part0010

Muda. It’s the one word of Japanese you really must know. It sounds awful as it rolls off your tongue and it should, because muda means “waste,” specifically any human activity which absorbs resources but creates no value: mistakes which require rectification, production of items no one wants so that inventories and remaindered goods pile up, processing steps which aren’t actually needed, movement of employees and transport of goods from one place to another without any purpose, groups of people in a downstream activity standing around waiting because an upstream activity has not delivered on time, and goods and services which don’t meet the needs of the customer.

Taiichi Ohno (1912–1990), the Toyota executive who was the most ferocious foe of waste human history has produced, identified the first seven types of muda described above and we’ve added the final one. 1 Perhaps there are even more. But however many varieties of muda there may be, it’s hard to dispute—from even the most casual observation of what gets done in an average day in the average organization—that muda is everywhere. What’s more, as you learn to see muda in the pages ahead, you will discover that there is even more around than you ever dreamed.

Fortunately, there is a powerful antidote to muda: lean thinking. It provides a way to specify value, line up value-creating actions in the best sequence, conduct these activities without interruption whenever someone requests them, and perform them more and more effectively. In short, lean thinking is lean because it provides a way to do more and more with less and less—less human effort, less equipment, less time, and less space—while coming closer and closer to providing customers with exactly what they want.

Lean thinking also provides a way to make work more satisfying by providing immediate feedback on efforts to convert muda into value. And, in striking contrast with the recent craze for process reengineering, it provides a way to create new work rather than simply destroying jobs in the name of efficiency .

The critical starting point for lean thinking is value. Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific product (a good or a service, and often both at once) which meets the customer’s needs at a specific price at a specific time.

Value is created by the producer. From the customer’s standpoint, this is why producers exist. Yet for a host of reasons value is very hard for producers to accurately define. Business school–trained senior executives of American firms routinely greet us when we visit with a slick presentation about their organization, their technology, their core competencies, and their strategic intentions. Then, over lunch, they tell us about their short-term competitive problems (specifically their need to garner adequate profits in the next quarter) and the consequent cost-cutting initiatives. These often involve clever ways to eliminate jobs, divert revenues from their downstream customers, and extract profits from their upstream suppliers. (Because we are associated with the concept of lean production, they are usually eager to label these programs “lean,” although often they are only “mean.”) By dessert, we may be hearing about their personal career issues in the current age of “downsizing.”

What only comes up when we push it to the foreground is the specific products the firm expects specific customers to purchase at a specific price to keep the company in business and how the performance and delivered quality of these products can be improved while their fundamental costs are pushed steadily down. In raising this issue it’s often revealing to ask these executives a simple question: Can you put yourself in the position of a design as it progresses from concept to launch, an order as information flows from initial request to delivered product, and the physical product as it progresses from raw material to the customer, and describe what will happen to you at each step along the way? Usually there is an awkward silence, and then, if we aren’t persistent, these issues quickly slip out of sight to be replaced once more by aggregated financial considerations. In short, the immediate needs of the shareholder and the financial mind-set of the senior managers have taken precedence over the day-to-day realities of specifying and creating value for the customer.

When we’ve gone to Germany, until very recently, we’ve found a reverse distortion of value specification. For much of the post–World War II era, executives of private or bank-controlled companies could ignore the need for short-term financial performance and were eager to tell us all about their products and process technologies. Even the most senior executives could go into great detail about product features and new processing methods which had taken years to perfect .

But who specified their value? The engineers running the companies! Designs with more complexity produced with ever more complex machinery were asserted to be just what the customer wanted and just what the production process needed. But where was the evidence?

In pressing this point, it often became apparent that the strong technical functions and highly trained technical experts leading German firms obtained their sense of worth—their conviction that they were doing a first-rate job—by pushing ahead with refinements and complexities that were of little interest to anyone but the experts themselves. Our doubts about proposed products were often countered with claims that “the customer will want it once we explain it,” while recent product failures were often explained away as instances where “the customers weren’t sophisticated enough to grasp the merits of the product.”

