Unlocking Lean efficiency

In today’s rapidly evolving business landscape, efficiency isn’t just a buzzword – it’s the lifeblood of successful organizations. With competitors always a step away and customers demanding more for less, the pressure is intense. This section is not about painting a dire picture; it’s about illuminating the pathway forward with Lean efficiency. By the end of this section, you will have grasped foundational Lean practices that focus on delivering unmatched value through meticulously streamlined operations.

As we begin this discussion, looking at Lean concepts through the lens of systems thinking and in the context of improving flows is helpful. For example, look at Figure 3.1 and ask yourself which workflow represents the leanest workflow:

Figure 3.1 – Workflow comparisons

Workflow A has five activities and one decision point. Workflow B also has five activities but two decision points. Finally, Workflow C has 15 activities and three decision points. At first glance, it is logical to assume that Workflow A offers the leanest set of activity flows. By the end of this chapter, you will realize the answer is not always so simple. But, for now, assuming all three produce the same product or service, we’ll go with Workflow A as it has the fewest activities and decision points.

With this most basic concept of Lean Flows in place, let’s move on to discuss why companies need to be Lean and not just Agile. Harmonizing agility and Lean – dual pillars for optimal efficiency

In today’s competitive landscape, it’s not enough for organizations to be Agile; they must also embrace the Lean mindset. The core philosophy behind Lean is starting every endeavor with the customer’s perspective, aiming to deliver unparalleled value through the products and services offered. Companies with a genuine Lean orientation don’t stop striving for improvement. Instead, they are on a perpetual journey of exploration, continuously experimenting with new ways to refine their operations. The end goal? Delivering maximum value by eliminating waste.

The concept of Lean value streams captures this intent beautifully. It outlines a complete, value- focused sequence of activities that starts with an idea or a customer request and ends with delivering that value. However, Lean philosophy is not just about processes; it’s about a holistic approach to business. By continuously evaluating and improving the Five Ms: Manpower, Material, Machines, Methods, and Money, Lean practitioners can coordinate these elements to achieve the best results for both the customer and the business. Simply put, Lean is about doing more and better with less.

Figure 3.2 illustrates the five principles of lean thinking, which originated from the Toyota Production System (TPS). The aim of these principles is optimize the flow of products and services through entire value streams and to continuously improve.

Figure 3.2 – Lean management

These principles were later articulated and popularized in the Western world by James P. Womack, Daniel T. Jones, and Daniel Roos in their 1990 book, “The Machine That Changed the World,” and further elaborated in their 1996 book, “Lean Thinking.” These lean thinking principles have been widely adopted beyond manufacturing and applied to software and hardware across various industries and business domains to improve efficiency and effectiveness.

The first principle is to identify opportunities to improve value using our customers’ perspectives as a North Star to guide our decision-making. Next, we map the value streams and their activities that deliver value. As we map our current state and explore options for improvement, our focus is always on minimizing waste and improving the flow of work, materials, information, and people to deliver value most efficiently and rapidly. Lean implements pull control systems, such as Kanban, to reduce the potential for excess inventory, bottlenecks, and delays. Finally, Lean organizations always seek perfection, never letting up on their efforts to improve. Those who do this well have a distinct and continuing competitive advantage over those who do not.

Orchestrating value streams

The very essence of value streams lies in their ability to represent the complete, end-to-end series of processes and activities crucial to converting an initial concept or customer request into delivered value. This continuous sequence transcends traditional departmental barriers and integrates cross-functional efforts. Ironically, while many companies adhere to hierarchical organizational structures for administrative purposes, the real challenge is ensuring these hierarchies do not inadvertently create silos for solution development.

Organizational silos, often found in traditional bureaucratic systems, obstruct the free flow of value. Therefore, executives must recognize these divides and proactively bridge them. They should fine-tune both controls and incentives to eliminate barriers, positioning people and resources to enhance value stream flows at a detailed, product-line level.

Figure 3.3 shows a Lean production flow on the left and a traditional hierarchical organizational structure on the right:

Figure 3.3 – Lean flows within hierarchical organizations

Classically, companies often attempt to manage business flows within a department and use cross-functional processes and business systems to manage work, information, and material flows. The problem with this approach is that the organization stays with a siloed approach to business management. A more effective approach is to identify and focus solely on value-adding activities, unconstrained by departmental boundaries or divisions. This is the essence of the concept of value stream flows, as illustrated in the Lean flows diagram on the left side of Figure 3.3.

It’s not necessary to turn an organization upside down to implement Lean-oriented value streams. However, it is easier to manage people across value streams where value-delivery work is being performed. We will revisit this topic repeatedly throughout the book. For now, it’s essential to understand that organizations can still maintain a traditional hierarchical management structure, even as they have value streams operating both within and across the various departments.

