Ever since evolution was discovered to be a powerful force of nature, scientists and lay-folk have tried to apply evolutionary principles to areas outside of biology, outside of science and into broader meanings. Hence we now take for granted statements like “survival of the fittest”. Businesses have taken the principle of competitive advantage deep into their philosophy and strategy. But an important lesson has been missed. The principles of advantage and fitness can be self-defeating when the environment changes. Many species have become extinct by over-specialising during periods of transformation. As the fourth information age takes off, the world of work is changing in front of our eyes. Can the highly specialised tools and micro-focus of management’s most sacred cow (lean) survive?
My first role as a Decision Scientist saw me teamed up with five other consultants. My colleagues were lean gurus, shop controls experts, supply chain aficionados. I felt a bit daunted working with the level of expertise around me. My immediate concern was with how I could add any further value for my client. I was working in an engineering environment and these guys had decades of experience making engineering processes more efficient. My road to Decision Science had been very different. I have a military background and, like so many military men and women, I have been heavily exposed to the art of dynamic decision making under pressure. Combined with a lifelong obsession with coding and data science, my military persona became a Decision Scientist. But that is not to say that Lean Philosophy was lost on me. In 2001 I was loaned to a team of lean specialists conducting a business process re-engineering project across a military base. In total we mapped and tweaked 1200 processes. It left me with an enduring professional appreciation for lean. Of course, most military people are well versed in operational management and the need for a lean supply chain. The aim of this article, then, is not criticise lean. Nor am I suggesting that lean has had its day. The lean discipline and philosophy, often rendered as Kaizen (or perhaps you prefer continuous improvement) is a great and noble cause. But I would argue that the spirit of lean is likely to be the only part which survives the changes modern workplaces are facing. The tools themselves are simply tools. Unfortunately many businesses become too focussed on lean tools which makes them unable to adapt to the changing environment. These businesses will become extinct. Why is that?
The widely accepted view among evolutionary scientists is that specialists thrive in stable conditions whilst generalists have an advantage over them in changeable conditions. It is a sweeping statement which automatically comes with a whole bunch of caveats. However, as a transferable idea it has creates some useful ideas for business strategy. Some species have developed highly specialised features which allow them to exploit certain environments to the maximum level. Take for example, the Koala which has a single food source, Eucalyptus. The Koala has a competitive advantage over more generalised species who need to spend more effort feeding from wider sources. Generalists incur costs by not having highly specialised features and they cannot compete with their micro-focussed rivals. The analogy with business is clear, specialised firms too can increase value in their supply chain fairly straight-forwardly whereas generalised firms need a broader supply chain and some redundancy in order to balance output with the market. Of course, in changeable markets, the generalist has an advantage, being able to hop from product to product. However, the specialist is in trouble when their single market becomes obsolete, just as a Koala is completely dependent on Eucalyptus.
The message business has taken from Darwin is that the strongest survive (this is far from the meaning of Darwin’s work). Often this leads to micro-focus on competitively advantageous marginal gains. Nature teaches us that we do not need to be the fastest runner, just faster than our competitors. Hence marginal gains was imported from the world of sport and joined our business-evolution hybridised language. Lean and the philosophy continuous improvement (not unlike marginal gains) feeds easily into this narrative. However being better at running will not help if the environment no longer requires fast runners. This is the paradox of lean. Being the most efficient, least wasteful, process-driven company in a certain market will not help when that market disappears. It’s not about being the best, it’s about being good at the best things.
Why would I say that specialisation is a threat to lean philosophy? Lean encourages flexibility and continuous change through the principles of Kanban (flexible production systems) and Kaizen (constant improvement). This is true and at the heart of how lean can adapt and survive. However lean philosophy and practice can be very different things. Let’s go back to the origin of lean: the Toyota Production System or Kanban. Kanban is the origin of lean philosophy, it was developed to solve a particular problem faced by Toyota at that time, a lack of resources. Lean is about adding value and eliminating waste. For Toyota which faced a lack of resources it was about making superior cars at minimum waste. They became so good at this they developed a competitive advantage. The discipline of minimising waste was so attractive, it basically went viral. A key way to reduce waste was to ensure that Toyota did not overproduce cars, i.e. make too many for which there was no demand. This was a huge paradigm shift because the standing wisdom was to produce in bulk as it was cheaper per unit. The flexibility of Kanban is essentially its ability to respond to market conditions in terms of flow (input of resources and output of products). Although Toyota became very flexible car makers they could not switch production to buses or motorbikes, tanks or nuclear submarines. They were efficient and responsive in terms of flow but not adaptive or agile.
This remains true for many lean practitioners today. By refining processes and applying the law of marginal gains one can certainly create flexible, responsive and efficient value chains. But the resulting value chains are not necessarily agile or adaptive to new markets, only to their target market. In practice, many lean transformation projects are aimed at creating very few outputs in the most efficient way possible. This is the wrong strategy in an age of change. The problem is that lean has become a near religion for some consultants and some businesses. Adherence to the strict principles of lean and the use of a narrow set of tools for all problems has become a zealous and self-harming obsession.
Survival of the nimblest
Lean was developed during the age of management science, when the business environment was sufficiently stable to allow the development of rigid frameworks which produced predictable results. These stable conditions allowed many academics and business people to create appealing models for decision making and production which were highly successful. An example is Michael Porter’s Five Forces models for creating strategy. Porter’s model, developed in 1979, was enourmously successful and is still taught in some MBA programmes today. But its use declined rapidly after the onset of a more Volatile, Uncertain, Complex and Ambiguous (VUCA) business environment at the beginning of the 21st Century. It is now widely acknowledged as suffering from the Planning Paradox1 ; that is making too many decisions at the beginning of a project, when least is known. Porter’s Five Forces is one example of many systems or models which increased efficiency by focussing in detail on specific problems. Kanban is also categorised as a 20th century management science technique which was not designed to deal with 21st century complexity. If anything, the rigidity of process engineering techniques should have been the first casualty of the Information Age. Yet, it survives long after Porter, Deming and many other management philosophies have become obsolete. I believe this is because of the spirit of continuous improvement or micro-improvements which lie at the heart of lean. But complacency is not warranted. Lean essentially has two forces pulling it in two different directions: Kaizen and Kanban. One is life, the other death for a company in the 21st century. By focussing too much on a few or single demands and optimising the value chain (Kanban), many companies could find themselves out of business. On the other hand, instilling a thousand micro-improvements in the day to day activities of the entire work force (Kaizen), companies can become agile market leaders. I often write about the battle between Industrial Age efficiency and Information Age agility. This battle is at the heart of lean. Another key area where lean needs to improve is in data. Imagine an information supply chain rather than a series of data bases, ERP and HR systems, intranets and so on. For some reason, information is not treated with the reverence as other resources, there is no drive to turn data into value in many companies, despite the cry “data is the new oil”. Not only should lean principles be applied to data, information is the key to responsive decision making and therefore where to apply lean philosophies. Lean is facing its hardest challenge yet: adapt or die.