Lean Is Not "Frugal." Lean Is "Value."

By Dan Markovitz

BusinessWeek online joined the rest of the media in noting that Toyota just passed GM as the global leader in auto sales this quarter. The article covers all the usual points, and to its credit, does add a few words about lean. But the author goes off-track when he states that,

Toyota workers value frugality—whether it’s turning down the heat at company-owned dormitories during working hours back in Japan, or spending weeks jawboning with suppliers to figure out ways to redesign a key component and shave another 10% from production costs.

Clearly, the author is trying to address the issue of muda. But he misses the point: Toyota (and the employees) aren’t trying to be “frugal.” They’re not trying to save money.

Rather, they’re trying to eliminate the waste in their operations — from the production line to the dorm rooms — that the customer doesn’t value. Hell, if Toyota really wanted to save money, they wouldn’t have company dormitories at all. They’d let employees take care of their own housing.

From this perspective, “frugality” isn’t the goal at all. Frugality is simply a by-product of the focus on customer value.

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Dan Markovitz

Dan Markovitz is president of Markovitz Consulting, a firm that radically improves operational speed and efficiency by applying lean concepts to knowledge work. He is a faculty member at the Lean Enterprise Institute and teaches at the Stanford University Continuing Studies Program. He also lectures on A3 thinking at the Ohio State University’s Fisher School of Business. Dan is a frequent speaker and presenter at conferences, and has consulted to organizations as diverse as Camelbak, Clif Bar, Abbott Vascular, WL Gore & Associates, Intel, the City of Menlo Park, and Memorial Sloan-Kettering Cancer Center. His book, A Factory of One, was honored with a Shingo Research Award in 2013. Dan has also published articles in the Harvard Business Review blog, Quality Progress, Industry Week magazine, Reliable Plant magazine, and Management Services Journal, among other magazines. All of these articles are available for download on the Resources page. Earlier in his career, he held management positions in product marketing at Sierra Designs, Adidas, CNET and Asics Tiger, where he worked in sales, product marketing, and product development. He also has experience as an entrepreneur, having founded his own skateboarding footwear company. Dan lived in Japan for four years and is fluent in Japanese. He holds a BA from Wesleyan University and an MBA from the Stanford University Graduate School of Business.

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3 Comments on "Lean Is Not "Frugal." Lean Is "Value.""

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  1. Mark Graban says:

    Thanks for posting that, Dan.

    I guess I don’t see the semantic difference between frugality and cutting costs. I don’t see what’s wrong with cutting costs as long as you do it in a way that doesn’t hurt the business.

    Traditional cost cutting, such as layoffs, can hurt the business (and customers) in many ways. Traditional “supplier development” means beating up the supplier with arbitrary price reductions, which hurts the supplier and ultimately your business.

    I think it’s worth pointing out that Toyota’s “jawboning” is a collaborative effort to find savings together, “spending weeks” to actually improve the process, not just cut costs. That’s much more constructive than traditional “cost cutting”.

    I do like how the article dug into “why” Toyota is doing better, not just reporting the fact that they are.

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