A central feature of the crisis of German industry in the period since the end of the cold war has been the dawning perception that the complex, customized designs and sophisticated processing technologies favored by German engineers are too expensive for customers to afford and often irrelevant to their real desires.

When we have traveled to Japan, also until very recently, we have encountered yet a third distortion. What’s been really important for Japanese firms as they have defined value is where value is created. Most executives, even at firms like Toyota which pioneered lean thinking, have begun their value definition process by asking how they can design and make their product at home—to satisfy societal expectations about long-term employment and stable supplier relations. Yet most customers across the world like products designed with an eye to local needs, which is hard to do from a distant home office. And they like products made to their precise order to be delivered immediately, which ocean shipping from a Japanese production base makes impossible. They certainly do not define the value of a product primarily in terms of where it was designed or made.

What’s more, the stay-at-home-at-all-costs thinking of Japanese senior managers, even as the yen steadily strengthened, depleted the financial resources these firms needed to do new things in the future. The immediate needs of employees and suppliers took precedence over the needs of the customer, which must sustain any firm in the long term.

Moving beyond these national distortions in the world’s three most important industrial systems (and every country probably has its own unique set), 2 we are repeatedly struck how the definition of value is skewed everywhere by the power of preexisting organizations, technologies, and undepreciated assets, along with outdated thinking about economies of scale. Managers around the world tend to say, “This product is what we know how to produce using assets we’ve already bought, so if customers don’t respond we’ll adjust the price or add bells and whistles.” What they should be doing instead is fundamentally rethinking value from the perspective of the customer.

One of the best (and most exasperating) illustrations of this backwards thought-process is the current-day airline industry. As frequent users of this service we have long been keeping detailed notes on our experiences and contrasting our own definition of value with that proposed by most companies in this industry. Our value equation is very simple: to get from where we are to where we want to be safely with the least hassle at a reasonable price. By contrast, the airline’s definition seems to involve using their existing assets in the most “efficient” manner, even if we have to visit Timbuktu to get anywhere. They then throw in added features—like executive lounges in their hubs and elaborate entertainment systems in every seat—in hopes the inconvenience will be tolerable.

Just today, as this is written, one of us has traveled the 350 miles from his summer home in Jamestown in western New York State, across Lake Erie, to Holland, Michigan, in order to make a presentation on lean thinking to an industrial audience. What was needed was a way to fly from Jamestown directly to Holland (both of which have small airports) at an affordable cost. What was available was either an absurdly priced charter service from Jamestown to Holland (total door-to-door travel time of about two hours) or an eighty-mile drive to the Buffalo, New York, airport, a flight on a large jet to the Detroit sortation center of Northwest Airlines (where the self-sorting human cargo finds its way through a massive terminal from one plane to the next), another flight on a large jet to Grand Rapids, Michigan, and a forty-mile drive to the ultimate destination. (The lower-cost option required a total travel time of seven hours.)

Why aren’t airlines like Northwest (and its global partner KLM) and airframe builders like Boeing and Airbus working on low-cost, point-to-point services using smaller jets instead of developing ever-larger aircraft? And why aren’t they developing quick turnaround systems for small jets at small airports instead of constructing Taj Mahal terminals at the absurd “hubs” created in America after airline deregulation—and long present in Europe and East Asia due to the politically motivated practice of routing most flights of state-controlled airlines through national capitals? (One hour of the seven hours spent on the trip just cited was taxiing time in the Detroit hub and a second was occupied with self-sortation inside the terminal.)

Few firms are aggressively promoting this definition of value because the airlines and airframe builders start their thinking with extraordinarily costly assets in the form of large aircraft; the engineering knowledge, tooling, and production facilities to make more large aircraft; and massive airport complexes. Old-fashioned “efficiency” thinking suggests that the best way to make use of these assets and technologies is to get larger batches of people on larger planes and to do this by sending ever more passengers through the expensive sorting centers. This type of efficiency calculation, focused on the airplane and the hub—only two of the many elements in the total trip—loses sight of the whole. Much worse from the standpoint of value for the passenger, it simply misses the point.

