Lean Thinking vs Fat Thinking
|Sep 23, 2016|
This is a longer-than-usual newsletter, with a 75-point tweetstorm, because I want to tackle a fairly complex topic today: lean thinking versus fat thinking. You've probably heard the term lean used in the context of both startups, as in "lean startups" and in the context of old-economy big companies, as in "lean six sigma", or the Toyota Lean model. It can get confusing because lean startup aficionados often try to both distance themselves from the older manufacturing tradition, but also ally themselves with the best of the tradition. Is it new, or is it old? Are the two the same, or different?
If you zoom out a bit though, the confusion vanishes, and it becomes clear that lean startup thinking is part of an unbroken 100-year old tradition, all of which can be labeled lean. The more meaningful contrast is between lean (whether in small/big or old/new economy) and what you might call fat thinking, which also exists as an unbroken 100-year tradition. The only difference is that the tradition of fat thinking is a mysteriously hidden one, like a shadow, or like the hidden Second Foundation in Asimov's Foundation novels. There is a reason for this.
The yin and yang of lean and fat
1/ Eli Goldratt's influential 1984 novel The Goal (one of Time's 25 most influential business books in 2011), captures the essence of "lean" thinking in fictional form
2/ It marks the maturation of a ~100 year tradition that can be called "lean", starting with Fredrick Taylor's interesting-but-wrong pseudoscience version in 1919, all the way to modern DevOps
3/ It communicated, to a non-engineering audience, the essence of ideas like critical paths, bottlenecks, "work in progress" (WIP) and the theory of constraints.
4/ From the first non-pseudoscience version (the Juran/Deming version that matured in Japan in the 60s) through Goldratt to today, "lean" has delivered HUGE returns to the global economy.
5/ If you grew up around engineering, or studying engineering, in the last century, this century-long tradition could not have failed to shape your life. It certainly shaped mine.
6/ I grew up in a steel/bus/truck manufacturing town surrounded by the TQM (total quality management) and ISO 9000 craze of the late 80s.
7/ Since my father was heavily involved in these efforts, I grew up surrounded by, and reading, his books in high school. Such efforts helped the Tata group grow into what it is today.
8/ Like many future engineers who grew up during the 80s Japanese ascendancy, the then-new idea that quality, innovation, and productivity were linked, was hammered home for me as a teen.
9/ I'd heard of kaizen and been immersed in the koan like sayings of Shigeo Shingo before studying operations research and production engineering in college.
10/ While I was working on a PhD 1997-2003, a bunch of my peers joined i2 after their MS degrees, a supply-chain company steeped in Goldratt's thinking. That's when I read The Goal.
11/ At Xerox between 2006-11, I encountered agile, lean and six sigma, all natural extensions of the tradition, as well as the lean startup model, which too fit neatly.
12/ Though some believe otherwise, the lean startup model also fits neatly into this tradition, as does its more technical cousin, DevOps.
13/ Gene Kim's excellent book on DevOps, The Phoenix Project, is a straight-up (and acknowledged) port of The Goal.
14/ Somehow though, after nearly 30 years immersion in engineering environments shaped by "lean" thinking, I began to feel something deep was missing in the tradition.
15/ The first clue was Ben Horowitz' contrarian 2011 post, The Case for the Fat Startup, which argued that for startups at least, fat was equally critical.
16/ Besides Ben's post and a few followups, including my recent one, Fat Thinking and Economies of Variety, there's almost no writing on "fat", compared to entire libraries on "lean."
17/ Lean is a yin that lacks an obvious yang. One reason for this is that "fat" is actually instinctive behavior, and resembles creative play that does not need to be taught.
18/ To get to the heart of why, consider a key plot element in The Goal: the company buys an expensive high-tech manufacturing robot.
19/ The managers instinctively begin to direct work towards it, since they paid a lot for the robot, and feel they ought to "use" it to get a "return" on their investment.
20/ The entire novel is based on the hero learning to fight this instinct, and proving to himself and others that the factory ought to be understood and optimized at a "systems level" towards, well, a "Goal."
