Nearly 30 years into the Lean movement, successes, failures, and future challenges are becoming increasingly clear. The successes make us happy and keep us motivated. The failures and their causes, however, are usually diminished or ignored. That means the information used to help define and execute future actions is distorted. That should be a source of worry for the Lean community and hopefully trigger an awakening that leads to a more accurate analysis of the current state followed by action that results in the desired future state.
In previous blog posts I have outlined some of the factors that contributed to the failures:
- Strategic Errors made by the Lean movement.
- Miscalculations that have helped shape what went wrong.
- Association to (Fake) Taylorism what continues to bedevil Lean.
These help define our current state and guide us toward future actions. There are, however, other threats to the continued existence of Lean that we must confront. They include:
- Business Schools – If Lean management is not taught in the world’s top business schools, then how important can Lean be? In academia, external funding is a clear indicator of the worth or importance of a subject area. The business leaders who have personally benefited financially from Lean should join together to fund research, endowed professorships, and new academic programs so that top business schools (and academia in general) will take Lean management seriously, help perpetuate its existence and its evolution, and quiet those who say that Lean is nothing more than a management fad. Will the wealthy Lean people self-organize and ante-up?
- Economies of Scale – The argument in favor of economies of scale remains as strong as ever among business and financial leaders, despite convincing evidence to the contrary (read here, here, and here). The Lean community has yet to made a dent in arguments that favor scale over flow. Influential prize-winning economists, as well as most ordinary academics, still think batch-and-queue is superior to flow. In the world of e-commerce, warehouses continue to increase in size under the assumption that bigger is better and cheaper. The same is true for container ships. What must be done to change this way of thinking?
- Leadership – Because Lean leadership (and, relatedly, the “Respect for People” principle) has been so late to enter mainstream Lean thinking, people remain largely unaware of how it can help overcome damaging organizational politics that are the source of massive time delays and disruption of information flows. Traditional team building exercises and other training fail to diminish organizational politics and eliminate illogical thinking and blame. This is another reason why people need to focus on kaizen. Do people in leadership positions truly have a desire to become good leaders?
- E-Commerce – The ongoing build-out of warehouses due to the continued growth of online sales and demand for faster delivery will drive batch-and-queue processing among the producers that supply the warehouses. A recent article in The Wall Street Journal said: “Products sold online can take up to three times as much space [in warehouses] as products waiting to be shipped to and sold in stores… mainly because online orders require individual packaging and shipping boxes, rather than being stored in pallets or large batches.” Plus, most people think the only way to achieve better on-time delivery is by having more inventory. Add to that customer returns (delays), which impairs demand information (higher incidence of starts and stops), and the costs of re-processing orders by both seller and producer, suggests that efforts to reduce batch-sizes and improve material throughput may stall. It therefore seems that the total business inventories to sales ratio will continue to climb for the foreseeable future, as both e-commerce and traditional accounting reward batch production and overproduction. So why bother with Lean?
- Corporate Debt – Large amounts of corporate debt fueled by a decade or more of cheap money will force top executives to avoid any type of uncertainty or risk that could impair their ability to make interest payments to lenders. Leverage will compel the continuation of batch processing, and standard cost accounting rewards such overproduction. This affects manufacturing as well as service businesses, and reduces the desirability of Lean among business leaders. But, manufacturing businesses have another thing to worry about. The large drop in profits when inventory is converted to sales during the early stages of a Lean transformation creates risks that any CEO or CFO of a debt-ridden company would want to avoid for the foreseeable future. It creates a scary, 6-12 month, microeconomic depression, imperiling growth and tanking the stock price. The companies that are best positioned to pursue Lean management are those with large cash reserves, of which they are few. And if those companies don’t adopt Lean, why should anyone else?
- Old Age – People will soon start viewing Lean as something that is old and they will begin looking for something new. The marks of old age include: Chronic ailments (see the three links at the top of this blog post), difficulty adapting to changing circumstances, cautiousness or risk aversion, fear of the new and thus satisfaction with what one knows, and comfort with established patterns of routine. How do we make Lean forever youthful?
- Complacency – Satisfaction with Lean achievements to-date, either individually or collectively, coupled with unawareness of threats such as those I have outline here and in other blog posts, create an environment ripe for complacency. We live in a fast-changing world, and so inaction on out part works against us. Will we summon the courage to respond to these threats? How do we make Lean more appealing and ever-better? Or, will we rationalize our efforts as “We did the best we could under the circumstances” and move on?
Lean’s savior seems to be slow-growth economies. Executives like Lean far more when economic conditions are down than when growth is robust, which also temporarily ameliorates some of the existential threats. But how many times can slow growth be Lean’s savior, and why should Lean be dependent on slow growth for senior manager’s attention? Leaders should want Lean because it is a better system of management for competitive buyers’ markets irrespective of economic conditions.
Lean management, done right, has too many positive attributes to let slip away simply because our challenges are many and may appear to be insurmountable. Sensei Chihiro Nakao says, “Failure is not failure. It is a step towards improvement.” So our failures, including Lean seen by executives as useful mainly in slow-growth economies, should be guiding us towards better outcomes, but only of we recognize our failures.
Chihiro Nakao also says, “You have to go back to zero. Put yourself under dire circumstances to think differently.” It seems to me that the time has come where we must do just that.