Mulally’s Early Lean Leadership at Ford

    By Dan Markovitz, Markovitz Consulting

    (Mark's note… Dan has been a unofficial, yet very welcome, contributor to the blog for a few weeks now. We should see him posting directly soon. But for now, here is a post he sent me via email).

    On Friday, the WSJ published an article on Alan Mulally, Ford's new CEO. The article, taken together with the article on Katsuaki Watanabe and Toyota from two weeks earlier reveals a key difference between a lean approach to business and, well, business as usual.
    The article on Ford states that:

    As part of his push for uniformity, Mr. Mulally is moving Ford to combine its global operations, modifying its current structure of separate businesses by brand and region. Mr. Mulally was shocked to discover that the plan before his arrival was to “operate our eight Fords.”

    In the executive suite he shares with Chairman Bill Ford, Mr. Mulally says he asked Mr. Ford why he hadn't integrated the company.

    He says Mr. Ford agreed that integration was desirable, but told him it was difficult. Every time Ford had considered forcing integration, a new hit product — such as the Explorer, Taurus or F-series truck — would come along and propel profitability without tough changes, explained the fourth-generation Ford leader….

    Ford has tried before to cut vehicle-development costs through the strategy of engineering a car once to serve markets world-wide. In the 1990s, Ford also tried to undertake a sweeping reorganization to run as one company, globally, rather than as a collection of regional fiefdoms. But these prior efforts failed, in part because the company's executives and managers resisted the pressure to give up their turf.

    So here's a company that's struggled for quite awhile, but never could find the executive commitment to improve, because every once in awhile they'd get a hit product. Now, contrast this institutional complacency with Toyota:

    Toyota's chief executive officer is a worried man. He thinks Toyota is losing its competitive edge as it expands around the world. He frets that quality, the foundation of its U.S. success, is slipping. He grouses that Toyota's factories and engineering practices aren't efficient enough…. U.S. and European car makers have spent years struggling to overhaul outdated operations and work practices to better compete with Toyota. By some measures, some of those companies are catching up. Now, driven by a severe dose of institutional paranoia, Mr. Watanabe is trying to move the target.

    Mr. Watanabe, 64 years old, wants kakushin, or revolutionary change in how Toyota designs cars and factories….

    “We know our resources are stretched thin; there's no doubt about that,” Mr. Watanabe says. “But at least we are beginning to know where our problems lie now. Our biggest fear is: What if those issues get stuffed in a desk drawer?”

    Toyota — profitable, growing, and ready to take the #1 spot — is terrified. They have every reason in the world to continue business as usual, but they don't. The institutional culture — that is to say, Lean — makes it impossible to rest on their laurels. Continuous improvement (whether you call it kaizen or kakushin) is built into the company's DNA.

    Does Ford stand a chance? Can Mulally make the necessary changes in how the business is run? He's got a tough row to hoe. It's not enough for him to see the need for improvement; it's not enough for him to squeeze out waste in manufacturing. He has to change the culture at Ford. He has to change the way people think and act.

    Lean is a state of mind, not simply an exercise in cost reduction. And that state of mind must permeate every aspect of the organization, from the machinists to the accountants to the administrative assistants.

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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.



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