By Kevin Meyer
There have been a couple articles in noteworthy rags over the last couple days that have raised my ire a bit – even if I eventually agreed with one of them. The first was by Adam Hartung in Forbes, describing the demise of Sony but in the process placing considerable blame on none other than Deming. After describing the woes of Sony, he begins his analysis:
So what went wrong for Sony?
Firstly was the national obsession with industrial economics. W. Edward Deming in 1950s Japan institutionalized manufacturing quality and optimization. Using a combination of process improvements and arithmetic, Deming convinced Japanese leaders to focus, focus, focus on making things better, faster and cheaper. Taking advantage of Japanese post war dependence on foreign capital, and foreign markets, this U.S. citizen directed Japanese industry into an obsession with industrialization as practiced in the 1940s — and was credited for creating the rapid massive military equipment build-up that allowed the U.S. to defeat Japan.
Unfortunately, this narrow obsession left Japanese business leaders, by and large, with little skill set for developing and implementing R&D, or innovation, in any other area.
You could say that is giving Deming far too much credit. The vast majority of companies used Deming's methods to improve quality – and not just in manufacturing – not as a complete corporate strategy. As one friend of mine said when I discussed this article with him, "Edward would chuckle if he heard that he actually reduced innovation."
Of course some readers then jumped back to when in 2001 Drucker called Deming "obsolete." Which is again a complete misinterpreation and misunderstanding of Deming.
Mr. Hartung goes on to describe the impact on Sony itself.
But after Mr. Morita Sony’s other leaders were trained, like American-minted MBAs, to implement Industrial strategies. Their minds put products, and new markets, second. First was a commitment to volume and production – regardless of the products or the technology. The fundamental belief was that if Sony had enough volume, and cut costs low enough, Sony would eventually succeed. Without any innovation.
Mr. Stringer’s Industrial strategy was to be obsessive about costs. Where Mr. Morita’s meetings were 85% about innovation and market application, Mr. Stringer brought a “modern” MBA approach to the Sony business, where numbers – especially financial projections – came first. The leadership, and management, at Sony became a model of MBA training post-1960. Focus on a narrow product set to increase volume, eschew costly development of new technologies in favor of seeking high-volume manufacturing of someone else’s technology, reduce product introductions in order to extend product life, tooling amortization and run lengths, and constantly look for new ways to cut costs. Be zealous about cost cutting, and reward it in meetings and with bonuses.
This is a failure of Sony, not a failure of Deming. Sony's leadership decided to listen to narrow-minded MBAs and focus purely on volume and cost. Hundreds of companies have successfully used Deming's methods to improve quality, cost, and value while also implementing successful innovation programs.
Yesterday Ron Ashkenas published a piece in Harvard Business Review suggesting we need to "rethink continuous improvement." In light of having just recently read Hartung's piece on Deming, my hackles were raised anticipating another crazy demonizing of proven methods. Fortunately my initial instinct was wrong – well sort of.
Six Sigma, Kaizen, Lean, and other variations on continuous improvement can be hazardous to your organization's health. While it may be heresy to say this, recent evidence from Japan and elsewhere suggests that it's time to question these methods.
He does continue to teeter on and even cross the line of calling those programs nefarious, but this is presumably to add credence to his valid point:
So should we abandon continuous improvement? Absolutely not! It has created tremendous value and still drives competitive advantage in many companies and industries. But perhaps it's time to nuance our approach in the following ways:
– Customize how and where continuous improvement is applied. [snip]
– Question whether processes should be improved, eliminated, or disrupted. [snip]
– Assess the impact on company culture. [snip]
And that's where he's right – the need to ask "why?" before blindly implementing "continuous improvement." But, as other bloggers have mentioned, similar to Hartung's claim on Deming's methods Ashkenas is wrong in his claim that continuous improvement hinders innovation. Jon Miller points this out:
I fail to see the "evidence" that continuous improvement has caused Japanese firms to fall behind or fail. The failure to launch game-changing innovative products was certainly a factor for the decline of Sony, for example, but if you talk to Sony people they will tell you not about a stifling culture of continuous improvement but the culture where senior engineers decisions were not be be questioned. Don't ask for evidence of why their brilliant idea will be a winner, in other words. This seems to be an instance of exactly a place where management by fact could have helped.
Ashkenas names a few American companies who practiced six sigma and failed to be innovative, implying but once again without providing a causal link.
But back to the somewhat different point I want to make – the need to customize continuous improvement and really look deep. He gives an example that speaks to a particular lean vs. six sigma hotpoint of mine:
For example, a six sigma team in one global consumer products firm spent a great deal of time streamlining information flows between headquarters and the field sales force, but didn't question how the information was ultimately used. Once they did, they were able to eliminate much of the data and free up thousands of hours that were redeployed to customer-facing activities.
Six sigma is a fantastic set of improvement and optimization tools. Lean is both a philosophy and also includes a fantastic set of tools to improve value by eliminating waste and increasing the application of human potential. I personally believe that in most organizations lean needs to be established first in order to not have the problems mentioned above. And as regular readers know I'm also convinced that the "respect for people" human side of lean is more powerful than the rote tool side – and not understanding that is the reason most lean transformations fail. And to add some fuel to that fire, I also believe that the concoction known as "lean six sigma" is nonsense and even dangerous.
However both lean and six sigma are phenomenally powerful – if used properly. And at the core of using them properly is to first ask "why?" What is the problem or opportunity, why is it important, what is the desired future state, and what is the most appropriate tool to leverage? I see many organizations just diving into the tools without asking why. I see many, admittedly including mine years ago before we woke up, having crazy programs like "we will implement two tools per year." Why? Just diving into the tools will create short term gains, but will almost always create long-term failure.
Not asking that simple question is the difference between companies that successfully leverage Deming's methods, lean, and six sigma… and perhaps companies like Sony.