How to use lean think­ing to grow sales, im­prove profit!

Asian Journal - - WORLD - Ea­monn Percy

The con­cept of Lean was re­cently pop­u­lar­ized within the tech­nol­ogy com­mu­nity by Eric Ries’ 2011 book, The Lean Startup. However, it may come as a sur­prise to some tech­nol­ogy en­trepreneurs, that the prin­ci­ples of Lean Think­ing were de­vel­oped decades ago and have been adopted by some of the lead­ing global in­dus­tries, par­tic­u­larly man­u­fac­tur­ing and lo­gis­tics, and proven to cre­ate sig­nif­i­cant value.

I was for­tu­nate to start my ca­reer in high vol­ume elec­tron­ics man­u­fac­tur­ing, while work­ing for The Ford Mo­tor Com­pany (within its elec­tron­ics di­vi­sion) dur­ing Ford`s epic bat­tle for sur­vival in the 1980’s against fierce Ja­panese com­pe­ti­tion. The senior man­age­ment of the com­pany had the vi­sion to re­al­ize that rad­i­cal change to busi­ness prac­tices was re­quired. They picked one busi­ness unit to pro­to­type their ideas for change, which hap­pened to be where I was work­ing. For over 6 years, I was im­mersed in im­ple­ment­ing lean think­ing in lead­er­ship, man­u­fac­tur­ing, qual­ity, prod­uct de­vel­op­ment and cus­tomer ser­vice. I ul­ti­mately took this ex­pe­ri­ence with me to Pirelli Ca­bles and Op­ti­cal Sys­tems where I lead a team in the ex­tra­or­di­nary turn­around of the com­pany from los­ing $1M a month to mak­ing $1M per month, and turn­ing the Cana­dian op­er­a­tion into a global leader in pro­duc­tiv­ity and prof­itabil­ity. The ba­sis of the en­tire turn­around was the im­ple­men­ta­tion of lean sys­tem prin­ci­ples: con­tin­u­ous im­prove­ment, re­spect for peo­ple, elim­i­na­tion of waste and the focus on value cre­ation for the cus­tomer.

What did my ex­pe­ri­ence with lean teach me that is most is rel­e­vant to your busi­ness to­day?

1. Lean is a Proven Strat­egy: Lean is proven. It has pro­duced sig­nif­i­cant im­prove­ment for thou­sands of com­pa­nies. It is not nec­es­sary to rein­vent the wheel, only adapt a proven and ex­ist­ing sys­tem which is read­ily avail­able, easy to un­der­stand, and then ap­ply it to your own busi­ness.

2. Lean is Fo­cused on the Cus­tomer: The foun­da­tional prin­ci­ple of lean is to focus all value added ac­tiv­i­ties on your cus­tomer, and to re­move or mit­i­gate, all non-value ac­tiv­i­ties. This cus­tomer fo­cused ap­proach is crit­i­cal to a high growth tech­nol­ogy com­pany, and all other ac­tiv­i­ties should be aligned with the cus­tomer in­clud­ing fi­nanc­ing, prod­uct de­vel­op­ment, and ad­min­is­tra­tion.

3. Lean Is A Cul­ture not a Tac­tic: Com­pa­nies which have suc­cess­fully im­ple­mented lean think­ing fully em­bed­ded it into the cul­ture, so it is per­va­sive at all lev­els of the com­pany across all ac­tiv­i­ties. Like in­no­va­tion or en­trepreneur­ship, Lean is some­thing a com­pany is, not some­thing a com­pany does.

4. Lean Makes You Money: By fo­cus­ing on the cus­tomer and by strip­ping away non-value added ac­tiv­i­ties, your pre­cious cap­i­tal is pre­cisely de­ployed and sig­nif­i­cantly lev­ered. This im­proves sales, gross mar­gins, and cash flow, which will mit­i­gate the need for ex­ter­nal fi­nanc­ing.

What did I learn about lean that you can ap­ply to your busi­ness to­day? Here are the most im­por­tant les­son that you can ap­ply to your own busi­ness.

• If you are in start-up mode, out­source as much ac­tiv­ity as pos­si­ble (par­tic­u­larly non-value added – de­fined as no di­rect value to the cus­tomer), and be­come ex­perts at the cus­tomer fo­cused value added ac­tiv­i­ties. • Make con­tin­u­ous im­prove­ment a habit within your com­pany by ap­ply­ing the PDCA Cy­cle (Plan-do-check-act) reg­u­larly.

• Im­ple­ment cus­tomer fo­cused Key Per­for­mance In­di­ca­tors (max­i­mum of 6) and re­view them reg­u­larly.

• Rig­or­ously re­view all ac­tiv­i­ties and spend­ing, and then ei­ther elim­i­nate or sig­nif­i­cantly re­duce ac­tiv­i­ties and spend­ing not di­rectly aligned with cre­at­ing value for the cus­tomer. • If you are the CEO, spend 50% of your time in the busi­ness (mostly with fu­ture prospects and cur­rent cus­tomers) and 50% of your time on the busi­ness (im­ple­ment­ing im­prove­ments based on a sys­tem such as lean).

It won’t hap­pen overnight, but if you focus on build­ing a cul­ture around this prin­ci­ples, your cus­tomers will be happy and your busi­ness will grow.

Ea­monn has a B. Eng. (Elec­tri­cal) from Lake­head Univer­sity, MBA (Fi­nance) from Univer­sity of Toronto, and has com­pleted Ex­ec­u­tive Ed­u­ca­tion at Stan­ford Univer­sity Grad­u­ate School of Busi­ness. He lives in Van­cou­ver, Canada. Fol­low him on twit­ter @ Ea­mon­npercy.

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