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I’m looking forward to sharing a preview of my upcoming book, Flatlined: Why Lean Transformations Fail and What to Do About It, at the 2018 Lean Accounting & Management Summit.

Will you be there? Be sure to see my mini-keynote on Friday, September 21st. I’d love to hear your story of flatlining on Lean.

Introduction

I have seen hundreds of companies attempt to transform their business through the application of Lean philosophies and methodologies. Most of these businesses had initial success but eventually “flatlined” in their operating and financial metrics. The reasons for this are many, however, this article focuses on the primary root cause of false starts and failed transformations.

What is the Lean Trilogy?

The Lean Trilogy characterizes the equilibrium that needs to exist between three primary stakeholders: the Employee, the Customer, and the Shareholder. If the requirements of these three groups are not met, the Lean Transformation will fail.

I recently spoke with a rather large financial institution that started a transformation quite a few years ago. They were speaking with me to gain my perspective regarding their path forward after a rather failed attempt to cut costs. Their primary focus for doing a Lean Transformation was to take cost out of the business thereby improving profitability. As I listened to them describe their situation, they used the word “cost” over a dozen times as the primary objective. Never once did they mention the customer or their employees. The person I spoke with reported to the CFO, which further reinforces the fact that they have a cost mindset to satisfy shareholders, and rarely considered their customers and employees.

[Read more…] about The Lean Trilogy

Strategy Deployment vs. Policy Deployment Knowing the Difference and Why it Matters

Introduction

Mention the phrase “Strategy Deployment” or “Policy Deployment” and a number of thoughts, concepts, and disciplines come to mind. In general, industry has confused the two, which in fact are quite different from one another. The Lean consulting industry added fuel to the fire with service offerings that unknowingly attempted to combine the two approaches, creating chaos and dysfunctional management systems with a lack of focus on what is really important to an organization. Most times, consultants have little or no hands-on experience with these approaches in the real world, adding to the turmoil that they helped create.

Having pioneered the implementation of Strategy Deployment at Danaher in the early 90’s, (note: Danaher is still using this approach today) I can safely say that we made many early mistakes in its implementation and deployment. However, we learned and improved the process using the PDCA cycle (Plan-Do-Check-Act). Most companies today are still using an early vintage of Strategy Deployment and these mistakes are as evident in industry today as they were in the early 90’s at Danaher. One of the biggest faults is the confusion between Strategy Deployment (SD) and Policy Deployment (PD). This will be the focus of this article.

It is important to understand that I am not advocating the use of one approach vs. another. On the surface, Strategy Deployment and Policy Deployment look and feel similar, like racquetball and handball. However, they are quite different and have different objectives. I believe that SD and PD are both necessary components to a successful Lean transformation. Understanding the difference between the two is paramount to providing clarity and focus as well as delineating your associates’ roles in your Lean transformation. [Read more…] about Strategy Deployment vs Policy Deployment

Introduction

It seems as if every organization today is doing some form of Continuous Improvement.  I have visited hundreds of companies who claim they are transforming their business with Lean methodologies.  On the surface, these companies have put in place all of the fanfare that would give the uneducated eye the impression that the transformation is robust, with a lot of rigor and discipline.  Signboards, banners, Gemba boards, tape on the floor, etc.  However, the more you become experienced with Lean, you realize it is what you cannot see that really makes the difference between a world-class operation and a mediocre one.

“What they need to know, they cannot see.”

-Toyota Executive when questioned why Toyota lets competitors tour their factories

“We had a Good Day”

The company had been “doing” Lean for close to a decade and this particular plant was considered one of the best within the $13 billion global organization. I was asked to do a review of their Lean progress, so I spent a day with them listening to the story of their journey and touring their facility. [Read more…] about Doing Lean vs Being Lean

Your Lean journey milestones can be measured. Lean outcomes must be measured. Lean leadership should expect significant, enterprise-wide improvements. A well-conceived, well-executed Lean transformation will result in the following:

• Quality: External quality as seen by the customer; internal quality such as reworks, rejection, redos, supplier quality. Quality should improve by a minimum of 50% per year outputs.
• Productivity is outputs divided by inputs, such as parts produced per hour. Productivity increases should be 2% per month, or 28% per year on a compounded annual basis the first year.
• Floor and office space should be reduced by 50%–70% in one year.
• On-time delivery to customer request should exceed 98%.
• Inventory should turn fifteen times per year within the first two to three years.
• Supplier base should be reduced by 50% within the first two years.
• Profits should increase by 100%–200% by year three.

Accurate outcomes can be developed for individual organizations in any industry. Your investment in lean should provide a twenty to thirty times ROI over the course of three years.

This blog is adapted from my new book (in stores now) on how any company can turn inevitable waste into cash. Stay tuned for continuous blogs on how to “Turn Waste into Wealth” at my website: www.markdeluzio.com.