FEATURE - Projects or programs? The authors discuss why Lean Thinking must go beyond small operational improvements as a transformative strategy that balances today's requirements with the adaptability of the future.

Words: Michael Ballé and Julie Chevalier

Where should we look for results in Lean? Looking back, it is easy to say it enabled us to achieve this or that - stories are told in hindsight. Companies we know firsthand have doubled or tripled their revenue over the past 15 years while maintaining profitability and weathering endless crises from COVID-19 to IPOs. Their CEOs will say Lean is a big part of their success story, but they will also express frustration with how to get their own managers to see it as a priority as events unfold. That Lean is a fantastic support for a company's ambitions is obvious in retrospect, but not so much when you're in the middle of it, because the pressure to just get the job done, deliver short-term results and hope for the best is relentless.

Imagine you are a middle manager in a service company. A major customer regularly complains about your turnaround time and price. As you review each unhappy e-mail, you find nothing out of the ordinary - there is always a valid contextual reason for what happened and you are clearly no worse than your competitors. So, you should:

• Apologize, explain and promise to do better next time and then get on with running the business of the day with the usual heap of burning fires? (Path 1)
  
• Or should you apologize, explain and promise to do better next time by investing in a program of gemba walks and kaizen events to figure out what is really lacking for this customer and how to improve both the deal and the relationship? (Path 2)
  

Of course, there is also a third path: get comfortable, ignore everything and expect the problem to go away on its own as long as people show up in the morning and do their jobs (which is what actually happens in most places). Your CEO says to follow path 2, but:

• You don't have time or resources right now.
  
• You are not sure how to go about it.
  
• You don't see how this would solve your long list of immediate problems.
  

And these are absolutely valid points. As a sensei once said to one of us, "You have to find a balance between today and tomorrow. If you only take care of today, you won't have tomorrow, but if you only look at tomorrow without taking care of today, you won't have tomorrow either."

The question is how? Here's what we know so far:

• Traditional management lets you ride along with market conditions. You grow and make money in good times, you stagnate and lose money in tough times, and eventually an unforeseen crisis will kill you. Until that happens, the stock market is hypersensitive to positive projections in the short term and merciless in the medium term.
  
• Point optimization in savings projects is common because you can easily project the return on investment: here are the points we need to improve, here are the consulting resources we can invest in, and this is the payback time we expect (and many consultants are happy to sell this to you). We also know that these programs always fail within two to three years (the savings do not appear on the books and what was changed under pressure from the consultant returns to normal) and probably worsen the overall situation by making the company more fragile rather than more robust.
  
• Lean transformation programs deliver on their promise for CEOs who are fully committed to understanding, practicing and teaching Lean , but these are few and far between. Such results are difficult to quantify because they are impossible to disentangle from market conditions unless you are bright enough to make projections "with lean / without lean".
  

So what do Lean CEOs want to achieve with Lean? Where are they looking for it? How are they trying to find it?

CEOs know that if their company is viable, the basic value proposition is in order - with different levels of market margin (some markets are profitable for all competitors, such as technology until recently, while other markets have very low margin, such as anything automotive). They also know that their performance will be affected by how well the company runs from day to day and how well it responds to market shocks. They also know that they have to renew their value proposition by innovating, which means making bold and difficult choices.

In this sense, building on Jim Morgan's formula for a successful management system, I would argue that, viewed from above, performance breaks down into three major components:

• Positioning the company in the market.
  
• The culture of the organization.
  
• Business systems.

This, in turn, is supported by actionable levers:

• Smart choices for better market positioning.
  
• Leadership behaviors to maintain a positive can-do culture.
  
• Improvement activities to support the operating system.

For Lean CEOs, Lean provides a framework for dealing with these very complex dimensions of running their business:

• A Lean strategy of quality and a broad lineup to satisfy every customer segment and flexible operations to better accommodate variety.
  
• The Toyota Way as a canvas for leadership behavior.
  
