Where and how to start a solid lean transformation
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1) Lean methodology focuses on systematically eliminating waste from organizations. It is being adopted by more industries beyond manufacturing as a way to reduce costs while maintaining quality and customer loyalty. 2) When starting a lean transformation, it is best to first conduct a proof-of-concept by applying lean principles to critical processes over 4-5 months. This allows organizations to see results and gain leadership buy-in before a larger rollout. 3) Common mistakes include focusing too much on training without practical expertise, or applying lean too broadly without clear targets, instead of targeting critical processes that impact key financial and customer metrics.
Where and how to start a solid lean transformation
- 1. All rights reserved. Copyright 2011@ Canopus Business Management Group www.collaborat.com | +91 4442851080 Where & How to Start a Solid Lean Transformation? Neil (Nilakantasrinivasan) In the current global downturn, high revenue growth is no more the flavor of the board room or management committee meetings. Organizations are convinced that the days of high octane growth are not going to return in the near term. Instead, board rooms are bubbling with discussions on cost reduction that can help in sustaining the operating income. However leaders are careful in choosing a systematic approach that will eliminate wastes or unwanted cost elements rather than mere axing. They are cautiously communicating this down the ranks so as not to be misconstrued as simple cost cutting exercise. This is the context in which ‘Lean’, a traditional management approach used by Japanese manufacturing companies to systematically eliminate waste is finding its way into the board room agenda. ‘Lean’ has gone beyond manufacturing and has been successfully applied in variety of services, government and non-profit scenarios. Financial services, telecom, IT, IT enabled
- 2. All rights reserved. Copyright 2011@ Canopus Business Management Group www.collaborat.com | +91 4442851080 services, hospitality are few industries in services that have been successful with Lean Transformation. However, Lean goes beyond mere waste elimination or cost reduction. It aims to align the organization & its resources to customers’ need, deliver high quality products/services consistently, and as a result become the most preferred partner to the customer. It’s a strategy to build customer loyalty. If you are in this juncture of deciding on how and where to apply Lean in your organization, you will certainly find my approach useful. Lean methodology is prescriptive in nature. It starts with an introspection of current state, usually through a site visit (Gemba walk-thro) by a lean expert. This is followed by a download of prescriptive tools, techniques, ‘things-to-do’ to the senior leadership team from the expert. This would include examples from competitors and other organizations where lean tools have improved turnaround times, reduced defects, inventory and increased profitability. This adrenaline shot is strong enough for senior management to commit for lean transformation across the organization. The most common approach used by organizations to deploy lean is to start with mega launch followed by mass-awareness programs, recruitment of on-roll resources, internal communication drives through banners, posters, videos, town halls, reward/recognition, etc. This calls for upfront investment, but leaders are convinced and they don’t find it difficult to garner the support from the CFO. All this fun goes on for few months (or even years) till someone questions the ROI. Unfortunately, once Lean deployment program has started across the organization without deciding the key purpose, it’s very difficult to course correct or quantify the results. Due to its prescriptive nature, several lean techniques become corporate rituals. So the program is
- 3. All rights reserved. Copyright 2011@ Canopus Business Management Group www.collaborat.com | +91 4442851080 put on a ventilator only to keep the big bosses happy. And then one fine day, someone pulls the plug! So, it is best to deploy Lean to areas where it makes business sense. The cultural spill that most experts sell doesn’t help if business doesn’t see value. I have seen cases of massive corporate drive to deploy lean in areas where it wasn’t needed at all. Probably basic discipline and process orientation like good housekeeping, clean desk and document management policies would have been enough. ‘5S’, one of the most famous tools of lean is adding cost on long run through frequent office or factory modifications rather than eliminating wastes! My recommendation is to stick to the following approach: 1. Identify financial measures that have consistently failed to meet expectations in the past few business cycles (quarters, halves or FY) 2. Identify all ‘Lead’ business & process performance measures that have strong impact on these financial measures. Create a ‘Metrics Value Tree’ by linking all these measures together. 3. Conduct an analytical deep-dive on these measures to identify the baseline performance, performance against target, gap with respect to internal and industry benchmarks. Infuse the customer’s feedback (Voice of Customer) and complaints data to get a full picture of the situation. 4. Use this information to involve the leadership team to identify 2-3 critical measures that needs to be improved. Selection can be based on importance to financial measures, customers, employees, environment and suppliers. 5. Initiate a Lean Proof-of-Concept (LPoC) phase that lasts for no more than 4-5 months. The primary deliverable of the LPoC is to successfully apply lean transformation principles to see a lift in process & financial performance. 6. Use the lessons learnt from LPoC, company cultural aspects, existing improvement practices, etc, decide a 12 month Lean transformation plan
- 4. All rights reserved. Copyright 2011@ Canopus Business Management Group www.collaborat.com | +91 4442851080 In the LPoC phase, many organizations have improved measures such as Time to Market, Opportunity to Order, Order to Delivery, Lead Conversion %, New product Ramp-up Time, Defects reduction, Complaints reduction, Utilization %, etc. The merits of this approach are straightforward: The saving accrued from the LPoC can be used to fund the next 12 month lean transformation. Isn’t this a simple way to justify the ROI for a solid lean transformation. As the leaders ripe the benefits of the LPoC projects, their acceptance to the concept of Lean is much higher. Three areas where organizations falter with this approach are: Identification of the scope and measure of success of the LPoC projects Unnecessarily divert energy towards training program Rely on amateurish skills of internal resources without practical lean expertise to deliver results on LPoC projects. About Neil Neil started Canopus Business Management Group in 2009. He helps a range of large enterprises in services and manufacturing, with particular emphasis on execution of business & functional strategies, customer experience & process transformation. He has worked with banking, outsourcing, IT, discrete manufacturing & telecom business processes. He draws on extensive experience (15 years) in Hoshin Kanri, Blue Ocean Strategy, Lean, Six Sigma, Outsourcing, Change Management and Touch point Management to deliver composite solutions that put client’s business in an Advantageous & Profitable position. Client engagements aim at eliminating the barriers for seamless execution of strategies, carpet bombing customer touch points, diagnostic interventions on customer churn & retention and implementation of transformational projects. He can be reached at neil@collaborat.com or +91 9176616766.