Crisis as an opportunity: Balance of the failures and reorientation
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A crisis is the best moment to make a complete turnaround. In Japan, the term ‚kiki’ means „crisis“ as well as „opportunity”. A lot of companies which suffered from the crisis could be in a better state if they had changed their business processes to the better on time. I can think of the Detroit ‚Big Three’ of the automobile industry. They now have reached the point of reckoning. Detroit’s company, their management, their share holders, investors, providers, distributors and the labor union UAW should now realise that they failed at using the lean production system respectively at supporting the management in doing so. They missed to observe their business from a long-term perspective over the next 10 till 15 years.
The today’s situation of the Detroit Companies derives from that failure. The management was obsessed to make rapid profit at every end-of-quarter. They were pushed by the shareholders who were eager for rapid profit as well. The today’s management hasn’t done anything to secure the long-term business survival. The company leaders even took the risk to endanger the long-run profit of their companies. In all those companies, the main focus is nowadays too much on the financial success which is typified by the Wall Street. In favor of those short-term profits, the leadership circles refused over years to strengthen the global competitiveness.
By ”Point of Reckoning“ I mean that all those companies, no matter if production companies, providers or distributors, need to bear the consequences now. They should quickly decide for changing their production system to “Lean”. Maybe for some companies it’s already too late, if not impossible, to start with it now in order to survive in the global competition, which is getting tougher and tougher.
The plant of the future needs a flexible production system which is adapting quickly to the changing customer needs. The KAIZEN/Lean production system is one of them which companies like Toyota apply. The previous traditional system, which the Detroit automobile companies use, is aiming for the search for minimal unit costs and goes with mass production and high inventory. The consequences of that system are long throughput times in the production, high running costs, a lot of quality problems and a lack of flexibility. The majority of companies, also beyond Detroit and other industries, is still applying the traditional production method.
The implementation of the Lean Philosophy does not need big investments. It is about improving things in small steps, continuously, involving all parties concerned. It is the people who are bringing their companies forward by their efforts. Important is the full support by the top management, but still, every individual counts. In the medium term, dramatic changes will lead to positive results by applying KAIZEN. State financial aid to companies should only be granted provided that these companies change their structures by continuous improvement.
Management systems of the 21st century should be made for keeping the companies alive. For this an operational re-organization is needed. This means the focus has to be on the currently applied production system. In most cases it will show that the positive aspects of the Lean Philosophy were missed to be applied. The Lean or Toyota production system is well-known for centuries and was explained in numerous books. Therefore the responsible will need to face the moral of conscience why they have not implemented the Lean method earlier.
I think the big Detroit Companies failed in doing this because the managers were too arrogant and too egotistic for recognizing the advantages of the Lean approach. I would say if they had spent a part of their high bonuses for implementing Lean in the past ten or twenty years, the companies would have never got into the today’s situation. Bonuses for the management and high expenses, for example for company-owned aircrafts, lead to the fact that the management was mainly busy making money. Furthermore, they completely ignored the necessary improvement on the operational management.
Masaaki Imai is the founder and chairman of the KAIZEN Institute which provides consulting in Lean and quality management and Japanese philosophy of management to companies.