by Terry Burton | Blog, Uncategorized
LEAN STRAIGHT TALK SERIES #2
In the medical field there is Sutton’s Law which states that when diagnosing, one should first consider the obvious. It suggests that one should first conduct those tests which could confirm (or rule out) the most likely diagnosis. It is taught in medical schools to suggest to medical students that they might best order tests in that sequence which is most likely to result in a quick diagnosis, hence treatment, while minimizing unnecessary costs. The law is named after the bank robber Willie Sutton, who reputedly replied to a reporter’s inquiry as to why he robbed banks by saying “because that’s where the money is.”
So what does all of this have to do with Lean? If we apply the sale logical thinking, the money (e.g., largest opportunities) of Lean exist within the professional, knowledge-based transactional processes. Look at your P&L and Balance Sheet – It’s obvious! However, organizations spend the majority of their efforts in manufacturing. Willie Sutton would not approve of this type of Lean thinking. Our latest Lean Straight Talk Series post sheds new light on the rationale and urgent need to shift your Lean focus to the transactional processes.
Background
Traditionally lean has made great inroads of improvement in the manufacturing floor in taking waste out of processes and thus reducing lead-times and cost. However, Lean as widely practiced has failed to recognize where the most significant root causes, detractors, and constraints of operating performance exist from a total business perspective. Here are a few facts to ponder:
- The majority of root causes of manufacturing issues occur up front in the transactional process space of the organization. The operating issues and their associated wastes in sales and marketing, forecasting and demand management/SIOP, capacity and resource planning, new product development, detailed product/process design, supply chain management, quality management, program and project management, field reliability, etc. are the primary drivers of manufacturing wastes. It’s too late to deal with these issues in manufacturing, it’s a much better operations strategy to predict and prevent these issues in the first place.
- As the transactional content in processes increases, so too does the complexity of improvement. The concept of process has rapidly morphed away from hard assets to knowledge-based transactional processes with a high degree of professional, technology, and human content. Transactional process improvement in the global enterprise network, and the improvement kata behaviors and cultural attributes to harvest these magnificent opportunities are yet to be mastered by most organizations. Furthermore, many organizations do not understand how to approach and adapt Lean, and reel in these incredible breakthrough improvements in operating and business performance.
- Most of the transactional process opportunities are hidden, unknown, undisclosed, or undiscovered. Because they are unknown, nobody understands the magnitude of impact and opportunities for improvement of the business without further mining and assessment. Many organizations are puzzled about where and how to begin this new focus of strategic improvement. Make no mistake about it – These are the largest untapped opportunities for improvement.
- In many situations, the diminishing returns of Lean manufacturing is a dwarf to the enormous, undiscovered opportunities in the global transactional process space. Harvesting these new opportunities requires an evolution to an enterprise-wide, organization-centric and culturally grounded Lean Business System . . . a for real, holistic Lean Business System that simultaneously develops new and higher order improvement talent, and nurtures the right aligned behaviors and cultural attributes of a great improvement kata.
These trends are pretty obvious (like Sutton’s Law). So . . . What is preventing many organizations from capitalizing on their transactional opportunities? The majority of organizations have not deployed Lean strategically using a total business system approach. Sure many organizations claim to have their “XYZ Business System” but it is in name only. It really isn’t a total business system approach at all. A true business system approach evolves enterprise-wide to new customer and market needs, adapts rapidly to a higher order of operating requirements.
New Challenges Of Transactional Improvement
Beyond the missing business system model, adapting Lean to the professional, knowledge-based transactional space is extremely complicated and requires creative thinking. Complex transactional processes include a lot of unpredictability, professional judgments vs. hard data, a high degree of informal activities underlying a formal process, and fuzzy cause-and-effects in space and time. Many of these types of challenges have the presence of reflexivity – circular relationships, interaction properties, and interconnectivity between causes and effects. In essence, causes and effects are multidirectional and affect one another, so neither can be easily assigned as causes or effects. Furthermore, causes and effects are relative at any moment.
These are very real challenges in the complex interconnected network of professional, technology-enabled, and knowledge-based transactional processes. Transactional processes are much more complicated because of their interconnected, convoluted, and cross-enterprise scope, lack of standardization, unsighted (invisible) transaction magnitude and velocity, and of course the human element of originality and workarounds in daily operations. You simply can’t get at these hidden opportunities by doing the same things, same approaches, same thinking as Lean Manufacturing.
In order to move Lean beyond the factory floor organizations expand their notion of process to include the enterprise-wide, interconnected network of transactional activities that contribute significantly to the customer experience. Lean on the factory floor is a diminishing proposition when compared to the larger digital transformation and operating model innovation possibilities. The Gemba is now the total business enterprise, the whole business of delivering unmatched customer value and loyalty. Lean manufacturing is still important, but a relatively small piece of the Gemba.
How To Achieve Transactional Process Improvement Successes
Today, a very high percentage of Lean/CI initiatives are not meeting leadership’s expectations. A major reason is the failure to capitalize on transactional process improvement opportunities. The content, cost, and relative influence of internal operations has shifted to knowledge-based transactional processes, yet many Lean/CI initiatives have remained focused on the production floor for decades.
