Update: Why "Lean Manufacturing" Is Not Enough To Guarantee Business Success.

The World is literally screaming for a bolder, higher order approach to strategic improvement. This post is not a criticism of Lean, TPS, OpEx, or other initiatives. It is a call to action to recognize and integrate the both the missing and changing critical factors necessary for a higher order approach to strategic improvement and operating success.

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Every organization continuously struggles with how to gain competitive advantage in the face of disruptive global market conditions. The hypothesis has long been that Lean – Putting the best manufacturing improvement tools and methodologies from the Toyota Production System (TPS) and other great manufacturing organizations in place is the cure all and end all. But it is not! It’s a great start . . . and it was an even greater start twenty years ago when the manufacturing leverage in organizations was much higher. 

The largest opportunities for improvement in organizations is in the complex interconnected network of transactional processes. Simply throwing the standard menu of TPS tools and techniques at these complicated global process networks creates an improvement ricochet effect

Why? Because the world is changing at a faster rate than the current rate of improvement:

Everyone hears about the 20% of organizations in publications and social media that are successful with their strategic improvement initiatives. The silent 80% continue to struggle like hell in the midst of numerous detractors and barriers to success. Even the 20% are not that successful when benchmarked beyond manufacturing to the complex network of core enterprise processes, organizational engagement, digital technology integration, or culture change. By the way, this is where the world of change has positioned the greatest future opportunities.

We become involved in many Lean and strategic improvement renewal engagements and observe so many common challenges in organizations. Many executives are questioning the value of Lean because they are not seeing the results that they expected. Lean and other CI initiatives are reaching a maturity and decline stage to where CI is a commodity. If everyone is following and mimicking the same tools-based approaches with the same thinking and heavily focused on production then guess what? CI helps to maintain a certain level of performance but it is no longer a competitive advantage. It's not Lean's fault; It is the limited choices that organizations make around the strategy and processes of how they implement Lean, combined with the external forces that are driving major industry and structural changes where Lean is being practiced.

If everyone is following and mimicking the same tools-based approaches with the same thinking and heavily focused on production then guess what? CI helps to maintain a certain level of performance but it is no longer a competitive advantage. 

Why? Why? Why? Why? Why?

Diminishing Manufacturing Leverage 

Manufacturing has become more generic, more software vs. hardware-based, and outsourced to lower cost third world countries. As a result, manufacturing is an increasingly diminishing component of total supply chain complexity, costs, and competitiveness;

Morphing of Processes 

Technology is morphing the concept of process away from a specific facility and physical assets and more towards additive manufacturing and 3D printing, IoT, robotics, subtractive finishing, and other professional and global, digital technology-based solutions;

Higher Human Professional Dependencies

The human and technology content of processes has increased dramatically. Today success lies in leveraging the entire complex network of enterprise-wide professional, technology, and knowledge-based processes. The future of improvement is enterprise and extended enterprise, and not limited just to manufacturing. The largest opportunities for improvement in organizations is in the complex interconnected network of transactional processes. Simply throwing the standard menu of TPS tools and techniques at these complicated global process networks creates an improvement ricochet effect. "For real" behavioral and cultural transformation is more important than ever before.

Evolving Technology Enablers

Digital technology continues to provide innovative applications to strategic improvement. The future is the cloud, big data, predictive and preventive business analytics, mobility, real time digital performance dashboards, instant digitized synchronization, IoT, and augmented reality supply chains.

Velocity of Improvement

Executives and their organizations are not interested in repeating the same old train the masses, value stream mapping the universe exercises, and other long drawn out waves of projects from the past. Executives expect a higher order of change leadership, accelerated diagnostics and analytics, and even greater results - Now!

Time for Lean Re-Thinking and Expansion

Consultants, experts, and practitioners are more focused on preaching the Toyota Way and mimicking the standard Toyota Production System (TPS) party line and other old school Lean manufacturing . . . and not focused enough on evolving Lean to meet these new challenges and opportunities. Many defend their TPS efforts by arguing that everyone must understand and master the tools-focused basics as a foundation. A closer look reveals that the actual interpretation and practice of the basics is misdirected or dead wrong with questionable benefits in many organizations. I often find that many consultants and practitioners can recite the tools and jargon and go through the mechanical motions, but they are missing the deeper fundamental understanding of the basic industrial engineering logic that makes things work in a variety of changing conditions. This is not a criticism but a fact when you look at how the world and its improvement needs are evolving beyond manufacturing . . . with less and less to show for the efforts in the majority of organizations. The world of improvement needs a renewed expansion, focus and alignment on the right competitive pain points. It requires adaptive thinking, creativity, new knowledge, experiences, technology, and continuous talent development and cultural alignment to accomplish the latter. The only way to discover permanent and sustainable success with continuous improvement it to discover and live the journey "in your own way."

