Flatlined

Why Lean Transformations Fail and What to Do About It

Mark DeLuzio

• Publisher: Productivity Press
• Year: 2020
• ISBN:
  9781000044133
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

With 30 years of driving Lean transformations under his belt—both in-house at Danaher and as the founder of Lean Horizons—Mark C. DeLuzio has a vantage point across a variety of industries. He often hears the challenges Lean leaders face now that they've been implementing Lean for a decade or more. They are concerned that they aren't getting the results they used to, and they don't know why. Most leaders believe their problems are unique to their company, but Mark sees more commonalities than differences. Flatlined: Why Lean Transformations Fail and What to Do About It draws on the author's experience as the original pioneer of the most successful Lean business system next to Toyota, as well as his progress over the past 18 years in helping companies replicate what Danaher achieved. Mark DeLuzio knows you need an actionable approach to make rapid shifts, not theory.

With this book, Mark DeLuzio gives you:

• the reasons why companies are now flatlining with Lean;

• five steps to solving this problem, no matter what your industry or corporate culture;

• real talk on why your organization is probably mediocre (even if it's making a lot of money) and how to disrupt it to make it genuinely world class;

• the questions you should always be asking at every stage and level of your Lean initiative.

1

Why Companies Have Flatlined

Seasoned executives are perplexed as to why their Lean efforts are now flatlining. These are the types of problems I’m seeing most often from talking with senior leaders in mature companies who seek my counsel:

• They do not understand that a Lean transformation is more than a cost reduction program.

• They typically view Lean as a manufacturing convention that does not apply to the rest of the business.

• They insist on running and structuring the organization with a traditional 1970s mindset.

• They believe that the fundamentals of Lean do not, or cannot, apply to their business.

• They’ve become confused by Lean consulting zealots promoting their latest product or service and tempted to move away from the basics of Lean.

• They fail to look at themselves critically when evaluating the reason for their “flatlined” performance.

• They are consistently being shown only one benchmark, Toyota, with little appreciation for the successes that “brownfield” companies have had in their journey toward excellence.

Sometimes it is hard to see something clearly when you are in the thick of it. As much as possible, it’s going to be important to step back and try to examine your own leadership and what’s happening in your company objectively. Aim to look for the root cause of why it is not working and divorce your ego from it.

In my consulting practice, I come upon organizations that are pretty mediocre when compared with world-class benchmarks. The problem is that they may still be making a lot of money or getting customer or industry kudos, so they see themselves as doing well and don’t have much incentive to disrupt their processes and aim to be genuinely world class. You’ll get the most value from this book when you can internalize that most organizations—and that probably includes yours, since you are wondering why it is flatlining on Lean —have a lot of room for improvement.

Ask yourself, “Do I want my company to be in the 98% or the 2%?”

Ninety-eight percent of all doctors, lawyers, and real estate agents are ones you don’t want to deal with. There are only really 2% that are exceptional. This phenomenon applies to those companies who are involved with a Lean transformation. Very few actually realize the potential that is available and have the discipline to get into the 2%.

I liken the necessary discipline to that of a professional golfer versus a weekend golfer. A professional golfer has a regimented workout plan, several coaches for nutrition, putting, driving, irons, etc. We do not always attribute that level of discipline when running our business. We think we do, but we don’t. A Lean transformation takes an incredible amount of discipline at all levels, yet few do this well in my experience.

This is also an example of how Lean is counterintuitive. You may be thinking, “But, getting to world class requires disruption and innovation, not discipline.” The paradox of Lean is that the more structure and standards you have in place, the more flexible and creative you can become. Think of Lean as the string of buoys that keep swimmers in their lanes. They can do whatever they need to do to perform at their best, but if they depart from their lane, they will no longer be a contender in the race.

When Michael Phelps won 23 Olympic gold medals and 28 medals overall, did he stop trying to stay at world-class levels? He kept pushing to become better and better even though he was getting to be one of the oldest swimmers among his competitors. After his initial success, he went on to win more golds in subsequent Olympic games and held seven world records after the 2008 Olympics. He was a living model of continuous improvement.

Companies that are flatlining are clearly not disciplined about trying to get into the 2%. Or, if they have reached the 2%, they aren’t aiming to be in the 1%. They aren’t embracing the fact that world-class companies are always evolving and improving.

Now, let’s dig deeper into why this happens. In our field experience over the past ten years, these are the four main reasons we’ve seen:

1. Lean is used as a short-term, tactical tool.

2. The Lean initiative isn’t connected to the broader strategy.

3. Functions are optimized for Lean, but the enterprise isn’t.

4. Leadership is either hands-off of Lean or reluctant to revisit its basics.

Lean Is Used as a Short-Term, Tactical Tool

I’ve found that many companies are using Lean for the sole purpose of getting results instead of to drive results-oriented processes that can be sustained. Focusing strictly on the results rather than the process which delivers the result is a very common mistake in a Lean transformation. This is especially true when companies are performing very well from a financial perspective.

Leaders in such companies become complacent and fail to create the burning platform within their organization to drive significant change. We saw this at Danaher. It took some coaxing for the more profitable divisions to realize that when they implemented Lean/DBS well, they became even more profitable in the long term. They had to make a culture shift to focus on the processes that would deliver world-class results rather than just on the results alone.

