Monday, January 25, 2010

Being Lean is Not Enough

One of the hottest trends in business over the last few years has been lean.  Most of the Fortune 50 companies currently claim to be doing lean and the market is flooded with training and consulting companies touting the benefits of the approach.  I recently Googled the term lean+business and received 30.1 million results.  It appears that we're presently in the midst of a lean blitz.

Don't get me wrong, I think lean is a strategy from which virtually every company can benefit.  It is a great way to gain control over processes and improve quality while reducing costs.  Throughout my career, I helped many companies implement lean and have seen some great benefits as a result.

The problem I'm having is that lean is being oversold to business.  Consultants and practitioners are promoting lean as if it is the cure for all of a company's problems.  I have gotten into many discussions over the years with people who are disappointed when leaders don't place lean at the very top of the company's priorities.

Part of the Picture

Lean can be a valuable part of the company's overall strategy.  The critical word here is part.  There are other elements of a corporate strategy that are just as - if not more - important depending on the company's individual circumstances.  In the most simple example, a company can be highly successful with lean but go out of business if it is not offering products or services that people want to buy.

However strategic planning is specifically conducted, the process should generally include an analysis of the four high-level objectives that are necessary for success:  (1) People/Leadership Development; (2) Process Improvement; (3) Product/Service Development; and (4) Market Development.  There are times when one or more of these areas will need extra focus, but unless all are analyzed on a regular basis, the ability to understand which areas are in need of attention is limited.

Strategic planning requires an assessment of the company's situation to understand where the current barriers are to achieving success at any given time.  The barriers can be weaknesses that interfere with success, or opportunities that can help the company grow and improve performance, but they will become evident during the process of understanding and evaluating the four high-level objectives.  The analysis helps senior leaders understand where the company's focus (in terms of investment and resources) needs to be in the coming one to three years (or beyond, depending on the normal planning horizon).

Let's Maintain Perspective

The point here is not to oversell the benefits of lean, and to understand why executives don't necessarily put it at the top of the company's priorities.  As an initiative, lean can directly support the process improvement objective and indirectly aid product/service development, but to truly help an organization succeed, it is important to understand that it may be end up being something other than the top priority.

Monday, January 18, 2010

When an Acquisition Becomes a Distraction

With business finally showing signs of recovery, the amount of M&A activity is sure to pick up again as money becomes more readily accessible.  We have already begun to see the increase with large corporations including ExxonMobil's acquisition of XTO Energy, Stanley Works purchase of Black & Decker, and Google's announcement to purchase AdMob.

Small company M&A activity has also begun to increase and I expect the trend will continue as the level of confidence in the future grows.  Although true of any size company, small companies must be especially careful that an acquisition does not become such a distraction that it pulls management attention away from running the organization, as a whole.

Fighting the Distraction

Since an acquisition ties up a lot of a company's capital, there  is often a great deal of pressure to assure the newly acquired company becomes profitable as quickly as possible.  Unfortunately, it is common for a number of problems that were undiscovered during the due diligence process to surface fairly soon after the acquisition takes place.  These problems have a tendency to become a drain on management resources, and can easily pull the attention of the company's senior leaders away from running the business.

Organizations do not run themselves.  Even with the most successful organizations, bad habits can creep in that will lead to long-term problems if not dealt with quickly.  Since senior leaders in small companies tend to be much closer to the organization's activities than do those in medium and large companies, they often have more of a direct effect on the company's operation than they realize.  A long-term distraction - like an acquisition requiring a lot of attention - can fundamentally change the parent organization before the leaders realize it has happened.

What to Do

If at all possible, attempt to understand the critical issues before the acquisition takes place.  For a variety of reasons, this is not always possible, so it is important to assess the acquired company quickly to learn about the problems that can prevent or delay success.

Once the issues are understood, it is critical for the leader to assign responsibilities and clarify expectations quickly to keep from getting too wrapped up in the issues.  There needs to be frequent updates about the progress in addressing the issues so action can be taken quickly to keep the changes on track.

Dealing with an acquisition without ignoring the overall business may require temporarily assigning people and/or bringing in outside help for a short period of time to help with the transition.

There will obviously be situations where additional attention is warranted by senior leaders to put the merger back on track, but it is essential to remain sensitive to the possibility of distraction in the process.  Above all, never forget the company's fundamental purpose throughout the process and focus effort on integrating the acquisition in a way that does not compromise the mission and vision of the new, larger organization.  Doing this will greatly enhance your ability to assimilate the acquired company quickly and successfully.

Wednesday, January 13, 2010

The Value of Thinking

"Thinking is the hardest work there is, which is probably the reason why so few engage in it." - Henry Ford

Do we consider the ability to think critical to business success?  If so, why do companies place such a low value on thinking?  How many organizations today would truly appreciate an employee who takes time regularly to sit in his or her office to think?

I believe if we started to value thinking and took the time to teach our organizations how to think, we could revolutionize the world of business, leading to greatly improved performance, as well as employee satisfaction and quality of life.

Thinking in Business

When I led an organization, I encouraged team members to make decisions. I also encouraged people to think - individually and as a group - before making a decision.  What I found in many cases was that a vast majority of poor decisions were the result of jumping to a solution without thinking.  On the other hand, I have observed that the most creative solutions and innovative idea result from deep reflection and thought before acting.

The U.S. culture is heavily rooted in the Puritan ethic that greatly appreciates doing.  This contributes to the tendency of businesses to value the person who acts quickly much more than the one to takes time to think before acting.  Our organizations are fjull of people who stay very busy doing things, but rarely think about what they are doing.  As a result, we face the same problems day-in and day-out and fail to achieve or sustain significant levels of improvement in productivity or quality.

This general disregard for thinking creates friction that continually pulls even those organizations that value thinking toward a culture of doing.  I believe this is the reason that companies respected for creativity and innovation tend to lose their edge as they become larger and more successful.  Think about how many internet startups have changed from high growth companies with imaginative offerings to stagnant, poor performing organizations.  Companies like Apple
, Toyota and LG, on the other hand, are among the very few that have been able to maintain their creative edge in products, processes, and services.

Thinking Required

Organizations are very complex systems that make it difficult to clearly understand the effects that result from actions taken.  To truly comprehend how a change in one part of the organization will affect another requires thought and reflection.  On many occasions, I have seen a change implemented by one area of the company result in increased costs and headaches for another.

I also believe that the lack of thinking is one of the reasons lean initiatives fail.  Lean requires a level of creativity and systems thinking that are nonexistent in many companies.  solving a problem requires a clear understanding of the underlying causes and the creativity to develop effective solutions.  Without the ability to think and reflect, improvements will tend to be short-lived.

What to Do

Because of the cultural resistance to thinking, encouraging people to reflect on issues before acting is not easy.  Everybody is so busy doing things that it very difficult to get them to take time to think.  Orders need to be entered, reports need to be written, customers need to be called, and deliveries need to be made.  Asking people to stop and think will be seen as adding more to an already full plate of things to do.

The key is to start small.  Leaders can encourage thinking as part of the coaching process to help
team members deal with problems and issues.  In one company, I initiated a policy requiring people to sit and think about their jobs for ten minutes each day.  Some did it and, I'm sure, others just said they did, but eventually the organization began to change because it became clear that I valued thinking.

However it is done, transforming the culture toward thinking before doing will help release the dammed up potential within the company.  Eventually, the change will become evident in productivity improves, more innovative products and services are introduced, and ultimately, the performance of the organization improves.