For some time I have been thinking about some different perspectives and practices that exists in the world of lean. I have been interested in how they hang together. Below I give you an overview of my understanding so far.
Firstly, I want to stress that to me lean first and foremost is a learning mind set for change and gradual improvement of and in our field of business.
Secondly, instead of asking “Do we need to lean our business -Yes or No?”, which is a no-brainier, I suggest we ask “Where in our business do we need to direct a better learning focus?” and then “How can we learn better together within this part of our value chain?”.
In our answers to these questions we will create a sounder platform to start on than stating the obvious – “We want the achievements the other companies have gotten by going lean”.
So let me explain. The practical learning approaches we choose to deploy will be different whether we want to:
a) grow a new sustainable business
(Lean Start Up)
b) deploy more economically impact-full solutions to our business system
c) deliver better cost effectiveness of our business operations
The simple reason is that the learning focus is not the same in the 3 contexts.
The classical arena for lean practices is the on-going business operations. The learning focus is to create flow in work by finding and removing waste understood as Physical buffers that prevent smooth flowing stable, predictable and cost-effective operations.
The key indicator and main enemy is variability as variability creates the symptom needs for the physical buffers. If we control the variability then we control also the physical buffer levels and the flow of production. A key understanding in lean operations is that if the flow is smooth and the variability is in control then the output will be as expected.
In general a lot of the variability in Business Operations are caused by unevenness, overburden, strains and demands that exceed current process, equipment and human capacities. To protect against variability typically Business Operations unintended institutionalise and accept the physical buffers.
Here is a list of physical buffers or wastes in operations:
- Overproduction (of things not demanded by actual customers)
- Inventories (awaiting further processing or consumption)
- Unnecessary Over-Processing (for example, relying on inspections rather than designing the process to eliminate problems)
- Unnecessary Motion of Employees
- Unnecessary Transport and Handling of Goods
- Waiting (for an upstream process to deliver, or for a machine to finish processing, or for a supporting function to be completed, or for an interrupted worker to get back to work).
Classical practical learning approaches to attack the operation waste includes institutionalisation of plan-do-check-act learning cycles through value streaming, visual control practices and stand up meetings, hand over communication practices, workstation design and 5S practices, standardisation of procedures, empowerment to all to stop operations and ask for help in case of identification of problems, process based skills improvement, simple problem solving, preventive maintenance, e.t.c.
Newer arenas for continuous improvement are the upstream areas of the value chain (like new product development and the strategic developments to our business system). The learning focus here is to create flow in work by finding and removing waste understood as Non-Physical buffers that prevent smooth flowing and viable developments.
If we walk through functions of finance, sales and marketing, product development, engineering and so forth we have a hard time to see what is going on. Most is happening in heads of people and lots of time is spent on meetings to connect and align what is happening in these heads. It is all that time spent connecting and aligning or waiting for it which is the sole learning focus in lean development.
The key indicators and main enemies in lean development are queues as queues create the symptom needs for non-physical buffers. If we control the queues then we control also the non-physical buffer levels and the flow of development. A key understanding in lean development is that too much design-in-process inventory makes cycle times substantially longer and with long cycle times we do not achieve much value because in the meantime other developments overtake us.
Many find this surprising as they learned variability is the big enemy, however without variability we cannot innovate. Development makes designs and if designs do not change then there will be no new value added. When a design is changed then uncertainty and variability in performance is also introduced. In fact often it is the extreme change outliers that cause us to perform the best, so if we cut the variability out we limit our innovative potential. Hence if we decrease the variability in development six sigma style we actually create practices that drive out development.
In general the queues in Business Development are caused by efficiency biases and conformity to plan coupled with a severely lack of economic prioritisation that over utilise current process, equipment and human capacities. To protect against this Business Developments unintended institutionalise and accept the non-physical buffers.
As the buffers in development are not physical maybe that is the reason they are also traditionally not accounted for. If you ask a typical CFO about development inventories in his business he will at best tell you about the payroll levels of staff assigned to development projects.
Here is a list of the classical non-physical buffers or wastes in developments:
- Uneconomic Prioritisation (not knowing delay costs and hence the impact on life cycle profitability)
- Unknown Development Inventory (not knowing the portfolio and lacking feedback loops design)
- Optimisation of Utilisation (not considering economic trade-offs to cycle time )
- Decreasing Variability (not considering the lack of innovation)
- Conformance Bias (not exploiting emergent information)
- Large Batch Sizes (not measuring and reducing batch sizes)
- Underused Cadence (delivering information asynchronously)
- Managing Timeliness not Queues (inserting extra time to prevent missing schedules)
- No Work-in-Process Constraints (letting queues get longer and less development complete)
- Inflexibility (rewarding for specialisation and not flexibility)
- Non-Economic Flow Control (not using minimum slack first)
- Rigid Central Control (not knowing and/or prioritising response time)
The practical learning approaches to attack the development waste includes institutionalisation of looking-asking-modelling-discussing-acting learning cycles through flexible visual project kanban (post-it-based value streams including tasks backlog, planned tasks, tasks in process and completed task), limit work-in-progress per resource across developments, prioritisation based on cost of delays (use service classes) and shortest job first, limiting batch sizes, regular and frequent stand up meetings, knowledge gaps (experiment needs) and knowledge assets (trade-offs), development space designs, A3 based problem solving, e.t.c.
