Most business leaders operate with the conventional mindset that dominates business school curriculums. They consider strategy a series of questions about market segments to pursue. They base most crucial management decisions on financial objectives. And they rely on employees to execute work through processes that their managers designed for them.
This static model rests on many assumptions about how the business will grow and endure: The company will find and pursue growing, profitable segments while cutting any others. The company will invest in customer acquisition and transformation while reducing all other costs. Leadership will use clearly defined budgetary objectives for motivation and assume that managers will make the right decisions to achieve them. Ongoing success depends on controlling processes while hunting down and eliminating variation.
This traditional approach works just fine under ideal conditions, such as if:
- You have access to a profitable niche.
- Your customers are happy with your offer.
- Short-term budgetary decisions don’t generate turf wars between functions or prompt disinvestment from key heritage resources.
- Your processes make sense to those who run them and are competitive.
That’s a lot of ifs.
Unfortunately, this established model of success applies in only a few (if any) of today’s market conditions. And, as we have learned from starting a business from scratch twenty years ago and fighting to grow it in this time, market conditions trump everything else. They certainly did on our path to becoming the publicly held 1.4 billion euro company we are today — and they continue to do so now.
When one of us (Nicolas) started Aramis Auto with his partner Guillaume Paoli in 2001 with a phone, a computer, and a desk, we envisioned a lean solution to the waste involved in buying cars. We pioneered car sales over the internet, and the industrial refurbishment of second-hand autos, to support an emerging circular economy. From the start, we were determined to be relentlessly customer-focused.
The mainstream framework taught in business school works well enough in good market conditions, but, as we learned the hard way, this approach is disastrous in adverse market conditions.
The mainstream framework taught in business school works well enough in good market conditions, but, as we learned the hard way, this approach is disastrous in adverse market conditions. First, it leads to making all the wrong decisions. It pushes you to favor internal processes over customers, to have functional heads make narrow-minded costly decisions, and to put resources in all the wrong places. Not only are these moves bad, but they also make all your employees miserable by enforcing compliance on procedures they can tell won’t work. All too often, you then seek “blue ocean” niches that don’t rightly exist while abandoning what made your brand great and being dragged down by legacy processes you don’t know how to change. But what can you do when this is all you know?
Any long-term growth will have to survive unavoidable, often unforeseen, crises. Of course, we know what to do in good times — reinvest profits in customer acquisition through marketing additional features and keep operations costs down as you can. But what of bad times, such as downturns or a crisis? These situations are the stay-awake-at-night question that led us to investigate lean.
When we first attempted to adopt lean thinking and practices, we didn’t realize how radical a change it required in our mindset.
When we first attempted to adopt lean thinking and practices, we didn’t realize how radical a change it required in our mindset. We initially interpreted lean through the mainstream framework — as a way to improve process performance and reduce costs. So, we expected lean management to deliver improvements around the edges, yielding incremental gains that never seemed to last.
As we looked more deeply into lean principles — finding a sensei to work with, visiting Toyota plants and suppliers in Japan, and talking to lean veterans — we realized that lean was not merely yet another way to improve the traditional framework iteratively. Rather, Toyota had built another framework altogether.
In this alternative framework, strategy means creating the technological conditions to satisfy all customers in all segments with high-quality, affordable products. Sales and business growth result from serving the customer base through higher quality, on-time delivery, and lower prices. Productivity is the sum of safety, quality, and lead-time improvements, which cumulatively reduce costs when delivering sustainable volume. Managers visualize processes to reveal problems and engage employees in kaizen. In this framework, time is the essential variable – not budget lines.
We came to adopt the following principles into our daily management:
- Each segment has to succeed, so you constantly need to adapt your offer to make it so;
- Responding to every quality complaint, learning from it, and building quality into products and processes are the key to sustainable sales;
- Reducing lead times to avoid overproduction and workload/capacity unbalance throughout the value chain leads to overall cost reduction;
- Engaging staff in autonomous problem-solving and kaizen enables management to discover and encourage positive variance and keep the organization agile, flexible, and friendly.
As Toyota’s lean framework became clearer, we faced a conundrum. We realized that applying best practices forcefully doesn’t work. Instead, it creates confusion and reaction. So how could we get our executives and managers, conditioned to the mainstream framework, to change their minds?
Again, we turned to Toyota. After all, it had led a global expansion over decades and must have faced the same issue. In asking this question, we realized that Toyota founders held tight to several key principles, which they had devised at the company’s founding in the 1930s. Most of their working practices were compromises with western industrial techniques. The Toyota Production System was not built from scratch and elaborated in isolation but resulted from a constant dialogue with US practices. Kanban came from seeing pictures of supermarkets. The suggestion system was born of a leaflet Eiji Toyoda brought back from visiting a Ford plant. Rather than copy and paste, they would think deeply about how they could adapt what they saw into their framework.
And thankfully, to spread their way of working to suppliers and others, Toyota progressively wrote the framework and shared it with the world. The intent was not to try to apply the Toyota Production System (TPS) as a sum of production techniques but to establish an ongoing dialogue with it. As leaders, we became committed to learning the TPS and teaching it to our executives on the shop floor.
The resulting “Aramis Way,” should we call it that, is the constant interaction between known “best” practices in our industry and TPS injunctions. So, we seek to improve customer satisfaction through higher quality, faster delivery, and better prices. To realize this goal we reduce lead times and level workloads, detect defects earlier, react faster, and turn our chain of command into a chain of help. We involve work teams in clarifying their standards and using them as a stepping stone to improvement through kaizen. And we make sure infrastructures and systems support every team and individual, to work smoothly with as little hassle as possible.
In hindsight, the one staggering takeaway from this learning journey is how powerful the mental shift from “actionà objective” and “problemà countermeasure” is in practice. The core instruction of the mainstay management framework is “do what you have to do to reach your budget objectives.” The different injunction in the lean framework is “go and see the problem for yourself on the gemba to understand it in real-life and create consensus on causes, then encourage people to come up with countermeasures, share them and reflect on what you learn.” It’s a radical shift in thinking that leads to tackling different problems and choosing better solutions. This mindset and approach is, we believe, the cornerstone of creating a lasting lean culture — and a successful business.
Raise the Bar is a blow-by-blow account of our lean journey in our specific digital/brick-and-mortar hybrid business model.
Our new book Raise the Bar is a blow-by-blow account of our lean journey in our specific digital/brick-and-mortar hybrid business model. First, the book tells how we successfully handled our increasing complexity to lead the company to its IPO. And then, again, the market completely turned on us with no new cars for sale from automakers and rising inflation, making customers extremely cautious. So it’s back to learning the TPS for us to discover, one workplace visit at a time and one kaizen at a time, how we will turn this new crisis into another successful growth opportunity.
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