What topics, tools, and techniques would you include in an MBA-level course on teaching lean concepts?

Dear Gemba Coach,

I am designing an MBA-level course to teach lean concepts.  What topics, tools, and techniques would you include in a 7-week, 14-session course?

That’s a fascinating question. I have to confess my MBA days are far back, lost with the twentieth century, so I don’t know how things have evolved since then. If we’re going about this the lean way we could start with some “self-study” of what is taught in MBAs. And then ask ourselves where lean could be useful to students.

The starting point is straightforward. I suspect MBAs still teach classes by topics, such as finance, accounting, marketing, human resources, operations, and entrepreneurship. In that sense, one possible response is to add a lean twist to each of these topics:

• The lean twist on finance: Rather than just look at financial ratios, learn to see on the shop floor the four underlying productivities: 1) customer productivity, basket size and repurchase, from a broad range of quality products, 2) capital productivity from flexible, just-in-time operations, 3) labor productivity from engaging teams in waste elimination, and 4) purchasing productivity from tighter interfaces with suppliers and stronger relationships.
• The lean twist on accounting: Starting with Real Numbers by Jean Cunningham and Orry Fiume, understand how financial accounting warps the reality of the business on specific topics such as standard costs based on numbers of products that will never be sold, building inventories based on demand that isn’t there, and opaque accounts made by accountants for accountants so no one understands the reality of the business.
• The lean twist on marketing: Work on customer retention rather than acquisition, product planning with takt time rather than being driven by the need to replace flagging products (doing away with the BCG matrix); focus on the role of the chief engineer in market research; branding and advertising by responding to societal challenges; and just-in-time as a key distribution strategy.
• The lean twist on human resources: Grow people from the inside by looking at their potential, not their current skill level, and help them develop to their fullest abilities – as opposed to “hiring the right person for the right job” (and then firing them when the fit is gone). Using lean systems to develop people in their day-to-day jobs through kaizen and respect by replacing command-and-control with instruct-and-improve, and looking at achieving employee participation (engagement and involvement) as the key management metric.
• The lean twist on operations: oh, where should I start? Essentially understanding the key role of logistics to lean the company. Switch from a managerial line that decides who does what when (and the ERPs to drive them) with a specialist quality department to check whether delivery is okay post fact, to a kanban system that reproduces customer demand through operations and a management line that has to create the conditions for precise on-quality on-time delivery. This also means turning the chain of command into a chain of help and imbedding kaizen in day-to-day operations.
• The lean twist on entrepreneurship: Solving today’s problems with ever better solutions, looking for new ways to do so, rather than imagining new applications of technologies we already master (or acquiring new technologies to see what they could do). Understanding that business plans are written with scant information and are a starting point, not a commitment to hold. Understand hoshin kanri, not as policy deployment but a way to create consensus from meeting people at the workplace and discussing real-life challenges, to encourage talented individuals to pursue their intuitions and do something new.

I guess that would keep us busy for the length of a course, and students would probably get a good flavor of lean – but not lean thinking. In doing so, we are adopting MBAs implicit worldview without discussing the deeper meaning of lean – how lean is a completely different paradigm. We’re responding to tools with tools, as, to be honest, many have done since lean came on the scene. 

Worldviews are more complex because they require standing far away, on top of the mountain and seeing the two different mental valleys, the basic assumptions that drive the two different models. 

MBA thinking is currently producing the worst of mixing bureaucratic and financial thinking … on the other hand, MBA thinking is sticky because people need the diploma to advance …

The MBA model grew out of the need for professional managers in the early twentieth century, with an explicit intent to teach “scientific” management, at a time where finance, accounting, operations, and sociology (management) were becoming scientific study fields. The main perspective was: 1) we have dominant technology which we can standardize and sell to the world, 2) we need officers to do so with the right competencies according to division of labor ( the way MBAs are still taught by specialty), and 3) the right managerial skills in terms of planning, organizing, staffing, directing and controlling.

