What is this thing called Lean?

The term Lean was first coined in the book ‘The Machine that Changed the World’ written by Womack, Roos and Jones in 1991. In this, their first book in a series of bestsellers, they describe how Japanese improvement capabilities, predominantly in the car manufacturing industry, have lead to the meteoric rise of companies such as Toyota as global competitors to US car builders. In their words, Lean is their way of “getting more with less and less”.

Lean has now been applied in many different business contexts and the approach is widely used in service businesses such as contact centres, public sectors organisations including the health service and also financial services (although the reader as a customer of these services may question this). With over 70% of the UK GDP attributed to service businesses, today the ‘lean’ opportunity is clearly evident in service operations, even within manufacturing businesses. However, the utilisation of this manufacturing improvement approach in service environments does require some translation.

In its simplest form, Lean is the set of "tools" that assist in the identification and steady elimination of waste (the Japanese call this muda). Lean implementations focused on getting the right products/services, to the right place, at the right time, in the right quantity to achieve perfect work flow (value transfer to customers) while minimizing waste and being flexible and able to change.

Lean aims to make the work simple enough to understand, to do and to manage. The tools provide different ways to identify, understand and workaround certain types of problems but they don’t solve them. It is up to operators and business improvement practitioners to highlight the underlying cause of many types of problems and then determine a context specific solution.

But the tools on their own do not fully define lean; ‘lean is both technical and emotional’. There are many examples of Lean tool implementation without sustained benefit and these are often blamed on weak understanding of the Lean culture. The cultural and managerial aspects of Lean are just as important as, if not more important than, the actual tools or principles themselves. When implementing Lean, the key question is not, ‘what tools do we need to use?’, but ‘how do we understand our business [system] and how can we engage our employees so that they can improve it?’

The five core principles of Lean

Womack, Roos and Jones (1991) defined Lean [Manufacturing] by describing five core principles. It is these five core principles that we must translate into service businesses to ensure that both the technical aspects and the emotional aspects are evident. Lean is as much about seeing and thinking as it is about doing!

Principle 1 – Maximise Customer Value

This first principle is the cornerstone of the Lean approach. It should be the key focus for all business operations; the need to deliver value to customers better than competitors. Lean’s approach, is seeing a business as a ‘living’ system that delivers value to customers.

To understand this system we must first understand what customer’s actually value. This is where many companies often fail as they assume they know what customers value without actually asking them! A common mistake when running improvement programmes is to exclude customer facing staff; REMEMBER these people are the eyes and ears of your business. They know what your customers value because they talk to them! Indeed it is often these people that are the real source of value to the customer (along with the process they perform) rather than the actual product/service you sell. They will also become the power of your lean business improvement capability.

Once we understand what customers value (and this should be an iterative process as value is not the same for every customer and also changes with time) we need to assess how the business actually delivers value through people and processes to customers; these are called value streams.

Principle 2 – Understand Value Streams

Value is created through a network of business processes, both internal and external, as a company’s network competes against other networks to deliver value to customers.

The processes by which businesses are able to aggregate customer information, technical knowledge, supply chain logistics and raw materials define the value streams. Often there are more than one, and the determination of value creation is based on an objective view of each process step in terms of its value to each customer. Some will add value, some will add no value (this is the muda) and some will add no value but will be operationally critical and so cannot be stopped or removed. The key to understanding value streams is to ensure that only value adding processes are present, but beware Lean is not Mean, so focus on value not cost cutting. Once we know how value is created we must ensure that value can flow though these processes efficiently to customers.

NOTE: Process and value stream mapping takes time, and those wishing to become a Lean enterprise, must allow their staff time to identify and understand the business system. Lean has a ‘lean cross code’; we must stop, look and listen to our business and customers to ensure we can create a lean business.

Principle 3 – Make value Flow.

The nature of making value flow is associated with an understanding of how customers [in the forms of requirements] flow through the business and what stops them (waste). Lean is renowned for its focus on reduction of the original Toyota seven wastes in order to improve overall customer value, but there are varying perspectives on how this is best achieved. The "flow" (or smoothness) based approach aims to achieve just in time (JIT), by removing the variation caused by work scheduling and demand.

The Seven Wastes

Defects – Where in your process do errors or defects occur? Do you know what an error or a defect is? Errors and defects can be internally or externally created and detected (sometimes this is called failure demand). How we deal with these errors or defects is a key to Lean. Many companies absorb defects into business as usual; some even expect and accept it, lean businesses don’t!

Over processing – This relates to the addition of product or service features that the customer does not value. Often these are added to satisfy distinct customer segments but are offered to all customers. Unfortunately consumers are now questioning the value (cost) of the products and services companies offer and are asking for the non-value adding elements to be removed! Just look at the rapid development of the low cost airline and hotel industry. They have stripped all the non-value adding activity out of the processes, and where appropriate they have identified costs which do not originate with them, i.e. taxes and surcharges; a very lean approach.

