What’s the Best Way to Deploy Lean? TPS? DBS? HOS? Other..?

The General Electric company has had a rough year. They were removed from the Dow Jones list after more than 100 years. Their stock price has dropped to half. This week they abruptly fired their CEO. On the bright side, Larry Culp, a GE board members and former CEO of the Danaher Corporation, was named his replacement. Followers of lean news took note.

Danaher is well-known within continuous improvement circles for its success with the Danaher Business System. They were one of the first American companies to recognize the value of kaizen and the Toyota Production System. They quietly built their business model around it. Danaher applies lean thinking to business expansion via acquisition and conversion to lean. They buy businesses that have good products and markets but operate traditionally. While the rest of us debate how to deploy lean, they do it again and again. Their nearly 30-years continual growth and profitability is testament to the effectiveness of DBS.

Almost every week I have a conversation with a customer or just a person on the theme of the “best way” for their organization to start or accelerate continuous improvement. Often someone has been given a mandate to get lean moving. They are looking for a playbook to guide them. Should they follow the Toyota way? The FastCap method? The Danaher model? The Honeywell system? The Virginia Mason experience? The answer is always, “Yes, but it depends.” No successful model deserves to be rejected outright or accepted without question.

Any proven method is a good place to start, IF one is willing to treat it as an experiment, expect failure and plan to learn and adapt. Business owners and Continuous Improvement Managers alike are often on a shorter leash to experiment at length needed for this. Expectations must be met, of their customer and shareholders. There is also the question of perception and credibility with employees, if a lean model is adopted then abandoned or significantly altered. Even with a high degree of communication and change management, rumors spread that “Leadership doesn’t know what it is doing,” or “It’s just another flavor of the month.” There are risk to launching and failing. It is understandable that people want a degree of certainty in which model they should pursue, and which to avoid.

These models and approaches are rooted in common principles and practices. But they differ greatly in their application. The slow-and-steady Toyota approach is based on organic growth and long-term reinvestment in the company, not right for companies needing a quick turnaround. Danaher’s conquer-and-convert approach is contingent on a buy-and-hold model of growth that is both more nimble and ruthless. FastCap’s approach works well in organizations of a certain size, business complexity and energy exchange between CEO and every person in the company. Not to mention that these models grew up in specific historical and economic contexts. The legal, regulatory, market and technological assumptions that shaped their success 20, 30 or 50 years ago may not apply today.

There are three ways to select an approach to deploying lean. The first is to “do it our way”. The positive is that if an organization is great at executing through projects, they will have some success in progressing lean via projects. The negative is that the scope of lean may be wider and deeper a project mentality (or whatever “our way” strength) can effectively manage. The second approach is to pick a model and go with it. The positive is the roadmap, available external benchmarks and external support. The negative is the aforementioned risk associated with poorly managing the fit, experimentation and failure. The third approach is to understand the specific actions, tactics and approaches that make up each of these approaches, to abstract them to general principles and guidelines, and reconstitute them to one’s specific circumstances. This requires work. The negative is that it is slow at first. The positive is that it is unstoppable once it gets going.

Back to Mr. Culp and GE, it will be fascinating to see which way he goes. Will he take what’s working at GE, diagnose what is not, and do the necessary? Will he attempt to bring in DBS to GE? Will he start from basic principles and build an approach that fits GE’s current context and available runway? For GE’s sake hopefully the new CEO is humble and pragmatic enough to  begin with the thinking and behaviors, thoroughly grasp the situation, set and align goals and  coach and mentor people towards achieving them.

7 Comments

  1. Shahrukh

    October 8, 2018 - 10:22 am

    Why this mad (maybe even stupid) rush to implement some or other company’s system into a company that, from what I have read, already has a good system of its own? I think you hit the nail on the head when you said “Will he start from basic principles and build an approach that fits GE’s current context and available runway? For GE’s sake hopefully the new CEO is humble and pragmatic enough to begin with the thinking and behaviors, thoroughly grasp the situation, set and align goals and coach and mentor people towards achieving them.”. IMHO (or IMHIO where I=Ignorant) opinion, Mr. Culp would do well to reach out into his org chart and invite the doers and thinkers to tell him what went wrong with their system taking root as did DBS.

