I’ve been a student of lean for 25 years, and the more that I learn the more I believe that, despite conventional wisdom, lean is a profoundly disruptive way of working. From the time that this new approach was popularized decades ago, there have been two completely different ways to look at the same tools, materials, and stories. Some of us saw Toyota as a disrupter, a small bankrupt company that became the dominant automaker in a saturated market ruled by U.S. corporate giants, by doing something radically different. Others, however, were fascinated by Toyota’s “operational excellence” as a means of safe, incremental improvements—they would cherry-pick tools (total productive maintenance becomes total performance management and so on) to leverage productivity gains without ever challenging either the strategy or the attitudes of top management.
This great divide continues to this day. “Lean” was first introduced to the world-at-large with the publication of The Machine That Changed the World, an ambitious book which extensively described the complete management system that Toyota had developed over decades. At the time (and this was before the internet offered the disruptive possibilities we now have seen), this struck a broad chord, partly because many business commentators were seeing how time (lead-time in lean terms) was becoming an essential competitive factor. Yet to many others this new approach was no more than a bunch of tools to eliminate variation from work, further discipline people, and processes, and squeeze productivity through ever more rigid and detailed routines. The battle for the meaning of “lean” was on right from the start.
Really Radically Different
“To make products, first we make people,” was the phrase that got me deeply curious about lean in the early 1990s. In those days I was studying Toyota’s development of a French supplier as part of my thesis research (on “mental models”). The key difference (a radically different approach to the interplay of people and systems) became clear to me: where French engineers saw technical solutions that needed to be applied to people, Toyota engineers worked with the people to discover countermeasures to existing problems and then to systematically reduce lead-times in order to get value closer to customers (and eliminate waste in the process).
Top management thinkers were recognizing the power of this approach. The NUMMI experiment was underway. Individuals such as Richard Pascale realized that Japanese transplants in the U.S. would spell trouble for domestic automakers. In Managing on the Edge, Pascale clearly saw back in 1989 that GM was missing the real lessons Toyota was teaching the world: a way to work with employees and across functional divisions to create an enabling company focused on satisfying its customers, that stood in stark contrast to the mechanistic competitive strategic approach that Michael Porter and others championed. Pascale argued early on for a dynamic, people-based approach, rather than the tactical pursuit of monopolies and market advantages which treated the actual creation of customer value as a static “black box”.
My father had been a Renault executive all his life, and had discovered Toyota as early as 1975, organizing a study trip every year, but had never had the opportunity to engage with the full system until Noel Goutard, Valeo CEO, asked him to. He had learned that the same tools could be interpreted widely differently by different people, and what really mattered was to relentlessly focus on quality by using kanban and kaizen to identify and develop good management judgment and the ability to work with each other (whether we liked each other or not). As he became CEO of another automaker, he delved more deeply on the huge impact of value analysis/value engineering (VA/VE) on market share – following the full thought process from kaizen to product design and innovation.
Today lean is still widely interpreted by many as merely a way to optimize work: let’s discard kanban, ignore VA/VE, discount product decisions and customers, wait until we’re grown up to try jidoka, and not even bother with stable teams. Instead, let’s focus on eliminating “variation” from workers’ jobs to make them more productive. In fact, let’s deliver enough productivity that we can hide the massive underuse of capital, loss of product competitiveness, and Waste with a capital “W,” stemming from top management’s strategic blunders. Let’s keep lean focused on operations and management routines to control the system more tightly; by all means, let’s never use it to actually challenge the business.
Today, I think its fair to say that companies that have used lean as a disruptive force have thrived. Noel Goutard and Freddy Ballé were disrupting the auto suppliers business in France, leading to the creation of global giants Valeo and Faurecia, just as Art Byrne was doing the same in his industry with Wiremold, as chronicled in Lean Thinking. Meanwhile, Amazon, one of the most disruptive companies of our time, has based its success on its founders’ absolute obsession with customer satisfaction (actually, in a very lean way, responding to customer dissatisfactions) and a fully lean supply chain. Bezos cites Lean Thinking as one of his top business books, and he hired a top lean executive who learned it the hard way from Taiichi Ohno’s Shingijutsu in Japan. Another disruptive company, Apple, was heavily influenced by supply chain effectiveness and releasing products at a regular rhythm, with a relentless focus on both innovation and quality. These lean concepts were discussed by management in the late nineties, as can be seen in this speech from Steve Jobs explaining how he intended to turn Apple around on his return in 1997.
