8/31/2015

Dear Gemba Coach,

How does the role of CEO in lean management differ from that in traditional management?

Great question, thank you. I think I’ll let Phil Jenkinson answer that one.

(In the following podcast transcript, Jacob Stoller, author of The Lean CEO, interviews fictional but very real CEO Phil Jenkinson, a main character in the “lean trilogy” of business novels by Michael and Freddy Ballé. Lead With Respect is the most recent novel.

You can listen to the interview here. Jenkinson is played by James Tedder, who is also the narrator of the audio version of The Lean CEO.)

Stoller: It’s a great pleasure to have you on the show, Phil. I wish I could have included you in The Lean CEO, but the publisher didn’t want me to include fictional characters. A category thing, I guess.

Jenkinson: Yeah, I see that a lot. In general, I think people underestimate what fictional characters can bring to these conversations, but I don’t take this personally. But that’s a whole other subject. Anyway, I’m happy to be here.

Stoller: I’d like to start with the burning platform theme. As you know, a lot of the CEOs in the book emphasized that they never could have gotten lean off the ground if they weren’t under a lot of pressure to change their companies. What’s your view? Could you have taken a lean path without that pressure?

Jenkinson: Hmm … probably not, but my take is a little different than some of the other CEOs you interviewed. It’s hard for me to admit this as an engineer, but as I look back, I can see that who you meet is just as important as what you do. For instance, I was pretty good at physics, but could have taken a completely different path if I hadn’t been encouraged by my PhD advisor. If I hadn’t met my business partner Matt, I might never have been involved in building a company. In the case of lean, if Mike Woods wasn’t my best friend, I might never have approached his dad, Bob [a retired lean executive in the trilogy], for advice and begged him to act as my sensei. Instead, I might just concentrated on product development have and hoped Matt could handle the financial problems.

As it turns out, real lean senseis are extremely rare as you show in your book, so the odds were incredibly small, and I was incredibly lucky. So the answer to your question is probably no, without the pressure to turn around the company, I wouldn’t have been desperate for answers, and would not have gone to Bob, and would probably have missed that whole opportunity. Sobering thought.

Stoller: Which CEOs in The Lean CEO do you personally connect with, and why?

Jenkinson: Art Byrne and Orry Fiume. In fact, I would say I really owe them my lean business vision. Theirs was the approach that influenced Bob Woods the most, so it really affected what we did.

So when you look at our story at IEV, it mirrors the Wiremold experience. As we got cash out of the business through our lean efforts, and sales grew when our quality got better than the competition, Matt acquired a string of companies to complement our product range. We did all this with the cash we liberated from turnarounds, getting better and better at it. This was pure Wiremold.

Of course, in the early 2000s, this kind of expansion was relatively easy to finance. We probably couldn’t do it now, but we were astonishingly successful then.

Stoller: Are there any lessons you learned from Art and Orry that you’d like to share?

Jenkinson: Art and Orry taught me about fixing quality in order to understand the product and generate productivity, and how you then accelerate flows to generate cash, and then maintain that growth by developing new products with the capacity you’ve liberated.

Orry taught me about lean accounting and the relationships between the cash flow statement, the P&L, and balance sheet. This helped me see that financials are nothing more than physical quantities multiplied by a price. I was a complete klutz at finance, and so his ideas turned out to be my salvation by the time I got involved with the Alnext mess.

Art also got me to see in a different way what Bob had been trying to drum into me for years, but as an engineer I found hard to grasp: you use the lean tools not just to get immediate results, but to develop the people who will continue to get results.

Stoller: What aspects of this did you find most challenging?

Jenkinson: Well, as an engineer, I was trained to think in terms of problems and solutions. It was really hard to think of a problem as an opportunity to develop somebody towards creating solutions. In The Gold Mine year, I was all about using the tools to fix things myself, with people sure, but I was driving the improvement directly no matter how hard Bob tried to get me to see that I needed to develop people, and I lost some good guys as a result.

Thankfully, by the time I became CEO of Nexplas, I had figured it out. So I was able to work with kids like Andy Ward, who were not so good at taking charge and fighting fires, but had the knack of developing their own teams and building sustainable results.

This is, by the way, one of the things I am most proud of. And although Bob had had tried to drum this into me for a long time, the real “aha” moment came from listening to Art and Orry. So I’m thrilled that you captured their experience so well in your book.

Stoller: As a lean-practicing CEO, how is life different from, say, a CEO who uses traditional business practices?

Jenkinson: Well, I guess that as a CEO who really believes in lean, you live in a constant fog-of-war where so many things happen every day, and things change so fast that you simply have no clear idea of what’s going on out there. And when think you do, you’re wrong half the time.

So Toyota teaches us that you really need to understand what you’re trying to do. So I spend a lot of my time on metrics that have to do with customer value, like reducing work accidents by half every year, or reducing inventory by 20% every year. Of course, the challenges are going to keep changing year by year.

So every year, I use the lean principles to reformulate what the business challenges are. Then, rather than tackle these challenges myself, I ask a person on my team to set up a kaizen on what looks like a similar issue on the ground. This doesn’t always work, but just looking into the kaizen gives me a greater insight into the nuts and bolts of the problem.

