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Dear Gemba Coach, Is there a lean strategy?

1/18/2015
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Dear Gemba Coach,

My team demonstrated the benefits of kaizen to the CEO who then asked us what our strategy was. Is there a lean strategy?

Good point. This is a tricky one to answer because, well, yes and no. Lean has challenges (what are the key business problems we need to solve) and then there is kaizen (how do we discover how to solve them by small, step-by-step experiments with the people themselves), but no such thing as “strategy” in the lean vocabulary. The general idea is that through learning how to practice kaizen yourself, through teaching others and through supporting kaizen over time, the right strategy will become apparent.

I understand this is not a very satisfactory answer to any one not already versed into lean. First we need to understand the problem. When I present lean to CEOs and COOs I sometimes get drawn into “strategic” debates. I feel this is way above my pay grade and, in any case, I’m not sure I understand what they mean by strategy, but I often get the feeling they’re talking about:

Pressure customers so they buy

+

Pressure people so they work

+

Pressure suppliers so they lower their prices

=

Making money

Or if you’re nicer than me, replace “pressure” by “create incentives” which is often much the same. And then executives are surprised (and not a little aggrieved) by the fact that it doesn’t seem to pay off that well. I guess the lean answer would be:

Help customers to support their lifestyle (so they repurchase)

+

Engage and support people (so they pay attention)

+

Partner with suppliers (so they share their innovations)

=

Grow sustainably

 All well and good you might say, but how does that work out in practice? Like all things lean, you start at the gemba and try to figure out:

Customers’ lifestyles

Value Analysis

Value engineering

What do customers prefer, what do they spend money on, and what do they avoid spending on (because they consider it’s not worth it)

How can we improve products in production or current service contracts to improve how our product or service helps customers right now?

How can we learn from improving products and services right now so that we figure out what to build into the next products to satisfy customers further?

How could that increase profitability? Where does the investment in this extra value for customers come from? From eliminating waste, of course. Typical wastes can be found in the form of:

  1. Cash from increasing inventory turns (with a $100 million company with 4 turns, increasing to 5 turns means generating $5 million – that’s quite enough to play with to increase value for customers)
  2. Cash from reducing rework and defectives (in a $100 million company with a 4% sales margin and 2% of sales spent on handling non-quality, reducing that by half means generating $1 million).
  3. Cost reduction by reducing work content and reducing part variety through modularity (and economies of scale through increasing volume at suppliers)
  4. Capital expense avoidance by learning to build more features, options and products on existing lines.

Where to Start

All in all, the place to start is with just-in-time: generate cash by reducing inventories, and use it to improve product or service value to customers, in order to increase market share, which supports profitability.

I’m not sure this counts as strategy as people mean it. We’re not talking about abandoning the less profitable segments in order to focus our efforts on acquiring more profitable ones. On the contrary, we’re considering expanding our range and our options because it’s definitely a customer by customer process, more of a Plan For Every Customer. Different customers are likely to appreciate different features differently, which is yet more reason to develop flexibility. But, overall, it might pass as a lean strategy. Of a sort. Fact is fact, and cash is cash.

5 Comments | Post a Comment
Daniel Breston January 19, 2015

Dear GembaCoach

I am part of an IT creation and support organisation. How do you do a gemba walk, initial or aftewards, when management and the business customer is in one country, IT development in another and IT OPS is in another?

Mohan Boovaragan January 19, 2015

Very Interesting Question .From my point of view irrespective of place of creation or development it doen't matter.As Lean more focuss on Process the ideal Gemba walk should happen at the place where you are adding value to the customer.For example if development taking place in another country the Gemba walk should happen in the place where the real work activity going on..

Open for disucssions..

Michael Webb January 20, 2015

I could not agree more with the weakness inherent in the general concept of "strategy."

One of the striking things about Lean is that it drives everyone - especially executives who are far away from where work is done - to be directly aware of the value added or waste created (rather than making assumptions). Lean requests that you bypasses computerized reporting in favor of making the flow visual, and that you go to the gemba to see for yourself, etc. Crucially, this approach can reveal that some assumptions ("strategies") executives have about how the company can make money are nothing more than floating abstractions. 

Take another kind of production system every business has: the one that produces customer sales orders. The work of finding the right individuals, and gaining their attention, interest, time, and trust inorder to ultimately gain some of their money is mostly invisible and unmeasured. It is an area where the use of "strategy"  is rampant, and quite often unconnected to what really goes on in the field with salespeople (who are usually left to their own devices to implement the so-called "strategy").

However, the precise approach you describe - actually creating value for the customer at each stage - can make the flow of this production visible and can speed it up, not to mention exposing enormous waste. And contrary to their reputation, this approach is readily embraced by marketers and salespeople.   

Millions and millions of dollars are wasted by companies who rely on fuzzy, unmeasured (and therefore unvalidated) "strategies" in sales and marketing. All manner of "solution selling," sales training, CRM, compensation, brand marketing, channel management, and more are implemented without ever actually defining the problem they aim to solve.

This would become readily apparent if only the marketing, selling, and servicing groups used operational definitions - getting down to brass tacks of defining the quality and quantity of their actual sales opportunities in their sales funnels, something akin to developing standard work in manufacturing. To be sure, the subjects of this production - people who happen to be prospects and customers - cannot be treated like somany ingots or engine assemblies. But in my experience, most B2B companies would be a lot better off if they put even a fraction of the energy they spend studing their ingots and engine assemblies into studying nature of the businesses and people who buy them. 

Strategy is an important concept, but I've become skeptical over the years that it is often used as a crutch for affirming what some executives prefer to belive, instead of going through the hard work of actually becoming directly aware of what the customers comprising their sales and marketing funnels are actually made of. 

Michael Webb
Author of "Sales Process Excellence," and "Sales and Marketing the Six Sigma Way"
www.salesprocessexcellence.com
www.salesperformance.com

Michael Webb January 21, 2015

So, to bring the conversation back around to lean and strategy, if it is important to keep management's attention connected to the facts in the plant or on the street, I would say Lean is more strategic than "strategy" itself. 

Joe Frazier March 17, 2015

Yes, Lean is a tool.  The tool to define a strategic vision and goals is the Hoshin Kanri process.

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