Related Podcast: Putting a Lean Strategy into Action
Note: This is a transcription of an interview. It has not gone through a professional editing process and may contain grammatical errors or incorrect formatting.
Joe Dager: Welcome everyone, this is Joe Dager, the host of the Business901 podcast. With me today is Daniel T. Jones. Dan Jones is part of the original MIT research team that discovered and codified the system. Toyota used to make automobiles and named it Lean. He is the co-author of classic groundbreaking works, The Machine that Changed the World and Lean Thinking. And one of my favorites and definitely worn out is Lean Solutions.
Dan is also the co-founder and chairman of the nonprofit Lean Enterprise Institute in the US the Lean Enterprise Academy in the UK and the Lean Global Network of Institutes. In addition, he has added one more book to the previous mentioned “The Lean Strategy.” Dan honored, once again and thanks for being here.
Dan Jones: I’m very pleased to be here Joe. Yeah, let me just say that one thing I actually freed myself of all of those responsibilities. So now I have time now to digest all the lessons we’ve learned and to write, and that’s the product.
Joe: I must ask you. Why the book? I mean you have not written for a while?
Dan: That’s right. Well, it’s a combination of circumstances. We were frustrated at the progress of Lean and in particularly consultant led projects that were being done for arm’s length leaders who were not involved. We’ve been involved in lots of those and observed lots of those, and they run into the sand after three or four years. We were trying to find an answer to why that was the case and what we’d have to do. We began working with a bunch of CEOs who had all been through the same experience of consulting led programs that hadn’t really worked and had convinced themselves that they needed to lead it themselves.
We were working with the CEOs and digesting and distilling changes in the thought process that they’ve gone through to learn how actually to lead a lean transformation themselves very actively. They gave us the starting point for this book. Bringing together a group of CEOs and one of the CEOs, Jacques Chaizes who’s an expert at learning, joined us as an author. He found the French chapter of the Society for Organizational Learning. He was very, very interested in learning.
Michael Balle who’s also been interested in learning for a very long time and I’ve worked with Michael and his father for years and years. Orest Fiume who was the finance director at Wiremold. We thought we needed some business grounding if we were going to address leaders.
We tried to answer the question, “What does a leader need to do?” To really grasp the fact that Lean is actually a strategy. Something that Art Byrne has said for years and years, and we all said nodded and said yeah, yeah. But actually, what does it mean? This book is trying to answer that question. What does a leader, how do they need to learn to think about strategy? How do they need to learn to think about building learning in the organization? And how to take that learning and turn it into the bottom line. Those are the questions that we started grappling with about three, four years ago.
Gradually, we started writing articles together, and they’ve come together on a book that Michael’s edited called “Leading with Lean,” and that’s the intellectual basis of our journey. But we’ve had a lot of fun putting this Lean Strategy book together. I didn’t expect to be writing this book at this point in time in my history but Michael pretty persuasive and actually frankly this has been a really exciting journey where we’ve learned a ton from each other. The book has really emerged out of a dialogue between the four of us. That’s really fantastic.
Joe: I would object with you right away. You have talked about leadership and CEO’s, but The Lean Strategy is written that I really think anyone in a lead enterprise could benefit from reading the book. I think it’s hardly exclusive to senior management.
Dan: No, I totally agree. In fact, what Toyota is trying to do, what we try to do in Lean is turn everybody into a leader at every level in the organization. While you can do Lean at the bottom, and you can create lots of leaders at the bottom of the organization. Unless the leaders at the top are involved, and we know this from experience many, many times. Unless the leaders of the top are involved; it is not going to last, and so that’s why we particularly focused on the role of the leader at the top. That’s what we want to capture and understanding that this message trickles down from leaders wherever they find themselves in the organization. So actually a team leader, group leader, plant manager, divisional, vice president they’re all leaders. So, this is the generic message you’re right. But it’s the top down piece of the bottom-up experience that we all have had with that with lean to date.
