What is Lean?
Hello everyone, thank you for watching this second video in a series of informative videos we’re putting out celebrating Opgrade’s 10th anniversary.
So, what is Lean? If you’re like most people, if I were to tell you I’m a Lean consultant, you might respond with something like “oh, so you’re an efficiency expert.” Or you might say under your breath, “Yeah, we're pretty lean where I work,” but probably what you really mean is, “We don't have nearly enough people where I work.” You may not be able to voice it directly, but you might just think Lean is an acronym for “Less employees are needed”
Well, fortunately for all of our clients, that’s not at all what Lean is about. And it is because of these responses that when asked what Opgrade does, I have started telling people, “we make people’s lives better by making their processes suck less”. After the prerequisite chuckle at my terrible sense of humor, they then say, “OK, so you’re a consultant. What do you really do?” My more precise and technical response is then, “We use and teach Lean to help companies see and solve their own problems.” to which they inevitably reply, “Oh so you're an efficiency expert!”
So let's talk about efficiency and why Lean is not about improving efficiency. There is a very important difference between efficiency, and productivity. Yes, efficiency is about doing things well, and while it's an important component of productivity, efficiency alone is often the wrong focus. Productivity, on the other hand, is about being as productive as possible, which typically translates into more of a focus about doing the right things, at the right time. Peter Drucker, a renowned management consultant from the 20th century, has a quote I really like. He says there is nothing so useless as doing efficiently that which should not be done at all. That, in a nutshell, is exactly what Lean is about.
So if lean is not about efficiency, what is it about? Well the best definition I've seen is “Lean is the reduction of all waste, in the delivery of a quality product or service, on time, to your customers.” Reduction of waste, plain and simple. Lean is about coming together and collectively deciding to stop spending time and money on the stupid stuff. The stuff, or rather the waste, that adds cost to our products or services but does not add value to the customer. Of course, to do that, you need to know what your customer values. don't fret though, this is easier than you might think. Your customer has a very good way of telling you what they value, and that's called payment. Ultimately, the only things in your business that add value to your customer are the things that, if you did them more, your customers would pay you more. just about everything else, is some form of waste.
Now the definition of value is a little more nuanced than just that, and we'll cover that in the future video, “What is Value?” but for now please simply understand that lean is about productivity, in that with Lean, we work together to reduce waste, those costs and efforts in your processes that just don’t create value. And I’m confident there is much more waste in your organization than you think.
Let's look at this from a different perspective. If you had to split the hours in your day into two categories, the first being your proactive time, and the second being reactive time, what would that ratio look like? if you told me your day is more than 50% reactive, I would not be at all surprised. in fact, from our very unscientific polls we do with our clients, the average tends to be around 70%. that would suggest that 2/3 of an average day may be less productive than you would like. What would it look like if we could cut that reactive time in half? Your day would be from 1/3 productive to 2/3 productive. Your capacity would double, and you wouldn't have to work harder.
That is what lean is about. Getting more done with less hassle, getting more done with less hustle. Productivity improvements, in a structured approach.
If you do lean well, You'll achieve benefits beyond productivity increases. Lean also focuses on improving quality, reducing inventory, and reducing lead time. And if you're Doing those things you're probably also impressing your customers and increasing your sales, Which isn't a problem because now you have all this extra capacity. Capacity which, by the way, you didn't need to invest in through extra capital or labor, so all your new sales have higher margins because your fixed costs are now spread across more sales.
This then is why Lean does not, and cannot, simply be an acronym for “less employees are needed.” creating extra capacity cannot result a reduction of force. If we now have all these extra sales because we have extra capacity, there is no way we would ever want to lay anyone off, because the business is too good. Think about the job security that provides for your people. Not to mention their jobs are also likely now more interesting, but with much less hassle and much less hustle.
But what if someone did use the extra capacity as an excuse to lay people off? Well, that would probably be the fastest way to ensure the people in your business sabotage your lean efforts. Why would I want to work on a project that I knew would result in people losing their jobs? For this reason, lean must never ever result in layoffs. A fundamental principle in lean is respect for people, and designing a program that aims to directly cut labor costs doesn't feel very respectful.
So now if you see me cringe when someone suggests that lean is about efficiency or headcount reduction, you know why. Lean really is about making your people's lives better, and making your company more profitable, all by making your processes suck less. And it has to be about process. If you focus on your processes, you'll get the results. If you just focus on the results, you don't get the results. It's like dieting. You don't lose weight to get healthy, you get healthy and the weight comes off.
To achieve this process focus, then, lean follows 5 principles, almost as a road map to achieve success.
The first principle is to define value, which we've already started to do here. The antithesis to value is waste, and we will discuss the value/waste relationship further in a couple of weeks. We’ll also discuss the question “am I not valuable if my work is not value-added?” This is an important topic to cover for any organization wanting to deploy lean.
The second of the 5 principles is to map the value stream. If we want to focus on value, we need to know how it progresses through our organization, and we need to start identifying which process steps create value, and which do not.
The third and 4th principles are flow and pull, specifically flow where you can, and pull where you can't. The concept of flow comes from Ford’s assembly lines. Wherever we can, we want our processes to look more like a river that flows naturally, and much less like a river stopped up with many dams. To set the flow rate of our river, we use a concept called Takt, the german word for meter, to match our flow with our customer’s cadence. Still, sometimes a perfect assembly line isn’t practical or possible, and that's where pull comes in. Sometimes your river needs a dam, meaning sometimes you need to create things in batches and have inventory between steps, but if you do, you need to have very clear rules about how that all works. And if the conditions are right, Kanban, which is the Japanese word for signal, can be a great way to achieve a pull system.
The fifth and last principle is to pursue perfection. Perfection must be the goal, because frankly we will never get there, and continuous improvement by definition never ends. We must also be careful to never rest on our laurels. As Jim Collins says in his book good to great, “Good is the enemy of great. Few people attain great lives in large part because it's just so easy to settle for a good life.” If you're OK with how good your company is, Lean isn't for you. However, if you know your company is capable of greatness, let’s get after it. Jim Collins wrote another book, called “great by choice”. In it, he says that “Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice and discipline.” if you want more conscious choice and discipline in your organization, lean may be for you.
We’ve come to the end of this video, and if I've just talked over your head and threw out words you don't understand like flow, pull, takt, and kanban, don't worry. Those are all topics in our upcoming videos, and if you want to see the release schedule, please visit us at opgrade.com and click on anniversary.
The topic of the next video, though, will be what is Kaizen? Which will drop on Sunday October 30th.
Until then, take care. thanks for watching and thanks for celebrating Opgrade’s 10th anniversary with us.