Why are most companies failing
with Lean implementation?
by Martial Durin, Managing Director, Kaizen Institute China
I started my Lean experience (Toyota Production System experience) in May 1985. It was a great opportunity and honour to work with and learn from Dr. Shigeo Shingo for 3 years. One of the first teaching points I learned from my Sensei Shingo was the 30 to 40% and 60 to 70% rule. But 30 to 40% and 60 to 70% of what? Shingo explained to me that “no more than 30 to 40% of a successful Toyota Production System implementation is coming from the tools while 60 to 70% of the success is coming from the people”. This was in 1985 – 30 years later, nothing has changed!
Now allow me to refer to the results from a study conducted by Harvard University in USA decades ago. Covering 400 different companies, the study analysed why most of the projects in these companies were failing, either partially or totally, concluding that the top 4 reasons for failure were as follows:
1. Lack of direction and vision in running the projects,
2. Lack of time allocated for the projects,
3. Lack of resources,
4. Lack of adherence from employees of the company.
Lean implementation or transformation isn’t an exception if we are excluding the fact that Lean cannot be considered as a Project. In fact, it cannot be considered a Project at all because Lean is a long term and endless strategy for a company; a strategy of growth in sales and earnings through constant waste elimination. Considering Lean as a project from the beginning may lead to failure soon afterwards.
Yes, Lean Transformation is a STRATEGY and not a Project. Lean must first start by deploying a crystal-clear vision all the way down to the entire organization of the company. All employees of the company must clearly understand the company vision and direction and must also understand all KPIs (Key Performance Indicators) and measurements used. In all honesty, this has rarely been the case.
Cascading vision consistently through all departments in a company is also a key for success. Policy Deployment in a company is crucial to ensure coherence across different action plans in various departments and services. Without consistency, Policy Department results would appear like a beautiful firework but would be ultimately rendered powerless for the company.
Secondly, most companies launch multiple projects simultaneously but do not allow sufficient time to implement these projects successfully. This kind of miscalculation occurs when Operational Excellence or Lean is viewed as a project and not a strategy. Consequently, companies consider Lean as being accomplished only after a couple of years of implementation, but, in fact, only 10 to 20% of the power of this approach is being realised.
Lack of resources is the third reason for failure. Most of the companies mistakenly consider that Lean is a matter of a few, select experts. This is not the case. All resources of a company must be involved in improving the operations and administration of a company because there are more improvement ideas in the brains of all employees of a company than in the brains of a few experts.
Lastly, lack of adherence or resistance to change is responsible for the fourth key reason for project failure. Generally, in a company, the overall workforce of a company follows a normal distribution where there is a low percentage of the total population known as “early adopters or Pioneers”. Although these individuals are not resistant to change, they are met by another small percentage of the total population categorized as “anchor draggers” or as Americans call them, “C.A.V.E”: “Citizen Against Virtually Everything”. As the name suggests, these individuals will never be open to change. In the middle of the distribution, the vast majority of people are referred to as the “uncommitted mass”; individuals unsure of which direction to go, who await and observe, ultimately following the direction of the mainstream.
As such, it is evident that, if the top management of a company utilizes “positive management” promoting good results, early adopters and the uncommitted mass will be pulled to the right direction. But, if the company management style is based on “negative management” such as through “punishment”, C.A.VE. people will win, and they will pull the uncommitted mass towards the wrong direction. With such a strategy, not only does Lean Implementation suffer, but all projects in the company will fail, more or less.
Nevertheless, there are many other ingredients that lead to an unsuccessful Lean Transformation. Unfortunately, today, there are far fewer success stories than failures. We can briefly analyse the following list of root-causes. It is important to note that this list is not exhaustive and for the most part, root-causes are people related and not Lean tools related.
· Project versus Strategy: Lean is definitively not a short-term project but a long term endless strategy for companies to leverage growth and earnings. Too often, Lean is mistakenly seen as a cost reduction project for companies! Reducing cost is a consequence of reducing wastes in a company but cost cannot be a primary target of Lean.
