GA 208 | How to Define Lean, Success, and Strategy with Jon Miller and Michael Ballé

So I think the lean strategy starts again. It's not an ending, it's a starting point. The starting point is a one time customer, lifelong customer. You don't want to lose a customer to an alternative.

If someone asked you whether lean could be used as a strategy for innovation and growth, what would you say? Well, my two guests discuss this very topic on today's show. Their names are John Miller, who you heard in last week's episode, and Michael Ballet, who we've had on the show back in episode 183. Now, I will say today's episode is a little longer than normal, but man, oh man, I highly encourage you to listen to the whole thing. Since John and Michael covered all sorts of ground, including why no one seems to be able to really define lean, how lean can indeed be used as a strategy. And believe it or not, we somehow managed to ponder whether artificial intelligence will be able to do SMED one day. Show notes for this episode, which will include links to everything we discuss, can be found over@gembapodcast.com just look for episode 208. And before we get to the show, I wanted to mention that Gemba Academy's newest course, focused on the Toyota Kata, has been released. So if you're already a subscriber, be sure to check this course out. And if you're not a subscriber, you can still check it out with a fully functional trial over@gembaacademy.com now let's get to the show. All right, well, John and Michael, welcome both of you back to the show. How's it going, guys?

Great.

Yeah, Pretty good.

All right, well, good stuff. So, Michael, where are you joining us from this morning? Well, or this afternoon, I should say.

For you, my desk in Paris.

Nice. All right.

And John, it's snowing, believe it or not, snowing.

Oh, nice.

Yes.

Okay, John.

I'm on the west coast of the US and it's not snowing. Cherries are blooming outside, so it's getting to be spring.

Yeah, Alison's promoted way better.

All right, good stuff, guys. Well, we have an interesting topic this morning, so we're going to kind of talk about lean and strategy and all things in between. So we're going to tag team this interview. We don't know exactly how it's going to go, and I'm just going to throw out some questions and you both can chime in as you see fit. So this first question is a big one. The first two are big ones. In fact, the first one is, how do you define strategy. So, Michael, do you want to take a stab first?

Yeah. It's an interesting point. My author always keeps asking the question, what do you want to be when you grow up? And then that begs the question, what is your path to become that? To me, strategy really is about defining success and then clarifying an approach of how to get there.

Okay. John?

Yeah. I think one thing that was very interesting to me or eye opening to me early in my career was when I forget who it was. Somebody who was coaching me, somebody who was mentoring me, said strategy is about the choices you don't make or the things you decide not to do. And that might have been just directed at me because I was trying to do too much and too much youthful energy. But that's stuck with me. Where strategy is what Michael said, I think. But being able to figure out what's important or what you're going to do and what you're not going to do, sort of make the tough calls and say, nope, that stuff I don't have time for resources for. So that might be a little bit of a different take on it. But that's personally what it means to me when I hear that word.

I completely agree. But the biggest problem I have with strategy, I think, is with the first part, which is defining success, is that people assume success is this or that. And when the world changes, as it does now, well, that's really that clear. I mean, what success actually is, what we were after, what you're reaching for is really. That is rarely that clear.

So what is success from a operational perspective? How would we go about defining success?

Well, I don't think it's operational. I think that's down to you. Precisely. That's what having a strategy is.

Yeah. Success, I think it's highly contextual. Depends on what you're talking about. You know, success for. For a person in their life, for their family, for a CEO, for their company, for a particular. Getting out of a particular situation. You know, I think it's. It's what you need to. To do, be in a better place within whatever time horizon you've given yourself, whether it's today or this year or the next 10 years.

See, here's an interesting one. We know that people in their personal lives, they either have success with money, success with their career recognition, success with doing something they really care about, or success with their lifetime. What's interesting is very few people have everything. And when you think about it, it's not really surprising because you commit to one. For instance, if I Want to be rich and famous, then it's going to take a. Do it on something that I like and it's going to take a toll on the lifestyle, if you see what I mean, because you're piling up constraints. What we see is only very few guys who are very lucky, very few people who are lucky and get three. Most people commit to one and then manage the second and then complain that they can't run the third. If you see what I mean. Again, defining success and then defining for a way to reach out for this success. I think to me, that's what strategy means.

Mm.

Where does. Like, if you pulled in Simon Sinek into this conversation, he'd want to talk about your why. So where does that fit in with strategy and perhaps success?

Precisely why do you do this? You know, what are you after? You know.

All right, so that was an easy question to get going.

What about, look, there's a business development strategy. We just want a new market and reduce costs.

Yeah.

There's a financial strategy. We want to make a packet when we turn around the company and sell it. There's an innovation strategy. We want to prove that this technology we have is going to take over the world.

Let's work.

Well strategy, which the lean CEOs I know tend to go for. It's like, I want to run this thing. Well, these are very different definitions of success.

Yeah. Okay, so what about this thing called Lean? How do each of you define lean?

Oh, wow. I was just reading an academic article that was saying lean is, hang on in there, a polymorphic term because nobody can ever define lean. So polymorphic. Can you believe that?

Polymorphic. There's multiple shapes and pieces to it. Yeah, I think that's a big word for an accurate description that says that it's not been defined well and it hasn't been defined in a way that's satisfactory. I think that's something I've felt and have stated for a long time. And so again, what definition we use kind of depends on who's asking, somebody's asking, who's really thoughtful and really wants a nuanced answer. You give them that if they just want to know, I've never heard of this, tell me what it is, then you might give them sort of an elementary school level answer where it goes. Well, it's kind of based on tps. It's got a longer history. You go into that description. But yeah, I don't know that I have a single definition I'm comfortable giving as kind of the broad general audience Top to bottom answer, but not to avoid the question, but I think I'd answer it based on who's asking, to be honest.

