Leading the Lean Enterprise Transformation

George Koenigsaecker, Hamdy Taha

• Publisher: Productivity Press
• Year: 2012
• Print ISBN: 9780367480295
• eBook ISBN: 9781466581197
• Topic: Business
• Subtopic: Operations
• Index: Business

Updated with new information, illustrations, and leadership tools, Leading the Lean Enterprise Transformation, Second Edition describes how the metrics used by Toyota drive every line item in a financial statement in the right direction. Rather than focus on Lean tools and principles, the new edition of this bestselling reference focuses on what ma

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My Journey of Lean Learning: Eleven Corporate Transformations

The lessons shared in this book represent my learning over the past thirty years about Lean—or perhaps, more specifically, about the Toyota Business System (TBS). (Note: I prefer the term Toyota Business System because it is aimed at the full business. Toyota uses the phrase Toyota Production System (TPS) for historic reasons, but those using that term are almost always talking about an approach to running the whole enterprise.)

Over the years, I have seen many companies attempt to apply the wisdom of Toyota to their enterprises, and I have seen most of them fail. For this reason, I am proud that all eleven firms that I started on the Lean journey, as either president or group president (within Danaher Corporation and HNI Corporation), have stayed true to the path and are still practicing Lean learning. Not all eleven are discussed in this chapter; instead, I give you a few relevant examples.

Although I would not consider any of these firms to be perfect in their path to Toyotadom, the first Danaher businesses have stayed the course for twenty years, and the first HNI business, fifteen years. No one can claim to completely understand all the elements of success that have made Toyota the model of a well-run enterprise, but at least the results and cultural foundations that were established at Danaher and HNI were strong enough to have lasted.

Deere & Company

My business career started with Deere & Company, the farm machinery firm based in Moline, Illinois. By the mid-1970s, after I had been with Deere for a number of years and worked in a variety of areas, I was given a project to assist in a “strategic alliance” with a Japanese firm called Yanmar Diesel. I went through all of Yanmar’s production facilities and visited many Yanmar dealerships in Japan. I also met with Yanmar senior management who, at one point, presented a couple of slides outlining its improvement efforts over the prior three years. I was a student of manufacturing at some level, and I had seen Deere invest 4 percent of sales in capital spending, which generated about 3 percent annual productivity growth. These sorts of numbers were my benchmark, as Deere was the leader in its industry. At Yanmar, however, they noted that they had more than doubled their product range in the prior three years while more than doubling enterprise productivity—and they proved it with major margin gains. At first I thought I did not understand the translation, but upon realizing that it meant what it said, I was astounded. This represented an order of magnitude over our annual productivity gain, but I had not seen signs of significant capital investment in my tours of the Yanmar facilities. A few other Yanmar metrics also were in this same range of an order of magnitude: inventory turns, customer complaint rates, and so on.

It turns out that what I saw was an early application of the TBS. After a lot more conversation, it came to light that Yanmar had three Toyota sensei (master teachers) who visited them on weekends, helping change the way they ran the business. These gains were the results of those long weekends consulting with the Toyota sensei.

Taiichi Ohno was the man who famously pulled together the key concepts to create the TBS. He also generated several aggressive change-management practices that have been forgotten by many since then. Ohno used a Toyota-wide brain trust—the Autonomous Study Group—to design its system. The three sensei at Yanmar were three of the first five members of Ohno’s original Autonomous Study Group.

I was blown away by the difference in the rate of improvement on all key performance measures and, to be honest, I was afraid of what I saw. I knew we would need to learn how to practice these approaches if Deere was to maintain its position. After returning to Moline, I arranged for Jim Abegglan, the foremost Western expert on Japanese advanced manufacturing practices at that time, to visit Moline and give a senior leadership review of Just in Time (JIT) manufacturing. But after the reviews, I remember being disappointed: Deere was doing quite well at the time, and the net was something to the effect of, “Gee, George, that was very inter-esting…thanks for bringing him here, but I don’t think we would want to try that Japanese stuff in Moline.” In contrast to that lukewarm reception, I was hooked on learning about this different way of running a business and continued to read anything I could find on the subject. Unfortunately, there was not much to read in those days, and much of what there was to read turned out to be incorrect, written by outsiders trying to describe something they did not really understand.

Rockwell International

A while later, I was recruited to join the automotive operations of Rockwell International. The company was based in Detroit and was a major player in Class 8 (heavy) truck components, including axles, brakes, and drive lines. I took the position, both because it was a promotion and because I thought that, being in Detroit—an automotive town that surely had to be doing things the way Japanese automaker Toyota was—I would be able to learn more about what we now refer to as Lean.

