This blog is a taken from The Democratisation of Lean – 7 Challenges for our Time & the Lean Transformation Framework Keynote by David Brunt at the UK Lean Summit 2024 on the 23rd April. David is the CEO of the Lean Enterprise Academy and has been both applying and researching lean since 1990. David has worked with Dan Jones since 1997. He is involved in both pioneering research into lean thinking and the practical implementation of lean practice. If you would like to watch this keynote, please watch the YouTube video below.
At our UK Lean Summit in Liverpool, we looked at the challenges facing all of us through a lean lens. Asking what problems do we need to solve? Can lean thinking and practice help us close the gaps we identify? The programme takes inspiration from what organisations and individuals are doing. Of course, any application of lean is situational – even if the high level issues share similarities, each situation is unique. So, we can learn from each other about how we tackle issues we face. However be careful not to resort to copying without thinking through the ramifications. At our 2023 event, Dan Jones talked about “democratising” problem solving. Taking this a step further we can democratise lean. But what does that mean?
The Democratisation of Lean
Democratisation is the “action of making something accessible to everyone”. When done effectively, lean is about harnessing and developing the capabilities of everyone. This contrasts with how many organisations approach the challenges they face. To control and improve, the six sigma crowd developed belts – experts that would come in and solve problems for you. We all know how it usually ends – line management become disaffected. They wait for the improvement or OpEx team to come along and solve their issues – often doing to, rather than with team members. Even if these experts use lean tools and techniques such programmes rarely involve everyone – they are fundamentally flawed in this regard. Given that we face so many challenges, why wouldn’t we want everyone solving problems and thinking lean? Why wouldn’t we want to democratise the approach?
Lean thinking is a set of principles to develop highly engaged people, to continually solve problems, to improve the flow of value to customers. Lean contains a set of specific practices – the working methods and innovations that managers use to improve the effectiveness of work systems, aligning purpose, process and people. We know that each of these practices can only be learned through doing. Time and again we can point to the benefits a lean approach gives. Not just to an organisation, but to society, customers, team members and partners up and down a value stream. As we planned the 2024 UK Lean Summit we focused in on seven challenges. Lean has a point of view on each and can be or has been used to close gaps that organisations have in each of these seven.
Productivity
The first challenge is that of productivity. We are told that higher output leads to better wages and a more prosperous economy. But UK productivity has grown by just 0.4 per cent annually in the years since the financial crisis. This is less than half the rate of the 25 richest OECD countries, according to think-tank the Resolution Foundation. UK household income, which used to be ahead of competitors such as France and Germany, now lags behind. Both main UK political parties are well aware that raising productivity is one of the keys to reinvigorating the economic growth that will be needed to improve public services and reduce taxes from multi-decade highs. Yet it shows little sign of improving.
Questionnaires carried out in 2020 and 2023 show that few SMEs are even looking at the issue. 10% of those surveyed haven’t done anything. Only 32% measure productivity and make regular improvements, 35% have planned something but not done anything and 38% say they have taken some steps. Why? Lean thinkers have the answer. Focus on customer value, identify the value stream and look at the activities in terms of value and waste, organize for flow, at the pull of customer demand.
Supply Chain Disruption
Our second challenge is that of supply chain disruption. In just a few years we have been faced with a global pandemic, environmental disasters, geo-political upheaval. Whilst also coping with rising labour and transport costs. There are huge business risks we associate with where we source and locate activities (products and services) that we provide to customers. Globalisation is a feature of our working lives. But with these conditions, the public policy climate has become less favourable to it and, in a number of countries the populist rhetoric is protectionist and nationalistic.
The question, we as managers should be asking is what does this mean for all of us? What activities should we carry out? Lean thinkers have a point of view. We design work at the step level, the value stream level and the extended value stream (supply chain) level. But how many organisations understand their supply network and develop a value stream design around some lasting principles? We have an opportunity to produce close to where we consume. To do that effectively we must address the productivity gap, then we can compress our supply chains. Of course, well thought out work and supply chain design should be green.
Environmental Impact
And this is the third challenge. Long supply chains have an environmental impact and making things in places where they are not used seems wasteful. So, as energy prices and transport costs increase surely we will begin to see that our move to low cost labour economies isn’t really a form of sustainable competitive advantage. The strategic reason for setting up new capacity is to develop new markets. However it appears lost in the sea of short term, tactical activity. Of course, wherever we do an activity we want to do it in as green a way as possible. Our actions that impact climate change don’t have country borders. We might hit our own targets by moving nasty activities off-shore. But if they are still being done is there really a positive change? Lean thinkers can solve the problem of producing in a greener way.
Visit any Toyota site and you’ll see fantastic examples of karakuri kaizen – using gravity, not energy to move products, closer to team members – reducing energy and improving productivity at the same time. Lean production is green production.
Just the idea of sell one, make one is more green than making a batch and trying to flog it off at a discounted price. The closer the batch size gets to replenishing real demand, the better we utilise available time and the less inventory that’s not sold.
