Eric Ries popularized a revolutionary term and inspired a movement in his 2011 book The Lean Startup. In it, he describes a new kind of business strategy—one where startups cater their products or services to the needs of early customers, reducing the need for large amounts of upfront capital.
Lean companies outperform their competitors in any sector, from manufacturing to health care, from startups to service giants. They are better at following and growing their customer base, at generating cash, and at engaging and involving their employees. There’s no longer any debate about this—so, why aren’t more companies leaning themselves in earnest?
Lean is not that hard, to be honest—you just need to get a few things right.
First, every customer matters, and quality is about delivering to customer preferences as opposed to fitting the customer in your processes.
Second, if you continuously reduce lead-time—from customer order to delivery, from production order to shipping, from supplier order to reception—all sorts of practical problems will appear and you can engage your people’s initiative in solving them.
Third, most technical problems are skills problems, so as you solve problems, you focus on training every employee every day at better using the tools at hand and at better working with each other. As you do so, patiently and in good cheer, you develop mutual trust in your company and that elusive, priceless quality: morale.
So, why should it be such an uphill battle? From practicing lean on the shop floor with CEOs and COOs since the term was coined 25 years ago, we can see that, actually, not all managers struggle. A few have a blast and generate results whilst enjoying themselves on the shop floor and in growing their company. Most, however, try to delegate lean and then struggle with unwieldy corporate programs, promised savings that never materialize on the bottom-line, disgruntled employees, and backbiting middle-managers. What are they missing?
What you tolerate will continue. Having done this for a long time, we have seen many managers actively fight against leaning the company and getting the corresponding performance—and financial improvements. A few misconceptions are so deeply engrained that your own management structure might be forcefully hindering your own performance every day. Here are the top five mistakes managers make that prevent effective leaning:
Many managers feel that existing customers are owned, so they worry about acquiring new ones, but the truth is that reselling to a loyal customer is much, much cheaper than acquiring a new one, and any market has a natural renewal rate. By reselling to every customer you can build a stable business, which will in turn attract new customers with word of mouth and reputation.
Most of the reporting management structure is built on the P&L sheet and the fiction of the bottom-line. As a result, your managers are constantly fighting to lower cost decisions at the expense of generating cash for the business. The purchasing manager chooses the lowest-cost supplier, rather than the most responsive with best quality. The footprint manager picks the lowest-cost area rather than look at minimizing travel cash outlays for products, components, and engineers. Every one of these decisions burdens your company with unnecessary cash spends—and the chances are, you yourself are rewarding your managers for making your company slower and fatter on the fiction that they’re "reducing costs."
The feeling is that, first, if it ain’t broke don’t fix it; but then when we’ve come to terms with the fact that it is broke, let’s find a once-and-for-all solution. That’s plain silly. As a result, staff directors are always inventing Rube Goldberg programs and systems to fix operational problems. The site manager is snowed under 1) the burning fires caused by real process screw-ups and 2) the various audits and systems imposed by corporate that don’t do the business any good but make sure the various support directors can show they’ve done their job well (new IT system anyone?). Operational problems are local and detailed and we’ll learn more by solving them concretely and specifically one by one rather than by looking for hyper-solutions to issues we don’t fully understand. But it’s easier to throw a huge chunk of cash at a new toy (new system, new plant, new program) than deal with the grittiness of real value-level problems. Don’t reform: make it work!
Frederick Taylor has posthumously convinced us all that the system matters more than the person—after all, employees will do what the system dictates, won’t they? Not really. Each specific situation needs a degree of good judgment to be handled smartly and this requires constant training to deepen both the understanding of the fundamentals of the job and the context of every situation. Any problem is, at its root a question of skills and tools and no system yet has shown any degree of wisdom. By focusing on processes rather than accepting that a process is the sum of what people do, managers ignore their own employees and miss the most fundamental source of innovation and productivity: people’s smarts and initiative.
Just as existing customers are often considered owned, managers feel that employees work for them because they have to. This is absurd as history has proved time and time again how big a difference morale can make: people need to feel confident that they have a future because their managers are competent and will treat them fairly. How hard can that be? Every time someone acts on a new idea or decision ask yourself: Is this improving common trust or, on the contrary, damaging it? What you allow will continue.
Lean is not that hard and growing market share, doubling margins, and halving inventories is not a pipe dream—it’s been proven by many, time and time again. Why doesn’t it happen more often? Because many of the day-to-day actions of management downright inhibit progress. Until these misconceptions are realized and addressed, the field will remain the same: a few will succeed spectacularly and many will struggle and explain it’s really not their fault because they’ve done every wrong thing right.
—Michael Ballé is author of The Gold Mine and The Lean Manager and founder of the Institut Lean France. He writes the Gemba Coach column on www.lean.org.
—Daniel T. Jones is author of The Machine that Changed the World, Lean Thinking and Lean Solutions, and is the Founding Chairman of the Lean Global Network and the Lean Enterprise Academy in the U.K., at www.leanuk.org.