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Building a Kaizen Engine

As more and more people in our industry turn to lean solutions for their businesses, I feel a stronger urge to point out the vast difference between how lean is practiced today and what it’s original intent was.   

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Contributing editor John Sweigart is a principal partner in The Body Shop @ (www.thebodyshop-at.com). Along with his business partner, Brad Sullivan, they own and operate collision repair shops inside new car dealerships, as well as consult to the industry. Sweigart has spent 21 years in the collision repair industry and has done everything from being an independent shop owner to a dealership shop manager to a store, regional and, ultimately, national director of operations for Sterling Collision Centers. Both Sweigart and Sullivan have worked closely with former manufacturing executives from Federal-Mogul, Morton Thiokol and Pratt & Whitney in understanding and implementing the principles of the Toyota Production System.

As more and more people in our industry turn to lean solutions for their businesses, I feel a stronger urge to point out, in ever greater detail, the vast difference between how lean is practiced today and what it’s original intent was.   

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Origin

If you look at the origin of the term lean and its path back to Womack, Jones and the team that first published its findings in the must-read book, “The Machine That Changed the World”, you’ll see that it was created to describe the work those folks saw at Toyota. They observed processes that seemed to do more with less. But they only uncovered the outer layers of the system, which led them to reverse-engineering it based on those things that they could see. But the truth is that it’s not so much what you can visually see but the thinking that’s different, and it’s that thinking part that has taken many years for us to both reveal and truly understand.

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Everyone we’ve worked with over the years who has strived to build a better business model has fallen into the same trap of mimicking only what they see. They want to know things about a flow line’s or a kanban system’s function or some other truly irrelevant component. But who can blame them? It’s just human nature to start with what we see first. After all, sight is our most robust sense.

Scott Marshall of Marshall Auto Body in Waukesha, Wis., put it best when he said, “Don’t listen to what he’s saying, listen to how he thinks,” to a highly inquisitive visitor who was listening to a guest speaker talk about the shop’s lean operation.

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It’s funny, but even today, Toyota actually uses the term lean in describing some of the tools it uses in its business model. So while the term was meant to describe the Toyota Production System or TPS (and to some it still does), the majority of the world today uses lean to describe a tool. This tool of lean’s purpose is to   eliminate waste, but that alone is not the TPS. The TPS is kaizen, or continuous improvement. So lean, or eliminating waste, is improvement.

By default, having less waste, continuously, could be part of kaizen, but it isn’t necessarily the only part. If my goal is just to eliminate waste and to use the tool of “lean” to do that, great! But using this tool as a project can be managed just like any other project. It doesn’t take anything special.
 
Here’s an example from a different angle. Race Team A runs a Honda motor and it wins the most races in a year. Team B decides to run Honda motors, too. Changing to the Honda motor is a project, but nothing the team can’t accomplish in a few weeks with some training and focus. The following year, Race Team A wins the championship again and Race Team B stays the same. Team B then decides to look at other teams and try some of those changes. In this scenario, Team B believes that the engine is the thing that made the team better. But, in reality, Team A knows that continuously looking for weaknesses in its racing system and improving those was the key to its winning, not the engine. For Team B to implement that would be a completely different kind of project. Team A changed its philosophy and belief system, while Team B only changed out a part.

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While what I teach is categorized as lean, it’s really the process of kaizen. It’s a new business altogether. With that perspective, let’s look at leadership in this type of business and how it differs from traditional businesses.

Traditional vs. New

The start for all traditional, for-profit businesses is about the same: The objective is to make profit. From there, it progresses to finding a need and filling it, which is opposite from the collision industry approach of, “I have a skill and I’ll find the need for it.” The next logical step is building the system.  

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To build a product delivery system, one considers things such as the required attributes of the product or service, required function, availability and accessibility based on the need. The way that each of these elements will be achieved is then developed, and a basic process is established that includes instructions, required resources and costs. The product or service delivery system is then organized into common and required functional departments such as purchasing, manufacturing and shipping. These departments are then arranged into some type of sequence, considering things such as available space, budgets, functionality or performance levels so that some reasonable outcomes of performance can be expected. The system also gets some of its other needed control elements such as sales, marketing and accounting, and once all the elements are built, management responsibilities are assigned.

