Episode #118 is a follow-up to podcast #116 with Jim Womack, founder and former Chairman of the Lean Enterprise Institute, now their Senior Advisor and author of the new book Gemba Walks, available in paperback, Kindle format, iBooks, and other formats.
In this episode, we talk about both GM and Toyota – their challenges, Jim's reflections on the companies, and thoughts about where they are headed. Jim also answers reader questions about the word “lean” itself and the combination of the Lean and Six Sigma methodologies.
For a link to this episode, refer people to www.leanblog.org/118.
If you have feedback on the podcast, or any questions for me or my guests, you can email me at email@example.com or you can call and leave a voicemail by calling the “Lean Line” at (817) 993-0630 or contact me via Skype id “mgraban”. Please give your location and your first name. Any comments (email or voicemail) might be used in follow ups to the podcast.
Welcome to the Lean Blog podcast. Visit our website at www.leanblog.org. Now here's your host, Mark Graban.
Mark Graban (13s):
Hi, this is Mark Graban. Welcome to episode 118 of the podcast for May 10th, 2011. My guest today is Jim Womack. He was the founder of the Lean Enterprise Institute, now serves as a senior advisor to that organization. And we're continuing the discussion that we started in episode 116 that focused on his new book called Gemba Walks. Today we're talking about a broader range of issues including the auto industry, general Motors, and Toyota, where they've been and where they're going. We'll talk about a combination of Lean and Six Sigma and we'll talk about some other topics as we go. So the podcast can be firstname.lastname@example.org slash one 18, and you can also go there if you'd like to post a comment or leave feedback.
Mark Graban (1m 1s):
Hi Jim, thanks for joining us again and for taking time to do another podcast. Well,
Jim Womack (1m 5s):
Mark Graban (1m 6s):
So here we're gonna talk about the state of the auto industry, where it's been recently and where it's going. And I think back to my very first day as an employee at LEI in June, 2009 was the exact day that General Motors filed for bankruptcy. So I wanted to hear your thoughts about General Motors in particular and where things are going.
Jim Womack (1m 27s):
Well, this is a, a big thing. GM, it's hard to turn. GM really invented modern management under Sloan back after the disaster of 1919. This 2009 bankruptcy was really the third, what you really should call bankruptcy in the history of gm. One in 1910, just two years after it was founded, the second in 1919, and then the third in 2009. I guess looking at the bright side will, it will be, I don't know what, 900 years until the next one or something if you, you know, work out the the sequence of numbers. But part of the problem with GM is that they were so good at Sloan-style modern management and then once that didn't work, it turned out that everything had to change.
Jim Womack (2m 15s):
And that has been the big problem. It's not a trivial issue that when you create a business where every manager thinks in a certain way and you have this long, long running union relationship that works in a certain way and the public thinks about you in a certain way, for anyone to walk in and say, we will now all think and think about each other and behave toward each other and deal with our customers in a different way, this is a truly heroic challenge for anybody coming in as a sort of transformative leader. So what you can say about GM is that so far so good that without the government getting into it, hard to know exactly what would've happened.
Jim Womack (2m 57s):
You know, really a big meltdown, not a little meltdown, but they've come through that the world is not necessarily going to be such a friendly place for car companies coming up because whatever you think of the climate issue, cars figure prominently in what people talk about doing about it. Whatever you think about oil and oil availability, cars, as we talk about it today, just overwhelmingly live on oil. And there are lots and lots of new competitors coming into the car industry. The most interesting of which are the state owned Chinese companies. The companies that get all of the publicity are the private BYD brilliance, great Wall Gilley and so forth companies.
Jim Womack (3m 41s):
But the ones that are just enormous, which are the venture partners of all the multinationals are the big S A I C first automotive companies that are gonna have their own brands and own cars here very shortly. So this is not gonna be an easy industry for anybody to flourish in. And so therefore that's the background. Having said that, it's interesting to me that gm, I think on the day they filed for bankruptcy, was a better company than they had ever been, that they really did fix the plants after about 2000, took them about 15 years of fooling around before they could finally get the General Motors, you know, the global manufacturing system to actually get traction.
Jim Womack (4m 23s):
But they had plants as of 2009 that were actually good enough. The GM did not fail because the number of hours of effort, the number of defects in their plants were not competitive. They failed because they had all these legacy costs that they just couldn't deal with. And Rick Wagner kept thinking if he could just get about another 10 years in North America of 17 unit million units per year, he could somehow or other get the pig through the python, which is all of those retiree and healthcare costs, and he just couldn't get there. So that was what happened to the bankruptcy was that that was greatly relieved. So now their wages are competitive with the other players in the North American industry that their plants are good enough, not brilliant, but good enough, their product development system is pretty good when they can get focused and shedding all of those hopeless brands that they couldn't support is really a wonderful advantage for the product development system because they now have less badge engineering and just fiddling around on the margins to do.