How does an organization step up, expand their Lean horizons, and achieve new breakthroughs in operating results? The following steps are helpful in shifting focus to the transactional process improvement space:
- Understand the complex nature and importance of transactional business processes. The operating environments in organizations have changed faster than the capacity and capabilities of their resources to improve it. Success is highly dependent upon a paradigm shift to nimble and efficient strategy and opportunity alignment processes, supply chain processes, time-to-market processes, cash-to-cash processes, engineering processes, customer service processes, sales and marketing processes, and many other “people plus technology” processes in organizations. This requires a large, enterprise-wide leadership commitment to pursue and harvest these new opportunities.
- Learn how to adapt Lean to transactional process opportunities. This is easier said than done and requires new thinking and new talent. The word adapt is important – Simply attempting to port over Lean manufacturing tools and methodologies is dead wrong. Understanding how to adapt Lean to transactional processes requires a deep understanding of the interconnected business systems architecture (e.g., supply chain processes, time-to-market processes, cash-to-cash processes, engineering processes, customer service processes, sales and marketing processes, and many other “people plus technology architecture” processes in organizations). It also requires creativity, innovation, and measurement system design competencies (many of the underlying transactional details have never been analyzed or measured relative to improvement).
- Realign Lean as a higher order business system approach to strategic improvement. There are many critical elements of a true Lean or XYZ Company Business System. Organizations need to stop the generic Lean broadcasting and mimicking each other’s Lean Manufacturing/TPS initiatives and return to the basics of what they must accomplish (Jobs To Be Done). We have developed a Lean Business System Reference Model which helps clients to architect their own business system model based on their own operating requirements and cultural development needs – In their own way!
- Conduct a detailed assessment of current transactional process conditions. This assessment requires special skills far beyond Lean manufacturing. The seasoned transactional improvement expert uses the organization’s integrated enterprise architecture and other applications to trace and defrag the transaction trail like a forensic detective reconstructing and processing a crime scene to identify wastes and root causes. In practice, the differences between root causes and outcomes is often fuzzy. The challenge becomes one of identifying and isolating the right pain point segments of these transactional processes with real facts. Transactional forensics is a very appropriate name for this approach to Lean and transactional process improvement. It involves setting up deliberate process experiments for transactional stream mapping and classification to either discover the deep root causes and magnitudes of problems, and/or to verify that problems have been eliminated through the right data-driven improvements and corrective actions. In most cases, what was perceived to be the problem is not the problem at all. It is something different, often several interdependent multiple root cause and effect issues buried in the complex transactional network. Solving this puzzle is what creates the breakthrough magnitude of improvements in organizations.
- Identify major transactional process improvements that will generate breakthroughs in operating performance. Again, this is a very laser targeted approach to strategic improvement. There are hundreds of transactional improvement opportunities in every organization and the key to prioritization is Sutton’s Law. The challenge is that obvious is not so obvious to the inexperienced and uninitiated practitioner. Engage the right outside resources and increase your odds for success. One benefit of transactional improvement is that it is interconnected: The right improvement initiatives executed successfully produce both direct and interactive benefits throughout the transactional process network. Be careful, the opposite is also true especially if the proposed improvement is limited, localized, and silo-based.
- Integrate transactional process improvement and digital technology. When we hear the word digital transformation, it usually refers to breakthroughs in transactional processes using technology. The greatest improvements are not incremental. They result from innovative thinking and initiatives that will WOW customers. Leading organizations in this area develop Lighthouse Pilots to test and validate totally different and more innovative operating models, integrating end-to-end business processes and the right digitization technologies. Business improvement plus enabling technology is a powerful force. Unfortunately the two have been at odds for decades. It’s time to get it right.
Summary – Results Realized
The need and benefits of transactional process improvement are very compelling and very real. If you don’t believe us then go look at your costs of obsolete inventory, returns and allowances, new product development, customer service, warranty and repairs, inventory write downs, inefficient supply chains, long and inefficient cash-to-cash cycles, and many other indirect hidden costs.
Transactional process improvement represents hundreds of millions of dollars in new value contribution for many organizations. Think about the short term P&L impact and the longer term competitiveness of reducing returns and allowances by $30M; improving speed-to-market by 80%; adding 3 gross margin points to the P&L through less planned financial reserves; reducing supply chain time, complexity, and costs by $100M; the hundreds of millions of revenue growth, cost reduction, profitability, and competitive market position from developing new products on time, on budget, without post release quality, reliability, or performance issues; reducing the financial close and all related G/L clerical adjustments by 75%; reducing engineering changes by 50%; hitting new product features/functions out of the park; reducing the need for professionals to travel internationally to put out fires; improving advertising and promotion effectiveness by 100%; reducing operating supplies and facility costs by $10M.
These examples are actual transactional process improvements achieved in our client organizations. Professional, knowledge-based transactional processes are the new goldmine for Lean.
Need help? We do this for a living.
