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My guest for podcast #158 is Art Byrne, author of the new book The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company.

Art is very well known in the Lean community for his successful run as CEO of Wiremold,having previously worked at GE and Danaher. He is currently Operating Partner at the private equity firm J. W. Childs Associates L.P. In this podcast, Art talks about operations improvement as a business strategy, why the CEO needs to be directly involved in a Lean transformation, why “stretch goals” aren't demoralizing when you have the right leadership and culture, and more.

Our discussion focuses on the role leadership plays in the transformation of an organization adopting Lean Principles. We examine the journey of Art Byrne, who underscores how critical it is for CEOs and top executives to be more than mere spectators–they must actively drive the Lean transformation. Art emphasizes this through his belief that operational improvement must be considered a core business strategy.

Apart from leadership, Art also highlights how his practices shift the discourse on corporate objectives, revealing that ‘Stretch Goals,' instead of demoralizing, can actually energize a team. His belief in lean thinking encourages embracing continuous improvement and fosters a fearless environment where experimentation, learning from mistakes, and aiming for audacious goals are valued. This approach, as Art demonstrates, works far beyond manufacturing and can address inefficiencies and transform cultures in various industries and sectors.

Also, listen to my podcast with Bob Emiliani (who documented the Wiremold story in the book Better Thinking, Better Results: Case Study and Analysis of an Enterprise-Wide Lean Transformation), where he talks about what happened to Lean at Wiremold after the company was purchased and Art left.

For a link to this episode, refer people to  www.leanblog.org/158/.

For earlier episodes, visit the main Podcast page, which includes information on how to subscribe via RSS or via Apple Podcasts.

If you have feedback on the podcast or any questions for me or my guests, you can email me at leanpodcast@gmail.com or call and leave a voicemail by calling the “Lean Line” at (817) 993-0630. Please give your location and your first name. Any comments (email or voicemail) might be used in follow-ups to the podcast.

Automated Transcript:

Mark Graban:
This is Mark Graban. Welcome to episode 158 of the podcast for September 28, 2012. My guest today is Art Byrne. He is the author of the new book The Lean Turnaround: How Business Leaders Use Lean Principles to Create Value and Transform Their Company. I think Art is very well known in the Lean community for his very successful run as the CEO of Wiremold, having previously worked at companies including GE and Danaher, and he's currently the operating partner at the private equity firm JW Childs Associates.

Mark Graban:
So in this podcast, we're going to be talking about a number of things from Art's CEO perspective. How to use operations improvement as a business strategy, why the CEO needs to be directly involved in lean transformation efforts, why stretch goals aren't demoralizing when you have the right leadership and culture in place, and many more topics including the importance of why you need to not use lean to drive layoffs. Why are no layoffs due to lean or no layoffs? Commitment is a really important part of this process. I hope you enjoy the podcast.

Mark Graban:
If you go to leanblog.org/158, you can find some additional links to the book, to some videos that are referenced in the podcast. Other good stuff related to art and his work. So as always, I want to thank you for taking time to listen. Well again, our guest is Art Byrne. Thanks for taking time to talk to us today, Art.

Art Byrne:
Well, thanks Mark, for having me on. I really appreciate it.

Mark Graban:
So I was wondering if you can start off by giving kind of the brief background of your career, the companies that you've been through. Most notably, I think people would know you from wire mold. How that led to the lean success that you had there at Wiremold, how those companies contributed to that.

Art Byrne:
Well, my first exposure to lean really started back in 1982, the beginning of 1982, it's my first general manager job at General Electric. Of course, it wasn't called Lean then. We knew it was just in time or quality circles or some other term. Basically, we basically just started a kanban system between myself and I was in the lighting business group at the time, running one of the businesses there, and one of the supplier companies that we had was also a group company. We started this Kanban system and we took my inventory from say 40 days down to around three.

Art Byrne:
And my supplier partner, his business eliminated all the inventory net net for the group, the lighting business group. We probably went from 100 days down to three. But the surprising thing was that what happened after we did that? That was interesting, because our quality got better, our space got lower, our defects went down, our customer service was better, employees were happier, all kinds of things. And that's really what got me started and got me turned on to lean.

Art Byrne:
When I left GE and I went to Danaher as a group executive, then not too long after I was there, a guy that used to work for me running one of my companies, George Koenigsaecker, and I came across the Shingijutsu company, which a lot of people know of. Shingijutsu, of course, was all a bunch of Toyota guys. They had all worked directly for Taiichi Ohno and been implementing lean in, the Toyota group companies under Ohno, and he kind of pushed them out into this consulting world. And we were fortunate enough to come across them at a seminar and run in Hartford, Connecticut, back in 1987. And we begged them to come and consult and work for us.

Art Byrne:
And they said, you know, we're too old, it's too far away, we don't speak any English and that kind of stuff. And we basically said, yeah, but we have great steaks and lobsters and we have golf. We have lots of great golf, and they like golf. So, anyway, long story short, started working with us, and in fact, we were the first clients of Shingijutsu in the USA, and we were the only clients of Shingijutsu in the USA for about four years. We focused first on Jacobs Chuck and Jacobs Brake, which might be stories that people know a lot about, got tremendous results there, and really learned how to run Kaizen events and how to do things the way the Toyota has always done them.