21/ One symbolically significant way he does this is to use an old, low-tech machine tool to rebalance the flow in the factory, lower WIP inventory, and begin saving the company financially.
22/ It makes for a great story, and a great way to learn almost everything non-technical you need to learn about lean thinking as a manager. For software, _The Phoenix Project _does the same.
23/ But it is only half the story. Fat thinking begins with a sacrilegious question within the lean tradition: what if the high-tech robot buyers in The Goal were right the first time?
24/ The key insight here is that under certain conditions, the instinctive action is also the correct one. The "certain conditions" are those that demand open-ended learning and retreat from hard-edged goals.
25/ If your company is operating in low ambiguity, high uncertainty conditions, you already know what's the right thing to do. You just need to do the thing right. That's a go-lean problem.
26/ If on the other hand, your company is operating under high ambiguity, you need to sacrifice whatever certainty you have, to drive up clarity around what's worth doing.
27/ In the robot example, if there is a macrotrend towards automation, the existential threat is failing to get sufficiently good at robotics, sufficiently quickly, to have a future.
28/ How does your old-fashioned machine shop with low-tech tools fit in the emerging robotic manufacturing landscape? You can't just intellectualize your way to an answer.
29/ You have to buy a robot and make learning how to use it priority number one. Even if productivity and profitability all go to hell while you're learning the new technology.
30/ At this time, prioritizing "lean" objectives can often be the worst thing to do.Your priority should be to devote all available resources to the learn-or-die robotics effort, investing just barely enough to ensure short-term survival elsewhere.
31/ This is "fat" because not only are you going to ignore cost efficiency and ROI, you're going to actively force operations from normal/efficient to weird/inefficient to learn.
32/ People steeped in "lean" thinking expect costs to go down as you learn more, like elite athletes training for an event. People instinctively comfortable with "fat" expect costs to rise while they learn, like babies stumbling about.
33/ This is why the first and most important element of "going fat" is what Bill Janeway called "cash and control" in his book, Doing Capitalism in the Innovation Economy
34/ The most visible sign of a fat company is that it is cash rich, and that the leader has highly effective and unquestioned operational control, rather than being beholden to the board.
35/ You have to have cash to survive the bleeding, and control to force through your vision of how to make the discontinuous leap into the new business model.
36/ Of course, money and control are a recipe for excess and corruption, but let's table that issue for a moment, and assume a leader with integrity who is aiming for a thriving, growing business.
37/ But cash (the most liquid form of fat) and control (in the highest leverage form of control of the board) are only the tip of the iceberg. You need "fat" in the system all the way down to the smallest experiment underway.
38/ This is a HARD condition to create. In a large company, it can be attempted by separating the "fat" and "lean" lines of business and explicitly using the lean to subsidize the fat.
39/ In smaller companies, fat is often incorporated via the idea of a "pivot," which can be anything from a real sense of true north to learn towards, to meaningless thrashing.
40/ But the idea of adding a pivoting behavior onto a fundamentally lean vehicle is a weak compromise between fat and lean. This can (and does) fail in two ways.
41/ The first failure mode is to treat the pivot as an uncreative second-level market feedback loop. Your minimum viable product bombed, so you do a market double-take and make up a new "data-driven" direction.
42/ The second failure mode is for the founders to have some holy sense of "true north" based on something like a values-based "mission" rather than an understanding of context.
43/ The first is a pretense that second-order reactivity is strategy. The second is the pretense that religion is strategy. Both turn the promising idea of a pivot into garbage.
44/ To "pivot" meaningfully, the team has to recalibrate the direction of maximal interestingness, where disambiguation will be quickest. This is a task requiring imagination and creativity, not just data.
45/ This is the essence of what, in Boydian strategic thinking, is called the "Schwerpunkt" (literally, the "point of the spear"). The best current direction for growth.
46/ The purpose of open-ended learning is to keep the direction of maximal interestingness, the "spear", actually pointing in the direction of maximal ambiguity.
47/ This yields a very specific notion of strategy. Strategy is not a particular course of action, it is a pattern of interpretation of all your actions. A sense of how they fit into a story.
48/ The actual embodied form of the "point of the spear" may seem superficial and change every quarter: landing a specific big customer, or winning a court battle.