    • Jon Miller

      October 8, 2018 - 8:11 pm

      Well said, Sharukh. Mr. Culp will need to create a high-trust environment in order for people to honestly say what went wrong and needs fixing.

  2. JAY

    October 8, 2018 - 6:12 pm

    Hi Jon,

    Hmmm… I fully agree that Danaher has a reputation for being successful with its “lean” implementations. That said, it’s not completely clear what Danaher has done in the past and whether or not it has remained consistent over the course of its existence. I say this because, as you point out in your post, TRUE LEAN THINKING AND BEHAVING involves a good deal of experimentation – regardless of one’s starting point – and evolves over time in response to both new knowledge/insight/understanding/ability and changing operating conditions. In this regard, given Danaher’s history, it’s more than likely their initial starting point was based on what the organization knew and understood about the Toyota Production System (in combination with the Toyota Way). But 30 years ago, the TPS/TW was NOT what it is today; yes, similar and consistent in many ways, but nonetheless vastly different in the full (i.e., SYSTEM-WIDE) spectrum of competencies and capabilities that exist (at the individual, group/team, department, and enterprise-wide levels). And given that Danaher’s implementation of the Danaher Production System (DPS/DW) is also capable of evolving in ways that are similar – but not identical – to the evolutionary/emergent nature of the TPS/TW, it’s more than likely that the DPS is NOT the same as it was 30 years ago.

    What we do know – according to your posting – is that Danaher’s past and present business strategy is to… continually expand and sustain its business operations “via acquisitions and conversion to lean.” On the surface, this description is NOT appear to be a heck of a lot different than the approach that was employed by Art Byrne at Wiremold. As a point of reference, over the course of Art Byrne’s 10-year tenure at Wiremold, he and his staff averaged just about two acquisitions per year.

    CLEARLY, this is not the sort of THINKING AND BEHAVING that is has been or is being manifest by Toyota. Instead, Toyota relies much more on organic growth and the application of TRUE LEAN THINKING AND BEHAVING principles and practices to pursue new and/or enhance existing business growth opportunities that typically originate from internal sources. That being the case, whenever one looks to Danaher (or Wiremold) as a potential model after which to pattern their lean journey and potentially institutionalize their own “PRODUCTION SYSTEM and WAY,” it is CRUCIAL to realize/recognize the fact that Danaher makes acquisitions of companies that are viable businesses in their own right; that is – as you pointed out, they already possess “good products and markets.” In essence, Danaher never begins its “lean” conversions of these acquired business from a difficult starting point; much as Toyota had to do with its NUMMI joint venture and has done from scratch since the beginning in building their global production operations.

    With those thoughts in mind, I believe that the question of which approach/model any company might rely on to begin its lean journey is a potentially misleading – and mostly irrelevant – one. How/why so, you might ask? Well, it has everything to do with the evolutionary/emergent nature of a TRUE LEAN SYSTEM. IF rapid/adaptive problem-solving via on-going experimentation and accelerated learning (at the individual, group/team, department and enterprise-wide levels) are at the heart of its existence, then the best place to start is in defining/codifying and institutionalizing the organization’s “COMPELLING” TRUE NORTH ORIENTATION or TNO (i.e., the integrated combination of its MISSION/PRIMARY PURPOSE, FUTURE-STATE VISION or TARGETED/DESIRED STATE-OF-BEING, its ENABLING/SUPPORTING VALUES, and NEAR and LONGER-TERM OBJECTIVES). With this in place, then the organization can begin to pick and choose and execute the most appropriate MANEUVER STRATEGIES from whatever sources make the most sense and provide the greatest potential sustainable gains. Relying on the past and present practices of organizations that have made a commitment to making the lean journey is tantamount to THINKING AND BEHAVING “INSIDE-THE-BOX.” When the entire objective of TRUE LEAN THINKING AND BEHAVING is to operate OUTSIDE-THE-BOX and outmaneuver the competition – ideally across multiple dimensions simultaneously – it makes little to no sense to mimic the thinking and behaving patterns of others, even on an experimental basis.

