Why Lean Fails

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Why do so many organizations give up on lean even after experiencing initial success with the effort? There are several examples of companies in various industries that experienced sustained success with lean, but these examples seem to be few and far between when compared to the large number of companies that attempt it and fail.

To be clear, lean doesn't fail . . . it's the transformation that fails. While there are many reasons for the failure, there are a few that seem to be common across various organizations. Regardless of which one or more of these reasons apply, correcting them is possible only when leaders begin to develop a deep understanding of lean and realize that the responsibility for the transformation rests squarely on their shoulders rather than something that can be delegated to lower levels in the organization.

Although the premise of lean is simple, integrating it into an organization is highly complex, and the larger the organization the more complex it becomes. Lean thinking is a system that requires understanding how the elements come together to drive continual improvement in support of the organization’s aim. The big gains that some organizations have been able to achieve with lean are only possible after fundamentally transforming the way people think, lead, and approach problems.

The list below is far from comprehensive but is meant to stimulate thinking and reflection to understand the reasons for failure and to help move toward fundamentally changing the culture to enable it to increase and sustain the rate of improvement.

1. Fail to understand the level of transformation required: Far too often, organizations attempt to lay lean on top of a traditional leadership system and expect things the change. It is a simple fact that nothing will change unless the leadership system changes, and failing to understand this will lead to frustration and disappointment in the effort. This is often the main reason behind what appears to be a lack of commitment by the organization’s leaders. People cannot commit to something they do not understand.
2. Focus on the home runs: Far too many people read about the Toyota and its rise from virtual ashes in the 1940s to become the most successful automaker in terms of sales, profit, and market capitalization. When reading an article about it or hearing someone tell the Toyota story, however, misses the point that it was the decades of small, continual improvements that led to significant step changes in performance. Although there are many examples of large innovative improvements at Toyota and other lean thinking companies, they happen because of the collective change in thinking that occurs through a focus on small continual improvements and daily problem-solving.
3. Focusing on financial benefits only: After experiencing a few early improvements, it is very common for leaders to become focused on the financial benefits of the effort and change their focus from learning to cost savings. When this happens, lean becomes a set of tools rather than a system of continual improvement. SQDC (safety-quality-delivery-cost) is replaced by C, and understanding the true meaning of improvement is lost. As small improvements and learning is virtually ignored and the big improvements (the home runs mentioned above) are celebrated, people will do what it takes to show big gains, whether real or fabricated, and any early success with lean will break down and die.
4. Focus on the tools rather than the thinking: Without a deep understanding of lean as a system and the fundamental reasons for its success, it is not possible to think beyond the tools. The tools are easy to understand while the theory behind lean is not. Leaders, especially in the west, are much more interested in things that are concrete, practical, provide quick results, and are easy to explain than organizational theory, psychology, learning, and systems thinking.
5. Lack of systems thinking: Unless leaders understand the complexity of the organization’s system, including how the subsystems work together to drive performance, people and teams will continually compete with one other resulting in continual performance problems and increasing sub-optimization. One of the most critical responsibilities of leaders is to create and continually improve the organization’s system to enable it to achieve its purpose. This includes helping everyone understand clearly how the work they do supports the achievement of organizational objectives.
6. Lack of patience: If you are looking for quick results, lean is probably not the way to do it. As mentioned above, lean requires a shift in the way people think, lead, and perform work, and it takes time – a lot of time – to make it happen. Although results will be seen along the way, there will be gaps that make it seem like nothing is happening. W. Edwards Deming once said that transformation is discontinuous, so it is important to understand that there will be many instances of two steps forward and one step back. The key is to stick with it and remain constant in the purpose and the transformation.

When any of the above characteristics are present, people who are against lean will gain ammunition to bury the effort. It is very easy for the people who feel threatened by lean to plant seeds of doubt in those who are on-board with the change. Getting past this initial stage of the transformation requires regular reflection and continual learning by leaders to see the signs and address them as they happen.

Driving Improvement Through Systems Thinking

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"Management of a system requires knowledge of the interrelationships between all of the components within the system and of everybody that works in it." - W. Edwards Deming 

One important discovery people make when they start on a lean journey is how much they still need to learn about their business.  Although they may have extensive knowledge about individual parts of their products, processes, markets, etc., lean thinking forces them to connect the components as a system, which is something many organizations have never done before. 