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How It Works

Once work begins, expected outcomes are sought. These outcomes have assigned measurements, and accountability has been placed on managers and people to make sure the outcomes are achieved. Again, the objective of a for-profit business is profit. The accounting department therefore has the job of collecting the data from the measurements and culling it into formats that reflect the organization’s expectations. These accountants use typical ABC accounting methods to identify issues and inconsistencies against expectations. Typically, “A – B = C” or “Sales – Cost = Profit” calculations are used to identify the culprits, i.e. sales is too low or cost is too high. These problems are delivered to management to be converted into specific instructions to be implemented at the area that generated them. Leadership’s role is to take this information and make effective changes to the system from which they came so that these outcomes will improve.

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In a traditional organization, the leaders use their power to drive these changes into the system. The understanding is that leadership has the specific and valuable skillset of understanding local conditions and making the appropriate decisions around the best way to make these changes. Some leaders bulldoze, some massage, some do both to a degree. These directives, once implemented, often deliver an outcome maybe exactly as expected, maybe close to expectations, maybe just closer or maybe not at all. But usually, these directives, once implemented, have an adverse effect on some other area of the business that accounting will notice during the next measurement period, and the whole process will start all over. It’s through these constant manipulations by management that most businesses advance.

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I refer to this entire process as “push” leadership. In short, the business establishes desired outcomes from its existing processes and, using its measurements, creates a mathematical conclusion to be “pushed” back into the system by strong leadership.   

Where’s the Customer?

So what’s wrong with this business model? For the vast majority of the business world, nothing. It’s how most organizations are run. But let’s be honest for a minute: Just how many great organizations do you know of? Not to be pessimistic, but most businesses I walk into are merely acceptable. I can only call a handful truly great organizations, especially if you look at them from a performance, not a stock price, standpoint. And I’m talking about real performance where both profits and customer satisfaction grow together. You can see what’s missing in the traditional model: the customer.

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These traditional businesses value profits alone. I’m talking about the “find a need and fill it” part – every action has been centered around “fill it.” Their focus is on the process used to generate cash, but the connection to the customer is not at the middle of the equation any longer. It’s more of an afterthought that accounting may discover when one of the expected outcomes doesn’t appear. The customer therefore can only be represented through data interpretation and management push.

These organizations value the profit delivery system and their systems values outcomes, and they behave accordingly. They have discussions that are removed from customer needs and only focus on their organizations. You see this in many organizations we deal with every day – their behavior says, “Do what’s right for my organization, worry about the customer later.” What’s always true is that all people’s behavior is equal to what they believe in: their values. The fallout of these systems is often the people used to generate the cash, who are both the customer and the producer (worker). The push for outcomes often has negative impacts on the people (customers included) and drives the organization farther away from the customer. Often, greater revenues (higher pricing, cheaper people) are required to both manage unsatisfied employees and attract new customers.

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Creating Kaizen

Jump now to a kaizen organization and how it’s created. You’ll have the same starting point: objective = profit. It also will take the same next step of “find a need and fill it.” After this step is where things differ. Whereas most businesses’ next step will be to focus on building the product or service delivery system, a kaizen organization will focus on the middle part of the equation, “Profit = FIND A NEED + fill it.” This part of the equation says that knowing the need must always come before filling the need. A kaizen business therefore puts the customer at the front, and it winds up with a production model that says that accounting only has a role in math and calculating results. It knows the customer creates the need and will exchange cash for the “filling it” part.

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The business structure, what I refer to as the “kaizen engine,” is built so that when customers’ needs are not met, it shuts down so that only the needs will get delivered (not defects) and we can identify the root cause of the problem. So, this business is fundamentally different than the majority of businesses in that it values problems, or the things that get in the way of delivering to customers the stuff they’re willing to exchange cash for.

The realization for these organizations is that outcomes cannot change if problems aren’t identified. In other words, you must know the problem before you can see the solution. It’s understood that solving problems is the easiest part of improvement, but knowing the problems is the really hard work. Protecting the kaizen engine (the customer problem generator), then, is what leadership must focus on.

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Taking the Lead

So how do you lead this new, customer-centered business? We know that customers have needs, and those needs change (usually they demand more and more). They’re always ahead of us in their desire and always asking us to do better. While they may be satisfied with us, there’s always something else we could have done better. They’re in essence “pulling” from us that which they desire.

