Dear Gemba Coach, Is there a lean strategy?
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
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)
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:
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:
- 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)
- 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).
- Cost reduction by reducing work content and reducing part variety through modularity (and economies of scale through increasing volume at suppliers)
- 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.
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