Lean Start Up
The latest arena for continuous improvement is the process of creating a new business – the start-up. The learning focus here is to create flow in work by identifying and removing waste understood as Non-Validated Assumptions that prevent us from building a sustainable business.
Most start-ups fail, are not successful or do not live up to their assumed potential. Often a fundamental flaw is that we think that if we just build the business around a visionary product or service then customers will come. Afterwards, when we have wasted all our resources on something that few really needed and wanted, we then pile up learning excuses as to why we did not succeed i.e. we did not have the right stuff, we were not visionary enough or we were not at the right place at the right time.
Basically all start-ups are grand experiments consisting of huge amounts of uncertainty as we do not really know who the customer is, what really the need is and how we really can deliver. The question therefore is not if we can build it, but rather if we should build it.
The key indicators and main enemies in start-ups are the assumptions about customers, customer needs and our business model in our business plan. If we spend our efforts on the learning validation of our assumptions we also increase the likelihood that we will succeed. A key understanding in lean start-up is that the faster we are to invent ways to discover and create validated learning on what is real and the quicker we iterate our start up based on the new insights the more likely we are in succeeding in making a sustainable business before we run out of resources.
In general the Non-Validated Assumptions in Business Start-Ups are caused by extreme uncertainty and efficiency bias coupled with a severe lack of cross business learning orientation that over-emphasise professional perfection. To protect against the uncertainty Business Start-Ups institutionalise and unintended make the non-validated business ideas (vision, strategy and product/services) a faith.
Here is a list of assumption buffers or wastes in start-ups:
- Perfection (focusing on the latest and greatest without knowing the customer need)
- Specialisation (flight from business uncertainty to passing tasks between departments)
- Production (jumping to what we can build before learning if a)there is a recognised customer need, b) there is a solution the customer would buy and c) the customer would buy from us).
- Misconceptions of Value (what good is it to build on time and budget if nobody wants it?)
- Evaluation of Productivity Locally (value is validated learning about how to build a sustainable business and not to create stuff as such)
- Ignoring Customer Development (not using early adapters to co-create with us and provide validated learning about both value and growth. New customers come from the actions of past customers)
- Success Theatre (hiding behind lack of sales targets and no sale as then we can still hope)
- Allure of Plan, Strategy or Market Research (most brilliant assumptions, strategies and whiteboard gamesmanships but lacking real exposure to customers and hence validated learning)
- Wasted Efforts (build without creating learning validation)
- Analysis Paralysis (diving into big competitive advantage questions, debates and analysis paralysis when we do not even know who customers really are, if they want what we plan to offer and are interested in us).
- Waiting (postponing getting any validation experiments until we believe we are sure of success)
- Just Do It (gain no validated learning – what was the value and growth hypothesis?)
- Training (no on-boarding in place causing misunderstandings and misalignments)
The practical learning approaches to attack the start-up waste includes institutionalising extremely fast and small batch focused learning cycles of building, measuring and validating learning through the use of learning milestones, experiments on customers with minimal viable solutions, innovation accounting (like portfolio kanban, value and growth rates, life time value and revenue targets) and preserving or redirecting elements in the business model (like scaling, customer segments/needs, platforms/architectures, value capture, engine of growth, channels and technology).
Learning milestones are used instead of organising the start-up into speciality areas. First stone is to establish the viability of the baseline, second stone is to tune the engine of growth and then lastly we have the stone on whether to preserve the strategy or go in another direction.
Lean the Business
As mentioned in the beginning of the article I believe it is worthwhile to reflect a little more before we initiate a lean journey – because where in our business is it really we do need to direct a better learning focus?
In Lean Start-Up the focus is on learning better to create a sustainable business, in Lean Development the focus is on learning better to deploy more economically impact-full solutions to our business system like new products or new business system elements, and in Lean Operations the focus is on learning better to deliver cost effectiveness of our business operations.
As you have read the practical vehicles of learning and change are not the same across the three lean practice fields and it would be a deadly sin to deploy them dogmatically all over the value chain.
On the other hand all the lean approaches share a core in that they are all about gearing learning efforts to the highest possible economic impact in the given context and when we are aware of that we can use the different lean approaches at the same time across the value chain in the different contexts that they belong to.