“Your margin is my opportunity.” –Jeff Bezos, CEO, Amazon.com
Profitable businesses around the globe should take notice. In today’s business world, if you are not growing and improving, you are losing ground. Economic and social forces enabled by technological advancements, aggressive exporters in developing economies, trade deals and slower domestic growth provide fertile ground for increased competition. Status quo will soon become setback.
How should you best position your firm for continued success? Scrum, Lean Software Development and Kanban are common frameworks and/or best practices embraced by firms that use technology for strategic advantage. What these frameworks have in common is a continuous improvement process, or kaizen. Kaizen is a Japanese business philosophy concept that has been popularized by the Toyota Production System. Toyota integrated its car manufacturing process with customer/supplier demand to provide “just in time” production. The resultant reduction in overhead costs (“waste”) and decreased time to delivery to the customer gave Toyota the competitive advantage the company needed to become an industry leader.
All C-level executives should read,” The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company” by Art Byrne and James Womack. Art Byrne started his Lean journey by applying Lean principles to improve company performance as the head of a division of General Electric and continued his promotion of lean principles at Danaher Corporation. Now he is an Operating Partner at the private equity firm J.W. Childs Associates L.P., using Lean to transform the businesses he invests in. He has led successful Lean transformations for over 30 companies in 14 countries. Art Byrne’s experience in both manufacturing and service industries shows that Lean is not just a manufacturing or technology initiative.[i] It also shows that Lean is not just for small organizations. In fact, the more “complex” your firm is, the more urgent the need to begin applying Lean principles, assuming you believe that being responsive to your customer is important. How often in your organization have you heard someone say, “That is fine for other firms, but our environment is too complex here?” The statement in itself is a red flag that the company structure and culture are not conducive to continued success.
Agile/Lean best practices are often in direct conflict with “command and control” management cultures that have evolved over the past 150 years. During the industrial revolution, Taylor’s Principles of Scientific Management focused on increasing worker productivity for factories that were not set up to handle any variation. “Command and control” systems worked well when the goal was to produce the same widget the same way each day. However, this type of system adapts slowly and inefficiently to market changes.
Toyota proved that, when customers began to demand variety, a new way of thinking would win in the market. Innovative work by definition has many unknowns that become known over time. This means that innovative projects should be set up to handle changes in specifications as they are learned. Lean systems are best equipped to implement variation and add value in response to customer demand.
The concepts behind Lean operations and Lean transformations challenge the established management practices and organizational structure of much of corporate America. It is very easy for senior leadership to agree that without improvement, there is risk of disruption. Every company seeks to eliminate waste along with improving quality and efficiency. However, to achieve these goals, kaizen promotes individual responsibility and decision-making throughout the organization. Leadership is often not comfortable with this shift in responsibility/control.
For an enterprise to truly transform, leadership at the most senior levels must be actively engaged and part of the kaizen process.[ii] This participation is crucial to a successful Lean transformation as part of a sustainable strategy for continued business success.
[i] The Lean Turn Around by Art Byrne and James Womack
[ii] Gemba Walks, Expanded Second Edition by Jim Womack