The end result of fifteen years of this type of thinking in the United States is that passengers are miserable (this is not what they meant by value!), the aircraft producers make little money (because the airlines can’t afford new planes), and the airlines (excepting Southwest and a few other start-ups pursuing the more sensible strategy of flying point-to-point, although still using large aircraft) have flown a decade-long holding pattern in the vicinity of bankruptcy. Europe and parts of East Asia are not far behind.

Lean thinking therefore must start with a conscious attempt to precisely define value in terms of specific products with specific capabilities offered at specific prices through a dialogue with specific customers. The way to do this is to ignore existing assets and technologies and to rethink firms on a product-line basis with strong, dedicated product teams. This also requires redefining the role for a firm’s technical experts (like the inward-looking German engineers we just cited) and rethinking just where in the world to create value. Realistically, no manager can actually implement all of these changes instantly, but it’s essential to form a clear view of what’s really needed. Otherwise the definition of value is almost certain to be skewed.

In summary, specifying value accurately is the critical first step in lean thinking. Providing the wrong good or service the right way is muda.

The value stream is the set of all the specific actions required to bring a specific product (whether a good, a service, or, increasingly, a combination of the two) through the three critical management tasks of any business: the problem-solving task running from concept through detailed design and engineering to production launch, the information management task running from order-taking through detailed scheduling to delivery, and the physical transformation task proceeding from raw materials to a finished product in the hands of the customer. 3 Identifying the entire value stream for each product (or in some cases for each product family) is the next step in lean thinking, a step which firms have rarely attempted but which almost always exposes enormous, indeed staggering, amounts of muda.

Specifically, value stream analysis will almost always show that three types of actions are occurring along the value stream: (1) Many steps will be found to unambiguously create value: welding the tubes of a bicycle frame together or flying a passenger from Dayton to Des Moines. (2) Many other steps will be found to create no value but to be unavoidable with current technologies and production assets: inspecting welds to ensure quality and the extra step of flying large planes through the Detroit hub en route from Dayton to Des Moines (we’ll term these Type One muda ). And (3) many additional steps will be found to create no value and to be immediately avoidable (Type Two muda ).

For example, when Pratt & Whitney, the world’s largest manufacturer of aircraft jet engines, recently started to map its value streams for its three families of jet engines, it discovered that activities undertaken by its raw materials suppliers to produce ultrapure metals were duplicated at great cost by the next firms downstream, the forgers who converted metal ingots into near-net shapes suitable for machining. At the same time, the initial ingot of material—for example, titanium or nickel—was ten times the weight of the machined parts eventually fashioned from it. Ninety percent of the very expensive metals were being scrapped because the initial ingot was poured in a massive size—the melters were certain that this was efficient—without much attention to the shape of the finished parts. And finally, the melters were preparing several different ingots—at great cost—in order to meet Pratt’s precise technical requirements for each engine, which varied only marginally from those of other engine families and from the needs of competitors. Many of these activities could be eliminated almost immediately with dramatic cost savings.

How could so much waste go unnoticed for decades in the supposedly sophisticated aerospace industry? Very simply: None of the four firms involved in this tributary value stream for a jet engine—the melter, the forger, the machiner, and the final assembler—had ever fully explained its activities to the other three. Partly, this was a matter of confidentiality—each firm feared that those upstream and downstream would use any information revealed to drive a harder bargain. And partly, it was a matter of obliviousness. The four firms were accustomed to looking carefully at their own affairs but had simply never taken the time to look at the whole value stream, including the consequences of their internal activities for other firms along the stream. When they did, within the past year, they discovered massive waste.

So lean thinking must go beyond the firm, the standard unit of score-keeping in businesses across the world, to look at the whole: the entire set of activities entailed in creating and producing a specific product, from concept through detailed design to actual availability, from the initial sale through order entry and production scheduling to delivery, and from raw materials produced far away and out of sight right into the hands of the customer. The organizational mechanism for doing this is what we call the lean enterprise, a continuing conference of all the concerned parties to create a channel for the entire value stream, dredging away all the muda.

