The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company

Lean is easy to explain, but very hard to do, and the author doesn't mince words about this. He says flatly that only five to seven percent of organizations who try to implement Lean do it successfully.

The reason is that most companies look at Lean as an operational process, not a strategic one. They only give some of their attention to the transformation, or delegate it to someone who can't make any headway. And, the effort fizzles out.

But it doesn't have to be like that. This book lays out in detail what you need to do to implement Lean in your organization. You're not left trying to figure out how to apply this theory yourself. The author does a great job making this difficult process as easy and clear-cut as possible.

And if you do it right, the results are more than worth the effort. There are plenty of case studies from the author's past clients to show what these changes look like, and what benefits you might see in your own organization.

At heart, Lean management is about reducing waste and focusing on the value an organization provides to customers. According to the author, using Lean strategies can help you, at the least, cut lead time from weeks to days, give you annual productivity gains of fifteen to twenty percent, cut defects by 50 percent each year, reduce floor space by 50 percent in two years, improve gross margins by four to eight percent, and much more.

Here's a quick, simple example of Lean management in action.

When banks process a loan, it often takes three to four weeks for the loan to get approved or denied. A typical application is read by six different departments, which are often located on six different floors. If someone is on vacation or in a meeting, an application might sit on their desk for days or weeks until they get back.

The author says that if this bank really thought about how to add more value to their customers, and used Lean management strategies, they could dramatically reduce this wait time.

For example, the mail arrives between 10 a.m. and 2 p.m. The bank could have one person from each department sit at a big table after the mail arrived. People could pass each application around during this daily meeting. Each application would be processed in a matter of minutes, instead of three weeks.

This is a simple alternative to a lengthy, annoying process that often frustrates loan customers. And, this bank would get swamped with business once they ran a few ads about how quick their turnaround time was.

The author, Art Byrne, first learned Lean principles from professionals at Shingijutsu Company. These men worked directly for Taiichi Ohno at Toyota, the company that pioneered Lean ideas. Byrne has been implementing Lean strategy in dozens of companies for over three decades. He's now Operating Partner at private equity firm J.W. Childs Associates.

So, keep listening to find out the three foundational principles underpinning Lean, how to restructure your organization into "value streams," and why you might encounter a bit of resistance along the way.

This book comes in at just under 200 pages, spread between 11 chapters.

The author spends chapter one telling his own story about how he got involved with Lean management. This helps solidify his credibility, and there are some impressive real-world stories and statistics that show what can happen when you get Lean management right.

If you're in a hurry, though, you can easily skip this and move on to chapter two, titled, "Don't Just Do Lean; Be Lean."

Here, the author goes into the importance of taking this process seriously. Lean management can't be something you delegate to someone else, or devote just a bit of your attention to. Lean has to be the foundation of everything you do, and every decision you make. If it's not, it probably won't work.

There are three foundational principles the author stresses here. In order for Lean management to work, you have to understand that Lean is your strategy, that you have to lead from the top, and that you have to transform your people. If one of these principles is missing, you're not going to see the full potential of what you're doing.

Chapter two is essentially a pep talk on why you need to become a coach to your people, and stay persistent through the process. The author also goes into those three foundational principles in more detail, and explains why each is so important.

Chapter three is where the author starts diving in to the real how-to of his Lean management strategies.

He starts with the four key principles at the heart of Lean management. These are "Work to Takt Time," "Create One-Piece Flow," "Establish Standard Work," and "Connect Your Customer to Your Shop Floor through a Pull System."

Now, before you turn off this podcast because this all sounds too complicated, or like it doesn't apply to your organization, hang on just a second. These fundamental principles are pretty straightforward, and the author uses this chapter to make it clear what these Lean strategies are all about.

So let's look at one of these principles in more detail – the one called "Work to Takt Time." Although it sounds like a typo, the word Takt, spelled T-A-K-T, is actually German, and it means beat or measure.

This principle is all about working at a steady pace, and according to the author it's probably the most important element in Lean management. Takt is supposed to help keep your focus on what matters most – your customers. Essentially, you're asking, "At what rate do we have to produce to meet customer demand?"

The author uses an equation to explain it: Your time available, divided by daily customer demand, equals Takt time.