    Instead, a much more effective way of rapidly moving up the learning curve is to pick problems internally that need to be resolved in order to move the organization in the direction of its chosen orientation and then begin – via trial and error – figuring out how best to resolve those problems, while at the same time building new and enhancing the competencies and capabilities believed to be essential to the desired/targeted future state-of-being. This process of rapid/adaptive problem-solving and accelerated learning (at all levels) is a cycle that needs to be repeated on an on-going basis and adapted to the changing conditions in one’s operating environment. AND the key objective in performing this cycle is to develop SPEED and PROFICIENCIES/COMPETENCIES on both an individual and collective basis.

    Once a foundation of these proficiencies and competencies is established, then it becomes possible to take on more and greater challenges/opportunities and evolve the ENTIRE SYSTEM in ways that will best accommodate the on-going sustained pursuit of the organization’s TNO.

    Back to Mr. Culp and GE… As I see GE at the moment, it has lost its way. I find it difficult to grasp any cohesive or compelling future-state orientation. Without such an orientation, Mr. Culp can do his acquisition thing – most likely on the basis of whatever sorts of acquisitions will make the numbers look good in the shortest amount of time possible – and then hope to create/build/evolve and sustain a truly world class SYSTEM; one that’s capable of rivaling the TPS/TW in terms of its RESPONSE-ABILITY in delivering superior levels of value-add to the company’s target market(s). In this regard, there’s nothing I’ve seen/encountered in the Danaher model that makes itself transferable to another organization that guarantees its longer-term viability.

    Note: As of the writing of this response, it appears that Danaher is in the midst of planning to spin-off its Dental segment of its business into an independently traded entity. OK… The natural question then becomes, WHY? IF the primary answer/purpose is to generate a substantial return for its shareholders, then I have to ask whether or not this is a good reflection of a company that supposedly embraces and practices TRUE LEAN THINKING AND BEHAVING?

    • Jon Miller

      October 8, 2018 - 8:19 pm

      Hello Jay

      Thanks for your thoughtful and in-depth comment. I agree it will be interesting to see how Mr. Culp sets or resets true north and actions towards it. I wonder if rather than acquisitions, he may be faced with divesting GE of some of its businesses in order to shrink to a manageable size and refocus on where they can win.

      • Jay

        October 9, 2018 - 6:22 pm

        Hi Jon,
        Based on what I’ve seen of similar “turnaround” scenarios over the past several decades, I’d have to agree with you as to what Culp’s most likely course of action will be. I doubt that there’s much free cash to work with in terms of making any substantive acquisitions right off the bat. Accordingly, divesting those businesses that are current up for sale would be the most probable starting point.

        Assuming that Culp can get over that initial hurdle, the organization is then faced with the question of what it really wants to be and why? Maybe an IIoT service provider? IF so, what does that really mean? And when you look at the organization’s potential positioning in that context, there don’t appear to any significant barriers to entry by other potential players.

        Finally, how might TRUE LEAN THINKING AND BEHAVING come into play? Well, like you said… it depends. Depends on what? It depends on GE’s ultimate, long-term, orientation and its enabling/supporting strategy for moving itself in that direction. And not unlike in many similar competitive situations, SPEED/RESPONSE-ABILITY IS LIFE! Ergo, taking a page out of Toyota’s time-based competitive strategy playbook might be of some value. Hopefully, somewhere in Culp’s past Danaher experience, he fully understands what that means and how to engage GE (or at least the human element portion of the SYSTEM) in those sorts of maneuvers.

        • Jon Miller

          October 9, 2018 - 7:34 pm

          Hello Jay
          Toyota pivoted from automatic looms to automobiles around 1937. It took them a dozen years to even start getting on their feet. WWII and the war in Korea had a lot to do with that timeline. It will be interesting to see if / how GE decides to pivot, IIoT service or otherwise. Can’t imagine them simply trying to lean their way out of their situation. Too many nimbler players competing in all of their niches.

  3. Ed Kemmerling

    October 9, 2018 - 8:12 pm

    Lean works. Just look at the financial performance of Toyota. All of the other systems are process improvements, but there is no system that has the financial performance and history other than Toyota. Companies that do not achieve the success of Toyota should not blame the system. Instead, blame themselves for not implementing and sustaining the leadership cultural transformation that is required.