Firstly, what is Lean?
Lean is a continuous improvement process that is aimed to increase value for your customers within your business. Understanding this statement is crucial. Many people seem to think it’s about Cost Cutting and a lot of employees tend to get nervous when they hear the word Lean. This perception is very misguided and implementing cost cutting activities will constrain development and de-motivate an already deflated workforce. The consequence of this cost cutting spiral directly leads to reduced service delivery, less business and with that the business inevitably shrinks. Sound familiar?
Embracing Lean for Growth Programmes in your business should be designed to deliver growth, profits and capacity to deliver more value for your clients. They also should be designed to engage the workforce and improve this deflated moral. Commencing a Lean Journey can take many forms as it’s not a one size fits all, however the common theme is deliver more value for less cost with reduced lead times. Sound Contradictory? Lets hold that thought for a second.
Another misconception about Lean is that it only applies to the operational aspect of the business. If this is what you believe Lean to be, you will never realise the true potential of Lean. At the heart of Lean is understanding ‘Value’ and to go a step further differentiating Value Add from Non Value Add. However before we can differentiate Value from Non Value, we need to define what Value is, and this starts with your customer and what they believe is value. Straight away you can see, that lean needs to operate outside of the traditional realms of operations.
So let’s put on our Customers’ Lens
Lets begin to see things from your customers perspective and ask yourself some questions
- What part of the product or service are they willing to pay for?
- Is your quality always at the service level requirements?
- Do they appreciate you going the extra mile or do they expect it?
- Do they actually appreciate your product or is it just serving a purpose until something better comes along?
Many more questions can be listed here, however should you still not understand what your client’s value, why don’t you send them a feedback form and ask them directly?
The whole point of this exercise is to discover what part of the service your clients are actually willing to pay for. THAT IS YOUR VALUE to them. So the question is, what are the steps in your business that you do to deliver that Value? Once you can identify those key steps , then everything else is actually considered Non Value Add. If you are still unclear of what Non Value Add is, here are some examples
- Too many Finished Goods in a warehouse
- Underutilised / Inappropriate use of resources
- Overstocking of materials as a ‘just In Case’
- Entering the same data into multiple IT systems
There are many more examples, and every company has them. Understanding all this information is imperative in building up a picture of the Current State of the Business. And looking at the figure on the left, on average more than 50% of what a business does is actually not adding any value. So why are we doing it? There are many different reasons for this, mostly organic and historic, however once we can realise this, the opportunities to create plans to eradicate and mitigate these wasteful activities becomes tremendous. However please beware while certain things are not valuable in the eyes of the customer, they are absolutely necessary to survive, e.g. support functions. As you can see from the charts, there are certainly opportunities to optimise these also.
So what are the improvements?
So lets have a look at the image below. The top aspect describes a business that’s has not undertaken a Lean for Growth Progamme. Using the criteria above, adding the non value with value add in a typical business, only then, can you deliver your service to your client. Then post-delivery, there is also lead time to wait to get paid for your service.
Through the thoughtful and contingent application of Professor Peter Hines’ Lean Business Model ®, businesses are not only realising additional capacity, eliminating wastes and inefficiencies through increased customer focus, they are also identifying ways of filling this capacity and achieving profitable growth, as the figure below illustrates. Simply put, you are doing less work and achieving the same results, therefore this is costing you less. Along with that, you are also delivering your service to your client in less time, thus improving service delivery AND the cycle to payment greatly improves. This greatly improves overall business health. With this you have automatically created capacity within the business so you can do more Value with the same resources.
So can you now see the opportunities and method in that somewhat contradictory statement above? Should this not be apart of any Formal Business Model? Lean for Growth is not something that should be dismissed lightly, in essence Lean is about Operations and Business Excellence that will give your business the competitive advantage which, in these economic times is crucial.
Lean thinking is successfully driving profitability in many Irish companies today. If you have not looked into the funding available from Enterprise Ireland then your competitor is probably ahead of you in the queue.
Lean thinking is about business growth and right now in Ireland we need lots of that. Customers make Jobs.