I was reading a recent post on LinkedIn, "Is Lean Good or Bad" with hundreds of interesting responses with different opinions. This is symptomatic of the real challenge: The answer is not a simple binary choice, and its outcome is totally human-dependent. Lean is a continuously evolving operating philosophy and core cultural standard of excellence created and nurtured by leadership.  Lean has great sustainable potential when organizations continuously and systematically adapt and evolve to changing market conditions and critical business requirements. The standard repertoire of manufacturing tools and practices does not create this enterprise-wide operating philosophy, people do in their daily behaviors, choices, and actions. The limit of success with Lean or strategic improvement in general is the narrow focus and other self-imposed limits that leadership and their organizations place upon themselves. Let's be clear - There's no replacement for Lean (or improvement). It's all about discovering and practicing new levels of greatness across the enterprise.

Remember and Accept Three Facts:

The need for improvement never goes away especially in our current competitive global economy

Additionally, the requirements for strategic improvement continue to evolve to a higher level, requiring a higher order response for success. We all live in an improve or lose world.  It requires constant human and cultural development to take on these higher order challenges;

Organizations cannot change unless they face down the basic principles of change

Recognition of the need, strategy, vision renewal, passionate adaptive leadership, awareness, alignment, talent development, communication, ownership, and deeper human emotional engagement. Same process, same people, same thinking = same results. You simply can’t get there by remaining on the traditional old school Lean tools treadmill;

There are more opportunities for improvement than in any other time in the history of improvement

Traditional tools-based Lean approaches miss the mark on larger scale enterprise improvement. These approaches are self-limiting in transformations within the complex, professional, knowledge-centric, and human-based network of core business processes. Technology combined with process innovation and integrated problem solving are the largest enablers of these new, hidden, and yet to be discovered opportunities.

A Lean Upgrade is Way Overdue

What’s going on? As the technology, knowledge, and human content of processes increases, so too does the complexity and people-dependency (i.e., culture) of processes. Today the global supply chain issues are much more complex and people-dependent and the opportunities are hidden, unknown, or yet to be defined. Lean manufacturing's relevance and impact (solely focused on production) is diminishing when one recognizes these evolving end-to-end value chain opportunities. Many of the academics, consultants, and practitioners have not kept pace with all the changes happening in the global operations arena. 

We are not advocating a halt to Lean manufacturing, but a major paradigm shift and adaptive expansion of the Lean philosophy across the entire enterprise. The key to success is in rediscovering and evolving Lean to a higher order, holistic, enterprise-wide, technology-enabled, and culturally grounded business operating system. In other words, a different and superior model of strategic improvement in your own way rather than the superficial and narrow mimicking of what Toyota and others are doing.

The Future: A True Autonomous XYZ Business System

Most organizations face a tremendous strategic opportunity if they can move beyond their current Lean manufacturing focus. One of the biggest challenges is expanding the adaptive knowledge content and scope of improvement in organizations. Like everyone, even continuous improvement practitioners can become captive in their normal routines, and often Lean practitioners (who advocate change) are the toughest people to change. 

Put the keys down - Rethink and reset your journey.  Understand Why Lean is underperforming to expectations and its full potential.  Most Lean, Six Sigma, and other strategic improvement initiatives are in a maturity or decline state for five essential reasons . . .

Lack of Adaptive Leadership 

Executives begin by following each other's standard recipes and the consultants packaged Lean or TPS offerings. In the beginning they are engaged and committed, but tend to extract themselves over time for other higher priorities. Executives do not view and accept improvement as an ongoing function of the organization . . . like marketing, finance, operations, human resources, and other roles. In all fairness, when the value from practitioners fades away, so too does the interest. But it's difficult to sustain value creation without leadership commitment. So this is a vicious circle and big challenge at resurrecting strategic improvement initiatives. Leadership and executives are not synonymous terms.

Lack of Enterprise-Wide Scope 

As we mentioned, the structural dynamics of organizations has, and continues to change. The production floor is becoming a diminishing area of opportunity as the scope and costs shift into global supply chains, new product development, sales and marketing, customer service, order fulfillment, and other professional, knowledge-based transactional processes. In healthcare and other service organizations, Lean is a teach the tools, check the box exercise and not focused on solving the greatest strategic challenges. Yet many practitioners are stuck in their time warp with their standard manufacturing tools, terminology, and approaches. Attempting to port over and mimic the TPS tools and methodologies that worked well on physical equipment is the wrong approach for highly complex human and technology dependent real time processes. 

