The Lean Turnaround Strategy to Transform Your Business for Maximum Growth

Discover the groundbreaking strategies outlined in “The Lean Turnaround” by Art Byrne, designed to revolutionize businesses and drive unprecedented growth. This insightful book unveils the transformative power of lean principles, offering a dynamic approach to overcoming challenges and achieving lasting success.

Dive into the pages of “The Lean Turnaround” to unlock the secrets of sustainable business growth and embark on a journey towards unparalleled success.

Genres

Business, Management, Lean Manufacturing, Leadership, Organizational Development, Process Improvement, Change Management, Entrepreneurship, Strategy, Continuous Improvement

“The Lean Turnaround” by Art Byrne provides a comprehensive guide to implementing lean principles in businesses to achieve significant improvements in performance, efficiency, and profitability. Drawing on his extensive experience as a leader in lean transformations, Byrne offers practical insights and actionable strategies for overcoming common obstacles and driving sustainable change. From eliminating waste to fostering a culture of continuous improvement, this book equips readers with the tools and knowledge needed to transform their organizations and thrive in today’s competitive landscape.

Review

Art Byrne’s “The Lean Turnaround” is a must-read for business leaders seeking to drive meaningful change and achieve remarkable results. With its clear and concise approach, backed by real-world examples, this book offers invaluable guidance for navigating the complexities of organizational transformation. Byrne’s emphasis on empowering employees and fostering a culture of accountability resonates throughout the book, making it a compelling resource for anyone committed to success in today’s fast-paced business environment.

Recommendation

Author Art Byrne, operating partner at the private equity firm J.W. Childs Associates, has been implementing Lean management at various firms for more than 30 years. He discusses how to make the most of Lean’s benefits, including improved profitability, efficiency, productivity and savings plus increased enterprise value. Byrne explains that Lean tactics can transform any service company or factory, but stresses that traditional executives often oppose it. That’s one reason, Byrne says, that fewer than 10% of Lean adoptions succeed. He includes savvy recommendations on how your firm’s Lean proponents – who must include your CEO – can bypass naysayers and make the most of Lean’s streamlined methods.

Take-Aways

• Lean management evolved from the Toyota Production System.
• The CEO plays a crucial role in the full adoption of Lean and must introduce it with a formal, in-person presentation.
• Lean flies against some traditional business practices.
• At most service firms, complex business structures generate waste.
• Streamline operations to avoid manufacturing waste.
• Switch from standard cost accounting to Lean accounting.
• Lean can help any firm in any sector.

Summary

Lean management evolved from the Toyota Production System.

Companies must add long-term corporate value to dominate their rivals and succeed. To increase value, they must eliminate waste and institute continuous internal improvement – the two hallmarks of Lean management. However, adopting Lean practices often requires a significant corporate transformation.

“Making the switch to Lean is not like any other new program you have tried [that] has a start point and an end point. Lean does not. Instead, it is the start of a journey that, if you do it correctly, will never end.”

The pioneer in this type of management was the Toyota Motor Company. Its Toyota Production System (TPS) became the model for Lean management and, over time, it has helped Japanese organizations earn their reputation for operational efficiency. TPS is the legacy of industrial engineer Taiichi Ohno. He and his Toyota colleagues invented the techniques used in Lean management as they worked to design a system for simplifying business processes.

Reduced to its basics, Lean involves four fundamentals:

1. Take the necessary time – In German, “takt” is a musical term for “beat” or “measure.” With takt time, you pace your work to match the speed of your customers’ demands. Going faster is wasteful if your goal is to detect and eliminate waste in your overall activities. Takt focuses your production on your client’s needs. Takt time is “time available” divided by “daily customer demand.” Of course, customer demand and production cycle times vary, but your goal is to match your cycle time and takt time to the pace of your clients’ requirements. Balancing takt time and cycle time will reveal previously unseen waste and opportunities, particularly when you unify related processes into their own cells.
2. One-piece flow– Manufacturers should rearrange individual operations so work moves logically through sequential steps, even if that means exchanging functional departments for cells that unite the steps involved in creating a product. Service firms can also adopt a unified flow for providing their output to their customers. This improved structure delivers top quality, lower costs and quicker client response times. Diagnosing how well a chain of processes is working, spotting defects and determining costs becomes much simpler once you arrange them together as a one-piece-flow cell. Your goal is to achieve meaningful improvements to maximize productivity.
3. Standard work – With standard work, your employees always do the same thing the same way in order to achieve consistent, defect-free results in a predictable time frame. As you perform kaizen reviews on particular activities, you can establish a standard, codified approach for each function. This may be a big adjustment for your workers, but it makes training easier and enables employees to step in for one another.
4. Pull System – With a “kanban” or pull system, customer demand drives your work. In a push system, you make your merchandise and see who buys it. In a pull system, you create goods in response to customer orders. The byword is, “when you sell one, make one.” Like standard work, a pull system can be tough to implement, but once it is in place, it functions system-wide, starting with your suppliers. A pull system lets you connect to your customers in a timely way, without waste.

