So a guy named Mark Selway is brought into the Boral Company – a big global building products company based out of Australia – to turn things around. Boral has been in some trouble the last couple of years, which should come as no surprise in light of the complete collapse of the construction business, but their problems run a little deeper than that so new leadership was in order.
Selway does what a new boss should. He launches a global, strategic review and conjures up a plan to get out of some peripheral businesses and focus on core building products appropriate for each region, and he determines that a couple of small acquisitions are needed and some investment in capacity in a couple of areas where business is good and the prospects are better..
No matter what the strategic review turns up, however, Selway's first order of business is a commitment to lean manufacturing. Now his understanding of lean is limited to manufacturing and there is still plenty of room for the folks at Boral to learn as they find out how big the lean iceberg is that is still below their surface view, but they are off to a pretty good start. Selway is personally involved and he leans on what he calls his "automotive buddies" – four guys from Toyota and Ford – for inspiration. You can read about some of Selway and Boral's lean thinking here in a company newsletter – scroll on down to page 5 and you will see that they have a good handle on the fundamentals.
The strategic review was finisheda few months back and Selway went to the investment community to raise $490 million (that's in Kangaroo bucks – about $430 million US) to beef up a plant here, replace a quarry there, buy up the rest of a joint venture somewhere else – all pretty basic stuff reflecting the commitment to the core business. The investment community was not impressed, however. Specifically, "Boral Shares fall 10% As Capital Raising Fails To excite Investors."
There are a lot of things to consider before anyone decide to pony up $432 million, but it appears as though Boral's lean strategy played no part in the investment equation largely because the investors knew next to nothing about it or the implications of it. Investors get their advice and insight from clowns like Joe Weisenthal who I wrote about yesterday, and a guy who sees the primary purpose of manufacturing as something to keep the stupid people busy is hardly going to understand or appreciate the significance of a fundamentally different manufacturing management approach.
But beyond The outrageously clueless guys like him, I am struck by the incredible ignorance of the basics of lean evident in statements such as, "It is about implementing just-in-time production, taking inventory out of the system and rationalising. At Toyota the introduction of such methods reportedly helped lower the percentage of working capital as a percentage of sales to 11 per cent from 25 per cent in five years." This from a guy by the name of Damon Kitney, writing for The Australian – an affiliate of and brother to The Wall Street Journal. Not only does he completely miss the point in describing lean, the Toyota statement is simply not factually true – not even remotely, wildly true.
So we have some little old lady in Topeka, Kansas – a retired school teacher – who wants to make good investments with the nest egg upon which her security depends. She relies on fund managers, who in turn rely on industry analysts and the people like Joe and Damon who write about the prospects of the companies representing her investment options. And it seems apparent that all of the folks between the old lady with the money and the management that will either blow it or put it to good use are completely in the dark when it comes to how the fundamental decisions will be made in the company using the money.
I believe that the old lady's interests and priorities, and the interests and priorities of Mark Selway are pretty closely aligned. The explosion of the online investing industry is a reflection of this fact. The investment advisors and analysts are subject to the same, core lean principles of value – either add it or be written out of the equation as waste. As it becomes more and more obvious that these people are not doing the job of connecting investors with the sort of companies they want – not providing value commensurate with their compensation - it is inevitable that they evolve or face extinction. Who would want to listen to the insights of someone concerning a manufacturing investment who knows so little about the current state of manufacturing that he thinks Toyota introduced lean to reduce working capital over a five year period?
My bet is on Mark Selways and his "automotive buddies", and their success will put one more nail in the coffin of the investment experts whose ignorance has a lot to do with the loss of so many little old ladies' nest eggs.