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A couple of weeks ago, I was attending a Kaizen workshop that focused on reducing the lead-time for delivering a batch of software features to our customer.

At Sipios, we design and code websites serving organizations in the financial sector. For this specific customer, our team would deliver features to end-users on a weekly basis. The delivery process starts on Thursdays at 12PM, with an expected lead-time of 3 days. However, for the last few deliveries, it ended up taking around twice as long, causing major issues for both our customer and our teams:

• skipped or delayed deliveries of critical features;
• waste due to the quality department having to verify every single feature of the application several time at the final inspection stage;
• frequent interruptions for software developers working on the next features.

The reason for this extended lead-time was quality defects, called bugs in our industry. Not only were there many of them, but I was also surprised to see that teams were not prioritizing fixing and learning from those defects and often preferred working on upcoming features.

That Kaizen session hit me hard, as it helped me realize that, as a CTO, I was not creating a culture of “Quality First” in the company.

Coincidentally, I had just heard about Sadao Nomura and his Dantotsu method, the radical approach to quality improvement described in his book The Toyota Way of Dantotsu Radical Quality Improvement. Dantotsu allowed Nomura-san to achieve exceptional results in all the Toyota Material Handling factories he supported.

For us in the digital industry, the Dantotsu approach can be compared to Extreme Programming, a set of techniques used to achieve low levels of defects when writing software. As I read Nomura’s book, I got increasingly enthusiastic at the prospect of trying this method at Sipios.

In this article, I’d like to share the main lessons I learned from reading the book and how, in my mind, these can apply to the tech industry.

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THE 8-STEP PROCEDURE TO PREVENT DEFECTS RECURRENCE

Simply speaking, applying Nomura’s 8-step method means to take every quality defect occurring in manufacturing through a full PDCA cycle in just 24 hours. As Nomura-san says: “Speed is the key.” In practice, this means that to fix a problem, root-cause analysis has to be performed, the identified countermeasure deployed, and horizontal deployment initiated swiftly through collaboration with the Quality Assurance function.

This is very different to the typical approach that exists in the tech industry, in which:

• only high-impact defects (those, for example, causing website outage or preventing the end user from performing basic tasks on the website) are given a thorough analysis, called a Post Mortem;
• post mortems don’t include a root-cause analysis and never result in the identification of skill that is missing from the team and that caused the problem in the first place. The countermeasures will usually strengthen inspection by adding automated testing steps to avoid the bug from outflowing again to customers, but they will rarely trigger the creation of a standard or training for software engineers;
• post mortems define long-term countermeasures that are typically executed in the coming days or weeks, but never on the same day.

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BUILDING VISUAL MANAGEMENT FOR RADICAL QUALITY

To visualize defects, targets as well as defect-related problem solving exercises, Nomura-san puts a lot of emphasis on visual management. This is to be expected in a lean book, but two elements really struck me. First of all, the fact that the computers are not allowed and defects are always analyzed physically, notably on a Quality Management board. Secondly, the way defects are divided into two categories – those coming from manufacturing and those coming from the technical department.

Once again, the tech industry does this in a very different way:

• bugs are usually tracked using software like as Jira or Trello – the same tools tech teams use to manage feature development tasks;
• There is no clear separation between engineering and production, even though there are great benefits to be reaped from distinguishing between coding mistakes and software design mistakes (like wrong specifications, defective architecture or choices in technologies).

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PREVENTING DEFECTS FOR NEW GENERATIONS OF PRODUCTS

A challenge Nomura-san faced was defect prevention at a time when production of a new forklift model began. At this point in the book, one would assume that quality is always the priority, regardless of deadlines. Instead, Nomura explains how launching mass production of a new model should take 24 months and that the deadline cannot be missed.

The described strategy to achieve this focuses on prevention, to avoid as much as possible detecting defects during mass production or, worse, when the vehicle reaches the market and is in the hands of the end-user.

Nomura introduced Simultaneous Engineering Manuals (SE Manuals) for incorporating learnings from previously introduced models (VA/VE), including manufacturing constraints. This allowed the teams he supported to catch more and more defects at the design stage of the new model.

In the tech industry, too, many defects are only found once a new website is released. They are usually the same type of defect for each new website launch: servers not properly configured, missing edge cases due to rushing the work to meet a deadline, or failing to handle a high-than-expected number of end users visiting the website.

The application of SE Manual is not easy to translate into measures we can adopt in the tech industry, but if we look at VA/VE we can say we should focus on:

• identifying the sections of the code where bugs are prevalent. This likely means that the features behind it are complex and should be either automated or avoided in future generations of products;
• taking into account features that are already built in other websites, ideally reusing code whose quality is already “tested and certified”;
• creating more standards, especially relating to the release of a new website.

In conclusion, I consider Nomura’s method a game changer. It teaches us that there is no shortcut to reach high levels of quality. As a CTO, this makes me want to raise the quality bar in the whole tech industry, where bugs are viewed as unavoidable time wasters. “Zero bugs” is the true way to go!

My team and I have already started to build visual management to try out Dantotsu at Sipios. I am hoping to be able to write a follow-up article soon to share with you the results we are trying to achieve.

“Furuta-san is a monster.” That’s what my boss at Toyota said to me after a meeting with Kiyoshi “Nate” Furuta in late 1983. We had been in a planning meeting during the earliest stages of what would later become known as NUMMI (New United Motor Manufacturing Inc.), the company’s joint venture with General Motors. Nate was in charge of key pieces, such as the Toyota way of working, human resources, and labor relations.

In subsequent years, the Toyota Production System (TPS), then lean thinking, and then the Toyota Way would become famous. Over the ensuing decades, most pieces of the system would become well understood by many, even as the means by which to apply the pieces in diverse, real-world settings would remain elusive to most.

Culture is often tossed up as a catch-all concept for everything in an organization that can’t be quantified or easily explained in mechanical terms. But using a compelling term, such as “culture,” doesn’t solve anything unless we can break it down into concrete, actionable terms. To build a strong organizational culture, nothing is more central than the pieces Nate oversaw at NUMMI: the Toyota way of working, human resources, and labor relations (NUMMI was a union shop).

Human resource management (HRM), including labor relations, is often considered a pain-in-the-ass afterthought, a job for people who can’t do anything more important, or a mysterious black box of unnecessary complex and arcane policies and procedures. Not so in Toyota’s system.

Lucky for us all, Nate has authored the book (co-published by the Lean Global Network and Taylor & Francis CRC/Productivity Press) Welcome Problems, Find Success: Creating Toyota Cultures Around the World. In it, Nate takes you along as he and others lead Toyota’s intense globalization, from the early 1980s to recent days. He will introduce you to famous characters, like Taiichi Ohno and Fujio Cho, and lesser-known executives, like Kenzo Tamai, the head of the company’s HRM function in the 1980s. Explaining the central role of HRM, Mr. Tamai told me,

“Human Resources is so important, we can say ‘no’ even to the president. Our policies and thinking are fundamental to the company’s culture, so they shouldn’t be altered easily based simply on any one person’s opinion or wish of the moment. It takes five years to truly understand the effect of a change in basic HR policy. If our values, such as respecting the humanity of each employee, are held sincerely, we need to be conservative about changing policies until we learn their impact. But don’t misunderstand: HR is not the point. We aren’t here to be a good at HR; we are here to sell better cars to more people.”

To me and many others to follow, this was an example of the kind of Toyota thinking that flew in the face of conventional wisdom and, like holding two opposing thoughts together at once, characterized the deep thinking that lay underneath every decision of the company: to find success, welcome your problems.

This is not a book about HRM policies and procedures. This is a deep dive into the way senior leaders embody deep awareness of HRM matters, developing and executing company strategy while at the same time developing human capability. The role of senior leaders isn’t just a matter of directing the company to achieve objectives; it is a matter of building the capability to achieve those objectives, consistently, and further developing capability as it executes.

Key to this is to develop the awareness, attitude, capability, and practice of identifying problems as progress toward achieving objectives, which is, in fact, attained through steadfastly attacking each problem as it arises. This becomes a self-reinforcing loop of the organization, tapping in to the essence of solving problems while simultaneously developing ever better problem-solving skills and better problem solvers. This loop propels an organization toward meeting its purpose while developing capability.

This is no minor attainment or aspiration. It requires a “revolution in consciousness,” as Ohno put it, and nowhere is the revolution greater than in managers’ attitudes toward problems. Every manager wants success. Does every manager welcome problems? Nate argues that, if managers can learn to welcome problems, they can find paths forward to building organizations capable of the greatest success.