The CEO plays a crucial role in the full adoption of Lean and must introduce it with a formal, in-person presentation.

A Lean transformation cannot succeed without the CEO’s full backing, enthusiastic support and hands-on leadership. The CEO should make sure from the beginning that everyone in the organization adheres to Lean fundamentals. The CEO is responsible for leading – not only managing – this change and for keeping everyone on target and moving forward. It’s up to the CEO to challenge employees to put forth their best efforts and achieve exceptional results.

Do not introduce your new Lean system to your colleagues and employees with an email or a memo. As CEO, prepare with your top people, get up in front of everyone, and formally announce the new program and the reasons for embracing the Lean method. Spell out your rationale and expectations. Plan on a full-speed-ahead approach for all of your continuous improvement – or kaizen – activities.

“The conversion to a Lean strategy can’t be managed in the traditional way. It can’t just be delegated down. The CEO must lead.”

Ideally, you want to set an ambitious “pace that averages two kaizen events [activities] per week per facility.” Start with your largest family of products and work toward your primary Lean goal: to establish a reliable, efficient flow of activities. Keep these three principles in mind. “Lean is the strategy,” and it relies on adding value and removing waste. “Lead from the top,” since this change cannot work without a committed CEO, and “Transform the people.” Moving from a traditional organizational structure to a Lean “value-stream” structure requires finesse and careful planning. Your firm may need to abandon much of its old, perhaps cumbersome operating structure. To begin, appoint “value-stream leaders” in each area – such as product groups, functional units or departments – to spearhead your Lean activities.

Many businesspeople incorrectly see Lean as a process suited only to manufacturing. Non-manufacturing firms tend to regard it as not relevant. Ironically, the gains non-manufacturing firms can derive from Lean generally prove to be greater than those manufacturing firms can achieve.

Lean flies against some traditional business practices.

Yoshiki Iwata, the president of Shingijutsu, worked with Taiichi Ohno at Toyota. Iwata believes that he can teach others the Lean methodology and show novices how the Toyota Production System functions in the real world. But, Iwata cautions, he does not believe that this alone would sufficiently prepare someone new to TPS to execute it efficiently. Iwata makes a telling point. Firms often find Lean difficult to implement. One obstacle is that TPS’ principles run counter to how most companies operate. For example, many conventional firms insist that their customers adapt to how they operate. Conversely – and successfully – companies using Lean adapt to how their customers operate.

“Improving your operations (i.e., your value-adding activities) by relentlessly trying to find and eliminate the waste should be your primary, all-consuming strategic focus. Getting all of your people involved in this will not only greatly leverage your efforts, but eventually will lead you to have a company culture of continuous improvement, or kaizen…Once you get to that state, you will be very hard to beat.”

Typical business forecasts show only gradual margin increases. A projection forecasting large increases generally stems from optimistic assumptions in the executive suite about how something that is still pending – an innovative product or a bold expansion into a new market – could generate new, greater profits. Almost always, these projected gains don’t add value or improve operations. In other words, managers who prioritize increasing margins are operating under the wrong priorities.

This wrongheadedness afflicts many firms. Consider, for example, a service company that requires 20 to 30 days to provide prospects with bids when its competitors require only 18 to 20 days. The firm’s executives acknowledge that they lose business because of their slow turnaround time on quotes, but they haven’t improved their efficiency, the one surefire remedy for most firms’ woes. They should prioritize improving efficiency, perhaps in order to achieve a 10-day turnaround on bids. With that new response time, they could dominate their competitors – and introducing new products would be an added boost. Use the kaizen approach to review any process for inefficiency and waste. Work with people who are pursuing the same processes and share perceptions with them about how to address waste and inefficiency, such as streamlining workflows and reducing inventory. Remember, “the best ideas for improving a process always come from the people who are actually doing the work.”

At most service firms, complex business structures generate waste.