MBA vs Lean Worldview

This is a completely dominant worldview in which we assume we have both the knowledge and the power, and the job is to create a cadre of officers to execute. In the automation boom of the twentieth century and reconstruction eras after two world wars, this made perfect sense. You could sell anything you could make and the challenge was making it fast enough and cheaply enough, which needed setting up machine-like organizations to deliver. Porter’s approach to strategy sums up MBA thinking: maximize your power on customers, employees, suppliers, and you’ll make a profit.

Lean grew out of very different circumstances. Toyota was a bankrupt start-up automaker in 1951, in post-war Japan. Its leaders realized that if they didn’t want to build American (or British) designs with American suppliers and American finance methods, as most of its competitors did, it needed to do something different. They developed an obsession for self-reliance, based not on power, but on appropriate responses to challenges. We are challenged by society and our markets, and we seek, by trial and error with our partners (our people, our suppliers, universities etc.) the most adaptive responses. It’s a learning worldview, not an execution one, as Nobel prize economist Josef Stiglitz clearly saw.

Rather than use our power to extract value from others, the aim here is to use our smarts to find ways to add value by exploring waste, the causes of waste in our wrong-headed thinking and how to get everyone fired up with looking for new, better ways of helping customers. Lean is inclusive, not extractive.

The trouble is that if we only teach the lean twist on classical MBA topics, every tool we teach will be re-interpreted in the light of the MBA worldview, as a way to extract more value from customers, people, suppliers and so on – which is what we, unfortunately, see every day in many sad/scary lean implementation programs.

Failing but “Sticky” Worldview

Is it possible to teach the worldview? I personally doubt it, but we can try. This would involve following Toyota’s own developmental path and that of those companies that sincerely tried to learn from Toyota’s alternative paradigm. The starting point would be understanding the key learning systems Toyota has developed over the years:

• The Toyota Production System: The best-known system that uses the precision of logistics with frequent pull and flexibility to explore wrong-headed ideas in management and involved managers at the workplace to work more closely with people in solving problems and coming up with improvement ideas.
• The Toyota Way: An evolution of Toyota’s early forays in Total Quality Control to respond to Deming’s challenge in the early 1950s, out of emerged the will to balance continuous improvement with respect-for-people, and the various practices to involve back office staff in improving procedures, such as the Toyota Business Practices (the A3) and its unique HR model.
• The Toyota Development System: The true secret to Toyota’s success is its product-driven strategy. Toyota has developed a full learning system to make better and better cars whilst adapting to the tastes of the fast-evolving market. This has led them to disrupt the industry in first, inexpensive high-quality small cars, then top quality large cars and now low emission low consumptions cars with its hybrid system.
• Toyota’s Product Planning System: The least well-known system Toyota has to both manage its product line-up and allocate production amongst plants globally according to the plant’s maturity and flexibility (older plants handle more models).

Teaching the basics of these lean learning systems doesn’t necessarily solve your problem. I’ve tried doing so in public seminars and the outcome is that people who have already committed to studying lean love it as they can explore the roots of lean thinking, while those who are firmly in the traditional MBA mindset feel lost and reject it, turned off by the strange way lean looks at things and the 50 years of cumulative experience to learn about – often calling it a “cult” or a “religion” (and failing to see how weird the dominant MBA thinking is in its own way).

The conundrum is that MBA thinking is clearly failing us. Whether on environmental issues or people engagement challenges, MBA thinking is currently producing the worst of mixing bureaucratic and financial thinking – not many people dispute that, and you can read it in the business press every other day. On the other hand, MBA thinking is sticky because people need the diploma to advance and professors teach what they know and believe companies want, which is well-trained officers for their cadre of middle-managers.

So far, I haven’t found any elegant solution to this riddle. I guess we just need to keep trying and understand the issue better. Let me know what you come up with?