The theory of lean transformation
FEATURE – In this compelling theoretical piece, the author reminds us how in a lean organization relations are structured around learning opportunities rather than execution. This is what ultimately enables a company to grow.
Words: Michael Ballé, lean author, executive coach and co-founder of Institut Lean France
After years studying lean transformations around the world, we have observed time and again how the adoption of the lean learning system (the Toyota Production System outside of Toyota) leads to five visible outcomes:
- Sales improve because quality and delivery improve.
- Cash improves because of a reduction in lead-times.
- Profitability improves because of less rework and management blunders.
- Staff motivation improves because management shows them more respect and involves them more.
- Products and services improve because people seek to make better products, which leads to innovation (improving current technologies) and occasional invention (developing new technology).
With Lean Thinking, the company is better off overall. It grows a base of loyal customers that attracts further customers, its people enjoy working and give the company their all, and as the learning system is adopted more deeply, management moves on from solving obvious issues to tackling more demanding, technical problems, which improves the business’ technical assets and prepares it for the future – as well as delivering results in the present.
We might often wish it were, but this is not magic. Every company operates within market conditions that are well beyond its control, and markets are prone to sudden swings. For instance, I have seen an Italian service company lose all its contracts with major oil companies over two years after they decided to divest from running their own gas stations (the company pivoted to servicing independent companies and, in the end, did very well). I have seen the construction market in the Paris area drop dramatically and real estate developers imposing a painful price squeeze on construction companies (this was a long crisis, at the end of which the lean company was the only remaining firm of its size, all business having gone to either majors or contractors run by the promoter – the market has turned and they have now doubled their turnover from their low point, but it was a long hard slog). And of course, right now I know industrial companies being hit by a 20% to 40% increase in the price of materials, supply shortages, and hiring difficulties.
TWO THINGS TO KEEP IN MIND
As sensei Ritsuo Shingo once shared, TPS is very good in normal situations – in abnormal ones, think deeply and be flexible. Lean Thinking, however, does help even in dramatic market reversals precisely because people who are used to tackle problems daily are more prepared and able to change and make the business more adaptive. For instance, a company that sells cars over the internet has been very successful at selling the overproduction for manufacturers and investing in becoming a pioneer of circular economy by refurbishing and reselling second-had cars. Now, because of the chip shortage crisis and other world events, automotive manufacturers have drastically reduced their production and the company finds itself completely reorienting its business towards predominantly used cars, which means rapidly building refurbishment sites and changing supply chains. Because of its years of lean practice, it is doing so successfully. Yet, such radical changes are typically messy and hard.
As we’ve seen (and this is a second hard truth we are mentioning here), in these market perfect storms, the lean learning system has to be constantly fueled by leadership purpose and focus. When things get tough, some managers can revert to panic mode and drop kaizen efforts. New hires don’t understand the lean culture, and since, in a crisis, no one takes the necessary time to train them, they misuse the lean tools in place. In difficult times, leaders themselves often take hasty, on-the-spot actions (sometimes necessary), which demotivates people and causes them to stop thinking about problems and improvement. Even without a crisis at hand, lean routines can create their own bureaucracy and people often use them sluggishly, increasingly focusing on internal problems rather than customer issues: in such scenarios, lean can stop being a learning system and becomes yet another source of red tape and compliance over competence. To deliver on-going benefits and “look alive”, the learning system requires constant energy in challenging and supporting improvement insights and initiatives.
Still, with these two caveats in mind – painful market shifts or lack of leadership constancy of purpose – the lean learning system does deliver better outcomes in any situation, even when conditions are bleak. How does it do that? Years of practice at the gemba tell us that the tools and attitudes of the lean learning system impact how people think and feel about their work. In a lean system, they care more about customer outcomes, they learn faster to perfect their technique, and they engage in teamwork with others to improve coordination in processes. Lean is the only management method that concerns itself more with what and how people think about their work than their actual behavior. This is where it clearly distinguishes itself from many taylorist approaches (often masquerading as lean) with an unhealthy obsession with “standards” and compliance to standards – as opposed to looking at problem solving and kaizen. Standards are an important part of the system but as a prop to learning, not a way to program people as if they were machines.
