Lean Six Sigma – Reality or a Myth?
“The great enemy of the truth is very often not the lie, deliberate, contrived, and dishonest, but the myth, persistent, persuasive, and unrealistic.”
—John F. Kennedy
It seems at every conference, symposium, or other gathering of thought leaders for higher learning where the topic is Lean Six Sigma, many of the attendees—and almost all of the speakers—glorify the supposedly unmatched performance of Japanese companies and their management techniques as enshrined in the most revered of holy scrolls, the TPS. And when followers of this scripture speak, they declare the virtues of all things Japanese and cast aside, as heretics, the nonbelievers.
However, when I attend similar gatherings at locations around the world where the audience is business leaders and the topic is business strategy and finance (e.g., events organized by the Association for Corporate Growth, symposia for Private Equity and finance, the various economic forums and congresses, and conferences on business strategy), there is rarely (if ever) any mention of Japanese companies nor reference to their styles of management.
This has always given me cause for pause. How can something that is supposedly an absolute truism and necessary for success in one circle be almost completely ignored in another—particularly when both circles purportedly share the same aspiration of improving business performance and accelerating success?
I know full well that taking a contrarian position will cast me as nonbeliever and draw the ire of those who hold the faith, especially those who are fanatic zealots. After careful consideration and investigation, I believe this reverence of Japan and Japanese companies is largely (perhaps entirely) undeserved and possibly even a myth. As they say, “sacred cows make the best hamburgers.” And even if all the hyperbole about Japanese companies was ever true at some time in the past, it is certainly not true today and has not been true since at least the early 1990s. Furthermore, I would argue that any business that has drunk the Kool-Aid (or the sake) and is trying to emulate the way a Japanese business operates as a path to a better future for themselves is misguided. Their expected results are likely overestimated, and this will inevitably lead to disappointment.
This is not to say the tools and techniques of the TPS and Lean Six Sigma do not deliver positive results or otherwise drive value in an organization; they certainly do, under the right circumstances and with pragmatically managed expectations. But today, awareness of these tools and techniques is now pervasive, even if they are implemented to a wide spectrum of completeness and achievement. By themselves, they are no longer a differentiator—nor do they offer the competitive advantage they once did. As such, they expose one of the limitations of the Japanese way of running a business.
But business people are data driven, so let’s examine some data. For your consideration, we are going to examine several economic and business indicators from two time periods, 1982–1992 and 1992–2015.
Macro View: Comparing Countries
During the period between 1982 and 1992, Japan was undeniably the envy of the world, with its economic prowess and productivity—the culmination of decades of evolving and quantifying the way Japanese businesses operated after World War II and as exemplified by the leadership of Toyota at that time. This was the period when Japanese companies were buying everything they could (including Rockefeller Center in Manhattan along with countless works of art).
It is during this period—the perceived assent of Japanese companies relative to companies in the United States at the time—when the envy of comparative performance and the reverence of the Japanese management methods began.
And not coincidentally, it is also the same period when the team of James Womack, Daniel Jones, and Daniel Roos at MIT wrote the book The Machine that Changed the World (1990), which put Japanese companies (specifically Toyota) and the Japanese style of management and process execution on a pedestal. It also introduced the term Lean Manufacturing into the lexicon of business management.
But is this perception the reality? Does it hold true over time or just a vignette of time in history?
When we compare the Gross Domestic Product (GDP) of Japan and the United States (figure 1.1) from 1982 to 1992, it is clear that the Japanese economy outperformed the economy of the United States. During this period, the Gross Domestic Product per capita (GDP per capita) of Japan grew an average of 4.03 percent—double the average GDP per capita growth of the United States of 2.01 percent (keeping in mind a 2.01 percent growth rate is a respectable pace for a large and mature economy).
