Lean Management Expert James Womack Says Businesses Face a “Prisoner’s Dilemma”

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The Lean Enterprise Institute founder told manufacturing, government, and healthcare managers at the Northeast Shingo Prize Conference how lean management turns the dilemma into a win-win.

LEI is celebrating its 15th anniversary in 2012.

The Lean Enterprise Institute's nonprofit mission is to advance lean thinking around the world.

Prisoner’s dilemma is an accurate behavioral metaphor for businesses sharing a process in which a win-win possibility becomes a lose-lose actuality because managers and executives don’t have a way to share an analysis of their common processes.

Managers and executives today face a “prisoner’s dilemma” in which they have to “betray” other departments or companies along a shared process in order to optimize their portion of it, according to management expert James P. Womack, founder of the nonprofit Lean Enterprise Institute (LEI).

Womack, who led the MIT research team that coined the term "lean" management, made his comparison during the opening keynote at the Eighth Annual Northeast Shingo Prize Conference, September 25-26, 2012, at the DCU Center, Worcester, MA. Womack’s presentation was titled “Learning to Share Your Value Streams.”

“Value streams or processes flow horizontally across departments, functions, and enterprises,” Womack explained. “But they are organized vertically with incentives for business people to optimize their separate portions of processes, rather than cooperate to increase the value delivered by the whole process, which is what customers care about.”

Thus, business people face a prisoner’s dilemma in which everyone could gain valuable benefits by cooperating, but find it difficult to coordinate activities in order to collaborate.

The prisoner’s dilemma scenario grew out of game theory research. Two suspects are arrested by police, who, lacking enough evidence for conviction, separate both prisoners, then offer each the same deal: If one testifies against the other and the other remains silent, the betrayer goes free and the silent prisoner receives the full 10-year sentence. If both prisoners remain silent, each gets only six months in jail on a minor charge. If each betrays the other, each gets a five-year sentence.

“It’s an accurate behavioral metaphor for businesses sharing a process in which a win-win possibility becomes a lose-lose actuality -- which happens every day in the real world – because managers and executives don’t have a way to share an analysis of their common processes,” Womack said.

Jail Break
The solution is for every company or department touching a value stream to “get out of their cells” by drawing a value-stream map together showing the opportunities for creating more value with less resources and waste.

“Sharing is not natural,” Womack said. “But it is necessary to escape the prisoner’s dilemmas we all face every day.”

Womack, who now is a senior advisor to LEI, is the co-author with Daniel Jones of such influential business management books as: The Machine That Changed the World (with Daniel Roos; Macmillan/Rawson Associates, 1990), Lean Thinking (Simon & Schuster, 1996, 2003), Seeing The Whole: mapping the extended value stream (Lean Enterprise Institute, 2002) and, Lean Solutions (Simon & Schuster, 2005).

His most recent book, Gemba Walks (Lean Enterprise Institute, 2011), is a collection of his essays on lean management, based on 10 years of walking value streams at a variety of companies.

What is Lean?
The terms lean manufacturing, lean production, or lean management refer to a complete business system for organizing and managing product development, operations, suppliers, customer relations, and the overall enterprise. It requires less capital, material, space, time, or human effort to produce products and services with fewer defects to precise customer desires, compared with traditional modern management.

Toyota pioneered lean management as a complete business system after World War II. During the late 1980s, a research team headed by Womack at MIT’s International Motor Vehicle Program coined the term “lean” to describe Toyota’s system.

Lean Enterprise Institute
Lean Enterprise Institute, Inc., was founded in 1997 by management expert James P. Womack, Ph.D., as a nonprofit research, education, publishing, and conference company with a mission to advance lean thinking around the world. We teach courses, hold management seminars, write and publish books and workbooks, and organize public and private conferences. We use the surplus revenues from these activities to conduct research projects and support other lean initiatives such as the Lean Education Academic Network, the Lean Global Network and the Healthcare Value Network. Lean Enterprise Institute and the leaper image are registered trademarks of Lean Enterprise Institute, Inc.

The Shingo Prize for Operational Excellence is named for Japanese industrial engineer Shigeo Shingo who was a thought leader in building operational excellence.

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Chet Marchwinski
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