Toyota remains amazing because it has become one of the largest automakers in the world, and it boasts the profitability of a premium boutique such as BMW. It has done so in a completely closed market in the Porter sense. Many people who see in Toyota a beacon of operational excellence miss the larger picture, which is how disruptive Toyota has been throughout its history:
- Flexibility. In the fifties and sixties, the Ministry of International Trade and Industry (MITI) thought that each Japanese automaker should focus on a narrow segment, to build up the national auto market. Instead, the key players threw themselves into a headlong competitive race by offering customers wider lineups and frequent product renewal — a race that helped Toyota become dominant in Japan through its innovative use of flexibility: building several models on the same lines to maximize every square inch of capital.
- Quality. Having failed in its first attempt to attack the U.S. market, Toyota returned in the eighties with a vengeance by offering small cars at much higher quality, “free” options, and best buy in the category price. They attacked the lower segments and the U.S. automakers retreated. Then Toyota moved into the mid-range segments, and the automakers retreated, arguing that all the money was in SUVs and pickup trucks. Then Toyota released the Lexus to cap the luxury markets. Sale by sale, car by car, Toyota established itself as a dominant player in the world’s top market, just as it was progressing across the globe.
- Sustainability. I still remember how the auto execs I know hated my first Prius. They hated it. With hybrid engines, Toyota first made a significant advance for society – sooner or later, we’re going to have to collectively face the music – by showing there was a door in what everyone said was a wall. But they also completely disrupted the world’s auto markets by starting the race towards greener cars, and greener factories. The competitive pressure is such that Volkswagen chose to cheat with a software trick, and as a result added billions of costs to its P&L when it got caught.
- Digital connectivity. Toyota at first didn’t see the next disruption coming. They thought Tesla was just about full electric engines and realized late that the real challenge was full digital connectivity: tune-ups and upgrades through the wifi. They’ve woken up to it and are investing billions in catching up. We’ll see whether they succeed is or not, but the game is on.
The Machine That Changed The World showed the world a fully new way to understand industrial thinking. It was a slap in the face and a challenge. Today I question how deeply the crucial message of its success has found its audience.
Frames for Learning, Scaffold for Improving
What can we learn from Toyota? It all depends on learning how to view the system as a scaffolding for learning, and view many of the popular (and effective tools) as frames for learning and improving. Consider the famed kanban card.
Real kanban is not about switching from a work order-based scheduling system to cards, but about tracking the response time to every specific demand throughout the supply chain. The kanban cards have to be served in the order they arrive to visualize the “sell one, make one” strategy of just-in-time. What is more, each card is numbered, and its lead-time is tracked to see where problems accrue. Kanban forces management to put resources where they’re needed, as well as to focus on quality and rework issues right now. Beyond manufacturing, problems surfaced from delinquent kanban cards are the key to improving value creation in production (value analysis) and then moving all the way to product engineering (value engineering) to increase fundamental product value in terms of function over cost. It’s a unique system of solving problems now to imagine better products tomorrow.
Toyota turned the humble kanban card into a machine to take over the world. And yet most people today still see only a way to replace the SAP with cards. Lean becomes disruptive when used to rethink value creation at a deep level. Amazon used the internet as a way to have an infinite shelf to offer consumers everything they can possibly wish for, while others think it’s about having a sexier website. Apple turned phones into a luxury hand-held terminal for a connected world of apps through better quality in design, manufacturing and supply chain while others still think in terms of phones.
The tool is what you make of it. In ancient times, bishops refused to look into Galileo’s telescope for fear of what they would see. The ancient Mayas ignored the wheel for fear that it would displace human work. Chinese emperors abandoned their exploration of the world by sail because of the scary new ideas that were coming back with the imported goods. And so it goes with any system. Lean can be either a method to disrupt your industry as my father or Art Byrne have done. Or it can be a way to teach internal consultants to make each team marginally more productive so that you don’t have to ask yourself the hard questions about how markets are changing and what alternative technologies are your real competitors.
I believe that when confronted with a complex problem, people naturally substitute a simpler problem they feel they can solve. Not surprisingly, rather than embrace the full strategic import of lean, with its revolutions in flexibility, quality, energy performance, and connectivity, it’s easy to reduce lean to balancing work content in a production cell to seek spot productivity, or to improve performance in a process by eliminating “wasteful” steps. The meaning of the word “lean” depends on which lessons you intend to draw from Toyota’s incredible rise over half a century from a bankrupt local company to the world’s largest, most profitable automaker. Aggressive disruptive competitor or bureaucratic big company obsessed with imposing standards and eliminating variation? Your choice. Your results.