Art Byrne:
And so they called themselves “insultants,” not consultants. So they were pretty tough on us. But, you know, we were very open minded and wanted to learn. And so we, whatever they, we decided early on, whatever they tell us to do, we're just going to do it, even if we think it's the craziest thing in the world. And a lot of times it was.

Art Byrne:
And then from there, I left Danaher, of course, I went to Wiremold as the CEO, and we transformed Wiremold. Over the course of about nine and a half, ten years, we took the enterprise value up about 2500% from what was only about $30 million when I got there. It was sort of a declining company to, we sold it a little less than ten years later for $770 million. So that was a great story. And along the way, I learned a lot.

Art Byrne:
And since then, the last ten years or so, I've been an operating partner with JW Childs Associates, which is a private equity firm, middle market size out of Boston. And so I've been transforming a number of our portfolio companies through a lean as well. So that's kind of a little background on me. The key difference for me, I think, than most people that have been doing and lean for a long time is that I've always done it from the effective position of a CEO. I mean, I started doing this during my first general manager job.

Art Byrne:
So I've always looked at it from the CEO position. And from a business point of view, what's the business implications of this? How do I improve my business? How do I improve what I'm doing with my customers? Was really the Broadway that I always looked at this, and it's the way I think most people should look at it.

Art Byrne:
So that's the quick Reader's Digest version of sort of my background on this.

Mark Graban:
Yeah. And you've been involved, we'll come back to this later on. You've also been involved in helping healthcare organizations, correct?

Art Byrne:
Yes, I have. When Virginia Mason first got started in the lean approach, the first company they visited was wire mold. They came, they brought 30 people from Seattle, Washington, to Hartford, Connecticut, spent a couple of days with us. We had a great time. We both learned a lot.

Art Byrne:
And from there, they've sort of gone on. I think they're probably the best, you know, the best at implementing lean in healthcare in the country. Some other good hospitals have done quite well as well, Thedacare and a few others. But Virginia Mason to me, stands out. And then one of the local hospitals here in Hartford, St.

Art Byrne:
Francis. I've actually spent a lot of time conducting lean Kaizen events at St. Francis as a kind of a volunteer free consultant, if you will. And so I've learned a lot in doing that over how does a hospital really work and what do you need to do and what don't you need to do? I have a lot of opinions on that.

Art Byrne:
And the opportunities in the hospital are just breathtaking. In fact, the opportunities in general, in my mind, in non-manufacturing companies are way bigger than in manufacturing companies because manufacturing companies have been working on some form of productivity or efficiency, always for a long, long time. Whereas if you get into banks, insurance companies, hospitals, other businesses like that, they haven't been doing that stuff very much at all. Their basic idea on how you get to better is you just have a new computer system. And in general, what they've done for years is sort of, in my opinion, kind of automate the waste.

Art Byrne:
They don't change the processes. They don't change what they're doing. They just automate what it is they're doing and get it on a computer system and figure that'll solve things. And of course it never does. But the opportunities and hospitals are used, the opportunities in other non manufacturing businesses are very big.

Art Byrne:
And it's really one of the key thrusts or premises of my book is that lean is not a manufacturing thing. It's something that applies to any business. And any business in any industry can be turned around dramatically by applying the right approach.

Mark Graban:
One thing that really struck me in the book, you talk about this strategy of actually improving the value added work. I think the phrase I wrote down is that you said nobody thinks of this as a strategy as opposed to new product introductions or acquisitions or other, you know, financial-driven improvements. Why do you think it is that the idea, the lean concept of improving the value-added work, the value to the customer, is not thought of very often by CEOs?

Art Byrne:
Well, because most people, quite honestly, it doesn't matter what kind of industry or business you're in, they take the value-adding for granted. This is sort of the concept of, well, this is the way we do things here. If you take a, let's take a manufacturing example and let's say that the lead time to produce product a is six weeks. It's always been six weeks. We've tried everything over many period, long period of time and it always takes us six weeks to do this.

Art Byrne:
So you accept that as the standard, as the value adding. Right. Therefore, with that in mind, what you really wind up trying to do from your strategy point of view is how do you get the customer to conform to the fact that you have a six-week lead time, and how do you overcome that particular issue? Other ways, like new products or expanding into new markets or other things that people traditionally think of as strategy. Whereas if instead you attacked the value adding itself and attacked the reasons that you have a six-week lead time, and for the most part, that's generally because you have long setup times because you run everything in a batch, because of the way you account for things and do things.

Art Byrne:
If you instead attack that, you could change the dynamic of what you're doing. You don't have to stop the strategic things that you're doing. You don't have to stop trying to grow your business and get into new markets or all this other stuff. But if you went from a six-week lead time to a two-day lead time, all the other strategic things that you're doing now, you're going to improve your ability to implement those things.