Jim Womack (5m 28s):
And so it should be easier to get focused. Wish I could say that anything much has happened with suppliers, by the way, with any of the companies other than they're now coming out with volume forecast in terms of tooling that aren't just completely loony and that's bound to make your suppliers think a little bit better of you. And then to me, the most striking thing, and this has nothing to do with GM of itself, in fact, Toyota in some ways has the biggest problem that the whole dealer relationship with the customer within the factory just refuses to get better. And no one seems to actually, actually have any ideas, even though Toyota figured out how to do it in Japan 50 years ago. So therefore when you look at gm, you say, Hey, a product development system pretty good factory's good enough supplier relations, well, you know, at least they won't be throwing chairs at each other as long as they're meeting their volume forecast dealers, GM's, dealers.
Jim Womack (6m 15s):
So if you look at the power numbers in terms of customer satisfaction are better than Toyota dealers. So that's some modest advantage GM. So therefore there are a lot of good things about gm. What I've written and what I write in the Gemba Walks book is that Sloan made it so clear what GM's purpose was, which was a product for every person purpose, the the customer having the purpose. And every GM product was to be slightly more refined and sophisticated than comparable products at similar points in the market. And that was Sloan simple answer to what GM was gonna do. They were gonna give you a slightly better car, whoever you were, whatever your purpose, then the other guys could give you.
Jim Womack (6m 58s):
And GM got vastly wealthy off of simply doing that. Now you say, well what's the purpose of gm? And I just attended a lecture, that's quite the word. It was a discussion that Dan Ackerson knew current, the latest CEO at GM had at the Sloan School here at MIT. And there was a lot of kind of talking about the need for heroic leadership and dramatic intervention and so forth, but there was absolutely no explanation of where this army, or in his case, Navy, since he's an old Indianapolis guy where this Navy is sailing. It was a lot of raw, raw and a lot of energy, but at least to my ear I kept saying, right, but what's the purpose of General Motors beyond, you know, they're gonna sell you a vote.
Jim Womack (7m 45s):
So I think that's the great challenge and that's not an easy one. As I say, transformational leadership is a lot bigger thing than people perhaps think that I think you really do have to restate an organization's purpose in its relation to its customers and what customer problems it's going to solve better than anyone else can solve them to be truly successful for the long term. Sloan did that between 1919 and the mid 1920s. He was there until '55, I would say the system started to grind down after Sloane left and then it did get revitalized a bit in after 2000. So look, they're okay, they're gonna do okay for a while, but if they're gonna go back to being that real exemplar of corporate performance that they were for about 60 years, I think they've gotta have a better statement of what their purpose is that customers can hear and understand, which will make customers willing to pay more for products in a, in a very crowded market than they probably are willing to pay for GM products right
Mark Graban (8m 47s):
Now. So let's shift now and talk about Toyota. One of your essays in the book Gemba Walks is called How Toyota Won and How Toyota Can Lose from a couple years back. And there there's some people that would give you some credit in a way for predicting perhaps some of the problems that Toyota has run into with its growth and allegations of quality problems. But now considering that the NASA report has come out more or less clearing Toyota for some of those problems and allegations, and I think we have a little clearer picture of what happened there, what are your thoughts on Toyota's situation and future?
Jim Womack (9m 26s):
Toyota set out to do something that was just incredibly bold, which was to go out into a world that managed its affairs in a very, very different way from Toyota and to teach an enormous number of people who actually had been trained to manage in a very different way how to adopt, embrace a new form of management. That is a very bold thing to do out of a country that when I first started going to Japan, 71 had modest language skills, very inward looking, not very comfortable out on the world stage, certainly not very comfortable designing or producing abroad.
Jim Womack (10m 10s):
So what an amazing march to go out across the world to become the world's largest car company and largest manufacturing company to do that in a relatively brief span of time, particularly after the late 1990s when they decided to really go for the brass ring and to displace GM as the world's largest manufacturing company. So that was a very, very bold thing to do in a company that we're used to think of as being very cautious and plotting. And that was a conscious decision they made, and I think we could all now agree that that was a little bit further than they perhaps should have aimed for.
