Dan Jones draws on his experiences introducing lean into the manufacturing, retail and health sectors, and provides his view of what true lean leadership means
Great lean leaders do three things well – they really understand the changing needs of their customers, they know that the only way to meet these needs cost effectively is through lean processes, and they know how to engage everyone in the organisation to do the right things to make this happen. This reflects the three core principles of lean: define purpose or value from the perspective of the customer, create end-to-end processes or value streams to deliver this value, and organise people to enable these value streams to flow.
These lean leaders realise that lean is not just another form of cost cutting but the way to create additional value which competitors can only match by increasing their costs. John Neill, chief executive of the Unipart Group, always refers to the opening phrase of the Unipart Way which states that the number one objective is ‘to understand and meet the real and perceived needs of our customers better than anyone else’. Sir Terry Leahy, chief executive of Tesco, is always talking about doing what is right for the customer because this will ultimately also be right for the business. If that means customers want to shop online or in local convenience stores rather than in their existing supermarkets then Tesco would find a way to make that happen. Other retailers thought this could only be done at higher cost. However, Tesco found a lean way to demonstrate that convenience, like quality, does not have to cost more. Geoff Bezos, chief executive of Amazon – now starting its lean journey – said much the same thing in a recent interview in the Harvard Business Review. He caused consternation among his staff by offering space on the Amazon site for competitors to sell their products in competition with Amazon. He was convinced that this would not only draw more shoppers to the site but would act as a spur to internal departments to become more competitive.
Perhaps the most far reaching example was when Eiji Toyoda, the real architect who built the modern day Toyota, declared in 1990 that the company would have to find alternatives to the internal combustion engine if it was going to meet the environmental challenges of the future. Competitors underestimated the seriousness of this commitment, and the way Toyota could use its superior product development and production engineering capabilities to introduce the first two generations of hybrid-powered cars onto the market ahead of the competition. Toyota, closely followed by Honda, has redefined the agenda for this industry, and all the sceptics in GM, Renault, Daimler Benz and Bosch, to name but a few, are now having to invest heavily to follow in their footsteps. But Toyota and Honda’s lead in simplifying and reducing the cost of expensive hybrid technologies will be hard to catch up with.
Having a challenging objective is one thing – creating an end-to-end process or value stream to deliver on it is another. Every business has to learn how to turn the activities that create value for its customers into a process that flows. Unipart initially struggled to translate the concept of flow from its manufacturing operations into its warehousing and distribution operations, until John Neill and his senior staff visited a Toyota warehouse and saw how creating a common pace or rhythm across the warehouse was the key to standardising each step and synchronising them. Creating this artificial takt image or cadence clears the way to using all the other lean tools to eliminate variation, overburden and waste, and shows warehouse staff how they can do lean too.
Tesco quickly realised that one of the key changes that would bring ‘flow’ to its fast moving supply chains was to minimise the amplification caused by its ordering systems and to pick up just the right amount of products to replenish the store shelves rather than wait for much less frequent deliveries of full truck loads of products. Until it mapped the information flows, this amplification in orders passed upstream and was invisible to its staff. Until it looked into Toyota’s practice of running milk rounds picking up exact quantities from several suppliers frequently, Tesco thought this would increase transport costs – which it did not. In fact it led to increased sales through better availability in-store, plus less work and hence less costs in cross docking products through its warehouses. It took pilot projects to demonstrate that this counterintuitive logic worked in practice. Once Sir Terry Leahy and the rest of the board saw the results of these pilots, they understood the power of eliminating every interruption and delay in their supply chains. They called it removing all the traffic lights that interrupted the flow.
But every organisation is actually a collection of different types of process beyond production and the supply chain – design and engineering, planning, purchasing, call centres dealing with customers and technical support services – marketing, recruitment, finance etc. Lean applies right across the business to every kind of activity. So lean leaders learn from looking at how others have engaged their staff in making lean work for them in their environments. Every business can learn from Fujitsu Service’s experience of putting experienced staff at the front line of their call centres to diagnose incoming problems and work with response staff to eliminate the causes of the calls, turning every customer interaction into a kaizen opportunity. Every service and repair organisation can learn how time spent pre-diagnosing the problem before you leave can improve the speed and effectiveness in fixing the problem when you get there. Pre-diagnosis is helping
pioneering lean car dealers improve the number of jobs completed right-first-time-on-time from 30 per cent to 50 per cent to 95 per cent, freeing up space to do twice as many jobs with the same staff and facilities.
Quite surprisingly, healthcare organisations and process industries, such as consumer goods and pharmaceuticals, share a common problem of treating many different types of patient and making many different products. Both are learning that separating out common medical conditions and high volume products opens up the possibility of making these ‘flow’ through hospitals and production. Staff now see how they can use lean methods to improve the quality of the patients’ experience and the on-time fulfilment of orders, as well as freeing up capacity to do more with existing resources.
Experiences of lean in healthcare are also
teaching us how to engage people in ‘leaning’ their value streams. Doctors are used to using the scientific method of defining a problem and then testing several possible solutions to the problem by conducting a series of experiments. A lean transformation can also best be seen as a series of experiments using the scientific method. Using this language of experiments shifts the focus to correctly choosing and defining each problem to be tackled, establishing how you would measure whether you had solved it and articulating the hypotheses about possible ways of solving it. Without this discipline it is all too easy to waste time on the wrong things and to jump to solutions that might not be effective. Worst of all, it is intervention by hunch or belief without answering a real business need.
Lean leaders recognise that every process, however lean, will be subject to interruptions and disturbances. Managing and improving these processes therefore depends not on superior IT systems but on the problem solving skills of the employees running it. They recognise that honing these problem solving skills is as important as solving problems day-to-day. Hence they place great importance on managers at every level spending time at the gemba (shopfloor), or any place where value is created, mentoring their staff to solve the most important problems they face, using what Toyota calls A3 thinking. They know the most effective way for staff to learn is by asking the right questions to guide their thinking rather than by telling them what to do. Regular gemba walks and good visual management develops managers’ ability to see what problems need tackling next.
Lean leaders also know how difficult it is to link lean improvements across departments, let alone include their customers and suppliers to create true end-to-end value streams. Without top management support most firms start lean in production and struggle to work their way upstream and downstream. However, with real lean leadership it is possible to start with a real business project for a typical product for a specific customer, and involve the key departments such as marketing, operations and supply chain in defining the performance gap to be closed, and the lean actions to be used to close it. Progress can be tracked and it is much easier to prioritise where to act. Most of the lessons from this product family will be applicable to other products and customers. Only a lean leader can create
these opportunities for real end-to-end cooperation to develop.