Whenever we present this idea for the first time, audiences tend to assume that a new legal entity is needed, some formalized successor to the “virtual corporation” which in reality becomes a new form of vertical integration. In fact, what is needed is the exact opposite. In an age when individual firms are outsourcing more and themselves doing less, the actual need is for a voluntary alliance of all the interested parties to oversee the disintegrated value stream, an alliance which examines every value-creating step and lasts as long as the product lasts. For products like automobiles in a specific size class, which go through successive generations of development, this might be decades; for short-lived products like software for a specific application, it might be less than a year.

Creating lean enterprises does require a new way to think about firm-to-firm relations, some simple principles for regulating behavior between firms, and transparency regarding all the steps taken along the value stream so each participant can verify that the other firms are behaving in accord with the agreed principles. These issues are the subject of Part III of this book.

Once value has been precisely specified, the value stream for a specific product fully mapped by the lean enterprise, and obviously wasteful steps eliminated, it’s time for the next step in lean thinking—a truly breathtaking one: Make the remaining, value-creating steps flow. However, please be warned that this step requires a complete rearrangement of your mental furniture.

We are all born into a mental world of “functions” and “departments,” a commonsense conviction that activities ought to be grouped by type so they can be performed more efficiently and managed more easily. In addition, to get tasks done efficiently within departments, it seems like further common sense to perform like activities in batches: “In the Claims Department, process all of the Claim As, then the Claim Bs, and then the Claim Cs. In the Paint Department, paint all of the green parts, then shift over and paint all the red parts, then do the purple ones.” Batches, as it turns out, always mean long waits as the product sits patiently awaiting the department’s changeover to the type of activity the product needs next. But this approach keeps the members of the department busy, all the equipment running hard, and justifies dedicated, high-speed equipment. So, it must be “efficient,” right? Actually, it’s dead wrong, but hard or impossible for most of us to see.

Recently, one of us performed a simple experiment with his daughters, ages six and nine: They were asked the best way to fold, address, seal, stamp, and mail the monthly issue of their mother’s newsletter. After a bit of thought their answer was emphatic: “Daddy, first, you should fold all of the newsletters. Then you should put on all the address labels. Then you should attach the seal to stick the upper and lower parts together [to secure the newsletter for mailing]. Then you should put on the stamps.” “But why not fold one newsletter, then seal it, then attach the address label, and then put on the stamp? Wouldn’t that avoid the wasted effort of picking up and putting down every newsletter four times? Why don’t we look at the problem from the standpoint of the newsletter which wants to get mailed in the quickest way with the least effort?” Their emphatic answer: “Because that wouldn’t be efficient!”

What was striking was their profound conviction that performing tasks in batches is best—sending the newsletters from “department” to “department” around the kitchen table—and their failure to consider that a rethink of the task might permit continuous flow and more efficient work. What’s equally striking when looked at this way is that most of the world conducts its affairs in accord with the thought processes of six- and nine-year-olds!

Taiichi Ohno blamed this batch-and-queue mode of thinking on civilization’s first farmers, who he claimed lost the one-thing-at-a-time wisdom of the hunter as they became obsessed with batches (the once-a-year harvest) and inventories (the grain depository). 4 Or perhaps we’re simply born with batching thinking in our heads, along with many other “common sense” illusions—for example, that time is constant rather than relative or that space is straight rather than curved. But we all need to fight departmentalized, batch thinking because tasks can almost always be accomplished much more efficiently and accurately when the product is worked on continuously from raw material to finished good. In short, things work better when you focus on the product and its needs, rather than the organization or the equipment, so that all the activities needed to design, order, and provide a product occur in continuous flow.

