In my previous blog post, “The Lean Movement’s Strategic Errors,” I noted five strategic errors that were made in how Lean management was presented to business leaders and subsequent efforts over the last 30 years to promote and advance Lean management:
- Presentation of Lean as a method for wealth creation
- Ignoring leadership’s critical role in enabling Lean transformations
- Failure to learn from earlier efforts to promote Scientific Management
- Failure to comprehend leaders’ attraction to new tools and their disinterest in any new system of management
- Lack of teamwork among Lean advocates
The first strategic error, wealth creation, bears additional discussion. The fundamental challenge 20 or 30 years ago was how to present something revolutionary, Toyota’s production (and overall management) system, to business leaders. It seems logical to present it in light of what seemingly is of greatest interests to them: wealth creation (stock price, market capitalization, cash flow, profits). This is a principal point of practical utility to executives, and should therefore easily capture their interest.
Wealth creation is the result of Lean that was featured in its presentation to executives, while the process, kaizen, was given little attention. It is noteworthy that some of the advocates of Scientific Management tried this same approach in the early 1920s, yet they failed to generate much interest for the new management system among business leaders. The reason for this will soon become clear.
While certainly desirable, wealth creation represents orthodoxy, a complacency of opinion, in both the result of business activities and the purpose of business. Fitting Toyota’s production (and overall management) system into this conformist view of business is an major error which undercuts its revolutionary nature – e.g. the use of the Scientific Method in management practice, flow, pull, etc. – and renders it to be nothing more than a minor variant of traditional batch-and-queue material and information processing.
The truth is that TPS and The Toyota Way represent a great advancement in knowledge, practice, and the human condition. In contrast, batch-and-queue material and information processing represents stasis in knowledge and practice, and an erosion of the human condition. Never should the two be confused, but that is what has happened.
Conformity to the generalization that the purpose of business is wealth creation signals to leaders that it is not necessary for them to advance their knowledge or practice of management beyond traditional batch-and-queue processing, and that their duties in leading people can be conducted absent of any improvement. Instead, they can freely pursue shortcuts to gain competitive advantage and even cut off competition. This is not management; it is gamesmanship.
Deep down, business leaders’ foremost predilection, after securing remuneration that greatly exceeds the value of their services, is to avoid competition with other businesses by creating supply-driven sellers’ markets. Why? Because it is simply too difficult to learn how to compete and too difficult to maintain and improve an organization’s competitive capabilities over long periods of time. Leaning how to respond to competitive, demand-driven buyers’ markets is a great challenge that the vast majority of leaders prefer to avoid. The easy way is the preferred way (see NOTE at the end of this article).
So, whenever possible, business leaders look to buy competitors or competing product lines. They also try to create non-competitive sellers’ markets through patents, litigation, and by other means. An important aspect of this largely unimaginative method for assuring competitiveness is the diminution of human resources by various means, as they are seen as a cost and not as the source of great ideas to improve productivity via process improvement. Clinging to sellers’ markets carries with it great costs and consequences.
Why was TPS and The Toyota Way were created? In the book Toyota Production System: Practical Approach to Production Management by Yasuhiro Monden (first edition, 1983), Taiichi Ohno said (p. i): “Above all, one of our most important purposes was increased productivity and reduced costs.” This was true not only in operations, but in all business processes including new product development. These revolutionary management innovations, TPS and The Toyota Way, were created and evolved to improve Toyota’s competitiveness in buyers’ markets and help assure the company’s long-term survival in fulfillment of its purpose.
Kiichiro Toyoda said: “The ability of this company… to make the transition from a controlled [sellers’ market] to a free [buyers’] market economy will determine its ultimate success or failure.” Taiichi Ohno said: “The world has already changed from a time when industry could sell everything it produced…We discovered that industry has to accept orders from each customer and make products that differ according to individual requirements.” For Toyota, the difficult way – changing all processes to improve competitiveness in buyers’ markets – is the preferred way because it satisfies customers better and generates valuable learning. Wealth creation is a byproduct of TPS and The Toyota Way, not its purpose.
The origins of TPS and The Toyota Way are as a method to compete against companies, especially larger companies with much greater production volumes and much higher market share; to figure out how to produce much lower volumes of product at the same or lower cost than competitors that satisfy customers’ wants and needs. Interlocked with learning how to compete was the need to learn how to fully utilize human resources and a systematic approach to learning. This too is a long journey with no end, therefore requiring evolution and adaptation to changing circumstances in the competitive business landscape.
Unlike athletes who must quickly adopt new methods in order to remain competitive with their peers, business leaders will avoid competition (buyers’ markets) as long as methods and mechanisms exist that allow them to do so. It is true they will invest in new technology (machines and software) to try to improve competitiveness, but only rarely do they seek to re-orient the business from sellers’ to buyers’ markets by improving all processes.
Experience has shown that the revolutionary nature of TPS and The Toyota Way, while eminently practical, fails to connect with business leaders even when it is carefully aligned with business orthodoxy (i.e. wealth creation as both the result of business activities and the purpose of business). It seems that the great majority of leaders are far more interested in satisfying their predilection to avoid competition than they are in learning how to compete.
Click here to learn more about the origins and (continuing) evolution of Toyota’s competitive strength.
Click here to read the next blog post, “The Illusion of Understanding.”
NOTE: Avoiding competition has long been the preferred approach among executives, despite having been urged, for many decades, of the need for and importance of learning how to compete. In 1922, Harlow Person, a contemporary of Frederick Winslow Taylor long-time proponent of Scientific Management, said the following:
“On a sellers’ market the conduct of a business is easy and management is simple – in fact, there does not have to be any real management. But now that you appear to be face to face with a buyers’ market and the necessity of developing real management, if you are to be successful in a most intense competition, if your competitor, instead of yourself, is to be the one to disappear in some readjustment of productive capacity to consumer demand, it is expedient for you to inquire into the nature of that real management [Scientific Management]… ‘the customer is king’… we forget the source of the impulse [for industrial activity] and come to believe that it starts with the producer.”
Isn’t it remarkable how the past informs the present and how history repeats itself?
Source: H.S. Person, “Shaping Your Management to Meet Developing Industrial Conditions,” Bulletin of the Taylor Society: A Society to Promote the Science and the Art of Administration and of Management, New York, N.Y., Vol. 7, No. 6, December, 1922, pp. 211-217. See also REAL LEAN, Volume Two, Chapter 5, “Managing to the Market,” 2007.