When starting an improvement effort, I usually ask about the minimum target the team is attempting to achieve.  The answer is often something made up on the spot or a generalization, like as much as possible.  Improvement efforts should generally be driven by the actual requirements of the business.  For example,  if a company determines that the time between a customer placing an order and receiving the product is too long, it should determine an improvement target based on what the business needs.  If it currently takes 42 days and customers expect to receive the product in 22 days because of their needs or what competitors are offering, the minimum improvement needed is 20 days.  Although the gap appears to be significant, people will look at it as if it is based in reality, rather than a target that management dreamed up.  So,  instead of thinking of it as an impossible target, it becomes possible and something that the business needs to survive.  Attempts to go beyond the 22 day target can be attempted later, but should still be based on strategic reasons. 

Although the concept appears simple, it can become much more difficult when applied to something deeper in the business than a product lead time.  In an oil and gas operation, for example, suppose it is taking too long to change out filters on a compressor.  Setting an improvement target would require first understanding what "too long" means.  This involves quantifying the compressor's contribution to the overall system, and includes things like: the overall production target; uptime of the facility required to meet the production target; uptime of the subsystem where the compressor is located in order to meet the facility uptime; the compressor startup time after maintenance; the current uptime of the compressor; and the time needed to change the filters.  By understanding how all of these elements connect and contribute to the production target, it becomes easier to accurately determine the gap between the required time to change out filters and the actual time. 

The more people learn the connections the components have with each other to achieve the overall business objectives, the easier it will be to see the problems and set improvement targets based on reality rather than gut feel.  It is not enough for people to know that the work they do contributes to the organization's purpose and objectives - they must know how.  This comes through a continual focus on coaching and basing improvement activities on learning, which happens through questioning, discussing, and connecting to gemba. 

No Systems Thinking in Trump's Plans

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It’s inauguration time and a new administration is moving into the White house attempting to fulfill its promise to “make America great again.”  A key to Donald Trump’s platform throughout the election had been the need to drive fast and significant change in government structures and systems.  Some Americans find this approach refreshing.  What I’m seeing, though, is a lack of a systems thinking in the plan, and it concerns me greatly.

APPRECIATING THE SYSTEM

The U.S. operates as a system.  Federal departments and agencies, businesses, states, citizens, and even foreign entities act as components of the system that interact and drive results that, although far from perfect, enable the country – and to some extent, the world – to function.  As with any system, there must be a clear and unified purpose to help drive objectives and improvement.  The more complex the system, the more important it is to understand how the system works and how the components interact to assure changes do not end up making things worse.

Making large-scale changes to components of a system without understanding how they interact amounts to tampering, and can quickly lead to chaos.  And what I've seen in the comments, tweets, and appointments in the new administration, this appears to be  exactly what's happening.  Talks of closing borders, eliminating the Affordable Care Act, turning education focus to charter schools, cutting environmental regulations, etc. look more like fragmented actions than steps resulting from a deep understanding of how the system operates and where the real gaps lie.  In lean terms, the Trump team is developing countermeasures to problems without truly understanding the causes.

EXAMPLES OF FRAGMENTED THINKING

Some examples that appear to result from a lack an understanding the system include:

Import Tariffs  On the surface, raising import tariffs to increase domestic jobs sounds like a good idea.  The effect this has on U.S. purchasing habits and the American and world economies, however, is complex and not easily understood.  For instance, there are many economists who believe that the Tariff Act of 1930, along with the retaliatory responses of many U.S. trading partners was a significant contributor to the Great Depression due to the negative effect on American exports and imports.  Exports fell because of higher tariffs on American-made goods and, because the prices of imported good increased, people bought less overall.