At the meeting that inspired my boss to call Nate a monster, Nate had been, well, not a monster, but forceful – winning arguments by the strength of his knowledge, combined with passion and coupled with vision and a sense of deep responsibility. What my boss meant by “monster” – he used a Japanized English term in the middle of a Japanese conversation and context – was that Nate had powerfully presented a way forward that would not be easy but would lead to success if we faced the uncertain road ahead with a clear vision, held our values sincerely, and adjusted to the twists and turns with open minds, welcoming the problems to come as the ultimate means of learning our way to success.

In this book, Nate will share – for the first time in print – his bold actions and points of view that informed Toyota’s phenomenal success in creating Toyota cultures around the world, beginning with a crazy three-way venture (with General Motors and the UAW) in California, to a wholly-owned, non-union operation in Kentucky, to the complex environment that is the European automobile industry. (Note: There is no actual European automobile industry – the challenges began right there.) Then finally back to the US for some mending, rework, and key innovations.

You will find no road map in the pages of Welcome Problems, Find Success. You will find some guideposts and a great many deep insights to aid you in developing your own organizational culture, inspired by Toyota’s efforts during the company’s period of great globalization. Nate and the book invite you to welcoming the problems that aren’t just in the way, but can lead the way to your organization’s greatest successes.

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Words: John Shook, Chairman, Lean Global Network

We are living in a time of huge changes, characterized by uncertainty and little predictability. Adapting quickly has never been more important than today, and for businesses around the world this often means to embrace and fully leverage the potential of digital tools.

A lot has been said about lean and agile – and their synergies – but for a company facing the prospect of a digital transformation it is still difficult to understand what to do and how. In our mind, while lean helps to solve the right problems, agility supports quick adaptability and the ability to change course whenever necessary. Indeed, the essence of Agile is not to deliver faster, but to make mistakes and learn faster.

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WHAT TO DO

Developing new products and services is important for companies that aim to grow, transform, and evolve in a hyper-competitive market. Too often, however, organizations offer products or services that don’t respond to customer needs or desires – a dangerous disconnect that can end up costing a lot of time and effort (not to mention resources).

To avoid this, we recommend using a model based on Design Thinking, Lean Startup and Product Discovery techniques for creating new products and services that are truly oriented towards customer satisfaction.

Such discovery frameworks and methodologies can help an organization to deeply understand the problems and generate truly value-adding solutions. They allow for a deep understanding of customer behaviors, expectations, and desires – for the creation of a better overall experience.

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HOW TO DO IT

In the context of the sort of digital transformation we most often observe in companies, we notice an inadequate use of agility that prevents them from achieving the desired results. Simply creating squads won’t make you agile! In the same way, grouping people without giving them autonomy, a multifunctional context to operate in, or the systemic conditions that facilitate decision-making and the direct contact with the customer will create a lot of waste (and even generate invisible silos).

We believe that agile values and principles, when applied with purpose and in their fullness, generate the results we want and the sustainability of a digital transformation. In a structured way, using Lean Thinking as a base, the development of a lean-agile governance will enable the company to become more responsive to market trends, faster in bringing a product to market and in responding to value-oriented, strategic changes.

It’s common to find managers who still work with a traditional, command-and-control approach. This is one of the first things a lean digital transformation, with its strong emphasis on leadership development, strives to address. Leaders are the ones who will be called to disseminate lean across the organization, so it only makes sense that they are the first ones we ask to change.

The foundation of any successful transformation is a simple structure that allows for quick responses to customer changes. Such structure is supported by a leadership team that engages and leads the teams while giving them autonomy and a set of well-defined objectives. This will be informed by the ongoing search for customer value that a lean company has to engage in.

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LEAN AND AGILE, TOGETHER

If we look at the concept of Improvement Kata, we see that purpose (1) is always visible to everyone taking part in the journey. To evolve from where you are (2) to the next step (3), you need a solid learning system in place that uses lean techniques (4) and quick learning cycles that rely on the agile methodology.

Being “agile” has never been so popular, and not just in IT – after all, any company who wants to survive needs agility. These days, we are seeing a push towards agile in HR, marketing, administration and, in general, any environment that needs to reinvent itself to respond to market needs faster.

But let’s stop for a second to look at agile more in depth. Where does it come from? In the February of 2001, at a resort in Snowbird, Utah, 17 thinkers, professors, and practitioners influential in the field of software development got together. After a weekend of intense debate, they created the Agile Manifesto, with four key principles:

• individuals and interactions over processes and tools;
• working software over comprehensive documentation;
• customer collaboration over contract negotiation; and.
• responding to change over following a plan.

We think that, when they look at and decide to adopt the Manifesto, people tend to only focus on the left part of the principles (individuals and interactions, working software, etc), forgetting entirely about the items on the right. However, we shouldn’t forget that the Manifesto uses the word “over” – not the word “instead”. Being agile doesn’t mean to get rid of process altogether. Just “because I am agile”, I won’t replace contracts with post-it notes! We need balance in all things.

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AGILITY IS A MEAN, NOT THE END

Whenever you are in doubt on “how perfectly” you are applying a particular tool or executing a certain practice or wonder “how agile” your transformation truly is, consider that purpose always needs to come first. If your organization is adapting at the right speed and moving in the right direction, with happier customers and workers and a healthier business, you are on the right track.

Think of your organization’s journey as a marathon. Now, technically you don’t need sneakers to run one, but – let’s face it – wearing them is much better option than running barefoot. Agile is the same: it doesn’t guarantee better results, but it gives you the tools that maximize your chances of getting them.

The quest for agility is nothing new in companies, but too many still don’t understand its true meaning. Being agile is not necessarily about delivering faster, but about learning faster and adapting faster to our changing purpose. And to become truly agile, you are better off if you combine agile practices with Lean Thinking. Alone, the dynamism afforded to you by agile won’t be enough to turn things around in a sustainable way – that’s where the solid foundation provided by lean comes into play.

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Words: Carlos Baldissera, Christopher Thompson, Erasto Meneses, Fábio Trierveiler, and Maria Fernanda Vieira

Today I am joining Benoît on a project gemba walk. He is doing two of these every week (each sale in this digital world turns into a project, to design and build the app sold to the customer) and he also attends a kaizen debrief at least once a week. When we enter the open space, the project team is waiting for us. A beamer displays on the screen the virtual project board with milestones and KPIs. With many in the team working remotely due to the pandemic, all the visual management that before Covid was manually updated on walls and paperboards had to be replaced by digital boards, shared by the team members from home.

Matthieu, the technical team leader and architect, is starting to comment the project board but Benoît has another idea on how to start the discussion: “Matthieu, can you show us the product first?”

A true lean question. Many still believe lean is all about honed, standardized processes, with a good dose of control at each key step or milestone. Benoît will later tell me that at first they had tried to solve their quality and delivery issues by focusing on processes but found that centrally-designed one-size-fits-all processes deterred people from thinking. The purpose of a gemba walk focused on a project, from Benoît’s point of view, is not to check whether the board is correctly updated or the milestones met, but whether the product under construction will deliver the value sold to the customer.

It turns out that the product is a mobile marketplace app designed to support on-line bids for an iconic auction house in France. Matthieu shows us a sober mobile app where artefacts on sale are listed together with a picture and description. He surfs the app to show the features already built, such as the details for the upcoming sales (Benoît will ask him to show where he clicks as he wants to understand the navigation on the app from the user point of view). At this stage (end July), the app has not yet been released to production: mock releases are scheduled for the end August (on users’ registration) and user testing is planned for the end of September.

Ghislain, the part-time Project Director, explains the context: “They have a web app that is a bit outdated. New 100% digital auction actors have stepped in over the last 10 years, and their historical competitors – such as Sotheby’s or Christie’s – have already developed on-line bids capability. Our customer needs to catch up, or even gain a competitive edge. Hence the idea of a mobile app (rather than a web page) that would deliver multiple features with a wow effect.”

Benoît challenges the team. “Multiple features and a wow… Are you sure about that?” The project team is present but so is the C-suite of BAM, one of the Theodo spin-offs, in which the gemba is taking place. Guillaume, the head of the Flutter Tribe (Flutter is the technology with which the app is coded), nods: “You mean there is a risk that too many features will never produce a wow factor?” Clothilde, the product owner, confirms that painful slashing on desired features has already taken place: “Each stakeholder on the customer side had a story to tell that seemed to justify a feature.”