Art Byrne:
You're going to give yourself a lot of other opportunities that you won't have if you take the value added for granting. I'll give you a quick example. That happened to me years ago. I was on the board of directors of a jewelry manufacturing company down in North Miami Beach, Florida, and I can't even remember the name of the company at this point, but they asked me to come down and what did I think? And they were mostly making rings.

Art Byrne:
It was gold and precious stones, that kind of thing. But they were selling to sort of the middle market, you know, JC Penney, Sears, Montgomery Wards, those kind of big customers. And when I went there, I said, well, how long does it take you to make a ring? And they said, oh, it's eight weeks. And that's the standard, of course, in the jewelry industry.

Art Byrne:
And I found out later from asking other jewelry companies that I happened to bump into after that, how long it took to make a ring. And every single one of them told me eight weeks. Well, I was only there about a few days or a week, and we set up a cell and we could do the whole thing in two days. So think about how dramatic that is. We changed the value adding from an eight week lead time to a two day lead time.

Art Byrne:
Your responsiveness to the customer. Everything else changes when you do that. And so when you ignore that, or you accept that it takes eight weeks to do the value-adding, you limit your strategic horizons. And if you take the whole thing a step further, if that company, or a company, like that said, well, we need to go out and get a new manufacturing guy. You know, one of the specifications that they would put on their list would be he should have some jewelry manufacturing experience.

Art Byrne:
And so any guy they're going to talk to, he already knows that it takes eight weeks to make a ring. And so what are the chances that it's going to get to two days? Zero, pretty much. I mean, they're just going to stay at eight weeks and struggle with the mess that that entails. So, focusing on value-adding opens up tremendous opportunities.

Mark Graban:
That mindset you talked about of, you know, a variation of it's always been this way, therefore it must be with, you know, say, customer lead times. You know, it reminds me of, you know, what the discussion you often have with machine change over time. So, well, it takes 8 hours, therefore it has to, or maybe more importantly, in hospitals, you know, x percent of patients get infections. It's just bound to happen. Talk about the struggle of trying to help convince people that a higher level of performance, something closer to perfection, is even possible.

Mark Graban:
How do you, what's your experience in having that discussion?

Art Byrne:
Well, I think it's a very simple thing. If you think you can or you think you can't, you're going to be right. Think about that. If I think I can't eliminate infections in hospitals, and that's the premise I start with, I'm always going to be right about that. I never will eliminate them all.

Art Byrne:
If, on the other hand, I'm determined to do that and I set my premise at zero infections, I at least have a shot at it, and I'm probably going to be successful over time. So people shut out the opportunities upfront by deciding that this is impossible, and so they don't do it. And it's really as simple as that. And I think setting stretch goals for your organization, to me, shows your respect for the organization, shows the respect for what your people can do. Whereas most people in management positions, however, when I try and push them to stretch goals, they'll always say, oh, well, we don't want to give people stretch goals that they don't think they can do because that will discourage them and demoralize them.

Art Byrne:
But think about somebody. Our goal at Wiremold was a 50% reduction in defects every year. The guy who doesn't want to set a stretch goal, he's going to set a reduction in defects of 5% every year. So let's say that that guy beats his target. He beats it by double.

Art Byrne:
He does 10% reduction in defects this Year. Fantastic over his target. And we miss ours. Our average at YMO was sort of like a 42% reduction in defects over a long period of time. And you have to say, well, Wait a minute, I missed my goal.

Art Byrne:
He beat his goal, but I'm going to kill the guy, right? I'm going to kill him because my goal was 50%, so I did 40% reduction in defects. His goal was five. He did Ten. He's way behind my reduction in defect rate.

Art Byrne:
Just because he set out a low goal, he set out to fail, really. It's kind of LiKE if you wanted to reduce setup time in a factory or in a hospital operating room or WHATEVER, and you said, I want to go from 3 hours to 2 hours. And the other guy said, I want to go from 3 hours to three minutes. Well, the guy who sets the three-minute target and gets there, he's going to kill the other guy over time. It's just, you know, what's your ambition?

Art Byrne:
What are you trying to do? I think if you look at it always from a business point of view, what you're really trying to do for your business is you're trying to deliver more value to your customer than your competitor can. And over time, that's what's going to improve the value of your organization and the value for all your stakeholders and your employees. Everything's going to improve if you do that. I always like to use the phrase productivity equals wealth.

Art Byrne:
And that's true historically. That's true for companies or countries or whatever. I mean, think about the industrial revolution. Think about why the United States is such a powerful nation. It's really because we've had tremendous productivity gains in all kinds of areas over a very long period of time.

Art Byrne:
And so when you look at that lean and the philosophy of lean and the tools of lean is probably the greatest wealth creator of all time. It's just that we get it twisted around and we think of it as a bunch of tools, not as something that will allow me to deliver better value to my customer. We just think of it as well. I want to do it because I can cut my head count or I want to do it because I can cut my setup time or I can reduce my inventory or something like that. We're not looking at it as a business thing most of the time.