· As a strategy for the company, the Lean direction/vision must be understood by all levels of the company and Policy Deployment must be deployed and cascaded consistently and coherently within the company’s organization. This is a key point (remember the top #1 reason for failure above). But again, such tools as Hoshin Kanri, PD, X-Matrix, APP, Catching the ball, and so on, do not guarantee success. Only people can make a difference through how they are able to elaborate Offensive Strategy of the company from Strengths and Opportunities and Defensive Strategy from Weaknesses and Threats. People will make a difference by deploying the strategy consistently, measuring progress by setting up up a few KPIs and executing this strategy strictly without any deviation. According to statistics published by Strategic Performance Measurement & Management Business Intelligence, execution oftentimes fails to match the vision. More precisely, while 97% of companies have a vision, only 80% have clear strategic plans with 52% having real execution success. From this 52%, only 33% have significant execution success. As a conclusion, if Lean Transformation is not treated and executed as an endless strategy, the company cannot expect to succeed in a leaders-driven market. Moreover, a perfect strategy and policy deployment execution will help to better understand internal customer/supplier relationships, as internal customers should be satisfied unconditionally.
· Lack of respect for people could be another reason for failures. People are neither machines nor numbers. All employees of a company are “the only appreciating assets of the company”, who must be respected highly and independently from the level. A good manager is someone who is able to create an excellent and efficient team of subordinators – the right people on the right bus. He/she must have good appreciation and respect for his/her team, while also being highly appreciated and respected by his/her employees. This mutual appreciation cannot exist without this code of respect. It is paramount to consider employees as “the highest potential for innovation in the company”.
· Lack of people management: People management doesn’t mean “buying peace” on one side or “managing with excessive authority” on the other. Many managers do have the technical skills for the position but do not have team management skill, and as a result, overall teamwork cannot be achieved at the optimum level. Operational Excellence requires cross-functional teamwork where customer (external and internal) must be recognized as the key target to satisfy first. The Second category of people to satisfy in the new corporate challenge is company employees (all company employees, I mean). How can we accomplish this with a lack of people management? Not only in China but all over the world, lack of people management skills is particularly weak at the middle management level (shopfloor or office middle management level). It is not because they themselves are poor leaders. On the contrary, they usually have excellent technical knowledge and expertise in the position but have never been properly trained in team management.
· Training approach versus Learning by Doing: Training of Lean awareness must be provided but successful Lean Transformation cannot happen with training approach only. Lean Transformation is not as simple as following a recipe for a dish. The same ingredients don’t guarantee the same result. Here I would like to highlight the risks and dangers of benchmarking or copying the success strategy in another company, even from the same business. Why? Because company culture is different, management style is different, and so on. What makes one company successful will not guarantee success in your company. The only workable approach is the approach of your company, using cross-functional teamwork and committing to the Learning by Doing approach. Yield of learning by doing is considerably much higher than the yield of training and as such, is far more more valuable for your people.
· Lack of standards in the company at all levels. What are standards? My Sensei Dr. Shingo would always say, “there is no game you can play in the world without rules”. Standards are defined as the rules to run a business and a company. Fixing any violations or abnormalities to standards open up room for improvement to the company. Taiichi Ohno, inventor of the foundations of Toyota Production System also always mentioned that “where there is no standard, there is no way to run KAIZEN™”. And if there is no KAIZEN™, the company cannot expect to be successful, of course.
· Tools approach versus Principles driven: In a Lean Transformation which requires at least 5 to 10 years of intensive work before starting to see the beginnings of a sustainable cultural change (or people mind-set change), there are 3 phases that occur: The “Tools-driven phase”, the “System-driven phase” and lastly the “Principles-driven phase”. Tools can bring you the low hanging fruits of a company but cannot be accomplished without people. When all people in the company are thinking uniformly based on the Lean System, Phase 2 begins. When people (production as well as supporting department) are driven by the same principles and foundations, without compromise, Phase 3 initiates. As said by Daniel Hilger, President of Trane EMEA, “It was taking us 5 years to change the furniture (“let’s understand improve overall flow”) and 5 more years to start to change people’s mind-set and company culture”. Meanwhile, do not forget what Dr. Shingo always said – “success of Toyota Production System is coming from its employees and not from the tools.” It is a common mistake in thinking that using Lean Tools available in the Lean tool box will guarantee success.