Another interesting piece of data can be found by comparing Japan’s GDP numbers in 1985 to those in 1986. In 1985, the GDP per capita was less than the Gross Domestic Product per capita based on Purchasing Power Parity (GDP per capita/PPP).2 But in 1986, the GDP per capita was far greater than the GDP per capita/PPP. The buying power enjoyed from 1982 to 1985 had evaporated. This tipping point—and it was a dramatic one—was an indicator that Japan’s economy was being pushed over the edge.
Then, if we look at 1992–2015 (figure 1.2), the average growth of GDP per capita in Japan was only 0.75 percent (less than 20 percent of its previous growth rate), versus an average GDP per capita growth rate of 1.60 percent in the United States. Over this second period, which lasted twenty-three years (so far), the average GDP per capita growth rate in the United States was more than twice Japan’s. This period of time in Japan is commonly referred to as the lost decade—a period of severe economic malaise and underperformance as compared to peer economies, which has turned into two decades and is now going on three decades.
One would think, if Japanese companies outperformed companies in the United States as some would have you believe, the Japanese economy would also outperform the United States. But as these charts demonstrate, I do not believe it can be reasonably argued that Japan, and the industrial might of Japan by proxy, has outperformed the United States for some considerable amount of time. And, according to the International Monetary Fund forecasts, there is no indication of this trend changing anytime soon.
Peer Group: Comparing Japanese and American Companies
We must also keep in mind that the performance of an entire country may not represent the performance of companies within that country. So let’s drill down a bit further and examine the performance of companies over similar periods.
I realize there are many ways of looking at the health of a company, and, as I mentioned earlier, free cash flow from operations is certainly among those with more weight. But I believe the simplest, and arguably most accurate, way of comparing company performance is the value of their shares.
After all, share price is a forward-looking indicator. It is an arm’s length reflection of how much value an investor perceives a company has. In evaluating the value, a shareholder will take into consideration all of the more objective financial aspects of the company including free cash flow from operations, the common financial ratios used by analysts, return on capital, price earnings ratios as compared to industry peers, and so on. A shareholder will also factor into the value of a share innovation, quality, customer satisfaction, integrity, sustainability, politics, and other more subjective considerations. And lastly but most importantly, a shareholder will consider the short- and long-term vision of the future for the company as communicated by the leadership, including the growth potential of the company (in both revenue and profits per share) and the faith of the shareholder in the leadership team of the company to pursue and achieve the company’s strategies as communicated. Indeed, the share price of a company over a period of time might not be the only indicator of company performance, but it is the weighted aggregate of all of the others. And this makes it the best indicator.
As such, an aggregate of values from a cross section of major companies within a country can be found in the major stock market indices of that country.
As with the previous comparisons made using GDP, we will compare the main stock market indices of the United States (DJIA) and Japan (Nikkei) as graphically represented in figure 1.3.
The Dow Jones Industrial Average (DJIA) vs the Nikkei Average
Through 1982, the DJIA and the Nikkei tracked very close to one another, respective to each of their currencies, and growth was rather unremarkable, if there was any appreciable growth in the value of these indices at all. But in 1983, the rate in the increase in the value of the Nikkei versus the DJIA went almost vertical.
The Nikkei
From a value of approximately ¥7,500 in 1982, to a high of almost ¥40,000 on the eve of 1990, it was a heck of a run and fun while it lasted—an increase of over 500 percent in a span of nine years. The pace was relentless, with just a brief pause for the stock market crash of 1987. During this same period, the DJIA enjoyed an increase in value of approximately 100 percent, which is considered a very reasonable rate of return in its own right.
However, this dramatic acceleration in the increase of the value of the Nikkei had all of the obvious indications of being possessed by irrational exuberance.3 The funny thing about financial bubbles is that people don’t normally realize they are in one until it pops.
It was all downhill from there.
The fall from grace was swift and ruthless. Breaking through the ¥20,000 mark in 1992 on its way to ¥17,500 by late 1993, the Nikkei had lost almost 60 percent of its value.
