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Advice for Managing the Change Process Successfully,
Year by Year
George Koenigsaecker

When a plant or company fails to successfully implement lean, people assume it was because the organisation did not know how to apply the tools. This is almost never the case. Conversions fail because management did not know how to handle the dynamics of change.

For instance, look at the chart alongside showing the gains you can expect from a conversion. Now think about the impact of a 100 percent productivity gain in your organisation.

The only way you can get that is to ultimately reengineer 100 percent of your jobs. The implication is that everybody's job is going to change, not only the shop-floor workers. People in product development, engineering, marketing, maintenance, human resources - in other words, people from the shop floor to the top floor will work differently and in departments that are structured differently. The politics of that are terrific. I'll describe what you can expect year by year so you'll be prepared and better able to manage the change successfully.

First, examine the chart showing the typical gains your organisation can expect from your conversion efforts.

The chart shows that if you begin the conversion from a batch style production system you can expect productivity increases of 300 to 400 percent. If you already have a Henry Ford-style production system (flow in final assembly but not in parts or component production) you are ahead of batch, but there is still another doubling of productivity and tripling of inventory turns to be gained.

Of the 100 companies my team studies, about one-quarter were using the Toyota Production System. The benchmark numbers on the chart come from this 25 percent. Impressive. But what startled us about companies in this group was beside their four-fold increase in shop-floor productivity, they were four times as productive in their administrative functions.

In fact two-thirds of your ultimate gains will come from extending lean from the shop floor to product development, accounting, accounts payable, etc. For example, at Jake Brake we converted product development from a batch process to flow with cross-functional teams. We netted over a four-fold increase in productivity, going from a 72-month average development cycle to a 12-month cycle.

A substantial lean conversion, one that gets to at least 80 percent of the possible gains, is a six- to 10-year journey. Don't be discouraged by the long term, the longer the better. Once you get the conversion effort moving, it will grind out improvements year after year. You'll want it to go on forever.

Typically, the magnitude of the gains you make with lean will revolutionise the position of your company in its industry. If you are the first to convert successfully, you will probably take over the leadership position before anyone else realises what's happening. If the competition starts implementing lean, they must play catch up. Whatever lead you open up, you should be able to maintain.

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Year One: Two Steps Forward, One Back
The conversion process is not an even and smooth ride. Progress the first year is slow. Be prepared to take two steps forward, one step back.

The reason is simple: the people who are implementing have never done it before. They are trying to understand principles that they are not accustomed to using in their environments. Being well intentioned won't help. They will make mistakes applying the principles and consequently, the tools. Only with experience will they be able to go into a particular production line with a particular volume, and a particular process and quickly and effectively apply the principles of lean and TPM. During this stage you should have the help of an outside sensei or expert teacher. It's the smart thing to do.

Typically, you'll find that some individual kaizen projects show great potential or deliver big improvements. But your follow-up won't be as good as it should yet. The gains will slip as people drift back to bad old habits.

In addition, not enough projects will be linked together in a value stream to make an impact at the company level or even the plant level yet. The gains are emerging, but they are not big enough or broad enough in the plant or the company for people to say without a doubt, This stuff works.

Naturally, there will be people who resist the change. Every time the team takes two steps forward and one backwards, they will highlight the step back. So there is typically a lot of dissension at this stage.

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Year Two: Appreciating General Custer's Position
In year two, the effort becomes interesting, to put it mildly. This is typically when the anti-change forces, the people who do not want to see the status quo altered, really assert themselves.

The "anti's" aren't lying in the weeds any longer. They can't. Their jobs are changing, and they are more worried. The organisation is in the second year of the conversion. Programs usually go away after a year. When they realise this one isn't, the anti-change people become more aggressive about pointing out the shortcomings and mistakes that have been made.

The change agents are still making normal learning mistakes so the anti-change folks will have plenty of shells to hurl. Basically, expect the second year to be pretty messy and confrontational.

If you surveyed employees now, the consensus reply would be, The jury is still out. Some people would say the progress looks pretty good; others would be very negative.

