Lean Thinking and the 2019 Nobel Prize in Economic Sciences

A few years ago, I read and blogged about the book Poor Economics and the key lessons it offered for change efforts such as Lean transformations. Congratulations are in order to the co-authors who won the 2019 Nobel Prize in Economic Sciences.

This is an opportunity to revisit some of their basic thinking on effective approaches to address the problem of poverty and the parallels with Lean efforts to increase wealth.

Get the problem statement right. When we ask the wrong question, we are almost guaranteed to get the wrong answer. Poverty is a complex problem whose long-term solution is almost never “add money”. The word itself is too vague for us to be able to envision a meaningful target condition. In Lean thinking, A3 problem solving dedicates half of the page space and a great deal of time in clarifying the problem, describing it in the customer’s language, stratifying it, narrowing the scope of action and identifying root causes, before proposing any sort of solution.

Break down big problems. Addressing poverty requires breaking down this huge problem into many smaller problems that can be addressed one at a time. There is no single solution to address the entirety of a large problem. People who sell large, comprehensive solutions to complex, nuanced problems are doing so most often serve their own interests, to meet an artificial timeline and/or to further their own ideologies. Breaking problems down allows more people to be engaged in being part of the solution. It helps maintain momentum through a series of small successes along the way. Practitioners of successful Lean efforts have found these things to be true.

Experiment through the zone of uncertainty. There are many situations where aid workers, governments, economists and so forth are not sure exactly what to do about reducing poverty. Duflo, Banerjee and Kremer ran hundreds of randomized control trials across a dozens of countries. They won the Nobel in part for demonstrating that such experiments were an effective way to test theories and possible solutions to poverty-related issues. Whether solving complex problems in society or in business, a laboratory approach can be useful.

Implement the practices that are known to work. Specific examples for proven poverty alleviation actions include quality education at an early age, preventive health care, and helping people to own and learn how to take care of value-creating assets. Good information, good health and positive cash flow are the very foundation of any enterprise. Stabilization is a known solution whether in poverty reduction or Lean wealth-building via the reduction of losses, waste, variation and burden.

Good ideas perform badly when we ignore context. A great example of this is the advice to boil water for twenty minutes to purify water and prevent illness. This seems like a no-brainer, a quick win, a just-do-it. But people who are poor may ignore this advice. Why? They lack a kitchen timer. They may wish to save the fuel cost of twenty minutes to boil water. They may be too busy or too distracted to add this new step to their routine. Helping someone put even such a simple new behavior into practice requires that we understand the context of their life. Only then do we have a chance of helping them to understand the benefits of spending time in a different way. Ditto Lean.

It’s nice that the Nobel Prize committee has recognized Lean thinking in this way, even if indirectly.

2 Comments

  1. Robert P. Meneses

    October 21, 2019 - 8:01 am
    Reply

    DMAIC
    D – Two examples are 1) old age, 2) too young. Thus, needing different Solutions
    M – Training alternatives (PRE & POST) integration of profit sharing benefits, RBP adjustments, Control on taxes (no exceptions).
    A + I Are developed by teams, an R&D división, PDC división, a QAM división. a PR división.
    C – A + I / CI Division.

  2. James R. Carey

    October 25, 2019 - 10:09 am
    Reply

    There is no doubt that this is progress. But it’s also important to recognize that large solutions that address large problems with real timelines are sometimes possible (Darwin’s theory of natural selection comes to mind) and sometimes essential (the current collective human response to climate change comes to mind) provided the solution serves the interest that humanity and the planet share in common, as opposed to one individual, group or ideology. These kinds of solutions are rare but they do emerge at chaotic times like the present so as the meet the (timeline inclusive) need.

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