The slope of the decline in the value of Japanese companies that comprise the Nikkei from 1990 through 1992 started by following the classic V shape4 normally associated with a market under strain and represented by the expected sharp downstroke, as we see in the graph. But the Nikkei never experienced a recovery that produced a sharp upstroke in the graph to complete the classic V, as would be expected. Unlike the recessions endured by the United Stated and its free-market peers, there was never any recovery in the aggregate of companies that comprise the Nikkei.
Instead, over the next few years, the Nikkei experienced a few dead-cat bounces: The index would rally to around ¥20,000 before falling back again. Then in 2000, the Nikkei began another dramatic slide in value, until it broke through ¥10,000 in 2001.
From then, there was a run-up in value until 2007 (along with its other G-75 peers), when the Nikkei closed in on ¥20,000 before falling back during the global financial crisis of 2007/2008. And from 2013, with the introduction of “Abenomics,”6 the Nikkei made another run and reached ¥20,000 in 2015 before again sliding in 2016.
Certainly, these momentary recoveries in company value after the crash of the Nikkei from 1990–1992 were influenced by the macroeconomic economic stimulus policies of the Japanese government and coordinated with the Bank of Japan. But for all intents and purposes, the Nikkei—and the value of the companies that comprise the Nikkei—have been in a coma since 1992.
The DJIA
From 1982 to 1992 in the United States, we can clearly see that the growth in value of the companies of the DJIA (see figure 3.3 below) was steady, but rather unremarkable, especially when compared to the dramatic increase in value of those companies who comprise the Nikkei.
But in 1992, we can see the start of an accelerated and sustained upward trend where the value of the DJIA increased from approximately $2,500 to approximately $18,500 in 2016, an increase of over 700 percent—but over a twenty-four year period. The time period is important because it indicates a pace of growth that has been sustained over a considerable period of time.
The two dips in the DJIA represent the recession of 2001 and the financial crisis of 2008. But on both occasions, the markets endured a sharp downstroke in valuation followed by a sharp upstroke: a classic V. The pain was felt, but recovery came quickly.
As is glaringly apparent in the graph, whereas the downstrokes endured by the Nikkei were as dramatic as in the DJIA, the upstrokes in the DJIA from 2000 onward were quicker and more dramatic than in the Nikkei. This resulted in step improvements in the value of the DJIA over the upstrokes in the Nikkei.
The bottom line is, at ¥20,000, the value of the companies of the Nikkei in mid-1992 is greater than the value today—twenty-four years later. And during almost all of that time, the value of the Nikkei was considerably less than ¥20,000. In fact, for a third of that time (seven years), at ¥10,000, the Nikkei was half the value it was during any of its run-ups between 1992 and 2016. Picture those numbers, sustained for as long as they have been (and still no end in sight) in any other developed, G-20 country. It’s seems remarkable.
And can you imagine the following speech from a CEO of an American company at an annual shareholders meeting? I can’t.
“My fellow shareholders, I stand before you today to let you know your investment in our company is safe. And I guarantee your investment will be worth the same twenty-four years from now as it is worth today.”
I certainly couldn’t imagine the CEO of a company in the United States still being the CEO for too long after that speech. He or she would probably be fired before the sound of their voice faded from the room.
And I find it impossible to imagine how leaders in business might hold Japanese companies, and their leadership and approaches to management, in such high esteem when the results and numbers don’t support it.
The Yen
Something else important to consider is the value of the Japanese Yen versus the US Dollar (see figure 1.4 below) and how these two variables (value of the yen versus the dollar and the value of the companies on the Nikkei) interplay with one another.
The value of the yen held reasonably steady against the dollar from 1982 to 1986, at approximately ¥240 to $1.00. But in 1986, the value of the yen abruptly rose against the dollar—a period that also coincides with the flip in the relative values of Per Capita GDP and Per Capita GDP adjusted for Purchase Price Parity as seen in figure 3.1—until it reached ¥140 to $1.00 in 1992 before continuing its rise to ¥80 to $1.00 in 1995.