As it turned out, Detroit in those days was not much more interested in Japanese automotive practices than Moline was. Nonetheless, I was able to get support from Automotive Group management to lead a small team that would benchmark best practices in manufacturing enterprises on an international basis. We were benchmarking against our own business units: Rockwell had the policy of being either number one or two in the industry. We were in the largest global market; therefore, we were the number one or two global competitor, and we assumed we would be the standard of performance.

The team was principally myself and Bob Pentland, who was considered one of our very best production engineering guys. We started spending about three weeks on the road each quarter, visiting firms and benchmarking their performance.

In those days, Rockwell was building the space shuttle, the B-1 bomber, and similar “interesting stuff,” so we had purchasing and sales offices around the world, which meant we were able to get into almost any firm we wanted to visit. We went around the world and quickly found that although European firms often developed a unique process technology and built successful businesses around it, they did not operate in any fundamentally different way from ours. But after the first tour in Japan, we began to see a few firms that were radically different. Over three years, we visited 144 manufacturing enterprises in Japan. Some were the big guys, like Matsushita; some were good midsize manufacturers, like Omron; and others were smaller automotive industry suppliers. We toured all the major Japanese automotive OEMs (original equipment manufacturers) and then started to visit their supply base.

What we saw was that about 15 percent of the firms we visited had radically superior performance metrics. We found firms making essentially the same class of product at four times the enterprise productivity, at 90 percent lower defect and customer complaint rates, and with 90 percent less inventory investment. It was hard to believe. At first we were not sure we really understood what we were seeing, but as we kept finding more firms that operated in this fashion, we realized that this was real performance. We also realized that the firms that had this order-of-magnitude superior performance were all part of the Toyota Group and its extended family of firms. We became believers. Of course, back in Detroit, these findings were just too incredible to be believed, so they were not.

Bob and I were learning about a couple of the basic tools that were used to improve performance—things like better flow and setup reduction that allowed for lower inventories—but we also could tell that we really understood only the tip of the iceberg. We didn’t have many ways to learn more, but during our tours in Japan, we had found a “Japanglish” translation of a book by Shigeo Shingo. In it, Shingo described the Toyota approach as he understood it and in his terminology. Between the local translation and Shingo’s rather obscure way of explaining things in the first place, it was real drudgery to try to figure out what he was saying. As we rode trains from one Japanese operation to the next, we read a paragraph at a time and tried to decipher what he meant. Since it was the only thing written about the subject, we worked it hard. We also tried to apply the lessons back in the United States and to experiment in our own operations.

Jake Brake (Danaher)

After a couple of years, I got the chance to run a company in Connecticut called Jacobs Vehicle Manufacturing Company, or Jake Brake. It turned out that Jake Brake had a great product (engine “retarders” or brakes made for heavy diesel engines), and we were shipping to companies like Cummins Engine, Caterpillar Diesel, and Detroit Diesel. We had good quality, but due to patent coverage, we had become arrogant and unresponsive to our customers. We typically were shipping a month late and in monthly batches of products. We also charged a bit too much for the product.

Shortly after joining, however, I found out that the patents had recently run out. Just to make it a bit more interesting, about this same time, a new company called the Danaher Corporation took over the parent of Jake Brake, Chicago Pneumatic Corporation, in a hostile buyout. There were fifteen companies in total that made up Chicago Pneumatic, fourteen of which lost money, so the new owners, Steve and Mitch Rales, had a special interest in how things were going at Jake.

The performance gap we already had between our delivery and our customers’ expectations made me think that we had little to lose by trying to radically change Jake Brake with Toyota’s practices. I didn’t feel as though we knew enough, but we started anyway. Given the magnitude of our crisis, we started very fast. Most of our associates thought that this approach would fail and that we would kill the company in the process, but we started anyway. Over the 1987 Christmas vacation, we moved all the equipment in the plant into a crude cellular flow. When we started up again in January, we began to see gains. We thought about the gains we saw at Rockwell organizations and the Toyota operations we had benchmarked in Japan, and we decided to set a goal of achieving a fourfold enterprise productivity target, which means growing enterprise productivity 2 percent every month for six years. As we put in place our new flow, we naturally ended up with something that looked like product-line value streams (the linked process steps to deliver a product or service to a customer). We also found that we had thousands of problems to solve: set-up reduction issues, quality issues, tool-change issues, material-flow issues, and nearly everything else. So we started to dedicate problem-solving resources to each of these product line “focused factories,” as we called them. By midyear, two critical events had occurred:

• The sensei who had worked with Yanmar in Japan retired from Toyota and, with some significant encouragement, I was able to convince them that they should adopt us as their first foreign students.
• Steve and Mitch Rales visited and reviewed what we were doing, why we were doing it, and the initial results.