The Lean Initiative Isn’t Connected to the Broader Strategy

Many of our Lean efforts were done for the sake of implementing Lean, without regard to our strategic initiatives. At times, we viewed the implementation of DBS/Lean as the business objective itself with little regard for quantitative business results backed by robust processes. We eventually learned that the tools of DBS were a means to achieve the objective, not the objective itself. It is common for companies new to Lean to get distracted from their business objectives, thereby spending valuable resources that will not move the needle. So, instead of transforming a significant value stream that will be meaningful to the customer, employees, and shareholders, companies sometimes tend to expend Lean resources to insignificant, non-strategic areas within the business.

CASE STUDY

When we implemented our first value stream at Danaher’s Jake Brake in 1987, management wanted to transform a component process called the Auto-Lash line. The Auto-Lash was a small component that went into every Jake Brake that we produced, and consisted of three operators. Group Executive Art Byrne and Jake Brake President George Koenigsaecker wanted to make a bold statement internally that they were serious about the implementation of the Toyota Production System, but we would not be catching anyone’s attention by focusing on the Auto-Lash line. Additionally, there would be little benefit realized in terms of safety, quality, delivery, and cost. So Art and George decided to transform the Caterpillar machining and assembly line. The Caterpillar business represented approximately 33% of Jake’s revenue, so the risks were high, but the opportunity to underscore the commitment behind implementing TPS was in keeping with their vision of changing the culture. Looking back, we made some fundamental mistakes, but it was a huge success overall. Although we didn’t realize it at the time, we were on the doorstep of making history by launching the modern Lean movement in the United States.

Lean alone can help you grow your business and provide a competitive advantage, but these gains will be short-lived when they are not backed with strategy. A company that excels with Lean but makes cement life preservers will not succeed, regardless of how robust their Lean transformation. Take a look at Delphi. They have been the recipients of many Lean awards such as the Shingo Prize. However, their strategy was not aligned to address the challenges that were eventually the demise of that business. We have found that 70% of your kaizen efforts should be focused toward your strategic breakthrough objectives as outlined in strategy deployment. The remaining 30% should be dedicated to daily management. You’ll find more detail on strategy deployment and daily management in Chapter 5.

Functions Are Optimized for Lean, but the Enterprise Isn’t

For Lean to realize lasting results for the entire company, it must be radiated across the enterprise. It can’t just exist in manufacturing, yet it often does.

CASE STUDY

I was once contacted by the CEO of a specialty valve manufacturer who wanted us to implement Lean on the shop floor. The shop floor consisted of several large CNC machining centers and assembly operations. He indicated to me that they were having trouble meeting their delivery commitments to customers, and he believed the root cause of this was their productivity issues on the shop floor.

I suggested to the CEO that we perform an end-to-end value stream map of the operations. He agreed, and our value stream analysis discovered that his product had a 60-day lead time, with a total process time of only 15 hours. It was further discovered that of the 60-day lead time, 45 days we attributed to the front-end, engineered-to-order configuration department. In fact, approximately 80% of the orders sent to the shop floor were already past the confirmed delivery date with the customer.

Instead of focusing our initial attention on the shop floor, we concentrated on the order configuration process. Through careful analysis and subsequent improvements, we were able to reduce the lead time for this process from 45 days to just 5 days over the course of five months. We eventually turned our attention to the shop floor opportunities, but not until we fixed the order configuration process, which was an obvious priority once we identified it as so through the use of value stream mapping.

This example shows the tendency to focus one’s entire Lean efforts to the shop floor. However, many of the problems found on the shop floor resonate from other areas of the organization. For example, quality defects are often traced to an ineffective product development process. On-time delivery issues, as just illustrated, can be traced to an ineffective demand management process.

Most Lean initiatives start by attempting to improve a single function or targeted area. We call these point kaizens. Point kaizens are easier to do than enterprise-wide kaizens and they result in quick wins rather than sustainable results. It’s no wonder that when the initial wave of point kaizens is complete, companies will “flatline” in their operating results.

Leadership Is Either Hands-off of Lean or Reluctant to Revisit Its Basics

Probably the most frequent reason we see for flatlining is that leaders are not owning the problem. They know the company has a problem, but they don’t think they have anything to do with it. Some variation of, “I’m okay, but everyone else is screwed up,” is what I hear all the time. Leaders must be willing to examine their own knowledge of the basics of Lean and how they manage these, as well as become active participants in a Lean transformation.

I recently began working with a multibillion-dollar diversified manufacturing company that has been implementing Lean in their plant for the past ten years and now they’ve flatlined. They are still using MRP (manufacturing requirements planning), a batch-and-queue-driven push system. They don’t have pull or flow systems or standard work and are only doing one to two kaizens a month. Their reasons are that they are “high mix/low volume” and that Lean concepts do not apply to their business. Little did they know, that condition is exactly the one in which Toyota Production System principles were developed. This client had to be willing to stop insisting on doing the same things and thinking in the same old ways.

You’ll see in Chapter 4 why kaizen, standard work, etc. are all critical to a sustainable Lean initiative. Because they hit a wall with their Lean transformation, this client had to revisit these fundamentals.

Lean leaders often treat Lean as a spectator sport that they can manage from the sidelines. In reality...