Jim Womack (10m 52s):
So they got into a situation as I observed it, and look, I unlike many people in the lean community who spend a lot of time around Toyota, I really don't, you know, I never lived in Detroit and I never lived with the transplants. I've always felt I'm more useful being an outsider, being an outside observer. And because Toyota, by the way did so many good things for so many years, everybody presumed that I was just practically on the payroll of Toyota. Absolutely not. I never received any money at all from Toyota, and by the way, they were never particularly nice to me. It was always hard work to get them to tell me anything. But as the outsider who was still pretty highly informed, I could just see that the faster they expanded, the thinner the management was in terms of true understanding of the core Toyota ideas about how to create value.
Jim Womack (11m 46s):
And I also knew that was gonna be trouble because it is gonna be trouble if you lose control of your management philosophy and you're just teaching it abstractly by telling your employees to go read books rather than teaching it by example over an extended period. Well eventually you're going to run off the road or hit the wall or something. So it didn't have to be terribly clairvoyant back in 2006 seven as the system really reached its peak just expanding at a staggering rate as one year. I forget which year they grew their sales by 20 billion, can you imagine 20 billion in a year increasing manufacturing sales when you know a large fraction of that is from Toyota or their core supplier group.
Jim Womack (12m 32s):
That's just a staggering amount of capacity and a staggering amount of new managers and workers to add to a system. So the further they went and the faster they went, they said, my gosh, this is now a very creaky mechanism and at some point something bad's gonna happen and they're gonna go off the road. And I didn't know when, by the way, I had absolutely no notion. And this business with the un commanded, unintended, unexpected, whatever, acceleration really was just a random event that you had an American cabinet secretary who needed to endear himself to his president from an opposite party. You had a bunch of very confusing and noisy data based on this web log that was created in response to the Ford Expedition Firestone Tire issue a decade ago where anybody could go to the web and log an incident in a vehicle without even having to give a VIN number.
Jim Womack (13m 27s):
And then that's just all visible out there for people to see. So that's the world however you live in as a consumer products company. Just asked Johnson & Johnson, this is not about cars. This is about being a consumer products business in a world that demands a whole lot of transparency in a way without doing any verification of the fact that all of the items being listed so transparently are actually real. So however, that's the plate where it lies. So therefore the timing of their problem was completely accidental. And look, it could have happened three years later, it could have happened two years earlier, but I think that they were gonna have some problems, was not something that was just an accident.
Jim Womack (14m 9s):
I think there was almost a deterministic quality about that. By the way, this is the best thing that ever happened to Toyota, that it gives them a cause for, for critical self-reflection. And they're doing a lot of that. And a Toyota after a very shaky start, you know, you really shouldn't hide from the media in a foreign country. You really ought to go to Washington and and take your medicine. I think it's serious about saying, let's get back to those basic values. But having said that, I think it takes years to teach managers how, not just to think, but to behave consistently under pressure in times of difficulty consistent with Toyota's management philosophy.
Jim Womack (14m 53s):
And I don't think there's really a shortcut to that. And by the way, it's one-on-one teaching. It's in some ways very old-fashioned. It's master apprentice sensei dehi, as we would say. It just takes time. It takes a lot of a three s to create a new lead manager. So I think there's an inherent do not exceed speed with regard to their ability to expand. And look, let's say that we don't absolutely have the data yet that a company of that size really can teach its management system to enough managers to get consistently brilliant performance. We just don't know. They don't know. So an experiment is now being run to see just how big a company growing, how fast is really possible.
Jim Womack (15m 39s):
And the data from the last year or two is that you can't go as fast and you're not likely to teach as effectively as you would hope. So that's where they are. Hey, by the way, they're still here as the world's largest car company. I have to think. They just are delighted every time they hear Dr. Pak at Volkswagen say that he's gonna pass them to become the world's largest car company because that is an objective. Let me just be very clear that as of no use to any customer, no customer cares whether they're buying a car from the world's largest car company. So how does management think they're solving customer problems by embracing that as their objective? It's just arrogance and hubris.
Jim Womack (16m 21s):
And then hubris if you're lucky, leads to or lucky. I mean, you know, if you've got a brain in your head, I guess if you don't have any willingness to do hune, well hubris just to dohan will hear bristas takes you right over the falls.
Mark Graban (16m 35s):
So Jim, one other question I wanted to ask, and it's a question that has come in from a number of people via the web is to, to maybe practice some SAI reflection about the term lean. And on page 227 of Gemba Walks, you reflect a bit on the term lean, which of course came out of the work from your MIT research team. So some 20 years later. I'm curious to hear your thoughts on the word and what it represents.
