Overview of the Lean Enterprise Approach to Commerce - Raphael L. Vitalo, Ph.D.

The Lean Enterprise model is a business improvement methodology and, for some, it is a comprehensive and strategic approach to conducting a commercial enterprise.

Origins

James Womack and his colleagues derived the approach from the findings of their study of the Toyota Motor Company and other Japanese companies. They compared the more successful methods that these companies employed to the approaches used by a wide array of automotive manufacturing companies around the world. The International Motor Vehicle Program located in the Center for Technology, Policy, and Industrial Development at the Massachusetts Institute of Technology implemented the study in 1985. Its goal was to enable automobile manufacturers worldwide to advance the prosperity of their host countries and improve the work life of industry employees by transferring knowledge of the more competitive approaches implemented by Japanese companies such as Toyota. The study lasted five years, had 36 sponsoring governmental and industry organizations, produced 116 scholarly publications, and culminated in the publication of The Machine That Changed the World (Womack, Jones, and Roos, 1991). It introduced the term “lean production” to characterize Toyota’s manufacturing strategy (i.e., the Toyota Production System or TPS) and contrasted it with “mass production,” which was the norm.

Absent from that work was the recognition of W. Edwards Deming’s contribution to Toyota’s success (Nemoto, 2009). Our research indicates that Deming’s teaching was, in fact, the foundation of the Toyota Motor Corporation’s success during the period of its emergence as an exemplary global automotive manufacturing company (circa 1960–1990). Indeed, Dr. Shoichiro Toyoda, the son of the founder of the Toyota Motor Corporation and its chair from 1992 to 1999, acknowledged this fact. “Everyday I think about what he [Deming] meant to us,” said Dr. Toyoda. “Deming is the core of our management” (Quoted in Burns, 2008). Nonetheless, Deming’s role with regard to Lean Enterprise is largely unrecognized, and its incorporation of his teaching is quite limited.

Over the decade and a half following the introduction of Lean Manufacturing, the Lean production model was refined and elaborated into “Lean thinking.” Its guidance was applied to a wide variety of commercial enterprises, including both manufacturing and nonmanufacturing businesses. During this period, its authors expanded Lean thinking’s guidance by incorporating their understanding of additional elements of Toyota’s strategic perspective, management methods, and operating guidance. Despite the model’s expansion of perspective, in practice, the main focus of Lean Enterprise applications has always been on business operations.

The Purpose Lean Serves

As Vitalo and Bujak (2022) document, the ultimate goal Lean’s approach to conducting commerce serves, as defined by the people who embrace it and use it, varies. Since Lean Enterprise is not a formally developed model—that is, it is not a set of knowledge logically derived from basic assumptions about what commerce is, why people engage in it, and what its contribution to society should be—there is no way to reason conclusively about its ultimate purpose. It is what its practitioners use it to achieve. Some practitioners see its purpose as a method for maximizing the profitability of a company by continuously improving a business’s efficiency and reducing its costs. Others believe that the Lean approach to commerce is about striving for perfection with a focus on applying Lean tools (e.g., 6S, Kaizen, TPM) to accomplish this end. Still others see it as a comprehensive approach to managing a business that integrates the contributions of all stakeholders in a common effort to maximize the delivery of value to customers.

What can be said with confidence is that Lean methods are capable of advancing a business’s success by eliminating waste in everything it does. They can also be used to maximize the delivery of value to customers, a purpose certainly endorsed by Womack and Jones (2003) and their followers. Lean thinking defines waste as any activity that does not materially change a product or service output in a way that a well-informed and reasonable customer is willing to pay for. A business adds value by introducing a new feature to its offering or modifying its customers’ buying–benefiting experience in a way customers deem worthy of remuneration.

The Definition of the Purpose Lean Serves That Vital Enterprise’s Endorses

All the guidance on this web site related to implementing Lean thinking assumes that the lean approach to commerce seeks to provide customers an ever-more value ladened and success enabling product or service and buying–benefiting experience by eliminating waste in everything a business does, maximizing its delivery of value to its customers as defined by the customer, benefiting all its stakeholders inclusively, and developing a workforce that sustains these activities into the future. Waste is any activity or resource expenditure that does not materially change a product or service output or a customer’s buying–benefiting experience in a way that a well-informed and reasonable customer can detect or, if detectable, does not value. Our definition of value differs from that offered by Womack. He defines value as being any feature of an offering or a customer’s buying–benefiting experience that he or she deems important enough to pay for. We define value as a feature of an object, activity, or setting that enables its recipients to achieve the purpose they seek to accomplish in a way that satisfies their preferences and provides a better life for everyone. A workforce capable of sustaining waste removal and value enhancement is made up of people who are aligned, teamed, energized, capable, and pioneering and empowered to apply their capabilities to continuously improve the business (Vitalo, Byron, Bierley, & Holmberg, 2008). In our understanding of the lean approach to commerce, a stakeholder is any individual, group, or entity that either is affected by or may affect the success of commerce. We include as a stakeholder, the ecosystem that sustains all life.

