Most of us learned the importance of organizing around value streams pretty early on in our lean education. Not only does this enable a lot of the good things Lean can bring, but it also helps us to identify the next big problem to solve in each of those processes. Sadly, most companies still don’t understand their value streams and keep trying to adopt Lean function by function, silo by silo. Sigh. Worse yet, by not being able to look across our multiple value streams, we cannot even begin to determine the highest leverage improvement priorities for the entire organization. Double sigh.
In The Goal, Eliyahu Goldratt emphasizes the criticality of understanding, managing, and improving the limiting production bottleneck to increase overall output. A bottleneck is the weak link in the system, the one constraint that prevents us from manufacturing that next toaster or frothing that next latte with our current resources. Now, let’s zoom out some more. Our company is a system that includes other value streams like strategy, sales and marketing, product development, and service… And if we zoom out even more, we can see our extended value streams that include supply chains and logistics, not to mention channel partners, advertising agencies, and legal counsel. Somewhere in that great big system is one true bottleneck, and I have yet to meet a company that really understands what theirs is (not to mention the next one and the one beyond that). Too bad, because that is where we probably need to focus our next major improvement activities if we want our company to get better overall.
So how does whomever is charged with fixing the entire organization start to understand the bigger system problems? Here are some ideas to experiment with:
1) Ask: What does “better overall” really mean to stakeholders? More Facebook Likes? Customers? More repeat customers? Not every company has subscribed to the notion of serving a purpose (come on, you really should know your purpose by now!), but let’s put that aside for a moment and think about how we can become more profitable and sustainable for the long haul. What bottleneck keeps us from increasing sales and/or making higher profits? Is it that we don’t have the manufacturing or delivery capacity to support more transactions? Don’t have enough coordination between manufacturing and outbound marketing to know when and how to moderate our advertising activities? Don’t have good enough products and services for our salespeople to convince potential customers to buy from us? Maybe it’s something less obvious like we don’t have enough legal capacity to approve contracts fast enough, or shudder to think, we don’t have enough executive talent to develop and actually implement good long-term strategies? It may feel like many things are holding us back, but Pareto would argue that there are only a few that matter right now.
2) Ask: Do we really have a value-producing strategy? No matter how we measure our “better overall,” customer-recognized value is what drives membership, sales growth, profit, etc. Most companies struggle to describe what value they produce, much less offer compelling customer value propositions. Empty descriptions like “world leader in…,” “first mover”, and “customer-focused” often obscure the fact that we really don’t have a good grasp on what value creation means for our customers. If we can’t describe that, then there is no way our people will know how to improve value in each and every value stream. In contrast, Coca Cola’s very clear, value-producing mission is: “To refresh the world,” and “To inspire moments of optimism and happiness.” That seems to be working pretty well for them.
3) Recognize that the end goal is not to become lean; it’s to become a more successful organization (and Lean is just our chosen path). Incremental improvement in particular functions make us feel good about our initial progress (for a little while anyway), but it’s the ongoing improvement of the bigger system’s output that matters. After we identify those specific growth and profit constraints, we need to leverage them to create direction and alignment for the entire organization. There’s nothing wrong with cost reduction if cost truly is the biggest problem. But why focus there first if poor quality and a bad reputation are what’s really keeping the customers away? (The last time I checked, quality improvement required an enterprise-wide focus).
4) Ask more “Whys?” One company wanted to apply Lean to sales so they could sell more. Sounds great, right? Well, they couldn’t manufacture to their current requirements and their sales reps were afraid to talk to customers because nobody in manufacturing could give them delivery dates (even on existing orders). They may not have had the most efficient selling organization, but sales efficiency was not their bottleneck. They had to drill down deeper into “Why aren’t sales higher?” to find their next constraint.
5) Ask: If we resolve this bottleneck, what new bottlenecks come next? Companies that apply Lean to sales and marketing are often at significant risk of disappointing customers. They see a step-change in orders, but the rest of the organization isn’t prepared to support that demand. The same thing happens when new products suddenly get developed in half the time. We work in complex systems and have to coordinate and improve ahead of orders to prevent future overburden, unevenness, and customer disappointment.
I realize I’m just scratching the surface of company bottlenecks, but what do you think? What’s your company’s bottleneck? Or what’s preventing you from finding it? Please share in the comments section below.
