Most Lean transformations don't fail because the tools are wrong or because people don't try hard enough.
They fail because the organization treats Lean as a collection of tools applied to one part of the business, rather than as a management system that has to operate across the whole enterprise. They fail because senior leadership engagement evaporates when a charismatic CEO moves on. They fail because the existing management systems, IT infrastructure, and organizational mindset are stronger than anyone planning the transformation expected them to be.
Research conducted by Sam McPherson and Art Smalley, drawing on data from the Shingo Institute, suggests that roughly 95 percent of organizations that begin a Lean transformation return to their original state within five to seven years. Eighty percent do so within two to three years. Fewer than 5 percent reach the point where Lean becomes institutionalized and begins to mature as the way the organization actually operates.
This webinar is Sam's account of what separates that 5 percent from the rest -- and what leaders can do to move from path A or path B onto path C. It draws on his work co-founding the Lean Leadership Academy with Art Smalley and Russ Scaffede, his earlier career as a plant manager at Crown Cork & Seal during an award-winning Lean transformation, and his background in U.S. Army Special Forces, where he served as Director of Special Operations Plans during Operation Enduring Freedom in Afghanistan.
Sam McPherson is an internationally recognized Lean Enterprise transformation leader with more than 28 years of experience developing senior leadership teams and designing Lean Enterprise management systems. He was introduced to TPS and the work of Shigeo Shingo in the mid-1980s while serving as a project leader. He has led industry award-winning Lean transformations and currently helps organizations develop their leadership pipeline and implement TPS as a comprehensive system.
The starting data point is unflattering. Of organizations that begin a Lean transformation seriously enough to consider applying for the Shingo Prize, roughly 95 percent eventually drift back toward their pre-Lean operating state. The trajectory varies. Some return quickly. Some sustain a partial program for years before regressing. But the long-term result is the same -- the transformation didn't take.
Sam's argument is that the Lean leadership community has contributed to this pattern. Most of what gets shared in conferences, articles, and case studies emphasizes Kaizen events and tools. Organizations adopt the tools. They run the events. They get short-term results in specific areas. What they don't change is how they manage the business -- and that's where the long-term result lives.
A study Sam references from Bain and Accenture (originally 1995, updated 2005) examined what actually predicted sustained transformation across multiple business models, not just Lean. The finding wasn't about the tools selected. It was about how far the management methodology penetrated the non-core functional roles of the organization. If Lean only existed in manufacturing but never reached finance, product development, customer service, or HR, the transformation eventually collapsed. The functional areas not operating in the Lean model kept producing outputs the Lean areas couldn't absorb, and the friction eventually broke the system.
The implication is sharp. Lean has to permeate the organization to sustain. Tools in one area, however well-executed, don't survive the cultural and operational gravity of an organization where everything else still operates the old way.
Sam describes three trajectories an organization can take.
Path A is what happens when Lean is led by middle managers, Lean specialists, or staff-level change agents -- what Art Smalley calls "Lean zealots." They believe in the tools and principles. They build sophisticated Lean operations in a specific area. But they don't have the organizational authority to make Lean permeate the rest of the enterprise. The result is increasing tool complexity in pockets of the organization without sustained business results.
Path B is the charismatic-leader path. A CEO or senior executive commits genuinely to the transformation. The leadership team aligns. The organization builds real Lean infrastructure. And then the leader leaves, gets promoted elsewhere, or retires -- and the system walks out the door with them. The new leader has different priorities. The Lean infrastructure decays because nothing was built to survive the leadership transition.
Path C is the 5 percent. Lean becomes institutionalized as a process and a system, not as a personality. The infrastructure outlasts any single leader. Sam's formulation: "Build a process, not a personality." Lean as an operating system has to be based on brilliant processes and brilliant process management. Those will generally outlive the specific leader who started the work.
The diagnostic question for any organization currently in a Lean program: which path are we on? The honest answer is usually A or B. Moving to C requires a different kind of work than the work most organizations are doing.
Sam identifies four specific failure modes that show up repeatedly. He calls them the 800-pound gorillas in the room -- though he notes that the more he sees them in practice, the more they look like 1,500 or 2,500-pound gorillas.
Underestimating the existing leadership mindset. The current beliefs senior leaders hold about how to run the business are stronger than transformation efforts typically account for. These mindsets weren't formed by accident. They reflect what got those leaders promoted in the first place. They won't change because someone presents a compelling Lean argument. They change through extended exposure to a different way of operating, and only if the leader is genuinely open to revising what they thought they knew.
