The Lean business methodology is based on the simple principle that organizations should strive to provide maximum value to the customer with as little waste as possible. The idea is simple, but it isn't easy. For most organizations, embracing Lean requires a significant culture shift and a new way of thinking about everything from leadership to everyday operations. While the effort is substantial, the rewards are extreme. Lean organizations enjoy greater profitability, happier customers, and engaged, productive employees.
What is a Lean Transformation?
Many people associate Lean with cost control or budget reduction because it emphasizes the importance of eliminating waste. That's unfortunate because Lean's true aim is to deliver maximum value to the customer. Eradicating waste is one way to achieve that goal.
Lean transformation describes the strategic, operational, and tactical improvements organizations implement to deliver more value to customers. These changes usually require a fundamental paradigm shift from traditional operational practices to a more customer-centric and value-driven approach.
There is no "one size fits all" approach to Lean leadership. Instead, your journey will depend on the organization's current practices, your customers' needs, and your ultimate purpose. There are, however, some transformation steps that most Lean organizations have in common.
Why Do So Many Lean Transformations Fail?
Before we get to the specific steps for transformation, it is essential to note that many Lean transformations do not succeed. McKinsey reports that 70% of all business transformations fail. Fortunately, the reasons for this are well understood and avoidable by those focused on success.
One common challenge is that top leadership doesn't approach the transformation as aspirational. As a result, the team does not see the conviction or understand the importance of this change in a way that convinces them to actively engage in transforming. Success depends on getting buy-in that results in extra energy.
Another barrier is that the leadership team does not invest in building the skills and space within the organization to bring Lean to life. It is essential to understand that everyone has day-to-day tasks to complete and that without intention, there is little room for positive change.
Finally, success requires that leaders implement the infrastructure and support for Lean activities. Technology for managing Lean projects, regular performance measurement, and constant feedback are crucial elements of a Lean transformation.
Critical Lean Transformation Steps
Strategy Deployment (Hoshin Kani)
The first step of a Lean transformation is developing and deploying the organization's purpose and strategy. The Japanese Lean term for this process is Hoshin Kanri, which means policy management. The organization determines its ultimate vision during strategy deployment, or "True North." It answers the question, "why do we exist." Once that is established, aligning every person and process with the objectives necessary to obtain success is possible. Strategy deployment consists of 8 steps:
Establish the vision and analyze the current state
Develop a handful of breakthrough goals that will take three to five years to complete
Set annual objectives
Cascade goals down to the individual level
Execute the annual objectives
Perform monthly reviews
Complete annual reviews
This approach to strategy management ensures that the strategic plan isn't just a document that is filed away. Instead, executing the breakthrough objectives becomes a daily concern for each individual. In addition, frequent reviews mean leaders can act quickly if barriers arise or progress is impeded.
Value Stream Mapping
The next step is digging deeper into the current state of every process to ensure that value flows smoothly to the customer. Value Stream Mapping is a technique for visualizing each step in creating the product or services delivered.
Value stream mapping involves five steps:
Plan and prepare: Assemble the team members involved in the process. Define the process to be mapped and the scope of the project. Set goals for improvement.
Map the current state: Be sure to document the existing steps that are actually happening, not what managers think should be happening. Include any delays between process steps and the capacity of each step.
Analyze the current state: Look for opportunities to reduce waste or remove friction from the process.
Draw a future state value stream map: Brainstorm ideas to create a new value stream that reduces the number of steps, eliminates rework, or minimizes delays between steps.
Work toward the future state: Overcoming the gap between the current state and desired state may require several projects based on each opportunity for improvement.
The definition of improvement is to make things better, but before you can do that, you have to answer the question, "Better than what?" That's virtually impossible to do if there is no standard way of performing each process and task. The Lean concept of standard work is simply the documentation of the current best practice for each operation. Work is always completed to the standard until an improvement cycle results in a new one. To be effective standard work must be:
- Developed by process operators
- Available in the workspace
- Detailed with images or diagrams when needed
Kanban is a Lean technique for visual management to streamline the flow of value. It helps uncover blockages or waste that impedes the progress of work in progress from one step to another. The three principles of Kanban are:
Visualize workflow: Kanban was initially used by Toyota and involved the use of cards to indicate inventory levels for parts on the factory floor. Today, organizations leverage digital Kanban boards to track the flow of work of all types, from software development to construction projects.
Focus on flow: Once the flow of work from one stage to the next is made visual, it is easy for leaders and team members to react to obstacles and eliminate the waste of waiting.
Limit work in progress: The Lean idea of "pull" goes hand in hand with the flow. It means no work in progress is created until there is demand for it. The work in progress is limited to what can be accomplished in a reasonable amount of time.
Employee-Led Continuous Improvement
Now that the organization is aligned around a strategic vision, the value stream is understood, standards are in place, and there is a method of visualizing workflow, it is time for employees to engage in continuous improvement.
In Lean organizations, employees are encouraged to submit opportunities for improvement to a central platform that collects them and supports the related projects. Remember that front-line employees are in the best position to recognize and implement improvement opportunities. In a Lean organization, continuous daily improvement is both a top-down and bottom-up endeavor.
When it is time to take action, the Lean methodology leverages a structure improvement cycle called PDSA. The steps are:
Plan: Define the scope of the project. Gather the current key performance metrics. Set reasonable goals for the project. Determine who will be involved. Brainstorm potential improvements.
Do: During this stage, the team will implement ideas for improvement to test them. Ideally, changes will be contained and variables limited so that an accurate assessment of the results is possible.
Study: Now, the results of the change are analyzed to see if improvement occurred. It is also critical to understand if the positive change happened for the reason the team expected.
Adjust: If the desired results were achieved, team members can update the Standard work and provide new training to process operators. If not, the cycle begins again with another hypothesis about what to change.
A successful Lean transformation is not a one-time event. Instead, it is a reimagining of how work gets done from the C-suite to the front line. The result is an organization that is constantly learning, taking advantage of all available resources, engaged in effective problem-solving, and moving ever closer toward its true north. Our team works with organizations on the Lean path to success every day. We'd love to chat about your goals and challenges.