The Center for Excellence in Operations, Inc. (CEO) is engaged with many different clients every day, within a variety of industries, operating environments, and with different Lean/CI and cultural renewal challenges. We can get your Lean/CI initiatives back on track and operating at a much higher order, daily business system model level.
Contact one of the authors below. We will be happy to discuss your current situation and needs.
Terence T. Burton is President and Founder of The Center for Excellence in Operations, Inc. (CEO), a management consulting firm specializing in strategic and operational transformation. Terry has four decades of extensive operations and supply chain experience as a hands-on practitioner and executive in private industry, and has led consulting engagements in a wide spectrum of industries, having consulted with over 350 clients in 23 countries on their strategic and operations improvement initiatives. Terry can be reached directly at burton@ceobreakthrough.com
Edward A. Fagundes is the West Coast Practice Director for The Center for Excellence in Operations, Inc. (CEO), with emphasis on serving clients in the West Coast, United States region. Ed’s career spans various leadership roles in general management and as a global business system executive. He has proven expertise and extensive experience with improving business processes, developing lean transformation strategies and plans, leading the implementation of business improvement journeys to address business issues, and implementing enterprise-wide continuous improvement applications. Ed can be reached directly at edfagundes1@yahoo.com.
by Terry Burton | Blog, Uncategorized
LEAN STRAIGHT TALK SERIES #1
What is the current status of your Lean/CI initiatives? It might be helpful to think about the answer to this question in terms of a simple normal curve. The majority of organizations are in the middle, having achieved mixed successes but are struggling and trying to figure out how they evolve these initial successes to a higher level of sustainable results. There’s a small group of very successful Lean/CI organizations to the left, and a small group to the right who have either abandoned or are failing miserably with Lean/CI. But let’s be candid with the current dilemma of Lean/CI in most organizations. Many corporate Lean/CI initiatives have been on the decline for the past decade. There’s a good chance that you are one of these organizations.
What happened? Most organizations experienced early successes applying Lean/CI to their low hanging fruit opportunities. Today the low hanging fruit has dried up as the world is full of many more complex operating issues. Lean/CI initiatives have not evolved with the times. In far too many organizations, leadership and people are blindly and deeply rooted into their daily accepted Lean routines, TPS improvements, symbolic storyboards and beautification exercises, Shingo lingo, GEMBA walks and KATA sonatas, and refuse to change course. Other organizations are grossly overloaded, exhausted, and more disengaged with formal CI initiatives and seem to continue on to other more pressing firefighting issues of the moment. Wow, these are bold statements, but the true fact is leaders and their organizations continue to struggle with this decline in Lean and strategic improvement in general.
Today the low hanging fruit has dried up as the world is full of many more complex operating issues. Lean/CI initiatives have not evolved with the times.
Background
A very high percentage of Lean/CI initiatives are not meeting leadership’s expectations. This dilemma is centered around challenges with creative and adaptive leadership, organizational commitment and full engagement, continuous talent development, and constantly focusing on the right things to produce the right desired results. In the absence of these key success factors, organizations are both uncomfortable and politically reluctant to think outside of their dominant Lean/CI operating model. Instead they focus too much on the accepted (and expected) process and mechanics of their current model, and not enough on evolving customer requirements and operating model innovation. Think about this – The world changes rapidly, yet many Lean/CI initiatives have remained the same for decades.
To achieve greater operating results with Lean and strategic improvement, executives must first:
- Step back and acknowledge the victories and shortfalls of their current initiatives;
- Recognize the gaps between their current situation and where they need to go to achieve new breakthrough opportunities for improvement;
- Develop a renewed and detailed approach that re-points their Lean/CI planning, deployment, and execution approach for greater success;
- Connect Lean/CI directly to the annual business plan and align daily execution activities to achieve the right desired results;
- Create a more real time, closed-loop performance management system to proactively reset the right priorities, gauge ongoing progress, and make the necessary course corrections for continuous success.
Most organizations fail to evolve, discover, and invent the full potential of their future Lean/CI initiatives. This dilemma can be either a permanent problem or a temporary bump in the road in the grander philosophy and correct practice of continuous improvement. The difference between the two is a leadership choice. The “larger process” of how we improve how we improve must always keep pace with ever evolving customer and market needs, changing business requirements, and cultural/talent development essentials.
Symptoms of Lean/CI Underperformance
Candor is a prerequisite to change leadership. If you’re serious about turning your present Lean/CI underperformance around, you can’t pretend that mediocre performance is great performance. Here are a few common observations to confirm the frustrating challenges of Lean/CI initiatives in most organizations. These conditions detract from evolving Lean/CI to a higher order business system of strategic improvement.
Creative change leadership is weak.
The leadership of major change is often hasty and impatient, where the focus is more on steering and rolling out the identical program content across the organization and across different business units. More importance is placed on adherence to the standard program and making sure that everyone is visibly replicating the same activities. Less importance is placed on creatively adapting the concepts to the right critical business challenges and developing people’s competencies to think and practice creative problem solving. Hence, Lean/CI fails to stick as the cultural standard of excellence. Sustainable success involves much more than following the standard protocol of Lean/CI methodologies, tools, storyboards, and templates.
