What is a Lean Business?

Simply stated, a Lean business is a business that maximizes value while minimizing waste. A Lean business model focuses on improving processes across the value stream in order to eliminate waste and deliver optimized value to the customer. This can help teams and organizations achieve their goals in smarter, more sustainable ways.

While the Lean business model originated in the manufacturing industry, it can be applied to knowledge work in almost any industry. Unlike other business methodologies with hard and fast rules, Lean is a way of thinking that can be applied in any business environment. A Lean business is rooted in seven principles that we’ve outlined below.

7 Principles of a Lean Business

Optimize the Whole

Every business operates through a value stream- a system of activities and processes that take place in order to deliver the end result to the customer. A Lean business identifies those value streams and figures out how to optimize them as a whole. This is different than only looking at those that are not working.

Eliminate Waste

In knowledge work, waste can mean too much work in process, or time spent manually completing a task that could be automated. A Lean business eliminates any activity that does not result in value for the customer.

Build Quality In

A Lean business uses strategies like testing and pair programming to ensure quality in the process. Rather than checking for quality at the end of a process, it is built in as early as possible as an ongoing focus throughout.

Deliver Fast

Rather than expecting to deliver a perfect product to the customer, a Lean business focuses on delivering value fast, and in increments, so that customer feedback can be included in development. This allows for giving the customer exactly what they want, and ultimately saving time in the overall process.

Create Knowledge

Learning is a top priority in a Lean business environment and can be done through small, incremental experiments throughout a process. It is crucial to create an infrastructure to document and share these learnings across teams and organizations.

Defer Commitment

This Lean business principle, similar to a just-in-time system, encourages waiting until the last responsible minute to make a decision. Doing so allows for agility to make decisions with the most up-to-date and relevant information.

Respect People

A Lean business focuses on creating environments that allow everyone to do their best work. Without this principle, the others are irrelevant. Just as a Lean business shows respect to their customers by delivering maximum value, it shows respects for its employees who are doing the work to create that value.

Benefits of Making your Business Lean

Process efficiency and cost reduction are the most direct benefits of a Lean business model. But the benefits of Lean extend far beyond the obvious. Here are some of the top advantages of operating as a Lean business:

  • More efficient processes, including greater throughput and increased productivity
  • Reduced operating costs, through a decrease in lead times and cycle times
  • Increased team productivity and morale, through spending less time fire-fighting and more time focusing on quality and value
  • Better project visibility at the team level as well as for stakeholders
  • Delivery of customer value through increased quality and predictability, leading to overall customer satisfaction

Using Lean Concepts in your Business

There are many ways to integrate Lean practices into your business at a team or organizational level. These examples of Lean concepts can be a great place to start.

Continuous Improvement

The seven principles outlined above are based in a mindset of continuous improvement. Whether viewed as a formal strategy or an informal way of thinking, it must be a foundational part of any Lean business. A commonly used model of continuous improvement is the PDCA model, which stands for Plan, Do, Check, Act. This model encourages teams to perform incremental tests and document learnings throughout a process in order to be constantly improving and building quality in.

Value Stream Mapping

Value stream mapping helps teams to visualize the steps of a process so that the steps can be evaluated and improved over time. This practice is commonly used to improve any process where there are repeatable steps and multiple handoffs. Through analyzing the steps and handoffs, inefficiencies are identified and improved upon.

Metrics and KPI’s

There are several metrics that can be used to measure quality and efficiency of a Lean business, such as lead time, throughput and cycle time. These metrics are meant to be shared real-time with all employees and stakeholders so that key performance indicators are visible at all time. This level of transparency helps to encourage shared responsibility of process improvement and customer value.

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