Gemba walks are always opportunities to learn on the job, and this is no exception. On-line bids are asynchronous and come in over a pre-defined period of time. Traditional auctions, on the other hand, take place on a specific date and time, when everyone bids simultaneously, either in the auction room or through a remote device. As one of the digital competitors has already announced the release of an on-line bid app, BAM’s customer aims to develop a mobile app that would both cater for 1) remote bidding in a traditional auctions and 2) on-line asynchronous bids.

Clothilde shows the four success key points agreed upon with the customer, which range from increased sales or enhanced registration to bids to the development of mobile bidders and better customer satisfaction so as to boost loyalty. Benoît nods but enquires further: “I see a lot of what I would call outcome KPIs. But how do you measure the factors that will lead to this outcome?”

Clothilde has some answers as she has listed end-user expectations – such as feeling confident in the bid’s process and the auctioneer expertise, easy registration, smooth browsing of the artefacts, and clear signals on who won the bid among others. Some of these can be easily measured (such as the time to control a bidder’s ID), but not all of them – she admits.

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WORRYING ABOUT THE TIME-TO-MARKET

During the meeting, Benoît is clearly using the TPS (Toyota Production System) as a framework. He is now back on the schedule: “Can’t we test some transactions before the end of August? We have four weeks ahead of us.” The team looks uncertain and Marek, the CTO, steps in: “We started the build mid-June and the only thing we can test by the end of August is the registration steps. Couldn’t we have done it faster?”

The advantage of using the TPS as a gemba framework is that it naturally leads to the right questions.  Next to, and part of, customer satisfaction is an obsession with the lead-time. Clothilde, as product owner, explains: “We discovered rather late that the bidder ID verification was the pain point of the current web page. It takes up to two days today, resulting in a large number of no-shows at the auction. We launched a benchmark of the market and our customer is now contracting with a new partner that offers an ID control within a few minutes. But the whole process took time.”

Benoît steps in: “How can we learn from that? Do we have a standard that could help us spot this kind of issue sooner?”

Baptiste, BAM’s CEO, and Marek, the CTO, have an idea on what could be improved. “It may be linked to the project staffing. Profiles with the right know-how may come in too late in the project to spot this kind of issue.”

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JIDOKA – SPOT ISSUES AND SOLVE THEM

Benoît has a tool in mind that can help detect problems as they occur. “Can we see the weekly customer feedback?” he asks. If you have read the previous article, you will know that every project team sends a weekly questionnaire to their customer to test their satisfaction with velocity and support.

Clothilde and Matthieu display those on the screen. On the last July sprint, the customer has given a 3 mark – below expectation. Matthieu confirms: “One batch of customer tickets in the database was not taken into account in the sprint. Beyond that, I confirm we have a productivity problem, we do not close our tickets fast enough. We are one week late on the first batch of user stories.”

I see no frowning, hear no sighing, and witness no body language indicating unease or exasperation. There is now a long tradition in the Theodo Group of admitting to problems and discussing them openly. “We have opened a problem-solving form on our productivity, but not yet on this undetected batch. We could not have absorbed it anyway,” says Matthieu. The team sets time aside for problem solving twice a week and they show us a number of problem-solving forms on speed or quality. Benoît does not comment the content but has some questions, most of them directly or indirectly aimed at management: “Were you trained on problem solving, Matthieu?” “Is anybody helping you on that?” “Productivity in projects is a known issue, is there a specific know-how here in BAM on this typical issue?” The answers will confirm the need to train on problem solving and better share know-how on standard issues.

Benoît is back on the overall lead-time. “It seems you have a delivery issue. Do you maintain a macro-schedule on your deliverables?” he asks.

Matthieu has developed a schedule on Excel, with the downside that what used to be easy to update manually on a white board turns out to be rather cumbersome now. The late delivery of the first batch is not yet visible on the schedule.

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TAKE CARE OF PEOPLE TO BUILD TRUST

Benoît is now concluding the gemba walk. “Really interesting, thank you! I would like you to sit and think for another 5 to 10 minutes on the following two topics: first, is there something that this gemba has revealed and that you would like to dig deeper into? And, secondly, where do you need help? Please send me an email when you’re done.

With that, Benoît leaves with the management team for a thorough debrief. Guillaume, the head of the Flutter Tribe, sums it up: “Very interesting, great discussion on the misconception that piling up features in a single app would lead to a wow effect. I would also point out that we should work on the KPIs to better measure whether the app we deliver effectively matches end-user expectations. We are not at the level on problem detection and resolution. And we have project tool issues.”

Alice, the COO, concurs. “Too much time is spent on admin, not enough on problem solving. We need to help them,” she says.

“We are still far from an MVP (Minimum Viable Product),” says Marek, the CTO. “The core bid feature is still not testable at the end of August, after two months of development. They need help with the tools and training on problem solving.”

Benoît nods. “We were given a huge amount of information, which is great. I was struck by the high level of the team’s commitment and reflection. But you need to help them with their tools. The way I see it, they are both building the house and the scaffolding. We need to focus more on the code, especially because Flutter is a new technology for us,” he comments.

Benoît then shows me the email he has just received from the team, confirming the diagnosis: the team plans to challenge the customer on the release schedule, disconnecting remote live bids from the on-line features, to provide an added value to users earlier. They will also refine their measurement of user satisfaction, but request help on the tools.

The management team leaves, but Benoît and I stay put to continue our discussion.

“We are now 420 people in the group,” Benoît says. “We need to keep in mind what will commit people in a fast-growing company: in other words, what is Total Productive Maintenance for our group? We have to spend time on our basic infrastructure, systems, offices, remote work. These things can’t be taken for granted like we did in the past. This is a way to prevent failures and show respect. Not to mention keeping costs down.”

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FORM A STRATEGY FROM THE GEMBA

We have grabbed a copy of the book Learning to Scale and Benoît shows me how he uses the TPS as a framework in his gemba walks. I have highlighted each stage of the discussion above with an image of the TPS house to show what he explains.

Benoît smiles. “I remember a time when I thought TPS was too far away from my digital work to be relevant. What could safety at the workstation mean to us? Or stock? We have learned a lot since then,” he says.

From the first image of the Toyota Production System, in Japanese, to a step-by-step TPS approach explicated in Learning to Scale and experimented with at Theodo, the diagram below illustrates the effort made by the group to learn, try and progressively unveil the Thinking People System – as TPS is often referred to.

I ask Benoît why he puts so much emphasis on gemba walks and genchi genbutsu. “This is sound management. If I stay in my office, the gap between my own vision of the group and reality will increase. I need to come and check regularly where we struggle and where we succeed,” he explains.

He thinks for a while and then continues: “To set a strategy for the group, I need to define where to go (point B) and how to go there (from A to B). My regular gemba walks help me understand where A is. Without a clear understanding of A, I won’t have a clear path to B.”

“Another reason,” he adds, “is the connection with the teams: during my gemba walks, I highlight the positive points, I spot talents. The time I spend on the gemba and the questions I raise show the importance of the topics we address.” Indeed, what I have witnessed has nothing to do with a traditional audit: during the gemba walk, Benoît challenges the team with questions, but never offers solutions. He tells me that those gemba walks also help the management teams: “We develop a culture of transparency, of no bullshit. It’s a good way to remain on top of the right issues, on what really matters, which can be difficult when there are many possible blind spots.”

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FIGHTING OFF BIG-COMPANY DISEASE WHILE SCALING-UP

“The more we grew, the more problems we had, Fabrice and I,” Benoît says. Fabrice Bernhard, you may remember from the previous article, is the co-founder of the group. “We were wondering: is this really what we dreamed of? Is this the price we pay for growth?”

Benoît confirms that Lean Thinking really gave him a method as CEO. It shows him the next step every time there is a problem, helps him and his teams not to feel guilty if any occurs, and provides a purpose and a True North. “With lean, you can do customer satisfaction and teams’ pleasure at work, or customer fulfilment and environment.”

Lean turned out to be the best way to fight off the risk of developing big-company disease. Benoît’s first steps in the job market, he recalls, convinced him that he would never want to work for a large corporation.