Lack of adapting and aligning Lean/CI to critical business requirements and cultural development needs.
We visit with many organizations and have active dialogues on LinkedIn and other social media sites. What do you see? There’s a lot of people talking the theory, methodologies and tools of a Lean Business System and following the right perceived recipes for success. Others are reading about and quickly attempting to mimic Toyota and other Lean/CI organizations. “It’s all great stuff and we gotta do this,” right? The result is a complex “swamp” of everyone running with their own perceived and accepted Lean/CI approach while totally missing and skipping the notion and tough work of architecting and deploying a true business systems approach to strategic improvement “in your own way. Hence, Lean/CI is misunderstood, misguided, confusing, and often a part-time effort to the organization.
Reluctance to change the strategy and approach to Lean/CI that has been in place for years.
There is no place for politics, emotions, debates about various methodologies, blindly following established and/or accepted routines, or hanging on to old habits in continuous improvement. The politics of doing Lean/CI and following the established religion du jour is very real in organizations. People do not want to stop or criticize things and make waves so they keep the process that isn’t working going. So they engage in Lean/CI created activity – Activities that follow the expected protocol and are perceived as value-adding but are really additional wastes. This visible going through the motions keeps everyone happy but achieves mediocre results and cultural acceptance.
Operating strategy does not include constancy of purpose.
Over time, many organizations experience leadership changes, restarts, different directives, and a totally confused organization. This is reality, not excuses . . . But recognize that it all happens and takes your Lean and strategic improvement initiatives off the tracks. Constancy of purpose is a timeless best practice to continuously reset, communicate, reinforce, and reaffirm Lean/CI leadership when these other natural changes occur. Constancy of purpose is the continuous casualty in favor of short-term performance.
Lean/CI is managed as a static improvement process instead of a broader, true business system.
Customer expectations, business requirements, cultural development needs, and the manufacturing vs. knowledge work content changes over time. Yet many organizations are deeply rooted in deploying Lean/CI in the production area with methodologies that have not changed with the times. This creates Lean/CI complacency, or just going through the motions and expecting greater and greater results. The organization’s Business System is symbolic and exists in name only.
Lean/CI is too focused on production.
Manufacturing is the easiest environment to apply Lean/CI, but it is beginning to have a lesser impact on the business. The largest opportunities in organizations exist in the integrated network of professional, knowledge-based transactional processes. These processes are full of hidden, unknown, undisclosed, and undiscovered opportunities for improvement. Examples include digitization, sales and marketing, program management, supply chain management and procurement, engineering and new product development, integrated product and process design, customer service, quality and compliance management, human resource management, talent development, and the like. Decisions made in these areas are often irreversible in terms of operating issues in manufacturing. Adapting Lean/CI to these complex knowledge processes requires much deeper forensics experience and are often avoided/excluded from an organization’s business system approach to improvement.
So the big question – Do you want to remain in the stalled majority, or do you want to turn things around? It takes bold leadership that objectively acknowledges the positives and detractors of current conditions, recognizes the need to do something different and better, and is open to a renewed implementation approach. The answer is simple but not easy. In fact, turning a declining Lean/CI initiative around is extremely complex from a change leadership, integrated business system, and renewed cultural perspective.
How to Rethink, Redefine, Realign, and Redeploy the Journey
Face it – The majority of organizations are not getting results they are entitled to with Lean and strategic improvement. You’re not alone, the majority of organizations are here. It’s only bad if you don’t do something about your situation. Continuing to follow your existing Lean/CI model and expecting different results is not the answer. Continuing to superficially mimic Toyota and the stalled activities of other organizations is not the answer. You can change this. As we mentioned earlier, it is first and foremost a leadership choice. If organizations wish to achieve greater results (that they deserve and are entitled to), the executive team must be willing to step back and rethink, redefine, realign, and redeploy their journey.
This is easier said than done and implemented. This requires leadership and technical interventions, and injections of new thinking/talent to get back on the right track. Since many organizations have been stuck in this decline mode for a while, the best approach is to engage outside expertise with the knowledge, experience, and proven track record of turning your situation around.
Below is our real world, common sense guidance for rethinking, redefining, realigning, and redeploying your Lean/CI journey.
- Acknowledge and accept that you’re not getting what you expected or need to achieve from your Lean and CI initiatives. Forget about politics, debates on methodologies, established or currently accepted routines, the mechanics of Lean/CI, etc. Stop doing the same things and expecting different results. Put the keys down, and rethink your journey – in your own way.
- Recognize the need to do something different. More of the same is not working. Mimicking what others are doing is not working. Success is more than going through the standard routines. Admit that your organization needs help and new thinking to evolve to a higher order of Lean/CI. It is much more difficult to achieve success in your own way.
- Conduct an objective assessment of current Lean/CI conditions. This is a detailed diagnostic of your present model initiatives, operating gaps, and missed opportunities. This detailed task will help reveal the gaps that need review and correction to realign with business objectives.
- Seek help from industry recognized experts. Resetting involves defining the customer experience, and clarifying business improvement and cultural development requirements to achieve renewed customer, financial, and operating success. The right outside expertise can provide both accelerated confirmation and guidance for new opportunities.