Here's a simple example of what Takt time looks like. The author says almost all businesses have some kind of order entry. And the people who enter the orders often say you can't calculate the rate at which they have to enter orders, because they're all so different. Some orders have three lines, while others have 300. This makes the time to enter each one highly variable.

But Takt time forces you to understand what the average order size is, and how many orders per day the business gets. When you apply the Takt equation to something like order entry, you'll probably be floored at how much you've overstaffed your department.

All four of the principles in this chapter form the foundation of Lean management.

Chapter four shows you how to define where you want to go with Lean management, and how to create a clear vision of what you want to achieve. There's also some useful advice on how to hire the best Lean consultant, and how to get Lean professionals on your board of directors.

Chapter five teaches you how to get your people on board with Lean principles, and how to reorganize their work. The author calls this the "Value-Stream Organization."

He says when you implement Lean management, your traditional hierarchy can pretty much stay the same. But below the top levels, you should make the organization as flat as possible. You need to get rid of all your functional departments and create new teams based on value streams. Value streams are another name for product families.

All the products or services you sell should be grouped by type and headed by a team leader.

Here's an example of what this looks like. You run a life insurance company. The process of applying for a policy all the way up to the company issuing that policy is one value stream, or product family.

In traditional life insurance companies, many different departments usually handle this process. These include data entry, case management, underwriting, and so on. But with Lean, one person from each of these different departments now works for this one value stream, or product family. The traditional departments no longer exist.

You also have to give each team leader all the equipment and people they need to make the complete product. And it's crucial you pick the right people to lead each product family. Team leaders should clearly be capable of working well in a leadership role. They also need to have the skills and mindset of an entrepreneur because in a sense, each team leader is running their own business.

Now, on paper this looks like a fairly simple concept. And, we can certainly see the sense in using a strategy like this.

But the author says that implementing a reorganization like this can be a real challenge, mainly because of your people, especially senior managers. They're going to want to protect their own departments. That's what they know, and where their power comes from. Their insistence to remain in place is, at heart, a fear of change and loss of power. And they're often willing to harm the organization's larger goals in order to hang on to what they know. So it's important to expect this going in.

The author also gives what we think is some controversial advice in this chapter. He says that in order to run a successful Lean management effort, you're going to have to promise your people there will be no layoffs as a result of these changes, and the new strategies you're going to implement.

So, he suggests you reduce your workforce before you begin making any changes, because most organizations are 25 to 40 percent overstaffed.

Although we understand the sense of this, it didn't sit well with us. You're essentially letting people go beforehand so you don't have to break a promise later on.

The author stresses that when you move to a value-stream structure, you can't let any traditional departments remain. It has to be all or nothing. Transforming some departments to a value stream, while leaving others, like HR, will cause inevitable failure down the road.

The rest of the book continues in this vein. Each chapter focuses on several very specific Lean manufacturing strategies. And by the time you're done, you'll have a very good idea of what you need to do to start transforming your organization to make it more profitable, and more efficient.

So, what's our last word on "The Lean Turnaround"?

It's a detailed book that's going to benefit anyone who's looking to use Lean manufacturing techniques to turn around their organization. It's clear the author knows what he's talking about, and has a lot of very practical, expert advice to share.

It's not a book you can skim through. Although the author did a good job making these concepts and strategies easy to understand, they still need careful thought and consideration. You'll understand these principles best if you read each chapter slowly, without taking any shortcuts.

Our criticism is about the organization and look of the book. The author didn't do anything to make his material easy to navigate. There are few sub-headings, and no bullet points to highlight important concepts. This doesn't detract from the good information, you'll just want to have a highlighter nearby to flag important concepts.

We should also reiterate that "The Lean Turnaround"was written for a very specific audience. It's not a book for learning Lean management from the ground up. Rather, it's a book that teaches how to apply the specifics of Lean successfully in any organization. The author has taken the liberty of assuming readers are high-level managers, who already have at least a basic understanding of the principles of Lean.

If you fall into this category, you'll learn a lot about implementing Lean management in your organization.

"The Lean Turnaround," by Art Byrne, is published by The McGraw-Hill Companies.

That's the end of this episode of Book Insights. Thanks for listening.