Well, to me Lean is pretty clear personally because I think Toyota came up with a new paradigm of doing business which doesn't happen every day. Lean is about trying to figure out what Toyota has done and how it applies outside of Toyota and outside of automotive. So for me personally, it's all about trying to figure out which way it does and does it apply outside. In terms of answering that question, where I got to is that Lean would be a learning system to increase market share sustainably and profitably by turning one time customer into lifelong customers. This has a lot of strategic consequences because first means a wider range, more frequent product renewal, higher quality of course, and reasonable prices. And then you start unraveling this and there are some features to it. For instance, the way to do this, you create a culture of autonomy problem solving by teaching people to recognize waste both to customers and yourself. And you tirelessly try stuff to find innovative ways of eliminating both the small waste of operations and the big waste in the system, which is the helicopter thinking we talk about in the book. So I think I have, I'm pretty clear on what Lean means to me and I have no idea whether that would be a definition.

John actually wrote an interesting blog series. The last one just actually went up this morning and he and I did a podcast as well, talking about kind of a more of a. I don't know if it's controversial, but it was an eye catching title to the series which Lean is all about people or is it? And you know, John posed the, the, the idea that, you know, people obviously is a very important aspect to it, but kind of thinking of Lean as a three legged stool with, with, with people being one leg. What was it? Visibility being another one. And what was the third one, John? I should know.

That's flow and flow size reduction accelerating value creation.

Yeah, the reason, the reason I think Lean is about people is not the reason most people think, but one. In the very one of the rare interviews we had from IG Toyota, the guy who created the Toyota we know, he was describing the company in terms of. Well, there was this older guy that brought me tps, but then there was this nemoto guy who brought me tqm and there was this, I can't think his name is Hasegawa. The name escapes me, who brought me the chief engineering system. So there was a clear version that individuals contribute to what the company is in the end. So whether this is an individual contribution because some guy is having a very small kaizen idea that contributes to taking some of the friction out, or whether there's some guy who has immense leadership and contributes something massive like which he contributing the prize. Do you see what I mean? At the end of the day, it is to be about people because it's a sum of individual contributions and it is about making all these people work together.

Yeah, that's interesting. It's human powered. But I think my argument in the blog post I wrote was yes, it's probably at least one leg, it's human power, but there's another leg which you can't ignore, which is that success and Lean demands that you conform your value creation to the laws of the universe, which suggests that large batches are inherently longer, more prone to slow quality feedback loops. And yes, humans can figure that out, but that exists separate from the human brain. That exists. That would have been the case if apes and smart rats were trying to build supply chains millions of years ago, that, that would have still been a constraining factor. So it's all about people, but it's not all about any one thing. It's people generated, but it's. Let's say Lean is going to end up looking and feeling a certain way because detecting problems and having some kind of abnormality management system, whether it's by vision or smell or something else, is sort of a key necessity. And I think that is something humans have to figure out. So it's more academic than anything. I think in the end, we're humans and we're going to be the ones that are driving this for a little while at least.

No argument there. One of the things that I'm always astonished by the Toyota people I meet is how much more they know about the processes themselves. So there's some physical knowledge there. But I still think that, as Aartburn points out, business is competitive and this is one group of people competing against another group of people ultimately. And yeah, we have all the bells and toys and big machines and all these things, but again, this is defined and bought and made by people, for people. So I completely agree with you that again, this is probably closer to it, which is how cleverly people deal with a real environment as opposed to the myth and fictions and opinions they have in their minds. If we're going down that way.

Yeah, I mean, it's not. I'm not supposed to be talking as a contributor here, but I can't help it. So. So I almost, I almost see it as Maybe, you know, you could have an organization with a smaller company with 40 people. These 40 people come to work, they love each other. They, they, they highly engaged, you know, really focused on the customer, really love their customer, great in relationships and all the rest of it. But unfortunately, they are absolutely clueless when it comes to anything related to, say, operational excellence. So they can't even spell 5s right. Or so they're just unconsciously incompetent. So I think perhaps the argument is the people is very important and if they don't all kind of get along and they aren't engaged, sure, that's going to be a challenge. But they do have to be at least introduced to, you know, to some of these concepts that we, that we, that we teach. Right. Whether it's flow or, or, or anything to, to make sure that you have, that it's not just one strong leg of this, of a stool. I think that's, I think we're all saying the same thing.

But I'm always struck by the opposite, Ron. Actually, I'm always struck by, you know, you visit Toyota plants through the, through the world and you see the same planet at different times of its history, and it's fascinating to see the impact people have on it when it's up and down and doing strange things or vital, less vital. And you can definitely see it. I really think it's the, it's the top guys. I really think it's who's the president and their personality that has an impact.

So.

Yeah, yes, yes. There is an interaction between the materiality of it, I think. You know what, John? It's funny. This is what it, you know, God, years ago, years ago. This is when my PhD dissertation was.

About, what do you know.

Yeah.

The mental model is an interaction with materiality and other people. The fact that we don't think in isolation. Back to what you were saying, I completely agree. We don't think out of context ever. We always think in context. No matter how hard people try to show their thinking as universal, it's always in context.

