Lean as your Business Model

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After reading Art Bryrne new book The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company, you will wonder why it took Art so long to write a book. The way I see it there has been a lot of people making money talking about Lean but Art chose a different path. He choose to practice Lean and make his money doing Lean. This is a transcription of the podcast.

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Lean as your Business Model

  1. 1. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Lean as your Business Model Guest was Art Byrne Related Podcast: Lean as your Business Model w Art Byrne Lean as your Business Model w Art Byrne Copyright Business901
  2. 2. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Art Byrne has been implementing Lean strategy in various U.S.-based manufacturing and service companies, such as Danaher Corporation, for more than 30 years, including The Wiremold Company, which he ran for 11 years. He now serves as Operating Partner at the private equity firm J. W. Childs Associates L.P.Art recently wrote the book, The Lean Turnaround that is said tobe the c-level guide to succeeding with Lean. I believe that is aninjustice to the book. I believe that anyone that is serious aboutimplementing Lean in any part of the organization can benefitfrom this book. It is about Lean as a business process or whatfuels the fire of a Lean implementation. Transcription of PodcastJoe Dager: This is theBusiness901 podcast where you Sponsored bywill find many of the leading edgethinkers in the world of continuousimprovement, Lean servicedesign, and sales and marketing.The podcast is sponsored by theLean Marketing Lab, the learningcommunity dedicated todeveloping and improving the userexperience.Welcome everyone. This is Joe Dager, the host of theBusiness901 podcast. With me today is Art Byrne. He has beenimplementing Lean strategies in various US-based manufacturing Lean as your Business Model w Art Byrne Copyright Business901
  3. 3. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsand service companies such as Danaher Corporation, and theWiremold Corporation. He now serves as the Operating Partner atthe private-equity firm J. W. Childs Associates. He recently talkedabout his experiences at these places in his new book, "The LeanTurnaround."Art, I would like to welcome you and start the conversation off byasking you about the title of the book. Is it a turnaround meant inthe sense of applying Lean to a company in trouble? Or justapplying Lean?Art Byrne: Joe, first of all, thanks for having me. No, "LeanTurnaround" is just a title to imply that using the Lean approach;any company can be drastically improved, or if you will, turnedaround. Its not intended to look at a company that is just introuble, but any company in any industry can be drasticallyimproved, or you could use the word turnaround by using thisapproach. Thats the intention.Joe: You start out immediately in the book with addressing Leanas a strategy. But it really struck me odd because you changedthe focus to strategy from big picture thinking to lets say Lean.Could you explain what you mean by Lean as a strategy?Art: The book really talks about a business approach. Its reallyintended as a business book, not just a Lean tools book. ButLean, from my perspective, Ive always looked at Lean from thevery beginning as something thats very strategic. Probably themost strategic weapon I think that any company can have. Itcreates an unfair competitive advantage for any company.Therefore, Ive always seen Lean as a strategy, not as somegrouping of tools. In fact, one of the biggest tragedies that wehave is that when we first started to hear about Lean, and Ivebeen doing this since 1982, always done this from the position ofa CEO if you will, either general manager, or group executive, orCEO, or chairman. Basically always from the position of a leader, Lean as your Business Model w Art Byrne Copyright Business901
  4. 4. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsso Ive always looked at it from a point of view of improving mybusiness.In the Lean world, we started out back when I started in 82,Lean hadnt been invented yet. We called it Just-in-Time. Go backto when it was called Just-in-Time. We messed that up. Westernculture, Western societies, we applied the word inventory to it.The thought wasnt just Just-in-Time as the way Toyota did it, butit was Just-in-Time slash inventory, and then of course becauseno one believed that you could take the inventory out of thewhole supply chain, it became Just in Time/Inventory/go beat theheck out of your suppliers because somebody had to hold thestuff.Unfortunately, the big three auto companies were pretty good atbeating the heck out of their suppliers and I think it was to thedetriment that occurred. But over time, when Womack and Joneswrote the book and created the Lean out of the book LeanThinking, again, the Lean thinking was the right idea, explainedthe whole thing correctly. It talked about value streams and allthat and really explained it as a strategy.But, once again, I think we messed this up. Today Lean isbasically thought of most commonly as "Lean manufacturing." Ithink thats a tremendous tragedy because it just takessomething thats very, very strategic and it reduces it down tosome manufacturing thing, if you will.That does two things when you call it Lean manufacturing. Thefirst thing it does is that even in manufacturing companies, itreduces Lean to some minor element of the strategy. Most CEOssay, "Oh, Lean manufacturing, thats something that I can handoff to my operations VP and let him work on that. Well do theother stuff that we normally do."Of course, if you call something "Lean strategy," anybody in any Lean as your Business Model w Art Byrne Copyright Business901
