On September 11, 2001 the airline industry descended into chaos. It found itself at ground zero in the worst catastrophe that had hit our nation since the Japanese attack on Pearl Harbor. Over the weeks and months that followed, the damage only grew worse. Without passengers to fill their planes, airlines closed gates, furloughed or laid off employees, and drastically reduced their routes. Some grounded as much as a quarter of their fleet, permanently slashing flights. All took significant losses, with some even falling into bankruptcy.
Unlike the others, this company kept all its planes in the air and all its people on the job — and continued to profit. Southwest not only survived but it expanded, acquiring hard-to-get gates abandoned by its competitors, extending its reach. For the first time in its history, the airline began offering cross-country flights. It was almost as if this company had been built for chaos to strike, using it as a powerful competitive advantage.
But Southwest Airlines is not alone. Other corporations across manufacturing and service industries are applying the same principles to achieve this same powerful result. What are they doing? Knowingly or not, each has applied “lean” principles — popularized by Toyota’s rise from the rubble following World War II to become the most profitable auto producer in the world. But their focus is different from how many have come to see these lean principles today.
What, then, is going lean?
The Lean Enterprise Institute defines the term “lean” as “creating more value for customers with fewer resources.” The is a great way to describe the basic idea of lean. Unfortunately, following this directly can lead organizations down an overly simplistic path of problem-solving, resulting in the many examples of unsuccessful implementation we see today — particularly in large, complex organizations.
This site is dedicated to showing that today’s widely-held idea that going lean is primarily about “cutting the fat” is terribly misinformed. Read our materials and you’ll see that there’s far more behind why Toyota and other lean benchmarks tower above their peers. You’ll likely come to to the same conclusion: they do succeed by applying lean principles, but with the entirely different focus of creating dynamic value
What is dynamic value?
For nearly a century, business leaders have clung to the idea that the value a company creates is integrally tied to its environment. Conditions that drive strong, predictable sales permit companies to operate their equipment at full capacity, generating the economies of scale that brings in the greatest profit. Their goal is to maximize this value while they can, which will sustain them during the periods when economic downturns inevitably strike. This is the understanding that for more than a century has guided corporations across the country and around the world. For business leaders everywhere, the rules have been clear, and those who have applied them the best have always won in the end.
Except today these rules no longer apply.
My research has shown that a growing group of companies do not resign themselves to excel only when times are at their best. For them, performing well during downturns is a far more powerful result. What they achieve is far greater than others can produce when they maximize their efficiencies for when conditions are favorable.
To understand why, consider for a moment something that many of us seek to do in everyday life: invest our money for retirement. We work to save money and we naturally want to gain the most from it. When we invest, we all face the same question. Should we put our money into a riskier investment that stands to gain the most when the market is up, but might lose more when a downturn strikes? Before you answer, think about what would happen if the markets suddenly dove and you lost 20 percent of your money. To just break even, your investment would subsequently have to return more than you lost — it would have to grow 25 percent to get you back to where you started. If the market plummeted by a third, you’d have to make 50 percent just to break even. Suppose you lost half. You’d need to make 100 percent — or double your money — just to get back to where you began.
The point of all of this is to illustrate that downturns have a far greater impact than you might immediately imagine, and the greater the downturn, the worse the result. The same goes for companies. Market crashes have lasting effects, but even lesser downturns can end up taking years to claw their way back once conditions improve.
So, what if I told you that companies could do something to avoid even the big shocks from the greatest downturns? Suppose I could point you to examples of companies that did not suffer losses during the Great Recession and other major events? There’s a term for that. We call it dynamic value — the ability to create and sustain customer and corporate value across the wide range of changing conditions that companies today increasingly face.
Those who seek to apply Toyota’s lean principles recognize the need to see value from the perspective of the customer. Dynamic value takes this concept a step further: Value is what the customers say it is — even if they keep changing their minds.
Creating dynamic value is precisely what this website is all about — its mission is to highlight real cases of companies that demonstrate what we call lean dynamics, an approach that gives them the capability to tower above their peers by constantly innovating new products and services while preventing losses from major downturns and minor ones, time and time again.
How is lean dynamics different?
Whereas lean manufacturing or Lean Six Sigma typically focuses on solving problems or removing “waste,” lean dynamics takes aim at addressing the dynamic conditions that drove these wastes to accumulate in the first place. Transforming your organization to work within variation and uncertainty enables it to grow, innovate, and profit not just within the narrow environment for which most operations are designed, but across the entire range of conditions that might strike.
Why I am writing this blog
After many years working as an aerospace engineer on some of the most cutting-edge aircraft programs, I landed the opportunity to lead a government-industry study of aerospace manufacturing. My team and I traced the industry’s business improvement efforts — from lean manufacturing to Six Sigma — carefully documenting what worked and what did not. What I discovered flew in the face of conventional wisdom. This industry–the beacon for American ingenuity and accomplishment –struggled against tremendous disruption throughout its operations. Worse still, the problem-solving tools and techniques that it had embraced — lean manufacturing, Six Sigma, and others — were not the solution that so many sought. Instead, I found, these were becoming the problem itself.
I found myself on a mission to learn more. I began researching other industries, and initiated a series of projects aimed at applying key lessons from my research to solving critical operational challenges. I had a number of successes, such as with Defense projects that dramatically improved the availability of critical supplies during wartime demand surges while eliminating need to stock hundreds of millions of dollars of “just in case” inventory. I continued to study companies that thrived as the nation’s industries struggled through growing unpredictability, even profiting and growing during the Great Recession. All the while I have written and spoken broadly about my findings and results (see publications), and I am honored to have received recognition from industry, academia, and government.
The purpose of this site is to share my findings, and to continue shining a light on the misconceptions that are preventing so many companies — and government agencies — from realizing the extraordinary gains that lean principles have to offer.