If Lean is so great, why are Japanese companies not doing better?

Himeji Castle, JapanI recently came across an interesting, and apparently fairly popular, article on Lean and Japanese management called The Myth of Japanese Companies and Management.

In the article, the author Joseph Paris argues that there is a major disconnect between Lean Six Sigma events and other strategy and finance events in that in the former, a Japanese style of management is seen as something superb, whereas in the latter, mentions of Japanese management hardly make an appearance.

He goes on to argue that most companies have now implemented the tools and methodologies of Lean and Six Sigma into their own continuous improvement programs, and as such, these no longer provide a competitive advantage.

The article does a fine job illustrating its points, but its fundamental misconceptions about Lean do an even better job at illustrating how poorly Lean is understood in the West at large.

Lean is not the Japanese way

One crucial misconception is the idea that Lean is the way Japanese companies are run. This is far from the truth. Lean is based on Confucianism and is definitely not representative of Japanese thinking in general. For a Toyota veteran perspective, you can take a look at these two blog posts on Toyota’s focus on people development and learning written by Katie Anderson after her long discussions with Isao Yoshino, a retired Toyota executive of 40 years.

So, in short, the greatness of Lean has very little to do with the success of Japanese companies, because Lean is not a popular management philosophy even in Japan.

Has the competitive advantage of Lean been exhausted?

The argument continues that Lean tools and methodologies are now so commonplace that they no longer provide a competitive advantage. Here we arrive to the crucial question, what is Lean?

It is indeed true that many companies apply 5S, A3 reports, SMED, value-stream mapping, and 7 wastes as part of their process improvement toolkit, but I don’t think any of those are essential to Lean. I have worked with many companies that are recognized for their Lean efforts, and seen a number of shop floors that are fine specimen of what a 5S work environment looks like. Yet, among the companies I have visited, I don’t think a single one of them had grasped the essence of Lean.

By far the most popular way to “do Lean” in the West is to use the process improvement tools and methodologies, most of which have been pioneered by Toyota, and the mechanical application of this toolkit indeed offers only limited competitive advantage.

At its very core, Lean is all about learning. There is only one tool that is truly essential to Lean, and that is the PDSA cycle, because that is the foundation of systematic learning.

The more general framework of how learning is built in to the Toyota culture is best described in Mike Rother’s phenomenal book Toyota Kata – still the most important book on Lean in my opinion.

OK, so if Toyota has this awesome learning culture, why is Toyota not doing better? The official line since 2010 has been that Toyota focused too much on growth and felt too good about themselves, and forgot to keep learning. Even the best are not beyond reproach. That said, Toyota is doing quite alright nowadays, dwarfing the earnings of the US Big Three automakers.

It seems that good old Lean may still have something worthwhile to offer.

Why is Lean not on the table among top executives when they discuss strategy?

Lean has traditionally not been associated with strategy in the West, only with process improvement – and that’s an operations thing, below strategic level.

When understood correctly, however, Lean is a management philosophy, it is something that exists prior to and above strategy, not as a part of operations. At the very center of this management philosophy is perfection – perfection of the product, perfection of the system, and perfection of each individual within the firm.

However, given the traditional Western idea of a firm as an entity the only purpose of which is to generate profits for its owners, Lean is a mismatch. An essential part of a Lean company is its focus on helping each individual within the company live a fuller, more satisfying life, and to help them strive to improve both themselves and the firm at the same time.

This view of life requires not a separation of work life and private life, but a harmonious synthesis of the two, in which individuals are engaged and interested in their work as one aspect of themselves. It also requires not a separation of the company and society, but a beneficial cooperation between the two.

Given the environment and view of what firms are all about prevalent in the West, is it any wonder that such discussions do not reach the top echelons of corporate management?

Two roads to an increased relevancy of Lean: CSR and dynamic capabilities

However, there are two trends that both work to make Lean more relevant.

The first trend is the increasing demand for corporate social responsibility. We are beginning to recognize that there is, in fact, no such entity as a corporation that is only responsible for creating profits for its owners. Corporations are part of society, and no part of society can be one-dimensional. Just like economics without an understanding of psychology could not create accurate predictions, companies are not simply financial entities with no effects on other spheres of life. Adopting Lean as a management philosophy can be one route to increase corporate social responsibility and make the company a more integral part of the society it is surrounded by.

The second trend is the faster pace of business and the corresponding emphasis on dynamic capabilities as a strategic asset. Whereas many executives of old preferred a top-down view of management, and would not tolerate dissent, nor even active thinking on the lower rungs of the corporate ladder, the ever faster pace of business forces companies to empower individuals to make decisions on the spot. The way to ensure you have capable people on all rungs of the corporate ladder is to adopt a company-wide focus on learning – such as Lean. Strategy becomes a matter of capability-building, not just an annual event for the top management to decide on a course on relatively calm seas.

The road is still not an easy one

One major remark, though. It is not easy to build a learning organization full of highly-motivated people. Helping people become better takes a lot of time and requires the coaches to not give out all the answers, even when they have them. Perhaps an executive could solve a problem within a single day himself, but in order to develop the problem-solving skills of others, he may need to wait for a month to get an issue solved by someone else, guiding them along the way of course.

Even should you decide to pursue a Lean path, success will not come overnight.


Photo: Himeji Castle, Japan by Edward Dalmunder @ Flickr (CC)

Author: Ville Kilkku

I run my own consultancy business, so if you find the ideas on this blog intriguing, contact me at consulting@kilkku.com or call me at +358 50 588 5043 and we can discuss how I can help you solve your business problems. I am currently based in Finland, but work globally.