- Create a compelling and renewed vision and reason why and how your organization needs to adapt Lean/CI to your business. Lean/CI must be viewed as the accepted enabling initiatives to achieve business plan and personal success. This step must provide a compelling reason for rethinking, redefining, realigning, and redeploying your journey as an evolutionary step to improved competitiveness and greater operating success.
- Develop the renewed Lean/CI road map. This is a clear implementation plan to chart and align a new Lean/CI course to changing customer, market, business, and talent requirements. This renewed approach includes the development of new critical core competencies such as digital technologies.
- Re-evaluate and reset the organization’s commitment. Commitment includes the competencies, capabilities, and resources to fully support the Lean/CI road map as a way of life. Commitment is not a short term token agreement.
- Educate the executive team, managers, process owners, and associates. This is not a train-the-masses exercise but a reinforcement of Lean/CI as a formal business system, reaffirmation of expectations for success, and consequences of poor performance. Adaptive and customized reinforcement education specific to your business system problem-solving needs is critical to success.
- Strengthen the organization’s communication, awareness, and reinforcement best practices. Purpose-Driven Communication assures that Lean/CI initiatives have been clarified, accepted, and realigned for the success. Use different communication protocols to engage and reach different people in the organization. Showcase successes and recognize teams/individuals for the right accomplishments.
- Execute the renewed deployment and execution plan. Prioritize on the highest impact opportunities in the business plan. Success is not demonstrating all the Lean methodologies and practices known to mankind, but establishing the business system model for solving the right problems with the right approaches to achieve the right desired results – Over and over again.
- Establish a Daily/Weekly/Monthly/Annual Leader Standard Work Framework to Measure Continuous Success. Conduct frequent reviews of Lean/CI responsibilities and results vs. business requirements and cultural development needs. Build a closed loop performance management system with the right aligned metrics and reinforce teams and individuals for great performance. Make the necessary course corrections to achieve continued, sustainable successes.
- Build a Strong Problem Solving Culture. Assure that your organization is framed around creating a culture of no fear and creative problem-solving. This competency drives the right approaches to Lean/CI. Going through the motions and hoping for results very common, but is not the right approach. Breakthrough success is more about building the right attitudes, behaviors, choices, and actions than it is about following the standard recipe of methodologies and tools.
Summary
It’s not the end of the world if your Lean/CI initiative has stalled out, declining, or is struggling to deliver true value to the organization . . . As long as you recognize and acknowledge this condition and the need to do something different to achieve different greater results. Easier said than done – Change can be difficult, especially for the internal Lean/CI resources.
Lean/CI has become a commoditized approach to improvement. If everyone is reading the same books, listening to the same consulting advice, using the same methodologies and tools on the same issues, there is no competitive advantage. Lean/CI has become a maintenance activity rather than a means of delivering the greatest customer experience and achieving superior operating performance.
You can’t do what everyone else is doing and expect superior results. We refer to this as the Lean Groundhog Dilemma: If you come out and observe a flurry of Lean/CI activities, then success must be on the way soon. The answers are not in copying some other organization’s way – It’s not your way, and many of the most critical success factors (e.g., leadership, strategy, culture, organizational dynamics, customer centricity, scalability, human capital, etc. ) are invisible and cannot be copied. It’s time to stop the variations on the same themes, and realign with an ever changing world with very different expectations of strategic and operational improvement.
Need help? We do this for a living.
The Center for Excellence in Operations, Inc. (CEO) is engaged with many different clients every day, within a variety of industries, operating environments, and with different Lean/CI and cultural renewal challenges. We can get your Lean/CI initiatives back on track and operating at a much higher order, daily business system model level.
Contact one of the authors below. We will be happy to discuss your current situation and needs.
Terence T. Burton is President and Founder of The Center for Excellence in Operations, Inc. (CEO), a management consulting firm specializing in strategic and operational transformation. Terry has four decades of extensive operations and supply chain experience as a hands-on practitioner and executive in private industry, and has led consulting engagements in a wide spectrum of industries, having consulted with over 350 clients in 23 countries on their strategic and operations improvement initiatives. Terry can be reached directly at burton@ceobreakthrough.com
Edward A. Fagundes is the West Coast Practice Director for The Center for Excellence in Operations, Inc. (CEO), with emphasis on serving clients in the West Coast, United States region. Ed’s career spans various leadership roles in general management and as a global business system executive. He has proven expertise and extensive experience with improving business processes, developing lean transformation strategies and plans, leading the implementation of business improvement journeys to address business issues, and implementing enterprise-wide continuous improvement applications. Ed can be reached directly at edfagundes1@yahoo.com.
by Terry Burton | Blog, Uncategorized
Changing Lean from a noun to an adjective may have extended the brand, but it has also added many new levels of confusion, division, and diluted the purpose of the basic essentials of Lean and CI.