Joe: The practicality of what you’re saying encompasses the entire organization. But it’s also maybe some of that missing part of that lean strategy is that they have to be sort of practical leaders. Is there any truth to that?
Dan: No, absolutely. They have to absolutely. But look, I mean leaders have been taught in business schools that their job is to worry about strategy. All right and watch the videos of Michael Porter. He says; strategy and execution are completely separate. The strategy is all about positioning in the marketplace against your competitors, etcetera. 
The execution is all about buying best practice. Whereas you buy it from the experts, you buy it from the low-cost location; you buy best practice. Execution is all about how smart you are buying best practice. That tells the leader that their not jobs not to get involved in operations. They get other people to do that. It separates leaders. They’ve been taught not to get involved in operations. At least not to get hands on involved in operations and to leave solving their problems to experts that they hire.
You get an expert to design a system you, get an expert to design a better process or in a new location and middle managers job is to force compliance by the employees you then hire with the expert designed system.
So, there’s very little learning, and there’s very little capability development which of course is the foundation for what is Toyota’s approach. Which is actually engaging everyone, not just the experts, in learning how to solve their day to day problems, in order to learn how to solve tomorrow’s problems, and the day after tomorrow’s problems using a common scientific approach.
Joe: Talking about Lean strategy then, in the most widely known strategy the module you brought up is Michael Porter.
Dan: Absolutely and look, I think Michael Porter articulated the management system that was completely appropriate for the age of mass production. With a standard product and where economies of scale were key, where cost cutting was rife, where it was a people free process. You don’t know who’s going to work in this process so you design it so any idiot can do it, with a little bit of training. You engage middle management in forcing compliance. That leads to highly disengaged employees. And it leads to a very static focus on staffing optimization rather than developing growing capabilities from the continuous improvement we know so effective with Lean.
Joe: What makes Toyota, The Lean Strategy different than Porters?
Dan: Oh, it’s fundamentally different. I mean Porter is essentially looking at the position of the organization in the marketplace. I’m not saying Lean don’t take any notice of that. But Porter’s vision doesn’t look inside Lean for the sources of competitive growth. It’s essentially about acquiring best practice, assets, and resources. Whereas, Lean is about focusing on the customer. Absolutely, creating customer value, additional value for customers and engaging everybody in understanding the work much more deeply. Understanding how they can through doing the work more accurately can link that and create flow? How do you build teams that solve problems together? How you create the management systems to support it encourage that learning of the shop floor. So, it’s a very fundamentally different set of objectives to create dynamic economy. So, engaging everyone in solving problems rather than static optimization through hiring experts.
Joe: I think in the book, in fact, you basically end the book with the comparison, between the Porter strategy and Toyota’s. Those differences, it seems to be a model of engagement. How do we engage surrounding people, I mean employees and everybody together.
Dan: Well, I think, so it looks to build dynamic economies through engaging everybody at every level and continually learning how to do their own work better. Learning how to work together more effectively with colleagues to create customer value. The major focus of leaders is to go and find the underlying problems that your organization needs to solve to improve its ability to create value for customers. You can’t find those problems unless you actually go to the front line and observe how the front-line struggles day to day with day to day problems.
As you support people at the front line, you begin to see, Aha, there’s an underlying issue here or policy. Often, which senior management is responsible for creating that is actually creating all of these obstacles to doing the work the right way. So, one-half of this is actually about learning how to improve today’s processes. But the really big benefit is when you actually feed those improvements back into the design of the next generation product and process. You create completely new opportunities out of that for serving customers and for creating new products and services.
Joe: One of the big terms used today is Agile. Everybody is agile. One of the things agile people talk about is complexity. It is often said that Lean can’t survive and prosper within complexity. But to me, it sounds like the teamwork that we describe in the cross-functional teams is things that have been part of Lean from day one. In your description, of just-in-time was a fantastic description of that process.