He and Fabrice, therefore, developed an innovative way to support the growth of Theodo. Every time they felt they had the right talent and a niche to investigate, they would create a spin-off with a pair of high-potential individuals that would act as CEO and CTO, just like they had done at Theodo. This allows them to offer a large range of products and services. Indeed, red bins on failed bids regularly reveal missing skills – whether in sales or technology – and the spin-offs are an opportunity to develop those.

Benoît deeply believes that an expert company is more visible on the market that a do-it-all group. The latest Theodo spin-off is Hokla, which uses digital expertise to track health treatments (like data mining, treatment effect tracking or chronical diseases).

Spin-offs are also a great way to retain individuals with high potential and offer them an ambitious career path as co-founders of a company. And, of course, managing small, lean, competent and autonomous organizations reduces the risk of developing a central bureaucracy.

Benoît and Fabrice may have found a lean way to growth on different market segments: much like small batches on a production line, small companies have a better chance to flow value faster to the customer.

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Words: Catherine Chabiron, lean author and member of Institut Lean France

Success is traditionally measured by profit. It is based on profit that a company’s performance is assessed. It is based on profit that investors pick which horses to back. In time, however, we have also learned that an isolated measure of profit drives leaders to put money before morals, swinging performance down a one-way street. It also makes us vulnerable to inequality, environmental damage, and failures in the economy. It’s a trajectory that is only lucrative for a select few. Decision making in this setting drives shareholder ahead of stakeholder value through cost-down strategies or by raising top-line revenues without much care for how it’s done. 

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TARGET MORAL PROFIT

Businesses need to perform financially to reinvest, grow and create stable employment. That’s not the debate. The issue is rather how we achieve profit and what we do to prosper. The Lean Community has for decades challenged traditional thinking, confronting how we think about profit and what the market is willing to bear (figure 1).

Gone are the days of hiking up the price to raise profit. Cutting operations and budgets to the bone won’t get us far either. Instead, we develop through well-focused kaizen, a proven method to bring costs down over time through long-term reform. We raise revenue by designing better products, doing better work, and delighting our customers. The shift from traditional thinking to Lean Thinking is indeed an important one. It influences how we take care of talent, focus change, and generate returns. But it also requires us to rethink how we value and measure success if we are to prosper. Measure more than financial performance and see costs differently (not just what’s in the management accounts, but the hidden, unchecked, out-of-sight costs), then consciously work to close the gaps.

Generating profit to the detriment of the planet is a cost and growing a business in this way is unethical and as offensive as profiteering.

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RETHINK SUCCESS

We operate in a global ecosystem and narrowly focusing on in-house success makes us guilty of insular, short-term thinking. Here we venture outside company borders to judge how we truly perform and to make sound judgments.

How we see success influences our decisions. It affects how we produce, consume, and distribute scarce resources to serve customers – all decisions that affect whether we spend or save the limited natural capital available to us. It will move us closer to or further from sustainability.

In figure 2, therefore, we illustrate a healthy balance of decisions to achieve prosperity and improve the condition in which we leave our planet to future generations. Prosperity implies financial stability but profit alone cannot steal the limelight. Removing the shareholder value blinkers helps us to rethink how we measure success, show how we perform across a broader selection of measures, and reframe the problems we spend time on.

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ADAPT FOR SUSTAINABILITY

Times are changing fast. There is growing awareness among employees, investors and customers about sustainable performance, compelling organizations to do more than ever before to care for the planet. Indeed, purpose-driven companies are adapting their business models and strategies to suit.

• Consumer behaviors are constantly shifting. Customers are gravitating to products that represent greener values. Before adding a product to their cart, people increasingly look at what’s in it, how it’s made and whether it’s recyclable. They’re shifting from gas-guzzling, carbon emitting vehicles to better environmental performers that still meet the driver’s quality and emotional requirements. They’re improving how they live and run their homes to consume less. What new customer problems will you solve to stay relevant?
• Competitiveness is hotter than ever as companies differentiate themselves through sustainable practices and supply chains, nudging others to follow suit. How will you ensure you’re ahead and not behind?
• Government intervention is increasing through incentives, such as grant funds or penalties and fines. How might you benefit and avoid unnecessary costs? What voluntary changes can you make ahead of legislation changes?
• Skilled talent chooses to work for responsible employers, especially the up-and-coming generation. What can you do to become an employer of choice?
• Even C-level execs are compensated for sustainable results and packages are restructured to suit. How will you reward impactful decision making and outcomes?
• Forward-thinking financial institutions favor sustainable business models giving preference to applicants that pollute less and deliver positive impact. What does your future value proposition look like and what financial instruments will become accessible to you? By how much will it improve company market valuation?

The conversion to the sustainable enterprise is no longer a nice-to-have. It’s an order qualifier, an investor lure, a strategy to woo, focus, nurture and retain talent and a path to secure loan capital. This conversion is how we’ll survive and thrive for generations to come. 

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ACCOUNT FOR REALITY, ACT REAL-TIME

In a Financial Times article, Sir Ronald Cohen explains how investors need to know companies’ social and environmental effects⁵. He asked what we might find if we compared the total environmental cost or the effect of deficient diversity in the workforce across companies and encouraged a race to the top. Cohen writes about the “impact revolution” and how this will help to reimagine capitalism. If governments force companies to publish impact-weighted accounts, this would focus their attention on social and environmental problems. Referring to a published assessment of 3,000 companies, 450 companies created more environmental damage in dollar terms than profit in a single year. That is a very good reason to take this seriously, urging transparency to drive investor and decision making.

How we account for reality drives what we improve. Unless companies make performance transparent and then do something about it, there is little chance we will see the change we need in the time we need it. Our impact on natural resources is just one aspect at a critical point if you refer to figure 3. This is not fear mongering, but current reality in a handful of areas. Brushing true performance and the role we play in it under the carpet supports profiteering.

Disclosure is key to focusing lean strategies and deployment. Because traditional accounting ignores the cost of degradation and profit is a poor indicator of overall performance, we need a holistic measure of prosperity to guide us. The concept is not new and sustainable accounting has been on the cards for a while, albeit lacking global acceptance as a standard. Institutions such as Harvard University initiated an “impact-weighted accounts project” that aims to create corporate accounting statements for financial, social, and environmental performance. This is good progress, but we need to act faster.

Cohen explains that the power of accounting rules must now be applied to ESG (Environmental, Social and Governance) and impact investing. This is a big step in the right direction, but sustainable accounting is a lagging indicator and waiting for the data to present is a loss of critical problem-solving time. Real-time leading indicators are also needed to focus our efforts and drive daily improvement. Our challenge is to translate 3P challenges into tangible problems to solve, to connect sustainable strategy with what we choose to improve on the ground (figure 4).

Accounting for sustainability prompts us to put a number to how well we perform in each of the 3 Ps. Granted, this may vary from company to company, but it leads us towards meaningful change. We get what we value; we account for it through metrics; we drive learning, outcomes, and results.

To discover and unravel your most pressing problems, consider how you might improve accounting for sustainability and install real-time probes where possible:

Across the value chain

• The environmental impact at each stage, from extraction or purchase to disposal of materials. The impact of these on the global vital signs.
• The material yield, or how well output is generated from the input material.
• The measurement and improvement in the 7 green wastes (an adaption from Taiichi Ohno’s seven wastes, including energy, water, materials, garbage, transport, emissions and biodiversity waste).

For your people

• A physically safe (accident-free) environment for employees to work in.
• A psychologically safe (fearless organization) environment for employees to flourish and solve problems in.
• The creation of equal opportunities through recruitment, retention, and promotion.
• Diverse representation and inclusivity in the teams solving the problems.
• Performance in job retention and job creation.
• Investment in training and education to develop strong, capable teams.

As a lens on finance and investments

• Measuring and reporting on environmental costs using impact-weighted line items, illustrating positive and negative impact on stakeholders.
• The generation of new revenues through sustainable practices.
• Impact investing and capital investment in projects that meet return on investment as well as impact on sustainability performance.

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In our experience companies find it hard to translate targets and measures into hands-on initiatives. We often end up referring to the Sustainable Development Goals or, if you are a lean aficionado, the Toyota Environmental Challenge 2050. It’s worth checking out some of the cases that Toyota presented as examples of work they are doing. But what about outside of Toyota?

In Norway, there are companies moving from intent to action in meaningful ways. A small furniture maker on the south-west coast of Norway established a circular hub where local school children and students are taught how to re-design and sell products made from old and discarded furniture. Addressing both the challenge of quality education as well as responsible production. Another company, on the west coast of the country, has been challenged to halve its climate impact by 2030, but has also decided to develop products that have a net positive impact on the environment. Finally, a large manufacturing company in Stavanger is building on its capabilities to involve the whole organization in continuous improvement of sustainability as part of their Hoshin Kanri process. These examples are encouraging and measurable.