Henry Ford and his associates were the first people to fully realize the potential of flow. Ford reduced the amount of effort required to assemble a Model T Ford by 90 percent during the fall of 1913 by switching to continuous flow in final assembly. Subsequently, he lined up all the machines needed to produce the parts for the Model T in the correct sequence and tried to achieve flow all the way from raw materials to shipment of the finished car, achieving a similar productivity leap. But he only discovered the special case. His method only worked when production volumes were high enough to justify high-speed assembly lines, when every product used exactly the same parts, and when the same model was produced for many years (nineteen in the case of the Model T). In the early 1920s, when Ford towered above the rest of the industrial world, his company was assembling more than two million Model Ts at dozens of assembly plants around the world, every one of them exactly alike.

After World War II, Taiichi Ohno and his technical collaborators, including Shigeo Shingo, 5 concluded that the real challenge was to create continuous flow in small-lot production when dozens or hundreds of copies of a product were needed, not millions. This is the general case because these humble streams, not the few mighty rivers, account for the great bulk of human needs. Ohno and his associates achieved continuous flow in low-volume production, in most cases without assembly lines, by learning to quickly change over tools from one product to the next and by “right-sizing” (miniaturizing) machines so that processing steps of different types (say, molding, painting, and assembly) could be conducted immediately adjacent to each other with the object undergoing manufacture being kept in continuous flow.

The benefits of doing things this way are easy to demonstrate. We’ve recently watched with our own eyes, in plants in North America and Europe, as lean thinkers practiced kaikaku (roughly translatable as “radical improvement,” in contrast with kaizen, or “continuous incremental improvement”). Production activities for a specific product were rearranged in a day from departments and batches to continuous flow, with a doubling of productivity and a dramatic reduction in errors and scrap. We’ll report later in this book on the revolutionary rearrangement of product development and order-scheduling activities for these same products to produce the same magnitude of effect in only a slightly longer adjustment period. Yet the great bulk of activities across the world are still conducted in departmentalized, batch-and-queue fashion fifty years after a dramatically superior way was discovered. Why?

The most basic problem is that flow thinking is counterintuitive; it seems obvious to most people that work should be organized by departments in batches. Then, once departments and specialized equipment for making batches at high speeds are put in place, both the career aspirations of employees within departments and the calculations of the corporate accountant (who wants to keep expensive assets fully utilized) work powerfully against switching over to flow.

The reengineering movement has recognized that departmentalized thinking is suboptimal and has tried to shift the focus from organizational categories (departments) to value-creating “processes”—credit checking or claims adjusting or the handling of accounts receivable. 6 The problem is that the reengineers haven’t gone far enough conceptually—they are still dealing with disconnected and aggregated processes (for example, order-taking for a whole range of products) rather than the entire flow of value-creating activities for specific products. In addition, they often stop at the boundaries of the firm paying their fees, whereas major breakthroughs come from looking at the whole value stream. What’s more, they treat departments and employees as the enemy, using outside SWAT teams to blast both aside. The frequent result is a collapse of morale among those who survive being reengineered and a regression of the organization to the mean as soon as the reengineers are gone.

The lean alternative is to redefine the work of functions, departments, and firms so they can make a positive contribution to value creation and to speak to the real needs of employees at every point along the stream so it is actually in their interest to make value flow. This requires not just the creation of a lean enterprise for each product but also the rethinking of conventional firms, functions, and careers, and the development of a lean strategy, as explained in Part III .

The first visible effect of converting from departments and batches to product teams and flow is that the time required to go from concept to launch, sale to delivery, and raw material to the customer falls dramatically. When flow is introduced, products requiring years to design are done in months, orders taking days to process are completed in hours, and the weeks or months of throughput time for conventional physical production are reduced to minutes or days. Indeed, if you can’t quickly take throughput times down by half in product development, 75 percent in order processing, and 90 percent in physical production, you are doing something wrong. What’s more, lean systems can make any product currently in production in any combination, so that shifting demand can be accommodated immediately.

