Lean Failure Rates

Believe it or not, blogging comes with its hazards. One of those is to publish a “fact” that you can’t back up. Part of the plan here at the TWI Blog is NOT to aspire to be like the NY Times, sometimes known for their sloppiness. Despite our best intentions, mistakes can be made when our guard is down and we take things for granted. So, from time-to-time, we have to backtrack and understand the situation after we have jumped to a conclusion...OUCH!

When thinking the other day about small kaizen in blogging, I threw out a number to make a point: 95% of lean implementations fail. Mark Graban and Karen Wilhelm called me out on that number. Mark asked: “Is this just an anecdotal number?” Karen went further and asks: “How do we judge failure and who would want to admit failure?" These are great questions that cast some doubt over the infamous 95% figure.

Let’s start with the percentage of lean implementation failures. After doing some more digging, my conclusion is that the 95% is "mostly" anecdotal with some supporting figures. For your reference, following are several “claims” about CI/Lean failure rates with the web link to that claim. There are two categories: 1) Straight Failure Rates in descending order, and 2) Supplemental Data, (which may help us begin to understand the phenomena)

Straight Failure Rates

a) Clifford Ransom numbers - 98%+ lean failure rate

b) “More than 95% of all lean implementations fail to provide sustainable results, even with the involvement of highly skilled engineers.”

c) 90% of all companies that head into 5S fail. 90% of the companies that head into LEAN fail.

d) It is estimated that 70% or more of companies that attempt to implement lean fail when using mainstream practices.

e) According to Mark Eaton of EEF South, a far lower number are successful than you might think – less than 30%. And of those who realize the improvements less than 50% are able to sustain it, slipping back to previous or lower performance levels.

f) +50% failure rate

g) and within an LEI forum, a member claimed another anecdotal estimated 75% failure rate.

Supplemental Evidence

a) "Only 2% of the companies reported achieving World Class manufacturing status."

b) The 2007 IndustryWeek/Manufacturing Performance Institute Census of Manufacturers is a study of manufacturing metrics, management practices and financial results at the plant level.

17.8% say continuous improvement programs led to a major increase in productivity:

67.2% report some increase

12.4% report no change

2.2% report some decrease

0.5% report a major decrease

c) 10-20% of leaders in a typical organization are unable or unwilling to make the lean conversion.

Conclusion

Judging from this information, it is safe to conclude that a sentiment or perception exists that the majority of lean implementations fail. We can't really go beyond claiming more than a general sentiment because none of these sources provided anything beyond the straight failure rate and we don't necessarily know what 'failure' means. So perhaps if one survey model was redone with another survey's failure criteria, the failure rate could drastically change. Its all relative.

For the record, the 95% from SME has been in my head for some time now. After this little bit of research, I will not be making this claim anymore. To be fair, it is not clear where SME obtained this figure. Although one can sneak by with this claim in the sloppily researched blogosphere, after seeing more anecdotal data I’m far from being, statistically speaking, 95% confident that 95% of lean implementations fail! It makes sense to revise this figure with something all industry can relate to.

Trying to find this common ground that all can relate to is where the problems begin in trying to understand the failure rate. Each member of industry defines failure differently from the next. To that end, it is tempting to put up a survey on the TWI Blog to try and gauge lean failure rates in 2009, but there is not enough traffic here to get a decent sample size within a meaningful period. Plus, we have yet to answer the second question posed by Karen:

“how would we judge failure?” which is the core question of any such survey.

One definition might be that the company stopped “doing Lean”. Another definition could be that the company filed for bankruptcy. Yet another could be bound by employee satisfaction levels. Or perhaps the leadership is evaluated in some way. So, this definition is left to others to offer up: what is the definition of a lean initiative and how would we judge it as a failure? Your comments please.