How is lean a strategy?
Eliminating waste is not just about increasing profitability – it’s about releasing capacity to make room for new products, which in turns feeds sustainable profitability.
How can lean be considered a full business strategy? Isn’t it it a box of tricks to make production more efficient?
Today’s markets are both highly competitive and volatile. Customers want one thing on day, and another the next. Because most markets are now renewal markets (customers already have the product, and choose to replace it), XXth military-style strategies of market segment conquest simply don’t make sense – and indeed, lead to costly failures documented in the management press.
But as long as one has to create dedicated production facilities for any new product, the financial gamble for new product introduction is huge, and here again, the literature claims from 50% to 80% of new product fails – staggering.
The lean approach is to use waste elimination to liberate capacity in existing facility. The second leg of the strategy is to design new products so that they can be assembled on existing lines.
Mastering these two techniques enables you to:
- enrich your product lineup in order to pursue customers in every segment
- not burden each new product with the costs and expectations of a dedicated production facility
- keep your offer flexible to customer demand as you learn to make more or less of any given product according to real-time customer demand (which tends to average out).
- With this clearly in mind, it’s a lot easier to focus on making new products attractive through higher quality and a few remarkable features (as well as continue to work on the flexibility of production lines to support the mixed-model approach).
Production and delivery groups grow by first mastering the quality and productivity of one product, then learning to absorb a second, then a third and so on. The most advanced – and therefore most flexible groups are also ideal to work with engineering to design the new product you want to test.
I’m often asked about what makes kaizen sustainable. What makes athletes get up at 5 in the morning to run? Knowing what they want to win. A clear vision of where to reinvest the gains of kaizen – higher quality for every single product or service, more capacity to introduce new products, getting engineering and production to better work together – is the key to sustainable kaizen. To keep the discipline going, you have to see what you want to do with the gains, and how this will get you ahead strategically. Lean is a full business strategy, for those who want to see it.