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MOVE BEYOND TRADITIONAL MODELS

Business models drive where we place focus and how success is accounted for. Following the Industrial Revolution, the “take-make-waste” business model became the norm bringing with it a general disregard for the pressure we place on the environment and the natural capital and how it’s measured. There is a premium to converting to responsible practices and offerings, but many have continued on a wasteful trajectory because it is cheaper to do so and perhaps in the past no-one was really paying attention.

From the time we extract resources out of the ground and put them back to rest in their processed, used form, we have a responsibility to do better. To waste less, produce efficiently and consume responsibly. To target every stage of the value chain and reduce the drain on natural resources. Lean makes us think about respect for humanity, which ultimately hinges on respect for the planet. Our business models need to reflect this.

It’s time to judge ourselves more harshly when it comes to how well we integrate prosperity into our Lean Thinking. It takes courage to critically evaluate the current business model, how true performance is disclosed, and what tough questions to ask. Resist the urge to do more of the same. Challenge the leadership team to rethink how success is measured. Develop a model to account for prosperity, not just profit.

Over recent years, Andrade Gutierrez (AG) – an innovative company known for its state-of-the-art engineering – has experienced solid growth. While positive, this has come with its challenges.

Bringing knowledge to new business areas and to the people involved in the expansion is no easy task. Given the nature of today’s market, the organization needs to change the culture of the front line, engaging them in the company’s lean transformation in pursuit of excellence. Today, AG has a structure that allows it to drive its growth and bring lean to the whole organization – including new business areas.

The journey of Andrade Gutierrez Engenharia towards operational excellence and a lean enterprise began in 2010 with the Arena da Amazônia project, with project leaders realizing the need to improve some specific processes to obtain a better performance. With the help of external coaches, they pursued the objective of reducing waste with an approach oriented towards achieving the desired results on the job.

What the company has achieved in just over 10 years goes far beyond operational benefits. The developing of internal skills was, indeed, an important result in this process of transformation. Today, AG can be considered a lean company, with lean culture and standards fully incorporated into the way the work is done. Through its transformation, Andrade Gutierrez has achieved several results, including:

• In just one year since the beginning of their effort to bring lean to all areas of the business, productivity gains of 20% on average were observed, together with reductions in lead-times and costs and increases in quality. These results encouraged the company to continue with its improvement efforts.
• Using a Value Capture Plan, AG has established that millions of reais have been saved over the years as a direct result of the application of Lean Thinking.
• The motivation, quality of working life and satisfaction of employees all improved thanks to the company’s lean efforts.
• The management techniques deployed ensure that improvement keeps happening and that processes keep evolving, while sustaining the results achieved thus far.

AG’s lean success is a direct result of the company recognizing there is more to lean than just tools. The organization fully understood the importance of achieving a cultural shift and incorporating Lean Thinking into every aspect of company life. It’s not about “doing lean”; it’s about “being lean”.

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THE IMPORTANCE OF LEAN

The cultural change AG achieved made lean second nature in the company, something that is deeply rooted in the work and well-respected across the business. Lean is also seen as an enabler of innovation in the organization, together with its continued investment.

The contribution of lean was even more evident during the Covid-19 pandemic: despite the difficulties all companies have faced, AG has been able to maintain its results. This allowed it to continue seeking improvements in its processes even in times of crisis, because thinking lean made the organization more flexible and better able to adapt in the face of uncertainty.

With more than a decade of experience applying lean construction principles and techniques, today Andrade Gutierrez can proudly say that what it has achieved is the result of the discipline and great effort of its people. Their transformation has not been driven by external coaches, even though their help has been an important element. The company recognizes that its accomplishments are of its own making, which wouldn’t be the case if AG didn’t see lean as its culture.

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HOW IT ALL HAPPENED

Following the success of Andrade Gutierrez’s first lean experiment in 2010, other initiatives ensued – all achieving equally impressive results. As its took its first steps towards Lean Thinking, front-line staff received specific training on relevant lean tools.

Over time, as it became clear that more and more projects would be run in a lean way, AG felt the need to internalize the lean philosophy. At that point, there was already a certain degree of awareness that localized applications of lean typically fail to create lasting results. The good practices developed in individual projects were not incorporated into company-wide standards, which meant that each new project had to start from scratch.

It became clear that, for lean to become the reference of all company activities, it would be necessary to develop people’s skills and create a permanent internal structure for the spread of the philosophy.

With trained people and the creation of a dedicated improvement team, the rollout to other areas of the business would be smoother and faster. Only this way could learning become an every-day occurrence in the business and knowledge be transferred effectively across it.

With this in mind, in 2014 AG reached out to Lean Institute Brasil (LIB) to development the core team of individuals who would facilitate the create of this learning system for the dissemination of Lean Thinking, the creation of a critical mass of change agents and the development of an independent, autonomous workforce.

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TRAINING THE FIRST GROUP OF FACILITATORS

To support Andrade Gutierrez, LIB created a 10-month program based on cycles of learning and practical applications, that followed a number of fundamental principles:

• Lean can only be learned by doing and generating results. Therefore, in addition to training, each facilitator-in-training had to apply lean to an open project, with a minimum return commitment.
• Learning cycles. The program was conceived in four training modules of one week each, interspersed with three on-site real-life projects with a duration of three months each. The projects were gradually more complex, from improvements in a specific service to more systemic interventions with an impact on the overall process.
• Gemba training. The training modules saw the practical application of lean tools in the field, to prepare the facilitators for the activities they’d be carrying out in their daily lives at work.
• Solid understanding of lean concepts and tools. The training was complete, including information on the origins of Lean Thinking, its purpose, basic manufacturing concepts and their application in construction. Among the topics discussed were: A3 thinking and problem solving, planning in flow and takt time, Last Planner System, visual management, value stream mapping, waste analysis, basic stability, standardized work, pull system, supply logistics, kaizen, lean engineering, leadership, and lean strategy.
• Applications beyond production. Implementation were not limited to operations. Lean office ideas applied to construction management processes were applied with great results in terms of indirect cost reduction. Support functions like engineering, procurement, logistics, and maintenance were also involved.
• Connection to business needs. The projects were selected together with the contract directors of each job, targeting specific objectives, needs and priorities to maximize the impact of the improvement work.
• Development of the facilitator role. In additional to technical skills, facilitators were taught behavioral skills that would help them influence and guide the teams more effectively.
• Support through coaching. Each facilitator-in-training received support from a LIB coach who guided them throughout the projects.
• Continuous assessment and feedback. An ongoing process of evaluation was established, with mentors regularly assessing the facilitators’ technical and behavioral skills and the results they attained, with feedback provided for each module.

The practical applications happened within important projects underway at the time, in six Brazilian states and across Latin America, covering different types of work – from mining to energy, stadiums to highways, subways to city streets.

The approach deployed led to great results, such as an increase in productivity of 30 to 50%, a reduction of months in the duration of projects, and financial gains totaling millions of reais. There were also organizational gains, like the implementation of management routines that led to the stability of the company’s processes and the sustainment of results. Eleven specialists were trained to become key players in the company who played a pivotal role in the spread of lean culture across Andrade Gutierrez.

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SUSTAINING AND EXPANDING

A lot has happened since the first lean training AG people received. The continuous improvement department was established, and the trained facilitators took over internal dissemination. Using the LIB training program as a base, new modules for training corporate and construction facilitators were introduced – relying entirely on internal capabilities.

Over the years, and thanks to a recruitment process that follows clear selection criteria, four generations of coaches were developed – with the original group acting as mentors to the new ones and ensuring the practical application of lean concepts remains aligned with business needs. With the support of LIB, the training program was enriched with internal AG examples and a greater emphasis on soft skills and specific technical capabilities.

No matter the circumstances, Lean Thinking has remained a priority for the company. Today, no construction job starts without lean principles and techniques being applied from the planning phase. Additionally, lean has reached all business areas. The ensuing increases in productivity and lead-times have resulted in greater competitiveness and, subsequently, in the company winning more tenders in recent years.