So what? This produces a onetime cash windfall from inventory reduction and speeds return on investment, but is it really a revolutionary achievement? In fact, it is because the ability to design, schedule, and make exactly what the customer wants just when the customer wants it means you can throw away the sales forecast and simply make what customers actually tell you they need. That is, you can let the customer pull the product from you as needed rather than pushing products, often unwanted, onto the customer. What’s more, as explained in Chapter 4 , the demands of customers become much more stable when they know they can get what they want right away and when producers stop periodic price discounting campaigns designed to move goods already made which no one wants .

Let’s take a practical example: the book you hold in your hand. In fact, your copy is lucky. One half of the books printed in the United States each year are shredded without ever finding a reader! How can this be? Because publishers and the printing and distribution firms they work with along the value stream have never learned about flow, so the customer can’t pull. It takes many weeks to reorder books if the bookseller or warehouse runs out of stock, yet the shelf life of most books is very short. Publishers must either sell the book at the peak of reader interest or forgo many sales. Because the publisher can’t accurately predict demand in advance, the only solution is to print thousands of copies to “fill the channel” when the book is launched even though only a few thousand copies of the average book will be sold. The rest are then returned to the publisher and scrapped when the selling season is over.

The solution to this problem will probably emerge in phases. In the next few years, printing firms can learn to quickly print up small lots of books and distribution warehouses can learn to replenish bookstore shelves frequently (using a method described in Chapter 4 ). Eventually, new “right-sized” book-printing technologies may make it possible to simply print out the books the customer wants at the moment the customer asks for them, either in a bookstore or, even better, in the customer’s office or home. And some customers may not want a physical copy of their “book” at all. Instead, they will request the electronic transfer of the text from the “publisher” to their own computer, printing out an old-fashioned paper version only if they happen to need it. The appropriate solution will be found once the members of the publishing value stream embrace the fourth principle of lean thinking: pull.

As organizations begin to accurately specify value, identify the entire value stream, make the value-creating steps for specific products flow continuously, and let customers pull value from the enterprise, something very odd begins to happen. It dawns on those involved that there is no end to the process of reducing effort, time, space, cost, and mistakes while offering a product which is ever more nearly what the customer actually wants. Suddenly perfection, the fifth and final principle of lean thinking, doesn’t seem like a crazy idea.

Why should this be? Because the four initial principles interact with each other in a virtuous circle. Getting value to flow faster always exposes hidden muda in the value stream. And the harder you pull, the more the impediments to flow are revealed so they can be removed. Dedicated product teams in direct dialogue with customers always find ways to specify value more accurately and often learn of ways to enhance flow and pull as well .

In addition, although the elimination of muda sometimes requires new process technologies and new product concepts, the technologies and concepts are usually surprisingly simple and ready for implementation right now. For example, we recently watched while Pratt & Whitney replaced a totally automated grinding system for turbine blades with a U-shaped cell designed and installed by its own engineers in a short time and at a quarter of the capital cost of the automated system being replaced. The new system cuts production costs by half while reducing throughput times by 99 percent and slashing changeover time from hours to seconds so Pratt can make exactly what the customer wants upon receiving the order. The conversion to lean thinking will pay for itself within a year, even if Pratt receives nothing more than scrap value for the automated system being junked.

Perhaps the most important spur to perfection is transparency, the fact that in a lean system everyone—subcontractors, first-tier suppliers, system integrators (often called assemblers), distributors, customers, employees—can see everything, and so it’s easy to discover better ways to create value. What’s more, there is nearly instant and highly positive feedback for employees making improvements, a key feature of lean work and a powerful spur to continuing efforts to improve, as explained in Chapter 3 .

Readers familiar with the “open-book management” movement in the United States 7 will recall that financial transparency and immediate feedback on results, in the form of monetary bonuses for employees, are its central elements. Thus, there is a broad consistency between our approach and theirs. However, a major question emerges for open-book managers as finances are made transparent and employees are rewarded for performance. How can performance be improved? Sweat and longer hours are not the answer but will be employed if no one knows how to work smarter. The techniques for flow and pull that we will be describing in the pages ahead are the answer. What’s more, when employees begin to feel the immediate feedback from making product development, order-taking, and production flow and are able to see the customer’s satisfaction, much of the carrot-and-stick apparatus of open-book management’s financial reward system becomes unnecessary.