Environmental Footprint
If we can teach economists that the Economic Order Quantity model (first written down by production engineer Ford W. Harris in 1913) is flawed. It assumes set up costs are fixed when actually they can be reduced through kaizen. As well as that we can right-size technology, we can have a huge impact on our environmental footprint. And, just look at the creativity and thought process in Toyota’s “leaked document” which reveals the automaker told its dealer network that the lithium and other rare materials required to build one EV, could be used to build 6 plug-in hybrids or 90 conventional hybrid vehicles.
It’s an answer to the question “what problem are we trying to solve?”. If overall carbon reduction is the aim, then this is an elegant step. The 1:6:90 rule means that “the overall carbon reduction of those 90 hybrids over their lifetime is 37 times as much as a single battery EV.” It also means that stumbling blocks such as range anxiety, charging infrastructure and vehicle cost can be managed.
Problem solving doesn’t stop there. In a forthcoming blog and video, Jon Hunt discusses Toyota’s efforts to develop hydrogen technology. Pursuing multiple solutions is a fundamental underlying thinking in the way in which lean product development differs from traditional product development.
Using Lean Thinking to Develop Innovative New Products
Lean thinkers have lots to offer in this area. Remember The Machine that Changed the world wasn’t just a book about lean production. Lean Thinking applies to the way products are designed and developed, the supply chain is coordinated and to the customer interface. In many ways, the lessons from lean product development can be more easily translated to different environments than the concepts in lean production. In the U.K. “design thinking” is all the rage. Lean product and process development, not so much. And yet, Josh Yu-Hung discussed how the approach is more comprehensive than design thinking.
The core thesis developed by Al Ward, is that the very aim of the product development process is to create profitable operational value streams. And also that the key to doing so predictably, efficiently, and effectively is to create re-useable knowledge. Lean thinkers have LAMDA – Look, Ask, Model, Discuss and Act. It’s a combination of Go and See, the set based concurrent engineering and PDCA cycle.
Creating useable knowledge requires learning. Such learning leads to looking at the management system, management behaviours, and the mental models needed for learning to thrive and bring value to customers.
In addition, we can Identify four “cornerstones” of lean product development gleaned from the practices of successful companies like Toyota and its partners. These being the Enterpreneur system designer, value stream principles of cadence, flow and pull, set based approaches and a team of responsible experts.
Lean and the Digital Revolution
Managers are bombarded by the latest things. There’s no doubt Covid accelerated the use of digital solutions. Now no large organisation’s strategy is complete without something on digital transformation. Of course, this all started way before Covid. Back in 2009 Apple started using the phrase “there’s an app for that” to show the multitude of apps available in their App Store. All of Apple’s investors were excited about FANGS and their stellar returns.
An article in Business Matters from November 2023 claimed that global investment in digital transformation is expected to double between 2022 and 2025. Estimates say that 70% of digital transformations fail, so the wastage bill could be as high as $2 trillion dollars. Again, lean has a point of view on digital. Mike Moore discussed lean, low-code/no code and AI. Theodo co-founder Patrice Bernhard talked about the lean tech manifesto – using lean to scale and we heard a brilliant case from Weightmans who have been using lean thinking in virtual work that supports front-line teams.
Lean thinkers have a “point of view and something to share with digital organisations and also with any organization thinking through their use of digital – the simple advice is start by understanding “what problem you are trying to solve.” Data based decision making and data based problem solving are a key part of lean thinking – but don’t forget the importance of “Go See” to grasp the actual situation first hand.
Core Consumer Problems we are Trying to Solve
Digital is something forward looking. To see how much has changed I took inspiration from Lean Solutions – I still think it is the best book Jim Womack and Dan Jones wrote way back in 2005. The premise is in the subtitle – “How companies and customers can create value and wealth together.” In the book Dan and Jim proposed there were 5 core problems we as consumers are trying to solve:
- Shelter – running and maintaining where you live,
- Healthcare (a plan for every patient for life),
- Mobility – how you organize getting around – car, bike, bus, train, plane,
- Personal Financial Management – including the financial planning, pensions, insurance we have, alongside separate banking and HMRC activity and
- Personal Logistics – obtaining all the mundane things we as consumers need to run our lives. Examples include the groceries, a new pair of shoes, some screws from B&Q etc.
Impact of Digitalisation
Some of these have changed beyond recognition in the 19 years since the book came out. You can now get almost anything at the click of a button from Amazon. I can get my weekly shop from Tesco with similar ease quickly reselecting frequently purchased favourites. Banking apps are getting better too and with Apple or Google pay many of us don’t carry cash anymore.
However, some things have been more stubborn to change. if someone can tell me how I reduce household maintenance time that would be very useful. When I needed a chimney sweep to replace a cowl on our chimney as jackdaws had already realized there was access and were busy making nesting preparations, I called a provider but they couldn’t come out until the following week. Luckily a friend recommended someone – but the hassle and the time of organising all these activities to maintain shelter is not inconsiderable and it’s never cheaper than the last call out. If anyone has had building work done on their house they know builders rarely come in on time, to budget with no snagging list. Quality, delivery and cost?