Driven by leadership, Lean Thinking was formally incorporated into the company’s culture and strategy. Several other initiatives were also tied more closely to the lean transformation, creating great synergies (examples include the systematization of the SAGE-AG Excellence System, the Vector AG Open Innovation Program, and the implementation of BIM projects).

The deep understanding of Lean Thinking and the development of internal capabilities were important elements in the sustainment of the great results the company has achieved so far, starting from its increased competitiveness. They represent powerful drivers of stability and continuous evolution for the business.

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Words: Deisa Conegundes, Flavio Augusto Picchi and Renato Mariz

This article was originally published on the Lean Institute Brasil website. Find it here.

Every day, each of us must make decisions. Countless decisions, in fact – ranging from what we are going to have for breakfast to how we should engage with people around us, from what time we should leave to go to the office to how we are going to spend our free time. Our daily lives are continuously, significantly, and directly influenced by the choices we make, which is why how we make decisions has always been a topic of great interest to neuroscientists, psychologists, sociologists, etc.

In the business world, too, decisions are expected of people at all levels of an organization, and it is the combination of those decisions that determines whether a company is ultimately successful. Do people at the front line flag up problems or do they hide them? Do managers strive to improve the system, or do they blame people instead? Do senior execs think long-term when coming up with their strategy or do they choose to just focus on making money now?

In the lean world, we often say that people should be given the tools and autonomy they need to make decisions and, therefore, solve problems, but I believe the focus of our attention has traditionally been problem-solving to the detriment of decision-making. Yet, without decision-making one can’t be expected to solve problems.

So, why not pay attention to how we make our decisions and see how the lean way of thinking and acting can help us ensure these are the best they can be?

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FIVE STAGES OF DECISION-MAKING

As mentioned above, theories on decision-making abound. It is mostly described as the cognitive process resulting in the selection of a course of action among several possible options (could be either rational or irrational). According to Herbert Alexander Simon, decision-making is a reasoning process based on assumptions of values, preferences and beliefs of the decision maker. Every decision-making process produces a final choice, which may or may not prompt action.

If we try to look at this cognitive process from a lean perspective and break it into smaller steps, we can say there are five main stages in the decision-making process:

• Perception – how good and trained we are to see the reality around us and recognize certain stimuli as problems requiring our attention.
• Intention – based on what we perceive, how willing and determined we are to act and do something about a problem.
• Evaluation – how I am going to assess the risk and benefit of acting on a certain problem. Is it worth acting on it at this stage? Do I have what I need to succeed? At this stage, we are trying to weigh up hypotheses.
• Action – based on our evaluation, we decide to act (or not) and use the tools at our disposal (in the case of lean, things like daily management, huddles, kaizen or hoshin) to bring our vision to fruition.
• Reflection – how good we are at extrapolating lessons from our experience. Did our intervention pay off? What did we learn from it? What’s the impact it had on the system?

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LEAN AND DECISION MAKING

The five elements highlighted above describe how decisions are made, the thought process that causes us to see reality one way or the other, to choose a certain course of action, to draw conclusions from something that happens to us. Because lean is so tightly connected with the way we think, I believe that it can help us to ensure that our decisions are the right ones.

Applied to these five elements, in fact, lean can turn decision-making into a powerful driver of a transformation. Its scientific approach provides us with a structured way to make decisions, even when these happen almost subconsciously (which is why it’s so important to make lean second nature, the way people see the world around them).

Lean tools and principles make the decision-making process as effective as it can be. How?

When it comes to perception, with lean we learn to see. This means developing our ability to see problems, to separate value-added work from waste. Because we get our information directly from the gemba – rather than a report or a presentation – we have a much more accurate understanding of the reality around us, of the problems we experience, on the decisions we are called to make. (This is where it becomes clear that decision-making is a much wider concept than problem-solving – if our perception is off and we focus on the wrong problem, we can be the best problem solvers in the world but that won’t mean much).

As far as intention goes, as lean thinkers we are driven to make daily improvements to provide more value to our customers, serve the best food we can in a restaurant, offer patients the best possible care. This passion for improvement comes from two sources: the motivation I receive and the knowledge I am given. Together, these two elements empower me, give me the will – and the means – to act. This way, each problem I observe becomes a trigger that awakens my intention to “do something about it”.

It is one thing to have the right intention, but what about evaluating the problem and the situation around it to understand whether my intervention has the potential to succeed? It is at this stage that we decide to act or not. After all, tackling a problem when we don’t have the knowledge or the support that we need is wasteful. This makes the evaluation phase critical. Lean can help us assess the situation, by encouraging us to ask questions such as, “Do I have the support I need from leadership?” “Are my people with me?” “Is this the right time to take this on?” “Do I have the tools I need to have an impact on the situation?” “Is it worth focusing on this problem or should it be something else?” Developing our evaluating capabilities is just important as honing our perception and problem-solving skills.

If we do decide to act, lean provides us with a wide array of tools, techniques and behaviors that can help us attack a problem – from its definition all the way to its resolution. The “action” phase is the problem-solving we typically talk about in the lean community. A3 thinking, kaizen, engaging with cross-functional teams, gemba walks, 5 whys – one could say that everything lean teaches us is ultimately meant to make the problem-solving process smoother and more effective.

Finally, we can’t forget the reflection phase. Doing hansei is also a decision. Too many neglect this critical activity, only to find how big a hindrance this is to our ability to transform organizations. Reflecting on the decisions we have made, on the problems we have solved and how we have gone about it, and on the impact that this has had on the overall system means that we will be better equipped to solve future problems of a similar nature. The more problems we solve, and the more we learn from them, the better we will be at solving future problems – it’s the virtuous cycle of lean. Without learning and capturing knowledge, there is only so much progress we can make (not sure if I got the meaning of this final sentence).

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TWO EXAMPLES

Let’s try to imagine two real-life scenarios to bring these ideas to life. In both cases, a patient in a hospital is given the wrong medication. Here’s how a non-lean decision-making process and a lean decision-making process would unfold.

In the first case, a middle manager learns about the incident. He is an old-fashioned guy, working in an old-fashioned environment. As he looks at what happened – indeed, giving the wrong medication is a very common occurrence in hospitals – he immediately shrugs the problem off by saying, “We have so many of these. No one ever died. We always find out in time.” This flawed perception of reality (which leads the manager to believe this is not even an issue) results in a complete lack of intention to do anything about it. The evaluation of the problem convinces the manager that the best course of action is to ensure that news of the incidence doesn’t spread. “We will do something about it next time. We have so much to do already,” he thinks. No problem has been tackled, and there is therefore no learning that can be drawn from the experience. Fast forward a few months, another patient is given the wrong medication. This time, however, she develops a rash all over her body and the hospital ends up with a lawsuit on its hands.

In the second case, the manager is a lean thinker. Someone tells her about the medication error, which she immediately sees as a problem that the whole team needs to look into. The manager knows this is common problem in hospitals. She had in fact worried that this might happen while visiting the gemba recently – where she remembers wondering how the pharmacists managed to tell medication apart when so many of them came in such similar containers. Her experience studying the work at the gemba has changed her perception and immediately alerts her that the medication error is a huge problem. As a lean thinker, her first instinct – or intention – is to solve it. For her evaluation, she goes to gemba and talks to as many people as she can, really trying to grasp the situation and understand whether an intervention can have the desired result. Once she determines that this is in fact the case, she decides to act. She forms a small team to analyze the problem in depth and uses A3 thinking to solve the issue once and for all through a simple, but clever system of colored tags and poka-yoke. As the team gathers to reflect on their learning, the success of their kaizen inspires them to share their experience with the rest of the hospital so that other areas can also avoid medication errors. A year later, the hospital records zero instances of medication error for six months in a row (and counting).

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WHY NOT SIMPLY PROBLEM SOLVING?

Until now, we have discussed how applying lean to the five dimensions of decision-making makes great sense. But the same positive outcomes can be seen if we look at this the other way around: decision-making gives us a much more complete view of our lean transformations than just problem-solving. It forces us to ask ourselves questions that would otherwise remain unanswered – what problems do we pick? Why? Based on what indicators? Why do I decide to go ahead and tackle this problem?

Looking at the five key elements of decision-making might just make us better at lean, because it can add a new dimension to our discussions and give us a new way to look at the challenges before us. To those of you who are on a lean journey and feel sometimes stuck, this perspective can help you see things in a different way, find new doors to unlock. Decision-making lies behind all the dimensions of a lean transformation, which is why it is so important we look at it and better connect it to our lean transformation efforts.