Basically, it’s my job as a CEO to put gas in the lean engine by bringing the challenges forward and supporting the kaizen process by developing people and teamwork. Never easy, but never a dull moment either.

Stoller: Some of the lean CEOs went through difficult periods with lean after six or seven years, and had to find ways to bring their lean journey to a new level. What are your views on that?

Jenkinson: Hmm … that’s an interesting question, but I might not be much help here. I’m probably part of that problem as I changed jobs every six or seven years, and I can’t think of an instance when the CEO after me had any interest in learning deeply about lean beyond the usual platitudes. So the lean efforts usually stalled. But, personally, I don’t think I’ve experienced that problem myself – maybe because I didn’t stay with the same company long enough.

Stoller: Getting back to engineering, one thing that surprised me in researching The Lean CEO was that there’s often tension between lean thinking and engineering. Pat Lancaster, former CEO of Lantech, for example, pointed out that it’s hard to bring forward a really big idea – throwing the long ball, he calls it – in a kaizen environment, which emphasizes a more incremental approach. What are your thoughts on that?

Jenkinson: Hmm … that’s an interesting question. I was an inventor before I’d ever heard of lean, so I can certainly see the problem here. In fact, when I’m looking at something really innovative, I’ve gotten into the habit of creating a start-up to look into it, which then invoices the company for its engineering services and sometimes even product. One of these start-ups even became a full-fledged company when we started making the command panels for the circuit breakers and using apps on tablets to first monitor then remote control the devices.

I think another issue is that engineers tend to fall in love with the tech they know, so they’re always trying to find new applications for it. I think we maybe need to focus more on customer problems, and be willing to bring in others to help if we don't have the tech. But I can’t give you a good general answer on this. This is one I would have to think about.

Stoller: Speaking of innovation, you got yourself involved in the software business in Lead With Respect. What do you think of Eric Ries and The Lean Startup?

Jenkinson: Andy got me to read the book, and I loved it. He really got into this IT stuff as a result of working with Jane Delaney, as you read in Lead With Respect. I think the book has very smart ideas. I certainly subscribe to the MVP idea – that’s minimum viable product - and the book has been helpful to get the idea across to my engineers. The emphasis on build-measure-learn is also spot on.

One of the bees in my bonnet with innovation has been to improve the test method and measurements before solving the technical system. I believe this is a profound insight that goes beyond The Lean Startup and is part of scientific thinking – development of innovation goes hand in hand with development of test methods – and that we often underestimate it. Other than that, I’ve spent my life working with industrial products and, even with living in the Bay Area, I’m afraid that web-based companies have sort of passed me by. Sounds like tremendous fun, though.

Stoller: Are you optimistic about where lean is headed these days?

Jenkinson: You should ask Bob Woods about that (laughs).

Stoller: Well, I can’t imagine him ever consenting to an interview.

Jenkinson: You’re probably right about that. I guess don’t really have an opinion on whether or not lean is headed in a positive direction. Bob and I still talk about it a lot, though, and he grumbles a lot about the current obsession with coaching and problem solving alone, which side-steps the real issue. The hard thing about lean is getting continuous improvement teamwork firmly established so that people in the workplace can come up with new ideas to drive customer satisfaction, the level of just-in-time, jidoka, etc.

Then again, when Bob and I first met he used to grumble that there was more to lean than flow, which was kind of the consensus at the time, with VSM and what not. Lean has been around for 25 years, and before that there was Just-in-time. Each generation latches on to a different aspect of it, but as Art Smalley keeps reminding us, a leg of the elephant is not the full elephant. By narrowly focusing on this aspect or that, you lose the system’s perspective, and, in my experience, its true business value.

Stoller: Why do you think it is taking so long to work through all this?

Jenkinson: Well, I think most companies are designed as groups of functional silos, so when people look at problems to apply lean to, they are looking at silo problems, as opposed to enterprise problems. So lean becomes a program run by internal consultants to optimize existing processes without ever touching the business.

Another big barrier is how hard it is to develop senseis in the real Toyota tradition – people who’ve been taught by people who’ve been taught by Taiichi Ohno or someone of his ilk at that time. Many people can join the lean movement at any one time, but it takes ten years at least to develop a sensei, and very few people are actually inspired to become senseis. Toyota has probably been suffering from the same problem internally as it expanded across the globe. I don’t know how they tackle it, but I’d be curious to learn.

Stoller: So what’s to be done?

Jenkinson: As Art and Orry often say, the trick to lean is to see it as a full business strategy, and this is something that can only be grasped at fairly senior executive level. To my mind, the challenge has always has been “how many CEOs can we interest on lean and how many great senseis can we introduce them to?”

This certainly has been my own path, and this is why I think your book is so important. Too many lean books focus on this aspect of the method or that. This is fine as far as it goes, but hides the fundamental insight of lean: you achieve your objectives by developing people. Your book balances this by showing what I believe lean is really about: CEOs who commit to lean as a strategy to deliver superior performance and sustained growth by developing their people. In order to do so, they commit to really learning this lean thing – which keeps being more and more interesting the deeper you look into it. Heck, I’ve been doing this of 15 years now, and am still fascinated by it.