A lean view on... strategic thinking
FEATURE – For many organizations, devising effective strategies remains a gap to fill and that’s something lean can help with. Michael Ballé discusses strategic thinking with our editor.
Interviewee: Michael Ballé, lean author, executive coach and co-founder of Institut Lean France.
Interviewer: Roberto Priolo, Managing Editor, Planet Lean.
Roberto Priolo: Many in our community believe that lean is a set of tools and practices that we can rely on to execute a strategy. For a few years now, most notably with the publication of The Lean Strategy with Dan Jones, Jacques Chaize and Orry Fiume, you have tried to promote the idea that lean is a strategy. It’s now been three and a half years since the book came out. Do you think that belief continues to permeate the lean community?
Michael Ballé: Beliefs are sticky. At the heart of learning there is a problem with our ego telling us that we can solve our current problems with what we already know, that we don’t have to change our minds or learn something new from scratch. I should know: Orry Fiume has told me lean was Wiremold’s strategy from the first time we met and it took me years to hear it and even longer to do something about it – bring together the most experienced lean people I knew and write about it.
The separation of strategy and execution is deeply anchored in how we typically think about strategy. Business school thinking implicitly distinguishes strategy from execution. It’s weird when you think about it: how good can a strategy be if it’s not implementable? How can perfect execution save a flawed strategy? The truth is that people see opportunities in what they feel confident they can do and, as they learn to do new things, they see new opportunities. Strategy and execution are twin processes because they’re both done by people who learn one from the other.
And that’s the rub. Taylorist thinking (yes, yes, I already hear the cries “foul” from the usual gang intent on protecting Taylor’s legacy) has us separating those who think (strategy and plan) from those who do (execution and work). It’s a convenient separation of roles: deciders decide, doers do. Of course, the most successful people explain that their strategic vision stems from their ability to get their hands dirty and learn things firsthand, but why should we listen?
If we look back at early lean systems – which I have studied up close or even participated in – we can see that the same system had very different results depending on the attitude of the local leader. We had spectacular results when the leader chose to immerse completely in the lean system to figure it out, hands-on, and progressively developed a sense of the systemic relationships between customer orientation, lead-time reduction, quality focus and people involvement. And we saw how useless and bureaucratic the system became when leaders delegated the improvement work to a lean manager or to consultants.
The unfortunate consequence of foregoing the strategic dimension of Lean Thinking is that it opens the door to reducing it to one element of the system or another – Toyota kata, “work”, kanban, SMED, coaching (rarely – if ever – jidoka) and so on. Back in the 1990s, Toyota leaders kept saying that the strength of the system was the system itself. Indeed, at the time Freddy and I wrote The Gold Mine to emphasize and illustrate this point.
By refusing to consider lean as a form of strategy (there are many forms of strategy), we have also abandoned the need to understand it as a full system, and so let the lean movement devolve in diminished factions competing for attention and quarrelling with each other – and ultimately powerless to transform anything beyond some short-term improvements.
To answer more directly: yes, although some people have come around to seeing lean as a strategy, the community as a whole still has an above-my-paygrade attitude towards strategy. Folks tend to consider lean as a great way to improve operational excellence and let the grown-ups decide on the commercial and technological strategy. (In reality, “Toyota’s lean” itself makes no sense without understanding its line-up strategy and the role cost reduction plays in its business strategy.)
RP: So, why is lean a strategy? How has your thinking evolved since the book came out? Any elements you would add to it today if you could?
MB: Strategy is commonly defined as a “general plan to achieve one or more long term overall goals”. In this sense, lean is a strategy. The goals it looks at are: 1) survival, 2) from benefiting society, 3) by satisfying customers, 4) through making things, 5) at a profit, 6) by developing people. As a goal, this is very different to, say, maximizing shareholder value by doing what it takes to support next quarter’s share price or to investing in the newest technologies to catch up with the most innovative companies.
Strategic goals don’t come out of nowhere. They are defined by people with their own set of glasses (mental models); not only lean goals are specific to lean thinking, but also the method to turn general aspirations into concrete goals and goal posts is unique to lean: going to the gemba and figuring out things firsthand by oneself (what military leaders have called “strategy from the ground up”), working with kaizen and yokoten (inspire and improve) to push back the borders of what is possible, and defining true potentials from looking at lead-times (take the best lead-time, imagine what it would be like if we always achieved it, and what the total cost would then be).
Secondly, the general plans sketched from Lean Thinking are also quite unique to lean. To sum it up, the plan is to teach TPS to a cadre of officers in order to get them to 1) prioritize customers over the business, 2) recognize the environmental challenges facing the business, 3) learn to make their areas of responsibility work by supporting people’s problem solving skills, 4) learn to improve their areas of responsibility by encouraging team-level kaizen and unit-level self-study projects, 5) learn to coordinate better across specialties and with customers and suppliers to come up with smarter responses, and 6) reinvest the gains in innovation initiatives.
Specific goals, specific plans – without this strategic-level thinking about lean, the tools don’t make much sense (other than being interpreted in a Taylorist way of solving the problem on paper and then getting the operators to apply the solution). Look, for instance, at the debates on standard work. Without a strategic understanding of lean, it’s hard to interpret standard work as the process of finding the pain points for operators and helping them to address them – as opposed to issuing detailed instructions about how to do the work.
At the time of publishing The Lean Strategy, we were focused on showing the strategic dimension of lean and we missed a more general lean lesson about strategy itself. I now believe that strategy is choosing what to improve. For instance, the strategic thinking of Sun-Tzu generally comes down to “improve your intelligence capabilities so that you know the terrain, your enemy and yourself better, attack where you are strong and they are weak, retreat where they are strong and you are weak.” It makes sense, but overall it depends on the operational ability to invest and improve intelligence – spies and scouts.