Steve and Mitch had a real-estate rather than an industrial background, but they had decided to build an industrial firm based on very high debt levels (typical of real-estate investments) and a strong belief that solid, industrial brands (like Jake Brake) would provide stable platforms that would grow the company. In retrospect, this was a good thing. If they had a strong industrial background, they probably would have “known” that this Lean stuff could not work, and we would have been stopped in our tracks. As it turned out, they thought the principles made a lot of sense. They were impressed by talking to our United Automotive Workers (UAW) operators about the changes made so far and encouraged us to continue on.

Over the next two-plus years, we continued to learn from our sensei, who would typically visit and coach us hands-on in the gemba (work-place) in jishukin events (weeklong kaizen events; see Chapter 3) that not only delivered improvements, but also taught us the principles and tools of the Toyota Business System. We began to build a culture of continuous problem solving and continuous learning. In these two-plus years, we redesigned these focused factories (or value streams) five times, each time taking them to a new level of performance. Overall, we were able to take our lead times down from more than thirty days to one day, with 100 percent on-time delivery. We reduced quality issues by over 80 percent and also reduced total inventory by just over 80 percent. But most of all, we grew enterprise productivity 86 percent, which was right at our 2-percent-per-month target.

While we were doing this, we were continuing to visit Japan to learn. We were taught the application in the production world, but we began to apply the Lean practices to our administrative and product-development process, too. For instance, in product development, we were able to quadruple the total new-product output without increasing the resources and get new products to market in 20 percent of the time it took us to do so in the past.

As we organized our learning and taught it to our organization, we came to call it the Jacobs Business System (JBS), because it was focused on more than just a production system. As we gained traction, our group executive, Art Byrne, began to spread the JBS to the other companies in his group, and it became known as the Danaher Business System (DBS).

In 1990, I was promoted to group president for the Tool Group, then the largest group within Danaher, and began to spread DBS to those operations. I also established a DBS office that helped document and spread the new learning. My role was interesting, as I now had five company presidents who reported to me and who saw themselves as the leaders of their companies, which they were. Yet I wanted each of them to go through this very difficult Lean transformation. The change-management issues that come from spreading Lean in this kind of structure were much more challenging than getting a single company on path (like Jake Brake), which had been difficult enough. Aside from the messiness of having five corporations with many locations start on a very new way of doing things, all at the same time, we began to get traction and were able, over the next couple of years, to improve our margins by 4 percentage points, which moved the Tool Group from a small loss to a small profit.

Hon Company

At that point, I had parents and in-laws back in Iowa who were at the age where steady health issues were starting to occur. It seemed that it would be good for my family to move back there, if we could, to help out with this. In 1992, I joined HON Industries (now HNI Corporation) and started it on its Lean journey. I became head of the HON Company, the largest business unit of the corporation, and was able to drive Lean practices there. Again, I had my outside sensei coming in regularly to teach my team how to apply the tools, and once again, my role was to manage all the big-time change issues that come up with a transformation of this magnitude. From 1992 to 1999, when I retired from corporate work, the HON Company moved from no. 5 in its industry to no. 2 (growing sales just under 3× through “organic growth”), with momentum toward the leadership position in the industry. B...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Preface to Second Edition
• Acknowledgments
• Introduction
• The Author
• Chapter 1 My Journey of Lean Learning: Eleven Corporate Transformations
• Chapter 2 What Is Lean?
• Chapter 3 Measurement Can Be Easy
• Chapter 4 Value Stream Analysis Provides the Improvement Plan—And Kaizen Events Make It Happen
• Chapter 5 Tactical Organizational Practices
• Chapter 6 Strategic Organizational Practices
• Chapter 7 Building a Lean Culture
• Appendix A: A Lean Tutorial
• Appendix B: Building a Sustainable Lean Culture—The Watlow Way
• Appendix C: Watlow’s Enterprise Visual Management System—Mission Control
• Appendix D: The Origin of Simpler’s Transformation ContinuumSM
• Appendix E: Red River Army Depot—Accelerating Lean through Leadership Immersion
• Appendix F: A New Product Design System That Uses Lean Principles
• Appendix G: Autoliv—Empowered to Solve Problems
• Index