  5. 5. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsother business looks at that and says, "Well, thats amanufacturing thing." I mean if you call it Lean manufacturingthey think of it as a manufacturing thing. "So were not going touse that at all. I dont know how it could apply to us."I think thats a tremendous tragedy and its partly something Imtrying to address in this book is that if you think of it correctly, inorder to improve any company, you need to have three elementsthat are present. One of them is Lean has to be the strategy.Two, you have to lead the implementation from the top.Three, you have to understand that the thing that youre trying toturn around is your people. Youre trying to improve your people.Most of that stuff is just lost on people and none of that stuff isutilized.If you use that approach, however, you can be massivelysuccessful with this in just about every instance. Ive been doingthis for over 30 years now and Ive run Kaizens in over 14countries. Ive done it in different industries, over 30 companies ifyou count some of the subsidiaries that Ive been responsible foras well. It works every time. Thats the approach that the booktakes, really is to..."How do you improve any company by usingthe Lean methodology?"Joe: Point of reference that really struck me in the book, the onebig overall thought I had from it, is you view Lean from justabout an appreciative inquiry point of view, what you do well,what are the value adding activities? Thats practically like heresysometimes, what many consider Lean thinking. I think the firstthing when someone thinks about Lean, they think about wastereduction. But, you talk about value adding.Art: Thats correct. Theres a simple definition of, what is abusiness in the first place, not just a manufacturing business, butany business? Its really a very simplistic thing. Its a collection ofpeople, and a bunch of processes all working to try and deliver Lean as your Business Model w Art Byrne Copyright Business901
  6. 6. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsvalue to customers. Thats true for any business. It doesnt haveto be just manufacturing. Unfortunately, the traditional approachthat weve evolved to when we run these businesses, we startedout with strategy, and more often than not the strategy is tocreate shareholder value, which I think starts out by having it allbackwards because shareholder value, to me, is a result, not astrategy. Its a result of what you do and the value that youdeliver to customers over long periods of time is whats going toimprove your shareholder value.You cant just say, "Im going to do shareholder value." Thatsbackwards. The other thing that occurs in almost all traditionalapproaches to a business is we take the value adding part of thebusiness as a given. For example, if youre running a companyand you have a six-week lead time, and youve always had asix-week lead time, then thats taken as a given, "OK weve got asix-week lead time. How do we do our strategy around that?"What we try and do instead is we try and get our customers toconform to what we do, to the fact that we have a six-month leadtime. Then, of course, we focus very, very heavily on making themonth. The traditional management approach is focus on thenumbers and make the month, make the quarter, that kind ofthing.Unfortunately, when youre focused on make the month; yourefocusing on something that already happened. You cant doanything about that anymore. That already occurred. Thathappened last month.In fact, for most companies, by the time they get the results oflast month, theyre three weeks into this month. Effectively, werealways trying to drive the car through the rear-view mirror whenyou look at it that way. The reality, however, is the opposite ofthat.The value is created by a couple of things, one, by improving Lean as your Business Model w Art Byrne Copyright Business901
  7. 7. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsyour own value adding activities. Two, by delivering more valueto your customer than your competitors can. Three, byconforming what you do to your customers to satisfy them andmake you stand out verses your competition. Its really thisopposite...value is created by the opposite of the traditionalapproach, if you will.I always like to use the example of a simple thing thatproductivity equals wealth. Productively, this is true for countries,for companies, for anything. Productivity always equals wealth. Ifyou think of the industrial revolution in England, if you thinkabout why the United States has become so powerful, its allreally because of productivity.A Lean strategy allows you to get big improvements in your valueadding activities, which is basically productivity. Its a way to getproductivity by focusing on your value adding activities. As youget these, this creates the opportunity for you to grow and togain to gain market share, which is particularly important in timeslike this when the economy is really flat and slow and people arestruggling to get any kind of sales growth.The Lean approach gives you the opportunity to do that byfocusing on your value adding. I look at Lean really as thegreatest wealth creator that was ever invented. But most peoplejust look at it as a bunch of tools, as I said before. Its a wholebunch of tools in a tool kit.We can roll then out when we want to use them. If we dont feellike using them...if you look at most manufacturing companies,they say theyre going to do Lean, and most of them will startwhere theyre trying to do Kanban, just because they canunderstand Kanban a little bit better than some of the other stuff.They wont do setup reduction.They wont do some of the other fundamental things. Theyll tryand do Kanban, without doing all the other things first; you dont Lean as your Business Model w Art Byrne Copyright Business901
  8. 8. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsget much cane out of doing Kanban. But, thats the approach thata lot of people take.I think you have to understand Lean as strategic to understandwhats possible here. I can give you a simple example of that,which is, if I just gave you an example that said, we gotCompany A and Company B, they buy the same equipment fromthe same manufacturer, so they run at the same speed.Everything is equal. They dont have anything different...asCompany B can change the equipment over in one minute, andCompany A takes an hour.If each of them can only afford an hour a day to change thatequipment over, then if I asked you who has the lowest cost, andwho has the best customer service, A or B, it becomes prettyclear to most people that the guy with the one minute setup isgoing to have lower cost. Hes going to have tremendously bettercustomer service because of his ability to respond quickly.He decides to leverage that by offering a two-day lead time,when Company A and the rest of the industry has a six-week leadtime. Hes going to start to gain market share. Company As firstreaction is probably going to be to build more inventory so thathe can offer a short lead time. Thats just going to drive his costup. Or, if that doesnt work, hes going to start to cut the pricewhich also hurts his cost structure and his profitability.Something that most people would look at clearly as amanufacturing thing, setup reduction, turns out that its going togive me lower cost and better customer service, two verystrategic things. That might give you a little insight into why,Lean at its core, is a very, very strategic thing. Thats part of thepoint that were trying to make in the book, here is applying theLean tools and doing this...therere some tremendous results youcan get from this.Joe: You talk about leadership as being a real focus in Lean. But, Lean as your Business Model w Art Byrne Copyright Business901
