Ask Art: How Much Time Does It Take to Complete a Lean Transformation?

Let’s get this straight: before you even get started, your first question is, “When will we be done?” Seriously, that’s how you think? If so, then my advice is don’t even start. You don’t understand what lean means, so all you will do is cause a lot of confusion and wasted effort before you eventually fail.

Let’s start by challenging the way you think about “lean.” If “lean” is another way of saying “continuous improvement,” would your first question still be “When will we be done?” After all, continuous improvement does mean continuous, so, by definition, once you start down the (lean) path, you will never be done. Toyota got all this started right after World War II, and they are still driving the Toyota Production System (i.e., lean) just as hard as ever today.

Once you accept the reality that you will never “be done” with this essential work, we can start to talk about what you need to do, and I can give you some ideas of what you can expect regarding timing. First, understand that because companies are very different in their physical and organizational structures, this will affect the rate at which you make progress. Size also comes into play, as transitioning a $50 million business will take less time than a $10 billion business.

Also, though your lean journey will never end, it’s reasonable to ask how long it might take you to achieve a sustainable transition. In answer to that, I’d say two good indicators would be when most people participate in daily kaizen, and you’ve transitioned most of your operations from batch and queue to flow and pull.

The biggest factor determining how long it will take to reach that point depends on the will and commitment of the owner/CEO. The enormity of changing from a traditional batch approach to a lean flow-and-pull approach tends to scare the heck out of CEOs. In my experience, they invariably ask questions like: “What if this doesn’t work?” “What do you mean everything has to change?” “Move every machine in the shop — are you nuts?” “Sell one, make one! We can’t possibly do that.”

The biggest factor determining how long it will take to reach that point depends on the will and commitment of the owner/CEO.

Most CEOs choose a “go slow” approach, wanting to try a few lean practices or tools cautiously to see if it works. Then, because they think of “lean” as a cost reduction effort, they focus primarily on operations. With this approach, a company can still make gains and even become a reasonable lean enterprise one day. However, stretching the timeline boosts the odds that they will fail along the way and revert to their batch and queue ways.

Let’s imagine we have a CEO or owner who is keen on converting to lean and wants to do it as fast as possible to deliver the most value to their customers. If that is the case, the company is trying to go from batch-and-push scheduling to flow-and-pull scheduling.

The biggest obstacles along this path are mental challenges. Even an aggressive, committed CEO will find individual and organizational biases the most difficult to overcome. For example, consider that every significant aspect of running the business is tied to fixed start and completion dates. And yet, with lean, you must accept that you will never be done — there is no end date. This simple notion defies human nature, especially the “get it done” mindset of most business leaders who are used to an endless series of end dates like “make-the-month” numbers. Or the formal beginning and end of every capital spending project or the target introduction date of a new product development cycle.

Even if your aggressive CEO fully commits to lean and can embrace that lean has no end date, you must now convince everyone else to think differently. Your associates will have to accept different goals and targets, not to mention annual bonus payouts. I know from experience that lean is “all about people.” So, expect significant hurdles when you do the essential work of converting your people to this new way of working —-and even thinking. If you can’t get everyone on board, you won’t be successful, and of course, you can’t do this overnight. That’s why your conversion will go quicker depending on how extensively the CEO commits to it from the very beginning.

Successful lean transformations start with the CEO articulating a vision and set of stretch — i.e., “are you kidding me?” — goals that will totally change the company’s ability to compete. The CEO will also establish the training to help everyone learn how to see and remove the waste: kaizen, kaizen, kaizen.

The CEO must set the pace at which the company will proceed. In my experience, I have seen too many companies set a slow pace of one kaizen every six weeks, ensuring that they will never get past the tools stage of lean. Even companies that start at a fast pace with good initial results have run out of gas after three to five years and started to go backward. They face these obstacles by refusing to believe that EVERYTHING must change, not just operations. Time will eventually expose this lack of total commitment.

But let’s be positive. Say that your aggressive CEO sets stretch goals, gets everyone on board, and sets the right pace. You will still encounter physical hurdles that take time to overcome. If, for example, you are a manufacturer, you can’t go from batch to flow and keep your two- to three-hour setup times. You will have to reduce the setup time for every piece of equipment to less than 10 minutes. How long will that take you?

You will also face other built-in speed bumps when you make essential changes, such as creating flow. To achieve this, you will need to change from a functional organization to a value stream organization. Each value-stream leader needs to control all the machines required to make their product(s), meaning you will have to move just about every machine you have to create one-piece-flow lines. At what rate can you do this?

And once you have created flow, you will need to create the pull signals necessary for you to respond quickly to the demand of your customers. The pull signals need to connect everything from your customers to your raw material suppliers. The concept here is simple, but doing it — switching from scheduling your plant on an MRP push system to a kanban pull system is complicated and will take you several years.

Non-manufacturing companies face many of the same types of mental hurdles. In fact, a white-collar fiefdom comfortable with “the way we’ve always done things” is often harder to motivate to change dramatically. While the physical challenges are far less dramatic, converting something like a hospital to value streams will break many taboos. Or a life insurance company will experience all types of resistance when challenged to reduce the 48 days it now takes to respond to and underwrite a request for a new policy to less than 20 days. People will consider it unprofessional (again, I know this from experience) to set up teams of underwriters and case managers instead of having them in separate departments.

Becoming a “lean company” will require you to make other fundamental changes that do not track neatly with traditional time-based goals.

Becoming a “lean company” will require you to make other fundamental changes that do not track neatly with traditional time-based goals. You will have to switch from standard cost accounting to lean accounting, which will require people to accept different ways of thinking about this work. Your sales terms, for example, might need significant adjusting to help level out incoming demand. Sales and marketing might have to stop pushing big batch sales or doing end-of-month promotions to “make the month.” Your product development will change to QFD (quality function deployment), and your IT systems will evolve as you cease scheduling production using MRP. While a company could take all these steps in parallel to the more physical changes above, they will add time. But, depending on how you go about it, they shouldn’t delay you by more than a year or two.

To keep track of your progress, I recommend two simple measures: on-time customer service and inventory turns. If both are going up simultaneously, you are doing OK. For manufacturers, inventory turns are a critical measure. In lean, inventory is the number one waste (the root of all evil, in my opinion), so improvements here will drive gains everywhere. If you start at 3x inventory turns, your initial target should be to get to 20x turns. While you can’t achieve this overnight, a good pace would be to go from 3x to 6x in year one, from 6x to 8x in year two, from 8x to 9.5x in year three, from 9.5x to 11x in year four, and then an additional 1x to 1.5x each year in the future. This reasonable pace will get you close to 20x in about ten years.

The time to convert to lean will vary, even if every company takes an aggressive approach. As a rule of thumb, based on my experience, you should plan on at least 10 to 12 years to reach a reasonable level of competency. Of course, you won’t be a great lean company by then, and you certainly will not be Toyota, but you should have achieved a level where 1) you will never go back and 2) the opportunities going forward will be even clearer than when you started.

Getting close to or reaching 20x inventory turns will be a key indicator that you are making progress. Oh, and by then, you should have more than doubled in size, increased margins by 10 to 12 points, gained significant market share, drastically improved quality, and increased your enterprise value by nearly 2,500% — as we did at Wiremold in just under 10 years. But, more importantly, you will understand that the next 10 years should be even better.