Business

How The Lean Approach Will Enhance Your ROI

Lean may apply to you as not a solid and firm capable organization but a thin, grim one that will crumble when pressure is applied. Businesses could harbor this fear since a lot of half-baked and ill-planned applications of Lean have failed.

We should, however, remember that Toyota set out to be far better than Ford and the rest of the US Automobile Industry and they quickly achieved this ambition despite a lack of resources and infrastructure. They achieved this through the application of Lean Principles and the many Lean Manufacturing Tools.

The Toyota Production System (TPS), actually set out to provide customer satisfaction and do so profitably and this feat they handsomely achieved with the lean principle. Whatever brand you may be into, customer satisfaction must take the fore at all times.

Everything that goes into the processes of manufacturing and marketing should aim at you providing value to the customer, anything else is waste. If the customer does not explicitly ask for it, why are you doing it?

This is why when you look at any process your first question should always be “WHY?” When you fail to make this the core of your brand, you only succeed in making a wasteful process more efficient and you end up getting better at doing something the customer does not even want and will never cherish.

The Lean process works at providing a scientific approach to creating and managing startups and getting the desired product to the customers’ hands faster. The method teaches you how to drive a startup, how to steer, when to pivot, and when to persevere-and grow a business with maximum acceleration.

It is a principled approach to new product development. Too many startups begin with an idea for a product that they think people want. They then sink in resources only to end up wasting months, sometimes years, perfecting that product without ever showing the product, even in a crude form, to the prospective customer.

When they fail to reach broad uptake from customers, it is often because they never spoke to prospective customers and, therefore, couldn’t determine whether or not the product was interesting. When customers ultimately communicate, through their indifference, that they don’t care about the idea, the startup plummets.

Customer satisfaction comes down to three factors: Quality, Cost, and Delivery (QCD). Being able to determine which of them is of the utmost priority to your customer may not be as easy as they come and mostly depend on the product or service you offer.

The masterstroke is understanding your customers’ needs. This is the magic wand to being able to keep them fully satisfied and everything you do in the way of services that you provide and products should be geared to meeting those needs.

This means giving them the best quality, the right delivery time (which should not always be immediate), and the right price.

In the manufacturing sector, it produces enormous improvements in efficiency, cycle time, productivity, material costs, and scrap, all of which lead to lower costs and a better competitive position.  

There are five principles to lean manufacturing:

  1. Value

The Lean approach begins with a detailed understanding of what value the customer assigns to product and services. This is what determines what the customer will pay. Establishing value allows organizations to create a top-down target price.

The cost to produce the products and services is then determined. The organization focuses on eliminating waste so that they can deliver the value the customer expects at the highest level of profitability.

“Value is created by the producer. From a customer’s standpoint, this is why producers exist…. The critical starting point for lean thinking is value. Value can only be defined by the ultimate customer. And it’s only meaningful when expressed in terms of a specific product (a good or service, often both at once) which meets the customer’s needs at a specific point in time.” – Lean Thinking

  1. Value Streams

A manufacturer needs to evaluate the value stream, such as raw material, processes, equipment, and the labor necessary to get the product to the customer. This stream must be evaluated as to things that obviously add value; those that don’t add value but are necessary; and those that have no value and can be eliminated.

  1. Flow

Flow is the progress of the work through production. When a production system is finely tuned, it has good flow with the work progressing steadily. When there are breakdowns in the flow, waste is created. A dependable flow leads to more consistent delivery.

  1. Pull

Pull, is basically just-in-time-inventory to manufacture as close as possible to when the product is needed by the customer. By taking this approach to production waste associated with inventory, transportation, movement, and motion, waste can be eliminated.

  1. Perfection

Nothing is ever perfect, but when steps that create value for specific products, allowing continuous flow, the process of reducing effort, time, space, cost, and mistakes, everything falls in line. Suddenly, perfection doesn’t seem like an irrational idea.

“As organizations begin to accurately specify the value, identify the entire value stream, make the value-creating steps for specific products flow continuously and let customers pull value from the enterprise, something very odd begins to happen. It dawns on those involved that there is no end in the process of reducing effort, time, space, cost, and mistakes while offering a product which is ever more nearly what the customer actually wants. Suddenly perfection, the fifth and final principle of lean thinking, doesn’t seem like a crazy idea.” – Lean Thinking

For your marketing efforts, you can apply the Lean Startup principles as follows.

Build-Measure-Learn

This is the essential feedback loop in Lean Startup methodology. This product “circle of life” helps entrepreneurs build an initial iteration of a product, see how it’s being received and used (or not), learn from that, and change it as needed.

Understanding your customer will help you decide where to focus your marketing efforts, from the types of images and copy you should create, to which social media channels will be most successful for your brand.

To effectively apply the methodology, however, you need to develop a minimum viable product (MVP) to begin the process of learning as quickly as possible. Once the MVP is established, a startup can work on tuning the engine.

This will involve measurement and learning and must include actionable metrics that can demonstrate cause and effect question. When this process of measuring and learning is done correctly, it will be clear that a company is either moving the drivers of the business model or not.

If not, it is a sign that it is time to pivot or make a structural course correction to test a new fundamental hypothesis about the product, strategy, and engine of growth.

Unequivocally, the essence of a business is primarily to make money if it does not make money it cannot pay wages, overheads, dividends, and will eventually fail. The more efficiently that a company can do this the happier all involved will be.

The employees because their lives are easier and without much doubt their wages fair, the customers because the prices are fair and the products are of very good quality, the suppliers because they are receiving a fair price and paid promptly, and finally the owners because they are making good returns on their investment (ROI).

By employing lean we remove all of the wasteful processes and focus only on providing the customer value; anything that does not provide the customer value is removed or minimized.

Photo Credit: The University of Michigan Flickr via Compfight cc

 

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About John Ejiofor

John Ejiofor is a curious life-researcher, whose quest to finding answers to life's pertinent questions has led to founding Nature Torch. This blog aims to debate and explore many questions about our earth -- including those a lot of people are uncomfortable with asking. He has been published on some of the internet's most respected websites, which you can find online.
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