How is your Lean developing?

Do you use Lean as a Continuous Improvement (CI) methodology in your organization?  If yes, how do you use it?  How satisfied are you with the results?

When I talk to people in CI, many often tell me that they prefer Lean to Six Sigma or have shifted more efforts from Six Sigma to Lean in their organizations.  There are many reasons for the preference.  One of them is that Lean is more relevant or applicable in their organizations — the emphasis on statistical methods in Six Sigma is burdensome given the lack of suitable data and skills.  

While Lean and Six Sigma are inseparable in practice, I also think that Lean is a better introductory CI methodology than Six Sigma.  The Lean concepts (such as value, value stream, flow, pull, and pursuit of perfection described in Lean Thinking) are much easier to understand by people in organizations new to CI.  By introducing simple Lean concepts and tools, such as 5S, Kanban, and 7 types of waste, we can quickly engage the organization and start creating a CI culture.

One caution of relying on simple Lean tools is that organizations may not grow beyond the infancy.  A symptom, for example, could be the “seven-waste scavenger hunts” as described by Mike Rother and John Shook in their book Learning to See (a must-read, by the way, for Lean practitioners).  This happens when the organization fails to invest in understanding the true customer value and mapping out the end-to-end value stream, therefore, missing the majority of the waste hidden in the processes.

One can use or develop a comprehensive Lean or CI maturity model to assess their organization’s progress.  I simply ask one question:  How is management using Lean?

In essence, how Lean is used by management determines whether the organization can achieve high Lean maturity. More specifically, do they conduct organized, systematic analysis and improvement of the value stream?

In Learning to See, Rother and Shook differentiate value-stream improvement from waste elimination activities as “flow Kaizen” versus “process Kaizen.”  While all employees can eliminate waste in their areas, value-stream improvement is the responsibility of the senior management, who can see across functions, set the vision, and lead the change. 

This management ownership concept is not new but rarely practiced.  Peter Drucker wrote in his 1964 book Managing for Results that a business needs a cost analysis that “Looks at the entire business as one cost stream” and “Defines ‘cost’ as what the customer pays rather than as what the legal or tax unit of accounting incurs.” Cost quantifies value and waste.  Once quantified, value and waste can be analyzed and managed.

It is important to note here that “cost is a term of economics” as Drucker pointed out – “The cost system that needs to be analyzed is therefore the entire economic activity which produces economic value.” Few companies look at the value stream spanning the entire business, let alone beyond its legal boundaries.

The frontline employees do not have the knowledge of the entire business.  Management must have it. 

Through Lean activities, such as Value Stream Mapping that crosses functions and organizational boundaries, management improves its understanding of the true cost (again, from a customer’s perspective).  It is with this understanding by the senior management that we identify substantial opportunities for improvement and value creation. Many CI initiatives lose momentum because they simply do not produce meaningful results at the business level, i.e. making it more competitive and more profitable.  

Lean has the power to transform a business, but this only happens after Lean is owned and practiced by the senior management.  Until then, Lean is like a sprouting seed without the sun – it will never reach its potential.