Dreaming about perfection is fun. It’s also useful, because it shows what is possible and helps us to achieve more than we would otherwise. However, even if lean thinking makes perfection seem plausible in the long term, most of us live and work in the short term. What are the benefits of lean thinking which we can grasp right away ?

Based on years of benchmarking and observation in organizations around the world, we have developed the following simple rules of thumb: Converting a classic batch-and-queue production system to continuous flow with effective pull by the customer will double labor productivity all the way through the system (for direct, managerial, and technical workers, from raw materials to delivered product) while cutting production throughput times by 90 percent and reducing inventories in the system by 90 percent as well. Errors reaching the customer and scrap within the production process are typically cut in half, as are job-related injuries. Time-to-market for new products will be halved and a wider variety of products, within product families, can be offered at very modest additional cost. What’s more, the capital investments required will be very modest, even negative, if facilities and equipment can be freed up and sold.

And this is just to get started. This is the kaikaku bonus released by the initial, radical realignment of the value stream. What follows is continuous improvements by means of kaizen en route to perfection. Firms having completed the radical realignment can typically double productivity again through incremental improvements within two to three years and halve again inventories, errors, and lead times during this period. And then the combination of kaikaku and kaizen can produce endless improvements.

Performance leaps of this magnitude are surely a bit hard to accept, particularly when accompanied by the claim that no dramatically new technologies are required. We’ve therefore worked for several years to carefully document specific instances of lean transformations in a wide range of firms in the leading industrial economies. In the chapters ahead, we provide a series of “box scores” on precisely what can be achieved and describe the specific methods to use.

Lean thinking is not just the antidote to muda in some abstract sense; the performance leap just described is also the answer to the prolonged economic stagnation in Europe, Japan, and North America. Conventional thinking about economic growth focuses on new technologies and additional training and education as the keys. Thus the overwhelming emphasis of current-day popular writing on the economy is on falling computing costs and the growing ease of moving data around the planet, as exemplified by the World Wide Web. Coupling low-cost, easily accessible data with interactive educational software for knowledge workers will surely produce a great leap in productivity and well-being, right ?

The record is not promising. During the past twenty years we’ve seen the robotics revolution, the materials revolution (remember when cars would have ceramic engines and airplanes would be built entirely of plastic?), the microprocessor and personal computer revolution, and the biotechnology revolution, yet domestic product per capita (that is, the average amount of value created per person) in all the developed countries has been firmly stuck.

The problem is not with the new technologies themselves but instead with the fact that they initially affect only a small part of the economy. A few companies like Microsoft grow from infants to giants overnight, but the great bulk of economic activity—construction and housing, transport, the food supply system, manufacturing, and personal services—is only affected over a long period. What’s more, these activities may not be affected at all unless new ways are found for people to work together to create value using the new technologies. Yet these traditional tasks comprise 95 percent or more of day-to-day production and consumption.

Stated another way, most of the economic world, at any given time, is a brownfield of traditional activities performed in traditional ways. New technologies and augmented human capital may generate growth over the long term, but only lean thinking has the demonstrated power to produce green shoots of growth all across this landscape within a few years. (And, as we will see, lean thinking may make some new technologies unnecessary.)

The continuing stagnation in developed countries has recently led to ugly scapegoating in the political world, as segments of the population in each country push and shove to redivide a fixed economic pie. Stagnation has also led to a frenzy of cost cutting in the business world (led by the reengineers), which removes the incentive for employees to make any positive contribution to their firms and swells the unemployment ranks. Lean thinking and the lean enterprise is the solution immediately available that can produce results on the scale required. This book explains how to do it.

Because lean thinking is counterintuitive and a bit difficult to grasp on first encounter (but then blindingly obvious once “the light comes on”), it’s very useful to examine the actual application of the five lean principles in real organizations. The material in the remainder of Part I , therefore, provides real instances of lean principles banishing muda. The place to start, as always, is with value as defined by the customer.