Therefore, much of the run-up of the value of the companies of the Nikkei until 1985–1988 was not due to some prowess in company performance but, actually, a reflection of the amplification effect of an increase in the value of the yen from ¥250 to $1.00 to ¥175 to $1.00. Remember, the Nikkei is valued in yen, so the values of the companies didn’t change as much as it was that the value of the yen that changed.
The Culture
In addition to the economic arguments of Japan and Japanese companies having superior performance to their Western peers, there is this notion that the culture of Japanese companies is more collegiate, open, and encourages engagement. However, a report from Ernst and Young showed that full-time workers in Japan—whether employer, employee, or colleague—had the least amount of trust in the coworkers within their companies than any other country polled. In fact, of the Japanese workers polled, only an average of 21 percent expressed trust in the people in their companies. Compare this with 45 percent in the United States and 48 percent globally.
The lack of trust expressed by the Japanese was a negative outlier among all the countries polled by a minimum factor of more than 50 percent. And it certainly runs contraire to the expectations we would have after reading about the Japanese methods of management, with its emphasis on employee engagement, camaraderie, collaboration, and team building. What statement is this poll making with regards to the reality of the Japanese style of management?
There are four main takeaways:
- The run-up of the Nikkei from all causes was relatively irrational and short-lived (eight years, 1982–1990), and the bursting of the bubble was equally swift.
- The perceived run-up in value of the companies of the Nikkei was amplified as a result of the dramatic increase in the value of the yen to the dollar.
- The value of the companies of the Nikkei is less today than it was twenty-four years ago. These are not companies in which I would want to invest or emulate.
- The corporate culture in Japanese companies is not nearly as collegiate as some would have you believe. There are no choruses of “Kumbaya” being sung.
Specific Example: The Single Company
Thus far, we have taken a macro view of economics, comparing and contrasting the performance of Japan and the United States and also comparing and contrasting the aggregate performance of the companies within these countries as represented by the value of the Nikkei and the DJIA. And in each case, Japan and Japanese companies fared poorly.
But what about a single company? Can a single Japanese company be an outlier performer among its domestic peers? How does it compare to peers in other countries?
For your consideration—and since it is at the epicenter of the continuous improvement discussion—we will compare the stock price of Toyota Motor Corporation with Ford (see figure 1.5 below). The reason for my selecting Ford is that it is the only American manufacturer of automobiles that remained publicly traded for the entire period (Chrysler being purchased by Daimler-Benz and subsequently sold to Cerberus and eventually to Fiat, and GM declaring bankruptcy during the Financial Crisis of 2007–2008).
We can see, from 1982 to 1992, the value of a share in Toyota tracked very closely to Ford. Relative to one another and in US dollars, Toyota did not enjoy the dramatic rise in value that was reflected in the Nikkei, nor did it suffer the dramatic drop in value.
In 1992, however, the value of a share of Ford started to increase at an accelerated rate as compared to Toyota and this pace quickened yet again in 1997. Ford enjoyed a value premium of 200 percent to 350 percent over Toyota for a period of four years, until the recession of 2001 brought the relative value of the two companies back closer to parity. Still, it wouldn’t be until 2005 when the relative value of a share of Toyota would exceed the value of a share of Ford. And the relative values of the two companies since have tracked closely with one another, exchanging turns at the top spot several times.
Can we say from this chart that Toyota was a better-managed company than Ford—a better-performing company than Ford—over the last thirty-four years? I don’t see it, and the data doesn’t support it.
Share-Value Aside, What about Execution?
Toyota has produced a total of ten million vehicles per year (including automobiles and trucks across all brands), plus or minus 5 percent, in every year between 2012 and 2015. But regardless, these have been very difficult years for Toyota and should challenge the claims to the effectiveness of the TPS to its core.
Information obtained from the Toyota website and the National Transportation Safety Board (NTSB) indicates, in each of the years from 2012 through 2015, Toyota recalled a minimum of 5.3 million vehicles, hitting a record recall of 8.4 million vehicles in 2015.
