Tough Love for Delphi Leadership

Dr. James Womack is not the only one saddened to see a corporation like Delphi who championed Lean so well struggle so mightily. I read Dr. Womack’s article on the LEI site about Delphi, hoping for a lesson learned. I was disappointed.
Dr. Womack talks about seeing some of the best examples of Lean implementation while visiting Delphi factories around the world. The examples he gives are all Lean manufacturing implementation, not “Lean Enterprise” examples where the long-term vision of the organization was aligned with the operational model and improvement activities. What’s the E stand for in LEI again?
No doubt there were great examples of Lean manufacturing at Delphi. The “Lean Enterprise” factories I walk through all have no layoff policies. They all have growth plans and are committed to people development. Many of them have 100 year visions and concrete 20 year plans. They typically haven’t won any Shingo Prizes. Maybe my definition of Lean enterprise is old school. Maybe it is a cultural thing and maybe Japanese companies do have an easier time thinking long-term and becoming truly Lean than American ones do. I hope not.
In the article Dr. Womack let the leadership of Delphi off rather easily, essentially chalking up the bankruptcy filing to bad luck, or more precisely a series of factors such as energy prices, weakening SUV demand and the loss of GM (Delphi’s largest customer) market share to Toyota.
What was the vision that Delphi was trying to achieve through Lean? I don’t know. This may be a rhetorical question. Why do you do kaizen or work to become a Lean enterprise? “Cut out waste.” Wrong. “Be more competitive.” Wrong. You do kaizen in order to become a Lean enterprise so that you can make money today, tomorrow, and forever. You become a Lean enterprise to achieve your vision, whatever that may be. Hopefully it is creating good jobs, wealth, and stability in the community by profitably providing products or services the market appreciates.
As a key player in the Lean enterprise movement and a prominent speaker and author Dr. Womack has the ears of many influential business leaders. To not address this lack of vision and the failure of Lean enterprise strategy at Delphi is an opportunity lost. Perhaps the kid gloves didn’t come off because Delphi is a founding sponsor of LEI.
Dr. Womack points out that Toyota beating GM caused GM to beat up on Delphi. “The irony for Lean Thinkers is that lean-leader Toyota beat GM and GM responded by beating up Delphi which has become one of Toyota’s most eager pupils. If only Delphi had Toyota as its major customer!” I agree. So why wasn’t supplying Toyota part of Delphi’s Lean enterprise strategy? More than one consulting customer of ours has a stated goal for Lean implementation to “become a Toyota supplier”. What a good way to combine long-term thinking with Lean enterprise transformation activities and a tangible business measurement for success.
“Simply fixing operations may not be sufficient if managers wait too late to start and factor costs (principally wages and healthcare costs these days) are too far out of line.” I agree with the first seven words, but the eighth word “if…” is followed by more talk of operational costs and none of vision and long term strategy. Dr. Womack revisits his “think twice before you outsource to China” theme and then concludes that the key to sustainable advantage is a combination of “appropriate labor costs” with “truly lean practices in product design, operations and logistics purchasing and customer touch.” To borrow his words, these things are necessary, but not sufficient.
Dr. Womack ends by making a contrarian prediction that Delphi will pull through and succeed because of the Lean foundation they have laid. I hope that this is so. But I fear that as long as they are hitched to GM this will be difficult. Any concessions GM will have to make to help bring Delphi out of bankruptcy will only weaken GM further, in turn not helping Delphi.
In my opinion simply pursuing the implementation of “truly Lean” operations as an automobile parts supplier to GM is not sufficient for Delphi. Toyota got out of making automatic looms to lead the world in automobiles. Nokia got out of tires, boots, and televisions to lead the world in mobile phones. The 3M company started out in sandpaper and is synonymous today with post-it notes. I don’t know what the path is for Delphi, but the important thing is that they return to a profitable existence and remain there as long as possible in order to serve customers, the people that work for and with the company.
Delphi has many great people. They have a good brand and a strong international footprint. They have one of the best Lean operations in the United States, possibly in the world. Delphi could succeed at anything they wanted if they put their mind to it.
The lesson here is that Lean is not about changing things (how factories look and run) but changing how we think. Lean enterprise transformation changes how everyone in the organization thinks about the work they do. That’s why it takes years, not weeks. This is hardest for leadership because visionary strategy and operational turnaround expertise are a truly rare combination. We also don’t reward leaders for thinking long-term, if this does not maximize value to shareholders in the short term. This is why today the Lean enterprise continues to be the exception.

3 Comments

  1. P. Moody

    February 1, 2006 - 3:29 pm

    The Emperor’s New Clothes – How can we expect that a guru who consulted to Delphi’s former CEO, JT Battenberg, on becoming lean, could at this point lay out all the issues behind Delphi’s problems? Look at the cost structure, look especially at the profits built into Delphi parts headed to GM. The answer is not so much how many Shingo awards a company can earn, it’s about COST STRUCTURE.

  2. G Culsen

    December 17, 2006 - 3:04 pm

    Delphi DOES have Toyota as one of it’s customers, and they do what Toyota suggests in the form of following Lean and Kaizen. Their Kaizen Teams are asked to tour other plants/companies in order to learn from them, so to the author, perhaps one should have researched a ‘bit’ more before writing this piece.

  3. Jon Miller

    December 18, 2006 - 8:08 am

    Thanks for your comment G Culsen.
    I was quoting Womack who said “If only Delphi had Toyota as its major customer” and the implication here is ‘instead of General Motors’ and what that would have meant for Delphi’s health.
    I am certainly aware of what Delphi is considered a leader in Lean and kaizen, having won many awards and developed many capable Lean teachers. Yet it was not enough.
    I think you may have missed the point of the article.