Most businesses are "Soviet" in character?

7 – Workers of Europe Innovate (subscription required)

Great article in the WSJ today about a company in France that sounds like it's doing many “lean” things without invoking Toyota.

The leader of this company says, in part:

Most businesses, in his view, are “Soviet” in character — they rely on centralized control by bosses, whose priority is the reduction of risks to themselves. This in turn means control of “how” things are done and the assertion of authority of managerial nomenklatura through deference and perks. At FAVI, what matters is “why” and “for whom,” not “how.” That is, workers aren't told how to do their jobs, but whom they are doing them for — the customer, not their boss.

I believe what he's saying is that, in keeping with Toyota principles, the role of the “boss” is not to tell people “how” to do things. The people doing value-added work need to define their own standard work and to take responsibility for continuously improving and focusing on the customer.

I'm glad to see someone else making the Soviet comparison, I've thought this for some time, based on experience at multiple companies. I'd say also that many companies rely on propoganda coming down from management (“Everything here is great!”) rather than dealing with reality. I'd also argue many big companies don't want real competition, rather they want protected markets. It's the small companies, for the most part, that are really customer focused, from my experience.

“There is virtually no middle management at FAVI; the company is organized into teams, which each serve one customer — one automaker, for example. Those teams choose their own leader, who reports to Mr. Zobrist. Thus, the organizational chart is only three layers deep.

Instead of obedience, Mr. Zobrist seeks responsibility and initiative from his employees. And to get it, he gives them freedom — to innovate and experiment, but also the freedom to solve customers' problems in their own way. He tells them they work for the customer, and gets out of the way. His only demand, just about, is that they always look for ways to do it “better and cheaper” — and never deliver late.”

It's a great article, it's on news stands today, or get an online WSJ subscription, it's well worth it.

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Mark Graban
Mark Graban is an internationally-recognized consultant, author, and professional speaker, and podcaster with experience in healthcare, manufacturing, and startups. Mark's new book is The Mistakes That Make Us: Cultivating a Culture of Learning and Innovation. He is also the author of Measures of Success: React Less, Lead Better, Improve More, the Shingo Award-winning books Lean Hospitals and Healthcare Kaizen, and the anthology Practicing Lean. Mark is also a Senior Advisor to the technology company KaiNexus.


  1. Dear Mark,

    Your comments remind me of my favorite article written by Gary Hamel in 2002, “Innovation Now!”:

    Excerpts I find profound and often quote:

    Most companies are organized like the old Soviet Union: There’s a hierarchy that is cleverly disguised as a perfectly sensible “resource allocation” process. An idea fights its way up through various levels of skepticism until someone near the top decides whether or not to invest in it. In most companies, the only person who can buy an idea is your boss or your boss’s boss. And the typical criterion that they use for judging an idea is that it must have a 90% chance of being profitable in the next year or so. The problem is, how many new ideas — including those with enormous upsides — start out as a 90%-sure thing?

    A systemic belief that creates hostility toward innovation is the notion that change starts at the top. I often ask CEOs, “Who in your company is responsible for fundamental shifts in strategic direction?” Nine times out of 10, the answer comes back, “It’s me” or “It’s the board.” But in my experience, the bottleneck that throttles innovation is almost always located at the top of the bottle.

    Big companies want things to go according to plan. These days, you hear a lot of C-level executives talk about the virtues of alignment. Of course, we need alignment: We need to know what our strategy is and how we’re measuring it and how we deliver value. But perfect alignment is death. Variety is the key to evolution. Mutation and sexual recombination allow a species to thrive in an unpredictable world. So it goes with innovation, which requires experimentation, trial and error, doing new things, and breaking old rules. An unhealthy adherence to conformity and alignment will drive out innovation — and innovative people.

    Most people who succeed at radical innovation inside large companies will tell you that they did it despite the system. What I find remarkable and disturbing is that so few senior executives seem to find that state of affairs to be remarkable and disturbing. Apparently, they’re willing to accept the fact that their organizations are built for perpetuation rather for than innovation. I’m not. Now, there’s nothing wrong with perpetuation. Control, hierarchy, diligence, efficiency, replication, quality — we inherited those virtues from the industrial age, and virtues they will always be. But in a discontinuous world, we need to turn down the dial a bit on perpetuation and turn up the dial a bit on innovation.

    In too many companies, real business innovation is an exception. Innovation lives in a ghetto, safely corralled in R&D or new-product development, where it can’t infect the rest of the organization. And yet we know that to lock up innovation in a corner of the company is to limit that group’s potential to create the future. The most important business issue of our time is finding a way to build companies where innovation is both radical and systemic.

  2. I recall Paul Graham’s essay entitled “The Power of the Marginal” at when reading this entry.

  3. Found this reference:

    Most large U.S. corporations are run like the Soviet Union economy…with their emphasis on central plans…a remarkably effective way of killing creativity and entrepreneurship.

    – The Mind of the Strategist, by K. Ohmae (McGraw-Hill 1982)

  4. Pascal Dennis said this in the intro to his book “Getting the Right Things Done” in the context of Strategy Deployment being the antithesis to command-and-control management:

    “Very strange,” my sensei once said. “In North America you manage business the way the Soviets managed their economy.”


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