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This chapter is from the book

The Fabric of Lean

Lean principles are woven throughout this book, just as they must be woven throughout the fabric of an organization with a lean mindset.

Chapter 1: The Purpose of Business emphasizes the principle Optimize the Whole, taking the Shareholder Value Theory to task for the short-term thinking it produces. The alternative is to Focus on Customers, whose loyalty determines the long-term success of any business. It is one thing for business leaders to have a vision of who their customers are, but quite another to put the work systems in place to serve those customers well. In the end, the front-line workers in a company are the ones who make or break the customer experience.

It turns out that the “rational” thinking behind the Shareholder Value Theory has had a strong influence on the way workers are treated. It all boils down to Douglas McGregor’s Theory X and Theory Y. Theory X assumes that people don’t like work and will do as little as possible. Theory Y assumes the opposite: Most people are eager to work and want to do a good job. The lean principle Energize Workers is solidly based on Theory Y—start with the assumption that workers care about their company and their customers, and this will be a self-fulfilling prophecy. The principle of reciprocity is at work here—if you treat workers well, they will treat customers well, and customers will reward the company with their business.

Reciprocity was the basis of human cooperation long before money was invented, and it remains central to human behavior today. However, reciprocity is local. It depends on group (or team) size, team member engagement, and norms for creating and enforcing mutual obligations. When designing work systems that Energize Workers and help them Focus on Customers, leverage the power of peers, rather than incentives, to steer behavior in the right direction.

Chapter 2: Energized Workers is based on the work of Mihaly Csikszentmihalyi, who found that the most energizing human experience is pursuing a well-framed challenge. Energized workers have a purpose that is larger than the company and a direct line of sight between their effort and achieving that purpose. They strive to reach their full potential through challenging work that requires increasing skill and expertise. They thrive on the right kind of challenge—a challenge that is not so easy as to be boring and not so hard as to be discouraging, a challenge that appeals to aspirations or to duty, depending on the “regulatory fit.”

Regulatory fit is a theory that says some people (and some companies—startups, for example) are biased toward action and experimentation and respond well to aspirational challenges. Other people (and companies—big ones, for example) prefer to be safe rather than sorry. For them, challenges that focus on duty and failure prevention are more inspiring. But either way, a challenge that is well matched to the people and the situation is one of the best ways to energize workers.

One of the most important challenges in a lean environment is to Constantly Improve. Whether it is a long-term journey to improve product development practices or an ongoing fault injection practice to hone emergency response skills, striving to constantly get better engages teams and brings out the best in people.

Chapter 3: Delighted Customers urges readers to Focus on Customers, understand what they really need, and make sure that the right products and services are developed. This is the first step in the quest to Eliminate Waste, especially in software development, where building the wrong thing is the biggest waste of all.

Some products present extraordinary technical challenges—inventing the airplane or finding wicked problems in a large data management system. Other products need insightful design in order to really solve customer problems. Before diving into development, it is important to Learn First to understand the essential system issues and customer problems before attempting to solve them.

When developing a product, it is important to look beyond what customers ask for, because working from a list of requirements is not likely to create products that customers love. Instead, leaders like GE Healthcare’s Doug Dietz, who saw a terrified child approach his MRI scanner, understand that a product is not finished until the customer experience is as well designed as the hardware and software.

Great products are designed by teams that are able to empathize with customers, ask the right questions, identify critical problems, examine multiple possibilities, and then develop products and services that delight customers.

Chapter 4: Genuine Efficiency starts by emphasizing that authentic, sustainable efficiency does not mean layoffs, low costs, and controlling work systems. Development is only a small portion of a product’s life cycle, but it has a massive influence on the product’s success. It is folly to cut corners in development only to end up with costly or underperforming products in the end. Those who Optimize the Whole understand that in product development, efficiency is first and foremost about building the right thing.

Two case studies from Ericsson Networks demonstrate that small batches, rapid flow, autonomous feature teams, and pull from the market can dramatically increase both predictability and time to market on large products. Here we see the lean principles of Focus on Customers, Deliver Fast, Energize Workers, and Build Quality In at work.

A case study from CareerBuilder further emphasizes how focusing on the principle of Deliver Fast leads to every other lean principle, especially Build Quality In and Focus on Customers. A look at Lean Startup techniques shows that constant experiments by the product team can rapidly refine the business model for a new product as well as uncover its most important features. Here the lean principles of Optimize the Whole, Deliver Fast, and Keep Getting Better are particularly apparent.

Finally, a discussion of how Spotify develops products summarizes most of the lean principles one more time, with a particular emphasis on customer focus, data-driven experiments, empowered teams, and rapid feedback.

Chapter 5: Breakthrough Innovation starts with a cautionary tale about how vulnerable businesses are—even simple businesses like newspapers can lose their major source of revenue seemingly overnight. But disruptive technologies don’t usually change things quite that fast; threatened companies are usually blind to the threat until it’s too late. How can it be that industry after industry is overrun with disruptive innovation and incumbent companies are unable to respond?

The problem, it seems, is too much focus on today’s operations—maybe even too much focus on the lean principle of Eliminate Waste—and not enough focus on the bigger picture, on Optimize the Whole. Too much focus on adding features for today’s customers and not enough focus on potential customers who need lower prices and fewer features. Too much focus on predictability and not enough focus on experimentation. Too much focus on productivity and not enough focus on impact. Too much focus on the efficiency of centralization and not enough appreciation for the resiliency of decentralization.

Lean organizations appreciate that the real knowledge resides at the place where work is done, in the teams that develop the products, in the customers who are struggling with problems. Several case studies—including Harman, Intuit, and GE Healthcare—show how the lean principles of Focus on Customers, Energize Workers, Learn First, and Deliver Fast help companies develop breakthrough innovations before they get blindsided by someone else’s disruptive innovations.

Developing a lean mindset is a process that takes time and deliberate practice, just like developing any other kind of expertise. No matter how well you “know” the ideas presented in this book, actually using them in your work on a day-to-day basis requires that you spend time trying the ideas out, experimenting with them, making mistakes, and learning.

Cultivating a lean mindset—especially in an organization—is a continuing journey. We hope this book brings you another step along the path.

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