Organizations don’t need someone at the back end analyzing data and creating fixes but someone out front pulling them to new levels of performance demanded by the customer. They need those in charge as close to the customer as possible. They need the producers right up there, too, as they’re the ones who make it happen. In short, they need leaders.

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Place a traditional push-style leader and place him or her in a pull-style organization. The push leader values outcomes and therefore studies them to determine fixes or changes to the system. He or she then manages them into the system. In a kaizen business, the engine or system has been designed by the customer and gets adjusted by the customer’s pull. The settings on the engine, for example the speed it should run, work quality and cost to perform work, are dictated by the customer and put in place so that when they aren’t met, the engine will shutter or misfire. These misfires are the problems the organization values, knowing that if they can be resolved, the customer will be better served (which always leads to more cash).

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So what happens if the leader just tells you how to run the system now and says, “Do it this way today”? What happens to the problems we valued? Because the settings have been changed to reflect what the leader wants, the problems that will arise are those that will, when resolved, only please the boss. Is that what you really want? If the boss has the cash we’re trying to make, maybe so. Maybe he or she is really the customer. Isn’t it always the customer’s job to do this? The point is that if you lead by push like the majority of businesses, you’ll always destroy the system you’ve designed to serve the customer.

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What’s Important

What’s important in leading a kaizen business?

Start with the values: What do we believe in? We believe that if we pay close attention to customer needs, we’ll have a better chance to receive their cash if those needs are met. We believe that a system built by the customer (a system that flows value back to the customer) will show us, through its flaws, how we can better serve the customer. We believe that a system is primarily a group of people working together. We believe that these flaws or problems are our most valuable resource. We believe that those who are closest to the work have the best chance of improving it. We believe that solving the problem is always easier than knowing the problem. We believe that the better our organization understands these things, the stronger we’ll become.

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Knowing all that, how should we behave? Remember that your behavior always equals your values and vice versa. The behavior of leaders in a kaizen business must reflect several things:

1. People are the system. Only people can advance the organization. Kaizen leaders must then pull people to higher levels.

2. Knowledge (knowing the problem) is the key to unlocking improvement. Therefore, teaching and learning must be the primary method of improving people.

3. Problems are the most valuable resource. The system or process built by the business is the thing that generates them, so it’s most important to protect the system that raises them.  

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4. The organization values the customer as the primary means of supporting the organization. Therefore, the values of the organization must support both the organization and the customer and be the primary reason it exists.

Pay Attention to Differences

The problem of leading a lean organization is one that goes unnoticed by many. Most who attempt the strategy pay little attention to differences. But in the end, those who hang on long enough recognize the need for understanding them.

There’s always a major “letting go” of the old management ways before any successful kaizen business ever develops into a genuine improvement machine. The biggest leap of faith here is usually the most logical: If we focus on change, we’ll get results, and if we focus on results, we’ll get nothing. It’s always the thing at the root of a situation that, when changed, will affect the outcome. Kaizen requires staying at the small things.  

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So if you struggle with your lean organization, ask yourself and your people how you manage. Are the outcomes more important to you than the work required to find problems? Do you find yourself not making changes because they seem too small to make a difference? Do you feel like you’re doing this all by yourself? Is what the customer wants at the forefront of everything you do? Are you telling people what to do all day? Do you stop to solve problems, or do you pay someone to make them go away?

Lean leaders lead people to effectively solve problems for customers. Lean leaders are teachers.


John Sweigart has developed the knowledge of the Toyota Production System and its execution over the past 11 years. As director of lean operations and ultimately national director of operations for Sterling Collision Centers, Sweigart helped lead its operations and production model growth up to and through its acquisition by the Allstate Corporation. Sweigart also acts as senior lean coach for Murli & Associates, a Connecticut-based lean consulting firm with clients in industries such as transportation, construction and insurance. Today, Sweigart’s primary function as direction leader of The Body Shop @, a Pennsylvania-based collision repair organization, allows him to further develop the discovery and value creation of kaizen in the collision repair industry. Its “Star-Link Certified” collision repair system knowledge is now exclusively offered to the industry through a strategic alliance with DuPont Performance Coatings.

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