Yeah. Well, as long as we're thinking right, as they say, TPS a thinking production system. Right.

No, absolutely. One thing that is very clear is even a Toyota plant or a Toyota supply plant without the sensei input, it's not the same. Without somebody who could say, go further, go deeper. Why you're putting that energy in. And as John was saying, there's a lot of abnormality control, but there's not only abnormality control, and you can definitely recognize a plant that has gone into the routine of abnormality, control and a plant that is moving because they want something and they want the new model, they're fighting for something.

I like to go back to what Michael was saying a few minutes ago and follow up on the definition, I think of lean and lean strategy and sort of pose a question. You were saying it's about basically satisfying customers and growing the business, growing revenue, keeping customers sustainably for the long term. I'm interested, how does that work when by nature of the business or the enterprise that you're in, it is either impossible or difficult or sort of awkward to grow your business, your top line, in a direct way through lean. What I'm referring to specifically is for healthcare, you may, for hospital organizations, may be limited by the community you serve. So if you're a children's hospital in a major metropolitan area, there's a finite number of children, you're not necessarily wanting to have more sick children, you want to serve as many people as possible, but you can't necessarily go out and capture more market share. Maybe you can, maybe you can buy another hospital, manage another.

Again, I think that brings us back to the first question. How do you define success and how open minded you are about it? And yeah, it might not be into revenue turnover, but I was thinking generally in business. But there's again, how do you define success?

Yeah, good point.

I think this is one of the most unlooked. All the guys have debates about strategy. They assume success is obvious. Success is never obvious.

So how does lean strategy help people ask that question. So for example, in a government organization, if they're pursuing lean, how does the lean strategy help that leadership team? Ask the question of what is really important. Let's use it to cut costs.

Whatever you do, there's a competitive, might not be a competitor, it could be an alternative, like no alternative. In the States we have rumors of people who we hear here in Europe of people who are up in the sticks with their guns and their food and don't want any government intervention. So there's always an alternative. So I think the lean strategy starts again. It's not an ending, it's a starting point. The starting point is a one time customer, lifelong customer. You don't want to lose a customer to an alternative. Once you've decided that in your context, it brings you pretty quickly to some very concrete things. If the customer is captive, as in government, you don't want to burden customers with stupidity. For instance, it could be another way to define success, which is the guys I know in government are trying to do what they have. The Lean spirit is you want to reduce the total cost of using government on customers, reduce the mood air for customers. I was writing this recently. It's like if you have a disruptive idea of lean is first you want to take away safety problems for both customers and people, safety in terms of safety of using the product. Then you want to take away non quality costs inside of each of your processes. Then you absolutely want flexibility to have better use of your capital. And at the end, yes, you do want a better organization to have more productivity or your labor. But it's only 10% of your problem. You have some much, much bigger problems of your cost base in terms of.

Strategically good stuff, guys. All right, let's move into the next section here. So we talk about Lean kind of traditionally for some it's about reducing costs. And then Eric Reese and the lean startup movement kind of introduced different topics. But what about Lean strategy for growth?

If we go back to this fascination I have with Toyota, what fascinates me is not so much Toyota now is how this bankruptcy local car company became the largest market share with the profitability of a boutique company like BMW in a dominated market. That is astonishing growth in a dominating market, in a completely saturated and dominated market. And I think that's what I find so extraordinary about it. And sure, I mean anybody with sincere intent can use OPEX tools and they will have improvement. But in order to have real top line and bottom line results, you need to have some idea what you're going to do with the gains. You need to have some strategic vision and saying, well, if we improve this cell, if we improve the flexibility here, if we do this and that, I'm going to use this, I'm going to put it here, I'm going to close the warehouse, I'm going to deliver more, I'm going to give cost back to the customers. Do you see what I mean? Yeah, I know what I'm going to do with the gains, which is why I can bring people with me because I say, guys, we need this. For instance, recently I heard ACC Toyota said this about the Kentucky plant saying guys, we need more productivity because I need it for the connectivity experiment we're running.

So how does lean strategy open up new markets, new services, assuming that capacity is freed up?

Well, this one is a strange one. In the book the Lean Strategy at the first we talk about, we talk about changing the story. We change the story and all the innovations we're seeing in the past 20 years, somebody changed the story of their industry and they've changed themselves, they changed the company, they've changed the industry. And this happens through hindsight. This whole notion of opening new market, new services. We see it as the old fashioned 20th century militaristic thinking of it's a very colonial approach to the world, which is like McDonald's or Coca Cola. We have the secret recipe, we have the technology and we're going to flog it to the natives. I really don't think the markets work like this anymore. I think the world is flat, it's saturated. I think China is the big story and I think we have a competitor everywhere. The real strategic question we're asking ourselves is where are our customers going? What do our competitors offer as alternative or competing alternatives in all the technologies that might make them switch? When you ask yourself that question, well, you have some very clear challenges to face. You try to offer customers what it is they're looking for without having to look outside. For instance, I'm with a big company has currently a problem in aerospace. They have a very, very aging technology. There's a solid state technology coming across, but it's not yet clear whether it completely works or not or at what cost. It could be disruptive, but it's not there. But these guys have been treating it as a monopoly, as a rent, treating their customers awfully, having incredibly bad quality issues. So they make it interesting to explore the solid state of weight. Do you see what I mean? If these guys were tops, if these guys were tops. We're constantly giving back value to customers. Great quality, great service, trying to work on price as one would do with lean. Well, the customer has other problems than trying to go into a dicey technology. You know, they might look at something else because they have a long list of problems. So we're always competitive. And I don't think it's a question of new markets and so forth. It's a question of where you are asking yourself from the where is the customer going? What are they after and what alternatives are they looking at?

