The lean movement, the concept that businesses should eliminate waste in order to use less capital and fewer resources, is often associated with major multinational manufacturers. But John Shook, chairman and CEO of the Cambridge, Mass.-based Lean Enterprise Institute, says the principles work for companies of all sizes, in all industries. Here he explains how startups can think lean and--trickier--stay lean while maintaining growth.
What do you mean by a lean enterprise?
Lean thinking is delivering value for customers with minimal resources. It is not about cost reduction. Instead, the focus is on customer value. There's nothing so meaningless as doing efficiently that which should not be done at all.
How can entrepreneurs build in leanness from the start?
Start by identifying the value creating work of the business. Back up from there. That will uncover many steps. What is necessary to do to create value? Separate the value-creation steps from the non-value-creation steps. We want to build systems and processes so that value flows quickly and reliably to the customer.
There's a certain kind of leanness that comes naturally to entrepreneurs. As you become larger, it becomes harder to maintain that. As the business grows, you begin to take on more employees, and they have different tendencies than your first team. Entrepreneurs have the natural ability to pivot; they can build it into their plan. If you don't have a plan, there's nothing against which you can check.
What's the difference between waste and slack?
Airlines build multiple redundant systems for safety. Redundancy is necessary for stability. It is not waste. We need to be careful that we don't identify redundancy as waste, or we start cutting into muscle.
I don't think we've seen a total waste-free program yet. There's always going to be some redundancy because we're all working in unstable markets.
What are some typical lean traps for entrepreneurs?
The adrenaline rush of risk-taking. Entrepreneurs get pleasure from the excitement of taking the risk, so they often don't plan as carefully as they should. A lot of entrepreneurs see planning and a process orientation as antithetical to the entrepreneurial spirit, but they don't have to be. Planning can incorporate a lean, entrepreneurial spirit and ensure that the flame doesn't burn out.
Growing and managing a more mature business requires tending to the capabilities. That requires taking a planned approach, working it into the business plan to get it into everyone's DNA.
How does one maintain flexibility?
Build check-and-adjust points into your plan. These are points where you compare the results to plan and make changes as needed. You want to work in short cycles so you can check and adjust often. You want to do this at multiple levels. It may be at a top level--how to apply the technology you sell to a different industry. At a more micro level, we want everyone in an organization to think like an entrepreneurial owner as it relates to his or her work. You're going to write plans, but write them in pencil, because you're going to be erasing.