The Rise of the Lean Business System

It’s almost two decades to the day since I presented at one of first Operational Excellence conferences in London. Back then, the focus was very much on tools, training of “belts”, best practice methodologies (particularly DMAIC) deployed in the style of Motorola or GE. Much has changed since then. From the recognition that improvement needs an integrated approach – bringing together the whole operational excellence toolset to attack waste and complexity not just variation, to recognition of that to improvement needs to be driven by the line to be sustainable, we have collectively been on a journey that has turned Operational Excellence from a craft into a profession with over a million practitioners worldwide. 

Even with this tremendous resource, organisations are under pressure like never before. Innovation cycles continue to shorten, making agility increasingly important and the risk of irrelevance from digital disruption ever greater. As highlighted by the challenges described in this report no organisation is immune from evermore-demanding customer expectations, evermore-agile competitors and evermore-disruptive digital technologies.

 Witness the rise of Amazon, as major retailers reel from consumers no longer thinking with their feet but by the click of a button. Technology that was blue sky five years ago is now here and becoming more widely adopted. Robotic agents are taking over repetitive (and increasingly less repetitive) work, organisations are mining big data to enable them to provide ever better consumer experience and industry 4.0 technologies are helping factories become smarter the world over.

 These technologies mean that the competitive bar is constantly rising and to survive organisations need a systemic way of not just improving today's operations but also consistently betting on and rapidly executing on the technical innovations and business model disruptions that enable them to stay ahead of the game.

 In response to this ever more competitive environment, it’s clear that the most consistently successful organisations – such as those listed in this report as thought leaders - see operational excellence not just as a tool for increased efficiency but as the basis for how they execute their strategy. In my assessment, this shift from thinking as Operational Excellence as an initiative to thinking of it as being the basis of a lean business (perhaps better called a strategy execution) system is one of the most fundamental and important trends that will impact Operational Excellence practitioners in the next three to five years.

The good news is not only can we learn a lot from these high-performance organisations, but also that there is clear evidence that what they are doing can be replicated. Lift the lid on the legendary Business Systems of Toyota, Danaher and more recently healthcare leaders like Thedacare and Virgina Mason, and it’s clear that they have built on the lean production system inherited from Toyota, by adding Hoshin Planning (sometimes called Strategy Deployment or Policy Deployment) to provide the systematic approach to implementing the breakthroughs needed to thrive in an ever changing, and increasingly disruptive, environment.

In these organisations, Operational Excellence is not seen as an initiative led by a central OpEx function rather as part of a systemic approach to strategy execution. On-going continuous improvement is squarely the responsibility of the front-line teams who strive each day to standardise work and find and address the root causes of unexpected outcomes (often referred to as Daily Management). In these organisations, the role of the OpEx function has transitioned from mostly doing to mostly facilitating. Typically the custodian of the standards for continuous improvement and strategy deployment, what becomes a small but strategic staff function, primarily concentrates on helping leaders identify and implement cross-value stream improvements (often called Value-stream Management) as well as helping leaders to define, deploy and implement the breakthrough objectives (Breakthrough Management).

Anecdotally, the leaders we spoken to in these leading organisations attribute the success of the execution system to the degree to which the leaders reinforce daily management through standard leader work and the degree to which leaders take direct responsibility for breakthrough implementation by owning and driving the strategy deployment process. This shift from the OpEx team pushing improvement actions to the operational leaders pulling improvement techniques is the key, they say, to the sustainability of the system.

It’s clear this transition - from Operational Excellence as an initiative to Operational Excellence as the foundation of the organisation’s strategy execution system – has the potential to address the majority of the challenges Operational Excellence leaders traditionally face. From increasing the buy-in of leaders (Hoshin Planning directly connects the operational excellence activity to the business priorities), to increasing the sustainability of improvement (a key goal of every breakthrough projects is the creation of new standard work and ensure that daily management is in place to sustain the gains), the Lean Business System approach helps priorities be maintained and organisations adapt more quickly to business trends.

I am often asked by OpEx leaders how and where to start this transition. The answer is it depends on your starting point. That said, it's clear there are implementation approaches that are more successful than others and many lessons that can be learned from the experience of others. To get you started on the journey, I would suggest you download on of our executive briefings from the Resources section on this web-site, or give one of our Strategy Implementation experts a call on +44 (0) +44 0333 9875288. You may also want to explore the ABS Overview section of our web-site which introduces the Accelerated Breakthrough System - a complete blueprint for building a Lean Business System which forms the foundation of our work. We look forward to helping you make the transition.