In 2012, Toyota had 12 recalls effecting 5,300,000 vehicles.
In 2013, Toyota had 15 recalls effecting 5,300,000 vehicles.
In 2014, Toyota had 24 recalls effecting 6,000,000 vehicles.
In 2015, Toyota had 27 recalls effecting 8,400,000 vehicles.
And 2016, at over 4,000,000 vehicle recalls (thus far), has not been much better.
This is a minimum recall rate of over 50 percent of annual production—and this does not include the unknown number of vehicles involved in “service bulletins,” which are problems known to the company that require remedial action but do not warrant a formal recall. Here are some of the recall details:
- In 2012, Toyota issued a recall for 7.4 million vehicles due to a problem with the power window mechanism posing a fire hazard.
- On October 17, 2013, 803,000 vehicles were recalled because water from the air conditioning condenser unit housing could leak onto the airbag control module and cause a short circuit.
- On August 7, 2013, 342,000 vehicles were recalled because screws that attach the seat belt pretensioner to the seat belt retractor within the seat belt assembly for the driver and front passenger could become loose over time due to repeatedly and forcefully closing the access door.
- In 2014, just one of the many recalls Toyota issued that year was for problems involving air bag cables and rail seats, which affected 6.4 million vehicles.
- In 2015, a recall issued to fix power window switches affected 6.5 million vehicles, and another recall involving defective air bags affected 1.4 million vehicles.
- And in 2016, a few of the more significant recalls issued included 1.1 million vehicles with defective lap-belts, and another 337,000 vehicles were recalled because of defective rear suspension arms.
These are the kinds of numbers, and this is the kind of publicity, that should result in many sleepless nights for the leadership of Toyota and should give pause to the millions of disciples of the TPS and the principles of Lean. The assumptions of even the most fervent advocate of the TPS and Lean should be challenged to their core. To give some perspective, if the average burdened cost to Toyota of the recall was only $100 per unit (a modest assumption, to be sure), then that would put the minimum annual cost of the recalls at $530 million dollars and upward of $800 million dollars for 2015.
Certainly, with these outcomes, I would not want to emulate Toyota if I were a business leader (and I am) without a level of skepticism and some considerable due diligence. And I would be very distrustful and hesitant—even resistant—to embrace the approaches used by Toyota to improve the operations of my business blindly, based only on the past reputation of the TPS. After all, who wants to be known as the company that makes defective products, but does so very efficiently? This is hardly a path to sustainable viability or a rallying cry for converting customers into fans.
Of course, if we look at the nature of the recalls and their root causes, we find almost none of the recalls are the result of a defect in the manufacturing or assembly processes. I submit and agree the products were manufactured as prescribed and the steps involved in manufacturing did not cause defects resulting in the recalls. In fact, almost all of the recalls are the result of failures in the product or in production design and engineering.
Some people will point out that many of the defects were due to defective materials being delivered by vendors in Toyota’s supply chain—as if this somehow absolves Toyota of the problem. The millions of vehicles recalled due to faulty airbags would be an example. But, to me, vendors in Toyota’s supply chain (or anyone’s supply chain) are merely extensions of the production process put in place for the convenience of Toyota. There should be no expected decrease in quality just because some other company actually manufactured the part. Besides, many vendors are also equity partners with Toyota. Where do you draw the line?
I am also sure there are many who will scream, “See! It’s not the TPS or Lean that’s not working at Toyota! There are no defects in the manufacturing process. They are doing just fine!”
I’m sorry to disappoint those people, but, in my opinion, Toyota is not doing just fine. In fact, there is a large part of the business that is operating at an entirely inadequate level of performance. And I will go even further and state that the general public does not recognize the nuance of who or what might be to blame the same way a zealot of the TPS does. All the general public sees—and rightfully so—is the output and results of the efforts of Toyota are defective.
It would be good for Toyota (and those who embrace TPS) to remember customers are not buying the perfect manufacture of a car: they are buying a car.
