The Way Forward

Lean Leadership and Systems Thinking for Large and Small Businesses

Wallace Garneau

• Publisher: Productivity Press
• Year: 2021
• ISBN:
  9781000377484
• Edition: 1
• Topic: Business
• Subtopic: Operations
• Index: Business

This book helps business leaders see how employees, companies, and missions all interact with each other, as well as with society at large, in systems and subsystems at various levels. It helps leaders learn how to connect the dots, becoming customer-centric in everything they do and then spreading the same goals down to their supply chains.

The book discusses what is, and what is not, leadership, covering such topics as statistics-based management, process-improvement, and human resources. The author accomplishes this through a blend of Lean culture and managerial theory, as well as his military experience.

In addition, the author contrasts many opposing subjects, such as efficiencies of scale versus efficiencies of build, automation versus process improvement, process innovation versus product innovation, technical versus tactical proficiency, and pull versus push production.

With most books focused on Lean initiatives, there is a tremendous amount of benefit involved in creating customer value while reducing waste, but this book takes a holistic approach, blending in modern managerial theory, team leadership skills, and economics. The result is a book that changes how the reader approaches business.

Essentially, the purpose of this book is to blend modern management theories with the culture of Lean (and perhaps a sprinkling of economics) to show current business leaders how to create organizations that are as customer-oriented and highly efficient in delivering value as possible. If one thinks of each role in an organization as a spot on an assembly line, where everything each person does creates output someone else uses, the question becomes whether or not each person's activities maximize the effectiveness of others. Do we, as organizations, set ourselves up for success or for failure? Most companies, if they answer honestly, would say, "A little bit of both." This book is about helping those companies improve.

1

The Corrupt Way to Make Money

Before getting into the concept of Lean Leadership, I want to go into a brief political and economic discussion about the state of business in America today, for the techniques in this book are based on free-market dynamics that are much weaker than they were in the past. This book assumes that the way for a business to make money is to find a need that customers are willing to pay to have met, and then to meet that need better than other companies. This book assumes, for example, that if air bags sell in cars, it is because the public is willing to pay more for cars with air bags, and not because the government mandated that cars have air bags. This book assumes that if wind turbines and solar panels sell, it is because they provide energy more cost effectively than do alternative sources, and not because the government decided we should have more solar panels and wind turbines.

This book assumes things that are, over time, becoming less true.

That’s not to say that the techniques in this book do not work, because they do. We still have free-market elements to our economy, and as long as we do, the methods in this book will be effective. This book would, however, be incomplete if I did not recognize that in our current, cronyist system, there are other ways a company can make money, rather than by pleasing customers. This chapter looks at how to use cronyism to make money, which stands in stark contrast to the rest of the book. I do not endorse cronyism, but it is important for the public to understand what a “mixed economy” really looks like, in the hope of one day restoring our free-market system, such that someday adding value can be the only way to make money.

There is a book called Executive Greed,¹ by Vinay B. Kothari, which I read as a part of a business ethics class. Executive Greed discusses how corrupt the US Economy currently is. Executive Greed doesn’t say how to make money in a gamed system, but it does discuss just how gamed the system is – and it is truly a system in which “we the people” are exploited, for the benefit of the economic elite.

I also studied nonmarket strategies in my MBA program, and I will never forget the studies we made on the pharmaceutical industry, which provides a great example on just how bad things have become.

Deceptive Advertising

It was not that long ago that pharmaceutical companies were not allowed to market directly to consumers. Pharmaceuticals are, by nature, prescribed by doctors, and it was thought that while consumers might be the ones who consume pharmaceuticals, doctors really are the ones best positioned to determine when to use them. The pharmaceutical industry lobbied government long and hard to have the rules changed, and today it is perfectly legal for pharmaceutical companies to advertise directly to consumers.

At first, pharmaceutical companies had to follow truth in advertising laws that said that their advertisements had to be true, and, in fact, some advertisements were taken off the air for making claims that could not be supported, such as a toe fungus commercial, in which a giant pill rolls over a fungus monster. The pill was not effective, so having a pill kill the monster was deemed by the FDA as being in violation of truth in advertising laws.

In time, pharmaceutical companies were able to lobby government, to allow pharmaceutical advertisements to say anything that was not demonstrably false.

That sounds like a small change, but think of the implications. If a pharmaceutical company markets a pill “for” a particular ailment, and the pharmaceutical company has to follow truth in advertising laws, then that pill had better work, for saying it “is taken for” an ailment implies that it has a positive effect. Change the law so that pharmaceutical companies can say anything that is not expressly false, and suddenly, as long as they can get people to take a pill “for” a particular ailment, they can advertise the pill as “taken for” an ailment, even if it does not work. Under this interpretation, pharmaceutical companies could sell pills “for” ailments for which the pills did absolutely nothing. Suddenly, the airwaves became bombarded with advertisements for pills, “taken for” different ailments, with no regard for how effective those pills may actually be. The most common advertisements are for pills “taken to enhance that special part of the male anatomy.” As I write this, none of the pills currently on the market taken to enhance that special part of the male anatomy, have any positive impact on any part of the male anatomy.