• The Toyota Production System as a system of improvement activities to keep the business system moving.

In short, what CEOs are looking for in Lean are not only day-to-day operational performance, but also the adaptability to respond to the inevitable crises that will occur in their markets in a VUCA world and the strategic ability to open options in the future for innovation and pivot. To look for this, they strive to clarify strategic challenges (which challenges do we address, which do we ignore, what are our options, how do we address it?) and develop internal leaders who will themselves support a Lean culture. They realize that it is not enough to pile one Lean project on top of another and that they need a more robust transformation program of Lean activities to guide their operating system.

What does such a program look like? Thirty years of studying how Toyota proceeded and conducting Lean experiments gives us a pretty good idea of how to do it. It starts, of course, by going to the gemba and visualizing processes to solve everyday problems:

The next step is to organize and support daily kaizen activities for all people, such as kaizen workshops, quality circles, follow up suggestions and so on.

The third step is to teach front-line managers to distinguish between "good" kaizen, which delivers value to customers or makes life easier for teams, and "bad" kaizen that reinforces bureaucracy - this is an essential step to begin building the right kind of culture by developing the leadership muscles of orienting to customer satisfaction and employee engagement rather than working around problems and reinforcing bureaucratic controls.

This leads to a look at executive changes. Department leaders and function heads are constantly making process changes to optimize the operation of their function, but in most cases, someone's solution is also someone else's problem (think of what happens when HR changes a policy). Functional changes create cross-functional problems that can cripple the business, but can also be avoided through honest communication and mitigated through kaizen capabilities. This makes our fourth step of the program: share executive changes across functions and solve the resulting problems for the teams.

The fifth and final step is a common recognition of the structural waste of the business. We're not talking about the waste of time spent searching for your favorite pen, but rather the understanding that whatever operating system there is to deliver value will involve the inevitable waste that most companies consider a "normal cost of doing business." A car dealership will have to maintain inventory, a B2C company will lose some dissatisfied customers, large industrial plants will have unused capacity, and so on. Because the program allows us to discuss kaizen opportunities by visualizing the TPS, these structural wastes will gradually be recognized and understood by the leadership team, which can then focus kaizen efforts on eliminating them. That is the transformational part of the program.

From this perspective, one can see how Lean projects that are not part of the more comprehensive vision of a Lean transformation (focusing instead on optimizing this or that process) can make the company less adaptive, rather than more so. In such a scenario, a company may recognize the structural wastes in its working methods, but will see them crop up regularly with each new external change (they are inseparable from how the company does business). Adaptability is thus the result of constantly fighting these wastes in changing circumstances.

The same sensei who taught us the importance of always seeking a balance between today's needs and tomorrow's needs would also always have us go back and look at an operator's steps in a workplace: "one meter, one step, one penny." And he was right, of course. The smallest change on the line affects the way operators must move to do value-added work. But it took me decades to realize that this only applied to production lines with high branch time. Operators who build one complex machine a day, for example, will be less affected by steps than by missing parts or technical errors. Waste types, such as Ohno's famous seven wastes, are tied to a specific operational set-up. They're a good starting point, but what about the waste of talking to customers in the wrong tone for a B2C company, or choosing the wrong sales channels (as Nike recently did by moving away from focusing on stores and trying to do all its business online, severely damaging its brand presence)?

To reap the promised benefits of Lean , we must look up from the toolbox (without ignoring it) and ask ourselves fundamental questions: what are we looking for with Lean? Where do we look for it? What do we expect to find? Daily process performance through greater process control is not transformative - too often it just leads to more bureaucratic pressure. Performance and adaptability through embracing a Lean strategy, Lean leadership behaviors and an Lean operating system are. To get there, however, we need to completely rethink how we "do" Lean in practice and draw lessons from our many experiments and long experience with Lean initiatives. Real Lean thinking is the way to better performance, greater engagement and ultimately a more sustainable society. We must look to the horizon and seek that path to find it one day.

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