As we study lean transformations, our focus until now has been almost exclusively on problem solving. While this is of course fundamental (it lies at the heart of lean), problem-solving without solid decision-making goes nowhere. I think we are missing an opportunity by ignoring the role of decision-making in our lean journeys. If we believe that decision-making constantly comes into play in our daily lives, why are we not discussing it more? Why don’t we treat it as the transformation driver it is?

I employed an accountant many years ago to head up the debt collection department in the company I was managing. On paper, she had all the skills and experience required for the role, and she presented herself well at the interview.

As she settled into her position, I was very impressed with her tidiness. Her desk was clean and uncluttered, and she was punctual, pleasant and helpful. (I must confess that I often wished that the person in charge of creditors was as tidy and organized.)

At the beginning of the third month, I started to see that we were not collecting the debts as well as we used to. I had a meeting with her to discuss the issue, and the excuses she gave sounded reasonable. As time went on, I realized that we had a problem. Before one of our scheduled meetings, a letter of resignation came onto my desk. She left the business the following day.

As we tried to catch up on her work, we realized we were in for an unpleasant surprise. She hadn’t done filing or responded to queries in three months. She had just neatly packed away all the paperwork in the bottom drawer of a filing cabinet. So much for a neat and tidy desk! It took a lot of time and effort to catch up.

Now, when I walk through an organization and see that everything is neat and tidy, I ask myself it’s real or just an illusion of efficiency. Without seeing private draws and storage rooms, it is impossible to tell.

During our lean transformation, a similar problem cropped up with the usage of plastic stacked filing trays. Staff members were hiding problems in them – not to purposely deceive but to handle later, when they had time. We all know how much the procrastination monster loves this sort of thinking and how happy it is to help us dig ourselves into a deeper hole.

When looking at a job being done in a factory, on a vehicle or any other physical item, it is relatively easy to see and observe the work. It is much more challenging with paperwork, however, as it is easy to pack a great deal of work in a stacked tray without anybody noticing.

Invoices, queries, estimate requests, and payment advice documentation can just be left in a neatly stacked pile until someone needs the document, which typically instigates a great deal of searching.

During the lean transformation in the administration department of our Service Centre, we had to make the work visible, to see if we were ahead or behind. Failing to do so would have made it impossible to develop flow or identify bottlenecks.

The very design of a stacked tray encourages the piling up of work: it contains a neat space that creates the illusion of efficiency. To move away from this, we had to work on something a little less comfortable.

To understand the process, I sat with a service advisor who had difficulty staying on top of his paperwork. I went through the paperwork with him at his desk. As I asked questions, I recognized that there were only two responses to the documentation on his desk. One is that nothing prevented him from completing the task, and the other was that a senior supervisor had to assist with information or approval.

We cleared all the work off his desk, removed the stacked holders, and using duct tape we taped two squares onto his desktop – a red one and a yellow one. The yellow represented “nothing stopping the work to be done”, while the red signaled a “hindrance to completion of the work”. Yes, I could have used trays, but I wanted to make it uncomfortable and easy to see a pile-up of papers.

The red square Andon response signaled the supervisor that this was a problem requiring assistance: they had to help the service advisor turn red to yellow to complete the task.

We then did this in the entire office, for every desk, and all filing was done centrally into visual holders so that everyone could have access and understand the progress of the work.

It became the service advisor’s task to sort the documents into the two squares. It became the supervisor’s task (now called Andon response) to constantly check the red squares and assist the service advisor in turning red to yellow.

Initially, the supervisors were not too happy with the changes, as it put some pressure on them to work through the red squares. After dealing with the initial backlog of problems, however, they realized that:

• They could see if their service advisors struggled to keep up or were overburdened with work that day.
• They had fewer confrontations with unhappy customers.
• Problems were solved before they became an emergency.
• It was easier to locate documents.
• They had better days at work.

The service advisors started to understand that:

• They had more time to assist the customer.
• It was easier to focus on the work to be done.
• They made fewer mistakes.
• They went home on time with the day’s work done, giving them peace of mind.
• They also had better days at work.

During the first three months of implementation, I spent a lot of time in this space. I was constantly observing the condition of the squares, especially the squares that belonged to the service advisors, to see how we could help them with their work and the problems that were constantly reaching their desks.

It was not only the Service Centre that gained from this change. As a leader, whenever I walked through this space, I could see how their day was progressing and what was causing problems.

We often think that 5S is all about factories and workshops, but this is an example of 5S in an office, applied to administrative work. Having 5S in this space created a visual management tool that allowed us to see much more than just “clean and tidy”: it allowed us to see the work and how it progressed.

5S supported us in the development of the single-lane flow of documentation within the Service Centre, speeding up the time it took to get the vehicle back to the customer, helping us align to the words at the top of our house. Fixed right, first time, on time.

The development of flow took time and effort, but – looking back – it’s clear to me that it would not have been accomplished without the Andon squares.

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Words: Sharon Visser, CEO, Lean Institute Botswana

By generating value for customers while reducing waste, Lean Thinking can help organizations to dramatically improve their competitiveness. Over the past three decades, the adoption of lean principles and techniques has spread to every industry. Essential to the success of these lean transformations is, as we now know, a deep commitment of the leadership team, which means that the development of lean leadership – and the behaviors, skills and capabilities it calls for – becomes pivotal. 

In recent years, manufacturing companies have had to deal with increasing complexity and customer requirements. Increased international competition and market volatility, coupled with customers expecting every more highly customized products, present huge challenges to these organizations – in terms of costs, flexibility, adaptability, stability and sustainability.

In a bid to meet these challenges headfirst, a team of leading thinkers tasked with developing a high-tech strategy for the German government came up with the concept of Fourth Industrial Revolution – or Industry 4.0. In 2018, Schwab defined Industry 4.0 as a set of ongoing and impending transformations in the systems that surround us.

Industry 4.0 is a new chapter in human development – on par with the first, second, and third industrial revolutions – once again driven by the increasing availability and interaction of a set of unique technologies. Industry is facing an era of significant transformations and leaders will need to develop a very specific stance and develop specific skills if they are to facilitate innovation and let it take the lead.

The integration of lean manufacturing and Industry 4.0 has been a recent topic of discussion among scholars and practitioners of both approaches. A number of studies have showed the synergy between lean tools and Industry 4.0 technologies and claim that lean leads to stable processes in which automation and digitalization can be successfully implemented. They also shed a light on the effects of Industry 4.0 technologies on lean practices and sustainable organizational performance. In this context, Lean Thinking has been seen as a facilitator for Industry 4.0.

Based on this analysis, it was concluded that smart factories encourage the promotion of lean principles and that, in turn, lean is a foundation on which to build a system that allows us to implement the changes made necessary by the coming of the Fourth Industrial Revolution.

A study developed by Bianco et al this year focuses on 18 lean leadership competencies and six Industry 4.0 leadership competencies. Its results show a clear relationship between the two sets of leadership competencies. The analysis used interpretive structural modelling (ISM) and the MICMAC approach (Matrix Cross-Reference Multiplication Applied to a Classification) to investigate the driving power and dependences of lean and Industry 4.0 leadership competencies. A structural model was elaborated, showing the hierarchy among the investigated competencies, indicating the ones that should be prioritized.

This structural model was developed based on the opinion and validation of 23 experts in both lean manufacturing and Industry 4.0. The main conclusion of the study is that lean leadership competencies can sustain the competencies that should be developed in leading engaged in Industry 4.0. Additionally, a strong synergy among the competencies from both approaches was observed. The results obtained in this study may inform the development of new leaders who will be called to work in an Industry 4.0 environment and will help them to integrate Industry 4.0 practices with Lean Thinking.

As seen in the graph, lean leadership competencies support leaders in Industry 4.0 – they occupy the lower part of the diagram. What does this mean? That before considering a transformation of the production system using emerging technologies, leaders must develop 10 lean competencies that will support this change. (In the model, they are those contained in levels I, II, and III).

The fact itself that the LC12 competency (always being present at the shop floor) is the base for all other Industry 4.0 leadership competencies corroborates what the available lean literature tells us about the need of leaders to be present at the gemba to acquire direct, in-depth knowledge of the process. With the arrival of Industry 4.0, leaders in production have experienced an increased complexity in the manufacturing process, which calls for an overhaul and improvement of the whole system. Without a deep understanding of the process and its interdependencies – which you can only really get at the gemba – change is not possible.