  9. 9. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsyou talk about it more in a participatory sense than what I thinktraditional thought leads us. We think of Lean as empowering theworkforce. But, you really do take it that leadership has toparticipate, and practically, at that ground level. Can you explainthat?Art: Right. Well, if you dont have the leader of thebusiness...and that doesnt have to be the CEO, it can be theleader of a plant. It can be the leader of a division, or anybodythats leading any business, a business owner, if you will. Myexperience with Lean...Its easy to tell you the facts about Leanand tell you the concepts. But, its very difficult to do. As a result,if the leader isnt leading it, and I dont mean managing it, but Imean leading it hands-on, out front, showing the way, thenyoure not going to really get very far with this. Its reallyinteresting to me over many, many years...when Ive given talksat national conferences on this stuff, or whatever, afterwards,people come up to me and say, "Gee, that was great. Can youcome and talk to my CEO and see if you can get him to do thisstuff?"Because, the people down in the trenches that are trying to doLean, they understand that without the CEO backing it, not muchis going to change. The reality is, whats very, very common isthat youll see companies that say, "Oh, yeah? Were going to doLean," and they think of it as some element of their strategy.Mostly, they attempt Lean for things like reducing headcount, orimproving their inventory turns, or something like that. Theydont look at it as a strategic thing. They dont look at it as, "Howdo I grow and gain market share by using this stuff...beat theheck out of my competition?" They just want to cut theheadcount.As a result, they delegate it down to their VP of operations. Then,they try and drop Lean on top of an existing batch structure, Lean as your Business Model w Art Byrne Copyright Business901
  10. 10. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsleave everything else the same. The reality is you cant do that.You can try it, but youre not going to be very successful for verylong.If you want to do this and use it as a strategic weapon, you haveto change everything over time. It doesnt do you any good, forexample, if youre in manufacturing, it doesnt do you any goodto try and do Lean at the manufacturing level and let your salesforce continue running around doing big batch order taking, orhave sales terms that call for you shipping 45 percent of yourmonthly sales for the last week of the month, and themanufacturing guys are trying to level load production. Youre atodds with yourself.You have to have the leadership to do this. If you cant get theleader to participate, its something that isnt going to work verywell. One of the main thrusts of this book is really to try and helpthe leaders understand what it is they have to do, and how theyhave to behave, and what they have to know in order to besuccessful at doing this.I give some examples of; you just start out with as to, "Why doyou want to do this in the first place?" Well, the results that youcan get are fantastic. If I can digress for a second, I could justgive you some of the results that we achieved at Wiremold.Theres a whole long list here. Basically, we dropped our leadtime from four to six weeks down to one to two days. That gaveus the ability to increase customer service from 50 percent to 98percent, and allowed us to quadruple the size of the businessover eight years. We improved our gross profit margin from 38percent to 51 percent.Improved productivity by 162 percent. Inventory turns went fromthree times to 18 times. Our operating income improved by 13.4times over the course of about nine years. The net result was,our value, our enterprise value, if you will, increased by just Lean as your Business Model w Art Byrne Copyright Business901
  11. 11. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsabout 2500 percent over the course of about nine years. We wentfrom a company valued at around $30 million to a company thatwe sold in 2000 for $770 million. That ought to give people plentyof incentive.I cant imagine someone leading a business and I said, "Gee, if Ishow you how to use these tools, and you can increase the valueof your enterprise by 2500 percent over the next 10 years." Ifyou look at me and say, "Well, thats interesting, but I dontreally want to do that." Then, to me, youre in the wrong job. Youshouldnt be in that position because you should want to do it.The book really tries to say, "Look, this is what you can get fromthis. These are the steps you need to take. These are the thingsthat need to be present. These are the things you need to know.This is how you go about implementing this, and the actions thatthe CEO, or the leader has to take to make it happen." Because,without the CEO driving this, you can really kind of forget aboutbeing successful, I think.Wiremold was an interesting example. After we got written up ina number of books, we were a chapter in the book, "LeanThinking." We were a chapter in Gemba Kaizen. We were writtenup in articles. All the industrial tourists started coming. Theywanted to come see what we had done.That was starting to cause a problem because we had a businessto run, and it was taking too much time. I basically put in asimple rule. I said look, we should be able...we should want tohelp other companies do this, but if they dont bring their CEO,then we know that theyre not going to do it.Lets put in a simple rule that you can still come and visitWiremold, but only if you bring your CEO. Guess what? All thetours stopped immediately. Lean as your Business Model w Art Byrne Copyright Business901