Weak belief that Lean is a management system. Most leaders in the organization, including the ones supporting the transformation, believe Lean is a collection of tools that can be applied to processes. They don't believe -- or haven't experienced -- Lean as the actual operating model of the entire enterprise. That belief gap has to be closed before sustained transformation is possible.
Underestimating the strength of existing management systems and routines. The daily routines that consume leadership time -- reports due at specific times, meetings on a fixed cadence, sign-offs required for specific decisions -- are structural. They shape behavior more than any training program does. And many of them are tied to enterprise IT systems (ERP platforms, in particular) that have their own logic and their own demands. Sam has seen transformations stall because a pull system couldn't be implemented in a way the ERP system supported. The ERP's tentacles reach into management behavior in ways nobody anticipates.
Underestimating the strength of the existing organizational mindset. The culture itself -- the patterns of how people interact, what they expect, what they reward, what they ignore -- has accumulated over years or decades. It's not changed by an announcement, a training program, or a poster campaign. It's changed by patient, sustained, structural work over time.
Each of these is a real obstacle. The pattern that produces failure isn't ignoring any one of them. It's treating them as smaller than they are -- assuming the transformation will succeed because the intent is good, when the intent is being actively opposed by four structural forces the planning didn't account for.
Sam's prerequisites are deceptively simple to list and difficult to execute.
A strong, clear business case for change. This is the question Sam gets asked more than any other: how do I get my senior leadership engaged in a Lean transformation? His answer is consistent. The business case has to be strong enough that doing nothing is visibly worse than the cost of changing. Art Smalley, drawing on his McKinsey days, used to frame this as "what's your $5 million problem?" There needs to be a quantifiable, undeniable business problem -- ideally one that senior leadership can't afford to let fail -- that the transformation is solving. Without that, senior engagement is a polite veneer over indifference. With it, the transformation has the political weight to survive the obstacles it will encounter.
Understanding Lean as a system. TPS isn't a collection of tools. The tools are the nerve endings -- they tell you how well the system is working. The system itself is comprehensive, with interdependent parts. Transforming to a Lean management system means rebuilding how the business is managed, not adding Kaizen events to an otherwise unchanged operation.
Investment in Lean leadership development. A Lean organization is organized differently. Sustaining it requires Lean leaders at every level who understand the principles, can coach the methods, and can sustain the culture. Without that leadership infrastructure, the transformation depends on a small number of people, which is the path-B failure mode.
One of the more original framings in the session is Sam's recognition that Lean transformation is a social process, not just a mechanical one.
The existing organizational behavior and routines are stronger than transformation efforts typically account for. To change them, you have to disrupt them. The disruption isn't violent or sudden -- it's structural. You change the physical environment of the organization. You change the cadence of management routines. You change what gets reviewed in meetings and how leaders spend their time. The disruption creates the space for new patterns to take hold.
After disruption comes reorientation. New routines, what Sam calls Keystone routines, replace the old ones. Keystone routines are the high-leverage patterns that other behaviors orbit around -- a daily standup at a shared visual board, a specific cadence of gemba walks, a weekly leadership review of strategic priorities. These routines create the structure within which the new culture can stabilize.
After reorientation comes indoctrination -- a word Sam acknowledges is provocative but uses deliberately. The culture has expected behaviors, core values, and standards for participation. New people coming in need to learn those expectations explicitly, not by osmosis. And after indoctrination comes assimilation, where the culture is robust enough to absorb new members without those members diluting it.
This four-phase framing -- disrupt, reorient, indoctrinate, assimilate -- isn't a typical Lean curriculum topic. It's closer to what organizational anthropologists study than what Lean consultants typically teach. Sam's point is that without this framing, transformation efforts try to install Lean as a technical change while leaving the social structure untouched, and the social structure wins.
Most organizations adopting Lean keep their existing reporting structure. Sam argues this is one of the most consequential mistakes they make.
Toyota's organizational design is built around a ratio of roughly one leader to five team members. One team leader for five team members. One group leader for four to five team leaders. The math compounds upward through area production leaders, department leaders, and plant leaders. The structure is matrix-based and team-based, with deliberately small spans of control.
Why does this matter? Two reasons.
