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From Failure: Lean Manufacturing and Scrum

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Why should we do failure analysis? Failures motivated at least two radical management frameworks adopted by almost all companies in their respective sectors: Lean Manufacturing and Scrum. Smart folks first analyzed failures then constructed counter-intuitive frameworks to prevent failure.

Lean Manufacturing Emerges from Near Bankruptcy

The first framework is Lean Manufacturing, which is today used by virtually all automobile manufacturers and many other manufacturers.

In the late 1940s, Japan was emerging from World War II after its industrial base had been bombed into oblivion.

Toyota had studied American manufacturers like Ford and decided if they wanted to compete, they had to do something radically better.

Despite its ambitions, Toyota barely avoided bankruptcy. It successfully negotiated a bank loan in 1949. But then it was rocked by strikes. It produced just 300 cars in 1950.

Toyota pushed forward with a great experiment, from 1948 on. In the USA, it was called “just-in-time manufacturing.” Employees didn’t start building a car until the minute someone ordered it. And then, they scrambled to assemble all the pieces. Initially, Toyota cars were crappy, but Toyota supported a team-based experimental philosophy.

Toyota codified its philosophy as the Toyota Production System (Ohno 1988). It encouraged team collaboration in building cars, defined waste very broadly (and sanctified waste reduction). It institutionalized that decisions converged from an ongoing dialogue between leaders and workers throughout the organization. When you get trained in Toyota Production System, or what is now called Lean Manufacturing, you adopt a mindset, a philosophy, and it goes far beyond your work life because it helps you at home, too. (Hino 2007)

Did it work? We could write a whole book on this with some great stories (and many have), but in short, yes.

Toyota became the most profitable car manufacturer in the world in 2008, but it wasn’t the most productive. It produced fewer cars with a higher profit margin. In contrast, General Motors produced a lot of cars. But GM went bankrupt in 2009, just a year later.

General Motors got a lot of support from the US government to rebuild. But then, to add insult to injury, Toyota became the most productive car manufacturer in 2021, delivering over 10 million cars. Toyota was producing more cars, with a higher total profit, than any other car manufacturer in the world. It now makes twice as much profit and 58% more cars than General Motors, once the profit and productivity leader.

Agile Emerges from Software Project Failures

Switching gears to the software industry , in the 1980s, a growing number of massive software project failures started to become obvious. (Charette 2005)

About a third of software projects were failing. And by this term, I mean, they were either abandoned completely, or they were released to clients who refuse to use them. The cost of some failed projects were in the millions and a few reached a billion dollars.

Stressed out managers would often assume that software project failures were due to insufficient planning. So engineers planned more and failures got worse. But some wise folks started to realize that because software development was a fundamentally creative process, it couldn’t be predicted longterm. This is when iterations, low cost team-based experimentation, and other approaches became the norm. Many frameworks were developed during this time. And this framework category is generally termed agile.

You’ll sometimes hear developers bellyache about agile techniques, because they’re now used everywhere and they require discipline. But they saved many software projects. About 10% of agile software projects fail versus a third of traditionally managed software projects.

The most popular agile framework is Scrum (Schwaber 2020). Scrum is more general than most such frameworks. It has been applied to a wide variety of project fields, including education, marketing, finance, and corporate organization. Agile practitioners in software borrow freely from other fields, including Lean Manufacturing.

Big Tent Agile

All these frameworks play well together so some colleagues and i have started to refer to any collaborative, experimental, waste-reducing framework as big-tent agile. Honestly, I just shorten it to “agile.” (Greening 2016)

To summarize, failure analysis led to new outcomes and manufacturing and software. Agile practices are now spreading to other areas, including overall business management.

I don’t know whether I said all this to convince you it’s worth your time to do failure analysis because of the opportunity to develop new ways to succeed, or to give you a little backgrounder or an agile history. But maybe i’ve done both.

Bibliography

Ohno, T., & Bodek, N. (1988). Toyota Production System: Beyond Large-Scale Production (1st edition). Productivity Press.

Hino, S. (2007). The Creators of Toyota’s DNA. Assembly Magazine. https://www.assemblymag.com/articles/84596-the-creators-of-toyota-s-dna

Charette, R. N. (2005). Why Software Fails. IEEE Spectrum: Technology, Engineering, and Science News, 42(9), 42–49. https://spectrum.ieee.org/computing/software/why-software-fails

Schwaber, K., & Sutherland, Jeff. (2020). Scrum Guide 2020: The Definitive Guide to Scrum: The Rules of the Game. https://scrumguides.org/scrum-guide.html

Greening, D. R. (2016). Agile Base Patterns in the Agile Canon. 2016 49th Hawaii International Conference on System Sciences (HICSS), 5368–5377. https://doi.org/10.1109/HICSS.2016.664

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