49/ The essence of having a strategy is knowing which of a dozen tactical fire-fights is also the strategic fight on which the future of the business is riding. Strategy is not a separate meta-level thread of activity.
50/ The point of a "pivot" is not to just make up one more thing to try, but to reorient around a new mental model based on a new understanding of the heart of ambiguity. The effect may be to promote an existing subplot to main plot.
51/ A pivot is not necessarily about stopping one set of activities and starting another. It's primarily about reading a new meaning (and therefore a new pattern of priorities) into all activities.
52/ Here's the bad news. Inevitably, when you pivot, you'll need to sacrifice some hard-won gains on the old front. This is why there is a fundamental conflict with "lean"
53/ "Pivots" fundamentally work better with "fat" operations because lean operations have far more momentum and inertia. They are harder to steer.
54/ As we discussed last week in "premature synchronization is the root of all evil", tight coordination -- the outcome of "good" lean practice -- is momentum.
55/ There is no point developing maximal momentum in a direction you're not sure is correct. Lean efficiency in what turns out to be the wrong direction becomes a liability once you pivot.
56/ So the general principle is this: only lean out operations in proportion to how well you've disambiguated your market environment. More is illusory gains that can turn into liabilities overnight.
57/ Running fat is much messier, more reliant on intuition, and free-form experimentation than running lean. My fat thinking post, gets into some of the messy ideas, messily.
58/ Running fat is also about seriously putting people over process. This means investing in developing the finger-tip feeling tacit skills of individuals.
59/ When you're running fat and optimizing for staying oriented around maximal ambiguity reduction, most of what you'll be learning will be tacit, finger-tips stuff.
60/ In our counterfactual version of the The Goal, the people experimenting with the potential of the new robot would be accumulating "finger-tip feeling" potential.
61/ In case it isn't obvious, THIS IS THE ROI! You turn it into a Schwerpunkt via the rough consensus and running code model.
62/ The leader must trust his/her people to learn fast enough to drive the increasing clarity that sparks leaps of strategic intuition around reorientation.
63/ At a talk at ALM Chicago a couple of years ago, I noted that though "lean" people often say "people over process" they often spend 99% of their time talking about process.
64/ This proved to be a very provocative thing to say and it got retweeted quite a bit. But I wasn't being contrarian. I was just pointing out an obvious point that most "lean" practitioners recognize.
65/ The tough lesson for those attached to the procedural scaffolding of lean is that while intuitive intelligence is accumulating in finger-tips, processes will not be sacred.
66/ Startups often need to be born fat (like babies), go through a lean phase, and then grow fat again. They tend to be lean or fat in monocultural ways. Big companies can be a mix.
67/ This cycling through lean and fat is, at the level of operations, the equivalent of cycling between eras of diversification and focusing on core competency at the level of strategy
68/ Learning to operate in fat mode is not so much as a _doer _skill (since it is the natural way people operate) as a recognition skill: an ability to "read" all the stories that are playing out, and picking a different one as the default.
69/ There are always problems in operations. The trick to switching from lean to fat is learning to tell when the problems are a signal to switch to fat rather than a trigger to solve specific issues using lean skills.
70/ In David Allen's 2x2 of perspective versus control, this is the high perspective/high control 'master-and-commander' quadrant: learning to steer with a light touch
71/ To return to our opening counterfactual about the robot in _The Goal, _the key question to ask when switching from lean to fat is to ask, "what is going wrong... and what if that is a good thing?"
72/ An even more powerful version is to ask, "what is going right... and what if that's a BAD thing?" This is harder because of loss aversion: we are reluctant to stop doing what seems to be going well.
73/ The intent behind both diagnostic questions is to critically examine not your factual assumptions, but your assumptions about values underlying culture and the company's _raison d'etre. _
74/ Lean to fat/fat to lean shifts are about turning the sacred into the profane, and the profane into the sacred. And religious transformations are hard. They require powerful stories to drive through.
75/ This is why fat/lean yin-yang thinking is a narrative skill. Reading a different story into a business is like rewriting fiction from the point of view of a villain.
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