I don't want to be critical all the time – really I am not an inherently negative person. But in order to write the blog, as well as to keep up with the state of manufacturing in the world, I comb through dozens of news sources daily and I can't help but be overwhelmed by the huge volume of utter nonsense that is being written, spoken and practiced in the misapplication of lean. So when I come across a story like the one that is unfolding at De Beers – the diamond folks – it is like a welcome hurricane of sweet, fresh air. They really get it.
At a meeting in London the other day between De Beers senior managers and their sales and marketing partners, De Beers Group Managing Director Gareth Penny preached about what he called the "new normal" – a world in which cash is king, lean manufacturing is critical, and the key to the whole thing is customer value creation. There are very, very few senior executives in the world who understand those points, making Mr Gareth Penny a very extraordinary individual.
Penny urged ten principles on the De Beers partners:
1. Be passionate and confident
2. Think outside the box – you can't do the same things and expect different results
3. Keep a long term (20 year) perspective and begin with the end in mind
4. Focus on competitive advantage – no distractions
5. Ensure rapid and sustained cost management
6. Remember that cash is king
7. Pursue operational excellence (lean)
8. Look for unprecedented acquisition opportunities (take advantage of the fact that a lot of companies don't get it)
9. Take customer value creation to new levels
10. Build leadership and organizational capabilities
I don't care what business you are in – that is great advice. Just as important is what Penny did not say: No blathering gibberish about shareholder value, nothing about headcount or labor costs and no concern for this quarter or even this year.
The other day I wrote that "it is impossible to achieve excellence – for some impossible to achieve mediocrity – until the leadership of the company decides what it is trying to accomplish and communicates that objective to the entire company." The folks running De Beers have done that very effectively. Penny made it about as clear as can be that they have a long term customer focus, and spelled out how they are going to operate over those twenty years.
We'll see how it turns out, but Mr. Gareth Penny is demonstrating some first class leadership at a first class company, and I think we can all learn quite a bit from his example.
Mark Graban says
Interesting… it is refreshing to see you say something positive.
Their having a focus on Lean is great, I guess, but since DeBeers is an illegal cartel/monopoly, their executives would be arrested upon entering the U.S. due to price-fixing charges for industrial diamonds. They make money by artificially constraining the supply of something (diamonds) that aren’t really that scarce in nature. Diamonds are “mined” often by literally scooping them off of the ground.
http://business.timesonline.co.uk/tol/business/article1029087.ece
MBA schools teach about it, presumably as an example of what NOT to do, but you can never tell how things get taken by the students. We watched a PBS documentary on this:
http://www.pbs.org/wgbh/pages/frontline/programs/transcripts/1209.html
So, “first class” company can be debated even without bringing up the treatment of people in Africa through the legal diamond trade.
Would you give glowing praise about an incredibly efficient drug dealer with a great kanban system, respect for his dealers, and a 100% on-time delivery record? I’m not accusing you of that…
Bill Waddell says
Mark,
This is more of comment on the sad state of affairs at the B-Schools if true. De Beers abandoned their cartel model more than ten years ago and has no legal problems in the USA or much of anywhere else. Their market share is down to around 40% from near 100% in their old cartel days, but their profits are up.
I don’t use PBS as a source of information for the blog for the simple reason that PBS doesn’t let the facts get in the way of their crusade for political correctness. Have you ever seen a PBS show that said anything good about any business – other than Ben & Jerry’s and the few others in lockstep with their PC agenda? Regardless, a 1994 PBS documentary is hardly a source that you, I or the B-Schools should put much stock in.
De Beers has a dozen or so stores in the USA, sorting operations in the UK and mining operations in Canada and they open for business every day without their management being thrown in the clink; they have taken a lead position in the Lean Summit Africa, and seem to have amicable relationships with their stakeholders in South Africa.
I think you are simply regurgitating twenty year old news. The De Beers company long ago moved on from those uglier days – PBS and academia should do the same.
I do actually check this stuff out before I write a post :)
Dale says
Interesting comments, Mark. There truly are two sides to every story.
Without the background knowledge of De Beers, what sticks out to me about this “success story” and others of its kind is that they are often in companies that have a lot of capital because of their profit margins. I keep hearing from management that because our commodity does not have a large profit margin that it is more difficult to implement many of the tools and principles of Lean such as better flow and level scheduling. It seems that they sometimes have trouble seeing the long-term payback to an improvement. They also see some of the Lean principles as adding waste to production because of ideas such as frequent changeovers to reduce inventory levels.
It would be helpful to hear success stories from smaller manufacturing companies that maybe have to watch their pennies closer than a diamond company that can possibly “afford” to mandate changes.
Mark Graban says
OK, Bill. That was taught to me 12 years ago. I tried to do a quick google news search before I posted and the latest reference I could find said the DeBeers’ execs were still not welcome in the U.S.
Bill Waddell says
Mark,
Your raising De Beers’ sordid past really brings to light the real lesson the lean community and the B-Schools should learn from them. By switching to a focus on customer value and operational excellence, rather than their old model of dominating volume and controlling costs by any means, they are more profitable then ever.
Jim Fernandez says
Mark:
Lean and drug dealing. Oh that’s just too funny an idea to let it pass without comment. The application of lean to drug dealing would make a great video for teaching us how to apply lean to a service company. And just think of the great lessons we could lean about just-in-time and flow from bank robbers. Too funny……
Mark Graban says
Bill – I agree with you on that. It does make for a positive twist in a relatively sordid story. Thanks for your post.
Peter Klym says
Bill,
I’ve just identified a Waddell-waste : wasting our reading time by belittling yourself as being ‘critical’ and ‘negative’. I’m sure that these are not words that would pop into the minds of the majority of your readers.
‘Straight-talking’ certainly. But it is far more refreshing to read the views of someone trying to change things by hook or by crook than most of the wishy-washy self-congratulatory stuff we are usually conditioned to.
By the way, I’m building a training course based to an extent on Rebuilding American Industry but substituting ‘French’ for ‘American’. I hope you don’t mind, but basically everything we need to do is in there.
Keep up the good work,
Peter
Jason Morin says
It is refreshing to see you write a blog posting where you’re not ranting and raving.
By the way, let’s be clear: De Beers didn’t “abandon” their cartel model simply due to a change of heart.