7 Wastes That Impact Business Growth

7 Wastes That Impact Business Growth Lead Image

Several of us among LeanKit’s founders and early employees first learned about Lean in the context of logistics and manufacturing. We wrote and implemented software that helped big companies buy and move and track physical goods. So we learned about the Lean concept of reducing waste in terms of inventory, transportation, motion, etc.

It made a ton of sense. I was really proud of the low-inventory, just-in-time supply delivery process I helped implement at my former employer. But, like many other people doing product development work, as opposed to physical production, it didn’t seem to apply to me. My work doesn’t take up space. I can sling around ideas without leaving my desk. I’m a “creative.” Why would we not want to keep churning out great ideas?!

The epiphany came for me when I read Mary and Tom Poppendieck’s Implementing Lean Software Development. They helped me to a) see how the canonical Lean wastes could be reimagined to make the same basic ideas fit my white-collar business world and b) that getting rid of waste wasn’t necessarily a matter of cutting but rather focusing our energies in ways that create value. Our waste elimination efforts should be focused on removing the things that prevent us from generating value.

7 Wastes That Impact Business Growth

1. (Too Much) Work in Progress

Completed work in the hands of our customers is valuable. Until then, it isn’t. That flies in the face of accounting practices that carefully track inventory and assign it a financial value. But from a customer perspective, it’s true. From their viewpoint, we need to be making just enough product at any given time to ensure that they get what they want when they want it.

Your organization is a value stream that takes in raw materials of some sort, processes them through a series of steps, and delivers goods or services as an end result. You may not own a physical factory, but you at least have a virtual one.

Somewhere along the line of that value stream is at least one bottleneck. That’s not a criticism; it’s just a fact. Some step in your process has a lower maximum capacity than the steps that come before or after it. That constraint is the limiting factor for the delivery capability of your entire system.

Trying to squeeze too much through that bottleneck is not only not helpful, it’s damaging. At a certain point, the extra work starts requiring so much coordination, reporting, replanning, and rework that less is actually being finished — and more slowly. Never mind how fast you are starting things.

As a Lean leader, your goal is to balance the work in the system to the capacity of your constraints.

2. Delays

If your customer orders something and you deliver it within days, that’s very valuable. You can probably charge a premium. If you can manage inventory well, like Dell or Amazon, for example, you can probably collect the customer’s money not only before you deliver the product but also before you take ownership of the materials that go into delivering it.

If you deliver in weeks, depending on your industry, your customer probably thinks you’re doing fine. If it takes months, that’s a long time. But years? Your customers will likely want their money back.

Context matters a lot, but in every business there is a delivery timeframe that delights, satisfies, annoys, and then loses a customer. If a customer orders something from you, at some deep level, it’s because they want it now. The longer they wait, the more likely that their needs have changed and that you will fail to satisfy them.

3. Extra Capabilities

You don’t know what your customer wants. You don’t. You may do lots of market research to understand your industry. I hope you invest liberally in regularly communicating with your existing customers. But, even so, if you’re doing anything at all innovative, you will be working on projects for which there is no real market data. (By the way, if your portfolio doesn’t have a healthy mix of innovation, your business won’t survive for long.)

Your customers can give you great feedback on incremental improvements to what your company does now. And you should always be thinking of them when developing new capabilities. But the only way for them to give effective feedback for entirely new capabilities is to see, touch, and try them. That process begins with giving your customers a Minimum Viable Product (MVP).

Instead of packing a new product or service with lots of theoretically valuable new capabilities, you should incrementally deliver a series of capabilities so they can be tested through actual experience. Each can be accepted, rejected, or enhanced. By applying what you learn from the MVP, you can build on successes instead of being stuck with embedded failures in your finished product.

How this works for you will depend on your industry. The larger and more capital intensive your business, the more this may require you to invest in capabilities for virtual design, rapid prototyping (through 3D printing for example), prefabrication and modular assembly, etc. But it will pay huge dividends in the long run.

To further explore the MVP concept, we highly recommend that you read Eric Ries’s The Lean Startup. MVPs aren’t just for startups in Silicon Valley. In fact, GE has run one of the biggest successful implementations.

4. Technical Debt

So that means we should build things quick and dirty? Just throw something together and ship it, right? No.

As a Lean leader, your goal should be to deliver value in increments that are as small as you can feasibly make them so that you can rapidly adjust your plans based on current market conditions. But you should be doing so in a way that’s sustainable once you are ready to ramp up from innovation to operations.

Companies spend a lot of time and effort controlling the time and cost of projects to deliver new capabilities. But in most cases, the majority of the cost of the product or service produced by a project comes after the project ends. Think about the total lifecycle cost of a building, a new model of car, new software package, or a hospital — each of which is initially built via a project with a notional end date.