Lean and an entire universe of continuous improvement (CI) labels have been around for decades. There is absolutely no doubt that these initiatives work well when implemented correctly . . . At least for a while. Like many of you, I have observed the tendency of organizations to search for what’s next while failing to acknowledge their basic building block failures of sustainable CI success. This has always been the case for decades – It’s how the Western economy is wired. In the last decade consultants and practitioners have continued to respond to this what’s next syndrome with a blue ocean of new acronyms and brand extensions of the same basic fundamentals of Lean and CI. Every time a study group visits Japanese companies (like they did in the 1980s) they come back with a new, repackaged what’s next.
All of these various initiatives have their assumed philosophies, methodologies, terminology, biases, conflicts, and benefits. There exists so much overlapping knowledge between these Lean brands while some attempt to push the brand into something that it isn’t (e.g., Lean Business Strategy, Lean Leadership, Lean Culture, Lean Transformation, Lean Innovation, etc.). These are standalone competencies that are not Lean dependent but serve a much higher purpose of organizational greatness. The intent is understood but these competencies must be developed far beyond the Lean cause. Then there are those constant debates about the benefits of one approach over the other approaches. Even within a particular CI approach there is widespread confusion. Interview a dozen different individuals in an organization and you get a dozen different perspectives, goals and objectives, and definitions of the content in their CI initiatives of choice. So how can organizations expect to cascade a uniform story across the organization? That’s a real problem.
What’s Next – Lean IoT? Lean Robotics? Lean AI? Lean Everything Else?
Changing the word Lean from a noun to an adjective has not worked so well. The answer is not in a single point of view or another new brand label using Lean as the adjective! The purpose of this post is to stimulate discussions about how all organizations can achieve a higher order of success with their strategic and operational improvement journeys – In their own way.
Remember the Fugawi Indian Analogy?
Instead of mastering the basic essentials, this constant Lean and CI branding extensions have produced more rain on the CI parade than real benefits. Everyone jumps on the branding bandwagon of what’s next, but no one takes the time to figure out what kind of bandwagon is really necessary. These good faith efforts and best of intentions have added many new levels of confusion, division, and diluted the purpose of the basic essentials of Lean and CI. Today in far too many organizations, leadership and people are exhausted and more disengaged with formal CI and on to other more pressing issues of the moment. Others are blindly and deeply rooted into their daily Lean routines, TPS improvs, Shingo lingo, and KATA sonatas. Too many organizations are on a Concord Coach ride with their Lean, TPS, Kaizen, and other CI initiatives and refuse to change course.
To really top things off, there are organizations who conveniently dream up excuses to postpone improvement. Here are a few comments (I know your management would never say these things right?):
“Let’s put off dealing with this problem until we get through this quarter.”
“We finished our continuous improvement program years ago.”
“You fund it. There’s no money in my budget for improvement, and it’s not part of my goals and objectives.”
“We already know how to improve, and if we had more time we could do a better job.”
“We’re good, it’s been assigned to a Black Belt.”
(Feel free to share any similar comments with us that you have heard)
After decades of experience only a minority of organizations have culturally embedded and institutionalized CI as a way of life. What have they done differently? They view their efforts as an adaptive, integrated business system and ever-evolving operating model (in name and in practice) in their own way. Their operating model is well aligned to customers, business requirements, and talent/cultural development needs and they consistently achieve superior performance. For everyone else, they are stuck in a mode of mimicking Toyota or other organization’s programs, or merely going through the motions of tools, terminology, symbolic storyboards and signage, A3s and value stream mapping, KATA cards, and beautification exercises because it must be the right things to do. Incremental improvement has become creeping complacency.
Some organizations have conveniently changed the name of their activities to a business system, while not understanding what a true “business system” approach to strategic improvement really entails. Lean, Kaizen, TPS, Toyota KATA, Operations Excellence, and CI in general has splintered into various mutual admiration groups who are putting their own du jour programs of choice on the wall and admiring them . . . While nothing is really improving. It’s like fake news . . . Fake improvement! It’s time to step back and ask the proverbial Fagawi Indian question (“Where the Fugawi?”).
The World Has Changed How We Improve
Now let’s add in innovation, digitization technologies, and operating model transformation possibilities into the mix. The need for improvement is at a higher speed and magnitude than ever before. The capabilities to innovate, plan, deploy, and execute these quantum leap improvements have arrived. We all live in a change or fall behind quickly world. All organizations now need to focus on the masteries of innovation, digitization technologies, operating model transformation and CI. All are necessary for sustainable successes in the marketplace. If your organization is not so great at CI, it probably won’t be so great at the larger digital transformation challenges.
Let’s return to CI. If organizations are reacting and always fixing the same problems, then they don’t have a solid planning, deployment, and execution infrastructure. They are failing at CI but maintain a false sense of success through activity. A digital economy promotes predicting and preventing wastes to come into the organization before it arrives. Organizations that choose to remain in a detect and fix mode will never get operating model transformation and digitization right. There just isn’t time to do both. It’s time to change the CI model. There’s probably a stronger word for it than reboot – Like adaptive reinvention or renewal, a radical shift from the static and superficial “As-Is” copy-and-mimic practices in many organizations.
