The idea of a “perfect” product and a “perfect” development and production process may seem a bit far- fetched. After all, no one and nothing is perfect, right? Actually, according to “lean” philosophy, perfection is a reasonable goal if you follow certain guidelines. The ultimate goal of Lean Management, according to lean.org, is to “provide perfect value to the customer through a perfect value creation process that has zero waste.”
Even if you’re sure perfection is beyond your reach, it’s worth your while to understand how lean thinking works. Why? The Toyota Corporation, which pioneered the approach, grew from its post-World War II roots to become the largest car manufacturer in the world—using lean principles.
If you’re thinking “that’s fine for Toyota, but we are a service provider, not a manufacturing firm,” consider the fact that some of the biggest hospitals and medical providers in the United States also use lean principles to provide the highest level of value to patients with the least degree of waste.
What Exactly is Lean Management?
To start with, it’s important to know that “Lean” doesn’t simply mean “cost-cutting.” Lean may, in fact, require spending a little extra money to get consistent, reliable results. A company that cuts personnel and costs without carefully analyzing where those cuts and costs should be made is cheap—not Lean.
An easy way to understand its general approach is to know that Lean Management is just a generalized version of TPS—the Toyota Production System. And TPS is really a specific example of an approach called “Just in Time” management. The basic concept behind lean is to focus more on the process (flow) than on the produce in order to provide precisely what’s needed (neither more nor less) exactly when it’s needed (neither earlier nor later).
Lean Management can be broken down into five basic steps, as described by the website lean.org:
- Specify the value desired by the customer.
- Identify the value stream for each product providing that value and challenge all of the wasted steps currently necessary to provide it.
- Make the product flow continuously through the remaining value-added steps.
- Introduce pull between all steps where continuous flow is possible.
- Manage toward perfection so that the number of steps and the amount of time and information needed to serve the customer continually falls.
Let’s unpack each step to better understand what it looks like in real life.
Step 1: Specify the Value Desired By the Customer
What does your customer, client, patient, or student want from you? The answer may not be obvious. Yes, you may sell shoes, but is the customer really shopping for shoes? Chances are, he or she is really shopping for certain qualities that embody the shoes you sell. Qualities like: price, style, or durability. Depending upon your product, and the processes you use to provide it, value will vary. Value may also change over time as tastes, needs, technology, and the economy all fluctuate.
Until you really know what your customer values, you have no clear corporate objective. You are aiming for a goal that may or may not be meaningful, and as a result you may be working very hard to achieve unimportant outcomes. For example, you may be working overtime to provide customers with a variety of color choices when the reality is that your customers would buy your athletic shoes in basic black—because what they truly value is the shoe’s quality and features, not the option to purchase the shoe in neon green.
Step 2: Identify and Map Your Value Stream
How does your product or service get to your customer when and as your customer values it? The process of creating and delivering the product or service is called the value stream. To map your value stream, you’ll need to enumerate and describe all the elements and steps that go into production and delivery. Once you have a complete picture of the value stream, you can tweak it to eliminate waste, increase efficiency, and improve value.
It’s easy to envision a value stream for manufacturing a product. Once you’ve defined the product and its parts, you source the materials and build the product in whatever manner you’ve determined is most appropriate for your industry. Then you package, distribute, and sell. In every case, there are points along the value stream where time, money, or resources are wasted—and those points offer opportunities for improvement.
It’s a little more difficult to pinpoint a value stream for a service industry, but the rewards are just as great. Dr. Sami Bahri, the “world’s first lean dentist,” describes his approach to using lean principles to dentistry—which led to a new approach to providing dental patients with quick, immediate access to only those dental services they needed. In just one year of applying lean principles, says Bahri, he was able to “provide the same number of dental treatments with 40 percent fewer resources.”
Step 3: Make the Product Flow Continuously
What is flow? The concept is as simply as the flow of water from the tap into your cup: business processes that flow involve no gaps, stops, or waste. When employees or customers must wait, or get more or less than they need at the time they need it, the system stops. Valuable assets are flushed down the drain.
