Many problems in business today are a result of failure to understand basic system variation within a product or process. Business failures today are a result of short sighted or mis-directed goals more than that of poor product or service. Poor product or service are the symptoms of our instant gratification culture which registers any variation in performance as instant failure or success. A culture that demands non-linear growth instead of understanding variation is whimsical and cannot establish a base of sustainable growth. That is where we find ourselves in America in 2013. How do we fix it? First we must understand the main forms of business. Businesses fall into one of three categories in the United States today. Federally funded (earmarked), Publically traded firms (Wall St) or the ever diminished organic Small Business. Let’s look at each of these types one by one.
Federally funded businesses produce a culture that plans only one year at a time because they depend solely on government funding and annual budgets. These budgets are created arbitrarily based on government lobbyists getting the most funding they can for their clients instead of funding real needs. These earmark firms can only growth through federal stimulus and consequently variation in the system is not a consideration. Lean concepts serve no value to these businesses on a macro level because waste is rewarded. Lean is about identifying and removing waste. In an organization that is rooted annually in deliberate waste there is no incentive to “get lean” or use any tools that do not simply increase federal funding. Lean can only provide value if organically grown in this form of organization without direct involvement of senior leadership. Once successful, senior leadership can be engaged and the success can be modeled throughout other areas of the organization as the results are difficult to argue with at the human and productivity level.
Publically traded Wall Street firms are the parallel path of federally funded firms. As the US government prints more money you see droves of investors piling into bonds with rates of return that do not even match inflation. This builds up and appetite for risk which leads to more investment in risky businesses. These businesses usually cannot look good on paper unless they show exponential growth plans and performance. The growth and funding for these firms is related to accounting games more than actual productivity or product in many cases. Unrealistic and unsustainable goals are set to predict and model future growth within the investment community. Any variance in performance good or bad is rewarded or punished accordingly in an exponential manner. This is a difficult environment not dissimilar to the federal business model in terms of how variation is completely ignored. If you don’t believe me go tell your boss you just figured out a way to cut their budget 40% next year enabling your division to give back funding to the greater corporation. As you sign your dismissal papers you’ll realize that budgets are designed in corporations to be spent, not saved. Ever heard of spend your budget or lose it? Conversely when budgets must be cut to appease Wall Street these corporations are now being punished for the earlier extreme of spending every penny of their budget. This pendulum of budgeting swings only at the extremes due to the fact these businesses don’t understand variation as it relates to system performance. This leads to sub optimization of a division or department instead of a greater good for the organization as a whole. So how do we apply lean in this environment? This is tricky. This form of business usually wants to slash personnel or product build time. They often miss low hanging fruit because it interferes with some departmental empire politics. Most are not willing to challenge corporate politics because they are deadly to your career in many cases. This is an area of opportunity in our country because we need to get more efficient given the ever closing gap of world capability. Lean needs to start organically within this form of business and be championed by those doing the work. These employees need to show some success and then gain support of leadership in the light of day in front of the greater organization.
Finally we take a look at lean application within a small business. This is a vast category where I believe lean is most widely practiced. Some used to call many of the lean tools common sense. I still do. Unlike the other two business models, the barrier to lean entry into this form of business starts with the leadership. Lean must start at the head of a small business as they control the scope and growth of their operation more than any other form of business. They have more knowledge and God forbid they have probably even done many (if not all) of the tasks that the organization performs daily. Experience and talent count for something in a small business more so than any other form of business. This insight makes the application of lean easiest at this level if the leader can engage people through trust and respect and is open to real change by empowering employees. Without trust and respect for employees lean goes nowhere fast in any organization, but the smaller the group the more trust is required. Most small business leaders are open to change as they often have change thrust upon them daily, however the key is to embrace the change and find opportunity in the chaos. Chaos is a part of life. If you can find the opportunities that are present within chaos you can take hold and shape your personal goals and that of any organization. The key to finding opportunity in the chaos is to understand and embrace variation and plan for it.