Art Byrne:
I think that's a tragedy, really.

Mark Graban:
And you talk about getting pretty deeply involved in your experience as a CEO of getting into the details of Kaizen events for setup reduction for machines. When you give that advice to other CEOs to get involved at that level of detail, I'm curious to hear how you describe it. Trying to convince those CEOs why they should do it other than increasing the value of their organization and meeting customer needs. Is it about learning the details of lean? Is it about providing that leadership of those points you're talking about of not allowing stretch goals to be demoralizing because you didn't quite get there.

Mark Graban:
What are the things, when you say a leader, the CEO can't just write a memo? What are those aspects of getting involved that deeply?

Art Byrne:
Well, I think that to be successful at making a Lean transformation, if you will, or lean turnaround, you know, you have to have, to me, you have to have sort of three things present to start with. First of all, you have to see lean as your strategy. It's not a bunch of tools. It's strategic. It's a very strategic thing.

Art Byrne:
And you have to see it that way and understand that that's what you're trying to do. And you're trying to improve your value adding activities so that you can deliver more value to your customer. That's the strategic part of it. The second thing you need that needs to be present is the leader, the CEO, plant manager or division manager, hospital manager, whoever. They have to lead it in an out front, hands on way.

Art Byrne:
They have to set the stretch goals. They have to push people. They have to always be encouraging them and telling them why we want to do this and what are we trying to do here? And if they're not doing it and they're not seen, if they just send a memo and let somebody else do it, then no one believes it's real and not much will happen. And when it starts to fall backward, if the CEO isn't pushing it forward again and getting it back on track, then it will always go backward.

Art Byrne:
And then the third thing that has to be present is you have to understand that lean is really making a lean. Turnaround is really all about people. The thing that you're trying to transform is your people. If your people think that it takes 3 hours to set up this machine than it has for the last 20 years and there's nothing that can be done and you allowed that to continue, then you didn't really lead them. If, on the other hand, you show them and help them and get that set up from 3 hours down to 1 minute, everybody feels pretty good about that.

Art Byrne:
Everybody's pretty excited about that. And they look at you quite differently and they say, okay, what do you want me to do next? Okay, we just went from 3 hours to 1 minute. That was cool. Now what are we going to do?

Art Byrne:
And so the leader has to be the guy that's sort of always pushing that next thing, the next hurdle, the next challenge, if you will. And I always think that that's the most rewarding thing for a leader is when you challenge somebody to do something that they think is impossible, and then you help them and show them how to do it, and then they do it. They feel really good about themselves. And it's really nice to watch that. It's very rewarding.

Mark Graban:
And when you talk about taking care of people or focusing on people, you talked about the wealth being created by productivity. And I'm trying to remember if this was wire mold. You were writing about some of the things that were done to share that wealth with the employees, right?

Art Byrne:
We tried to share that a couple of ways. We had a profit-sharing plan that everybody participated in on an equalized basis for the short term. And then we really encouraged all of our employees to be in the 401 plan because in the 401K plan we matched their contribution with company stocks. So that was sort of their long-term plan, if you will. And we weren't a public company at the time, we were private.

Art Byrne:
But at the end of the day, when we got this huge gain in enterprise value, the nice thing was, is that the employees through the 401K plan were the biggest shareholder and therefore they shared in the most, the biggest share of the wealth that was created, which is exactly what we intended. But you know, when you get everybody participating, everybody giving ideas, and everybody gaining from what you're doing, it kind of multiplies. It's sort of, most companies, all their ideas and key things they're going to do are going to come from maybe the top 20 or 30 people. But if you got 1500 employees and you can tap into the brains of all 1500, then again, you're going to multiply what you can do. And so understanding and understanding that as you make a lean transformation, the best ideas on how to improve the value-adding will always come from the people that are doing the work.

Art Byrne:
And if you listen to that and implement that, you're going to be able to go further and faster. But most people seem to miss that stuff somehow.

Mark Graban:
Yeah, well, and was there also an explicit, some form of a no layoffs commitment that was made?

Art Byrne:
Right. It's hard to do Kaizen if you don't have a, you know, a no-layoff promise as a result of the kaizen. In other words, if I do a kaizen this week and I can go from ten people down to three to do the same work, and plus I can shorten the space and lead time and inventory on a bunch of other things. But say I go from ten people to three, and my first action next week is to lay the seven people off that I don't need anymore. And then the week after I wanted to do another Kaisen, what do you think?

Art Byrne:
What kind of cooperation do you think I'm going to get from anybody? So, I mean, it just, most of this stuff is just common sense. And that's something that makes common sense.

Mark Graban:
Yeah. One other thing you wrote about, this comes back again, I think, to people in leadership creating a culture where it's okay to fail in the context of trying to do Kaizen. Can you talk about that a little?

Art Byrne:
Well, I think you always learn from trying to do things. And one of my Japanese senseis used to always tell me, he said, Byrne-san, if you don't try something, no knowledge can visit you. And I always thought that that was pretty profound. And so I used to encourage, particularly our younger product development engineers, that, how come you guys aren't failing? I don't see failures.