A second, but difficult to quantify consequence of significant tariff increases is the effect on developing nations that rely on access to the U.S. market to continue growing.  The administration wants to build a wall along the U.S.-Mexican border to keep people from crossing into the U.S. illegally.  Since many of those coming into the U.S. from Latin America do so for economic reasons, raising tariffs and pressuring manufacturers to scrap foreign factories to build in the U.S. will result in lost jobs and other problems for those countries.  It seems logical then, that this action could actually increase the number of people attempting to cross into the U.S. to escape poverty.  And this does not take into account the fact poor economic conditions tend to increase drug trafficking.

A third, but rarely considered effect of restricting trade with other countries is reduced influence on the working conditions that exist in some countries.  Improvements in labor conditions in many developing countries have resulted from the influence of American companies and trade groups because of the size and power of the U.S. market.  As we reduce imports, we reduce our ability to influence international labor laws.

Scrapping the Affordable Care Act

The Affordable Care Act (ACA) has been a huge source of political strife since it was enacted in 2010.  Whether you agree or disagree with the effects of the ACA, it is important to understand and recognize that the Act is a component of the healthcare system which, in turn, is a component of the overall American system.

A systems approach to dealing with the problems from the ACA is to improve it – not scrap it and start from scratch.  It includes understanding the problems – i.e., why they are problems and what is causing them – and taking steps to reduce or eliminate them.  Although completely replacing a system may address some of the problems, it is likely to create many others that are not problems with the current system.

THEORY AND LEARNING MUST DRIVE ACTION

Raising import tariffs and scrapping the ACA are just two examples where actions meant to drive improvements can lead to negative consequences if done without a holistic understanding of the system.  As long as I remember, though, American politics has never taken action resulting from a deep understanding the nation as a system.  Fortunately, the changes have rarely been large enough to cause major problems in the American system.  What I’m hearing now about the coming changes, however, I’m very concerned that the damage could be long-term and significant.

When Lean Fails: The Common Causes

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Many companies today are jumping on the lean bandwagon and expecting huge cost reductions as a result.  Unfortunately, many of these companies will never see the type of improvements they expect from lean, and their leaders will likely become disappointed and frustrated, and eventually abandon the effort.

There are a number of reasons companies fail with lean.  What I present here are the causes I’ve seen over the years that are the most destructive and the most difficult to resolve.  It is important to understand these causes and work to prevent or address them early in the process in order to initiate the type of transformation that will lead to a more competitive and stronger organization in the long run.

1.       Underestimating the Transformation
Most leaders tend to underestimate the level of transformation required to create a lean thinking culture within the organization.  Lean is not something you “implement” or use when convenient.  In virtually all cases, it involves a dramatic shift in the culture to drive a new way of thinking and approaching work.  As such, it requires transformation in the systems for leadership, training and development, recruiting and hiring, promotions, and others before one can expect to see results that have any chance of being sustainable.

2.       Delegating the Effort
One of the major differences between lean and improvement methodologies like six-sigma is that it requires the involvement of the organization’s leaders to be successful.  As noted above, lean requires a fairly significant transformation in order to be successful and this can only be done by those at the top because they are the people who are in the position to make it happen.

3.       Humility
Arrogance is one of the biggest killers of a lean culture.  Built on the Plan-Do-Study-Act (PDSA) cycle, lean is about continual learning.  I have seen many organizations over the years that had started well with the effort but, after a few early successes, became overly confident and killed the transformation.  The saying that the man who is too big to learn will get no bigger applies to organizations as well as individuals. 

The most effective leaders I have worked with are those who accept responsibility for the organization’s problems and realize that it is they who need to change in order for the organization to change.

4.       Patience
The extent of change in systems and behaviors required to be successful with lean takes time to achieve.  Although there will undoubtedly be early successes, the ability to sustain the successes and drive others will not happen without continual effort to shift thinking.  Especially when a crisis occurs, people will go back to their comfort zone, which most likely involves how they behaved before learning about lean.

The key is to never let up by continuing to reflect and drive change through the conversations and actions that occur every day.

5.       Consistency
Lean requires clear alignment from the organization’s purpose to the work performed by people every day.  In order to achieve and maintain this alignment, the organization must have a clear and constant purpose that is motivating and well understood by everyone.  Doing this well requires a significant amount of effort by the leadership team – especially during bad times when many organizations find it easier to abandon the purpose in order to maintain profits and short-term goals.

