Thinking Lean – new ways to compete

Lean is a hot topic, be it a lean startup, lean innovation, lean marketing or lean manufacturing.

If you are a mid-market manufacturing company, you will have heard of Lean Manufacturing. It’s a production practice that aims to reduce waste and unnecessary steps in the manufacturing process, a management philosophy derived from Toyota.

With Australia’s small market and relatively high wage costs, the Lean philosophy has taken off as one of the ways to compete with low-cost-manufacturing countries.

A strategy for growth

Lean can be applied in other areas and in recent years has morphed into becoming a key strategy for high growth, agile and innovative businesses. As well as cutting out unnecessary steps, Lean focuses on value and customer needs and wants. Lean is centred on preserving value from the perspective of the customer who consumes a product or service. “Value” is defined as any action or process that a customer would be willing to pay for, which is pretty important!

Lean startups have become the norm, particularly in the innovation hotbeds of Silicon Valley and Surry Hills, and it requires a significant mind shift for an entrepreneur.

The Lean way

In the past the entrepreneur would secretly create the ‘perfect product’, before unveiling it on the unsuspecting public with great fanfare.

Lean focuses on the opposite, shining a light of reality on the product early in its development, testing product ideas with paying customers before it’s ‘finished’.

The new way to do it involves:

• Creating a prototype solution
• Engaging customers as soon as possible with the prototype
• Taking customer feedback on what is valuable in the product and quickly make changes to create a new prototype
• Repeating the process rapidly

The philosophy behind this according to Eric Ries in The Lean Start-up (http://theleanstartup.com/) is to:

• Eliminate uncertainty
• Work smarter
• Employ validated learning i.e. what customers use; how they use it, and are they prepared to pay for it?
• Create a Minimum Viable Product (MVP)

Other changes include the ideas of ‘small batches’, utilising new techniques like 3D printers for rapid prototyping. The idea is to test changes quickly, identify what is valuable and useful rather than to just finish the product.

Lean helps you to identify which customers are not prepared to buy a feature, or don’t like a product at all. In a similar vein, software enhancements would be delivered every few weeks rather than an annual major upgrade cycle.

Focus on failure

Failure is expected and welcomed in the Lean innovation movement and drives a key part of the learning process – the Pivot (or Persevere) meeting.

On a regular basis, the vision is tested against customer feedback. Everything from product design, to marketing, the distribution model to pricing is tested.

Based on feedback you decide whether the project is tracking as planned and you should Persevere; or more famously you decide that the business won’t grow as you want and you need to make a significant change, or a Pivot.

For example, a product you are developing for large companies is not successful, but small businesses love it – so you adapt and re-target for the SME market. A famous real world example is YouTube, which started off as a failing video dating website. It took the core idea of easy video uploading and then opened it up to a broader market.

Lean marketing

In the marketing sphere Lean helps companies to run campaigns quickly, by testing on small groups, then improving them and testing again to generate the maximum return.

Lean requires a couple of project management changes, such as multi-disciplinary teams, that are data driven, that can make quick decisions and deliver rapid results e.g. if a project regularly requires legal input, then a legal resource would attend all project meetings.

Some of your competitors may well be looking at Lean today, be it the startup testing products or your large competitor’s innovation group. So what are good ways to start competing better?

Firstly, look at some of your current initiatives and identify which ones could easily be run as “Lean” projects:

• A new Product/Solution innovation
• The next quarter’s marketing campaigns
• That internal project that seems to be stuck or not making progress

There’s no need to jump in and redo all of your manufacturing in one big leap. Try it on something small, learn from it, and repeat quickly for the best results.

Please share your experiences with us!