Not to stop there, the pharmaceutical companies began to pay doctors to tour the country, giving presentations on “new” ailments that did not previously exist, which the pharmaceutical companies could sell their medications as being “taken for.” These are “ailments” pharmaceutical companies made up out of thin air, and pharmaceutical companies, at the time we studied them, made more than half their revenue selling medications that did not work, treating ailments that did not exist.

Pharmaceutical companies are also protected from litigation when their products harm consumers. As long as they run really small print, telling those who see their advertisements all of the innumerable ways their products might hurt people, they are protected from anyone suing them.

The interesting thing about this pharmaceutical example is that on first glance, it sounds like the government needs to correct for the free market, but the root cause of all the problems is that the government has protected pharmaceutical companies from the harm their products may do to consumers. Everything else the government has done has been in response to problems caused by this violation of free-market standards – standards in which the courts are the proper mechanism to address harm.

There are only three kinds of politicians: those who can be persuaded, those who can be intimidated, and those who can be bought.

A.P. GIANNINI, FOUNDER, BANK OF AMERICA, quoted in The Innovation Stack, by Jim McKelvey²

Forced to Buy a Product

Ethanol is another great example. Corn farmers have convinced the government to mandate that ethanol be added to gasoline. Ethanol is made from corn, and burns both hotter, and faster, than does gasoline. The ethanol mandates make both corn and gasoline more expensive, while making cars less fuel-efficient. Ethanol mandates hurt everyone except the corn farmer.

The lesson is that in today’s economy, companies can enhance their ability to make money by lobbying government, rather than by making goods and services that benefit customers. Because lobbying activities are not considered “competitive,” companies can even collude in such activities as “industry groups.” Sadly, getting government to intervene in markets can, in certain circumstances, be more effective than producing goods and services people actually want (like gasoline without ethanol).

Making goods and services which meet legitimate customer needs better than competitors is a very dog-eat-dog world. This is a consumer-friendly environment rather than a business-friendly environment. Socialists often claim that free markets favor corporations, but that is not true. Free markets favor consumers and are unforgiving on businesses, of any size, that do not meet the needs of consumers. In a free market, if a small competitor can better meet the needs of consumers than can a giant corporation, the small competitor will grow and the giant corporation will shrink. Given time, the giant corporation may become a small competitor and may go completely out of business, whereas what was a small competitor can become a giant corporation. Apple started in a garage, but look at it today. It is only when markets are not free that corporations can use regulatory barriers to squash smaller competitors, and to maintain their positions, independently of how well they serve customers.

Customer Needs or Political Needs?

Companies can find products that meet political needs (chosen by politicians rather than expressed by customers, that is, such as regulations on air and water, consumer safety, reducing co2 emissions, etc.). The type of political need does not matter as long as there is one. It does not have to be a legitimate political need either, and the “solution” need not be effective. As long as the cause is considered “noble,” even a bad solution will get good press, and government support.

When dealing with political needs, it is actually better if goods and services have as little effect as possible, such that the “need” for those goods and services does not go away. This dynamic also creates job security for politicians.

One company I worked for made money through government grants, by spraying coal with fire hoses. “Clean Coal” was a popular political goal at the time. Spraying coal with water had no effect on the coal (other than making it wet), but it earned this company tens of millions of dollars a year in federal grants, and was the principal way a big part of this company (not the part I worked for) earned revenue. This company operation was dishonest, but it satisfied a political goal.

Once a company has goods and services that meet political needs, it can then figure out how to get the government to help. Government can create tax breaks for those who buy the company’s products (think Tesla), government can create subsidies to offset the company’s expenses, government can make regulations requiring that a company’s products be included as “safety devices” on bigger products (like cars), or government can purchase a company’s goods and services directly.

Companies can take out government loans. CEOs and other executives can pay themselves handsomely, with high salaries and bonuses, while doing almost nothing, and then push the company into bankruptcy once the loans dry up. Solyndra did this, and it is a perfectly legal Ponzi-like scheme. Once Solyndra went out of business, there was nothing stopping the people who built Solyndra from taking out more government loans, to start more companies, meeting more political needs (instead of the real needs of real consumers). Ponzi-like schemes based on government loans are a great way to make lots of money in a relatively short period of time, all at the taxpayer’s expense.

What Solyndra did was similar to a Ponzi-scheme, but sometimes the government assists companies in creating actual Ponzi-schemes. According to court documents, between 2011 and 2018, an Obama...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• Acknowledgments
• About the Author
• Introduction (A Personal Odyssey)
• Chapter 1: The Corrupt Way to Make Money
• Chapter 2: The Limits of Demand and Systems Thinking
• Chapter 3: Layoffs, Trust, and Changing Cultures
• Chapter 4: Automation and Bottlenecks
• Chapter 5: Maturing Markets
• Chapter 6: One-Piece Flow, Inventory, and Rapid Changeover
• Chapter 7: Statistics Based Management
• Chapter 8: Standardized Operations and Process Improvement
• Chapter 9: Quality
• Chapter 10: Supply Chain Management
• Chapter 11: Human Resources
• Chapter 12: Project Management and On-Time Delivery
• Chapter 13: Strategic Decision Making
• Chapter 14: Executive Team Operations
• Chapter 15: Marketing Operations
• Chapter 16: Waste
• Conclusion: Lean Leadership Requires Systems Thinking
• Glossary
• Index