Art Byrne:
I'd like to see you fail some more. At first they thought I was a little nutty, but then they sort of got the idea that it's okay to have a lot of small failures. What we don't want you to do is to save up and have, when you do fail, you have a really big failure that can sink the company. And so trying to create an environment where as long as you're trying, we're not going to ding you for failing, we're going to encourage you to try again. And that's very opposite, the sort of traditional command and control environment where if something goes wrong, the first question is, who?

Art Byrne:
Who did that? Let's fire that guy. And that creates an environment of fear. And it's very hard to get much gains and move forward in an organization where everybody is afraid of trying something because they might fail and might get fired. So you really just have to create the opposite of that if you want everybody to participate, because people are the most important thing here and you have to respect their ideas and implement them, then you have to create that kind of environment.

Art Byrne:
I think.

Mark Graban:
Now, last question, and maybe I'm asking you to generalize too much, but with your experience in healthcare, I mean, what are your perceptions of Healthcare CEO's as opposed to manufacturing and industry CEO's in terms of their willingness to get involved the way that you've recommended?

Art Byrne:
Well, the ones that have gotten involved the way I recommend, Gary Kaplan at Virginia Mason, for example, have had tremendous success and the organizations look to them for the leadership and then push to the next level. Other CEO's are just like a lot of the manufacturing CEO's, whereas, okay, yeah, well, this sounds like a good idea, but, you know, I'm just so busy. I can't be doing that stuff. I'm too busy. I have to delegate this stuff.

Art Byrne:
And, you know, it's really hard to get CEO's in healthcare or non healthcare involved. But healthcare has, you know, has tremendous opportunities. I know it's in almost every Kaizen I've ever done in the hospital. I get the team together the first day and they say, we're going to work on this particular problem. And I say, okay, now let's go through and tell me what's the biggest issue you have here.

Art Byrne:
And almost 100% of the time all the hands go up and they say it's the doctors and they say, oh goodness, that's amazing. I said, but look, you know, we got a hospital here, the one that I've spent the most time in, about 5000 employees and only 500 of them are doctors. And so I always would say, well look, let's not worry about the doctors. Let's worry about making what the other 4500 people do way more efficient. And I can pretty much guarantee you I can get the doctors to come along and do whatever you need them to do.

Art Byrne:
And they will. And that's always been the case. But nobody ever thinks of it that way because hospitals are tremendous silo operations. I mean, there's very few places that are as big as silo operations as hospitals. And if you don't have leadership to try and change that, it's very difficult to do.

Art Byrne:
And yet if you think of a hospital, it has natural value streams. For example, anything related to the heart in a 5000 person hospital it's probably a five or $600 million business. I'd be shocked if heart related things wasn't really something like $125 million business all by itself. And maybe you have a business called, I would call it bones or babies or whatever, but you understand what I'm saying, value streams that exist in the hospital. And for example, I did a kaizen at St.

Art Byrne:
Francis and it was creating a discharge policy for the cardiac care floor which is the floor where patients that had open heart surgery went to recovery. They didn't have a discharge policy so we created one. And you know, I told, I said, look, what I want you to do is as soon as the person arrives on the floor I want you to set a day and an hour of the day when that person is going to go home. And then I want you to monitor this and, you know, track how close to our targets and estimates we're hitting and how we're doing. And of course at first they all say, oh, you can't do that, blah, blah, blah.

Art Byrne:
But then when you ask the question, well, what is it that they have to do? What are the things that we want to track every day that they have to do to go home? And in that particular case there was only two things. They had to walk and they had to pee. And I mean, really it was, the reality was it was pretty damn predictable when they could go home.

Art Byrne:
But because there was no discharge policy they got discharged at the shift change to the doctors later in the day. Then they had no ride home. And then, so you had them through dinner and then you had them into the night. And new entrance into the ward couldn't come in because you were clogging up with the bed. Clogging it up, clogging up a bed that was going to free up at 07:00 or 08:00 at night and you're going to be empty all night.

Art Byrne:
And so we created this discharge policy. We created the whole thing. And then when you went to say, okay, now who's going to monitor this? Well, gee, there was cardiac surgeons, there were cardiac pas, there were cardiac nurses, and then there were the cardiologists. So you get four separate groups, four separate silos, but nobody was in charge of something like this.

Art Byrne:
So if you had a value stream leader or somebody who could manage and run that kind of thing, the gains for hospitals would be astronomical. But unfortunately, the silo approach and the silo mentality makes it very, very hard to do well.

Mark Graban:
There's so much opportunity. And thankfully, you know, there's some organizations like you mentioned, Virginia Mason and others who are getting great advice from people like yourself. And there's a lot of great advice in your book, the lean Turnaround. As you were saying, you know, about the thinking that you, the stories that you tell that illustrate that thinking and the experience that you share and the advice you have for people. Highly recommended book is pretty widely available from McGraw Hill, I'm sure, on Amazon and all the other usual places.

Mark Graban:
Art, do you have any final thoughts for the listeners or advice or anything else that you'd like to say as we close?

