Lean Thinking – Principles to Scale Effectively

10 minutes, 33 seconds read

lean thinking finger pointing

Lean thinking is about more than a process. It’s a business philosophy that can be applied to every aspect of an organization and drive better results. Many people are already familiar with its applications in the world of manufacturing and engineering. But in truth, the principles of lean can benefit a much wider range of businesses. Most companies can use lean concepts to increase productivity, reduce waste, and improve their bottom line. If you’re looking to grow and scale your organization, then these principles can be used to do it effectively. In this article, we explore how to apply lean practices that support sustainable growth and business transformation.

What Is Lean Thinking?

The term was first coined in a book by James Womack and Daniel Jones. They had studied the impressive Toyota Production System and published their insights in ‘Lean Thinking: Banish Waste and Create Wealth in Your Corporation’. The book provided a framework for making lean manufacturing systems that were more efficient. The concepts were adopted by companies throughout the world and proved to be successful in many other types of industry. The principles were followed as a process by some and a philosophy by others. It’s this latter philosophical approach that became known as lean thinking.

What Are The 5 Principles of Lean?

Having studied Toyota’s system in extensive detail, Womack and Jones identified five principles at its core. These concepts were the reason for its success and provided a framework for others to follow. They became known as the five lean principles and can be summarized as:

  1.       Value
  2.       Value stream
  3.       Flow
  4.       Pull
  5.       Perfection

In order to identify the best ways to scale a business, it’s important to first understand the principles of lean manufacturing. Let’s explore each of them in more detail.

Value

The first principle of lean thinking involves identifying customer value. What do clients see as most important? Which aspects of a product or service are customers willing to pay for? This approach enables you to focus on the value adding elements that customers most appreciate and establish top-down pricing. Defining value allows you to understand what a customer will pay and then work backwards to ensure the cost of production is lower. It enables you to eliminate waste and produce things in a leaner way which maximizes profit. This is the opposite of a bottom-up approach where the price is calculated by adding a profit margin onto the cost of production.

Value Stream

The second principle is known as mapping the value stream. This can be thought of as the lifecycle of a product or service, from initial inception to final disposal. It involves every aspect such as product development, raw materials, shipping, and customer usage. In order for a company to eliminate waste, they must first have a clear picture of the value stream. This enables them to examine the processes, materials, transport, and features in a holistic way. By doing this, it’s possible to identify where value is added and where none exists. Value stream mapping also makes it easy see which areas are contributing to waste so that these can be addressed.

Flow

Flow refers to how the value stream moves. When there are delays or blockages in the production process, the flow is hindered and inefficiency occurs. Waste is then created, whether through lost time, unused materials, or increased storage costs. Developing a value stream that flows continuously is the most effective way to create lean processes. When each step or activity interacts seamlessly, there are no delays to cause waste. With lean thinking, every aspect is perfectly synchronized to maximize efficiency.

Pull

The fourth lean principle is known as ‘pull’ and refers to creating things based on proven customer demand. Traditional business models involve the batch manufacture of products which are then sold on to the end-customer. Sales teams or data scientists are asked to forecast the volume of products that are needed and then manufacturing happens based on estimations. But it’s not always possible to sell everything that’s been made which can have disastrous consequences for profitability. The pull method takes an alternative approach by requiring all products to be made based on customer orders. Nothing is produced in advance in case it becomes wastage. However, it does mean that production systems need to be fast and flexible so that customers don’t have to wait long for their orders to be delivered. Companies that achieve this benefit from increased cash flow and profitability.  

Perfection

Lean companies don’t stop once ‘pull’ is achieved – they continue to strive for perfection. This is one of the reasons why Japanese companies have achieved a reputation for quality and excellence. Many have been practicing lean thinking for decades and are always looking to continuously improve. They actively seek feedback, adopt Kaizen improvement efforts, Kanban, or Six Sigma philosophies, and take action to implement ideas. This drive for perfection is what fosters innovation, creativity, and solution-oriented approaches. It’s often this final principle that separates industry-leading companies from their competitors.

Other Lean Principles

Since the five principles of lean where first published, several others have been suggested. They apply to the philosophy as well as the manufacturing process and are therefore worth considering when adopting lean thinking. These additional principles include:

  • Create knowledge – incorporate learning and teaching into the business so that more people are able to add value and contribute to on-going improvements.
  • Build quality in – remove possibilities for error by automating or standardizing aspects that are repeatable, tedious, or have potential for human error.
  • Respect employees – by giving them the resources, environment, education, and space to do their best work so that they deliver more value and stay with the company for longer.

These principles are key when scaling a business and adopting a growth mentality. They’ll ensure that you scale the things that are working without accidentally growing underlying issues into larger problems.