The Future of Strategic and Operational Improvement
First of all, organizations can do themselves a great service by stepping back and looking from the outside-in at their various CI initiatives. It’s an emotional competency called “Learning to see yourself” and acknowledge what you’re looking at even if it’s bad news. Remember, failure is just a temporary learning experience in a true continuous improvement environment . . . Unless organizations choose otherwise. If organizations ever want to turn things around they must be willing to put the keys down and rethink their journeys. More of the same is not an option for success. Statements like “We’ve been involved with Lean or TPS for years” are now highly subjective in terms of real value contribution. This recent evolution of Lean and CI branding has caused executives to lose interest in Lean and CI in favor of instant gratification and short term performance. They look at words like Lean Strategy, Lean Leadership, and Lean Culture and assume their Lean people are taking care of these things. The answers are not in copying some other organization’s way – It’s not your way, and many of the most critical success factors (e.g., leadership, strategy, culture, organizational dynamics, customer centricity, scalability, human capital, etc. ) are invisible and cannot be copied. It’s time to stop the variations on the same themes, and realign with an ever changing world with very different expectations of strategic and operational improvement.
Return to the Basic Business Fundamentals for Success
What are these basic fundamentals? They have nothing to do with a particular brand or label on an improvement movement. The basic business fundamentals address what the organization must accomplish to optimize competitive success. We help clients to define these basic business fundamentals using a “Jobs To Be Done” approach. A return to the basics of what makes organizations successful is a great place to reset any and all improvement initiatives. For example, within your own organization this will include but is not limited to the following points:
- Customer-Centric Market Focus: Understanding and fulfilling an unserved need with greatness, consistency, and best value;
- Creating the Customer Experience: Delivering the WOW factor to customers through service, ease, value, collaboration, support, and other valued attributes;
- Creative, Adaptive, Servant Leadership: Developing, engaging, and empowering the full brainpower of the organization;
- Innovation, Creativity, and Openness to Change: Understanding known, unknown, and undiscovered customer requirements (“Jobs To Be Done”). Embracing and recognizing the constant need to reinvent and improve (innovation + continuous improvement)
- Best Practices in Critical Core Processes: Sales, marketing, advertising and promotions, order entry, S&OP, supply chain management, finance, customer service, engineering, manufacturing, distribution and warehousing, transportation and logistics, etc. Also a willingness to disrupt these best practices for better best practices;
- New Product Development: Focused on innovation, speed, cost, minimum viable product (MVP). Quality, reliability and field performance are givens;
- Clear Strategy, Vision and Direction: This has become a real time challenge for organizations;
- Awareness, Communication, and Reinforcement of Purpose: The time of “launch and delegate” is over. Major change requires the fresh stream of new ideas, and communication emotionally connects people to this journey;
- Proactive Talent Management: This is deliberate and well planned human capital development (e.g., talent planning, acquisition, development, scaling, growth, etc.)
- No Fear Engagement and Ownership: Engagement is the norm, experimentation and new learning and a wealth of new experiences without consequences is a must for personal and cultural development
- Business System Best Practices: Best-in-class practices for leadership, strategy and alignment, deployment planning, execution, and sustainability of new gains;
- Innovation through new people + new thinking + emerging technology + open experimentation;
- Integration of the right digital technologies (e.g., predictive and preventive business analytics, mobility, cloud-based visibility, real time performance dashboards, real time process and equipment diagnostics);
- Velocity, cost, efficiency, quality, perfection, margins and making profit, growth, investing in the future, agility, talent either in company’s DNA or you cannot compete;
- Continuous idea streams followed by innovative, rapid-fire improvements (Amazon model). Simple, low overhead improvements, laser targeted, easy to implement, quick market results;
- Execute Correctly and Swiftly, Achieve the Desired Results: Most companies oversimplify change so they underplan and under-execute (Weak at execution and sustainability);
- Balanced Performance Scorecard: Right balance between short term (financial performance) and long term (CAPEX, talent development);
You get the idea. The objective is to define the basic business fundamentals for success in a way that is totally removed from the standard spectrum of improvement offerings. The focus is more on building opportunity harvesting and problem-solving competencies independent of embracing and practicing a particular CI approach of choice. It’s a big mistake to layer on Lean, Kaizen, TPS, KATA, or any other improvement initiative (especially technology) unless the basic business fundamentals for success and the corresponding what, why, who, when, where, and how details are well analyzed and defined and widely understood. These details change much more frequently in a digital economy so the “means matching” is a continuous challenge and improvement horizons are shrinking. The need and possibilities for improvement are greater than ever before in the history of improvement.
Every organization’s journey is unique in terms of operating model transformation and CI opportunities, and the canned, single perspective solutions are the wrong approach. The basic business fundamentals for success should drive the type and focus of change and improvement initiatives. The future successes of strategic and operational improvement requires a more holistic business system approach that embraces innovation, operating model transformation, emerging technology, human talent and cultural development, and CI as the sustaining factor. All of the elements for success are tucked under the business system or operating model framework. For the best performing companies at improvement, it’s an extension of their current business system best practices. These organizations have a huge advantage at digital transformation.