The value stream is only as good as its weakest link. If a person, process, or procedure creates a bottleneck, you have a problem with value flow. By analyzing value flow, you can find bottlenecks in the process. Next, of course, you’ll address those issues to smooth out the flow and ensure that products or services can be delivered when and as they’re needed—without unnecessary delays or bumps in the road.
Step 4: Introduce Pull Between All Steps
Most of the time, businesses build products or develop services based on what they think they may need or on what they want customers to buy. In other words, they “push” products and services forward, assuming that they will be needed sometime, by someone. The typical “push” approach generally results in either too little or too much product available at any given moment.
Lean principles suggest that companies allow customers to “pull” products and services as they need them. This allows businesses to create only what is needed, as it’s needed—resulting in more efficiency and less waste. In other words, a lean company only has on hand what it expects to need in a given amount of time, and replenishes only what is used. Of course, it’s important to have access to new supplies of material or service support exactly when it’s needed—otherwise “pull” turns into “wait,” and the system breaks down.
Pull works well for product-driven businesses such as retail stores, or for manufacturing businesses that require parts and machines. How does your local grocery store keep just the right amount of tomato sauce on the shelves without filling their stock rooms with Del Monte products? They simply keep a small stock of tomato sauce in stock, to refill shelves as they empty—and reorder their stock when it runs low.
Pull can also work well for service and care industries. For example, rather than hire all the people needed for the busiest time of year, many companies turn to outsourced or freelance support staff to supplement core staff when business picks up. Outsourced consultants or freelancers can be hired on a project basis—and can be rehired when needed, but not before.
Step 5: Manage Toward Perfection
Perfection is the ideal result of implementing value, value stream, value flow, and pull—the four steps we’ve just described. When all of these steps are implemented properly, according to the Lean theory, your business will have achieved a kind of perfection.
Of course, as we’ve already noted, perfection is more of a concept than a reality, as can be seen in the fact that Toyota, which flourished under the post-World War II lean approach, has declined significantly in recent years. According to some analysts, though, the problem with Toyota is not a problem with Lean Management, but rather with the reality that even Toyota strayed from the path of “perfection.”
In part, it turns out, Toyota’s downfall occurred because Lean Management isn’t simple, it isn’t easy, and it isn’t necessarily responsive to trends or immediate market pressures. Rather, it is a focused, careful, approach that requires constant vigilance. A business's “flow” may be terrific today, but chances are something will come along and gum up the works tomorrow. And if you’re not paying attention because the problem is “fixed,” the system will break down.
Is Lean Management Right for Your Business?
While the basics of just in time or Lean Management are probably useful for any business, there are a few businesses that may find it more difficult to implement. These include:
- Some very small or sole-proprietor businesses. In very small businesses, one or just a few people may need to fill many roles at once, thus making it tough to create smooth flow on a regular basis. While there are still ways to use lean principles to streamline processes and improve value, it may be impossible to come close to “perfection.”
- Some family businesses. What’s most important in a family business? In some cases, the answer is not “productivity and the bottom line,” but rather, "family." When that’s the case, you may actively choose what’s best for the family over what’s best for the business. Is cousin Joe really needed at the warehouse? Possibly not, but he needs a job—and family is family.
- Some creative businesses. The concept of flow assumes a predictable process and predictable set of needs and outcomes. In some businesses, however, predictability isn’t an option. Research and development runs at its own speed, as do arts-related businesses and non-profits. Yes, you can improve flow when it comes to selling tickets or arranging venues, but no—you really can’t hope to create perfect flow for the song-writing or R&D process.
While you may not feel that you need or want a total lean overhaul (or you’re not in a position to overhaul your company), everyone can benefit from understanding and implementing at least some Lean Management concepts. After all, lean is all about understanding your clients’ values, streamlining your process, and continuing to be vigilant about keeping costs and waste under control. And every business can benefit from getting closer to perfection!