In service companies, waste often stems from an overbuilt organizational structure that arose over time as various managers strove to protect their fiefdoms. Managers typically believe that, throughout their company, only their little group can do what it does and that anyone who attempts to improve their methodology is horning in on their exclusive territory. For example, the typical loan application at a bank needs to obtain various approvals from numerous departments, usually scattered throughout a large building. During its journey, an application may land on the desk of someone on vacation. It can sit there for days, unattended. Once the vacationer returns and signs off, the application moves to the desk of someone else in another department. And, that person may likely have his or her own reasons for delaying the application once again.

“As CEO, you will need to know enough about operations to pick the first kaizen projects. Focus on areas where improvement will have the largest financial impact on your business.”

As the application moves through various delays, it may take weeks to process. But these lags, though they may appear to be the essence of the bank’s culture, are unnecessary and create difficulties for the bank’s customers. How else could the bank approach it? Perhaps the relevant people from each department could meet briefly, pass the application around for review, and approve or reject it. With such an approach, the bank could reduce its approval time to a few days.

Streamline operations to avoid manufacturing waste.

For manufacturing firms, long setup times directly reduce added value. That’s why a Lean transformation at a manufacturing facility often calls for greatly reducing setup times, ideally to 10 minutes or less.

“Use stretch goals and improvement teams to sell Lean to your people. Think strategically about who needs convincing and when, and put that person on a high-impact team.”

However, executives who want to make this change often encounter resistance from engineers and setup specialists. To understand the value-added possibilities of streamlined operations, factory leaders need to develop “Lean eyes” so they can detect the waste that’s blocking their progress and then take the right steps to eliminate it. Opportunities to eliminate waste are everywhere, but you must learn to see them. To develop a Lean vision your organization can understand and support along with a Lean strategy everyone can learn and implement, streamline your implementation process by hiring certified Lean experts or consultants. Having someone on your Board with Lean knowledge also can speed your company’s adoption.

“As the CEO, visit a few…companies that are well down the path of their own [Lean] transformation[s]. Talk with their CEOs and management teams. Find out what worked for them and what didn’t.”

A well-implemented Lean program can achieve various concrete goals. In a manufacturing company, that would include cutting lead times, reducing inventory, increasing productivity, reducing how much floor space your operations require, reducing defects, improving gross margins, increasing market share, and creating a team-based culture in which everyone can learn and prosper. A service firm’s Lean goals are somewhat different. For example, a healthcare staffing agency used Lean to cut the time it needs to respond to doctors’ queries, collect accounts receivable more quickly, reduce debt, and run kaizen reviews to make customer processes quicker.

Switch from standard cost accounting to Lean accounting.

Most companies suffer excess baggage, which often manifests as complex processes for approving expenditures followed by cumbersome financial reviews. Standard cost absorption method accounting can turn out to be the most intractable of these burdens.

“Leaders looking at a company through the lens of a standard cost P&L statement cannot see the detailed information about productivity and inventory levels, all of which has a huge impact on current and future competitiveness.”

You can’t get rid of all corporate effluvia, but you can change from standard cost accounting, which can suffer from accuracy issues, to less costly, more reliable Lean accounting methods. Lean works well with generally accepted accounting principles (GAAP), though conservative CFOs might resist changing their accounting methods.

Lean can help any firm in any sector.

Most companies operate under structures that resemble each other closely. They feature numerous processes that enable them to operate and make a profit. Despite the nature of any particular business, quite a few of these processes prove pretty much identical in practice, including recruitment, procurement, accounting, billing and other routine procedures. Lean enables companies to boost their profits significantly by improving each individual process to get rid of waste and to provide new value to customers. Lean can yield substantial payoffs for a firm of any size in any sector. When handled properly, Lean reliably increases earnings. No matter what a firm’s basic purpose, orientation, size, industry or market, Lean can be an excellent strategic tool that offers operating efficiency, a path to profit and increased value for customers.

“The idea of continuous improvement, or eliminating waste, [is] to let value flow to your customers faster and more cheaply.”

One way to ensure that your employees welcome and sustain a Lean approach is to enable them to share in your company’s overall gains. Profit sharing is a powerful incentive. As Lean increases your profits, your gains can lead to sustained financial success. Then, you may want to consider capitalizing on your gains with smart, new acquisitions that bring additional earnings and profits.

Clearly, Lean can improve your internal processes, but don’t limit its impact to inside your building. To embrace and implement Lean more fully, deliver genuine value everywhere, including externally. This means both maximizing customer benefits and making your vendors your legitimate partners. Don’t assume that improving customers’ outcomes means cutting the cost of your products and services. Lean companies often can charge more because their offerings meet customers’ needs more efficiently than those of their non-Lean competitors.

About the Author

Art Byrne, the operating partner at the private equity firm J.W. Childs Associates, also wrote The Lean Turnaround Action Guide.