I’m a little down today. I’ve been practicing and consulting in Lean for about 20 years now and it’s getting to be a bit depressing. Problems here, waste there, and that’s all anybody ever wants to talk about! Isn’t there more to running a successful business?
My favorite definition of Lean is this: “Principles and tools for delivering the most customer value while consuming the fewest resources.” When practiced, however, the math often gets a little fuzzy. “If we eliminate all the waste, then aren’t we just left with pure value? Isn’t that good?” Sure… but that still doesn’t guarantee that there will be enough value to attract and retain customers. We need to keep creating more value in the minds of our customers than their perceived alternatives for us. Now we’re getting somewhere.
For fear of inciting a Lean riot (one enraged sensei burning a kanban card?), I need to point out that the success rate of creating lasting change through Lean (or any improvement methodology) is alarmingly low. Some estimates are < 10%. Forums are filled with discussions about why, and one common belief is that leadership doesn’t properly embrace Lean. I can’t disagree, but I’d prefer a root cause. Why doesn’t leadership embrace lean? One hypothesis is that it’s just not that interesting to most CEOs.
Marc Miller’s book A Seat at the Table proposes that CEOs think about four major strategic decision areas: Innovation, (strategy) Implementation, Optimization, and Outsourcing. Of those, Innovation and Implementation capture much more CEO attention. Where does Lean fit? It can be part of each, but it often rests in Optimization which is relegated to those “operations folks” who don’t get to schmooze around strategy much. If we want Lean to have a seat at the table, we need to start talking more about strategies for creating value.
Now value is a tricky thing. Our logical selves like to treat value like it is hard measurable benefits minus hard measureable costs. That may be relatively easy to do on the plant floor, but requires different scientific Market Research techniques to measure for emotional purchases like Starbucks Trenta Macchiatos, Harley Fat Bobs, or Jimmy Choo Luna Peeps (those are non-steel toe shoes by the way). Even technical B2B sales require important emotional elements like relationships and trust. Unfortunately, this leaves us in some pretty uncharted Lean waters when it comes to defining and delivering more value. But hey, we are problem solvers right? What new problems do we need to solve in both our established businesses and in the startup community?
- How do we really measure value in ways to understand how customers make purchase and re-purchase decisions? Packaged coffee has about 100 different attributes, for example, but only six are statistically significant in driving sales. Touch time on the packaging line does not equate to brand image, and guess which one drives sales?
- How do we create uniquely valuable products and services as perceived by our target customers? What is our development process and is continuously improving what we already have good enough? Do we need something fundamentally different if we want to attract new customers?
- How do we deliver all the elements of value? In the Lean world we have become experts at improving value streams, but what are our Lean Product and Process Development methods for creating new ones? And how do we deliver critical emotional elements in customers’ purchasing process value streams?
- How do we communicate value? Customers don’t know if we have something valuable unless we tell them. And sometimes we have to use seemingly wasteful promotional methods to create that influence. Of course that shouldn’t imply that we can’t also be more effective and efficient communicators in whatever means we choose to be heard over our competition.
Waste reduction will always be important in addressing our overall business challenges, but we are missing much of our competitive potential (not to mention CEO engagement) if we don’t start thinking and acting differently about value creation. Apple, Google, and Zappos take this approach and through totally different paths ended up with very high value-creating processes. They’re not doing half-bad financially either.