Art Byrne:
Well, my only thought or hope and the reason I wrote the book in the first place is that I was trying to provide a roadmap for people to be able to make a lien turnaround, to improve the business dramatically by following the steps that we outline in the book. And, you know, if I can get, you know, another hundred, 200 people to have a really great success, that would be the satisfaction for me because I just see us, you know, lean's been around a long time. A lot of companies have tried, et cetera, et cetera, et cetera. But the number that are really successful have really done this the right way and have looked at it as a strategy and a business thing, not as a bunch of tools, is quite limited, I think. And so I'm just trying to add to the pile and hope that more and more people can understand what this is all about and what huge opportunities that they have from doing it.

Art Byrne:
If you just look at wire mold increasing its enterprise value by 2500% over ten years. And if you told a CEO that if you followed this approach, you could do the same thing, and he said, well, I'm not really interested. I'm pretty busy right now. And to me, he's in the wrong job. Why is he in that job?

Art Byrne:
What's he doing? And so all I'm trying to do with the book and all is to sort of pass on. I've been doing this from the CEO position for over 30 years. I've learned a lot. And I was just trying to pass on the knowledge that I've gained so that hopefully some other people can be successful.

Mark Graban:
Yeah, well, and thank you for doing that. Thank you for writing the book and for taking time to tell just a little bit about it here on the podcast. I really appreciate it. Art.

Art Byrne:
Okay, well, thank you for having me, and take care.

Mark Graban:
All right, thanks.

Art Byrne:
Bye bye.

Article Based on the Episode

The Transformative Power of Lean Principles in Business

Lean principles have long been recognized as a transformative force within the manufacturing sector, but their application and impact go far beyond traditional boundaries, extending into service sectors, healthcare, and even the leadership strategies of top executives. This article explores the multifaceted effects of lean principles on businesses, led by pioneers such as Art Byrne, who have championed lean not just as a tool for operational efficiency but as a comprehensive business strategy.

Lean Leadership: The CEO's Role in Transformation

A pivotal theme in the success stories of lean implementation is the active involvement of CEOs and top executives. Art Byrne's journey underscores the necessity for leadership to not just endorse but deeply engage with lean principles. Byrne, with his storied career from General Electric to Wiremold and beyond, exemplifies a CEO who didn't just implement lean methods but lived by them. His leadership at Wiremold saw the company's value skyrocket by 2500%, a testament to lean's potential when supported by visionary leadership.

Central to Byrne's approach was the belief that operational improvement must be seen as a core business strategy. This contrasts with the often narrow perception of lean as a toolkit for manufacturing efficiency. By aligning lean principles with business objectives, Byrne demonstrated that sustainable transformation requires more than just superficial commitment–it demands a rethinking of leadership roles. CEOs and business leaders are thus not mere spectators but active drivers of lean transformation, a stance that challenges conventional views on corporate leadership.

Stretch Goals and Corporate Culture

The integration of lean principles into business strategy fundamentally alters the nature of goal setting and achievement within the organization. Byrne's experiences reveal that stretch goals, far from being demoralizing, can actually energize a team, provided the right culture and leadership are in place. This perspective shifts the discourse on corporate objectives from what is merely achievable to what is potentially transformative.

Creating a culture that embraces continuous improvement, a hallmark of lean thinking, necessitates a shift in how accomplishments and challenges are viewed. Instead of fostering a fear of failure, lean leaders like Byrne cultivate an environment where experimentation, learning from mistakes, and reaching for audacious goals are valued. This approach not only propels businesses toward remarkable outcomes but also enhances employee satisfaction and engagement.

Beyond Manufacturing: Lean's Broader Application

One of the most compelling aspects of Byrne's lean journey is the application of lean principles outside the manufacturing sector. His involvement with healthcare institutions, such as Virginia Mason and St. Francis Hospital, showcases lean's versatility. The successes in these endeavors are particularly noteworthy, as they dispel the myth of lean as solely a manufacturing tool. Instead, Byrne's work illustrates lean's profound impacts on quality, efficiency, and customer satisfaction in healthcare, highlighting vast opportunities for improvement and innovation.

The broader message here is clear: lean principles hold untapped potential for sectors traditionally not associated with operational efficiency programs. From healthcare to banking and beyond, the principles of lean, when thoughtfully applied, can address endemic inefficiencies and transform organizational cultures.

Lean as a Strategy for Value Creation

Art Byrne's philosophy positions lean not just as a method for cutting costs or improving production processes but as a strategic tool for overall value creation. This approach champions the idea of enhancing the very activities that add value to the customer, fundamentally rethinking operations to eliminate waste, reduce lead times, and improve quality.

This value-centric strategy challenges businesses to rethink their operational models, from how products are developed and produced to how services are delivered. By focusing on value creation rather than merely on cost reduction, businesses can achieve a competitive advantage that is sustainable and responsive to changing market dynamics.