Leaders must be enlightened enough to understand that, although success will not come easy, it is possible to transform the company into a stronger and more successful organization.  Looking out for the causes of failure can save a lot of frustration early in the process and greatly improve the chances for success. 

Lean Leadership & Systems Thinking

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One aspect of lean that often gets overlooked is the depth of systems thinking required to be successful.  For a variety of reasons, people like to jump into the more visible and concrete elements of lean – like dashboards or problem-solving – without clearly understanding the organizational elements that are necessary to support and sustain continual improvement.

What is important to understand about the organizational elements is that they all fall within the responsibility of leadership.  Unless leaders are continually looking for problems in these areas, they can go undetected and destroy efforts to transform the company.  Leaders need to openly and honestly reflect on organizational issues to understand that addressing the problems is their responsibility.  When done well, continually improving the organizational issues will build a foundation that results in sustaining the transformation for many years.

Building the System

Establishing a systems thinking mindset requires the ability to comprehend the whole and how individual components work together for the benefit of the whole.  In real terms, this means establishing clarity around the purpose of the organization and understanding how each system, function, and team supports achievement of the purpose.  It also means establishing balance throughout the system to assure that no individual component becomes optimized at the expense of the overall organization.

People generally think of systems thinking in terms of value stream management and working to optimize the flow of material and information throughout the system.  Although value stream management is a critical element of continual improvement, there are other system-related issues that need to be understood and improved in order to sustain the gains made in throughout the process.  Without addressing issues like hiring, employee turnover, and leadership development, there is little chance that efforts to improve will truly make a difference to the organization.

Kaizen for Leaders

The overall organization is gemba for leaders and as such, needs constant attention and effort to improve.  Leaders must continually look for and remove the high-level systemic issues that interfere with the ability to improve.  Realizing, for example, that a poor hiring decision is the fault of the organization will drive kaizen toward improving the hiring process.  Just as problems on the shop floor require operators to act, hiring problems (as well as other organizational issues) require leaders to act. 

The organization is a system, and leaders must recognize their responsibility to improve the way the components work together to drive and sustain improvements in performance.  They must also understand that the responsibility of driving improvement never ends.

Where are the Generalists?

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"[Management is] an integrating discipline of human values and conduct, of social order and intellectual inquiry, [a discipline that] feeds off economics, psychology, mathematics, political theory, history, and philosophy. In short, management is a liberal art..." - Peter Drucker

Businesses need specialists in order to be successful – this is nothing new or earth shattering.  Having people with specialized knowledge in areas related to the company's products, services, processes, network infrastructure, etc. enable the ability to serve customers and meet objectives on a continuing basis.  What many people do not realize, however, is that having generalists – especially in leadership positions – is just as critical to the organization’s success.

What is a Generalist?

A generalist is someone who has broad knowledge and skills, and understands the organization's high level system, including the hand-offs and interactions between people and processes.  A generalist is not usually interested in working and developing his or her skills within a single area but is more motivated to learning more about the big picture.  He or she is much more comfortable learning a little about many subjects than learning a lot about a single subject.

An organization can have the most talented specialists in the industry but be completely ineffective if these people are not able to agree on what's important and work together to turn their combined talents into commercial success.  By understanding the system, the generalist can bring value to the organization by focusing on overall company performance rather than attempting to optimize any single function or area.  For this reason, generalists often excel in leadership positions and cross-functional roles like project management and planning.

Why Generalists Are Necessary

By clearly understanding the company's high level value stream, the generalist is able to continually align the objectives in one area to those of the organization.

No matter how talented a company’s specialists are; without a common direction and continual effort to improve the way people interact and work together, there is no "organization" - there are only individuals working on what each feels is most important.

Peter Drucker wrote that management is a liberal art in that it requires skill from many different disciplines including psychology, sociology, history, and others.  W. Edwards Deming included psychology, learning, variation, and systems thinking as components of leadership in his System of Profound Knowledge.  What Deming and Drucker were referring to was that management is a role for generalists.

