Pat Byrne first encountered lean management more than two decades ago and has since become an expert practitioner and believer in the power of its philosophy of continuous improvement. So much so that Byrne, CEO of GE Digital, also serves as vice president for lean transformation at GE, which placed lean at the core of its turnaround. “What I learned about lean is that it’s the ultimate engagement tool,” he says. “Lean is not a thing you do at the end of the month to fill out forms, you do it every day. It is a full-contact sport. It is at the point of impact because you cannot see things until you are there.”
GE Reports recently talked to Byrne about this approach to business organization. Below is an edited version of our conversation.
GER: What is lean and how does it compare to other management tools?
Pat Byrne: Lean is a mindset of continuous improvement in managing and leading businesses and engaging with teams. The focus of lean is to take the waste out of delivering value to customers. Naturally, everyone is trying to do that but things get in your way.
GER: What do you mean by waste and how do you use lean to navigate around obstacles?
PB: Waste is often another word for process variation, and a big piece of lean is eliminating that variation so you can be consistent. If you can be consistent, then you can apply continuous improvement and get better every day, every week, every month, every year. Part of that is creating what we call standard work.
GER: Can you explain the concept?
PB: Standard work is the idea of being able to do something the same way every time. Establishing standard work is really about understanding what delivers value to customers, standardizing it, and then creating metrics around it so you can measure it and improve it.
GER: How often do you measure it?
PB: Daily. Daily management in lean is about managing that standard work every single day so that if you put five good days together following your standard work and delivering value to customers, you've got a great week, and with 30 days together, you've got a great month and so on.
GER: How did you discover the power lean?
PB: I first encountered lean more than 20 years ago, and it was a mixed bag involving filling out forms, getting certifications and going through the motions. But later, during the financial crisis, I had another job and I started to see what lean can achieve. I was working at a company where teams started to come together around common data and have very rich, fact-based discussions about what was really going on in the business. It was about getting the facts on the table. There was no politics to it. Transparency, humility and candor, those are all values that get promoted through the lean mindset.
GER: What is the lean mindset?
PB: Lean is about getting better. You don’t have to be perfect. One of the challenges inherent in leading organizations is that you're trying to set high expectations. But high expectations cannot be a premeditated disappointment. The continuous improvement culture allows you to keep getting better every day. You can still aspire to those higher expectations, but you’re not demanding perfect. It is a way of managing and running a business, not just reporting the business.
In that second job I mentioned, I got to visit large companies that were already very good at lean, yet they were still humbly getting better every month, every year on that journey. They were looking at the data, setting the next bar, listening to customers, incorporating those insights, and using the basic lean tools to improve their operations. When you start getting good at getting better and building a common culture of purpose and customer focus, you get the flywheel effect that is enabling you to keep getting better and not just exhausting people. That is a highly engaging experience.
GER: Speaking of large companies, what role does lean play in GE’s turnaround?
PB: GE is a company with tremendous global reach and incredible talent. But there are a lot of opportunities for improvement. The role that lean plays is really in building the lean mindset and building a management system focused on our most important financial, customer and growth commitments.
GER: What are those commitments?
PB: I'll give you a couple of examples. Improving our cash generation is critical to the improvement of GE. There are billions of dollars of potential improvement through lean in free cash flow from working capital improvements.
Lean is also being applied by GE businesses to accelerating growth by better targeting of customers, refining value propositions and enabling sales. It's also happening in dozens of places in improving customer experience with on-time delivery and quality. This is especially important given the power of GE’s brand and the importance of our installed base. We have customer relationships that are 20, 30, 40 years old, and we have support contracts that go for decades ahead of us. If you improve that quality and delivery, you earn the next contract.
GER: How do you teach lean?
PB: You can read a book on lean but the way you really learn it is through repetition, much like golf or music. Repetition comes through being taught, mentored and developed in teams with good lean practitioners.
GER: What does the process look like at GE?
PB: We have to organically grow the lean practitioner base, and then it's daily repetition through daily management. Lean will never work without daily management, that’s why it’s so important. Without it, it’s just a reporting thing. That's called fake lean.
GER: What does daily management look like?
PB: The teams meet after each shift on the shop floor. If you want to know what’s really going on, you have to do it at the point of impact. In lean, this is called gemba, which is a Japanese term for the real place. You want to go to gemba, you want to do it daily, you want to do it visually, and you want to do it with real practitioners. We use big whiteboards to record the situation the teams are facing and make it very visual. Then we can say, are we ready, are we agreed? We knew yesterday's action plan and what's today's problem? Many problems are solved just daily. You don’t need some big problem-solving exercise. It's really done daily by the operators.
GER: I noticed that many leaders in lean factories moved their desks to the shop floor to be closer to the workers, or operators, as you say.
PB: The role of the leader is different in lean. It is about using lean tools to knock down barriers, coach and ask good questions. Good lean leaders are asking cross-functional questions — ‘Is this department connected with that department?’ — they are asking questions associated with standard work.
GER: This is the support on the ground. But at a higher level, GE has opened the Kaizen Promotion Office, with kaizen being the Japanese term for continuous improvement. What is its role?
PB: The role of the KPO is to provide tools, training and expertise. Lean has to happen in the businesses, so most of the lean resources in GE, well over 90% of the resources, will be in the businesses. We have close to 1,000 leaders in the company where the KPO is maybe 10 lean experts like Betsy Bingham, who develop standard problem-solving and train people to use it. In the end, though, Betsy is going to train a couple hundred people. But how are we going to train thousands of people? It’s going to be done by people who took the class from Betsy, used it, became practitioners and then taught it themselves. You see, lean is not delegated, it is taught. That’s why I say that lean has no grandchildren, it only has children. Lean is taught by lean practitioners, by people who applied it.
The only reason I'm any good at teaching lean is because I have used it. And I'm just, you know, I'm just a different spot in the journey. But I've spent years trying to learn how to get better. And that's what the KPO is, just people that have more experience and use it to teach others.
GER: Can you use lean to improve processes that don’t involve manufacturing, say finance or the supply chain?
PB: Absolutely. The core tools, like standard work, are the same. I've seen lean used in human resources for improving how recruiting is done. I've seen lean used to improve service delivery. I’ve seen it used in engineering, product management, cash collection and to close the books faster in finance. We've used lean at GE Digital to close the books every month, which is new to us. We weren’t anywhere (near it) six months ago and now we are doing it in three days. The goal next year is to do it in two days. I have yet to really find a place we can't use it.