The principles and practices of lean, as demonstrated by leaders like Art Byrne, offer a blueprint for transformative change. This change is not confined to the shop floor but permeates the entire organization, challenging CEOs and business leaders to reimagine their roles in driving sustainable growth and innovation. The journey of lean transformation, as showcased through Byrne's career, provides valuable insights into the power of lean as a comprehensive business strategy, capable of delivering remarkable results across industries and sectors.

The Importance of Challenging Traditional Norms

Art Byrne's experience with the jewelry manufacturing company in North Miami Beach serves as a quintessential example of how questioning and challenging traditional business norms can lead to significant operational improvements and strategic advantages. The drastic reduction from an eight-week lead time to just two days not only transformed the company's responsiveness to customer demands but also demonstrated the immense potential that lies in reevaluating and redesigning established processes.

Rethinking Talent Acquisition and Expertise

Byrne's insight into talent acquisition and the need for expertise within an industry underscores an often-overlooked aspect of lean transformations–changing the criteria for experience and expertise. This approach suggests that businesses should seek leaders and team members not just with industry-specific knowledge but with a mindset open to challenging the status quo. The jewelry company example illustrates how conventional expectations can limit improvement and innovation. By valuing adaptability and a lean mindset over traditional industry experience, companies can unlock opportunities to drastically overhaul their performance and competitive stance.

Stretch Goals as a Measure of Respect

Art Byrne's perspective on stretch goals offers a radical departure from the traditional management view that goals should be easily achievable to avoid employee demoralization. Contrary to this belief, Byrne champions stretch goals as an expression of respect for the organization and its capabilities, arguing that setting ambitious targets demonstrates faith in the team's potential and drives significant improvements–even when those targets are not fully met. His experience at Wiremold, where aiming for a 50% reduction in defects led to an average 42% reduction, powerfully illustrates how ambitious goals can lead to better performance outcomes than modest aims, even when the loftier goals are not entirely achieved.

Lean's Role in Delivering Value to Customers

The conversation transitions into a broader discussion of lean's role in business strategy, emphasizing that it is more than a tool for cost-cutting or efficiency improvement. Byrne positions lean as a fundamental strategy for value creation, connecting the philosophy to the broader objective of delivering more value to customers than competitors. His assertion that “productivity equals wealth” reflects a deep belief in lean's capacity to generate value, not just for the company, but for customers, employees, and stakeholders. This view elevates lean from a set of operational tactics to a central element of strategic business planning.

Leadership Involvement in Lean Transformation

The necessity for leadership involvement in lean initiatives underscores a recurring theme in Byrne's narrative. Leaders must see lean as their strategy, lead from the front, and recognize the transformation as fundamentally about people. This triad of requirements highlights the critical role of leadership in not just endorsing lean initiatives but actively engaging in them. The success stories shared by Byrne give credence to the idea that when leaders are visibly committed to lean principles, they can propel their organizations toward unprecedented improvements and cultural shifts.

Sharing Wealth with Employees

Lastly, the discussion of wealth sharing introduces a pivotal aspect of the lean journey–ensuring that the benefits of increased productivity and efficiency are equitably shared with those who contribute to these successes. Byrne's approach at Wiremold, involving both profit sharing and encouraging employee investment in the company, presents a model for how businesses can ensure that their lean transformations contribute to a holistic improvement in the company's ecosystem, benefiting not just the bottom line but enriching the lives of their employees.

In conclusion, the transformative power of lean principles as demonstrated by Art Byrne and his leadership philosophy offers businesses a road map for achieving remarkable operational efficiency and strategic growth. By challenging traditional norms, investing in people, and focusing on delivering value, organizations across various sectors can leverage lean principles to achieve sustainable success and competitive differentiation.

Fostering a Culture of Inclusion and Innovation

Embracing a culture that encourages failure as a pathway to success is vital in driving innovation and continuous improvement. Art Byrne's approach, especially towards nurturing an environment where it's safe to fail, provides a crucial lesson for businesses aiming to achieve a lean transformation. Instead of penalizing failure, companies should celebrate the efforts made toward innovation and learning from trials, which, in turn, fosters a culture of fearlessness among employees. This approach is especially pertinent in product development and operational processes where the fear of failure can significantly stifle creativity and hinder the process of ideation and improvement. Encouraging small failures and iterative learning can lead to breakthrough innovations that push the company forward.

The No Layoff Policy: A Sustainable Approach to Kaizen

The concept of a no-layoff policy in relation to Kaizen activities presents a revolutionary shift in how organizations approach efficiency and productivity improvements. By guaranteeing job security, companies can eliminate the fear of unemployment, which often hampers employees' willingness to contribute to and participate in continuous improvement processes. This policy enables a culture where employees feel valued and secure, motivating them to identify and implement efficiencies without the worry of job loss. This not only boosts morale but also aligns employees' interests with the organization's goals, leading to a more engaged and proactive workforce.