  12. 12. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsArt: No one could get the CEO to come.Art: Thats still true today. I think its one of the two main thingsthat I see in the Lean movement over all these years is twothings. One, why isnt it being applied to other companies thanmanufacturing? I said before, I think thats because we startedcalling it Lean Manufacturing, which limits it right off the bat. Themain reason, however, is that...that there’s no Lean leader outthere. Therere not a lot of people that are willing to really leadthis. They want to delegate it. They dont want to get their handsdirty. They dont want to have to be on Kaizens. They dont wantto have to go out in the shop and do this stuff.As a result, you dont get anywhere. The book really tries to takea Lean leader through what has to be present for you to besuccessful and basically break it down into a couple of things.One, you need what I call the management on principles ormanagement musts. Those are things I mentioned before, whichare one; you have to see Lean as your strategy.Two, you have to commit to leading it from the top, and three;you have to understand that its really all about people. Whatyoure trying to transform is your people. Thats the "Toyotarespect for people" aspect of things, and understanding that allthe best ideas for improvement and change, are going to comefrom the people that are doing the value adding work.In fact, I always think of whether people could see theorganizational structure upside-down instead of...mostcompanies, when you look at the organizational structure, it lookslike a pyramid with the CEO at the top, and it cascades down, andthe people at the bottom are the people that are adding thevalue, the work force, if you will.Really, you should flip that around, upside-down, and...where thevalue adding people are at the top and everybody else is belowthat, and anybody thats below the value adding people, unless Lean as your Business Model w Art Byrne Copyright Business901
  13. 13. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthey are spending a lot of their time every day contributing tohelp the value adding people do their work better, then theyrejust a formal waste.Theyre just in the way because, what the company delivers to itscustomers comes through how it does its value adding. If you canstart with those management principles, then the next questionthats very logical for most CEOs is "Well, gee, I dont knowanything about this Lean stuff. What do I have to do? How do Igo about this? What do I have to learn?"I think the approach, there is very straightforward. First of all, itspretty easy these days to...theres a lot of books on this subjectyou can read. There are probably companies in your area thatyou could go visit that are doing Lean already. They canparticipate on some of their Kaizens and get a feel for it.Maybe you can have them come and help you run a Kaizen inyour operation first and see what that looks like before youcommit to this. I think the other key thing for a CEO; they needto learn what I call the Lean fundamentals, if you will. Really,therere only four things there.Therere a zillion different tools in Lean that youre going to pickup as you go along, but I think if you can start with the mainfour, which is work to takt time, one-piece flow, standard work,and pull systems. If the CEO can grasp those four concepts, andtheyre pretty easy to understand pretty quickly, and he can justkeep driving them into his organization and keep asking thequestion, "Are we working to takt time?""Is everything in a one-piece flow? Have we reduced all thesetups? Have we got a pull system working? Can we connect thecustomer to the shop floor through a pull system? Doeseverybody do standard work or standardized work, whateverterm you want to use?" Lean as your Business Model w Art Byrne Copyright Business901
  14. 14. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsIf you just keep driving those in, you have a really good chanceof being successful. Then, of course, how the leader and the CEOgoes about his daily work and his daily management, and how hedrives this down into the organization is really, really critical. Itssomething that has to be much more hands-on than sitting inyour office and looking at the numbers. Most guys think oncethey get to be the head of the company, they figure all the valueadding occurs in their office.Art: The reality is its certainly the opposite of that. No, not a lotof value adding really does occur in that office, and the valueadding is going on the shop floor. Youd be surprised at howmany people running companies dont have a good idea of howvalue is added in their own company. They really dont have agood idea of whats possible. Again, if we go back to an exampleof setup, if you came by one of my companies and you said,"Gee, Arts setting up this punch press in one to two minutes allthe time. We take three hours." I say, "Well, I know, Joe. Thatscorrect. Thats why were beating you to death."You say, well now I understand it. Im going to go back and tellmy guys that theyve got to set this punch...our punch presses upin one to two minutes. You go back and say hey, I just went overto CR, and now I want you to set them up in one to two minutes.Thats it, thats my order. What do you think is going to happen?Nothing, right?First of all, they...theyre going to look at you like youre an idiot.Secondly, theyre going to give you a long list of why this isabsolutely impossible to do. Theyve been doing their setups foryears and years and years, and they cant get any better thanthis. You dont know how to do the setup. Youre the CEO. Youvenever done one before.Now youre stuck, right? You went and saw somebody doing Lean as your Business Model w Art Byrne Copyright Business901
  15. 15. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthese setups in this timeframe, and you can get the idea that,"Gee, if they can do that, they might be able to beat me to deathover time. I better get there." But when you go home, andeverybody resists it, what are you going to do?Thats where the leadership comes in. The leader has to figurethat out. The leader has to work towards making those thingshappen. The nice thing is its really fun to do that. I rememberwhen I first went to Wiremold and we had a bunch of rolling millswith some of the equipment that we had, and these are reallylong machines, rolling steel into shapes, and then we had one.I said, well, how long does it take to change that over? They said14 hours. I said oh, thats no good. Weve got to get that under10 minutes. Of course, they all looked at me like...who is thisguy?Joe: Yes, whered he come from?Art: Why did we get him as the CEO? We dont need...get himout of here. But I said no, no, come on. Ill help show you. Weran some Kaizens and we did some experiments and we had toalter the machine a bit, and it took us a while. It took us a bunchof Kaizens and, as I said, quite a bit of alterations, but a numberof months later, we were changing that machine in six minutes.Now, all of a sudden, youve got some real believers. They wentfrom "what are you, nuts?" To "wow, this is really good." Then, ofcourse, about oh I dont know, a year or two after we were doingit in six minutes; somebody runs in one day and theyve got ametal magazine.Its talking about some automotive company, an automotive partssupplier; I guess it was that had the exact same rolling mill thatwe had. They were bragging in this article for four pages abouthow they had figured out how to reduce the setup time down tosix hours from 14 hours and wow, what a miracle. My guys aresaying, "But Art, we do it in six minutes?" I just said thats right. Lean as your Business Model w Art Byrne Copyright Business901
