Ask Art: Why do so few companies that implement lean do it successfully?

Let’s start with the fact that there are no exact statistics on:

• how many companies have started down the lean path, and
• how many have been successful at becoming lean enterprises

Even so, I think if you asked most of the lean consultants or others who have studied the lean movement that most would say that the number is 5-7 percent. That seems about right to me. That doesn’t mean, however, that a higher percentage have not gotten some gains from their lean work; it’s hard not to. But, very few have made lean the basis of everything they do in every part of the company, meaning that they could therefore be considered lean enterprises.

So, why is this? Why do far more companies fail than succeed? I guess I could oversimplify and just say that lean is “easy to explain but very hard to do.” After all, lean is all about people. It is the people that you are trying to convert, and people are complicated. They are the ones that built the system that you currently have and they are resistant to change. No surprise there but let’s try to be more specific. The list of things that create failure in implementing lean is a long one, too long for this article, so let me just highlight some of the more major issues that I see over and over. 

1. FOCUS ON COST REDUCTION. I would say that 90-95 percent of all companies that start down the lean path do it primarily as a cost-reduction effort. They fail to understand the strategic nature of lean and the need to focus on removing waste in order to deliver more value to their customers. They probably have always had some cost-reduction efforts underway, but hey, maybe applying the lean toolbox will help them cut out more costs faster. So it is sort of the “same old, same old” of just using some new tools and buzz words. This narrow focus has nothing to do with the customer and the real problems the company needs to be solving, such as having a 6-8 week lead time.
2. DROP LEAN ON A BATCH SYSTEM. If you are going to make a lean turnaround you have to understand that everything has to change. This is way beyond what most companies can grasp. They just want to cut costs, and so they try to drop lean on top of a traditional batch system without changing anything else. The sales force is still incented to go out and get large orders and to offer volume discounts. The factory floor still produces to a forecast using MRP and ships 50 percent of orders in the last week of the month, even though the lean efforts are aimed at level-loading the factory. Finance, HR, IT, product development etc. all stay the same. Lean is just added as another of the top ten strategies. This of course will never work and will just cause confusion everywhere as one part of the organization goes in a totally different direction than everyone else.
3. LACK OF LEADERSHIP. Lean is a ‘learn-by-doing’ approach that needs to be led from the top in a hands on, out front manner. The leader needs to be in the work place [gemba], participating on kaizen events, talking and listening to his/her people, learning the details, setting stretch targets and pushing the organization forward. Instead the traditional manager tries to continue to “lead from behind,” staying in the office and delegating the lean turnaround to someone on his/her staff like the VP of Operations. “You have my full support. Keep me informed.”
4. NO STRUCTURAL CHANGE. Switching from a traditional functional organization to a value-stream organization where the company’s operational excellence targets can be pushed down closer to the value adding and get all the value adding associates to own them is a critical step to take early on in a lean turnaround. Unfortunately you rarely see this. Instead the manufacturer tries to keep all similar equipment in functional departments, or the hospital wants to stick with its silo structure despite having natural value streams for things like the heart, orthopedics, cancer, babies etc. The result is that when the company tries to switch from its traditional batch approach to lean’s more efficient flow, its own structure gets in the way and causes lots of problems.
5. NO TEAMWORK. Most people fail to realize that lean is a team sport. When you try to work to takt time at the pull of the customer, make everything in a one piece flow, establish standard work and pull everything through the system from your vendors to your customers using the lean principle of “sell-one-make-one”, then you better have everyone on the same page and working together. Unfortunately, the traditional management-by-objective approach is more the norm. This often pits one part of the company against another without anyone being aware of the contradictions. For example, telling the VP of Operations to lower inventory and the VP of Purchasing to lower the cents for each cost of raw material, which of course he does by purchasing in huge quantities, thus driving inventory up.
6. DUMP THE LEAN CONSULTANTS TOO SOON. Implementing lean without having the lean knowledge internally is almost impossible. Someone has to push you through the barriers that keep you at your current state. This usually means that you will need some outside consulting [training] help. Most companies do this, but after a few kaizen sessions they say, “Oh, I got this.” Then they fire the consultants on the mistaken idea they will save costs, and before you know it they are right back to where they started.
7. OTHER PROBLEMS. As I said, the list of why companies fail is a long one. A few other items are;

• Trying to implement lean and keeping a traditional standard cost accounting approach even though standard cost accounting incentivizes all the things you are trying to get rid of with lean
• Continuing the focus on “make-the-month” instead of focusing on removing the waste from the processes that created last month’s results so that future results can be better
• Going at too slow a pace like running one kaizen every six weeks and even then focusing on small out of the way issues instead of the main product families
• Continuing to try and solve problems with automation and IT which often results in just automating the waste.

In any event, I think you get the picture. The list of why companies fail at becoming lean enterprises is a long one. But don’t be discouraged. Just try and avoid all of these traps and you will have great success. Remember, focus on your process not your results. Your results already happened. You can’t do anything about them now. You can, however, do something about your future results by improving your processes.