· Lack of teamwork: The only one way for a company to survive in the long term is cross-functional teamwork. As defined by Dr. Shingo again: “A process is a sequence of steps and each step has its own process but… the optimum of a process is never equal to the sum of the optimum of each step of the process!” What does this mean? It means that maximizing each step of a process is a mistake if it does not strictly meet the requirements of the customer. In addition, paying operators on a piece rate basis is the biggest mistake that can be made in Lean. In the same category of lack of teamwork, I would like to highlight the poor performance on average of supporting departments for production. Usually supporting departments or admin departments do not play the role of supplier, since they have to play with production (e.g. quality issues, design issues, breakdown, material shortages, etc.). This standard cannot be tolerated anymore by Lean BIC company (BIC = Best In Class). If internal customer satisfaction is poor, supporting department incentive bonus must be impacted.
· Lack of measurement: Generally, not establishing crystal clear measurements leads to disputes. Everybody seems to be right, but everybody could also be wrong, as responsibilities were not clearly defined. Some managers prefer this style of management, which is called “no wave management”. It appears to be a comfortable management style temporarily, as it is buying peace in the short term. However, it reveals to be a very explosive management style in the long term. It is definitively not the Lean way. Adherence to standards is mandatory and so is reaching targets or KPIs. Number of KPIs must be limited (2 or 3 maximum per SQDCM category). S for Safety /Environment, Q for Quality, D for Delivery, C for cost and M for Morale /Motivation of employees. I know people usually prefer not to be measured in offices, but it is mandatory for all departments.
· Lack of abnormality management with quick response time for problem solving: When standards don’t exist, people tend to accept violations or abnormalities too easily in daily life. This cannot be accepted. Any violation / abnormality must be considered as an opportunity for improvement and must be solved as quickly as possible, known as “quick response time for problem solving”. Unfortunately, this process is very often weak in companies, negatively impacting the motivation of employees to propose new improvement ideas. Employee suggestions or ideas are inversely proportional to the Lead Time used to solve the issues. Employees are most proactive in the beginning, but if issues are not managed quickly, they will lose motivation and keep quiet.
· Lack of efficient decision process: In a company, both material flow and information flow are well known but unfortunately too often stopped by poor decision flow. Manufacturing Engineers spend time and energy to secure processes through putting in place alternative processes in case of emergency. Production Managers work on multi-skill operators to secure processes while Material Supply people work on securing supply chain. However, if a problem arises, they tend to stop the process because the decision maker is not present or because decision-making consumes too much time!! This is absolutely intolerable. Each position must have its deputy position or replacer. This specific point can also be linked to quick response time for problem solving above.
· Lack of overall leadership or what-is-called Bold Lean Leader. A Bold Lean Leader creates unwavering passion and excitement for a Lean Transformation Growth Vision that drives cultural transformation across the enterprise, resulting in sustained competitive advantage and increased stakeholder value. Bold Lean Leaders tend to take, consciously or unconsciously, a discipline called “Deliberate Practice” to improve personal performance. Reaching great performances is not reserved to a preordained few; it is available to everyone assuming that the right people are on the right bus and at the right seat. In a summary, essence of bold leadership can be compiled as: Vision, Passion, Effective Involvement, Deliberate Practice, Effective Teamwork, Talent Multiplication, Boldness and Decisiveness. Good managers must have leadership and credibility if they expect to embark the company in the endless Lean Transformation Strategy.
· Local improvements versus working on improving the overall company organization: Although Lean oftentimes starts from manufacturing – because it is where Value Add really is, because it is where the highest asset of the company is and because it is where the maximum people of the company are – the vision cannot ignore the big picture, including Production and Production related departments plus supporting departments and / or administrative operations. If there are wastes in manufacturing impacting Lead Time negatively, there are the same wastes in admin operations impacting Lead Time dramatically too. Lean is not a Production tool exclusively. If one of the key roles of Lean Champions is to guarantee the perfect execution of Vision and Policy Deployment, another key role is to constantly balance manufacturing Lead Time with administrative Lead Time as well as balancing internal reactivity and flexibility and external reactivity and flexibility (for example, best balancing as possible between manufacturing Lead Time and purchasing Lead Time). Otherwise any “imbalanced” Global Operation would be extremely painful for a company and quite impossible to manage efficiently.