Yeah, what I think is interesting. What I think is interesting is Michael, when you talk about Toyota has used this as a used TPS and lean and continuous improvement, whatever you want to call it, as a long term growth enabler. Back in the 50s, it was more a survival, it was a method, you want to call it that, it was a necessity. They just needed it to stay in business and they needed it to stabilize quality to be viable in the US market. Then they needed to be cost competitive and then Sort of afterwards it became more about.

I don't know, did it.

Ever become about Toyota's ability to respond to customers like what you said, sort of the non colonialist approach, where it's not like, here's the product, now buy it, here's what you need. So we will quickly, in an agile fashion, respond and turn around and deliver what you need. Car development, automotive developments are kind of long cycles anyway. But have they made that? Have they really made that?

John, one of the difficulties I have is working with CEOs, I see this a bit differently because my main problem is development, not production. I see the factory as the sort of testing ground, as a testing machine for the development. And everything I learn in production is whatever cost reduction I can have in production is going to be 10% of the total cost reduction, because it's all in engineering. And I've seen this and we write about this. And when I was Studying for my PhD, my dad's first experiments with Toyota as a supplier, which is basically, Toyota came in on one cell and after two years of work, they came up with a 30% productivity improvement. Is that good or is that bad? Well, it's 30% improvement on 10% labor costs. This is 3% total productivity in two years. This is what you get from any old method, Taylorism included. But what was surprising is that we suddenly realized that four years later at the product renewal, they came up with a 30% total cost reduction, which they split with the supplier. Now we thought, wow, when you go to visit the Toyota City Museum, you see all these products that you see the learning curve where they produce the product, the size, everything. The big story is with products, the big story is Prius and Lexus. That's the big story. Now the interesting thing is to make this big story work, you have to work in production. To actually make this big story work. There is no distinction between strategy and execution. I see that question very differently because to me, the big story and working with CEOs, our big story is always the product. Always. Because our strategy, which is words, comes into reality, as you said earlier, John, into materiality, into people's hands, as either products or services. That's it, the product lineup. This is where the game is.

Yeah, I agree, I agree with you. What I'm just wondering was whether, whether or not speed to market has played a significant role for Toyota and to what degree to other companies that are trying to use Lean as a growth strategy, or whether it's more like you said, being able to learn in production, learn and Learn through, learn through design and take the cost out that way in a more.

We have cases in the book. We have, for instance, we actually put three pages of the book into the 11 generations of Corolla which I found fun. So we have the Corolla story and then we have Lexus and priors. So we have both cases. We have Toyota being to it and saying like we're going to come with a Corolla every four years and every four years it needs to be somewhat different. But there's a lot of learning from the factory that is re injected in the design and then occasionally this is not just a response, occasionally they're, let's call it optimistic paranoia. Makes them come up with something radical like the Prius and the Lexus. They do both.

Yeah, very good.

Michael, this might be more for you. We've been talking about innovation here a little bit, but can you, aside from Toyota, you're not allowed to use Toyota. Can you give any other examples? Even if it's clients that you work with, you don't have to say their names. Larger companies that use Lean and innovate. So as we spend a lot of time talking about innovation, so can you give us some non Toyota examples of innovation?

There is a small mom and pop local company called Amazon that has adopted a lean strategy with Avengers. I'm not saying it's Toyota because different the influence with a vengeance. Clearly when you read Jeff Bezos letters to shareholders, his strategy is customer satisfaction and that's it. It's an obsession. I'm very fortunate because I know the guy who built this supply chain for him, who he recruited because the guy was a lean crazy. He was a lean maven. He learned with Shiji jutsu in Toyota City and he'd done it in GE and he built the Amazon supply chain. So I will not compare AMAZ to Toyota. They have a lot of differences but the inspiration is absolutely the same. And one of the first things they did was add on and they have a just in time system. So I think Amazon is pretty spectacular. The other company I've heard about, which I don't know firsthand, which is Zara. So there was a recent BCG article saying that we should look at the 2% company, the 2% of the companies that outperform everything every time and they were mentioning Toyota, Amazon and Zara. And it's amazing that the lean world can't get, you know, doesn't have the perspective to realize that we don't have to make mini Toyota. We have to see People who are inspired by the same ideals.

What do you think? And either when you guys can jump on, what's the difference between if you talked with leaders of Toyota and leaders of Amazon, would they answer? How would they answer the question what is success?

Well, the success that I understand in Amazon is clearly defined by the. They want availability, they have an infinite shelf, they want delivery, so it has to be on your home quickly. And they want to be best buying the category.

They want to be what?

Best buy in the category, Best price in the category. So their success is they're clearly stealing the business from everything. It's very disruptive, very competitive and they have a clear way to go about it. They have a clear strategy about this. I don't hear anything explicit about the respect for people angle. I know they have debates internally, it's not ignored, but it's not as the focus is so much on respect for customers completely all the time. I hear less about it, so wish I hear a lot more of it in Toyota itself.