Lastly, improvement strategies that copy, mimic, and attempt to replicate what others are doing leaves organizations behind by definition. At best it's an inefficient follower, not a leader approach to improvement. 

Organizations must develop new approaches and analytics to address these complex interconnected networks of core business processes. 5S'ing the file cabinets in the Accounting department or spending the next year value streaming the office universe are huge wastes. It takes deeper experience, new approaches, and more accelerated means to make an impact in these areas.

Lack of Formal Infrastructure

The success of Lean and other initiatives is highly influenced by the leaders engaged in the process. When executives shift around, someone else arrives with different approaches and priorities. This destroys constancy of purpose when Lean is human-dependent. A business system approach includes the formal architecture for leadership, improvement strategy, deployment, execution, communication, talent development, performance measurement, and continuous alignment between business strategy and daily improvement activities. These are formal processes and best practices for a high performing systematic process of improvement. This formal infrastructure is not executive on the spot dependent and is able to sustain improvement momentum and focus as executives change roles. Improvement for improvement sake and going through the motions goes unnoticed by most executive teams.

Lack of Technology Integration

There are too many Lean initiatives using magnetic and manually updated storyboards, beautification exercises, manual kanban cards, outdated signage and metrics, paper A3s, and other inefficient means in their Lean efforts. Twenty years ago the goal was KISS, a focus on tools, and unplugging ERP. Integrating technology like the cloud, mobility, big data, business analytics, real time digital dashboards, and predictive/preventive countermeasures is enabling an evolution of Lean in organizations that is almost recognizable to the traditional old school Lean people. This does not imply another Y2K technology fiasco, but a precise selection and integration of the right enabling technologies. Do this well and the Gemba can be in your hands 24/7, regardless of where you are in the world.

Lack of Culture Change 

Culture does not change by tools and methodologies. Many organizations have fallen down in this aspect of Lean. Real culture change is a continuous process through structured means and deliberate actions to develop the right habits, patterns of behaviors, and code of conduct in organizations. Communication through coaching and mentoring is the largest determinant of the rate and magnitude of cultural transformation. Culture is the superglue that makes Lean and strategic improvement sustainable as people proactively improve how they improve as a daily way of thinking and working. When executives give the "no interest, not a priority" signals, Lean goes out the window. 

For arguments sake, we could all think of a dozen or a hundred more reasons for failure. But the above points are critical in moving toward a culturally embedded, systematic socio-technical process of improvement (a true Lean or XYZ "Business System").  

Transformation Takes More Than Changing Labels

We talk with organizations who claim they already have a Lean Business System, but it is in name only. A closer look reveals that they have conveniently re-labeled their production system to a business system, but have not changed their process, scope, technology, and human development  aspects of strategic improvement.  Subsequently, they have not made much progress directly porting over manufacturing improvement tools into the enterprise network of complex transactional business processes, or in transforming culture "for real." Lean as it is widely practiced is a commodity of sorts; if everyone is doing similar variations of the same thing then there is no incremental competitive advantage. If organizations were to stop what they're doing, it's a competitive disadvantage . . . and in some instances, an unnoticed change.

Put The Tools Down For A Moment, And Follow The Leaders

Many organizations have successfully evolved far beyond the original intent of Lean Manufacturing (Ahrens, Flextronics, Lincoln Electric, Avery Dennison, General Cable, GE, Harley Davidson, Motorola, IBM, Deere, Lockheed Martin, Raytheon, Dana, Boeing, Johnson Controls, Visteon, Emerson Electric, Caterpillar, Honeywell, and dozens of other great organizations). These organizations are successful because they are not just best plants: They are best organizations with the best leadership, the best business strategy, the best talent, and best culture - and they are great at everything, not just manufacturing:

• They understand that Lean and continuous improvement in general is first and foremost an operating philosophy, a core operating competency, and cultural standard of excellence . . . created and sustained by leadership. 
• They embrace enterprise-wide strategic improvement through a formal systematic approach, advanced technologies, and continuous alignment between business strategy and daily improvement. 
• They leverage culture and people to position themselves as a powerful, unique, distinctive, and superior performing competitor in their markets.
• They have evolved to a higher order, holistic, enterprise-wide, technology-enabled, and culturally grounded business system approach to strategic improvement as we mentioned earlier. 

They have continuously adapted and evolved to a higher order of Lean and have mastered adaptive systematic improvement.

What Is Adaptive Systematic Improvement?