The Components of Lean Thinking

In general, the Lean model contains management rubrics along with much guidance for how one applies these rubrics and a set of methods, termed “tools.” Management rubrics guide one’s behavior in overseeing business operations and managing one’s relationships with workers. Some typical high-level operations-related management rubrics are

• define value from the customer’s perspective,
• map the value stream for each business function,
• management from a value stream perspective,
• establish flow in every business process,
• establish pull in every business process, and
• strive for perfection.

Some operating-level management rubrics are

• respect all people,
• standardize work processes,
• go to where a problem is occurring and see what is actually happening, and
• use systematic problem solving methods to eliminate problems.

Most Lean tools facilitate the discovery and elimination of waste. Other tools, guide the discovery of opportunities to elevate the delivery of value to customers. Some tools are complex such as Total Productive Maintenance. It is a system of activities that ensures that every machine is always able to perform its required tasks as expected. It includes methods for implementing autonomous maintenance, predictive maintenance, and equipment improvement. Other tools are constrained in their scope. 6S ¹ is one such tool. It ensures that every work setting is continuously maintained in a manner specified in each process’s standardized work document.²

The Outcomes Lean Applications Can Produce

The outcomes that Lean applications produce vary based on the purpose Lean methods are put to, what aspects of Lean thinking are incorporated in the application, what constraints are applied by higher-level executives with regard to the scope of the application and the decision-making authority of the people implementing it, and how competent its implementers are in the skills needed to apply Lean thinking.

When implemented by competent people with the aim of benefiting all stakeholders inclusively and earnestly supported by executive decision makers, Lean thinking increases the value received by customers, reduces operating costs, and provides employees the opportunity to experience pride in the products they produce and the services they deliver. It also yields new learning, improved employee engagement, elevated teamwork, and has raised the performance of businesses on traditional measures of business success. The histories of companies applying Lean thinking including Wiremold (Million, 2007), Danaher (DeLuzio, 2019), and, most recently, General Electric (Kellner, 2020), attest to the benefits it can deliver, as well as the outcomes produced by Kaizen improvement events (see, for example, Bujak and Vecellio, 2014; Reed, 2004; Vitalo, 2005; Vitalo and Guy, 2004; Vitalo and Lowery, 2003).

References

Bujak, C.J. & Vecellio, P. (2014). Kaizen applied to public health improvement. Retrieved June 24, 2022, from http://www.vitalentusa.com/learn/kaizen_applied_to_public_health_improvement.php

DeLuzio, M. (2019). The Danaher Business System vs. The Toyota Production System. How are they the same? How are they different? Retrieved June 24, 2022, from https://www.linkedin.com/pulse/danaher-business-system-vs-toyota-production-how-same-mark-deluzio

Emiliani, M.L. (2007). Better thinking, better results. Center for Lean Business Management, LLC.

Kellner, T. (2020). New energy: How GE embraced ‘Lean’ and reinvented its birthplace. Retrieved June 24, 2022, from https://www.ge.com/news/reports/new-energy-how-ge-embraced-lean-and-reinvented-its-birthplace

Reed, M. (2004). Kaizen in action in Asia. Retrieved June 24, 2022, from http://www.vitalentusa.com/members/asia_ci.php

Vitalo, J. & Guy, M. (2004). Office Kaizen with customer involvement. Retrieved June 24, 2022, from http://www.vitalentusa.com/learn/projects/office_kaizen_full.php

Vitalo, J. & Lowery, T. (2003). Improving product shipping. Retrieved June 24, 2022, from http://www.vitalentusa.com/learn/projects/separator_kaizen.php

Vitalo, J. (2005). Core staging and setting Kaizen. Retrieved June 24, 2022, from http://www.vitalentusa.com/learn/projects/core_set_full.php

Vitalo, R.L. & Bujak, C. J. (2019). The missing pieces in the Lean Enterprise Model. Retrieved June 12, 2019, from http://www.vitalentusa.com/learn/missing_pieces_in_the_lean_enterprise_model.php

Vitalo, R.L. & Bujak, C. J. (2023). Life Enabling Enterprise: An economic system for the good of humankind. Lowrey Press, Austin:TX.

Womack, J. P. & Jones, D. T. (2003). Lean thinking. New York: Free Press.

Footnotes

¹6S extends the original “5S” method by adding Safety as the sixth concern.

²No lean literature provides a truly systematic approach to applying Lean tools to improve business operations. Also, none re-integrates Deming's contributions to Toyota's success. However, there is such guidance. It is provided in Life Enabling Enterprise: An economic system for the good of humankind (Vitalo and Bujak, 2023). See especially, Section III The Operations Component of the Life Enabling Model.

Published June 29, 2022

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