Dan: I have been listening to all of the founders of the software development movement, Agile and so on, one by one in the Paris IT Conferences. It strikes me, all of them, have actually lost their inspiration for Agile, Scrum, DevOps, and Extreme Programming. With all of that, they start to borrow from Lean, Toyota for their processes in their work.
A lot of the Agile movement is absolutely confluent with Lean. And indeed, Lean is a way to create an organization in itself is Agile if you like. It is an organization that can adapt to changing circumstances, and it can tailor products and services to individual types and customers. It can also cope with the introduction of new technologies much faster.
I mean the big advantage of continuous improvement in both product and service development is that you can feed forward the lessons much faster in a series of experiments and more rapid series of experiments. That creates new products and services. So, cumulative iteration is actually the foundation for the scaling up of a new idea through repeated experiments. So it’s taking the continuous improvement idea into the customer relationship with the product development folks. That actually turns product development from a project based activity into a continuous stream of creating new products and that is exactly the world that the agile folks come out of. Agile and lean actually are going to come together. It’s just that we don’t use the same language, we come from different places, but there is a huge amount of overlap. And there’s on the agile side I would say this is still a fairly shallow understanding of the deeper aspects of the Lean management system and we’re trying to explain some of those in this book to them as well.
Joe: I think you hit that very well in the book. I always thought that Agile attached Lean to its name to create sustainability because without it I don’t know that it’s sustainable. It may be me just being a Lean guy. But, I seem to have this conversation fairly often.
Dan: I’m sure you do. There are Lean folks who resist the Agile world and or even the Lean Startup world. I’m of the opposite persuasion I think we’re actually all drawing from the same sources and we’re interpreting them from different perspectives. Gradually, as we get an integration of software and hardware, knowledge work and physical work, as this is happening in every industry, we have to find a common language to manage things together. And manage things together with a workforces that are actually vastly more skilled and knowledgeable than the workforce we’ve had in the past.
They’re not going to be treated in a traditional system designed by others that people just are expected to comply with. I think Lean in many ways, plus the Agile, plus the Entrepreneur in a Startup, plus Design Thinking and so on is actually the basis of a people-centric management system for our time? I think Toyota was pointing the way many years ago and our job is now to articulate the people-centric management system that our time needs.
Joe: I go back to that complexity thing about agile a little bit. Is that the knowledge work and Lean is for production? I argue that so often and even from that viewpoint I smile so much because I don’t think I’ve been in a car factory if they think it’s not complex.
Dan: Exactly, and I mean the software guys have hidden behind this complexity nonsense for so long. When you start up challenging them, do you have fewer tickets coming resulting from the introduction of your products? That’s old muda, that’s all waste, that’s how it should have been designed out of first place, and they say well but that’s not software. And I say hey that is the world of the software. And that is a world that you need a very different approach to the architecture of software. To break it down into small pieces and to experiment with continually improving those pieces. So, continuous improvement is actually a foundation of the approach to software whereby the as Amazons and the Googles of this world, where they are releasing changes by the day instead of once every six months like in a SAP system.
The differences are nothing like as great as as we have experienced. I mean you had the same thing from the healthcare folks many years ago. They said healthcare is so different because every patient is different, and it’s not a factory. Well no, it’s not a factory, but an awful lot of things that apply in a factory, also apply in a hospital and the same with software. I’ve seen all these excuses before, and they don’t work. Increasingly, I think we need to blow up the I.T. departments and put all the software guys right next to the customers rather than have them design systems at a distance which don’t work.
Joe: At the SHRM conference last week, I heard that 47 percent of senior executives feel that they are employees are burn out over change. I thought that’s because they don’t have a Lean Strategy in place.
Dan: Absolutely right. I mean that is the logical consequence; one of the logical consequences of the traditional management ,which hires hands rather than brains because their brains it buys brains from a few, few experts. But the more widespread manifestation of that you can see in the political field. Where people are feeling not only nobody cares politically but also my manager doesn’t care and I don’t care about my job either. So, that the level of dissatisfaction I think is alarmingly high and actually not sustainable.
