3 Reasons why (certain) US Companies are Struggling

Ignorance and/or Lipservice to Lean & 6Sigma

When I'm out of sugar, I take the pack in the pantry, and put 'sugar' on the shopping list. Minimal inventory, never out of sugar.
When my son was 3 he helped me wash car wheels in the drive way. When the water bucket was too far away and he had to keep running back and forth to wet his sponge, he didn't ask for a bigger sponge so he didn't have to run as much. He moved the bucket closer. What a concept. And here we are in 2010 asking for bigger sponges in so many US companies.

The same companies will claim "yes, we're a lean company". This can mean that they are running scarce resources (typically manpower) or they may actually be trying to apply some lean ideas, but don't really get it.

6Sigma is taking on a whole new twist. Seems like everyone is pursuing or already a notorious Black Belt. I think belts are what holds your pants up. It's what's between your ears that matters. For what it's worth, we will at least have a belt-wearing army that speaks the language of lean and six sigma. Now all they need is the authority to really change things around, instead of tweaking process a little here and cutting waste a little there.

Bill Waddell makes a similar point on his blog http://www.evolvingexcellence.com/blog/2009/12/global-ignorance.html based on a study in The Economist.


Reliance on Standard Cost Systems

Unlike the lean perspective on inventory, inventory is better than gold for many finance and accounting departments and their respective heads of organizations. When you produce something, it becomes an asset. Assets are good. You can borrow against them. And as long as the ROA is decent nobody pays too much attention.
When you reduce inventory (with stable processes and other lean benefits), your balance sheet shrinks. Although cash flow is great, your 'profitability' actually suffers.
This is just one obstacle.

Another would be the stubborn focus on overhead absorption and variances. Besides bashing operations upside the head with every month's variance analysis, is there ever an endeavour into root cause analysis? Or do we just adjust overhead and labor rates for next year to minimize our variances?
The desire for overhead absorption leads to undesired activities, namely period end rushes to build something, ANYTHING, to make sure the accountants are happy. It's the sales department's job to sell it right?

I assume the most obvious use of standard cost would be to figure out what something costs. There's just a slight problem. Although any cost accountant can accurately determine a widgets cost to 4 digits after the decimal, it is rarely the true cost. Widely known as 'peanut-butter spread', the assignment of overhead arbitrary. And what does direct labor have to do with assigning activities such as material handling??
Incomprehensible to many, a widget's unit cost varies from week to week, if not daily.
The problem is that standard cost cannot even get close to the true cost.

And try to make decisions based on a cost structure consisting of material cost, direct labor cost, and an overhead portion. I guess you pressure purchasing to get better deals, you can't really do much about overhead in the short term, so you're left with increasing productivity and/or letting people go.

What about the rate of flow through all processes? What about capacity levels? What about the stability of your processes?


Outdated Leadership 'Styles'

Command and control. Don't let people think on their own. And God forbid they make a mistake. The intimidation of workers or managers is so great that they do as they're told and never step outside the box. Successful companies foster an environment that let's people experiment, and do not punish them if something does not work out, but make sure that the organization learns from the mistake.

Again, just one aspect, but in its entirety, Leadership is misunderstood, misapplied, and misguided by way too many people.

Dan Pink made a point on TED about it.


Some more thoughts added on Feb 1, 2010 - I found this in John P. Kotter's "What Leaders Really Do" (emphasis mine):

"A close examination of the day-in, day-out actions and responsibilities of a "manager" or "leader" will produce a picture that doesn't resemble anything like the "able manager" or "visionary leader" of our dreams. In "real life", effective executives spend a lot of time just talking to other people, including people who are not their subordinates. They deal in a broad sweep of topics rather than just their functional specialty, are much more likely to ask questions than give orders, and actually make "big" policy decisions only rarely."

Nice highlights of real leadership vs. the command-and-control still prevalent in too many organizations.