Jim Womack (17m 1s):
Well look, the word's always been problematic. What word do you pick? The word was a label. And labels are always well superficial. We came up with that term in '87 when we needed a name for what we were seeing. By the way, just aside on the MIT project, we did something that most academics don't do. Instead of doing a survey of development in manufacturing of, I'm sorry, performance in manufacturing, product development, supplier management, and then just take the data that comes back and spend endless hours regressing it against everything and doing all kinds of statistical manipulations, we decided from the outset that we would go out and verify every number by walking the gimlet.
Jim Womack (17m 48s):
And so, so that gave us a enormously powerful set of insights about what was really going on that we were benchmarking performance, but then we were trying to trace it back to methods, techniques, what managers and employees were doing. So we had set out to look at every car and light truck assembly plant in the world. We never got all of them, but we got most of them. And John Krafcik and John Paul McDuffy and others were out verifying every number in every plant. So by '87 and certainly by '88, we had some very compelling evidence that Toyota and Honda, who were typically the star performers, Mazda as well, did well on our surveys, really were in a different place from the American and European companies in terms of their ability to get products to market quickly and accurately in terms of their ability to make things with low hours of effort, with low defects, with low inventories, with low CapEx.
Jim Womack (18m 45s):
And so we needed a name for it. And this whole situation as of the mid eighties was a Japan versus the world thing, which we thought was just a complete misunderstanding of what was going on. It was not about Japan, it was about a different management system, which really only Toyota and Honda had fully mastered in Toyota in Mazda was copying. So what to call this system, I mean, you know, you look colored Odom for Tachi or na nomism for Kenya. Naura, the guy who invented the chief engineering system, Toyota, you're gonna call it Toyota when Honda does it, Mazda does it, you're gonna call it Toyota for Toyota and the family, all of those labels just seemed wrong and yet we needed to call it something.
Jim Womack (19m 32s):
So the term mass production was out there. I wish we had probably used the term modern production or modern management, but we weren't quite into post-modern at that point. We said this is a contrast on every dimension. It's just different. So what do we call it? And we had a session in the office at MIT and the big boiler room where I had all the young people who had come out of industry, came back to MIT to get some additional credentials. And there were probably a dozen of us sitting there, and I don't even remember who all John Paul Duffy and Krak and Jose Ferro from Brazil, and Richard Lambing from the UK and Toshi Ishii from Japan and all of the young people, these were all kind of late twenties, maybe early thirties, but probably late twenties, young people.
Jim Womack (20m 15s):
Tric wasn't even that old. We're sitting there one afternoon saying, we gotta have a name for this thing. What are we gonna call it? Because we were getting ready to do some publishing and so what we do, so it was agreed we should label it for what it did. So I remember holding the chalk at the whiteboard, you don't hold chalk at a whiteboard. I had my marker, my marker at the whiteboard and said, okay, so it uses less time, right? Less time to go from concept to launch, less time to go from raw material to customer. And it uses less effort, right? Less hours of engineering to do product development, less hours of human effort in the factory. And there're fewer suppliers, right?
Jim Womack (20m 55s):
Fewer suppliers and there're fewer injuries. Well actually were, and there's less inventory. Well you know, there was. And there're fewer defects, less defects. And by the way, you can make money at lower volume because of the ability to flexibly change over from one product to another, less, less, less, less, less. And so then John, I got his moment of fame, John Krafcik, by saying, I've got it, let's call it lean. So I remember writing on the blackboard, l e a n. And of course the problem is that lean rhymes with mean lean rhymes with mean, now lean also rhymes with green.
Jim Womack (21m 36s):
So hey, I don't know, maybe there's something there. But the biggest problem with the term is it, it's about less. And of course what we meant was you create more value was less of everything and the more value sort of got lost. And that's a great shame. So what's the word we should have used that in one word captures more value, more customer problems, solved happier customers, better experience, work experience for the people who are creating the value, and then less so it more value, better experience, less of everything.
Jim Womack (22m 17s):
Don't know what that word is, didn't know it then don't know it now. And so we settled on lean and here we are.
Mark Graban (22m 23s):
One other question, it's also came in from people over the web talking about terms and and methods. Curious to hear what your thoughts are on the packaging of Lean and Six Sigma or Lean Sigma, if you will.
Jim Womack (22m 39s):
Well, first off the problem course is, is training companies, organizations spend a tremendous amount of money on training. Most advanced countries spend a tremendous amount of money on education. And I'm skeptical that an awful lot of it makes any difference because simply training people to do something when it's disconnected from what managers are going to ask 'em to do, or what the work the fundamental work requires 'em to do is not likely to be very effective. So any program, whether you want call it Lean Sigma or Sigma Lean or you know, how about Eight Sigma and really lean Nine Sigma and and Hyper, you know, perfectly lean zero, Muda, you know, whatever you want to call it.