First, the responsiveness Lean depends on -- the ability to respond to an andon pull within seconds, the depth of knowledge a team leader has about every operation their team performs, the coaching attention managers can give their team members -- requires small teams. A supervisor with 75 direct reports cannot do any of this. They cannot respond to problems in real time. They cannot coach problem-solving. They cannot maintain deep job knowledge across all the work their team performs. They can only firefight.
Second, the math behind Toyota's structure has scientific grounding. The work of British anthropologist Robin Dunbar identified the consistent sizes of human social groups: roughly 5 people for high-trust intimate relationships, 15 for close friends, 50 for friends, 150 for stable casual relationships, 500 for transactional relationships. The "Dunbar number" of 150 represents the natural ceiling for an organization where people can maintain meaningful recognition of each other. Hewlett-Packard, in its early years, capped manufacturing organizations at roughly 1,500 and divided them when they grew past that point. W.L. Gore famously caps its manufacturing organizations at 150 for the same reason.
Toyota's structure isn't a quirk of Japanese organizational design. It's an applied use of how human social organization actually works. Organizations adopting Lean while maintaining 1-to-50 or 1-to-100 spans of control are trying to install a management system in a structure that physically can't support it.
Sam introduces two principles that aren't standard Lean curriculum but have direct application to why Toyota's structure produces the results it does.
Metcalfe's Law -- developed by Robert Metcalfe in the 1970s -- holds that the value of a network is proportional to the square of the number of connected nodes. Two connected nodes have a value of 4. Five connected nodes have a value of 25. Twelve connected nodes have a value of 144. The value grows non-linearly as connectivity increases.
Applied to Toyota's structure: each Lean team is a node. Each team is connected to other teams through the matrix structure. The aggregate value of the organization isn't the sum of its teams -- it's a function of how the teams are connected. A traditional command-and-control organization with one supervisor for fifty workers has very few high-quality connections. A matrix Lean organization with small teams in interconnected relationships has dramatically more.
Moore's Law -- Gordon Moore's 1965 observation that transistor density doubles roughly every 12 to 24 months -- applies to Lean teams in a different way. Every time a team develops a new capability (problem-solving, standard work, Kaizen, coaching), the team's effective capacity to produce improvement doubles. Combined with Metcalfe's Law, you get an organization whose total improvement capacity grows exponentially as teams add capabilities and as the network of teams expands.
This is the underlying math of why Toyota's structure isn't just "nice to have" but compounds in ways traditional structures can't. The investment in team capability pays returns that grow non-linearly.
One of the most practical recommendations Sam makes is the deliberate use of an obeya -- a physical "big room" -- as the structural anchor for transformation.
The obeya does several things simultaneously. It physically interrupts existing routines and forces new ones around its activities. It establishes a cadence of leadership and management behavior -- daily, weekly, and longer-cycle reviews -- that all happen in a single space. It creates a focal point for cross-functional communication and problem-solving. It accelerates leader development by giving leaders a shared space to learn and practice. And it makes the work visible in ways that drive collaboration rather than competition.
Sam's analogy is the information kiosk in the middle of Grand Central Terminal. Before the kiosk was installed, commuter foot traffic was chaotic -- people moving from one terminal node to another collided with each other because nothing structured the flow. After the kiosk was installed in the center of the concourse, traffic patterns reorganized around it. People walked around the kiosk in a natural flow that didn't exist before. The physical object changed the behavior of the people.
An obeya does the same thing for organizational behavior. The physical reorganization creates the conditions for new routines, and the new routines accumulate into new culture. Without a physical anchor, transformation efforts depend on willpower and meeting hygiene -- neither of which scales.
Sam closes on a point he attributes to Bob Miller, former director of the Shingo Institute: the most important work a leader will ever do is create a culture of excellence based on principles, and that work cannot be delegated.
Six concrete actions that follow from this:
Expect excellence. The standard the leader visibly accepts becomes the standard the organization holds.
Create a common language. Shared vocabulary makes shared work possible.
Define expected beliefs, values, and behaviors. Make the implicit explicit.
Build Keystone routines. The patterns that anchor everything else.
Create cultural artifacts. Distinctive markers that mean something specific in your organization.
Maintain rituals and celebrations. The recurring moments that reinforce what the culture values.
And, Sam adds, every transformation needs a good war story. The story you'll tell about how this organization changed, when you're decades into it and a new generation is asking what it was like in the beginning.