In reality, you and/or your customer will be investing for years to maintain and improve any of these long-lived assets. You’ll save money in the long run and maintain much more flexibility for incremental innovation if you invest in making your product robust and sustainable.

You may need, at times, to make short-term sacrifices in this area in order to meet market expectations. But you should understand that, when you do so,  you’ll face additional costs beyond just doing now what you should have done then. Just like borrowing cash, borrowing against your future incurs interest. Choose carefully when taking on technical debt.

5. Handoffs

Did you ever play the telephone game when you were a kid? They call it Chinese whispers in England. One person whispers something into another’s ear, who whispers it to another, and then to another, etc. By the time the message gets to the end of the chain, you usually end with the last person receiving and sharing a message that’s hilariously different than what was first said.

Well, the same thing happens inside your company, but it’s not so hilarious. Marketing asks the customers what they want. The customers do their best to share the picture that’s in their head. Marketing does their best to write that down. But fails. Product management does their best to understand what marketing asked for and translate it into a plan that the company can execute. But fails. Engineering does their best to design a system that matches the plan. But fails. And so it goes, on down the line.

By the time the customer gets the finished product, it never exactly matches what they envisioned. If there are a lot of handoffs, especially handoffs of written specifications with a delay between request and execution at each stage, the mismatch can result in failure.

Many organizations try to solve this problem through ever more rigorous processes of documentation. But this exacerbates the problems of excess WIP, delays, and extra capabilities we discussed above. It is bound to fail.

The Lean solution is to bring together the members of the value stream so that they can function as a cross-functional team. Communication can happen directly rather than through documentation. Ideas can be demonstrated instead of described. Feedback loops can be shortened. You can build a better product, faster.

This change can be hard for organizations that are built around functional silos and the idea of maximizing resource utilization and efficiency. But if you can understand and implement a flow-based model, you’ll achieve a better economic outcome.

6. Task Switching

Executives often pride themselves on their ability to multi-task, to juggle lots of projects, and spread their attention across many subordinates. We may or may not be right about our personal capabilities in that regard. Regardless, the type of work executives do is fundamentally different than their employees. Someone who is primarily consuming the output of others, evaluating it, providing feedback and making decisions will necessarily switch back and forth quickly between contexts.

On the other hand, someone whose fundamental job is to do work is different. An overwhelming abundance of research shows that the more people have on their plates, the more they lose productivity.

Whether you’re working on architectural drawings, or engineering specifications, or computer code, or installing light fixtures, or developing a new advertising campaign, it takes time to get your “materials” together, to get your head around the problem, to do the work, to ensure you’ve done a good job, to wrap things up so you can hand your piece of the puzzle off to the next person involved.

The more projects  you’re assigned and trying to work on simultaneously, the less of your time is going towards that central bit of doing the work. You are wasting a higher and higher proportion of your time in “set-up and tear-down.” And, aside from the pure mechanical inefficiency of this multi-tasking, these are people we are talking about.

All of those projects, that set-up and tear-down, that sense that most of their effort is going towards the process rather than the result — all of that adds up to stress. Inflicting that upon them is neither productive nor moral.

To further understand the impact of task switching, we recommend the work of Jim Benson and Tonianne DeMaria Barry. Personal Kanban and Why Limit WIP do an outstanding job of explaining the economic and personal costs of task switching.

7. Defects

Your customer pays for high-quality output. Your long-term economic viability depends on sustainable, efficient output. You can’t afford defects to reach your customers. So you need to do testing to ensure high quality. But you can’t solve quality problems through testing, and neither can you afford the extra WIP of rework generated from testing. The goal of your testing shouldn’t be to find problems so they can be fixed. It should be to identify root causes so you can fix your system to avoid future defects.

The Bottom Line

It’s common to discuss Lean and waste in terms of customer value. In fact, I did that recently in a blog post that described seven principles of business fitness. It’s a good, simple rule of thumb that value is anything your customer would pay for if you itemized your bill and waste is anything they wouldn’t. But, while the ultimate arbiter of value is our customer, properly serving the customer requires building a smoothly flowing system through which value is delivered to the customer.

A great business system is one that:

1. inspires employees to pour talents and energy into
2. repeatedly creating high-quality, innovative products that
3. delight customers so they become raving fans and repeat buyers which
4. generates growing revenue (and eventually profits) to reward investors so
5. they cheerfully provide more resources to keep the virtuous cycle going.

An expanded view on waste takes that entire system into consideration. Our goal is building business fitness so we can do more, not just cutting to have less.

Recommended Reading

In addition to the resources mentioned throughout this post, here are a few more that address applying Lean to business functions:

Jon Terry

Jon Terry is COO and co-founder of LeanKit. Before LeanKit, he held a number of senior IT positions with hospital-giant HCA, where he helped lead the widespread adoption of Lean/Agile methods. Jon is a frequent speaker at Agile, Lean and Kanban conferences around the world. Follow him on Twitter @leankitjon.

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