  16. 16. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsBe quiet. Dont tell anybody.Art: But the leadership is critical here, and so the book tries tofocus on a step by step approach to what does the leader have todo? How does he have to be involved? How does he introduceKaizen? How does he train people? How does he get teamsstarted? How do you organize to do this? As I said before, youcant just drop Lean on top of a batch organizational structureand think youre going to be successful. Youre going to have tochange your structure. If you change to a value stream type oforganization early on, you have a much higher chance of beingsuccessful.Joe: When you change like that, to a value stream, is there astep by step way of doing it, or do you just have to kind of takethe leap and do it?Art: There are lots of leaps of faith in going from batch to Leanand lots of leaps of faith on the part of the leader, because youretrying to get massively better, and that means youre going tostumble. Youre going to fall a number of times. But I always goback to what one of my original Kaizen senseis, a Mr. Nakou,from Shinjujitsu, just as a background thing, when I was a groupexecutive at Danaher corporation, we were the first company inthe United States and, in fact, the only company in the UnitedStates for four years to utilize Shinjujitsu.Shinjujitsu, for those people that dont know, is a consulting firmout of Japan, and the founders of Shinjujitsu, there were four ofthem, all worked directly for Taichi Ono for most of their careers,implementing Lean, and they mostly spend their focus on Leanand the Toyota supplier companies and in the Toyota companiesother than Toyota automotive itself.But these were the original guys. These were the guys who did Lean as your Business Model w Art Byrne Copyright Business901
  17. 17. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthis. But Mr. Nakou used to tell me all the time, hed say"Byrne-san, if you dont try something, no knowledge will visityou." I always thought that was a great statement, because ifyou think of it, its really true. But that means you have to take alot of leaps of faith. Youve got to try something. Youve got togive it a shot, see what happens.It doesnt always work. Youre going to fail some. But if you dontallow that to happen, if you dont even want to try, thenobviously, you cant get very far. The CEO driving it and being theguy taking the leaps of faith and trying these things is very, veryimportant. I try and layout for the CEO what, as I said, what theyhave to know, how they go about it, how they implement it, howdo you switch to a value stream organization.We switched to a value stream organization at Wiremold beforewe ever did the first Kaizen. It wasnt fully implemented. We justtook the people, and we announced it, et cetera, and themachinery, of course, was still spread all over the place in thetraditional batch way. A department doing stamping, adepartment doing painting, all that kind of stuff.The value stream leader, we were eventually going to give him allthe equipment to make his product family complete. Wedidnt...there were no excuses. You couldnt say, well, this guydidnt get me this part, because you had all the equipmentyourself. You didnt have any more excuses.As you go along, there are lots of things that happen that youjust have to say, "Well, no, this is the way were going to go." Iremember when I went to Wiremold, we had a lot of punchpresses; a lot of punch press dyes. We made our own dyes. Wehad a big tool room. I said OK, weve got to bring the setupsdown and all of these...all this equipment, so I want you to go toa standard shut height for all the dyes.If you need two standard shut heights, one for the smaller ones Lean as your Business Model w Art Byrne Copyright Business901
  18. 18. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsand one for the big, progressive dyes, thats OK, but no morethan that. The guy who was running the tool room in themaintenance shop, who had been around for a long time and wasa really good guy, he looked at me and he says but Art, you cantdo that.I looked at him, and I said, "Well, why not, John?" He said,"Because we have 1,600 punch press dyes. Its going to takeforever."Art: My response was, "Well gee; thats a lot. You know weought to get started because were doing it." Sure enough, it tookus two or three years of altering every one of these dyes to get towhat we needed to be, but after that, machines that used tochange over three times a week, we were changing 20, 30 timesa day. We had a great example once that we presented an AMEmeeting way back when where we had taken one punch presssetup, it was a progressive dye, coil change and everything; itwas three hours and ten minutes when we started and we got itdown to one minute. Things like that, when you challengesomeone to do something like that and they at first say "yourean idiot." But when they achieve one minute, they feel prettygood about that.Its a really wonderful thing to watch, but without the leaderpushing it, and without the leader insisting on it, it will neverhappen. All the excuses will overwhelm it, and you will stay atthree hours.Joe: What I feel is interesting when youre talking about theseleaps of faith, these things you are talking about are all justsmall, little changes because youre out where the value is beingcreated, its not this leap of faith up in the corporate office its onthe floor. Lean as your Business Model w Art Byrne Copyright Business901
