Why Lean Remains a Superior Business Model and Way of Thinking

By: Dan Jones

From the time that?the?Toyota Production System?(TPS), or?lean production?system,?was recognized globally, it was clear that it was only one part of Toyota’s successful business system. For example,?The Machine that Changed the World (1990),?written by James Womack, Dan Roos, and me, described the superior performance of this production system, which brought together production, supply chain, product development, and selling to create an approach very different from conventional corporate strategy. Still, it took a while before many fully understood that lean production is a part of a more comprehensive lean business system — a perspective Jeff Liker emphasized in The Toyota Way (2004) and other subsequent books.

Over time, it also became clear that viewing the lean system, or TPS, solely as a new set of tools and principles that “experts” could use to design more efficient and integrated horizontal processes misses its real potential. Lean thinking and practices challenge the assumption that only experts should design, maintain, and improve processes and that line management’s job is to ensure operator compliance. It also challenges the focus on asset utilization and point optimization, which comes from big organizations’ vertical, functional deployment of knowledge and resources. And it challenges the Western assumption that technology is the only way to integrate the sequence of?work?to design, make, and deliver a product — Toyota achieved this integration well before such information technology (IT) became available.

… lean production is a part of a more comprehensive lean business system …

More critically, however, we’ve come to understand that adopting lean methods is not merely about defining a new “best practice” or system versus point optimization. Instead, it is about seeking accelerating, dynamic economies through engaging everyone — shop floor and management — in using scientific?problem-solving?to define and continually improve their work, supported by engineers and technology. Michael Balle and the other coauthors of the 2017 book?The Lean Strategy presented this argument. So, lean principles, practices, and tools are learning frames that help develop individuals’ and teams’ capabilities, ensuring they can solve the next set of problems and create and build the next-generation product and production systems and future innovations.

We now also understand that having an entire workforce with these problem-solving capabilities makes it possible to integrate?value?streams without relying on batches, queues, and buffers. In other words, it is capable teams that make streamlined horizontal value streams work in changing circumstances. So, ultimately, lean is a people-centric learning system requiring a very different management system, as described by Michael Balle and colleagues in 2006 in their article “The Thinking Production System.”

Value-stream analysis is a powerful way of visualizing the potential gains from lean practices. But, to realize these gains, leaders must build problem-solving capabilities from the bottom up, one step at a time. Otherwise, line managers will again resort to compliance with systems devised by experts. Moreover, developing these capabilities challenges the traditional assumption that strategy can be separated from execution. Lean leaders must lead this execution themselves rather than relying on experts to do it for them.

Lessons from Dissemination

Today we can draw some conclusions from research and experimentation over the past 30 years.?The first conclusion is that lean production practices work in all activities — well beyond high-volume manufacturing. But although most of the tools and practices are relevant, the starting points and sequence in which they are used to unlock the benefits are very different. For example, while high-volume automotive manufacturing starts with standard work and flow, producing consumer goods begins by separating the tail from high-volume products. Retailing starts with basket fulfillment and rapid replenishment, whereas service and repair begin by turning unpredictable into predictable work. Healthcare starts by unblocking discharge and making the work plan visible. And so on.

The second conclusion is that things are changing as we move from the era of stable technologies, economies of scale, long supply lines, and big systems. Initially, lean practitioners saw lean practices as a way of improving the performance of these “legacies of?mass production” — big factories, big warehouses, big supermarkets, big airports, big hospitals, etc. Hence the focus on lean production.

But big factories are beginning to be challenged by distributed production closer to customers. Big warehouses are becoming hubs for rapid replenishment. Convenience stores and home shopping are replacing big supermarkets. Point-to-point flights are bypassing hub airports. And overloaded district hospitals are likely to give way to local treatment centers and medical support in the home, described in Lean Solutions (2005).

These changes shift the focus from production to distribution and customer service activities on the one hand and engineering, development, and the rapid scaling up of new products and services on the other. Lean management is central to rapid replenishment and managing all kinds of service delivery.?Still, it’s critical to understand that Toyota’s focus was this broad all along, from the beginning of its development of the TPS. For example, Toyota created an incremental four-year development cycle, which has evolved into a superior?process?for rapidly scaling up new technologies rather than depending on making the occasional giant leap, as described in?Designing the Future(2019). Both approaches, though, are, of course, needed in a rapidly changing world.

The third conclusion is that, on the one hand, we have achieved widespread awareness of lean across the world, but on the other,?lean programs have often been challenging to sustain over time. Very often, this was because external consultants or internal lean teams controlled lean training, redesigned the work and the value streams, and then told frontline teams what to do. As a result, the frontline teams did not sustain the initial successes after the experts had left. (This also happened after the roll-out of?Six Sigma?programs.) Consequently, many organizations end up using lean teams as cost-cutters or firefighters.

To avoid this, organizations must build a daily management system in which line management learns to help teams to define their standard work as a baseline for improvement, make plan-versus-actual visible, and engage everyone in problem-solving to respond to deviations and to make improvements. To do this, line management and their teams learn by doing, using the plan-do-check-act?(PDCA) process?through a mentored dialogue using the A3 process in alignment with corporate objectives using a hoshin framework.?

In this process, learning is very focused on a specific issue. However, the cumulative experience of repeated learning cycles enhances the organization’s ability to formulate insightful hypotheses and possible countermeasures rather than jumping to solutions when tackling problems.

But even lean programs that build a daily management system sometimes fail when top management is distracted by other matters. This situation happened at Tesco after 2011. Sir Terry Leahy headed a top team with significant experience running stores and distribution centers, and all the directors spent one day a week in Tesco’s operations every week. As a result, they could quickly understand the potential of the operational improvements revealed by pilot projects for the rest of the business.

As Tesco grew, the next chief executive, Philip Clarke, chose to focus on expanding Tesco’s newly acquired operations worldwide and rely on bigger IT systems to improve its operations. And when these failed to deliver, it took a change of leadership in 2014 to recover by going back to basics and refocusing on the UK market.

Successful lean leaders often realize they must lead lean efforts themselves after witnessing them run into the sand. They also recognize the value of having an experienced lean?sensei?as a dialogue partner to help them, as described in The Lean Sensei (2019).

Future Challenges

The shareholder-first business model is increasingly being questioned today. It is no longer credible to ignore the externalities like the impact of the organization on the environment and the challenges from climate change and to rely on workforce compliance from an increasingly skilled workforce that does not share in the profits from dominating markets. Moreover, at the operational level, organizations are full of wasted time, effort, and costs and are slow to respond to change.

The lean business model offers an alternative. It enables organizations to gain a competitive advantage by helping them be better at helping customers to meet their needs and retaining them rather than dominating markets and controlling customers. In addition, the lean business model is better and quicker at developing and scaling up new product technologies that meet the changing needs of our time. For example, Toyota was the first to commit to replacing the internal-combustion engine and, more recently, to transform itself into a mobility provider. The company also has one of the most comprehensive environmental assessment systems guiding its progress to making its products and operations carbon neutral.

Leaders who use the lean approach to operations are also not driven by the desire to replace people with technology and systems. Instead, they see the intelligent use of technology as enhancing rather than replacing human decision-making. For example, Toyota’s operations continue to evolve — most recently, by replacing some robots in assembly with humans, developing very simple physical-assist measures instead of powered devices, and creating a completely new and highly flexible modular production line, Takaoka Line 2.?

Nevertheless, we still have a lot to learn from the Toyota example.

Editor’s Note:?This?article was originally published on Lean Enterprise Isntitute's Lean Post?on?March 13, 2020.