Leading Lean: Get Your Payback From Lean!
Investments are made expecting future payback. You invest in people through training and coaching. You invest in improvements through capital equipment and process changes. You invest in leadership through your own time and energy. You invest in lean, so shouldn't you expect a payback?
Of course you should. After all, lean is not the goal, it's a means to achieve your business goals. But payback is where too many lean efforts fall short. Employees are asked to shorten lead times, improve capacity, reduce floor space and improve productivity. They do all this but, too often, the profits are missing! This is partly due to challenges in accounting, and increased material costs. But the hidden and most dangerous reason why companies do not realize gains from getting lean is because they haven't changed what they do in their markets. They don't take full advantage of the resources that are freed up by getting lean!
To understand this better, it's useful to rank the role manufacturing plays in the overall enterprise. A Stage One company has managed to stay in business in spite of its manufacturing capabilities. A Stage Two company is in a fairly neutral position; manufacturing neither helps nor hinders the business. A Stage Three company has strong manufacturing capabilities that effectively and efficiently support the company's business strategy. Many lean companies reside happily in Stage Three; what more could one want?
But remember, lean is not a goal, it is a never-ending journey toward a goal. Therefore, I propose that you should strive for Stage Four, where your manufacturing capabilities reshape and drive your market strategy. The perception of your company in the marketplace is derived from your advanced operational capabilities. To fully realize the gains from lean, more companies must go beyond "booking the savings" and turn more towards creating new strategies.
This is not a new concept. My grandfather, Don Flinchbaugh, started a company that made cigar manufacturing equipment and military ordinance casings. While that seems like an odd combination, the capability to machine parts was a core competency in those days. I never personally knew the company, as it was sold before I was born, but I visited recently. One of the very few employees who was there during Don's era told me that if Don walked past a piece of equipment and it wasn't running, he asked why. If the answer was "we don't have any work for it," he would go out and find a new customer or new need. The next day, that machine would be running again. He was able to quickly turn a resource-capacity-into a gain-new revenue. This might sound like a simple concept, but it illustrates how a Stage Four company should think.
The roadmap for realizing the gains from getting lean comes from the intersection of two lines of questioning. The first line represents the needs, problems and wants of customers, both new and existing. The second line represents your capabilities, including such things as capacity, proposed increases in capacity, dramatically improved quality and new skills. Where do these two lines intersect? Where have you grown capabilities that you have not yet turned into value for your customers?
Do not ask people to deliver manufacturing improvements without turning those improvements into results. That is your responsibility as a leader and, if you fail, you'll have two problems. First, you will not see the results you expected on the bottom line. Second, you will lose momentum because people will see their efforts essentially wasted, instead of generating results. This is the difference between a good-looking lean company and a good-performing lean company. Which one do you want to be?
Whether you agree or disagree, Jamie will welcome your comments. Contact him at email@example.com.