· Resistance to change to be managed on the right way. After 6 or 12 months of Lean implementation all companies are more or less facing a resistance to change. There are two types of resistance to change: “open” or “silent” resistance to change. Open resistance to change is always easier to manage because people show their resistance evidently, while silent resistance to change is far more difficult to detect. But one of the common mistakes made by management is spending too much time and energy on convincing people who, previously referred to as C.A.V.E, are not willing to change. In the reverse, management must focus on “early adopters, pioneers” by supporting them, recognizing and celebrating their improvements. That is the way to change company culture step by step. Another important thing to understand is: the longer the Lead Time required to implement something to fix an issue, the more naturally resistance to change is generated. It shows again that time and Lead Time to do something are the first enemy of a company. At least, please also understand that resistance to change often comes from the middle management and rarely from the top level or workers. Even if the number of people making resistance to change is small, do not underestimate the huge power they have in the organization because those people are permanently in contact with the workforce and it is easy for those people to “manipulate” the workforce.
· Fear of losing power and fear of what is new and consequently unknown. One of the reasons why the middle management is making more resistance to change is because they feel that a new Lean management style, which needs more oriented team-work than individual work, would lead to a loss of power for them. And for sure, nobody likes to lose power! But it is not a loss of power! As a matter of fact, with Lean, the daily life of a supervisor is changed dramatically for the better, although they may not understand it or have not been trained for that change. Another reason is because most humans, with the exception of those with pioneer personality, do not like change. Change is by nature disturbing, because it obliges people to move from a familiar and secure world to another unknown world. This is another reason why a clear vision and direction must be provided by the management to minimize the fear of the new Lean world. Lastly the third issue creating fear comes from the traditional background of the middle management/supervisor. Most of them are selected because they possess valuable technical skills. However, when they are promoted, they are not sufficiently trained in management skills, people management and so on. That is, they are super qualified people in term of technical skills but they are poor in terms of management skills. This weakness is particularly true in China.
· Lack of recognition of internal customer/supplier relationships: Within a lambda department in a company, if its internal customer(s) cannot be clearly identified, and its primary target is not to satisfy its internal customer(s) unconditionally, then it would not be honouring the Lean way. Alas, in many companies, pushed by management by an objectives based approach, primary targets are too often department objective achievements rather than company vision achievements. In many other cases too, career opportunism comes first. No matter which department an employee is working in, his/her primary objective must be to satisfy his/her internal/external customers FIRST, then employees and lastly business partners. It cannot be compromised, or ranking cannot be changed.
· Lack of consistence and coherence in Lean Deployment: Lean implementation or at least the first 5 years of implementation is a top-down process. It is managed and driven by management, therefore, during this phase it is mandatory to guarantee the consistency and the coherency of this deployment throughout all the organization. But Lean won’t start to show the sign of success until the process starts working bottom up, meaning that people who can see the benefits of Lean Transformation begin to propose improvements and implement them themselves. This phase is more critical and must be controlled carefully because there is an evident risk in deviating from the roadmap. A department that generates a beautiful firework, following unfocused objectives, is not Lean at all.
· Short term benefits-oriented versus long term Strategy: As reminded, Lean Transformation is a long term endless Strategy for the company and not a project. Lean cannot be used to reach some sectorial targets, such as reducing cost only or asking suppliers to be better than the company is. Generally, implementation works backward, that is: from external customers of the company to upstream or primary operations, including material supply. This is the best way to really understand customer requirements and to implement what a customer really wants and what a customer is ready to pay. I would like to highlight something extremely important here, that is: Lean is not a fashion, but a Strategy for all your life for leveraging company growth and earnings. Toyota has been applying consistently the same approach for over 60 years and they are still using the same approach. It is definitively not what a General Manager of a Chinese company told me: “Oh Lean, we have done Lean and we completed the project 5 years ago”!