Harnessing the Company's Talent

The obsession many companies have had with specialists over the last several years has created a shortage of generalists that is hampering growth and success.  As a result, many companies are full of great ideas, new technologies, and brilliant technical minds but aren't able to transform them into consistent commercial successful.  A company may be staffed with highly skilled scientists, engineers, and chemists, but if it is not turning this knowledge into viable products or services, it is compromising its future.

Whenever hiring or promoting someone into a leadership position, I have found that a person with a varied background tends to be more effective than someone whose experience and training is completely focused on the function the person is expected to lead.  For example, I would tend to favor a candidate for a quality management position who has experience in procurement and/or manufacturing in addition to quality than one who only has quality control or quality assurance experience.

It's in the Mix

Success in business requires having and leading people to consistently achieve high level objectives.  To do this successfully requires respecting the different talents people have and understanding how best to position and organizing everyone to serve the customer effectively.  This means having the right mix of generalists and specialists to assure success.

How Well Do You Know Your System?

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“If you can’t describe what you’re doing as a process, you don’t know what you’re doing.” – W. Edwards Deming

As a leader, how well do you understand how your organization works?  Do you have a good picture of the relationships and interconnections that exist both inside and outside that enable the company to operate?  I’m not sure it’s possible to truly grasp all of the complexities within an operation, but the more a leader understands about the overall system, the more effective improvement efforts will be to reduce waste and improve performance.

W. Edwards Deming wrote about the importance of understanding the system in Out of the Crisis and The New Economics, and what it means to leadership and transformation.  At first glance, it’s easy to miss the significance of the message Deming was trying to convey because of the assumed simplicity of the system diagram he referred to so often.  A common response after first seeing the diagram is, of course an organization consists of processes working together to produce a product or service . . . so what?

Deming's Production Viewed as a System (Out of the Crisis)

Other important aspects of leadership that become evident when systems thinking begins to take hold include:

• the importance of flow to the success of the organization, as well as some of the areas that impede flow the most;
• how individual functions tend to work against, rather than with, each other within the system, and how detrimental it is to serving customers;
• the importance of internal customers and suppliers and how critical it is to improving quality and productivity;
• a better comprehension of all of the organization’s stakeholders and why they matter to overall success;
• a much clearer picture of what adds value to the overall system and what does not.

Organizations are in a constant state of change and, although it is not possible to completely understand all of the interrelationships that exist, it is important to appreciate how critical continually improving the interactions is to overall performance.  It also becomes evident that promoting leaders who have this level of appreciation and never stop attempting to learn about and improve the system is important to the company’s long-term success.

Success With Kaizen Requires Thinking Small

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I read a whitepaper recently that touted the benefits of a kaizen process. The paper presented an example from a British company where an improvement project resulted in an annual savings to the organization of £1.2 million.  The point of the paper was to demonstrate the type of improvement that companies could achieve with an effective improvement process.

The unfortunate part of a story like this is that it creates the expectation that implementing a kaizen process will lead to million dollar improvements.  This is not the essence of a kaizen process and often leads to skepticism or disappointment and eventual abandonment of the effort.

Small Improvements by Everyone, Everyday

To be successful and sustaining, an objective of a kaizen process must be to get everyone involved in identifying and attacking waste. This means focusing on - and celebrating - the small improvements that result from the effort. Daily improvement will not happen, however, if the company's leaders are expecting and driving for the million dollar improvements.  People will not invest the time or effort necessary to implement a small improvement when it is not considered important by the company's leaders.

Will you ever get a million dollar improvement from a kaizen process?  Maybe, but it will be the result of a culture that enable ideas to flow and improvements to occur.  Keeping the process alive long enough to reap the benefits, though, requires celebrating the small improvements as much as the large ones.

In reality, a million one dollar ideas are much more likely to occur than a single one million dollar idea.  Because of this, the focus needs to be on coaching people to identify problems, address root causes, test countermeasures, and change standard work at a rapid pace.  Leaders need to be kaizen experts in this type of environment, and able to effectively coach team members in the improvement process.

Practice is the Best Training

As more improvements are made, people get better at solving problems.  The pace quickens, ideas get better, and morale improves.  When the focus is on large improvements versus the small ones, there are fewer projects and fewer opportunities to teach people how to solve problems.  The culture does not change because learning, if it does occur, it is at too slow of a pace to make much of a difference.