Another thing to keep in mind, but rarely mentioned, is that the ascent of Toyota (and the other Japanese automobile manufacturers) in the United States was largely the result of the Organization of Petroleum Exporting Countries (OPEC) Oil Embargo of 1973–1974.
This event caught American vehicle manufacturers flat-footed.
Until then, Americans loved their big cars with big engines, and that is what the American manufacturers made. According to a report by the Economic Policy Institute (EPI) entitled “The Decline and Resurgence of the U.S. Auto Industry”, in 1974, General Motors, Ford, and Chrysler accounted for over eighty percent of the market share with Japanese manufacturers accounting for less than ten percent.
I remember looking at some of the early four-cylinder engines made during this time. They called them “in-line four-cylinders,” but they looked like eight-cylinder engines cut down the middle lengthwise and were complete with a large flat wall where the “cut” would have been made. Engineering marvels they were not, and the quality was poor.
It took the American automobile manufacturers over a decade to learn how to build quality vehicles that were fuel efficient, and then only after creating partnerships with Japanese companies (such as the partnership between Ford and Mazda). And during this time, the Japanese automobile manufacturers were able to establish themselves in the United States.
So I would argue that the ascent of Japanese automobile manufacturers in the United States had as much to do with the geopolitical circumstances of time—being in the right place, at the right moment in history, with a product that proved attractive versus the incumbents—as it did with any particular management philosophy.
System-Wide Integration
I would like to clarify: I have no axe to grind against Toyota. I have owned Toyotas in the past and believe they are fine vehicles. I would even consider purchasing another.
What I am offering is perspective on trying to separate the hype from the reality when it comes to the TPS. In my opinion, the TPS is not delivering satisfactory results, even for Toyota. I only single out Toyota and the TPS because people have a tendency to sell them both unreservedly as beacons to a corporate Valhalla and consume it without looking at the label or reading the directions. Those disciples of the TPS possess boundless hubris and display a great arrogance in their ignorance, looking down with contempt on those who question it.
There are many who would proclaim in defense of Toyota that Ford has had its fair share of defects and a similar number of recalls, and that is absolutely true. But neither Ford nor proponents of Ford and Ford’s business operating system are holding themselves up as the standard-bearer of production or organizational performance prowess, as is the case with the advocates of the TPS and Lean.
The TPS was developed between 1948 and 1975, which makes it roughly forty to seventy years old, and Six Sigma is roughly thirty to forty years old. And although it might have been transformational back in the day, it is obvious from the experiences and results at Toyota that the TPS is in dire need of transformation to remain effective—even relevant—and to meet the needs of the twenty-first century organization. After all, even the TPS should be subject to kaizen.
You must always keep in mind and realize that the TPS (and Lean Six Sigma) are incomplete and imperfect—and one size does not fit all. They are not magic elixirs that you can swallow and make everything better. It takes work and lots of it. And the methodologies and tools as they currently exist and are employed are not enough, not nearly so. Just look at Toyota.
Leveraging TPS and Lean Six Sigma Across the Enterprise
Most TPS and Lean Six Sigma professionals think of the production line as what goes on inside the factory (see figure 1.6). They believe that if their intended output is created with minimal waste and at peak proficiency, they have accomplished their mission well. They might even consider the expansion of the TPS into any one of the other boxes. From this micro-level perspective—where the focus of the effort is on processes—that might be accurate.
However, if we examine the entire production line from a more macro- or systems-level perspective—marketing, through post-sales service, including all of the finance and supply- and value-chain points along the way—we can see the actual production process (any individual box in figure 1.6) is only a small part of the overall process of delivering a product to a consumer.
A basic tenant of the TPS and Lean is to rally resources when an opportunity for improvement is discovered, so it stands to reason that a defect discovered at any point along this production line should result in an alert and the dispatch of a kaizen team to resolve the defect before resuming production.
Certainly, the TPS and Lean Six Sigma have played a significant role in bringing companies to a higher level of performance over the past several decades, and those early adopters certainly realized rewards.