CREATING LEARNING OPPORTUNITIES
Lean teaches people how to think about their work, their place in the process, and the entire system to deliver quality, agility, and price to customers. Thirty years ago, when I first encountered lean techniques, the thinking was mostly mechanical: much like in an industrial engineering perspective, the idea was that you set the production system right and good things will follow.
Toyota’s veteran sensei have painstakingly tried to move us away from that misinterpretation and teach us that what the lean system really does is visualize learning opportunities for people to make up their own minds. In The Thinking Production System, Godefroy Beauvallet, Art Smalley, Durward Sobek and I describe a typical blow-by-blow account of how Art’s Japanese sensei led him to explore a highly technical problem. His sensei asked him to look into a machine that was making 2-3% scrap, way above Toyota’s standard and something completely inacceptable. After poring all kinds of data and not gaining any insight into the problem, Art was asked to go and stand in front of the machine for an hour and report back. Returning not further enlightened, he was then asked to draw the grinding process in detail and list the potential causes of the defects. With a list of 15 items, he was then asked to devise a test for each of these potential causes. The eight first tests didn’t yield any breakthrough but helped clarify the problem. Art hit paydirt in the morning of the third day with the ninth test: the coolant liquid tank was contaminated with bacteria, fouling up the concentricity of the solution. This minor issue was enough to cause most of the defective parts.
After finally resolving the problem, Art asked his sensei how long it would have taken him to solve the problem. The answer was, “About ten minutes.” He had encountered this problem in the past and could tell the problem was contamination because of the smell. Why then spend three days investigating causes that were known dead ends? The sensei answered: “This way you learned one thing for sure that worked and eight that did not work. If I’d told you the answer upfront you would have learned eight things less.” What the lean learning system creates is endless learning opportunities like this one. In fact, the entire system of Kanban, boards, 5S and obeyas can be seen as a structure of learning opportunities – it is up to people to either step up or don’t.
We are in front of something of a theoretical quagmire here: each of the principles of the TPS change the working conditions, but not the work itself. The TPS never says “regularly check the coolant tank for contamination.” Setting up a shop stock and a kanban launcher creates learning opportunities – such as when the former doesn’t have the parts the next process seeks or when the latter has too many cards – but doesn’t touch the work itself. And yet the work is improved. The empty shop stock is a learning opportunity. What I have long puzzled over is how that learning opportunity is created and then seized.
TRANSFORMING RELATIONS WITHIN THE COMPANY
Learning occurs in the situation Art discusses with his supervisor at the time. Learning requires the activation of known concepts and the elaboration to new ideas. It happens mostly when the learner is presented with 1) a troublesome problem (data shows that machine creating defects), 2) a situational interest (supervisor asks to solve it), 3) self-directed investigation (list possible causes and test them out) and 4) a tutor to scaffold the learning (supervisor encouraging and directing to explore, not just to provide a quick fix). What stands out from this list of factors setting up the conditions for learning is that many of them are relational.
Bear with me as I put down my lean thinking hat and put on my systems thinking hat for a second. Most company cultures in Western business framework relations are based on execution: “You have/have not done this or that.” This is obvious of manager/subordinate relationships, but also of colleague-colleague interaction. Most of the beef between colleagues is that one has not delivered what was promised, not pulling their fair share of the weigh, or does things the other reprove. The big shift in lean thinking is moving from execution to learning: “You have learned/not learned this or that.” And from that moment onwards, the emphasis on management is very different because, as the lean saying goes, if the learner has not learned, the teacher has not taught.
The concrete change the lean learning system brings to the workplace is a change in relational protocols. In sociology, to use a definition by John Padgett, relational protocols are the practices through which people establish (different types of) social relationships. In other words, who talks to whom, about what and how often. The first obvious relational protocol change is leaders going to the gemba and discussing problems (rather than leaders visiting the workplace and expecting to be reassured by rosy pictures of Potemkin villages). The second relational protocol Lean Thinking changes is the interaction between manager and subordinate, as described in full by John Shook in Managing to Learn. As with Art’s example, the manager is expected to tutor the subordinate’s learning through the use of an A3 piece of paper (the learning opportunity space) and a problem-solving methodology (tutoring scaffolding).
Changing the hierarchical relational protocol also changes how colleagues interact with one another. For instance, Anne-Claire Baschet, Chief Product and Data Officer at Aramis Group, explains how she expects a conversation to go. “Let’s first look at the current method (before telling what should be done), explain the problem as you see it, and propose alternative ways to solve it (have considered at least an alternative or if only one option, who you should talk to, to develop another one.”