Waiting times – Where do your people or your customers have to wait for products, services or information? Quite often this waste is immediately obvious to employees, especially in reference to internal communications or our customers when they call us or have to wait in queues in our service centres. For many consumers time is their most valuable asset and many companies ‘waste’ consumers time.

Over production – this waste leads to the formation of inventory or demand that we cannot satisfy. An example of this would be a recent company I have worked with that markets its services to the whole country (26 million households). It produces advertisements and documents that it posts to these households monthly. The business cannot cope with more than around 1 million calls per year, of which it currently converts around 50%. Over production in this case is the printed material, the customer expectations that they can get the right product (50% call off disappointed) and the excess demand they cannot handle at periodic times due to an imbalance in demand and operational capability (missed calls).

Transport Waste – This relates to the movement of parts around a factory, however in a service business this relates to the movement of people or customers around the business. If you want to know what transport waste feel like, map your travels around your business? How many miles do you walk each day? How much time do you spend transporting yourself around your business? One company I worked with recently lost over 100,000 productive hours each year due to the time taken to leave the building for smoke breaks! And this excludes the time spent smoking! COVID has reduced this significantly or at least removed the evidence from the workplace. We expect people to be more efficient working from home, but it's taken a global pandemic to start to work on this waste.

Inventory – In service businesses this accounts for data, materials (normally paperwork) and people. Data is often easy to collect or generate, however once collected it has to be regulated (data protection), stored and updated, which for many businesses is very expensive and often involves enormous data warehouses. As for people, especially in contact centres we carry a stock of people who are often either underutilised or not utilised at all. Inventory has to be managed, it has to be counted (or entertained), or it can perish.

Motion Waste – This is a more subtle waste and can often be seen when we are searching for information or having to move between screens when processing. It is focused on human movement rather than the transport of humans and materials. In service businesses this is often taken to be part of the work we do, however in Lean terms this is waste and should be removed. An example of a lean solution would be CRM software which collates the necessary customer data in one place and allows the customer or agent to pull the required processing data easily (or automatically) when required.

Once all this waste has been removed from the ‘system’ it can operate very efficiently, however the business has to then take the most difficult step which often requires managers to reverse their management approach. Efficiency should be measured in terms of demand not supply, which can result in machines or people not working. This takes guts and an iron will to make it succeed. However the evidence and the rationale are clearly correct.

Principle 4 – Customers Pull value from the business

The principle of Pull is the most difficult principle for companies to embrace; it often requires companies to completely reverse the way in which they measure operating capability. Pull focuses on creating a heartbeat for business activity based upon demand and not operating capability. It requires businesses to make products or have the capability to serve customers only when they are demanded. By basing workload on the demand then businesses are able to control their operating capability to ensure that it is as efficient as possible in serving customers. This requires a ‘just in time’ capability and requires businesses to reduce ‘work in progress’, stock and rework such that customers are served at the point of demand as efficiently and effectively as possible.

Principle 5 – Search for Perfection

This principle is focused upon the continuing aim to maximise efficiency and effectiveness of the business operations. This is the basis of continuous improvement and requires the empowerment of employees to be able to fix or improve business processes that they are responsible for.

Start at home first [your business] and then work backwards and potentially forwards in the value chain. This requires the development of long term relationships with suppliers and customers that is based upon trust and commitment to deliver maximum value to the end consumer based on a shared ‘profitability’ model. Central to this is the focal company, the company with which the customer associates the value and whom ultimately represents the value chain.

Perfection is a goal, there are very few perfect businesses and those that achieve a perfect status don't stay there long, as customers and employees tend to mess things up!

Deploying Lean

Lean is not simply the application of analysis tools, indeed our most important analysis tools are our eyes, ears and brains. Lean is as much about thinking, listening and seeing as it is about formalised analysis.

Lean is deployed in three ways; through rapid improvement events (kaizen events), through long term interventions (conventional projects) and through workers finding the best way every day to do their jobs. Kaizen events require a facilitator and are run over 1-5 days during which a problem/opportunity is resolved and implemented. By nature these solutions are often simple and easy to deploy. More complex projects are delivered through interventions. However the real success of lean is when every member of staff is focused on improving their area of work through a collective vision of the business system. As you can imagine this takes time to achieve, in fact it’s taken Toyota over 40 years and they are not finished yet!

If you want to know more about Lean drop me a line or you can read the book; just beware it's not that easy a read, unless you love car manufacturing that is.

Author: Dr Lee Williams, JOWSA Consulting Ltd