Level III of the diagram presents a series of lean leadership competencies that are preconditions for the development of the competency to be developed by the Industry 4.0 leader (IC6). Leaders must develop the knowledge and skills set of employees, thus contributing to the creation of a culture of experimentation and learning from which fear has been eliminated and new endeavors can be pursued with confidence.

This finding tells us that before revolutionizing the organization with the adoption of new technologies, leaders must ensure experimentation permeate the daily life of the business and shape its culture. Taking risks to learn rather than obsessing with perfection. As an essential competency of a lean leader, this competency tackles the all-important challenge of encouraging employees to solve problems without direct supervision (LC13). This skill is critical for those who will be working in a technological environment.

In the model, competency IC6 is the base of the fifth level in the structural model. Promoting and spreading the experimentation and risk-taking culture (IC6) will prepare people for their interaction with new technologies (IC4), which in turn will give them autonomy and empowerment (IC5). These competencies are focused on employee development and preparedness in continuously changing environments, contributing to more sustainable innovation in the long term. Which is of course key in Industry 4.0. Training and continuous professional development are, therefore, crucial to the success of a digital transformation in its early stages. Industry 4.0 requires the workforce to possess a high degree of knowledge and dexterity.

Although the competencies of lean leaders represent the basis for the development of the Industry 4.0 leadership competencies, in the structural model we also found that the opposite is true. Indeed, some Industry 4.0 leadership competencies can significantly influence a lean transformation. Lean leaders stimulate employees to solve problems autonomously. As they start learning from their mistakes and seek different solutions on their own, they become more empowered and willing to try things out.

Some lean leadership skills are positioned high up in the model, at Level V (specifically, LC6, LC7, LC8 and LC17). They are connected to the need of keeping employees – and, indeed, the whole organization – motivated and fluent in lean principles, always aiming for continuous individual development and eliminating barriers to change as they appear. These competencies embody the importance of understanding that lean is a continuous improvement effort and not just a few projects with a beginning and an end. And aren’t we used in the Lean Community and literature to say that lean is a never-ending journey?

These four skills play an important role in shaping the future steps of a lean journey and expanding its reach the whole organization and supply chain (LC18 and LC9, shown on level VI in the model). Interestingly, LC6, LC7, LC8 and LC17 are also crucial to Industry 4.0 competencies shown at levels VI and VII (skills here have a high dependence power).

The model says it clearly: mature leaders are well versed in lean principles. Moreover, they must be prepared to assume the responsibility of impacting the organization and society with the emerging technologies they deploy. The Industry 4.0 competencies at level VI – IC2 and IC3 – speak to the need of implementing technology only when it brings advantages to the production process. One role of a leader is to design systems that leverage new technologies to give people freedom and control of their own lives. The IC2 competency (be analytic when allowing the implementation of advanced technologies) is particularly critical.

The last level of the structural model (VII) is composed of only one competency from Industry 4.0: implement technologies to promote the organization’s business model (IC1). This shows that the implementation of Industry 4.0 technologies requires the business to be prepared and employees to support change.

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TO CONCLUDE

This model makes it clear that the competencies typical of a lean leader will sustain Industry 4.0 practices and facilitate innovation.

There is no doubt that Industry 4.0 will bring dramatic changes to the production systems around the world, impacting leaders, employees, whole business, even society. This study suggests that leaders must develop specific competencies to really tap into the potential of new technologies and make the lives of employees easier. We hope that leaders will find this structural model of help as they try to adopt strategies and practices related to Industry 4.0. A leader called to act in a tech-heavy environment must develop a specific set of competencies to fully prepare for the Fourth Industrial Revolution: our model highlights the importance of lean skills in this all-important process. Without lean, the promise of Industry 4.0 won’t be entirely fulfilled.

FEATURE – Reflecting on Nomura-san’s recently published book on radical quality improvement, the author encourages us to embrace the spirit of “Dantotsu” to meet the challenges we face as a society.

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Words: Michael Ballé, lean author, executive coach and co-founder of Institut Lean France

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Over the years, I have heard many great stories on Nomura-sensei from my friends at Toyota’s South African plant and from TIE’s forklift plant here in France. Reading his book is a real delight – if somewhat wistful.

I remember when we did all this stuff, with my father Freddy, in automotive plants across Europe at the turn of the century. And then, some time after the Lehman Brothers crisis – right about when Nomura-san started his Dantotsu initiative with Toyota’s forklift operations – we somehow stopped.

We didn’t stop lean, mind you. Companies new to Lean Thinking, whether in construction, car refurbishment, hospitals or digital start-ups, all had spectacular successes with the same fundamental principles of putting customers first, reducing lead-time and reacting right away to quality issues in order to train people to be better at their job. The leaning of companies continued: progressively, we had the ear of CEOs and were able to explore what lean meant as a full company strategy, as pioneers like my father or Art Byrne had experienced it.

What we stopped doing is the rigorous, detailed work of collecting quality and lead-time data, standardized work training, and so on. For many years, the name of the game in car plants was tracking complaints, then defects found at final inspection, then at the end of the line, then at the workstation – gradually moving the curve backwards towards self-inspection, thus reducing the lead-time between defect occurrence and detection. We opened up machines to find ways to self-inspect the process. We drove rigorous and detailed technical analyses of where defects came from. We used Production Analysis Boards systematically to engage operators in rigorous analysis of missing production. Before starting production, all 4Ms (man, machines, materials, methods) aspects of a line were checked by team leaders and conditions corrected by supervisors whenever something went amiss.

The same detailed work was conducted on flows, with laborious Materials and Information Flow Analyses (forget VSMs – MIFA is the real deal) and tracking kanban cards one by one (before the use of bar codes was generalized) to understand exactly what happened in the flow and where the backflows were.

And the results were as described in Nomura’s book – steady, but uneven. With breakthroughs and backslides (new model, summer workers, change of local manager). And, what is less discussed in the book, behind each improvement of the results, the human stories of hours of discussion, investigation, sometimes argument (“We’ve progressed so much. Why do you want us to do it again?”).

I can’t help but wonder – we know we should be doing this (indeed, in my case, I’ve been privileged to be taught this firsthand), so why aren’t we?

Maybe it’s just me. Did I go soft? At some point I got tired of the arguments, the pushing and pulling, the cajoling (sometimes, the threatening) to get reluctant managers to stop playing the system against the system and actually do the work: inspect all parts, in their real conditions on the shop floor with the operators. Or more generally to simply actually care.

It also seems the lean movement as a whole lost some of this oomph as it veered towards coaching (to what?) or admin processes (to what end?) and progressively minimized the importance of looking for muda and how to eradicated it. Few lean efforts I now visit are serious about reducing lead-times by installing pull and creating flow, or radically reducing defects and not-right first time.

What troubles me most is that whereas the financial crisis of 2008/2009 should have been a turning point in our understanding of the catastrophic impact of financial management on industrial companies, it seems that the opposite has happened. Financial management is now the firmly established norm. Value is harvested on the stock market (or at the resale of unlisted companies) and created through expectations management rather than performance improvement. It’s all about what story the analysts want to hear, how the market will take this or that move, never about competition and advantage building.

Our real problems, however, are only beginning. You can deny gravity all you want, but gravity doesn’t care – it’s still there. Global issues such as climate change and pandemics will continue to disrupt supply chains and require deep technological solutions if we want to retain our way of life.

Dantotsu is the way – not only to achieve results but to learn more deeply about the reality of our delivery and production processes. Dantotsu is absolutely necessary to train the next generation of engineers who know about real processes, not just moving digital levers on a smart tablet. Dantotsu is about getting your hands dirty, gathering the data and learning to speak its language – recognizing what one scatter dot says versus another.

“Lord, we know what we are, but not what we may be,” says Ophelia, distraught in Hamlet. We’ll never know quite what Shakespeare had in mind when he wrote the line, but to me, it strikes a very deep chord. We also know what we were. I have been deeply affected by Sadao Nomura’s book on Dantotsu because it speaks so directly to what we are, as opposed to what we were, and what we may be if we only have the will and grit to own our own thinking processes and polish our methods.

Don’t miss out on this book. Take it one step at a time and really read it. Compare your current practice with what he suggests. Ask yourself what you could be doing better if you tried. We are incredibly fortunate to read his published briefings and share his thinking. Whatever mess your company is currently in, there’s a blueprint for getting out of it. It’s the way of Dantotsu radical quality improvement.