Jim Womack (23m 24s):
I'm just got my problems right there when you've got a program and a label. But then on the other side, you know all of these ways of thinking, these isms that are out there that you get from total productive maintenance and you get from Six Sigma and you get from Lean and you could think of lots more. Basically everybody who's out here trying to do this is trying to figure out how to create the perfect process that creates perfect value with the least possible resources. Okay? So you're trying to recreate perfect value with the least resources. And these are all different starting points on how to do that, that the Six Sigma folks started with variation.
Jim Womack (24m 8s):
In other words, with process capability. Okay, now when you look at what people are really doing with their DMAIC projects, well it's all kinds of stuff, much of which often just looks not different from Lean. When you look at TPM, which started out as a machine equipment availability exercise, but then they changed the name to total productive maintenance to try to get your head off of maintenance and into productive. And you look at the good people in the TPM training world and they're telling you to look at the whole picture. The lean guys were trying to figure out how to basically take the wasted steps out by reorganizing things and process sequence and how to make every step capable and available and how to make it adequate.
Jim Womack (24m 51s):
And there's another interesting discussion with the theory of constraints, folks. Hey, we need adequacy. We don't need bottlenecks. So therefore they're part of the conversation as well. You put it all together and in some big picture way, everybody in the process improvement, continuous improvement area is trying to do the same thing. Little bit different focus, little bit different emphasis on this versus that. And so therefore the conflicts between these I think are often basically driven by consultants whose best form of advertising is to disk, whoever came before. And you really do see an awful lot of negative advertising in the consulting world that long ago ceased to shock me, but I still think it's sad.
Jim Womack (25m 35s):
So a lot of the supposed conflict between let's say Lean and Six Sigma is just completely imaginary and non-existent. And it's just driven by consultants who feel more comfortable with one approach or another and it's a big distraction. So I always say, Hey look, we're all trying to create the process which provides perfect value with zero resources, let us cheerfully proceed together. We're going to use slightly different methods to get started and to do this and that and the other. But much of the supposed conflict here is just really made up. But having said all that, no amount of training is gonna make much difference if you don't change the way managers behave and the way the work is organized.
Jim Womack (26m 21s):
So therefore it's a bigger problem way beyond any conflicts within the different isms amongst the process approvers.
Mark Graban (26m 30s):
Well Jim, thanks for taking your time to share thoughts on General Motors ,Toyota, the word lean, lean six sigma. I wanna thank you and as we'll get more used to saying Jim Womack, senior advisor to the the Lean Enterprise Institute. Thank you.
Jim Womack (26m 45s):
Hey, look, Mark, it's, it's been fun and it's not over yet that this is really a long, long thing that in the book I have a lean walk through history exercise that goes all the way back to the Venetian arsenal where they literally pioneered flow production by floating the boats down an assembly line. But good grief, what were the Chinese up to when they built the treasure ships in 1421? What were the Romans up to with all those gazillion identical wine jugs and the boats that sunk in the Mediterranean? What were the Greeks up to? This is a long history of human beings trying to think creatively about process and trying to improve process. We've been at it for a couple thousand years.
Jim Womack (27m 25s):
We've been at it really seriously for a century because I think Henry Ford was the first really systematic process, lean thinker. I think a lot more people have got their head in the game now, but it's a big game and there's just an enormous amount to do. So the notion that we're gonna be through this year, next or the year after is laughable that we're ever gonna be through at all. Though I think is to look at it the wrong way that I think this journey really does have a destination. The fact that none of us personally are gonna get there is one thing, but that doesn't mean there still isn't a destination. And look, I think we're making steady stumbling progress along the way.
Jim Womack (28m 7s):
And my role has been to be the outsider cuz I'm always an outsider. I'm, I'm never an insider. The guy who's just out there taking a walk, pointing out a different way to think about reality or maybe just a way to think about reality here, to see reality. And so therefore it's been a great journey for me. I don't feel I'm nearly finished, but even when I am finished, well then there are just more people who need to get on the journey and gradually one of these eons we might even get there, but it'll be a long time. So let's keep on keeping on.
Mark Graban (28m 39s):
Well, thanks for supporting your fellow stumbler, like myself and the others that are listening, Jim.
Jim Womack (28m 45s):
Okay, great. Thank you.
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