How Do You Say "Lean" in Swedish?
By Dan Markovitz, Markovitz Consulting:
The McKinsey Quarterly just published an interview with Peter Gossas, the president of Stockholm-based Sandvik Materials Technology, a leading producer of advanced alloys and ceramic materials. When he was appointed president in 2003, the company was making decent profits, but hardly excelling. Mr. Gossas described the challenge this way:
How can one awaken a sleeping giant with untapped potential, make it a little leaner and hungrier, and make it realize that, even if some units are doing well, it could do a lot better? It is like awakening a fat cat sleeping in the sun.
Mr. Gossas's choice of words notwithstanding, his first step was straight out of the traditional manufacturing playbook: layoff workers and reduce costs. But he quickly found that that approach didn't work. As he explains it,
We started off by using ordinary rationalization tools such as simply reducing manpower, which usually stimulates creativity and gets the organization interested in finding more efficient ways of working.
I had believed that this would lead to a good increase in productivity, but the result was actually that productivity fell slightly. When we analyzed the result, we discovered that because the organization had been largely unchanged for many, many years, an informal structure of key operators, unbeknownst to management, had been keeping the wheels turning. When we reduced staff levels, this informal organization lost steam. Clearly, we had to try something else.
Mr. Gossas responded with a typical Toyota approach: “genchi genbutsu.” He went to the factory floor to see what was going on and to learn how the company could improve its operations:
We began with a diagnostic. I've always believed that by taking a one-hour walk through a company's manufacturing and other departments and asking some questions along the way, one can get a good idea of how it is performing. So that's what we did. We walked through, unit by unit, and evaluated strengths as well as gaps between where we were and where we should be.
Walking through the factories, finding out what his employees knew, understanding deeply what challenges they faced, and discovering solutions — this is what ultimately led to the creation of what the company calls “the SMT business system,”
. . . a fancy name for something very simpleâ€”namely, the processes for seeking ways of working that can be defined as excellent or, in other words, the continual development, by every single unit, of the very best practices in all areas.
And in a statement that echoes Katsuaki Watanabe, despite his very obvious success in the past few years, Mr. Gossas is afraid. He doesn't want the company to become complacent, even with its (very decent) status quo:
We have come some way, but we are not ready, and we never will be. That's in the nature of things. I get really nervous if managers say that their units have been very good at something for some time and are working in exactly the same way today. It's a recipe for disaster. . . We cannot afford to rest on our laurels. The challenge is to keep up momentum. The day our fourth-quarter 2005 results were published coincided with us reaching our three-year financial targets, so we arranged a photograph of the management team standing on top of a pile of gravel. But when we looked at the photo, we thought, “Yes, success should be celebrated, but, hey, this is the wrong message.” So we added five bigger piles to symbolize mountains we have yet to climb.
There are still more similarities in approach with Toyota, but what's very clear is that Mr. Gossas is a leader who is willing to implement lean in its totality. For him and for his company, lean isn't just the managerial flavor of the month designed to reduce costs. Rather, its a perspective that permeates the organization from top to bottom, and leads to constant, relentless, pursuit of excellence. Reading his interview, you get the feeling that Mr. Gossas would never get fat and satisfied if he lucked into a hot product.