Several of the structural elements Sam describes connect directly to what improvement-management infrastructure can support.
The obeya concept depends on visibility -- the work in progress, the metrics, the priorities, the problems being addressed. In a single-site organization, that visibility can live on physical walls. In a multi-site organization, or one with remote and hybrid work patterns, the visibility has to be sustained through shared systems. KaiNexus serves as the digital obeya for organizations whose work doesn't all happen in one room.
The matrix team-based structure Sam advocates requires accountability that flows through the existing management chain rather than through the central CI team. KaiNexus configurations like the bottleneck boards described in other case studies surface where management attention is needed without making the CI team the enforcer.
The exponential value Metcalfe's Law describes depends on connections between teams. KaiNexus makes those connections operational -- a team in one facility can see what a team in another facility has learned, replicate what worked, and contribute back to the shared knowledge. The platform doesn't create the network; it scales the value of a network that already exists.
None of this substitutes for the leadership work Sam describes. The platform amplifies what the coaching and structural design produce. Without those, the platform produces tracked-but-shallow improvement. With them, it makes the transformation sustainable at scale.
Sam McPherson is an internationally recognized Lean Enterprise transformation leader with more than 28 years of experience developing senior leadership teams and designing Lean Enterprise management systems. He was introduced to TPS and the work of Shigeo Shingo in the mid-1980s while serving as a project leader. Following the attacks of September 11, 2001, Sam was recalled to active military service to serve as Director of Special Operations Plans for the United States Army Special Forces during Operation Enduring Freedom in Afghanistan. He has led industry award-winning Lean transformations including work as plant manager at Crown Cork & Seal. He co-founded the Lean Leadership Academy with Art Smalley and Russ Scaffede.
Why do 95% of Lean transformations fail to sustain?
Because the transformation is treated as a tool deployment rather than a management system change, because it's led by people without the authority to make it permeate the organization, or because it depends on a charismatic leader whose departure ends the program. Research by Sam McPherson and Art Smalley, drawing on Shingo Institute data, suggests roughly 95 percent of organizations beginning a Lean transformation return to something close to their original state within five to seven years. The 5 percent that succeed have built infrastructure that outlives any individual leader.
What's the difference between Path A, Path B, and Path C?
Path A is Lean led by middle managers or Lean specialists -- builds sophisticated tools in pockets of the organization but lacks the authority to permeate the enterprise. Path B is the charismatic leader path -- works while the leader is there, collapses when they leave. Path C is the 5 percent -- Lean as institutionalized system, built as a process not a personality, capable of surviving leadership transitions. The diagnostic question for any program: which path are we on?
Why does Lean have to permeate every function of the organization?
Because functional areas not operating in the Lean model keep producing outputs (decisions, schedules, financial reports, IT system requirements) that the Lean areas cannot absorb. The friction eventually breaks the system. Bain and Accenture research found that the strongest predictor of sustained transformation across any business model was how far the management methodology reached into non-core functional roles. Lean only in manufacturing, while finance and IT and HR operate the old way, cannot sustain.
What are the four most common reasons transformations fail?
Underestimating the existing leadership mindset. Treating Lean as a collection of tools rather than a management system. Underestimating the strength of existing management systems and IT infrastructure (especially ERP platforms that shape leader behavior). And underestimating the existing organizational culture, which is the accumulated result of years or decades of patterns. Each is structural. Each is stronger than transformation planners typically expect.
Why does Toyota's 1-to-5 team structure matter?
Because the responsiveness, coaching depth, and problem-solving capacity Lean depends on requires small spans of control. A supervisor with 75 direct reports cannot respond to andon pulls in real time, cannot coach problem-solving, and cannot maintain deep job knowledge across all team operations. The 1-to-5 ratio is also grounded in Robin Dunbar's research on human social organization -- 5 is roughly the natural size of a high-trust working group. Toyota didn't invent this through theory; they arrived at it through trial and error, and the science confirms what their experience produced.
What is an obeya and why does it matter for transformation?
An obeya is a physical "big room" where the work of the organization is made visible and where leadership cadence is anchored. It interrupts existing management routines by physically reorganizing how leaders spend their time. It creates a focal point for cross-functional communication, problem-solving, and leader development. Sam's analogy is the information kiosk in Grand Central Terminal -- the physical object reorganizes the flow of people around it. The obeya does the same thing for the flow of organizational behavior.
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