Yeah, I agree. What fascinates me about Amazon is the similarities and differences. Like you said, the similarities, they're all about ever lower cost and ever faster delivery. They can give you delivery in a day. What does that mean? That means they have to have warehouses close to the major cities, which is a very expensive proposition. But they're doing that and talking about even drone deliveries and whatever it takes for them to get you the product quickly at the lowest possible price. And they're willing to. Jeff Bezos is willing to not be the most profitable quarter to quarter company. In order to do that, he'll keep reinvesting and making those things a reality. And by doing that, they're shutting out the competition. Like the other retailers can't afford to spend to build the warehouses or build the infrastructure to be that fast because their stock prices would get killed. Amazon has educated Wall street into understanding that they're going to grow faster for the long term, but they're going to be less profitable. The Walmarts of the world are on the drug. They're on the cocaine of every quarter I give you these returns, otherwise you hit my stock price in the face. Amazon doesn't have to do that. They're playing a different game than everybody else because they've trained everybody on Wall street to tolerate that. And it's kind of sneaky, it's kind of snuck up on everybody. And in that sense they're also similar to Toyota and that Toyota doesn't.

They're very. Look, look exactly what it's just very similar to Toyota. And Toyota analysts always said Toyota doesn't have a strategy. Toyota this, Toyota that, they're doing exactly the same thing. They just don't want to be dependent on bankers.

Yeah, yeah. And one difference, another difference I think is that Amazon is probably one of the handful of companies and probably in the last 10 years. This is a newer phenomenon. They're really clever about using customer data. I don't think that yes. Is as clever. For one thing, Toyota doesn't have as many direct customers and direct consumers as Amazon does. But Amazon knows what we buy month to month, what we look at, what we search in their search engine, what movies we watch. They know a lot about us and we're happy to give that to them. Then there's the. Whatever the device is, the Alexa.

Yeah, she's always listening.

Exactly. So that is a much different. So in terms of customer intimacy, they do that to an unbelievable level, historically unthinkable level. And Toyota can't match that, or at least they're not structured to get close to this.

One thing that fascinated me with Toyota is that clearly at some point IO Toyota clicked. And you hear it when he says that when he realized that the thing with the problem with Tesla was not Tesla as an electric car, they could deal with that, they knew how to deal with it, but it was the over the air upgrades, the WI fi, the connected car. And the result of he clicked is a few years later you have this massive investment in the Stanford Research center about the connectivity. Again, this is a paranoid company that disrupted first the global market with hybrid and energy performance. And they got, they got, they got disrupted with connectivity. But, but they're fighting back, but we'll see if they succeed or not. But they're reacting.

Michael, in the book you talk about the four D's and four F's. Can you talk a little bit about that, maybe shifting from one to the other?

Well, you know, it's something. Strangely enough, it all came from a discussion in a Toyota plant in Taiwan where the guys didn't want to hear anything about Lean. They said we want to do tps, we don't like Lean and say what it's like. And for once we weren't stupid. Rather than just go our separate ways, we actually went into it. We started thinking about it, talking about it, and this is a discussion that took months later through email. And here's the thing. Whenever you have a decision to make, doesn't make sense that you draw the problem on paper, you figure it out and then you draw the options. And I used to work with rational choice theory and all these things. You draw the options, you make a decision and then you look at the people around you and you drive the decision through. You find the resource and twist the arms and drive the decision through and then reality fights back. Sometimes it works out, a lot of times something else happens. So you spend a lot of time tap dancing and dealing with the consequences as they are. Would you agree that's a fair estimate of the way we work? Yes. No. Yeah, it sounds sensible because we do this every time. And so in lean means that you start with a value stream mapping and then you break down, you look at the key choices and then you go in the operations that please make these changes. You have an action plan and then life happens. And then you try to explain why things didn't work out the way you want it. What happens? Events only are discovered. That lean thinking starts with the gimbal, it starts with the reality and it starts with, hey, let's solve all problems we can see right now. Then we have a list of obvious problems. If only the seven ways to start somewhere. But let's solve real problems right now. As you do this, you figure out that some problems are just silly problems and they go away because okay, you fixed it. But some problems keep coming back because they're deeper problems. So you find what are your deeper problems, which brings you to the point that you've got to face them. And this is a very interesting moment because you realize that everybody's trying to get around them and not face them. And certainly Amazon is a very good example of facing problems. And when something doesn't work, they just stop it. Which then you get to frame the problem. Frame the problem is express it in a way that everybody can understand. I have a sad example sadly, but it's a recent exactly that I have it like of a frame problem is the Toyota guys in Australia. GM left, Ford left. And Toyota said, the supplier said, sorry, we can't do this. So Toyota decided to close the plant. It was a very traumatic moment. And the guys got together and they framed their problem in a way. They said last car, best global car. And I have to hand it to them because they fought for every last car they thought they would have never activation people would just forget it. And I think the president himself said yes, yes, their last car is the best global car and gonna finish its life in the Toyota museum in Toyota City. They fought for it. You see what I mean? So this is a frame last car, best Global car. This tells everybody in the company what you're trying to do. And once you have a frame, the good thing about it is that now you can form solutions. You don't have to tell everybody what to do. You orient. It's a radical change. You orient where they look. You don't try to control their behavior. And spontaneously people will come up with stuff and initiative and ideas so that you will build the solution with them, not to them. Does that make sense? So we have the four days on the one hand, which is define, decide, drive, deal, and we have the 4F on the other, which is say we find our problems, we face them, we frame them in a way everybody understands, so we can form solutions with everybody.

