Principles of Software Flow



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.

Some people point to an Evolving Excellence blog post as a source, where we find Bill Waddell doing the hansei:

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.

Bill Waddell quotes the figure with full attribution in a Super Factory article, but the link provided there is now dead.  Fortunately, there is a title given: “Lean Manufacturing: Fat Cash Flow“.

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.

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?

Supplemental Evidence

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.

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Comments

  1. Useful and insightful roundup of estimated rates of lean, who estimated, and what their basis was. I know Dr. Robert Hall and know Cliff Ransom by reputation and would believe their analysis is fact-based. The supporting information from IW is helpful too. So many companies are seeing a benefit from lean, though only a few are getting what they ultimately want.

    | Reply Posted 6 years, 12 months ago
  2. Very interesting – 2% gaining financial benefits does not surprise me.

    | Reply Posted 6 years ago
  3. I love that you went digging. There are two points I’d like to offer.

    You reference to made up statistics is actually very relevant. Consider the IndustryWeek report. This is self-reporting. There are a couple of issues with this. The save survey had (if I remember correctly) over or around 10 percent of companies reported that lean had been “fully implemented”. Really? I have of yet to ever see lean “fully implemented” but apparently 10 percent of companies are done with lean. This survey also only includes companies that actually respond to the survey, and that population is hardly representative of reality. Finally, the definition of successful isn’t clear. How are they defining that. And Cliff’s measure, that it shows up in the financials: how do we know? How do we know what the financials looks like if they HADN’T done lean. I share these reflections to make this point: this is nearly impossible to say what is and is not based on any single statistic.

    Secondly, we have to distinguish between “does lean work?” and “was it implemented well?” Diets fail, but not because it was a bad diet, but because it was implemented poorly. Lean, to be done right, is hard..very hard. Most companies that even dip their toe in the water end up better off, but only a few end up significant better off, and that’s because they do the hard work of making lean a real journey.

    Jamie Flinchbaugh
    http://www.JamieFlinchbaugh.com

    | Reply Posted 6 years ago
    • * Ged Byrne says:

      Jamie,

      I’m pleased that you found the article worthy of a response. I’m still finding my feet as a blogger.

      You’re right about the quality of Information Week’s sources, but even as they stand they no support for Leans failure.

      It’s interesting that you raise the point of diets failing because they are not done right, because there are so many fad diets: http://www.faddiet.com/ these do not lead to long term weight loss because of their nature, not because of the dieters failure.

      Is Lean a fad? There’s an interesting paper on the subject of fads that I hope to blog about soon: http://www.hear-see-do.com/AM/projects/hartwick%20miller%20management%20fad%20and%20classic.pdf

      | Reply Posted 6 years ago
  4. All points above accepts, I’m not seeing how this “debunks” the 98% figure (or the more general “most lean adoptions fail”). Can you help me? What have I missed in this post?

    Cheers
    Bob

    | Reply Posted 6 years ago
    • * Ged Byrne says:

      Bob, You’re right. The debunked is just there to make the title more dramatic. I’ve dropped it now.

      | Reply Posted 6 years ago
  5. PS Apologies for typo: s/accepts/accepted/ :{

    | Reply Posted 6 years ago
  6. * Ged Byrne says:

    Bob,

    The problem I have is with the statement “most lean adoptions fail”

    Fail to do what?

    The following statements are true:

    “Clifford Ransom believes that 98%+ of Lean adoptions fail to show benefits financially”

    “Industry Week reported that 98% of Lean adopters fail to achieve world class manufacturing status.”

    “Industry Week reported that 84% of Lean adopters successfully increase their productivity.”

    Obviously it has to be understood that you were tweeting, not submitted an academic article. I know that you are seeking to improve things (right shift them, as you say) so I am certain that like Bil Waddell you are reflecting on these figures for the right reasons.

    The post is really in response to the way in which Lean’s “self proclaimed failure rate” has become something of a mantra for those who criticise. For example, see the comments on this article: http://www.qualitydigest.com/inside/health-care-news/why-lean-why-now.html

    Personally I’m not interested in advocating Lean or anything else. Experience has taught me that advocacy doesn’t work.

    What I do believe in is Kirkaldy’s motto: “Facts not opinions.” http://members.optusnet.com.au/jph8524/JHfacts_not_opinions.htm

    The goal of this post is to present the facts behind the 98+% failure rate for those that are interested. It’s far from perfect, I still have a long way to go as a writer.

    | Reply Posted 6 years ago
  7. Ged,

    Many thanks for curating this post, and for ferreting-out the information from across the net, too.

    Like yourself I try to avoid advocacy (not always successfully) :}

    And as for my reasons in signalling the challenges in e.g. realising financial returns from “going lean” (or “going agile”, likewise), I have seen so many folks dive head first into the inviting waters of a Lean/Agile adoption, committing much of their own personal time and enthusiasm to the effort, only to see it come to naught (or naught of any positive significance to the businesses in question, anyways).

    Here’s my position on Lean/Agile adoptions:

    1) Attempting to install Lean or Agile in just one part of an organisation (most often, a development project or department) in itself runs contrary to the spirit of Lean (i.e. it does not embrace the whole organisation as a system).

    2) Attempting to install Lean or Agile across a whole organisation (a necessity for long-term adoption and significan benefit realisation for the organisation in question) is at least an order of magnitude more difficult than a local adoption.

    3) The nature of the challenge (rightshifting a collective organisational mindset) is not widely understood. Nor is the “target mindset” well understood, either, for that matter.

    4) If folks would understand the nature of the challenge, they would be much better placed to find effective solutions and increase their chances of success from the circa 2% reported by the sources you mention.

    5) A successfully Lean or Agile organisation is a great place to live and work. I’d love to see more folks and more organisations succeed in making it happen.

    HTH
    – Bob

    | Reply Posted 5 years, 11 months ago
  8. * Mark Graban says:

    There is a huge difference between Lean “failing” (altogether) and
    “failing to meet expectations” as the LEI white paper by Rother stated.

    If you set expectations unrealistically high, as in “Lean is a 12-week program that will fix everything,” then of course people will be disappointed. But, of course, Lean is not a quick program to “implement.”

    I think people like Jeff Liker and Cliff Ransom set the bar for “being Lean” very very high, meaning the whole organization thinks that way. Liker often said that under 2% of auto suppliers were really Lean. They were using Lean methods, but not thinking Lean. That’s not the fault of “Lean,” the methodology. It could be the fault of teachers who are peddling tools, belts, and quick fixes.

    It’s disingenuous to say Lean fails to deliver any results (better quality, better safety, faster cycle time, lower inventory, etc.) 98% of the time. That just doesn’t square with reality – in manufacturing or in healthcare.

    Lean’s not guaranteed to work, but it doesn’t fail to deliver improvements 98% of the time.

    | Reply Posted 5 years, 3 months ago
  9. * tnetland says:

    Although a bit late; I appreciate the digging too. Good work. We seem to lack robust figures about the failure and success rates of lean implementation. If someone have trustworthy references, I’ll be glad to hear from you!
    http://www.better-operations.com

    | Reply Posted 3 years ago


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