In continuation of our weekly series on business principles, today we focus on lean thinking and ways to use it to create a very profitable business. This is especially true for a highly competitive field like digital marketing where price wars mean that businesses need to look at ways to cut down costs and increase profits.
Lean thinking is very much related to Kaizen, the business principle we discussed last Monday. Both of them owe their origin to Japan and especially Toyota.
Lean thinking was a direct result of Ford’s production system problems in the 1920s and 1930s. When it started, Ford’s production system was considered revolutionary. But as demand increased and people started clamouring for variety, the system’s flaws became apparent as it did not allow for quick changes to the factory production process. It did not allow the company to get efficiencies out of its systems beyond a certain point.
Toyota realised this and decided to create a system that would allow them to get more efficiencies out of their production processes. Thinking of ways to get this done lead to what is now called lean thinking, which is a part of The Toyota Way.
The focus of lean thinking is to create a very agile enterprise that focuses on efficiency, constant improvement and feedback to create a continual self-sustaining flow of product manufacture or service creation processes.
Lean thinking can be classified into two.
Lean thinking in its essence is about continuous improvement and does not focus on creating only lean processes without changing the inherent principles governing the business.
Unfortunately or fortunately, depending on how you see it, lean has also come to mean lean manufacturing or development processes that use the principal to reduce inefficiencies in the system and create value-adding cycles without changing the fundamental principles of the business.
Both sides have aficionados. What people forget is that there is no right or wrong way of saying which one is right. The idea should be to reduce waste, increase profitability and deliver better products or services to customers. How it is done, which one is right, etc. are like theoretical questions rather than practical ones.
Purpose, Process, People
The concept of lean thinking in its modern avatar owes its origin to a book called Lean Thinking by James Womack and Daniel Jones. They wrote about lean thinking after observing at Toyota.
According to the book, three business issues guide the transformation of an organisation into a lean one.
#1. Purpose
The question that needs to be answered is what customer problems will the transformation solve? It also needs to be lucrative enough for the company to go through the process.
#2. Process
Here the idea is to check whether each and every step of each and every process is adequate, valuable, capable, flexible, etc. How do they adhere to the concept of product or process flow, the pull of upstream activity, etc?
#3. People
There should be somebody to oversee the process. Someone who is continuously evaluating it and ensuring that everyone who is a part of the value stream helps to make the process better on a continuous basis.
The book ‘Lean Thinking’ breaks down the thought process to implement lean principles into five.
- Which is the specified value that is desired by the customer?
- Identify the processes for each product that provides value and reduce all waste steps in the process. Generate ideas to remove the unwanted processes
- Make the product flow continuous for the rest of the value-added steps
- Introduce pull between the steps of continuous flow. The idea is to have customers pull value from the next upstream activity
- Manage the steps so that there is a continual goal to attain perfection in the process and then to take it one step further. This ensures the processes continuously improve
How to Implement Lean in an Organisation
This follows a series of steps as put in brief below.
Starting
- Finding Someone to Start the Process: The first step is to have someone who takes responsibility for the entire transformation
- The Expert Comes In: The second step is to have a senior person or a consultant from outside who has the necessary knowledge that will give the organisation the knowhow to implement the lean process
- Find a Place to Start: Third step is to identify a problem area or find problem areas of vendors, customers or even competitors and see how lean can be applied to reduce or completely nullify their problem
- Outline the Value Streams: The fourth step is to map the current process or production flow and then think of lean ways to get the same thing done in a lesser number of steps
- Start Now: One key element of lean thinking is to start as soon as possible
- Immediate Results: Another element is to expect immediate results and track and measure those results.
- Expand Scope: As soon as the processes start working, the idea would be to take it from the problem area and try applying it to related areas
Recreate the Organisation
- This means reorganising the business by product or service or process
- Have a leaner workforce. Move the people who are not required in the process to a new process where they add value
- Have a growth strategy and remove any legacy processes or systems that have been slowing down growth
- If certain problems arise, then lean thinking should be applied to each one of them so that the problem is solved
Introduce Processes and Systems that Inculcate Lean Thinking
- The first step is to have policies and principles that are clear
- It is essential to have lean departments and units
- The performance measurement should be clear to everyone
- There should be a continuous focus on lean learning and thinking
- The final step to installing lean thinking in the business is to ensure that all the tools necessary for the job are those that produce exactly what is required and not anything more
Drive the Transformation to Vendors, Customers
- Suppliers, customers and other stakeholders need to be told about the change in the company’s principles
- The idea is to have an organisation with a hierarchy that welcomes questioning, coaching and teaching. A quick way to do this is to use the PDCA method that we discussed in last Monday’s post on Kaizen
We hope the information was helpful and gave you some insights to make your processes better, reduce inefficiencies and get a more streamlined organisation.
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This post originally appeared on our earlier website: ihusresearch.com