How Can Lean Concepts Help Businesses To Scale Effectively?

So, what can these principles teach businesses about scaling effectively? How can you apply them if you don’t run a manufacturing company? One of the appealing aspects of lean thinking is that you can adopt the mindset whatever industry you’re in. It’s a philosophy you can apply whether you work in healthcare, marketing, or finance. There are underlying concepts that benefit every type of organization, from small start-up to large-scale enterprise. Here are a few of the ways that lean principles can help businesses to scale.

Elimination of Waste

Waste can be eliminated from every type of business, whether you manufacture physical products or sell less tangible services. It’s vital to do this before you attempt to scale a business or amp up production, otherwise any wastage will only be multiplied as you grow. This will ensure you have a lean foundation on which to build from.

There are several forms of waste that businesses should look to reduce. In the manufacturing context, these include defects, overproduction, waiting, transportation, inventory, movement, and processing. In the knowledge working arena, sources of waste may be disorganized information storage, poor communication, or unnecessary context switching. Spending time on activities that don’t drive customer value is always deemed a waste of resources. Eliminating these elements will ensure that you only scale the most valuable aspects of the business.

Flow Management

Of all the qualities that link lean thinking companies, flow management is one of the most fundamental. It’s the lynchpin in the system that connects value with output. Without it, companies can’t hope to create successful pull systems based on customer orders. Having procedures and tools in place to manage the flow is essential for this approach to work.

As companies scale, many struggle to adapt their systems and processes quickly enough. They maintain a small business approach even though they’ve grown to a medium-sized enterprise. This often results in departmental siloes, poor communication, more errors, and lower profitability. But these problems can be avoided by addressing flow management from the outset. Creating a flow where every step is synchronized and everyone communicates clearly helps to prevent these issues from occurring. It’s about being intentional with plans and processes rather than letting them evolve naturally. This approach makes it easier to accelerate growth when the time comes and achieve ambitious targets with ease. Plus, it allows you to leapfrog other competitors who will likely fall into these traps.

Deferring Commitments

Traditional business wisdom tells us that businesses need to plan and prepare as far ahead as possible. Yet, they need to be agile enough to change direction or adopt a new strategy as market conditions change. This can be a tricky line to balance and companies often end up leaning towards pre-preparation. They manufacture products in bulk and store them until customers place orders. They create and launch complex software programs instead of testing a minimum viable product (MVP). But this isn’t aligned with the lean thinking philosophy.

The lean approach removes pressure to finalize plans, make concrete decisions, and complete work ahead of time. Instead, it encourages these things to be done when the market requests them. It prioritizes value and flexibility over preparation so that wastage is minimized. This approach forces companies to review value streams and create flow so they can still meet customer orders in a timely manner.

Imagine a business is launching a product in 12 months and needs to update its website in preparation. It could push full steam ahead by creating product descriptions, detailed specifications, and image portfolio widgets. They’d probably reason that it’s best to get ahead and be ready well in advance. But what if the most popular web browser changed its settings during that time? If they changed something as basic as the height or width of the window, then the website would need to be reconfigured. If market trends changed or competitor products launched first, then the copy would need to be rewritten to address these aspects. The time initially spent on creating would have been completely wasted. A better approach would be to schedule   A better approach would be to wait until nearer the launch with time scheduled in for the project. This would ensure that any web content created was based on the most relevant, comprehensive, and up-to-date information.

Adopting this type of thinking avoids wasting time, money, and effort on activities that could ultimately be useless. It encourages a more agile approach that enables companies to scale yet remain flexible. By incorporating lean concepts into growth strategies, businesses can multiply their profits as well as their revenue.

Your Lean Management & Continuous Improvement Tool

Rever is all about sharing and reusing, doing and tracking. Continuous improvement becomes a hundred times easier with our innovative digital platform. Using Rever’s dashboard, you can monitor the performances of your teams, the summary of their impact, and easily identify the people making the biggest difference at your company.

Rever Cycle is our version of the PDCA methodology and guides your teams on the exact steps to follow to execute their own ideas. It allows them to capture the entire process, from identifying a problem to experimenting and implementing a solution. They can use it to capture the before and after with pictures, notes and drawings, making their ideas a reality in no time. The time of your team is too valuable to be wasted in handmade drawings and complex explanations.

At Rever, we believe that anybody can be a knowledge worker and thrive. What makes us human is the capacity to grow our intellect and will, and to use them for good. We observe, especially at work, that most people are asked to stop thinking and do as they are told. We want to change that. We enable people to achieve their full creative potential.

Interested in learning more? Then get a software demo today with one of our friendly lean management experts.

THE FRONTLINE DOJO

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