· Lean can be customized to some businesses but there is no compromise to be made on key Lean principles. Quite often, companies are thinking to be unique, but key Lean Principles are the same and universal, which can be used and applied in any kind of business category, such as discrete manufacturing, process industry, services, healthcare, catering, government, and so on. In my long Lean Life, spanning over 30 years, I even implemented Lean in the French Administration of Jails. Yes, implementing Lean in the workshops for the prisoners in jails! The 3 keys objectives: improve Safety (important in prisons), improving Quality and improving Efficiency. Believe me, I had never seen such high level of auto-discipline among prisoners working at the same workshop. Not compromising key Lean principles functions on the same logic as not accepting abnormalities as the normal way to run a business. If a company starts to accept compromises on key Lean principles, it is certain that the company will fail in terms of successful Lean Transformation.
· Mistake of using Lean as a Cost reduction program primarily. Lean is not a cost reduction program! Some companies are extremely cost driven. In some cases, only cost driven companies are willing to use Lean as a cost reduction tool. This is a big mistake since the sequence of SQDCM cannot be changed to CSQDM even if cost is crucial for the company. Cost is not a key driver, but a consequence of removing a maximum of wastes from company processes to make cost reduction easy. But if the company places costs as the number one KPI, Morale/Motivation of people to improve processes will be negatively impacted. This will result in a predictable failure of Lean Transformation.
· Lack of sense of urgency: A common reason for failure in companies is lack of sense of urgency. There are two key reasons behind lack of reactivity. The first is an inefficient decision flow in the company, resulting in long periods before decisions are made. The second is defaulting to an expert approach to find the best solution. Oftentimes, companies never actually implement anything concrete, despite spending a lot of time evaluating the best solution. As very often taught by Mr. Yoshiki IWATA from Toyota, another Sensei of mine, “In Lean, crude and simple solution is always better than slow and elegant”. Many companies do not apply the 5R rule or, even know what the 5R rule is. 5R rule = Responsiveness + Reliability + Rhythm + Responsibility + Relevance. A company must be responsive to market and customer demand, must be reliable in terms of QDC and respecting engagement 100%, must follow the rhythm of customer demand through Takt
· Time. All the first 3Rs (Responsiveness, Reliability & Rhythm) are market/customer oriented. The last 2 (Responsibility & Relevance) mean that the company and all people within the company must be responsible and relevant. Again, lack of sense of urgency in a company would generate extra and unnecessary Lead Time, which is the biggest enemy for an enterprise. Could you imagine a company where there is no Lead Time for anything? Meeting customer requirements would be easy, wouldn’t it?
· Last but not least: My Sensei Dr. Shigeo Shingo classified managers and engineers into 3 categories:
1. “Niet” engineer and manager,
2. “Catalog” engineer and manager,
3. “True” engineer and manager.
· “Niet” (Meaning “No” in Russian) people are defined as people whose reply is No if the idea does not come from themselves,
· “Catalog” people who are only able to find solutions somewhere in a catalog (poor innovation),
· And “True” people as really VA (Value Added) people. Please refer also to the definition of “a Bold Lean Leader” mentioned above.
· But Dr. Shingo concluded that the issue in companies is that there are more “Niet” and “Catalog” people than “True” people. The people we need are “True” engineers and managers but they are a minority like VA operations in a process versus NVA operations.
If you are “True” or Bold Lean Leader, you will drive people in the right direction for a successful and sustainable Lean Transformation. It is a “Deliberate Practice”, but it is also your “Deliberate Choice”. Meanwhile, you will recognize the ownership and the successes of your people, as successful Lean transformation must be “the baby” of all your employees working as a team rather than the baby of isolated Lean experts, Lean Consultants or any other Lean Guru.
Remember the 30% to 40% and 60% to 70% written by my Sensei and friend Shigeo Shingo: no more than 30% to 40% of a successful Lean Transformation are coming from the tools, 60% to 70% are coming from people.
So, please highly respect and recognize your people.