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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