Business, Lean

Flatlined – Why Lean Transformations Fail and What to Do About It

Download this executive summary in PDF: Flatlined by Mark Deluzio

Chapter 1 Why Companies Have Flatlined

Companies that are making money don’t have an incentive to improve their process.
Same as professional athletes, lean transformation requires discipline.
Lean is used as a tool to get short-term results instead of focusing on the process and long-term transformation.
Doing lean in non-strategic areas doesn’t move the needle.
Lean is not only for the shop floor but for the whole organization. Using a value stream mapping reveals that problems may come from other areas of the organization.
Point kaizen improves a single function or target area, it has a low impact on results.
Leaders are not fully invested nor actively involved enough in the lean transformation.

Chapter 2 The Solution in Five Steps

Lean principles apply to any kind of business. There is waste in the traditional thinking and practices we inherited. Lean is a growth vehicle for the organization.
Default to the basics of lean for results: heijunka level scheduling, standard work, kaizen, just in time, jidoka, and SQDC hierarchy.
Lean goes hand to hand with business strategy deployment. Align your lean transformation with your strategy.
The whole organization should adopt lean thinking with kaizen, not in some areas but in the structure and operations.
Use lean principles to evolve your company’s culture. You will need lean leadership in the right place to challenge the status quo.

Chapter 3 Step 1: Shift the Lean Mindset for Sustainable Results

The lean trilogy: for long-lasting results, the lean strategy should consider the employee, the customer, and the shareholder.
Focusing on reducing costs to satisfy the shareholder may have a positive impact in the short term but may reduce employees’ motivation.
The employee will not cooperate and do kaizen if management plans to reduce headcount.
The customer will love you to reduce the price but it may put at risk the financial stability of the company.
Tradeoffs are necessary to optimize the three stakeholder’s interests.
The “we’re different” mentality: it is an excuse for managers to refuse to change. You are not Toyota but you can still apply the lean principles in any business.
Lean as a growth vehicle: by improving quality, on-time delivery, and lead time, you will gain some competitive advantages other than cost to get some market shares.
Six Sigma is a statistical tool that has its place along with lean but it should be used when suitable.
Six Sigma takes longer to collect data and accepts 3.4 defects per million which are against the zero-defect philosophy in lean.
Only Six Sigma experts understand Six Sigma while lean asked for everyone to contribute to the continuous improvement process.

Chapter 4 Step 2: Default Back to the Basics

The foundation of true lean is heijunka, standard work, and kaizen.
Heijunka is a process to level-load the production schedule over a predetermined time horizon.
Strive to get a one-piece-flow, if too difficult, do a pull system, but never a push system.
Standard work defines the interaction of people and their environment when processing a repetitive product or service. You can improve upon this standard.
The takt time is the rate that the customer is placing orders on a particular operation.
By respecting the takt, you can produce without building inventory or doing overtime.
If one process is exceeding the takt time, we don’t blame the person but the process.
The standard work sequence is the order the operator has to perform his tasks.
Standard work in process (WIP) is the amount of inventory necessary to keep in the process that will allow the operator to continue operating within the work sequence.
Kaizen is continuous improvement in Japanese on small and/or strategic initiatives.
Just in time is producing what is needed, when it is needed and in the quantity needed.
Jidoka is when a machine is capable of stopping by itself when there is a defect or malfunction and alerting the operator.
Prioritize according to SQDC, Safety, Quality, on-time Delivery, and Cost.
Relate back to real life. Produce what is needed, it is a waste to stock in inventory what is unnecessary to optimize machine utilization.

Chapter 5 Step 3: Align Your Lean Transformation with Strategy

The strategy deployment process is a methodology to deploy key improvement initiatives aligned with your strategy.
At Jake Brake, they reduced the product development cycle from 72 months to 18 months by focusing their kaizen strategy on SMED to reduce changeover time.
Top management should prioritize profitable growth/operational improvement/financial improvement or a mix of the three instead of working on too many non-strategic initiatives.
The first step is to map the strategy and how the organization is connected. Then, empower the teams to define the problems, make decisions and implement the solutions.
Using PDCA Plan-Do-Check-Act to solve problems locally, not to explain why it fails.
While strategy deployment focuses on key initiatives by multifunctional teams, daily management manages and improves daily metrics.
With a robust daily management system, management has more time to work on strategic priorities.
Being above average competitors in performance is not acceptable. One must benchmark with world-class standards.
Disrupt the status-quo by learning the standards from the best in the other industries.
World-class benchmark is relative, you can be the best this year and become average next year.
Breakthrough happens when leaders overcome their fear around attempting them, when you don’t know how to do it yet, and it’s a cross-functional team effort.

Chapter 6 Step 4: Make Lean an Enterprise Endeavor

Point Kaizen is necessary for lean transformation but it is not enough to change the organization.
Senior leaders must have a high degree of lean IQ to transform the organization as a whole.
All functions and managers should be willing to conduct business in the lean way.
Value stream management is: “a grouping of all the processes necessary to bring a product or service from its raw state to a finished product or service that is profitable saleable to a customer.”
With value stream management, all the departments work together and share the resources to serve the customer.
Muri (unevenness) and mura (unreasonableness) are generated by policies set by management.
The 7 wastes of muda (motion, inventory, overproduction, defect, transportation, walking, over-processing) are eliminated by point kaizens in the operations.
Management needs to understand muri, mura and muda to eliminate them at all levels of the organization.
Lean accounting is applying lean principles to accounting.
Absorption accounting, purchase price variance, and traditional capital justification promote the wrong behaviors.
Producing more units to reduce the cost of fixed overhead per unit doesn’t really lower the cost. Cost is transferred into the inventory.
Purchasing more stocks to get a discount is also wrong if the stock is not used and becomes obsolete inventory.

Chapter 7 Step 5: Use Lean Principles to Evolve Your Company’s Culture

Lean culture is not a slogan, it must be seen in action and employees’ behaviors.
The CEO has a crucial role in leading the lean transformation.
Is the CEO invested in the transformation? Does he believe in the benefits of lean on the organization?
The CEO should empower lean leaders in each business unit to spread the word and practices in the whole organization.
Lean leaders should go see, ask why, and show respect.
Go see means going to the gemba where the work gets done so he can understand the situation.
Ask why means management is asking the right question daily to realize the problem.
Show respect is committing not to reduce headcount when there are improvements, providing tools and training so the people can perform their tasks effectively, and cultivating a blameless environment.
Around 10% of the organization will be naysayers. Give them a chance to change. If they refuse to adopt the lean culture, you may have to remove them even if they are skilled.
Challenge the status quo by questioning the practices and the “we have always done this way”
Delegate problem-solving to those closest to the work. Provide the tools and training so they can solve the problems.

Chapter 8 Conclusion

There is no quick answer for lean. Automation and ERP are valuable if thought carefully. Lean doesn’t replace your business strategy.
Lean is more than appearance (clean shop floor, metrics on a wall,…), it is a mindset. Being lean is focusing on the right problem.
A good lean leader is ready to learn, is involved, and is committed.

Download this executive summary in PDF: Flatlined by Mark Deluzio