David vs. Goliath
Several authors have asked a very simple question: how can the little guys beat the big guys so soundly? In Part I of this Executive Briefing I used the German defeat of England and France at the Battle of Dunkirk as an example of how smart strategy may be more important than size and firepower. To look at business examples, how did Dell beat IBM and HP? How did Wal-Mart best Sears and JC Penney? John Boyd, who designed not only the F-15 and F-16, but also the first Gulf War strategy, began asking this question in 1952, and found four things that the German army did that successful companies like , Dell and Wal-Mart do as well.
- Have a clear mission. A mission is an agreement between top management and the rest of the company on a target state. The target state itself is not a goal; it’s a state of being. For the German army, the target state was world dominance. Their mission was to beat the British and the French. As a leader, do you have a clear mission for your organization? Do people understand why they are doing what they are doing?
- Teamwork. This comes through training and experience; people working/learning together. In your Lean initiative, what kind of training do your people – at all levels – receive? Are they learning from their experiences?
- Decision-making. For the German army, decision- making became intuitive based on training and experience, which made decisions on the battlefield easier and faster. Also, decisions were made at the lowest levels by tank commanders in the field, not lawmakers or generals. There was extensive communication so that top generals were rapidly made aware of developments, but generals were there to support the decisions made in the field, so long as they were in line with the strategy and the mission.
One of the main reasons Lean is failing in American companies is that top management isn’t willing to give up decision-making power. It takes a high degree of trust. Oftentimes leaders can’t bring themselves to trust their teams to make the key decisions needed for day-to- day action.
- Strategy. This provides the focus and direction. It’s the game plan.
Mission, teamwork, decisions made at the front lines, and strategy. I emphasize these concepts with my clients whether they’re doing Lean or not. One of the first questions we ask about any improvement initiative is, “Do we need improvement, or do we need to eliminate this process entirely?” If you proceed directly to Six Sigma, Lean, the 5 Whys, Theory of Constraints, etc. without asking whether you really need those tools, you risk wasting a lot of time and energy. We need to understand the process – and find out if perhaps there are elements that don’t need to be done at all – before we begin deploying improvement methodologies.
The Toyota Production System is more than just tools, cost reduction (cost reduction is an outcome, but not an objective), and waste reduction. Taiichi Ohno’s book3 is about speed: reducing cycle time from order to delivery while maintaining high quality at the lowest possible cost. It takes Toyota less than two years to design a new car and begin production. General Motors, in contrast, requires three to four years. By providing exactly what the customer wants in the shortest possible time, Toyota creates extremely happy customers and a clear competitive advantage. Quality and cost are important, but speed is the key.
In a competitive marketplace, other companies can copy your design, they can emulate process improvement, but they can’t replicate speed or culture, and that is how you can stay ahead of the pack. Likewise, anyone can implement the lean tools to reduce costs or improve quality, but not everyone can get faster or establish a culture of continuous improvement.
Toyota is happy to give tours of their factory because they know that even if outsiders see the inner workings of their production facilities, few can copy their speed or culture because American managers can’t let go of the reins and trust their employees to make decisions. Just like the German tank commanders, if supervisors on the factory floor aren’t allowed to make decisions or respond to day-to-day events, the pace of production will remain slow and opportunities for innovation are missed.
Strategy is built on the following elements:
- Vision – communicating a target state.
- Right people in the right positions – particularly supervisors, managers, process engineers and others who design business processes. This includes getting rid of the wrong people, who can be like a cancer in the organization.
- Agility – the ability to quickly move from one strategy to the next as situations change.
- Speed – execution, time to market, cycle time, etc.
As a leader in a Lean environment you have a lot to do. If there is one thing that can serve as a unifying factor in determining your operations strategy, let it be your customers. You can communicate a compelling mission, develop strong, cross-functional teams, push decision-making down to the lowest possible level, and foster a culture of continuous improvement, but ultimately these things won’t matter without steady attention on the customer. Strong leadership combined with constant focus on the value you provide your customers adds up to competitive advantage.