Is this the dawn of a lean era?

After the miracle of Toyota was introduced to the world, the story line goes, the business world got the tool part, but not the people part.  I think there’s a missing piece in that narrative.

The clue is in the article “The Age of Consumer Capitalism” (Harvard Business Review, Jan, 2010) by Canadian business guru Roger Martin, which outlines three business eras of the past century. The first era was managerial capitalism – essentially the professionalization of management – that began in 1932. Then came the shareholder value era, beginning in 1976, where short term speculative value becomes the primary focus of the CEO.

Martin argues that shareholder value capitalism makes it virtually impossible for the CEO to develop a long term business strategy. Instead, the focus is on increasing Wall Street’s expectations, typically through disbursement of assets, downsizing, consolidation, share buybacks, and other maneuvers – any of which is liable to raise share prices at the expense of the company’s long term viability. Proxy fights led by activist shareholders often bring this conflict into the news.

Lean as a long term strategy is clearly out of the question in this scenario, and that, I believe, is the missing piece in our narrative about lean adoption.

Now for the good news. Martin argues that shareholder capitalism’s days are numbered, and that we are poised to enter the age of consumer capitalism. Here, companies will be concerned with building customer value over time, and long term performance will once again become the primary focus.

It’s been five years since Martin wrote the article, but there are growing signs that he may be right. Just in the past few days, DuPont successfully kept a group of activist shareholders off its board, and Toyota announced a special share offering with a minimum holding period of five years.

The era of consumer capitalism would have management scrambling not just to make their quarter, but to find ways to maximize customer value. This could lead to many more CEOs adopting lean. As Mike Lamach commented in our interview for The Lean CEO, “Lean….is the simplest way to look directly at a line of sight to the customer, and to rally people around that customer experience.”