What Is Lean and Why It Matters to Your Start-Up
December 20th, 2022
A common misconception among start-up leaders is that “lean isn’t helpful for my business right now, because we are not manufacturing / we don’t have a product yet”. The truth is quite the opposite. In fact, start-ups have the unique advantage of being able to benefit from lean concepts early, in the crucial formative phase of their companies. Lean enables much more than reducing waste in a production line. By practicing lean and building a culture rooted in value for the customer, problem-solving, and the relentless pursuit of perfection, start-ups can accelerate innovation, set themselves up for long-term success, and altogether avoid pitfalls that plague larger, more established companies.
What is lean?
Rather than thinking about lean as simply a “program” to run, or “tools” to implement selectively, leaders should take pause. Lean is a way of thinking - it is about finding ways to do things better so that results are delivered sooner, require fewer resources, and at higher quality. To do this, we focus on reducing waste in value delivery. Chances are you already have been unknowingly practicing lean.
The two pillars of lean are Continuous Improvement (“kaizen” in Japanese) and Respect for People. These two ideas manifest in many different ways.
In order to improve, we must first measure and understand the baseline condition, or “current state”. This is the standard by which we can measure improvement. Through Plan-Do-Check-Act learning cycles, we generate new knowledge iteratively and make improvements which become the new standard. To do this, we must:
Make problems are easy to detect. Treat them as opportunities to improve.
Understand the problem thoroughly before implementing countermeasures
Empower the team to collaborate and solve problems
Capture the improvement as new standards
It is impossible to capture the breadth of lean thinking in a few sentences. The reader is encouraged to refer to the following texts for a deeper understanding. Below is an introductory synopsis from a start-up perspective:
Lean Product and Process Development by Allen C. Ward and Durward K. Sobek II
Managing to Learn: Using the A3 Management Process to Solve Problems, Gain Agreement, Mentor and Lead by John Shook
The Toyota Way: 14 Management Principles from the World’s Greatest Manufacturer by Jeffrey Liker
Toyota Kata: Managing People for Improvement, Adaptiveness and Superior Results by Mike Rother
Focus on Value
Lean thinking distinguishes between value-added versus non-value-added activities. Value is what the customer is willing to pay for. The “value stream” is the sequence of activities that create value. To paraphrase Ward and Sobek, commercializing novel technologies essentially means building two value streams: an operational value stream, and a development value stream. Development value stream results in the operational value stream, which in term results in products. If done well, the development process creates reusable knowledge efficiently, which then enables profitable operation value streams. In this sense, product development and process development go hand-in-hand.
If products and the operational value stream don’t exist yet, start-ups should focus more on “knowledge” as a key output in the development value stream. Structuring the development activities such that the team can generate and capture reusable knowledge efficiently is the one of the most important things start-up leaders can do to boost their company’s performance.
Reducing Waste
The 8 wastes in lean are the following:
Transport
Inventory
Motion
Waiting
Overproduction
Over-processing
Defects
Skills / unused human talent
(acronym: TIMWOODS )
Given that the building block to product and profit is knowledge in an innovation-driven company, one should work to reduce waste in the context of the knowledge generation process. For example, are activities and experiments planned to answer truly essential questions, or just there because of curiosity (overproduction)? Are activities at the right level of detail and effort, without going overboard to yield negligible marginal returns (over-processing)? Is someone waiting for key information to act because it is not accessible to them?
The most important waste to look out for is skills / unused talent. Many start-up leaders are managing people for the very first time, and feel unsure how to best help their team as their size and activities expand. How does one make sure that employees have the skills and support they need to operate at their best? How should different functions collaborate? Leaders should think deeply about how they will coach and mentor their team members so they can grow with the company.
Quality at the source
One of the top drivers of product quality is good process and product design. Relying on screening to identify, remove and rework defective products does not enhance quality. Rather, it results in non-value added, wasteful activities. The best time to build in quality is early on, in the process and product development stage, when the cost of change is relatively low . Start-ups should take advantage of the fact that they are early in the development process to avoid costly operations in production later on. Time spent early to ensure that value-adding activities are done right every time (poka-yoke / mistake-proofing) will be well-spent.
Build your team of problem-solvers
As the company grows, so will the number and complexity of its technical and operational problems. The best defense against these problems is to develop expert problem solvers within your team. Leverage the A3 management process described by Shook to help your team members take ownership of problems and make improvements. Aligning problem-solving efforts to company goals is a process called “strategy deployment” (“hoshin kanri”). Company-wide goals translate into department, team, and project goals in increasing specificity via a cascading set of A3s from each level. See Chapter 6 of Managing to Learn for an in-depth discussion.
Start-up leaders have a lot to gain from becoming familiar with, and incorporating lean philosophies into their daily work, even prior to being “in production”. As teams work to refine their processes and products, take special care to build a company culture rooted in continuous improvement and respect for people. Anchor your efforts based on value for the customer, and look to identify and reduce “waste” in the development process. Build quality at the process and product design level, and always work to enhance the team’s problem-solving capabilities. When people, process, and product all do well, impact and profit will follow.