Yeah. It sounds like if Marcus Aurelius were alive today and he became a lean thinker and wanted to practice stoicism, this is a very stoic way of approaching life.

Really nice compliment. Thank you.

Yeah, yeah.

What I love about the shift from the 4d to the 4f, I think it really captures, among other things, it captures the difference. You can say the difference, or let's say how people do Hoshin planning or strategy, deployment, whatever you want to call it, Hoshin karma, the right way and the wrong way to do it. A lot of people look at that as, oh, here's my X matrix. I'm going to apply the four Ds and we're going to drive it through the organization versus using it as a collaborative fine face frame form with the catch ball. And we're getting people on board. I think that really it's a lovely way to explain the difference in when it's working and when it's not. And I still. My experience over the years and now it's changing more now, I think more awareness. But in the past it was always disappointing because people see it as a way to. People see that people used to see Hoshin as a machine to drive the 4D behavior versus the way policy.

Deployment.

Yeah, yeah, exactly. Deployment, which is very sort of. You deploy weapons, you deploy troops, you deploy soldiers in a top down, command and control way versus manage.

But it has implications for the way you do lean because again, suddenly you find yourself, rather than roll out the program, you spill over, somebody does something good and Yokota and you bring somebody else and say, please be inspired. It's like Lena's movement. We don't want mini Toyotas. We want people inspired by Toyota that do.

Yeah, good stuff, good stuff. So, yeah, you're like the new Marcus Aurelius. Michael. There you go. Hey, so we've kind of touched on this a little bit, but I do want to ask it because I had it in my notes here and I think it's, it's worth a. At least a short discussion. As we all know, many companies start Lean really as an OPEX strategy. Right or wrong. They do. They focus on lead times, quality, try to reduce costs and so forth, really with the idea of satisfying their customers. So nothing wrong with that, but it seems like you can't go after growth until you have stability. So how do companies use a Lean strategy? Is it like, is it a phase 1 OPEX and stability thing, then growth, or is it both at once? Do you follow what I'm saying?

Yeah, it's very puzzling to me because I learned Lean from my father, who was given permission to Lean by Noel Gutta at the time of Valeo, who was one of the most disruptive people I've ever met. When my dad became CEO again, his aim was to disrupt the market. Clearly there was no doubt in his mind. And these two things created this huge supply to value in forest. Yeah, because before that, these companies were clearly nothing like that with the global players they've become. And then the other guy who taught me Lean was Orif humor, he worked with artburn. And again, clearly the intention to disrupt was there from the start. So. And the same thing, I currently, I'm currently I have fun. I work with a guy who founded a company that is selling cars over the Internet. So the guys I'm surrounded with, I don't know anybody who's using it as an OPEC strategy. It's hard for me to say.

I bet you've interacted with Lean people, Michael, at conferences and so forth. Do you disagree that.

Yes, yes, that happens. Interact is a term.

Yeah.

Okay. We're just not talking about the same thing. I happen to think that things are like, you know, cognitive shoots in your mind. You know, you go down one path, you ski down one path and you go to a valley. I happen to think that when you're in the valley of opex, there's actually you have to climb back out to get into the valley of disruptive Lean. There's no way around the mountain, so. But, but that's probably me. I don't think, I don't think in reality, everything's so clear. I've worked with some people who are not CEOs and who do it as an OPEX way, because we have a turnaround situation, we have a big problem, and sooner or later you Hit that wall, you know, what do you do with the games? At the end of the day, it's pretty, I mean, come on, rolling. It's pretty clear. I mean, it always works. We have gains, so we liberate capacity. So what do you do with the gains? Do you fire the people or do you find new products? It's as brutal as that. I don't want to be part of something that uses people's minds to fire them. This is ridiculous. When I get involved with something, we're looking for new products, we're freeing capacity, but we're looking for either volume or offering or something. You have to know where you're going.

John, what do you think?

Yeah, I agree. I think it kind of goes back to the definition of lean. Way back at the beginning of this discussion. It's almost like we have to redefine lean so that lean includes and people say this, not firing people as a result of your improvements or OPEX actions. That has to be built into the definition of lean. Otherwise it's not that it doesn't work because you see companies that achieve some semblance of improvement and sort of lean like thinking and some companies will use it to downsize and then maybe have a second or third generation of lean that's more humane or more closer to what we're talking about. But it's almost like we have to redefine lean with that built in to where if you're not using it for growth, if you're not using it to build people, if you're not using it to secure employments and somehow contribute to society, if you're looking at it just as a way to drive shareholder return, then that's not really lean, that's just updated Taylorism or a bad version of nothing wrong with opex, but just a bad version of an unsustainable version of opex. So it almost has to go back to that. Because as long as we're dancing around, the lean is about identify the customer, let them define value, map the flow, pull, flow, perfection. If that's our understanding of lean and we don't put sort of, how do I say it? People first is too easy of a way to put it. But just recognize the element that you have to secure, you have to have. I think that's where this question, this latest question of Ron's comes from. The stability question is if you're in a situation where you've got to have layoffs to survive or to do some restructuring, you do that first. You do that or do you just say, no, we're going to keep people regardless of whether it puts us deeper in debt and then going to go after growth. It's a tough place.

