A tsunami is but another wave: A tale of two companies

The Great Wave off Kanagawa. Artist Unknown. Some things can't be stopped. Tsunamis are one. Digitalization is another.

The year is 1981.

In a board room full of serious, gray-haired, suit-wearing executives, a jacketless Taiichi Ohno has been responding to a barrage of questions for more than an hour now. This half-Japanese, half-American engineer has been studying the Toyota way, Toyota being a major competitor of this particular carmaker.

Yes, executives should go see by themselves what’s going on in the shop floor at least twice a day. Yes, precious minutes of everyone’s time should be spent discussing the daily issues, starting with the organization and layout of the factory. Yes, the whole production line should be stopped as soon as a quality issue arises. Yes, production batch size should be as low as possible, one being the ultimate target. Yes, every single step should be standardized and workers should be trained to perform multiple, different actions. Yes, production orders should be created only when actual demand is there, and the following process step has been completed.

“Thank you, Mr. Ohno. That was extremely instructive,” says the chief executive while walking the young engineer to the door. Immediately after shutting out the door, the executive in charge of the performance of the Group almost shouts:

“This is all bonkers! This won’t work at all! Our finest engineers, not working mainly on R&D? Batch size of one? How are we supposed to make for the cost of our expensive machinery? And what, our site director going on the shopfloor and participating to “problem solving sessions” to improve worker’s conditions?”

The HR head, with a smile of disdain, takes the lead: “Giving time and ressource to each and every employee to organize the plant? Let’s give the keys of the factory to the unions! And what he said about 5% of all time of everyone dedicated to training on this Lean thing? This is, as you put it well, bonkers.”

The Production Director ended with a definite sentence: “Gentlemen, the never-heard-of results of Toyota must certainly be explained by Japan’s peculiar positionning, their government sponsoring them after the war, and a local culture of extreme respect to the hierarchy. Things we don’t have here in America, won’t be able to replicate, and that Toyota will lose as soon as they open up to the world, when they will face the same increase of cost and non-quality as we big boys are dealing with.”

The CEO called off the meeting. It would take another five years, and the eventual firing of the CEO by the board in relation to its lacking performance compared to the Japanese, to implement Lean management principle, resulting in double-digit improvement on cost, quality, inventory.

It would then take about twenty years, and thousands of professionals, for the Lean management principle to permeate all industries, all companies. Tens of thousands of people would be trained to this new way of working in what is arguably one of the most widespread efforts in organizational mutation in the last decades. Today, a company having a dedicated team responsible for implementing Lean principles, and an organization-wide effort of training of each manager, each employee continuously to implement those techniques is the norm, rather than the exception. Yet, in 1980, in this room, it seemed “bonkers.”

Hindsight makes everything look sharper. Those executives, in that room, were bright professionals with the best interest of their company and their country’s economy to heart, despite evidence with Toyota’s stellar performance that the future was laying bare before their eyes. Yet, they missed what seems now as the obvious path to profitability, performance, and staying relevant in the economy. Why?

While numerous factors can explain that, let’s state the most important and obvious ones:

First, inability to project existing system in a fundamental change: When a new system arises which fundamentally alters the existing rules, the sheer mental effort needed to make the transition can be too much, especially in a short meeting, to bare. Result is smart people refusing to re-think everything existing.

Second, untold fear of becoming irrelevant as a professional: While some of the skillset of those fine executives were transferable to that new world organization, the magnitude of what they had to learn to be relevant in that new system makes it uncertain for them to remain at the top of their company. Similarly, in each and every other position of the company, the magnitude of the change is a threat to the existing balance of power, which makes embracing the change a perilous choice for most managers and executives having something to loose.

The year is 2019.

In a board room full of serious, gray-haired, suit-wearing executives, a T-shirt-wearing young coder has been responding to a barrage of questions for more than an hour now. This half-French, half-American engineer has been working with the Tesla carmaking division, a major up-and-coming competitor of this particular carmaker company.

Yes, executives should be technical on the product but also on all the software involved in making the distribution. Yes, everyone should at least possess the basics of coding and statistical modeling. Yes, shopfloor manager should be able to use low-code tools to implement custom-made code repositories and link the data produced to the data lake. Yes, field managers should low-code apps that automate part of their daily routines and plug the info in the data lake. Yes, engineers should be working on the shop floor, solving issues directly with the workers and linked with the client. Yes, everyone should be able to get any type of information, including the financials of the new products, the customer complaints and the sales numbers from yesterday. Yes, all employees should be trained in basic data modeling and be accountable for keeping all the data clean for future use. Yes, each new product should be modular so that competitors can plug new applications on top of the existing product, seen as a platform. Yes, modularity should be thought upon at inception of the product. Yes, all machinery and subcontractor should be gauged by their ability to be modulable and changing the process each week should be routine. Yes, getting up to date on technology trends should be considered part of the responsibility of each leader.

“Thank you, young fellow. That was extremely instructive,” says the chief executive while walking the young engineer to the door. Immediately after shutting out the door, the executive in charge of the performance of the Group almost shouts:

“This is all bonkers! This won’t work at all! Our finest mechanical engineers, getting trained to code little applications as a fun hobby? Buying expensive machinery and tweaking it ourselves? Thinking our product like a platform? Allowing our competitors to plug part of their modules on our cars? This is bonkers!”

The HR head, with a smile of disdain, takes the lead: “Giving time and ressource to each and every employee to code low-code application and structuring the data? My employees barely are able to read their smartphones! And what he said about 5% of all time of everyone dedicated to implementing digital first processes? And the part about our CEO coding — let’s send him to summer school? This is, as you put it well, bonkers.”

The Systems Administrators ended with a definite sentence: “Gentlemen, the never-heard-of results of Tesla must certainly be explained by America’s peculiar positioning, their government sponsoring them with army R&D money, and the local hippie culture at San Francisco. They are loosing money on production and are producing about 5% of our current production. Things we don’t have here in Europe, won’t be able to replicate, and that Tesla will lose as soon as they ramp up their production, when they will face the same issues of replicability, supply chain management and politics as we big boys do.”

The CEO called off the meeting. It will probably take another five years, and the eventual firing of the CEO by the board in relation to its abysmal performance in the general area of electric cars, to implement natively digital operations.

It will then take about twenty years, and thousands of professionals, for the natively digital operations principles to permeate all industries, all companies. Tens of thousands of people will have to be trained to this new way of working in what will arguably be one of the most widespread efforts in organizational mutation in the coming decades. Twenty years from now, a company having a dedicated team responsible for implementing natively digital operations, and an organization-wide effort of training of each manager, each employee continuously to implement those techniques will be the norm, rather than the exception. Yet, last week in that room, it seemed “bonkers.”

Good thing we learn from history.

Actual names and industries have been changed for anonymity.

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