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Sunday, July 25, 2010

The Characteristics of a Lean Enterprise

While Lean can be beneficially applied to any process within an organization, its greatest benefit comes when it is applied across the enterprise.  In The Machine That Changed the World in 1990, Jim Womack, et al., emphasized "that Lean thinking can be applied by any company anywhere in the world but that the full power of the system is only realized when it is applied to all elements of the enterprise." 

Over time, it can be said that an organization that implements Lean becomes a Lean Enterprise.  While there is no precise definition of a Lean Enterprise, I believe those organizations share common characteristics.  A Lean Enterprise can be defined by these 15 characteristics:

  1. Customer Focus - The external customer is both the starting point and ending point.  Maximize value to the customer.  Optimize not around internal operations, but around the customer.  Seek to understand not only the customer's requirements but also their expectations of quality, delivery, and price.
  2. Purpose - The purpose of an organization encompasses your vision (where you want to go), your mission (what you do), and your strategies (how you do it).  Focus on purpose, not tools.
  3. Organizational Alignment - You want people to understand their purpose, not just their job description or the tasks that are assigned to them.  All the people involved need to have a common understanding of the organization's purpose, and practical understanding of the consequences of failure and the benefits of success.
  4. Knowledge – People are the engine of the company, so it is vital to build knowledge and share it.  This includes explicit knowledge (like that from books) as well as tacit knowledge, involving soft skills.  Knowledge is built through the scientific method of PDCA.
  5. Questioning - Encourage a questioning culture.  Ask why several times to try to get to the root cause.  Encourage everyone to question.  "Seek first to understand, then to be understood," said Stephen Covey.
  6. Humility - The more you strive for Lean, the more you realize how little you know, and how much there is yet to learn.  Learning begins with humility
  7. Trust – Build confidence in your promises and commitments.  Building trust takes time.
  8. Empowered employees - Give frontline employees the first opportunity to solve problems.  All employees should share in the responsibility for success and failure. 
  9. Flexible workforce - As the Greek philosopher Heraclitus once said "The only constant is change."   Flexibility is the ability to react to changes in customer demand.  The key to success is to maintain redundancy and hence flexibility within the core competency.
  10. Partnership - Use teams, not individuals, internally between functions and externally with suppliers.  Employees are partners too.  As Covey says, "You must find a win-win, never win-loose, solution and if you can't you should walk away."
  11. Simplicity - Lean is not simple, but simplicity pervades.  Simplicity is best achieved through the avoidance of complexity, than by 'rationalization' exercises.
  12. Process - Organize and think by end-to-end process.  Think horizontal, not vertical.  Concentrate on the way the product moves, not on the way the machines, people, or customers move.
  13. Improvement - Continuous improvement is everyone's concern.  Improvement should go beyond incremental waste reduction to include innovation breakthrough.
  14. Prevention - Seek to prevent problems and waste, rather than to inspect and fix.  Shift the emphasis from failure and appraisal to prevention.  Inspecting the process, not the product, is prevention.  Use poka yoke to mistake proof process errors.
  15. Visualization – Visuals translate performance of every process into expected versus actual, throughout the management systems.  It is regular, frequent, and factual data driven.  Visuals provide the opportunity to quickly spot and take action at the earliest point that performance has not met what was expected.
A Lean Enterprise is not created quickly.  When a business applies lean thinking, culture, and methods throughout the entire organization and beyond its four walls to customers and suppliers a Lean Enterprise is formed.

How do you define a Lean Enterprise and what characteristics embody that concept?

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  1. Very good post. I really love your explanation on 14 - prevention. That makes a lot of sense. I know waste elimination is part of continuous improvement (#13) and respect for people is part of Empowered Employees (#8) but you can't say it too many times. For me personally, those two concepts would be at the top of the list. Best line ever: "Lean is not simple, but simplicity pervades." I may just have to quote you!
    Thanks for sharing.

  2. Tim,

    This is a great list and an excellent summary of what Lean Organizations should be striving for every day. It's true North! Thanks for sharing.

    Chris Paulsen

  3. I'm glad you began with the customer focus. Too often the customer gets cut out of the "lean" process as part of the fat. Cutting away until the customer focus is completely replaced with the process.

    An effective process is great. But how effective is a process that forgets its customer base?

  4. JC, I am glad you enjoyed. I couldn't agree more. A lean culture is really about solving problems. You do that with empowered people focused on improvement to provide value to the customer. Definitely, go ahead and quote me.

    Thanks Chris.

    Claudia, I can say I have not seen a Lean process cut the customer out. Everything in Lean starts with adding value to the customer. I would call the other stuff fake Lean or as Mark Graban says L.A.M.E. (Lean As Misguidedly Executed). It can be a difficult concept to understand value from customers perspective. Some people never truly understand this. Safety and customer are always on the top of my list.

  5. Although my point is not one of practicality, more theoretic, but I would argue that a truly lean organization would reject your list.

    It's not that the list is bad. I think it's a great list.

    But a truly lean organization lets no one else define success for them. They define success, they define their ideal state.

    Technically, that's in your list under Purpose and Alignment, so really just making a point here. Thanks for sharing your reflections.

  6. Jamie has an interesting point, which also aligns with why most true lean organizations don't bother with awards and belts and such.

    Two other points:

    - On "humility"... in general I agree. However Shingo and Ohno were both known to be tyrannical and condescending in approach. It's a different form of teaching, especially in western cultures, where problems and issues simply aren't tolerated. I think we need to differentiate between "humility" and "timidity" - perhaps there are different words. Strong, forceful, teacher, yet knowing you don't have all the answers. A great example of this is how Michael Balle portrays the very knowledgeable lean CEO in The Lean Manager - he was sometimes brutal in how he considered wasteful processes and lack of knowledge intolerable. But it was as a teacher.

    - Speed. It's implied in some of your points, but I've found it often needs to be made overt - it's a huge characteristic. Being fast to satisfy the customer, take appropriate risks, and especially fast to capitalize on new opportunities. Correlates, somewhat but not fully, with agility and the removal of wasteful processes.

  7. Jamie, I see the point you are making. I would say Lean is not nebulous. There are a number of characteristics that most Lean organization would share in common. The list will be a little different to each organization and the priority of the items on the list will differ. And it should. Thanks for weighing in Jamie.

    Kevin, I think those who have not had a sensei like that wouldn't understand. I am fortunate to work for a Japanese company and have had a Japanese sensei formerly from Toyota. There is a unique style of demanding improving while respecting the individual. I see your point on speed. It is really a strategic advantage.

  8. Tim, good point, I agree it would be misguided application.

    Still, when the c-level execs get it in their heads to do something, it can be difficult to get then to consider anything different...

  9. Claudia,
    This is where we use PDCA. We need to reflect and to learn along the way. If we do this then we can change course otherwise you can run full speed off a cliff. Stop and look along the way to ensure we are still on the path to True North.

  10. Very useful info. Thanks.