  19. 19. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsArt: Thats right. Thats right; its knowing whats possible, beingout on the floor, understanding what you can do, et cetera.Youve got to fight what I call the company lore or the industrylore that exists in almost any business. Ill give you an interestingexample of that. Years ago, I was on the board of directors of acompany making jewelry, in this case making mostly rings. Theywere using gold and precious stones and all that, but it was kindof middle-market rings sold to JC Penny and Montgomery Wards,and Sears, that kind of level of rings. But the process of makingthe rings was the same as the whole industry.Of course like any industry, theres a certain sense of what youcan and cant do. They said, "Would you come down; youre onthe board. Can you come down and take a look?" I said, "Yeah." Igot down there. It was in Miami, North Miami Beach. I said...firstquestion was, "Well. How long does it take you to make a ring?"They said, "Eight weeks." I said, "Youre kidding?"Art: They said, "No, no, no. It takes eight weeks. Well showyou." They take you out in the shop, and the way they weredoing it; I believed them. It took them eight weeks all the time.Art: Then when they told me that was the industry standard.Thats exactly what it takes. For some reason, or other after thatI ran into three or four different companies making rings likethat. Everyone of them, I said, "How long does it take you tomake a ring?" They seriously all told me, "Eight weeks." Theysaid, "What do you think?" I said, "Two days. Were doing this intwo days," and we did. I set up a little cell; we could do this intwo days. We could do everything right in the cell. Before in eightweeks, they would finish the rings, put them in a room. Theywent to a separate department to ship and all that stuff. We setup shipping and everything right at the end of the cell.Anything that you sent me today I could wax it up tonight and Lean as your Business Model w Art Byrne Copyright Business901
  20. 20. Business901 Podcast TranscriptionImplementing Lean Marketing Systemscast it. Tomorrow morning I could finish it and send it to you thenext day. It was a two-day lead time. It changed the wholenature of the business really.If you think about how most companies go about things, if theyhad an opening for a VP of operations, and they put a spec sheetout to a headhunter; one of the things on the spec sheet wouldbe, "We want somebody with industry knowledge." When thatindustry knowledge came in, they would understand already thatit takes eight weeks to make a ring.Art: There wouldnt be any pressure to change to two days, or toone week, or two weeks, or anything like that. It would be, "Oh,well; eight weeks is a given. Every place Ive ever been its eightweeks, so were not going to touch that." Thats exactly what Imtalking about in this book. Thats your value adding, how youmake them and what you do is your value adding. If youre notwilling to change the value adding, if youre taking the valueadding or the eight weeks, if you will, for granted, how are yougoing to get any better?If theres nobody at the top position of the company trying tochange that or trying to improve it, then youre just going to keepgoing sideways really. It doesnt mean that companies that dothings in a batch cant do them well; they can; they can besuccessful; they can make a lot of money. Its just that if theyhave a competitor who switches from that batch model to a Leanmodel, over time theyre going to eat your lunch and if you dontrespond youre going to be in trouble.You might not see it right away. It might take a number of years.But over time, if youre still changing over in three hours and Ican do it in one minute, Ive got you, and I’m going to win.Joe: Does a Lean guy, when he walks in somewhere, just see Lean as your Business Model w Art Byrne Copyright Business901
  21. 21. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsthings differently?Art: Absolutely. Im in the private-equity business now; werealways looking for companies to buy, et cetera, and we bought 21companies when I was at Wiremold. To me, one of the mostimportant aspects of looking at a company was to go physicallysee it. You could understand what you were going to seebeforehand by looking at the balance sheet. Because if thebalance sheet, for example, showed you that inventory wasbigger in dollars than accounts receivable and that inventoryturns were only two or three times, you could almost predictexactly what you were going to see when you went to the shopfloor. You could understand in advance what you were going tosee and then youd go see it.By walking around, a guy with a Lean set of eyes is going to seea lot of things way different than almost everybody else. Leangives you a tremendous advantage in acquisitions as a result ofthat, because you can get your cash back so much faster,because you know what you can do to inventory turns, you knowhow much space you can reduce, you know how muchproductivity you can get in a very short period of time.As a result, you have a big advantage. A lot of the companiesthat we bought at Wiremold, we got it down to where we weregetting all of our cash back within about three years. Then, fromthat point on, those companies were generating cash that wecould use to go buy something else.In answer to your question, yeah, a guy with good Leanexperience walking in, looking at a company, is going to seesomething totally different than what most people see. Its ahuge advantage.Joe: When you go into a company and look at that and startworking with a company, the shop floor is not the tough people tochange are they? Theyve kind of known it all along what they Lean as your Business Model w Art Byrne Copyright Business901
  22. 22. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsneeded to do, right?Art: Youre right. Thats very, very true. Thats really interesting.Ill tell you a funny story, back in by Danaher days, we wereconverting our own companies and working with Shingijutsu, andwe couldnt get Shingijutsu to move off the first two companiesbecause they said...we had 13 companies and they startedworking with only two of them. When we wanted them to moveto the others, they said, "No." They said no because they said,"These are still so bad that wed like to get these improved tosome level before we do anything else." In order to do stuff onthe other companies, we created something called the PresidentsKaizen. We went and did Kaizen ourselves in these companies. Itwas really interesting because we basically ordered all theDanaher presidents, at that time there were only 13 companies inDanaher was much smaller than, and the VPs of Operations to goto one of our factories and spend three days doing a Kaizen.Youd go in, and at first, the workforce would say, "Wow. Wereimpressed that Danaher would send all of its presidents here.But, gee, weve been working here for 20 years. In three days,youre not going to do anything. Wed just as soon youd goaway."Wed start doing Kaizen. The first late morning or early afternoon,we were moving equipment around the shop and we were doingall these things. At the end of three days, the reaction from thesame workforce that didnt want us there in the first place was,"Hey, you guys have gotten more done in three days then wevegotten done in the last five years. Couldnt you stick around for acouple more days?" Or, the other reaction you get from them allthe time was, "Hey; youre not going to go away and leave uswith them are you?"What they meant by that was, "We have been tellingmanagement all the things that we just did over the past three Lean as your Business Model w Art Byrne Copyright Business901