And to be honest, personally I've never encountered that problem. I know that sounds silly, but my Lean is flexibility first, guys. It's not productivity first, it's flexibility first. And flexibleizing cells or processes gets me immediately into quality and productivity problems. But things tend to be. So I go in very hard with Kanban right away, you know, and because everything resists, there's so much friction at first, you do have a clear, clear of the window period. And things tend to sort themselves out and you gain customers. I mean, I have, knock on wood, I've never encountered this massively because part.

Of that may be the nature of employment in France versus employment in the United States is this amount of security that how easy it is to fire somebody here versus there. I'm not.

Yeah, probably it's very, very hard to fire somebody here. So we look for other ways first. Yeah, absolutely, absolutely. That's probably very true. But again, I think that if we're discussing Lean, the one big thing I see that to me Lean is first and foremost about product range and flexibility and capital cost, not just function cost. You were discussing what happens when I talk to people in Lean conferences and OPEX and so on. We're simply talking about something back to the definition. We're talking about different object or different things. I haven't. I understand what they're telling me. I don't know what to say.

Yeah, I got you. I gotcha.

Because it's the same thing. When you read out Burns book. The first thing he did, he did smed. He did smed. And then he did smed. And when he was done doing smed, he did smed. You know, it's like.

But I thought it was all about people. That's kidding.

Sorry.

I thought it was all about people.

No, no, that is the point. That is the point. Try to do SMED without people. No, no, that is try to do.

SMED or try to without smed.

Right.

I don't know.

It's people in a very mundane day to day way. I mean, making a process more flexible is just hard. It's just hard. And you can't do it by engineering. And that's.

What about, what about. Is it possible that one day AI will be able to do smed?

We're talking.

I shouldn't even ask that, sorry. We'll edit it.

I think this is actually Ron thing. It's a very deep question because this is clearly what we're going through. Productivity, if it was a word, the hell out of farmers and then workers. And now we're down to white collar workers and anything that is rule based, ultimately we're giving to AI, which gives us the thing that we'll have more creative people because somebody has to run the AIs. And then there's a last major problem. We still need somebody to deliver that package to you, which tend to be jobs that are not as attractive. But the clear thing when you try to do flexibility and quality for real on the shop floor is that this is a granular because of the friction of materiality, this is a level of granulosity. Do you see what I mean? The grains of sand are so much finer. That is not rule based. It's all about pragmatics and context. So no, I don't think we'll find ever have AI doing smed. And actually I see these big automated, completely automated factors. Toyota and Amazon are smart. They understand that you need to do it in the rule based area where there's not that much thinking. But the moment you get into creating chakuchaku cells or having real flexibility, this is where you need the engineers working with the people themselves because of the granulosity of the problems you want to solve. Does that make sense? Is it the right world?

Sure, yeah, yeah. The granularity, I agree on one hand, but I think the other person, I think AI will be able to do a huge chunk of the rule based. Like in anything there's always going to be part of it that there's going to be. That last 20% or 2% that we haven't yet taught the AI to do may not be cost effective to do it. That's just where you got to finish it by hand. Your robot can't lap and polish that part to tenth of a thousandth of an inch the way you can by hand. For some reason our hands are more.

Sensitive than robot and the robot can't improve. The robot can't think if it's rule based.

If it's rule based and you give the robot certain values, directional values of saying achieve these things, this is what safety, quality, cost, speed means. Do the things that according to the data you have and then iterate and simulate. I think it's possible. But my point was really not so much that this is a problem, but if the rule based things can be done, if we don't need to do the rule based things, then that frees People up to do more creative things, more interesting things, more difficult things to do, the last 2% or just to create more products and create more services and be better at helping other people. I think there's plenty for people to do. If we just get our work, my job's gonna go away.

There's a question of respect from management as well. To me, Lean thing that what Lean has taught me is I look where the tool hits the part and where the hand hits it and to really respect the hand knowledge and smarts of people who are actually doing, you know, where we touch the part where it does a service, when they, when the service person looks at you in the eyes and smiles or shake your hands. That level. That level. And there's so much to learn at that level. And the problem I have with managers and engineers is they tend to not be interested in this, that they want these big solutions. But this is what I found with Tutor, and this is again back to when we came up with this 4F and this factory in China. I was there with the Lean sense and we were looking at it using tablets like iPads to check quality. And he was saying, well, I can't resist every technology because they think I'm an old fart, but I'm not sure about this. And then we looked and we say, hey, look. Yeah, you're right. When it's a piece of paper, the eye immediately goes to the place on the piece of paper and looks at the cart. Now with the tablets, they're spending 50% of their time figuring out the tablet and then the card. Do you see what I mean? Yep. So this is the level at which there's so much in. Even actually in mechanical systems, there's so much to learn and the only way to learn is to actually know how to talk to the people themselves. And I don't think this is going away anytime soon. But I think that managers tend to disrespect that and look for bigger level solutions and not care much. And they're completely missing out.

Yeah, they're approaching it as a 4D rather than a 4F experience. They're saying, here's AI. Let's drive it through our organization versus saying how can AI help us do our thinking and help us frame and find ways to apply smaller lot sizes to better serve our customers? That's the more interesting questions for humans to solve. What can we do once we're faster at doing changeovers? Not how do I do a smed better, because that's rule based. That's Easy.