Architect Your Own Business System – In Your Own Way
Here’s an interesting hypothetical question: If you threw all CI philosophies, approaches, methodologies, tools and techniques, etc. into a basket and were asked to develop a tailored XYZ Business System using only 20% of the content of the basket to drive your basic business fundamentals for success, what would you do? This proliferation of branding, philosophies, and approaches is all good stuff but it’s confusing as hell to people. It’s like each week the menu changes, the direction changes, the priorities change. In your own way means consolidating and rolling in this scope, depth, and breadth of CI under a common umbrella (XYZ Business System) that fits your customer expectations, business requirements, and cultural development needs. The rest is there in the background and can be tapped when the basic fundamentals drive the need.
Next, organizations must design and develop the operating architecture of their XYZ Business System. This has nothing to do with Lean, TPS, Kaizen, KATA, or any other CI branding. The architecture defines the company’s operating model. Below is an illustration displaying an example of this holistic, integrated approach. On the left is our Lean Business System Reference Model framework. It was named Lean for a book (Global KATA) but the word could be replaced with the name of your organization, It is a living work-in-progress and our perspective of a true business system architecture, which may be differ slightly from your organization’s required architecture. It’s a useful guide based on decades of client experiences and benchmarking data – But don’t try to copy and mimic it. More thought and work is required to adapt this reference model in your own way.
The most successful organizations have adapted a business system approach to their initiatives with the formal elements of leadership, strategy and alignment, deployment planning and prioritization, change awareness-communication-reinforcement, talent and human capital development, flawless execution, balanced performance management. This architecture is their operating model engine and runs like a high performance engine, including frequent tuning and upgrades to increase system performance.
Integrate Innovation, Digital Technology, Transformation, and CI
On the top left of the diagram is the Fuzzy Innovation Zone. This is where a steady stream of new ideas and possibilities are conceived. Obviously organizations can’t do everything and there are many unknowns to each of these ideas. It is not known if some are even feasible. A formal down-select process takes innovation to the next level (The Transformation Zone) where more definition, goals, and expected outcomes are added. Assumptions about operating model strategies and digital technologies are formulated.
In the Fuzzy Innovation Zone and Transformation Zone, the proposed ideas are non-deterministic in that they are unpredictable and involve choices between indistinguishable options and possibilities. At this stage, transformation is an open ended journey without concrete solutions to business challenges. Lighthouse Pilots provide the sandbox of experimentation where non-deterministic ideas are translated into workable and executable deterministic solutions, or discarded through lessons learned for other options and possibilities.
In the Alignment, Planning, Deployment, Execution, and Sustainable Results Zone, the XYZ Business System provides the integrate architecture to do this successfully. This is a more deterministic problem solving zone where more structured waterfall-like improvement approaches can be used with great success. The diagram displays three distinct zones. In real life there is a lot of grey area between zones. For example, some Lean initiatives are pretty innovative and clever, and may result in a breakthrough. Not all transformation strategies require Lighthouse Pilots, only the ones where high uncertainty, risks, costs, and customer/market disruptions may occur. Many operating ideas can be implemented immediately. Innovation and transformation rarely hit the intended mark and require CI efforts to fine tune these dramatic changes.
Summary
The major difference in this business system or operating model infrastructure is that everything is well integrated, and driven by the basic business fundamentals for success. It’s a concept and proven approach for greater business improvement successes because it aligns and connects the full spectrum of improvement possibilities from innovation to transformation to CI. This is much different than a variety of du jour initiatives and single point perspectives running and hoping to address the basic business fundamentals or applied without knowledge of the basic business fundamentals. These initiatives should be connected as their impact is far reaching across the organization.
No single point improvement initiative is all inclusive or all encompassing. In other words, organizations are kidding themselves with just a Kaizen, just a KATA, just a TPS, just another single point initiative. CI initiatives are most effective at improving the As-Is conditions of work, but it does not tell you how to optimize the basic business fundamentals for success. Many CI initiatives are narrowly focused and address only a small or the wrong increment of total improvement opportunities. All of this points to the organization’s need for an integrated business system approach to improvement, and to redefine, consolidate, and re-point their strategic and operational improvement initiatives to achieve greater success now and in the future.
Share your own thoughts and experiences. How should organizations move to a higher order of improvement?
So what’s your organization’s next step? The first step is a Operational Transformation Diagnostic, whether you find the time and resources to conduct this on your own or seek outside help. Our specialty is small and mid-sized companies. For the typical $100M+ facility this thorough diagnostic and reset effort can be completed within 3 weeks.
Postponing your own effort or continuing on the same course is not an option. Take the first step now and see a big difference in operating performance within 30, 60, 90 days and beyond.
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Terence T. Burton is President and Founder of The Center for Excellence in Operations, Inc. (CEO), a management consulting firm specializing in strategic and operational transformation. Terry has four decades of extensive operations, quality, engineering, mergers and acquisitions, and supply chain experience as a hands-on practitioner, interim operations leader, and executive in several corporations. He has led consulting engagements in a wide spectrum of industries, having consulted with over 350 clients in 23 countries on their strategic and operations improvement initiatives. Terry can be reached directly at burton@ceobreakthrough.com