The Importance of Leadership Engagement

The engagement of leaders at all levels, particularly in healthcare, is crucial for the successful implementation of lean principles. Art Byrne's observations on the contrast in attitudes towards lean transformation between healthcare and manufacturing CEOs highlight a broader issue of leadership engagement across industries. Leaders who embody and actively participate in lean initiatives, like Gary Kaplan at Virginia Mason, can drive remarkable change and set a precedent for others to follow. Leadership engagement is not just about endorsement; it's about leading by example, demonstrating commitment, and being actively involved in the lean journey. This level of involvement sends a powerful message throughout the organization about the value and importance of lean transformation efforts.

Leveraging Employee Potential for Continuous Improvement

Byrne emphasizes the untapped potential residing within organizations–particularly the ideas and insights of frontline employees. Creating a system where every employee feels empowered to contribute ideas can significantly multiply an organization's capability for innovation and improvement. This approach, which contrasts sharply with traditional top-down decision-making models, democratizes innovation and leverages the diverse perspectives and expertise of the entire workforce. Companies that succeed in tapping into the collective intelligence of their employees can accelerate improvement processes, enhance value delivery, and foster a more inclusive and innovative organizational culture.

Transforming Hospital Operations through Value Streams

The application of lean principles within hospital settings, as described by Byrne, showcases the significant impact of breaking down silos and focusing on value streams. By reorganizing around value streams, such as cardiac care, hospitals can improve efficiency, patient outcomes, and staff coordination. Streamlining processes from the patient's entry through to discharge can not only enhance the quality of care but also optimize resource utilization and reduce waste. This approach requires a shift in traditional hospital management and a move towards integrated, patient-centered care pathways. Leadership plays a pivotal role in facilitating this shift and overcoming the entrenched silo mentality that often hinders hospital operations.

In essence, the lean transformation journey, as elucidated through Art Byrne's experiences and insights, is both a strategic and cultural shift that calls for reevaluating traditional norms, engaging leadership at all levels, and harnessing the collective intelligence and creativity of the workforce. The principles highlighted extend beyond manufacturing and healthcare, offering valuable lessons for organizations across various sectors aiming to achieve sustainable growth, operational excellence, and enhanced value delivery.

Engaging Top Management in the Lean Journey

The insights shared by Art Byrne underline the critical role of top management in the successful implementation of lean principles across any organization. Leadership from the CEO and other top-level executives is not just about setting expectations or delegating tasks; it's about being a part of the change, both in mindset and practice. When senior leaders actively participate in lean initiatives, they not only bolster the morale of their teams but also demonstrate a commitment to the principles of continuous improvement and respect for people. This engagement is particularly essential in driving lean transformation, as it helps to overcome resistance and aligns the organization's strategy with lean objectives.

The Role of Training and Education in Lean Transformation

An often-overlooked aspect of lean transformation is the need for comprehensive training and education at all levels of the organization. Art Byrne's experiences highlight the importance of building a solid foundation of lean knowledge among employees. This educational aspect involves not just the understanding of lean tools and techniques but also a deep appreciation for the cultural shift towards continuous improvement. Training programs should be designed to encourage critical thinking, problem-solving, and collaboration, enabling employees to effectively contribute to the organization's lean journey.

Operational Excellence Through Standardization and Problem Solving

The journey towards operational excellence requires a disciplined approach to standardization and an unwavering focus on problem-solving. Art Byrne's philosophy encompasses the establishment of clear standards as a baseline for continuous improvement. These standards are not meant to stifle creativity but rather to provide a framework within which innovation can flourish. Encouraging employees to identify deviations from these standards and engage in root cause analysis fosters a problem-solving culture that is at the heart of lean. By systematically addressing small problems before they escalate, organizations can maintain operational stability and improve performance over time.

Building a Lean Culture Beyond Manufacturing

While lean principles have their roots in manufacturing, Art Byrne's experiences and teachings advocate for their application across various sectors, including services and healthcare. The transcendence of lean thinking beyond traditional manufacturing environments into areas like software development, financial services, and healthcare signifies its versatility and relevance. To successfully implement lean in these diverse settings, organizations must adapt the principles to their specific context, focusing on value creation, waste elimination, and process optimization. The core idea is to create more value for customers with fewer resources by engaging and empowering employees at all levels.

The Significance of Continuous Learning and Adaptation

Art Byrne's dedication to sharing his wealth of knowledge underscores a vital aspect of lean transformation: continuous learning. In a rapidly changing business environment, the ability to adapt and learn is indispensable. Organizations embarking on the lean journey should foster a culture of curiosity and lifelong learning, where experimentation and learning from failures are seen as stepping stones to innovation. This involves staying abreast of evolving lean methodologies, sharing best practices, and being open to new ideas. Continuous learning not only facilitates adaptation to external changes but also drives internal growth and improvement.

In summary, Art Byrne's extensive experience and success in implementing lean principles across diverse industries serve as a beacon for organizations aspiring to embark on a lean transformation journey. The key takeaways from his approach–such as engaging leadership, emphasizing education, standardizing for consistency, expanding lean beyond manufacturing, and fostering a culture of continuous learning–offer a roadmap for achieving sustainable growth, operational excellence, and a competitive edge in today's dynamic business landscape.

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