“Lean” is back. And this time, it means business!

When the American auto industry desperately needed help in the 1980’s to catch up to foreign competition, namely from Japan, it essentially followed the motto: ”If you can’t beat them, join them.” Unconditionally, American auto companies gradually adopted a management philosophy that came to be known as “Lean Production” to improve competitiveness in operations, from logistics to manufacturing and sales.

Lean Production was a term coined by MIT researchers James Womack, Daniel Jones and Daniel Roos in their seminal magnum opus, The Machine that Changed the World, which profiled the “secret sauce” of Japan’s premier auto manufacturer, Toyota and their eponymous and now famed production system (largely devised by the venerated Toyota legend, Taiichi Ohno).

Soon, terminology such as Kaizen (Continuous Improvement), Muda (Waste), Jidoka (Quality), Genchi Genbutsu (See for Yourself), Pull vs. Push, and Continuous Flow vs. Batch Processing became common language among masses of eager managers and line workers alike, enthralled by a philosophy that empowered them to focus on customer value and reduce the superfluous. The immutable change in approach to excellence happened first in the auto industry and was quickly adopted by numerous other firms in fields ranging from consumer packaged and hard-goods manufacturing, to software development, to a litany of consumer services.

It is interesting to note how the change from complacency to Lean Production actually happened in the American auto industry. Fearing the proverbial “Not Invented Here” syndrome that plagues most large and siloed corporations, the leaders of the big three, namely GM and Ford, set up (relatively) small experiments with Japanese partners to understand the nuances of Lean Production and adapt them to their particular culture and circumstances.

GM opened a joint venture facility with Toyota in Freemont California, called NUMMI (now Telsa’s main facility) to learn the Lean Production principles first-hand.

Ford and Mazda followed suit, opening a plant in Hermosillo, Mexico, which quickly became a benchmark for proving that the Lean Production system could be transplanted across oceans and wasn’t dependent on any particular national culture — it could be mastered by everyone.

Once the experiments proved successful, the system was rolled out across all sites, and in turn, to European partners (Ford and VW set up a joint venture in Portugal in the early 1990’s, Auto-Europa, where I personally learned the Lean Production system as the company’s first Industrial Engineer).

Lean Production was the answer for the problem of the times — How to improve operational efficiency to compete in a crowded and predictable ‘known market’. You either kept up with the best-­‐in-­‐class ‘Jonenes’, or you perished.

But the major problem that faces companies today isn’t yesterday’s problem of efficiency: The major problem has become unprecedented uncertainty. With the possible exception of the coffin and tax-preparation industries, nothing is for certain anymore. Clayton Christensen’s “Disruption” has become “Hyper-Disruption” and “Competitive Advantage,” once the stalwart of corporate strategy has given way to what Columbia Business School’s Rita McGrath characterizes as “Transient Advantages.”

The era of rapid change has changed what the function of the corporation is all about — from that of efficiently executing a known business model to searching for new business models — and form must follow function.

Like the search for a better production system, so has the corporate search begun for a better innovation system. This time, large companies are turning not to other best-in-class, established companies (you’ve probably seen the flack Apple has been getting about not being an Innovation act to follow), but for the best-in-class startups, whose very nature is to innovate or die.

Turns out large companies are in luck! The Taiichi Ohno of the top startup innovation system exists and his name is Steve Blank, who is the father of the Customer Development movement — and he even has a Womack, Jones, and Roos to coin a catchy term to his seminal teachings: Eric Ries, Steve’s best and intrepid former student at Berkeley and author of the best-selling book, the Lean Startup (whose term has now replaced Customer Development). We have gone full-circle!

Another brilliant scholar should be given credit for promulgating the Lean Startup movement: Alex Osterwalder, who added “Business Model Generation” to the mix. A Lean Startup is searching not simply for a better product or technology, but for a better business model.

Combined, these three gurus are bound to become the biggest force in corporate innovation since Schumpeter, Drucker, and Christensen.

Taking a page for how auto firms learned and adopted Lean Production, various companies today are setting up small experiments to “grok” the principles of Lean Startup thinking — they’re not simply observing actual startups in corporate venture capital “fish-bowls,” they’re allowing their own employees to learn and practice the principles themselves in bold, corporate accelerators, where emphasis is placed not simply on hard-metrics of new venture success such as fast time to market and revenue, but on learning both substance and process of how to search in highly uncertain market conditions — the new reality for most firms.

Lean Startup terms such as “Get out of the building,” “Minimum Viable Product,” “Pivot,” and “Business Model Canvas” have become part of the innovation lexicon among the early adopters (namely at my former employer Qualcomm but also General Electric and Intuit), and they are gradually taking root among other pioneers where I’ve had the pleasure to personally consult such as Clorox, Jarden, Panasonic, and HP. There are many others joining the ranks of the new Lean — Lean has crossed over from production to business — and business is now inseparable from innovation.

Thanks to Frost&Sullivan for publishing!  You can read the article in Frost&Sullivan’s quarterly e-bulletin

Advertisements

3 comments

  • Improving processes and products is, beside of innovations, one of the most important aspects to stay competitive in the market. Therefore Lean Management offers a great possibility to achieve this goal. But Lean Management is not only about learning how to use the methods, how to improve processes, how to increase output or incerease quality. It is even more about changing the mindset of the employees. One important thing is the mindest about making mistakes. At Toyotas location in Japan, a mistake in their process is seen as a positive thing, because it offers the possibility for improvement, whereas in other companies in the US or in Europe a lot of employees are afraid of making mistakes, because their boss may blame than. So at Toyota a mistake is not the fault of an employee, it is the fault of the process, because the process allows mistakes.
    So I disagree with the point that Lean Management and the success of implementing this philosophy is not dependent on a culture. Because a culture, which does not allow mistakes, will never be able to implement Lean Management that successful as a culture which is very openminded for making mistakes.

  • Great insight, Herbert! Talking about Lean Management, I think in its early days it was also inevitably important how much one identifies with the final product. At Toyota, for example, a group of (assembling) engineers was in charge for each car they assembled as a group. Did it turn out that this car had an electrical/ mechanical issue, it was basically their ‘fault’. Consequently, they double checked and tried to ensure perfect outcomes.
    Transferring Lean to modern times, I agree with the aspect that ‘failure’ shouldn’t be treated as something negative per se. It should enable workers and management to identify issues & learn from there. Fear and punishment should most certainly not be part of it (at least not right away in the beginning).

  • Pingback: Innovation jargon for cocktail parties – time to sound smart | Necrophone

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s