An example of this approach is seen in Toyota, the birthplace of Lean principles. While Toyota employs a distinct hierarchical structure, which encompasses global corporate offices cascading down to geographic and then product line divisions, the core intent remains the same: decentralized decision-making. This decentralization tailors decision-making to address local product and regional nuances more effectively. Yet, in daily operations, the spotlight remains on managing work as continuously refined value delivery streams. Remember, the path to enhancing these streams requires consideration of the Five M’s - Man, Machine, Material, Method, and Metrics.

Next, we’ll touch on the philosophy governing Lean principles and practices.

Understanding the Lean philosophy

At its heart, Lean isn’t just a methodology – it’s a philosophy. Originating from the Japanese manufacturing industry, particularly Toyota, Lean has transcended its roots to become a universally applicable approach for enhancing efficiency across various industries and business domains. Central to this philosophy is the relentless pursuit of delivering the most value with the least amount of waste. Everything that doesn’t add value, from a customer’s perspective, is seen as waste and is, therefore, a candidate for elimination. We’ll get into the details on the types of waste in the next section, Identifying waste and constraints. But first, let’s find out what we mean by the term value.

Delivering value – the core of Lean

Before diving deep into efficiency, let’s understand the Lean-oriented concept of value. In Lean terms, value is anything the customer is willing to pay for. For example, it could be the features and quality of a product, the responsiveness of a service, or the user-friendliness of software.

Now, reflect on this: How many of our daily operations genuinely contribute to this perceived value? You might realize that numerous processes, while integral from an organizational standpoint, don’t directly enhance customer value. On the other hand, many existing functions are necessary, but they could still benefit from Lean’s efficiency-driven lens to eliminate wasteful elements within them. So, let’s talk about that in the following sub-sections.

Creating operational efficiency – the Lean way

Lean’s magic lies in its ability to identify and minimize waste, allowing operations to flow more smoothly. Waste, in Lean terms, is classified into eight types: defects, overproduction, waiting, non-utilized talent, transportation, excess inventory, motion, and extra-processing. By recognizing and addressing these wastes, businesses can significantly amplify their operational efficiency.

For instance, consider a simple process such as document approval in a corporate setting. Traditional methods might involve multiple handoffs, manual signatures, and prolonged waiting times. By applying Lean principles, we might shift to digital approvals, streamline the number of approvers, or even question the necessity of certain approval stages. The result? Quicker approvals, less waiting time, reduced motion waste, and, most importantly, accelerated value delivery.

Again, we’ll get into the details of identifying and eliminating waste in the next section. But we have a couple of other issues to address first, starting with what it means to meet our customers’ needs.

Meeting customer needs effectively

In the opening statistics, at the beginning of this chapter, we noted that a significant majority of shoppers, from Baby Boomers to Gen Z, prioritize price over quality and value. It’s a clear signal that, while quality is indispensable, efficiency (which often translates to cost-effectiveness) cannot be overlooked. Efficient operations, shaped by Lean practices, can lead to reduced costs, which, in turn, might allow businesses to offer competitive prices without compromising quality.

Remember, customers today have an abundance of choices. If they can get the same quality of product or service at a reduced price (thanks to operational efficiencies), they’ll likely choose the more cost-effective option. Moreover, operational efficiency also means faster delivery times, quicker responses, and more timely innovations – all crucial in meeting and exceeding customer expectations.

Lean-oriented efficiency does not happen by accident. It takes constant diligence and effort across the organization to identify, prioritize, and execute strategies to eliminate waste. This is the human element of Lean.

Valuing the human element

While tools, techniques, and methodologies form a significant part of Lean practices, the human element is paramount. It’s the people on the ground – the ones involved in the daily grind – who often first spot inefficiencies. Lean empowers these individuals to voice their observations and even champion change. By fostering an environment where every team member is a potential efficiency enhancer, organizations can tap into a vast reservoir of on-ground insights.

Furthermore, operational efficiency isn’t a one-time milestone; it’s a continuous journey. The market, customer preferences, and technologies are perpetually in flux. What’s efficient today might become a bottleneck tomorrow. Hence, the real skill isn’t just in implementing Lean practices but in perpetuating a Lean mindset – an ethos of continuous improvement and relentless pursuit of adding value.

This completes our discussion on what it means to unlock lean efficiencies. Before we move on to learning how to identify waste, let’s summarize what we’ve learned so far.

Embracing operational transformation

Lean efficiency is not about doing more with less but about doing what’s right for the customer and the organization. It’s about a strategic alignment of processes to ensure that every step, every action, and every decision inches the business closer to its goals. By understanding and implementing the principles discussed, you’re setting the stage for an operational transformation – one where value isn’t just delivered but is amplified at every turn.

Now, we’ll move on to learn about the different forms of waste that hinder our ability to deliver maximum value to our customers.