Stop Using Lean to Cut Costs Part 2

As stated in Part 1 of this series, using Lean to cut costs, while popular, actually does not adhere with the original purpose of lean.  As described by  Jim Womack in the 1991 book “The Machine that Changed the World,” lean production described how Toyota produced products with little to no “waste” while simultaneously (and more importantly) bringing value to customers in a way that earned revenue for the company.  Another description from Kevin Meyer, Co-Founder of The Gemba Academy, states that “The goal (of lean) is not to reduce spending – since to do so means sacking valuable people – but to convert people's time and effort from wasteful activities to value adding ones – activities customers will pay for.” 

Previously, an example was given of a manufacturing firm using reduced throughput time to increase revenue.  However, one familiar critique of lean is that it is only valid in manufacturing environments.  This is not actually true, and to demonstrate, consider the following example from a web platform company.

This company was going from onboarding about 50 clients to their web platform in one month to about 350 in the next after they added a new sales channel partner.  The five steps in the onboarding process were largely manual.  When client volume scaled up this much this quickly, the employees got frustrated, felt overworked, unable to keep up, and were not getting their clients onto the platform as quickly as they needed to.
It was unclear, however, where in the Five-Step process were the real pain points.  A current state assessment including data collection and value stream mapping helped define the biggest issues.  This assessment highlighted that there was a big difference in the two training steps, the 2nd step and the 4th step.  In the 2nd step they were training clients on a five-clients to 1-trainer (5:1) ratio.  In the 4th step they were training clients on a 1:1 ratio.  It doesn’t take a rocket scientist to know that if you go from a five-lane highway down to a one-lane highway, things are going to back up.  But it was dramatic what the backlog actual was, since this had never been calculated.

WIP Backlog over 5-Step Onboarding Process

The data showed that there were 630 clients waiting at that fourth step, just waiting to go through that 1:1 training!  It would have taken approximately six years to get through the backlog at the projected pace of incoming clients.  Six years is an awfully long time to wait to be able to earn revenue from your web platform. Amazingly, though once this problem was defined, through discussions and review of the data, everyone became aligned about what to do for execution.

The easiest thing was to just increase the ratio of clients to trainer, 2:1, 3:1, 5:1.  Also to level load all the steps so there were the same number of training slots for each type of training, and cross-train all the Trainers themselves to be able to give both types of training.  They also added online self-scheduling for both initial signup, and when people cancelled at the last minute it was much easier to backfill spots.  After that, things started moving more smoothly and they were able to get through their backlog in just a few months and start earning Revenue.

Both this and the previous example from the manufacturing company followed a straightforward model which can help all companies use Lean to increase revenue.  AJC calls this the “DAER” model.

DAER Model; Copyright Andrea Jones Consulting, LLC 2017

First, Define the problem using data when possible.  Then, Align everyone to that problem and to the plan to execute.  Third, Execute the work – which is often straightforward if you’ve taken time to do the Define and Align steps well.  And finally – remember this is all about earning Revenue for your company. 

If your company is constantly using Lean to cut costs, you might not be all that popular with your employees.  However, if you can message Lean in the way it was originally intended – to increase value to your customers and Revenue for your company, this is a much more compelling purpose around which your employees can rally.

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