Joe: In the book you discuss collaboration and building productivity not only internally but externally as well. One of the things that support collaborations is that mentoring or coaching aspect that needs to happen in our management structure. Does the book discuss that needed management structure?
Dan: Well, it does in the sense that it introduces the consequences of following a Lean Strategy is that it is a different thought process. There are different decision-making model behind the process of finding the problems. So, we know about problem-solving, once we define what the problems are we got PDCA, A3s and all of that. So organizations are well structured. But we’re saying there’s actually a prior process that leaders go through which is actually finding the problems finding the underlying problems then framing those problems as improvement directions; not as a plan, as improvement directions. Then designing a whole series of experiments with people to see how they can contribute to improving those improvement directions and then through repeated experiments finding solutions that last for that organization. We’ve come up with a different or an additional decision framework for this dialogue between the mentor and the mentee at every level in the organization.
It’s following the progress of the strategy discussions in the military which no longer think that traditional jumping to a solution or the opinion of the highest paid executive in the room and then developing a plan and forcing that plan through. The military knows that doesn’t survive contact with the enemy. They are talking about creating the front line that can cope in the right way with unforeseen circumstances.
We call it leading from the ground up because you cannot find the key problem, strategic problems in the organization unless you can see them which means a metric that can actually see problems and the improvements that result from the actions. Also, make sure that the organization focuses on the right things, and you can only do that at the Gemba. Leaders have to actually find the problems at the Gemba but by helping others learn. That’s something we’ve observed time and time again. It was a surprise to us, and we thought a lot about how we could articulate that. That decision-making structure that we outlined the beginning of the book is fundamental I think to understand what Lean leadership’s all about.
Joe: I have to tell you a story that Michael Balle told me probably four years ago. When you first get into lean, you typically start with the tools. Then you go a little farther in Lean, and you talk about culture. And then when you finally understand lean you see Lean as a culture and the tools. I think your book nailed that final outlook on Lean and hopefully, it opened up the next chapter.
Dan: We’ve had a lot of discussions over the years about the difference between a western approach to imposing solutions to an eastern approach. Eastern philosophical approach which is gradually working with to improve what you’ve got and learning how through perhaps through deeper study and deeper practice you make the next step and the next step and the next step in a direction towards that mountain. So this very much does reflect the different philosophical deeper, philosophical thought processes that come from an Eastern perspective absolutely no question about that. We talked about that for a very long time. It doesn’t directly inform what we’ve done and what we’ve really done is when we’ve been frustrated by the fact that when we’ve seen people talk about the Lean management system and you put in daily management, problem-solving in, any approach. People still focus on those management tools rather than the thought process and practice that makes those come alive. The call to us is that understanding is all about learning.
Leadership is all about creating an environment where people can learn and grow. It’s not an easy environment as Michael’s is discussed in the book, Leading with Respect. It’s a challenging environment but one that respects the human being and gives the human being the opportunity to grow and develop and that alone is a tremendous source of comparative advantage. Once mobilized in an organization is unbeatable.
Joe: Dan, I appreciate your time very much I could go on and on with you. I’m always so interested in what you have to say. Is there something that you would like to mention that maybe I did not?
Dan: I think cause us to re-frame the discussion about Lean. And that would be that would be an achievement because I Lean’s got stuck in the consultant, do it to people mindset that actually is very limiting. So I’m hoping that this book will change the language hopefully and will deepen our understanding of Lean and open up the opportunity, as I said, the people-centric management system of the future to emerge. So, there are still pieces to add to the Lean story. We haven’t yet finished with the book on this. I’m sure Michael Balle will because he’s younger than me, but this is a management system that has to come in the next 10, 15 years.
Joe: Great book, I think it’s going be a companion for me for a very long time. So, I appreciate, I appreciate the effort you actually put into it, Dan.
Dan: Well, we really learned a tremendous amount in doing it, so it’s been it’s been a privilege to work with those guys. Well, so great to talk to you.