miércoles, 23 de noviembre de 2016

Modern Management Theory: Lean Methodology




Modern Management Theory:
Lean Methodology

Lean Manufacturing[1] is an Operational Excellence strategy that enables you to change for the better. Lean principles are derived from the Japanese manufacturing industry. The term was first coined by John Krafcik in his 1988 article “Triumph of the Lean Production System”. “Kaizen”, word recurrent in the Lean process, means to change for the better. It is the persistent pursuit in the elimination of waste, also called “Muda”. We must always fight to eliminate waste but taking care of the most important resource of all: the employees. Lean is not only about attacking waste while increasing the speed at which products are produced. Lean is also very focused in improving the quality of our products as well as the stability of our processes. Lean supports a continuous improvement cycle that is consistent with how we always approach quality. Lean is about incremental improvement, for example: improve 30% instead of 100% later or never. By the time we plan a 100% perfect improvement, we have lost valuable time, and the business environment will have changed. Lean is about removing the wasteful steps in a process or in how we approach our work. It is NOT about eliminating jobs or devaluing what people do. When wasteful steps are removed from a process, it frees people up to focus their time, and talent, in other quality work.
Lean Management[2] is based on 4 principles:
1.       Pull: rather than producing as much as possible, customer demand pulls goods or services through the manufacturing process. This minimizes overproduction, inventory and ultimately work in capital.
2.       One Piece Flow: focusing on one single piece at a time minimizing work in progress, process interruptions, lead and waiting time while increasing quality and flexibility.
3.       Takt: is how fast manufacturing must occur to meet customer demand. Takt allows us to balance work content, achieve a continuous flow and respond flexibly to changes in the market place.
4.       Zero defects: a Lean company does not pass on defects. Mistakes from previous steps must be fixed before going on.
Lean Thinking[3] is a philosophy about bringing value from your customers’ perspective, eliminating waste and continuously reducing costs and improving efficiency, productivity and quality. It is a way of thinking that is orientated to find and eliminate waste, and building a habit of looking for it. Office waste can take 4 forms: Information, Process, Physical Environment and People. Even if all the steps in a process add value, we still do not get ideal efficiency if it is blocked. Lean is derived from the Toyota Production System an appears as a generalization of it into other industries. However, it is not the same. Lean is more market orientated and focuses on the improvement concepts of “flow” or “pull”. A Lean Thinking includes a cultural change in organizations, by training the employees to review their processes regularly identifying and eliminating waste as well as increasing productivity and customer services.
The Lean Startup[4] is a business development methodology developed by Eric Ries in 2008 mainly orientated to high-tech companies. If an organization can learn as quickly as possible what the market values enough to pay for, it will be able to adapt it’s business and grow it into a sustainable enterprise. This is called validated learning. This is achieved through a cycle called: Build, Measure, Learn. The idea is to get back as possible to the Build phase as soon as the market has been tested. Innovation Accounting is the measurements that are taken, the milestones that are set, and prioritize the work that it done. If Innovation is valued, whether it is as a big company or as a start-up, this is the best way to accomplish it. The milestones of the Start-up:


Build a Rapid Prototype: A Minimum Valuable Product (MVP) is the smallest product or service that you can create and start to generate learning from. The goal is to attract the early adopter market, since they know that the products will have bugs if is not necessary to have the best possible product to launch. Any effort you need outside the MVP is considered waste because it wasn’t driven in a response to the market place.
Measure and Learn: this is composed of 3 learning milestones. 1. Establish the baseline 2. Tuning the engine 3. Pivot (or persevere). Be careful with vanity metrics! In the start-up world this can be website visitors or even registered users. The metrics must be Actionable, Accessible and Auditable. When implementing an improvement to your product, you should be testing that improvement against a baseline to see what impact the change has on your business. Once you define if your business has any chance of success, you can pivot or persevere. A pivot is a fundamental change in your business strategy. If you conclude that your business strategy isn’t likely to succeed you can change your strategy.  
Lean introduces the most modern management theory orientated to boost efficiency. Consider the introduction of the MVP in the IT Industry as a revolutionary concept. It concentrates on testing the market to look for the business opportunities before pushing through with them. But innovation can also be applied to drive organizational change. Internal resistance however can spoil it up. The Lean Turnaround[5] describes such situations, and how to use Lean Methodology to turn around companies. Lean introduces also it’s own metrics and analytics to analyze information and pivot when necessary. Pivoting and changing business strategy in time is key to success, as well as understanding which is the right information to analyze. 


Cristian Bøhnsdalen
CMO/CFO & Co-Founder @ITRevolusjonen

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