In its simplest description, adaptive systematic improvement is an integrated business operating system that enables the entire enterprise to work swiftly and harmoniously to define, plan, deploy, execute, and sustain business strategy and achieve superior competitive performance – over and over again. It goes way beyond the tools themselves to a religion-like standard of conducting business. The goal of adaptive systematic improvement is to optimize the requirements of customer loyalty, strategy, finance, technology, quality of life in organizations, and the broader social and competitive well-being of society. This business operating system is always aligned and in balance, and not tilted toward one of the above requirements at the expense of other requirements. These combined characteristics create a superior operating system of improvement. Best-in-class organizations make their numbers, and also achieve all of the other critical success factors for longer term success.

The Lean Business System Reference Model?

The diagram below provides a concept overview of the Lean Business System Reference Model?. Our reference model serves as a guide and playbook for creating a higher order paradigm of Lean and strategic improvement in general - A reference guide for architecting, implementing, and sustaining an organization’s own XYZ Business System. Obviously there is a wealth of detailed operating system design criteria, experiences, best practices, and guidance information behind this chart.

This is not another tools and practices reference. A major objective of the reference model is to guide organizations away from the superficial mimicking of other organization’s improvement efforts or the perceived Toyota way – and think, innovate, and become the next Toyota in their own way. The reference model concentrates on precisely adapting, expanding, and aligning improvement to today’s global business and economic needs. It goes much deeper into the enterprise and extended enterprise opportunities for global improvement, the behavioral “kata” attributes of cultural development, and the integration of emerging technology. What is the purpose of a reference model and why is it needed?  The reference model is an architectural framework of integrated concepts, principles, frameworks, processes, an expanded body of improvement knowledge, and best practices that is used as a guide to communicate, educate, and create a shared understanding of a holistic, higher order, enterprise-wide XYZ Business System. 

A true XYZ Business System is a fine-tuned network of integrated and interdependent sub-processes working together. The Lean Business System Reference Model? helps organizations to adapt the architecture, sub-processes, and underlying best practices to their own operating environments. The intent of our reference model is a design guide for XYZ Business System success.    

Purpose of the Lean Business System Reference Model?

The Lean Business System Reference Model? provides a working framework for designing, developing, and implementing best practices relative to adaptive systematic improvement. This reference model provides the total architecture and sub-processes for creating a for real, forever XYZ Business System.  It serves as the organization’s relentless, never-ending operating system of improvement. 

The reference model is not a replacement for Lean and strategic improvement. Rather, it is a roadmap and guide to adapting and architecting a higher order, organization-centric and culturally grounded XYZ Business System. It provides the detailed architecture, sub-processes, and best practices for both the visible (operating system, principles, methodologies, tools) and invisible (behavioral alignment and cultural development) sides of adaptive systematic improvement. Emerging and enabling technologies such as the cloud, big data, mobility, business analytics, digital manufacturing, real time performance dashboards, and other digital supply chain applications are a key element of the reference model. An XYZ Business System is a holistic management operating system; Keep in mind that standalone technology by itself will not get organizations to this new level of strategic improvement and superior performance but it is a major, critical element of success. The reference model is a proven guide for architecting, implementing, and sustaining a true, culturally embedded business system approach to improvement.

Summary

Where is the money today? It's in the complex network of professional, knowledge-based transactional processes . . . supply chain planning and execution, sales and marketing, distribution and logistics, new product development, advertising and promotions, procurement and supplier management, customer loyalty and service, IT strategy and planning, product management and rationalization, software development, R&D, capital planning, finance and cash-to-cash, warranty and returns, mergers and acquisitions, and many other non-manufacturing goldmines of new opportunity. Too many Lean initiatives continue to narrowly focus on tools and production, leaving a ton of money on the table in these opportunity-rich areas of strategic improvement.

The Lean Business System Reference Model? helps organizations to design, integrate, adapt, and systematize high velocity and high impact improvement in a variety of different industry environments, business requirements, cultural situations, and industry segments. It helps organizations to implement and sustain a superior, enterprise-wide, technology-enabled, and culturally grounded Lean Business System . . . in their own way. Our reference model is not a repackaging of Lean or a replacement for TPS. It is an evolution of Lean thinking to reinforce the most important enterprise-wide people, higher order processes, cultural success factors, and the integration of new evolving and enabling technology. 

The philosophy of improvement is universal, but the correct path to adaptive systematic improvement is very different in different industries, operating environments, and cultures. It also changes over time, with changing market dynamics, strategic shifts, and other emerging needs and opportunities. Like all reference models, it evolves every day as we acquire new knowledge through our own experiences and the successes of others. The reference model approach to architecting an organization-specific XYZ Business System is a proven and road-tested best practice for discovering the next paradigm of Lean and strategic improvement.

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