Actually, you're completely right. You're completely right. This great. I mean, this Internet company I'm working with on the cars, I mean, they grew from. I mean, I have a lot of time for these guys. I mean, they grew from a computer on their desk to 430 billion. Sorry, million euros company. I mean, 430 million is pretty impressive from your, you know, from starting with a computer on a desk. And of course, because they're in the digital world, they have a lot of AI Ish ventures and so forth. And it was really interesting to see that at first, at some point they go crazy there. And then they said, no, it's all B.S. forget about it. And now we're coming back because we have a far more centered approach to where it actually can bring value. And it's not AI for AI sake, is blending it with human work. And this is fabulous, I think. I completely agree with. I'm seeing it right now. I completely agree with John. This is what we need to figure out. And it's the same thing Toyota has always done, is the tool is a tool is a tool. No matter how large the robot, the robot is there to help the human. The human remains a driver. The human is not the flexible part in the mechanical system. I think this is a. A profound lesson from Toyota and from Lean, and I think that this key to. It's as applicable to AI as it was to automated looms. John, don't you think. Yeah, I agree.

They just have to get our thinking right about it. That's like you said, we're not. We're not a piece of the machine. The machine becomes a piece of us.

Yes, absolutely. Absolutely.

All right, guys. Well, we've been. We're going to push an hour here. It's about great conversation, and I just want to wrap things up maybe with each of you taking a moment to maybe speak to that manager or the leader of a company who is kind of beginning there to think about a lean strategy for growth, or whatever you might want to call it, just more strategic in their lean thinking. What advice do you have for that person? Where should they start? What are some traps that they should avoid?

Well, I'm a big fan of the conversion from 4D to 4F, so I think.

John, tell them to read the book. Read the book?

Yeah, read the book called the Lean Strategy. It's by Michael Ballet and several other brilliant authors. Talks all about it. I think that's one thing to do, and honestly, I think that's. If you haven't read the Book. Please do. That's a great place to start. The 4D to 4F conversion. That's a tectonic shift in your culture. That's just earth changing, earth shaking, if you can make it. And you should keep striving to make it. And then what Michael said earlier about defining success, what does that mean? That's something I find that is difficult. It's difficult for a lot of people. And you both lean onto your business plan or strategy and you expect it to do good things, but oftentimes you don't understand it deeply enough and you're embarrassed to admit that you don't understand it deeply enough. So you don't ask the right questions and you sort of leave it to your lean guy to figure out. And then three months later, you're not happy with your lean guy because you haven't given him clear goals, you haven't defined success, and yet you're not achieving whatever it is your boss is hammering on you to get. So define success carefully and use the 4F process to get everybody engaged and read the book.

Thanks, John. It's great to hear. It's fantastic. I mean, Dan and Jack and Ori and I are very committed to. Committed to this for a thing. And we think we've seen a bit of something here. So it's lovely to hear. It's great. Thank you very much.

So, aside from reading your book, Michael, what are the thoughts do you want to have for folks to leave them with?

It's a difficult question. I think I have the same point of view John has, which is there's a question of intent. Back to the question my co author already says, which is, what do you want to be when you grow? I think that's, you know, how clear is your intent? What kind of success are you looking for? And then I have to say that I'm not sure I'm going to end on a positive note here, but there is a skeleton in our closet in the lean world. I haven't yet seen successful lean transformation without a sensei. So I would say find a sensei. And that is difficult. But at some point, the finder sensei is somebody who makes. I have several senses. Somebody who opens this frame, who makes you look at things differently and who challenges you on the clarity of your intent. I think this is very hard to on your own. I know some CEOs who, without doing lean, have done it very well with the advisory boards. But again, I think that you are who you surround yourself with. So I think that definitely would be My answer is like, how do you surround yourself with people who are going to help you see beyond what you see and look at things differently, whether in lean or non lean ways. I don't think it matters. But again, one of the conclusions of the 4F frameworks is that we are not, not just the masters of the universe, we are who our allies are. We build things with other people. And I think this is a radical shift in perspective when we understand that the people we surround ourselves with have a disproportionate influence in what happens to us. Does that make sense?

Yeah.

Yeah.

Makes perfect sense. I think especially in the facing part. It's difficult for us to face our own mistakes or weaknesses, mental models that are wrong or biases or whatever. So you need the sensei, you need the spouse or the friend or the mentor or the advisory board to hold a mirror up against and say, michael, do you see this? Do you hear what you're saying? Go out to the floor and say, you say this, but look at the reality. Somebody that can help you do that at a minimum. And then there's all the teaching part, which is what a sensei does. They're a teacher. The. They introduce you to things that you don't know and help you guide your learning. So, yeah, I think that's really great because in the 4D, you can pretend that you're almighty and give orders and everybody's afraid and nobody challenges you. Where the 4F invites learning through challenge for the leader. So, yeah, that's great.

Beautiful. All right, guys, well, good stuff. Let's wrap things up with both of you telling folks how they can connect with you, whether that's website, social media, or anything in between.

Sure, you can find me on LinkedIn. You can find me on the Gamb Academy website. Yep. You can reach out to me.

Okay.

I think most people connect. Most people connect with me on LinkedIn. Think this is the way things are going. I'm easy to find there.

Yes. Spell your last name.

Michael Bally. B, A, double L, E. Got it, Got it.

All right, well, good stuff.

Hey, thanks, Ron. This is fun.

I know you guys are both busy.

Thank you so much.

Yeah, no, good stuff.

Thanks for making the time.

This is fun.

Okay, guys. All right, well, maybe we'll come back on to do round two on some other. Some other fun topic.

Sounds good.

All right, take care, guys.

Okay, bye.

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