Because we rarely have infinite resources, the fundamental choice we make is on what we are going to do differently, which involves learning something new. This, I feel, is the most profound strategic choice we can make, and a lean lesson on strategy itself.
RP: In your experience coaching organizations, what are the biggest difficulties that leaders encounter when it is time to design the strategy for the business going forward?
MB: Strategic difficulties are well known and haven’t changed much since the dawn of strategy. Leaders can be confronted with:
- the fog of war – it’s hard to grasp what is going on, particularly in fast-moving, fluid situations;
- friction – the every-day difficulty of getting things done. Wanting something to happen doesn’t make it so and operational difficulties can expose the best on-paper thinking as nothing more than wishful thinking;
- initiative – strategies succeed when ground officers understand them, buy into them, and take the appropriate decisions to make the strategy succeed when they see what local conditions turn out to be;
- technical capabilities – more and better cannons always help to win a battle;
- loyalty – strategy assumes everyone will do their best to make the strategy work, but in many cases this is a strong and ultimately unfounded assumption. With weak or disliked leadership, people are likely to draw their own plans and do their own thing.
Lean Thinking asks these questions in a particular way: 1) what customers do you want to follow and pursue? 2) with what products? 3) with what technology partners? 4) with what financing? 5) By promoting which officers? These are very hard questions business leaders always struggle with because it’s hard to change commitments made in the past. For instance, when practicing lean, leaders typically change their minds about what they look for in their managers – less fixed mindset, more growth mindset. On the other hand, they are committed to the people they have and don’t want to change them at a whim, which would be disastrous for morale. They know that who their line managers are is a strategic dimension, but don’t see what can be done about it. It turns out that this legacy problem dominates all five key choices – it’s hard!
In the end, what gets you in trouble is not so much what you don’t know (the famous “unknown unknowns”) but the mental models you cling to that turn out to be incorrect. The great advantage of lean seen as a strategy is that it leads you to question your mental maps all the time, which in turn leads to more fruitful discussions and more flexible responses.
RP: What has the past year taught us about how we deal with strategy? We have seen many, many failures to effectively handle the pandemic, from a chronic lack of PPE in the first few months to the most recent vaccination debacle in many countries. Can lean help?
MB: I wouldn’t know for other countries, but the repeated debacles we have experienced in France essentially come down to the strategy/execution distinction. Sociologists observing the government response to the crisis have highlighted three fundamental mistakes:
- Medical strategies without logistical considerations. Medical strategies were established purely on medical grounds, and then logistics were planned accordingly – and failed. When dealing with the size of population we’re looking at (as most countries are), logistical considerations have to be seen as an integral part of the medical problem.
- Creating ad hoc structures as opposed to making the system work. In a country as bureaucratic as ours, there are multiple administrative agencies in place to do things – for instance, veterinary services had massive testing capacities (which are used for cases of avian epidemics) but they were never used. Our government’s strategic thinkers have a poor understanding of existing civil service networks and little understanding of how they work and what they can do, so tend to bypass them with cobbled-together ad hoc structures, which then fail predictably.
- Seeing the world as processes. It turned out that many government strategies were formulated by top-dollar consultants. Consultants, in turn, have the particular bias of seeing the world as processes (sequences of dependent events) and not systems (interactions between parts). Processes are a very, very special case of systems. As a result, current strategies tend to constantly underestimate system feedback behavior, ending up generating failed outcomes.
This pandemic is an unprecedented catastrophe, and everyone is doing as best they can. We will never know what lean thinkers would have done if they had been given the chance. But I’m quite confident they wouldn’t have made these three mistakes (perhaps we would have made others). Lean Thinking is a learning strategy and, as such, makes you far more responsive to the actual impact of your policies. The one case I know is that of a lean thinker heading a major hospital in France, who has had some of the best scores in the handling of the Covid-19 pandemic overall – and the greatest difficulty explaining to his bosses how he went about things.
RP: Would you say that one of the reasons behind Toyota’s success has been the ability to come up with a long-term strategy? It seems to be that “short-termism” is a plague in our governments as much as it is in many businesses.
MB: Oh, absolutely, I don’t think this is in much debate. I was very fortunate to participate just last week in a remote gemba walk with a Toyota tier-2 supplier in Japan, and they were very open and generous in showing their hoshin process. They start with a 10-year plan of which challenges to respond to – with the corresponding customer/product/technology roadmap (as you can imagine, the shift to electric is quite a challenge for an engine part supplier). They then formulate a 3-year improvement plan, and then a yearly kaizen plan. Long-term thinking in action. Although they stopped for a full month in the spring and were contemplating a total disaster in May, 2020 ended being their best year in terms of financial performance!
But long-term thinking is not quite the point. Lean’s strategic thinking rests in the helicopter between the 10-year plan (who knows what really happens next year) and the daily responses to Just-in-Time: two customer trucks per day requiring a mix of all the parts needed. Lean Thinking is a superior way of crafting strategy because of the deep insights that are born from moving one’s eyes from the ten-year horizon to the takt time horizon and back. This is how we learn to see the dots and connect them.
To go back to your first question, lean is a strategy if you see it as a strategy. Open that door and you’ll discover the immense power of Lean Thinking on strategic matters, starting from avoiding arbitrary distinctions such as strategy and execution or organization and people. On the other hand, if you keep arguing that lean can’t be a strategy and restrict it to operational questions… well, you’ll never know, won’t you? A CEO I know has shown me his business results since he adopted lean as a strategy (he wrote the preface to French edition of The Lean Strategy): his growth was flat, now he’s doubled the size of the company; his profit margin was close to zero and now it has doubled every year. He says lean is his strategy. Worth considering, don’t you think?