Inflation and the Cost of Living Crisis
That leads us neatly onto the issue of managing inflation and the cost-of-living crisis. Inflation is the rate of increase in prices over a given period of time – how much more expensive the relevant set of goods and/or services has become over a certain period. Long-lasting episodes of high inflation are often the result of lax monetary policy. If the money supply grows too big relative to the size of an economy, the unit value of the currency diminishes; in other words, its purchasing power falls and prices rise. This relationship between the money supply and the size of the economy is called the quantity theory of money and is one of the oldest hypotheses in economics.
The UK CPI rose 3.2% in March vs a Bank of England target of 2%. It’s interesting that economics works a bit like creating level pull – there’s a demand side and a supply side. Pressures on the supply or demand side of the economy can be inflationary. Supply shocks that disrupt production, such as natural disasters, or raise production costs, such as high oil prices, can reduce overall supply and lead to “cost-push” inflation, in which the impetus for price increases comes from a disruption to supply.
Demand and the Economy
Conversely, demand shocks, such as a stock market rally, or expansionary policies, such as when a central bank lowers interest rates or a government raises spending, can temporarily boost overall demand and economic growth. If, however, this increase in demand exceeds an economy’s production capacity, the resulting strain on resources will reflect in “demand-pull” inflation. Policymakers must find the right balance between boosting demand and growth when needed without overstimulating the economy and causing inflation.
Most economists now believe that low, stable, and—most importantly—predictable inflation is good for an economy. Deflation, or falling prices, is not desirable either. If inflation is low and predictable, it is easier to capture it in price-adjustment contracts and interest rates, reducing its distortionary impact. Moreover, knowing that prices will be slightly higher in the future gives consumers an incentive to make purchases sooner, which boosts economic activity.
Applying Lean Thinking in Economics
So, what does lean thinking have to do with this economics lesson? Well, we can all play a part but it really does depend upon the underlying thinking of the sector we work in and of our organisation in that sector. For many sectors the underlying thinking is Cost plus profit = Price. Think the lady doing the chimney work at our home. Her expenses have gone up, her van costs more to fill with diesel, her food bill has gone up, she now has a 20mph speed limit (in Wales) meaning she can’t make as many house calls in a day. If she doesn’t know about kaizen, she’ll pass on the costs to the consumer.
But, where one company is a market uses this equation Profit = Price – Cost, the dynamics can change. If the market sets the price then the way to increase profit is to remove waste. It gives a strategic double whammy – we can retain the margin, or be even more competitive by sharing some of that benefit in the form of lower prices (being careful not to cause deflation) and/or better salaries – a win – win- win for everyone. This leads us to the final challenge for this year’s summit.
Lean and Capability – Bridging the Skills GAP
Are you fretting about the looming “skills gap” and its potential impact on your organisation? The skills gap is a chronic problem. In the late 1960’s companies identified the need for more engineers. In the 2020’s it’s computer programmers and coders. A report from the World Economic Forum in 2020 claimed 40% of the core skills in the average job will change. We have one year left to see whether that forecast is true, but there’s little denying that all our organisations need their list of the top 5 skills for 2025.
Interestingly they have much to do with lean thinking and practice. We’ve often associated A3 thinking with the development of analytic thinking, problem solving and creativity. We know that sound LPPD processes develop critical thinking, analysis and innovation. It’s easy to say what the skills are that we would like. It’s also relatively easy once we’ve identified a standard to agree what the gap is between where we are and where we want to be. However, the difficulty is in deciding what to do to close the gap.
Lean and Capability – Bridging the Skills GAP Continued
Over the two days at the Summit we hear from presenters about what they are doing to close their skills gap. In terms of problem solving, Toyota’s keynote fits squarely into this. It’s called “Flexible, motivated members.” The Canals and River Trust shared how they are developing A3 problem solving capability and Hologic a Rapid Problem Solving capability. The key point is not the tools being used, but the development of learning processes to develop capability. David Marriott and Peter Watkins shared such a process for developing core leadership skills. We can close organisational gaps using a good thinking way – a good process – and we can measure the effectiveness – both in terms of development and retention of how well that process is performing, so we can continuously improve it.
Summary
So, in summary – here are the 7 challenges we want to address this year.
I think lean is more relevant than ever. But a word of caution. Problem solving is situational. You might not all have these challenges and some of them may be more important than others for you. So remember these 2 important questions – “What problem do you need to solve?” “What gaps do you need to close?”
And remember that there are Purpose, Process and People elements at play in each of these challenges.
We must find a balance between them and experiment with ways to democratize – make lean accessible to everyone. It follows logically that if we are to stand a chance democratizing lean, leaders need to do for themselves. Use processes that help them become self-reliant in this approach.