  23. 23. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsdays, the improvements that you made, weve been telling themabout this for a long time, but they never listened. You guyscame rolling in here, and in three days, you did all the stuff thatwe wanted to do." The value adding people, they know what canbe done. The resistance to implementing Lean almost nevercomes from them.The first real Lean thing we did in Danaher was at Jacobs EngineBrake. That was a UAW location. We never had any problemswith that at all because we treated them all like people. We didnttreat them like they were the UAW. We just said, "Were going toget together and were going to do this." It was no problem. Wehad IBEW at Wiremold. It wasnt a problem.Its really understanding that the resistance youre going to get isgoing to come mostly from middle management, occasionallyfrom senior management, and heavily from finance. The financeguys are very resistant to this because theyre in charge of what Icall the anti-Lean. Theyre very protective of the anti-Leanbecause theyve been doing it that same way for a long time.The anti-Lean, in this case, is standard cost accounting becausestandard cost accounting incentivizes all the things youre tryingto get rid of with Lean. If you think about inventory, I callinventory the root of all evil because it hides the waste thatyoure trying to get rid of. Standard cost accounting systemsincentivize people to build inventory, to get absorption hours, tomake the month look pretty good.Youre just pushing stuff off into the future, et cetera. But, thatsystem incentivizes all the wrong behavior. Youre finance guys,are very, very hard to move off of that kind of system. But if theywin, if the CEO doesnt overcome that and the finance guys win;you wont get too far with your Lean implementation. You wontmake the gains that you ought to.Joe: I think thats a huge thing that you have to get over there, Lean as your Business Model w Art Byrne Copyright Business901
  24. 24. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsbecause the measurements in traditional numbers just dontspeak.Art: They dont make any sense, and yet, people cling to thembecause thats what theyve always done. I understand that.Thats human nature. Its a normal thing. Thats where theleadership has to come in, right? Then when you look at the Leanapproach here, for other kind of companies, other thanmanufacturing, the opportunities and the gains innon-manufacturing companies, in my opinion, are way biggerthan in manufacturing. Because in manufacturing people have atleast been trying to get productivity and do all these things for along time. They might not have been using the Lean approach,but theyve been trying other things for a long, long time.Whereas in service companies, banks, insurance companies,hospitals, that stuff...they havent been doing that. Theyreprocesses are things that are done on somebodys desk. Unlikemanufacturing where you can go out and physically see theprocess, its hard to see the process in some of these other kindsof companies. Therefore, the waste thats in there is enormous,absolutely enormous.Ive done a number of Kaizens in hospitals. The opportunities inhospitals are frightening, actually. Theyre exciting and Im reallyhappy to see a number of the hospitals in the country areimplementing and really driving down the Lean path right now.There are several great examples, one of which, we got startedway back 10 years ago, was Virginia Mason Medical Center out inSeattle.One of their first Lean visits was they took 30 of their seniormanagement and seniors doctors from Seattle, Washington toWiremold to see what we were doing in Lean, pretty impressive,really, that a hospital would do that. We basically said, "Hey look,we do the same thing that you do. We start out with our raw Lean as your Business Model w Art Byrne Copyright Business901
  25. 25. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsmaterial as a piece of steel or plastic and we run it through aseries of processes where we punch holes in it, we add stuff to it,we put it in a box, and we sell it to someone."You start with a human body, and you run through a processwhere you punch holes in it, you attach stuff to it; youre notallowed to put it in a box, you have to put it in a car."Art: "But its the same thing." I was very impressed that thoseguys were able to see that, understand it. They went fromWiremold to see Toyota in Japan and theyve been on a Leanjourney for 10 years now. As far as I know, I think theyreprobably the leader in Lean implementation in the hospital field.But they certainly proved that’s possible. ThedaCare is anotherone out in Appleton, Wisconsin thats done a great job with this.Its nice to see this can be done and other people are doing it inother industries. But boy, the opportunity for this applied to otherbusinesses is absolutely enormous and no one really talks aboutit, because we call it Lean manufacturing, unfortunately.Joe: I think so. I think one of the things that...I see its driven inLean services now; youre seeing more of a Lean design. Lean istough for a lot of people to get their hands-on outside, because itstill has that waste connotation to it.Art: Yeah, but thats what youre trying to do. Lets just take ahospital for example. A hospital is what I would call a...almost allhospitals are what you would call a silo organization, everythingsa silo. If you broke your leg or something and you went into thehospital, youre going to go through about 10 or 11 differentsilos; the emergency room silo, the admissions silo, the nursesilo, the x-ray silo, the blood lab silo, on and on and on. All thosesilos have to somehow relate and work with each other andcommunicate with each other well for you to get the care thatyou need to get. Lean as your Business Model w Art Byrne Copyright Business901
