Lean’s 98+% Failure Rate
Bob Marshall finds Lean’s 98% failure rate scary. So he should! Why would anybody want to attempt something when success is so unlikely?
Just as I was about to throw all my Lean books into the bin, the wise words of Vic Reeve’s came to mind.
“88.2% of Statistics are made up on the spot”
Less than 20% of Statistics are actually based on any facts! It is possible, even probable, that this figure of 98+% is just a work of pure fiction. I need to find out where this number comes from.
I keep using the Clifford Ransom numbers – 98%+ lean failure rate – which most folks seem to think jives with our feel for the situation.
Here we see the figure attributed to Clifford Ransom, a man with fine Lean credentials. It took some effort to find the original source.
The original interview with Clifford Ransom by Dr. Robert Hall, AME Target Editor, can be found in full on the BMA Inc website. Here we find some context and the actual definition of failure.
Q: Do you track many lean manufacturers?
A: No. Very few companies have advanced with lean manufacturing until you can see the results financially — perhaps one or two percent at best. Another two-three percent are “getting there” —OK but not outstanding. Another 10-15 percent mostly “just talk lean.” The majority, 80 percent or so, don’t even have the buzz words straight. Unless I see three pieces of evidence, I do not consider a management to be serious about lean manufacturing. 1) They must proclaim that they are becoming lean. They can call it whatever they want, but intentions must be boldly stated in a vision that everyone can understand. 2) They must tie compensation to lean systems. You are not becoming lean if you reward people for doing unlean things. 3) They have to drive the company with lean metrics — time and inventory measures. You have to persist to see results. You won’t see much change in the financials for 12 to 18 months, sometimes longer. Clearly, confirming the sustainability of superior performance takes much longer — years. Most managements waffle around, make only a half-hearted attempt, and never get rid of the inconsistencies in their own leadership.
The figure of 98+% and the word “fail” do not occur here. What is says is that only one or two percent, at best, advance with lean manufacturing to a point where the results can be seen financially.
The inversion of 1-2% at best to 98+% is made by Bill Waddell in his article, where he paraphrases the interview:
But there is, according to Ransom, a 98%+ probability that whatever looks so lean on the shop floor makes no difference to the bottom line of the company.
So it turns out that this frightening statistic was not made up on the spot after all. However, now we have the context there is clearly nothing to be afraid of.
98%+ lean failure rate
lean = “what looks like lean”, including attempts that “waffle arround” and make only a “half-hearted attempt”.
fail = “No difference to the bottom line of the company” significant enough to attract the interest of a Wall Street investor.
A webinar with Clifford Ransom explains why so many Lean initiatives will fail in this way:
Lean is a terribly fragile thing. It is not robust, it can fail, it needs constant feeding and watering and reinforcing and scrutiny. And quite frankly I think it probably fails much more often than it succeeds. It’s counterintuitive, it’s innovative, it forces new ways of thinking. I think that empowering employees can be scary for both bosses and employees in some instances. There — I talk about the failure rate of Lean and I guess this slide would be better why companies fail at lean, or fail to even start at Lean. Change is threatening.
In the same webinar the 98+% figure is revised a little more favourably
I think there’s really only 5%who practice the art skilfully in a world class master practitioner kind ofway. I’m actually mellowing in my old age. I used to say only 2 to 3% of companies did it.
Perhaps Clifford Ransom’s third criteria for true Lean success explains why so many find it hard to attain:
3) They have to drive the company with lean metrics
Successful Lean is driven by the numbers, and it seems that people struggle to understand the numbers and their implications. Why else would somebody use the following metrics to support a case for Lean’s failure?
a) “Only 2% of the companies reported achieving World Class manufacturing status.”
b) The 2007 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers is a study of manufacturing metrics, management practices and financial results at the plant level.
17.8% say continuous improvement programs led to a major increase in productivity:
67.2% report some increase
12.4% report no change
2.2% report some decrease
0.5% report a major decrease
c) 10-20% of leaders in a typical organization are unable or unwilling to make the lean conversion.
Any approach that may lead to world class performance must be worth a try. Larry Rubrich’s figure of 2% of companies achieving a “world class” manufacturing status is in line with Clifford Ransom’s observations. He credits an Industry Week census as the source.
The results from another Industry Week census in 2007 provides a clear story for the success of continuous improvement, a pillar of Lean. 85% of companies succeeded in improving their productivity and nearly 20% achieved a dramatic improvement. On the failing side we see 15% who reported no change or decline, and the 10-20% who are unwilling to even give it a try.
Implementing lean is like taking regular exercise. It isn’t easy but done right it can benefit anybody. My own abysmal failure to maintain an exercise regime does not change this.
Exceptional athletes have the dedication to take their exercise and training all the way to Olympic gold. Their achievements do not make the rest of us failures, their achievements inspire us all to try harder.