How tactics from the Lean Management approach of the corporate world can be borrowed to improve your startup's resilience.
Lean Management is a concept deployed in the corporate world that champions continuous improvement. Lean Management is well worth understanding in its own right as it can help founders refine their management approach, improve processes and develop new perspectives to make their startups more resilient.
The five principles of Lean Management
Lean Management was born out of Lean Manufacturing processes developed in Japan in the 1930s, specifically from Toyota's operating model, The Toyota Way, which is still in operation today. The Toyota Way is about eliminating factors that waste time, effort or money. A key aspect is flow, or how well work progresses through a system. If a system is free from interruption, it is said to have good flow.
Another key element is kaizen (continuous improvement). Part action plan and part philosophy, it asks employees at all levels of a company to work together to make incremental improvements to processes. As an action plan, kaizen is about organising events cross-company to improve a specific area; as a philosophy, it aims to create a culture or mindset where employees constantly seek perfection.
While Kiichiro Toyoda, the founder of the Toyota Motor Corporation, developed many of the concepts seen in Lean Manufacturing, the term “Lean” and the concept of “Lean Thinking” were coined by James Womack and Daniel Jones. Their book The Machine that Changed the World told the story of how American, European and Japanese firms applied Lean Manufacturing principles to survive the recession of 1991 and achieved growth over the next five years.
Womack and Jones boiled Lean Manufacturing ideology down into five core Lean Management principles, where each step leads on to the next.
1. Define value
The first step is to assess how much value a customer assigns to a product or service. Value is what a customer truly wants and how much they are willing to pay for it. Once a business has figured out what the customer desires, through quantitative and qualitative methods like interviews, questionnaires, surveys and data, it is possible to redesign processes to achieve that goal. For example, Dyson created the first bag-less vacuum cleaner to address a customer pain point. The end goal is to meet customers’ expectations at the lowest possible cost to your business.
2. Mapping the value streams
The second principle is mapping the value streams. Womack and Jones say that a business should create a visual tool that displays all the steps from the start of production all the way to customer delivery. Some elements may not add customer value, but are necessary for production and should therefore be tolerated. Elements that do not add customer value and are unnecessary for production should be cut—like the vacuum cleaner bag, alongside any machinery and raw materials. Reducing waste of this kind can have a significant effect on a business’s bottom line.
3. Create flow
Any kind of waiting is a form of waste, which is why the third principle of flow is so important to Lean Management thinking. A business that can ensure smooth delivery from start to finish can ensure a product or service gets into customer hands sooner and at a reduced cost. Alleviating bottlenecks is important for this end, so Lean Management practitioners often recommend regular reviews of production methods. A key tool is to reduce multi-tasking among employees so that they have the capacity to focus on key areas of production.
4. Establish pull
The fourth principle encourages businesses to ‘pull’ orders through the production line. A pull-based system creates a product only when there is customer demand, which helps businesses avoid the very significant costs associated with storing inventory. If the previous three principles have been actioned, the time from order to delivery should be streamlined, allowing for the pull system to operate effectively. A pull system allows for just-in-time delivery and gives customers a clear expectation of the delivery date.
5. Continuous improvement
The fifth and most important principle is continuous improvement. A business that pursues continuous improvement seeks to make small incremental changes each and every day. While these small steps may not seem like much when actioned, over time the effects multiply. Constant improvements also prevent inefficiencies from creeping back into the system, whether that’s in the mechanics of production or personnel.
Lean Startup methodology is different from Lean Management in that it predominately focusses on getting a new product to market. You can read more about it here (Link to Monday piece on Lean Startup)
Developing your Lean Startup approach
Lean Management techniques can be applied alongside established Lean Startup approaches, so your business can be as streamlined and efficient as possible. Startups may not be producing physical products or need to store inventory, but many of the Lean concepts still apply.
For example, it might be that you introduce the pull system to staff work planning. You might encourage employees to start on a new task only once the last one is complete, creating pull. This can help to reduce the amount of work in progress, which in turn improves throughput.
Refining your feedback systems using Lean Management techniques can also help identify what your customer base truly values, as well as what they are willing to pay.
Developing the mindset of continuous improvement can help startups deliver end-to-end innovation. Perhaps most important here is a mindset where employees are on an equal footing with founders, so that everyone shares the same vision and feels able to contribute.
The concept of flow is also one that startups can learn from. Productivity often drops when staff have to keep jumping between tasks and investing time in creating workflows that allow employees to concentrate on job at a time may be worthwhile.
With the economic outlook still uncertain, and the UK likely to see ongoing disruption, Lean Management methodology is one approach that founders can use to find ways to make their startups more efficient, resilient and successful.