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Year Three: The Gains Appreciate
The third year is a building year. The people who are doing the implementation are getting better. More and more their efforts advance the organisation two steps forward without taking a step back. They are getting more skilled at applying the tools and principles of lean and TPM. Now, when they go in to convert an area, they get higher quality results right from the start. Their follow up is better, too.

By the end of this year, you will be 36 months into the conversion, so the compounding of accelerated inventory turns, quality improvements, and increased productivity now show significant gains. It's hard for somebody to say this isn't different than anything the organisation has done in the past because the gains are now big enough to show up in the financial statements and to customers. If you make it through the third year, the anti-change forces won't have much of a case.

If you surveyed employees now, the typical comment would be, We're making good progress.

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Year Four: Headed for Industry Leadership
Assuming your conversion effort is aggressive and sustained, this is the year that change becomes the norm; the change process starts to become institutionalised. People at all levels will start kidding, We have our machines on casters because we move them every week. But instead of feeling threatened, they take pride in that ability.

You'll begin to get tremendous positive momentum in the organisation. Buy-in is nearly universal. There are still pockets of opposition, but people, in general, are less afraid of the change now. Having been through several rounds of changes in the past years, they know that things were better after the changes. When new change comes along as the next step, it is less threatening. They are learning how to live in a world of more rapid change.

From the fourth year on, the organisation tends to make it's own good luck. It's on a path to becoming a leader in its industry. It has demonstrably shorter lead times, better on-time delivery, higher quality, increased productivity, and higher profitability. I have found that it's not uncommon to acquire customers from the positive buzz about your company that begins to circulate through your markets.

Interestingly, this cycle holds true for administrative conversions, too. For example, as you convert product development from batch-based departments handling design, drafting, testing, etc., you turn it into a different organisation and you'll go through a similar four-year cycle.

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The State of Lean Implementations
Unfortunately, not many companies in North America are four years into a conversion process even though lean was introduced here 12 to 15 years ago. I'd estimate that one or two percent of North American manufacturers could be described as 80% lean.

Another three or four percent have made significant results, but have a lot more they can do. An additional 10 to 20 percent have dabbled in lean. These organisations built some cells in part of the company or plant, experimented with some tools, but went no further.

A big reason why companies never reach the 80 percent mark is that they don't know how far they can go. Remember the chart at the start of this story? Just think, if you're a batch manufacturer and you make a 50 percent productivity gain, it's logical to think, Hey, we've done great. I guess we're there.

As a result, many organisations start the conversion but stop unaware that they are still at the starting gate. That's why we have a lot of confusion about companies claiming to be lean. They apply some of the tools for a couple of years, grab some big gains by traditional norms, but they aren't lean. They have only scratched the surface of what is possible.

But such lean 'experiments' by a few companies have achieved enough results to show that lean and TPM are different, they work, and are worth pursuing. Yet most organisations are only thinking about starting.

That's not a reason for pessimism. Look at the evolution of the traditional Ford-style production system. It started in about 1911. Fifteen to twenty years passed before it had spread to the rest of the U.S. automobile industry. It needed a full generation - 30 to 35 years - to spread through the European auto industry. It was not common in Europe until after World War II.

The lean movement is following a similar course. With a sea change as dramatic as lean, it will take a generation for it to spread. After all, it is not just a collection of tools and techniques, but a radically different business system and philosophy.

The last time we had anything approaching this level of change in business was during World War II when about three-quarters of the workforce left to fight. There was a total conversion of both product lines and production processes to support the war effort. The change involved mostly a new workforce, and mostly a new product line, and mostly new process technology.

The job of change management was made easier then by the country's unity of purpose. Everybody was willing to do whatever it took to win. You won't enjoy such commitment at the launch of your conversion effort.

Toyota needed 25 years to implement TPS, the model for lean. Granted, it was inventing the system as it went along. Toyota began in 1947, but didn't begin using kanban companywide until 1962. And it didn't use all of the tools with vendors until the early 1970's.

So if we are about 10 years into the time line, we have 15 years ahead of us. This is an exciting phase. Whole industries are just starting on the conversion path. In others, the effort to date is spotty. There are lots of opportunities for early adapters to dominate industries.

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