But today, most companies have recognized the benefits of these methodologies and have incorporated them as a cornerstone of their own continuous improvement programs, even if to varying degrees of completeness and success, including at Toyota. And, if everyone is doing it, it’s no longer a differentiator, and it no longer drives a competitive advantage.
The business that focuses on cutting waste over innovation and driving value to the customer—for which the customer is willing to pay a premium—is not at any particular advantage. Nor is the business that optimizes its processes but does not take the time to balance these processes so that they work harmoniously within the systems they comprise.
Instead, businesses that perform the following actions more quickly, efficiently, and effectively than their competitors have the advantage today:
- Are innovative, creating demand and marketplaces
- Thoroughly understand their capacity, capabilities, and weaknesses
- Quickly recognize, anticipate—even seek—an opportunity or threat
- Rapidly formulate an effective response
- Evaluate and make the go/no-go decision
- Decisively deploy a response
- React to the fluidity of engaging
The advantage now comes from balancing these processes so they work harmoniously within and across the systems of the enterprise. The differentiator is the speed, precision, decisiveness of decision-making (often from imperfect data), strategy execution, and operational excellence. And those companies that do not master these disciplines and skills—wherever they may be located—are punished by the markets.
As well they should be.
So how do we leverage the TPS and Lean Six Sigma to gain alignment and integration across the entire enterprise? We take it to the next level. We build upon what we know and grow it into a new way. We expand the toolsets of the TPS and Lean Six Sigma, even the name itself, so it involves, incorporates, and supports the entire company across all its aspects and endeavors.
After all, even the TPS and Lean should be subject to Kaizen.
To summarize; the competitive advantage for businesses in the 20th Century was centered around the efforts related to process excellence—eliminating waste and making the processes throughout a business as efficient and as effective as possible. And this was accomplished using a variety of disciplines including (but not limited to) Lean, Six Sigma, Theory of Constraints, and so on.
This is not to say that a mastering of these management systems, methodologies, and their tools are obsolete or otherwise diminished in their importance. They are a necessary foundation on which to build and go beyond.
But, time is the enemy of the 21st Century company.
Therefore, the competitive advantage will go to the companies that can see further beyond the horizon then their competition, be able to recognize opportunities and threats sooner, have the ability to devise and deploy decisive engagements of those opportunities and threats more quickly—and be capable of making adjustments in real-time as circumstances unfold.
Not just see further and detect sooner, but decide and act faster.
This means, they will have to make decisions more quickly and more boldly—often synthesizing a course of action from incomplete data.
And to be successful here, companies will have to improve their capabilities and capacities—not just within the business siloes—but horizontally integrated across the siloes. They will have to work to improve their organizational design so that, as an organization, they are operating efficiently and effectively. Therefore, the competitive advantage will go to the businesses that not only have a command of the fundamental building blocks of process excellence, and systems excellence, but also achieve a level of operational excellence – ensuring the entire organization is in a State of Readiness.
The key to success here are having an organizational design that is built for speed—nimble, capable, and decisive—and investing in talent. Not just hiring and retaining the best, which will be increasingly more difficult as the competition for talent in the talent pool becomes tighter. But investing in those who are already working within your organization so that they can be the best they can be and drive value throughout organizations.
After all, you can’t be a high-performance organization without having high-performance teams who are made-up of high-performance individuals.
By Joseph Paris
Paris is the Founder and Chairman of the XONITEK Group of Companies; an international management consultancy firm specializing in all disciplines related to Operational Excellence, the continuous and deliberate improvement of company performance AND the circumstances of those who work there – to pursue “Operational Excellence by Design” and not by coincidence.
He is also the Founder of the Operational Excellence Society, with hundreds of members and several Chapters located around the world, as well as the Owner of the Operational Excellence Group on Linked-In, with over 60,000 members. Connect with him on LinkedIn or find out more here: www.JosephParis.me/card