  26. 26. Business901 Podcast TranscriptionImplementing Lean Marketing SystemsBecause when hospitals dont communicate well, silo to silo, youcan die. They can make a big mistake, give you the wrongmedication, or something like that. The opportunities in thosepieces, though, are enormous and the Kaizens Ive done inhospitals, you start out with the first day and you got the teamtogether and youve got really great people there, a lot ofdepartment heads and theyre all dedicated to what they do.Its really fun to do Kaizen in hospitals, because the people are sogood. You say, "OK. You want me to work on this. Whats thebiggest problem you have?" Almost 100 percent of the time theyall say, "Its the doctors." I say, "Oh, really? Whats the problemwith the doctors?" "Well, theyre arrogant and they dont do thisand they do that," and theres a whole list of stuff about thedoctors.I say, "Well look, this hospital," and the one that I was doing thestuff in was about a 5,000-employee hospital, inner-city hospital.I said, "Look, weve got 5,000 people who work here, 500 ofthem are doctors. Were going to work on what the other 4,500do."I said, "If we improve what the other 4,500 are doing, makethings flow and make things better; I can guarantee you we canget the doctors to come along and do what they need to do."That was always proven true; always you could get that tohappen. But no one thought of it that way.They thought of it backwards. "Its the doctors. Its not ourprocesses and the way we do everything is such a mess. Welljust blame it on the doctors." But its never the doctors. Its theprocesses.I always like to tell people, "Look, you have to focus on yourprocesses, not your results. If you want to get results, focus onthe processes." Most people do it backwards; they look at lastmonths numbers, make the month, and they try to improve the Lean as your Business Model w Art Byrne Copyright Business901
  27. 27. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsnumbers.Theyre looking backwards. As a result, you wind up with a lot ofcompanies that have a terrible month or a terrible quarter inoperations, but they try to offset that with a great month inaccounting. You do that enough times over a bunch of years andyou wind up with guys like Enron and WorldCom and HealthSouthor whatever it was, that guy Scrushy ran. All those guys are injail...Art: ...because the great month in accounting caught up withthem.Joe: I think thats an interesting perspective on that one. Iwanted to make sure I got this in; The Lean Turnaround wasprobably the best business book that Ive read on Lean. It tiedbusiness to Lean as well as any book that Ive read. I wanted toat least complement you on that while I had you.Art: Well, I appreciate that, but I think thats always the wayyou should look at this. Lean, as I said, is the best strategicthing, best strategic weapon you could ever have. Ill tell you aninteresting story, because this is a little piece of, its a little Leanhistory in the United States. Back when we first started workingwith Shingijutsu at Danaher and Jake Brake. I was the groupexecutive and the guy that ran Jake Brake was a guy namedGeorge Koenigsaecker. Koenigsaeckers a very brightstrategic-thinking guy and a really good Lean guy as well. Wewere having lunch with Mr. Iwata one day. Iwata was the head ofShingijutsu.Both of us said, "Wow, Mr. Iwata, this Lean, this Toyotaproduction system," it wasnt called Lean for another 10, 12years. But that was the... "This Toyota production system isfantastic. As far as were concerned, this is the most incredible Lean as your Business Model w Art Byrne Copyright Business901
  28. 28. Business901 Podcast TranscriptionImplementing Lean Marketing Systemsstrategic weapon we have ever seen in our lives. Why wouldToyota allow you guys to come out and teach other people how todo this stuff? Its such a strategic weapon."Iwata looked at us and he just started laughing. He said, "Look, Ican tell you about Lean," at the time was called Just-In-Time. "Ican tell you about Lean. I can show you Lean. But I bet you cantgo home and do it." That to me has always been true. He wasright on the money then and hes still right on the money now.Thats why we havent had a lot of great successes in this.A lot of companies are trying Lean or dabbling in it a little bit, butthe number that are successful and made a conversion I think isquite small still. Thats all I was trying to address with this bookis, "Hey, it doesnt have to be that way." If you look at this assomething that can really help you improve your business, if youcan understand how strategic it is, and if you can understandyour role as the leader, and what you have to do to make ithappen, then you have a shot at this.If you reject either of those two things, then you have no shot.You might as well keep doing what youre doing, because allyoure going to do is get your people upset, and mess aroundwith something, youre not really committed to.Joe: Well, I can go on because Ive enjoyed listening to you verymuch, but we have to end at some time. I would like to thankyou very much for the time Art. I look forward to seeing yourbook get passed around; its well worth it.Art: OK, well thank you very much Joe. I appreciate that andthanks for having me on.Joe: This podcast will be available in the Business901 iTunesStore and also the Business901 blog sites. Thanks again. Lean as your Business Model w Art Byrne Copyright Business901
  29. 29. Business901 Podcast TranscriptionImplementing Lean Marketing Systems Joseph T. Dager Business901 Phone: 260-918-0438 Skype: Biz901 Fax: 260-818-2022 Email: jtdager@business901.com Website: http://www.business901.com Twitter: @business901Joe Dager is president of Business901, a firm specializing inbringing the continuous improvement process to the sales andmarketing arena. He takes his process thinking of over thirtyyears in marketing within a wide variety of industries and appliesit through Lean Marketing and Lean Service Design.Visit the Lean Marketing Lab: Being part of this community willallow you to interact with like-minded individuals andorganizations, purchase related tools, use some free ones andreceive feedback from your peers. Marketing with Lean Book Series included in membership Lean Sales and Marketing Workshop Lean Service Design Workshop Lean as your Business Model w Art Byrne Copyright Business901

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