Adapting Lean to North American Business Culture: A Thought Experiment

Since we all have a short attention span, this article asks if Lean leaders should be part of a process that generates Net Profit on a consistent basis to be successful in the given North American culture. It attempts to validate this by comparing this process (called the Throughput Improvement Process) to the 14 principles of the Toyota Production System. Book an appointment to have a conversation about how these principles can improve the performance of Lean and make Lean experts highly effective.

Now stick with me here. It’s just a thought exercise.

In today’s fast-paced business world, it's crucial to consider the broader impact of any operational change. When adopting Lean methodologies, many organizations turn to the foundational principles outlined in The Toyota Way, often considered the “bible” of Lean. However, there’s an interesting aspect of Toyota’s approach that goes beyond mere cost-cutting—it’s their focus on profit, driven not just by reducing waste but by enhancing throughput.

The Cultural Divide: Short-Term Profit vs. Long-Term Philosophy

One of the key challenges in implementing Lean in North America is the cultural difference in how businesses view profit. In North America, companies often prioritize short-term gains, whereas Toyota’s first principle, as outlined by Jeffrey Liker, is to base management decisions on a long-term philosophy. This cultural divergence can make it difficult to sustain Lean practices once a leader who championed them moves on. The risk is that without a deep-rooted commitment to Lean, these efforts might gradually fade away.

Integrating Lean with Financial Metrics

What if we adapted Lean to fit better within the North American business environment? Imagine a Lean methodology that directly aligns with key financial metrics such as Net Profit, Return on Investment (ROI), and Cash Flow. While making money isn’t the sole purpose of a company, it’s a necessary condition for survival and growth. By aligning Lean outcomes with these financial measures, Lean might achieve greater acceptance in North America.

Unfortunately, traditional Lean doesn’t offer a straightforward formula for increasing profits, focusing instead on reducing costs. For those who prioritize financial outcomes, this can be a risky approach, leading to the downfall of many companies. However, by incorporating elements from the Theory of Constraints (TOC), we can reframe Lean in a way that directly impacts profitability.

A New Approach: Lean Through the Lens of TOC

Let’s consider Lean through the TOC’s formula for Net Profit:

Net?Profit=Throughput?(T$)?Operating?Expense?(OE)

In this context, “Throughput” refers to the rate at which money flows into the organization, calculated as the difference between the Selling Price and Total Variable Cost (TVC) multiplied by the throughput rate. TOC teaches us that Operating Expense includes costs that do not vary with throughput, such as fixed salaries.

Applying this to Lean, we propose that any Lean decision should be evaluated based on its impact on Throughput and Net Profit. Waste reduction only matters if it hinders the ability to generate Net Profit. Continuous improvement efforts that increase Throughput—especially at the bottleneck—are inherently valuable.

Focusing Lean Efforts on the Bottleneck

In Lean, the system’s throughput is constrained by its bottleneck. Therefore, to make Lean profitable, efforts should be concentrated on improving throughput at the bottleneck. This approach simplifies Lean implementation, as resources are focused on one area rather than spread thinly across multiple stations. It’s a bold strategy, distinct from the traditional methods used today, but one that aligns better with North American business culture.

Aligning Liker’s 14 Principles with a North American Perspective

By focusing Lean efforts on the bottleneck, many of Liker’s 14 principles can be reinterpreted:

1. Long-Term Philosophy: Prioritize long-term throughput improvements at the bottleneck, aligning with a long-term view of profitability.
2. Continuous Flow: Improving the bottleneck naturally creates a smoother process flow.
3. Pull Systems: Base pull systems on the bottleneck’s capacity to avoid overproduction.
4. Workload Leveling: Continuous improvement at the bottleneck helps level the workload across the system.
5. Quality Assurance: Focus on fixing problems at the bottleneck to prevent defective parts from slowing down throughput.
6. Standardization: Standardizing processes at the bottleneck becomes the foundation for continuous improvement.
7. Visual Controls: Emphasize visual management at the bottleneck to ensure no issues are hidden.
8. Reliable Technology: Invest in reliable technology at the bottleneck to maintain consistent throughput.
9. Leadership Development: Train leaders to understand and focus on bottleneck management, tying their success to Net Profit.
10. People Development: Empower employees to improve throughput at the bottleneck, linking their compensation to profit increases.
11. Supplier Relationships: Respect suppliers who directly impact the bottleneck and thus the company’s profitability.
12. Genchi Genbutsu (Go and See): Focus leadership attention on the bottleneck for more effective decision-making.
13. Decision-Making: Make rapid decisions based on bottleneck performance to enhance profitability.
14. Continuous Improvement: Drive continuous improvement by relentlessly focusing on bottleneck throughput.

A Bold Choice for the Future of Lean

This approach represents a significant shift in how Lean is applied, particularly in a North American business context. It’s not a perfect fit, but it offers a more logical and potentially more successful path forward. For those tired of the slow progress of traditional Lean methods, this alternative presents a compelling choice: continue with a process that has struggled to gain traction, or embrace a strategy that aligns Lean more closely with financial success.

If you’re interested in influencing the development of this process, I invite you to set up a call with me. Let’s explore how this approach could impact the next three to five years of your business life. You can book an appointment or visit www.calendl\kevinkohls to set it up.