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When Should I Begin Implementing Lean?

A frequently posed question concerns the timing and approach for initiating Lean practices within a business.  Numerous individuals, including consultants and trainers, often advocate for an immediate and comprehensive implementation of Lean throughout the entire organization via a top-down, company-wide rollout program. Nevertheless, based on my experience, this approach may not be the most suitable solution for most businesses.

When we discuss the implementation of Lean principles, we are primarily addressing the reduction of waste by establishing efficient and robust business processes, standardizing daily tasks, and nurturing problem-solving skills for continuous learning and improvement. Ideally, these aspects should be integrated from the inception of your business.

However, having observed numerous small and startup businesses, it's important to acknowledge that management often grapples with limited resources during the initial stages. The primary focus is typically directed towards developing and refining the product to be sold, alongside marketing and selling this product, all while managing tight cash flow. At this juncture, formal business processes may be minimal, as these businesses are often operated by a small team that wears multiple hats.

As your business grows, the complexity increases.

The initial inclination might be to increase overhead by hiring more supervisors and managers, along with attempting to "automate" processes through improved business management software. Regrettably, without an initial improvement in business processes, these additions of personnel and software can merely escalate costs and complexity, without addressing the fundamental issues at hand. Businesses of this size often discover that inadequate business processes are actually constraining their growth, manifesting in several ways:

1. Key leaders within the organization, including owners, become consumed with ensuring the day-to-day fulfillment of customer requirements, leading to a continuous cycle of "firefighting." Consequently, they have minimal or no time to focus on crucial strategic activities like product development, marketing, and long-term business growth.
2. Despite managerial efforts to manage the constant "firefighting," the business is prone to making frequent errors such as late deliveries, quality problems, and poorly planned product launches. These issues have a negative impact on customer relationships and reputation, causing potential customers to think twice before making further purchases.
3. Even if these subpar processes don't directly affect customers, costs tend to outpace revenue growth, which adversely affects competitiveness. This phenomenon is known as "dis-economies of scale" and is driven by the expansion of overhead expenses and high internal costs related to quality, including waste, rework, and downtime.

From my observations, a considerable number of businesses tend to remain stuck at this particular stage. They reach a plateau, maintaining a relatively constant level of sales, occasionally experiencing growth (typically as an opportunity arises, like when a competitor falters), only to regress when their inadequate processes and absence of innovation drive their customers to seek alternatives. For many of these businesses, a critical turning point is reached when they encounter severe financial challenges. Their elevated overheads, subpar processes, and, in most instances, excessive inventory and working capital render them ill-prepared to weather a decline in sales, and they quickly deplete their cash reserves. 

When Should We Begin Implementing Lean?

It's not uncommon to hear statements like "we're not ready for Lean" in various organizations. However, this reasoning can be somewhat circular and illogical. Essentially, when management claims that their business processes are too flawed to initiate improvements, they inadvertently affirm that the business will never enhance its operations. I've never encountered a situation where processes were so severely flawed that improvement couldn't begin.  Nonetheless, there are a couple of valid reasons to consider delaying the start of your Lean journey. Firstly, if you're planning significant changes to key leadership roles, such as hiring a new Plant Manager, it's advisable to wait until the new personnel are in place before commencing the Lean program. This allows the new manager to be actively engaged in the program right from the outset. Additionally, in smaller organizations, it's crucial not to overwhelm management with too many major projects simultaneously. Typically, management can effectively handle a couple of projects concurrently, but beyond that, focus tends to wane, and results may suffer. When prioritizing projects, we recommend placing Lean high on the list, as it's likely to have a more substantial impact on the business than any other operational project under consideration. Implementing Lean processes can also provide valuable insights into your business's genuine needs and facilitate more effective planning for other projects. For example, it can clarify how business processes will function in a new software system, define layout and machinery requirements for a new factory, or establish robust foundational processes to build a quality system upon.

When determining the starting point for your Lean implementation, it's imperative to clarify the 'Why' behind your need to adopt Lean principles. The driving factors may encompass delivery, lead times, quality, cost, or a combination of these aspects. Consequently, your Lean program should be meticulously designed to directly address these specific issues.

In my experience, many companies attempt to achieve improvement through indirect methods. They enroll their staff in comprehensive 'Lean training' courses, adopt pre-packaged 'out of the box' Lean deployment programs, or invest in training 'Lean Six Sigma Black Belts' tasked with driving improvement. Another common approach is to prioritize 'stability first' with a focus on initiatives like 5S and Visual Management. However, these approaches often result in substantial investments of employee time and company resources, even with training subsidies factored in. Unfortunately, they frequently fail to bring about significant improvements to the core challenges facing the business.

I advocate for a more direct approach. First and foremost, identify the core issues plaguing your business. Next, pinpoint the most critical product stream (value stream) affected by these challenges. Our starting point involves mapping this value stream. This process helps reveal the root causes of your problems and enables your team to develop both a solution and an action plan to address the issue.

This action plan should focus on achieving results within a manageable 6-9 month timeframe—no lengthy 'Five Year Plans.' This ensures that the team sets goals and actions that are practical and attainable within the resources available to the business. Once the initial implementation gains momentum in the first value stream, extending it to other value streams becomes relatively straightforward. Furthermore, as improvements take effect, issues diminish, granting managers and frontline leaders more time to implement further enhancements, creating a 'virtuous cycle.'

To fully capitalize on this 'virtuous cycle,' it's often necessary to establish certain Lean cultural foundations. These include implementing 5S for workplace organization and standardization. Additionally, introducing Visual Management and Solving Problems are key components. 

Should We Begin with a Pilot or Attempt a Full-Scale Business Transformation? 

The answer to this question hinges on the size, complexity, and unique circumstances of your business. However, for most medium to large businesses, initiating a pilot project is a prudent choice. This approach allows you (along with your Lean consultants) to tailor the methodology to the specific needs of your business. Moreover, it instills confidence within your team that the new approach aligns with your business's requirements.

The counterargument against a pilot is that it may consume too much time. Nevertheless, based on my experience, launching into a company-wide implementation without the groundwork of a successful pilot program can be costly, risky, and often progresses more slowly."