Small improvements are generally made very quickly, and tend to cost very little – if anything – to implement.  Large improvements, on the other hand, can take weeks or months, cost significantly more, and are riskier because of the difficulty to test before adopting.   So while you’re waiting for that million dollar improvement to occur, think about the number of small improvements that could have been implemented and the benefits that were lost during the wait.

PDCA: Improvement Tool or Mental Model?

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“Management is prediction.”  – W. Edwards Deming

Much of the literature about the Plan-Do-Check-Act (PDCA) cycle focuses on its application to kaizen activities.  This is unfortunate because PDCA has a much wider application across a business and can be used to clarify direction, increase learning, align efforts, and improve results.

The benefits of PDCA begin to appear when people recognize the cycle as a mental model for managing the business rather than merely a tool for kaizen.  Getting to this point, though, requires a lot of coaching, reflection and practice.

Linking Activity At All Levels

The figure below shows how the PDCA cycle applies to different levels of the business and how, even though different in scope, each relates to the others in providing direction and assuring results.

The application of PDCA thinking to a typical organization

Business Planning

At the highest level, Hoshin Kanri applies the PDCA cycle to business planning.  The cycle involves:

• PLAN:  Determining objectives (including key performance indicators-KPIs), identifying barriers and market opportunities, and developing action plans (predictions) to address the barriers and take advantage of the opportunities;
   
• DO:  Implementing the action plans;
   
• CHECK:  Reviewing progress of the action plans and determining whether the plans are leading to accomplishing the objectives;
   
• ACT:  Making appropriate adjustments based on the CHECK activity (e.g., adding resources to get action plans back on schedule or adjusting the action plans to better align them with objectives).

The catchball process helps clarify the objectives and make sure they are understood by more than those at the organization’s highest levels.  Catchball is the thread that connects actions at different levels and helps assure that there is clear alignment throughout the organization between activity and objectives.

System/Area Improvement

Clear and consistent objectives help assure area leaders are focusing on the right things.  In most organizations, there are a virtually unlimited number of areas that can be improved, but since time and resources are limited, it is critical to focus on those things that are the most closely related to objectives.  This is what Pascal Dennis refers to as the “right things” in his book, Getting the Right Things Done.
At this level in the organization, PDCA involves:

• PLAN:  Understanding objectives (through catchball) and setting clear targets at the process level.  For a production process, this could include targets for safety, quality, delivery, and cost (SQDC).  The PLAN stage also includes assuring standard work is deployed for the process, including work instructions and the proper WIP and buffer inventory levels to assure the process can meet takt;
   
• DO:    Assuring the process is operated and managed in accordance with standard work;
   
• CHECK:  Reviewing the KPIs, possibly at the individual process and team level, to determine the gap between current performance and ideal condition.  For any gaps, the general issues that are causing the gaps are identified;
   
• ACT:  Initiating kaizen activities to address the gaps.  This could involve providing direction to a team to assure improvement activities are focused on the proper gaps or creating teams with specific objectives to address gaps.

Kaizen / Daily Improvement

This is what comes to mind for most people when they think about kaizen– the daily activities that result in small, continual improvements to a process.  At this level, PDCA consists of:

• PLAN:    Understanding the ideal condition and gap between current and desired performance (through catchball).  Identifying the root cause(s) of the gaps and developing countermeasures that may help close the gaps;
   
• DO:  Testing the countermeasures to understand whether or not they result in closing the gap;
   
• CHECK:  Reviewing the results of the test to determine whether the countermeasure did, in fact, result in expected improvement;
   
• ACT:  Adopting the countermeasure and updating standard work; adjusting the countermeasure based on test results, or abandoning the countermeasure if it did not result in improvement.

The Learning Organization

One of the most critical aspects of PDCA thinking that is often ignored is the amount of learning that each trip around the cycle provides.  Whether an action results in the desired improvement or not, proper testing can provide valuable information for future activities, as well as increasing the knowledge of team members.

As with much of a lean deployment, the benefit lies in transforming thought rather than implementing tools.  Thinking of the PDCA cycle as a management model rather than a tool is critical to a successful and sustained lean effort.