A FRAMEWORK OF RELATIONAL PROTOCOLS
Looking at the lean learning system in this light, we can see it is a framework of relational protocols:
- Customer satisfaction: measure quality, lead-time and cost and seek to improve them. See the opportunity in improving value to customers.
- Just-in-time: establish all interactions at a regular pace (takt time) and reduce the number of handovers until all processes are in continuous flow. Use Kanban and Pull to see detailed opportunities to improve the flow.
- Jidoka: improve anomaly detection and speed up management response to anomalies for either operator training or machine problem solving. See the opportunity in more detailed understanding of manual and machine work.
- Heijunka: balance workload and capacity, smooth peaks and troughs and break up batches in smaller ones. See the opportunity of learning how workload variations (mura) create overburden (muri) and then breakages (muda) and learn to reduce these workload swings.
- Kaizen: engage operators in looking for pain points in standards to find improvement opportunities. See opportunities to engage people in managing and improving their own work.
- Basic stability: teach problem solving across the board and practice TPM to make sure equipment works as expected – a necessary stable basis for work. See opportunities to improve work enablers.
Any of these relational protocol changes are quite momentous. For instance, when a hospital CEO starts to, first, go to the gemba to talk directly to the teams and then uses an obeya to get the directors (his direct reports) to share their problems and discuss the administrative changes they are considering in their functions, many directors are up in arms against this intolerable interference in their areas, which they consider their private fiefdoms. The relational protocol with the previous CEO was four-hour-long weekly management meetings in which each director reported good news and tried to assign blame for problems elsewhere. The change of format radically altered the relational protocol both with the CEO and among the directors – a change that will eventually create an inflection point in their careers.
Changes in relational protocols induce behavior change from managers (when they adapt) but also changes promotion and hiring choices (joining a lean company is notably difficult because few executives are familiar with lean relational protocols and, not knowing the concept, don’t understand where/how they’re expected to change to fit in the lean culture). Changes in relational protocols impact careers and, as such, have a very direct influence on the structure, both in accelerating learning and creating resistance from those who don’t intend to change how they relate with bosses, subordinates, and colleagues.
FORMULATING A THEORY
A theory of lean transformation could then be:
Change in relation protocols --> highlighting learning opportunities --> change in work practices
Such theoretical framework can also explain lean implementation failures when consultants conduct workshops or training without changing relational protocols. Whatever changes are made during the workshops or insights gained during training will disappear in the face of established work relationship patterns. This approach also explains why successful transformation hinge on the CEO’s commitment to TPS – relational protocol change starts at the top and spreads through both mimesis and training.
Transformation is, well, transformation. The elephant in the room of the transformation literature is what do we transform? Scratch the surface, talk about people, and very often you’ll find the old mindset of changing organizations – structures or processes. Yet, what makes lean so different is not what Toyota veterans have taught us. Indeed, most transformations I’ve been involved in have worked out without changing the organization in any way (or minor ways) – it’s mostly been about interpretation of current structures and procedures, changing from a focus on compliance to one of competence, and from execution to exploration.
Looking at the business through the prism of relational protocols unearths a previously unexplored leverage point to hinge a transformation on. Seeing the elements of TPS as a set of relational protocols designed to highlight learning opportunities creates an actionable structure within the company that can be made concrete through visual management. Each visual technique focuses on a specific learning opportunity, but it is the relationships around the visual tool that will either encourage people to step up and learn or shy away and hunker down. Lean is about people and people are about relationships.
In The Lean Strategy, Dan Jones, Jacques Chaize, Orry Fiume and I concluded our analysis of the cognitive revolution of lean by noting that lean changes the relationship people have with their work. I now believe we need to extend this insight to the relationships people have with each other. Indeed, it could well turn out that the transformation works the other way around: by changing the relational protocols between people, and thus their relationships, lean impacts how people work, emphasizing greater care, deeper thinking, improvement experiments and teamwork (critical elements of successful innovation).
As we used to say in systems thinking: change the relationships, change the behavior. By structuring relations around opportunities for learning rather than execution, we create organizations where people have space to grow, and by encouraging personal growth, in the end, we achieve company growth.