaining the improvements. If that so how can we think a bail out amount will help without drastic changes in organization structures.
khaja ansari
Anonymous December 18, 2008
Very intersting point of view. While some may argue against govt intervention you only have to look back at the Great Depression and how the massive govt programs pulled the country out of economic malaise and quite possibly led to the greatest economic expansion that this world has seen for the next 50 years.

I agree that failure of the Detroit 3 has far reaching consequences beyond the pure economics. Maybe a lifeline is needed to shake these 3 out of their mediocrity.

Sam
Anonymous December 18, 2008
Since, the lean philosophy is an all inclusive approach in an continuous effort to find a better method to improve flow, it would stand to reason that the big three would over-look the successes of the lean philosophies.
Too, embrace lean now verses 20 years ago maybe a little to late. The culture of the industry lacks trust at every level of the diverse group of people that comprise these organizations. This would be a ground floor restructuring that reduces all layers of "muda" quickly.
Robert S. December 19, 2008
The problem: an inflexible over capacity.

Domestic 3 automakers have too much capacity and that capacity is inflexible to change as consumer tastes change.

Recommendation: Close half the plants; retool the remaining to be able to produce an ever-changing mix of vehicles. This retooling includes the need to mentaly "retool" the design and development process also.

The credit crisis is only half the problem: It has made the money to retool unavailable. The consumers not buying cars is not the problem, them not buying trucks and SUV's is the "problem" because the domestic three loss money making small cars and have tied their money up in very high-capital capacity to produce the vehicles that are no longer in demand.
Anonymous December 20, 2008
To Sam, there are many historians and economists who think the FDR government spending and interference actually PROLONGED the depression and it was only WWII that brought us out of it.
Ralf Lippold January 4, 2009
John,

Thanks for sharing your insights with us on that (and other issues).

In MHO there are two major flaws in the system that should be investigated further

1. lack of leadership
2. immenant over-burden (muri) in the organizations (that are troubled and in general)

Rebecca Henderson, Professor for Strategy at MIT Sloan, has some very profound thoughts on that:

https://www.lean.org/shook/

I think she perfectly shows what is going in the deeper areas of organizations that hinder the transformation towards lean (all around us).

Best regards from a passionate Lean Thinking (applying the ideas whereever possible - to be exact everywhere, where I am part of the process in one way or the other, and can make a difference:-))

Ralf

PS.: http://www.community.presencing.com - as we would like to see a truely huge shift in thinking and action, this could be useful (even though no direct connection to lean; having Shingo's words in my head "thinking out of the box" will bring the true lean leader forward to the levels to reach).
Mark Rosenthal January 9, 2009
Interesting thoughts.
Regarding government intervention - while I largely agree that government intervention is, generally, not a solution, I don't think we can attribute the failure of GM to government intervention alone. There are plenty of thriving companies operating in places where governments have much more interference in the economy than is the case in the USA. Toyota, by the way, is one of them.

Rather, I think government policy is part of a bigger picture that has built, for GM and other companies, an internal belief that their misfortune can be attributed to external factors. In their appearances before Congress, the general theme seemed to be "...but for recent unfortunate events, beyond our control, we would be OK." This reflects a victim belief structure: "We would be OK if only [fill in the blank] was different."

Unlike John, I have not had the benefit of a long-time insider view of Toyota. But in my view from the outside, going back to Sakichi, I see a culture of self-reliance. I see that the leaders have taken responsibility unto themselves for whatever difficulties they happen to be in.

Those difficulties give rise to their "challenges" (to tie back to another post). So rather than looking to outside themselves for causes, they reflex to looking inside themselves for solutions.

This seems to me to be the key difference between what I hear from GM and what I hear from the Toyotas of the world.