Why Lean Operations Apply to Companies in Every Stage of Growth
As belt-ratcheting seems to lessen and businesses emerge from the recession, I can only hope that lean operations don’t become a thing of the past. No matter what size your company, owners have to understand that a more buoyant economy may soon help you increase your growth. Without a lean approach, however, you’re also going to increase your inefficiencies.
Hopefully the focus on lean prompted by the 2008 recession won’t become a thing of the past. The smarter companies will retain the elements of quality control that help them persevere through the tough times.
I’m finding ample evidence that the not-so-lean ways of the past won’t be duplicated in the future. Start-up organizations today are growing lean from the get-go. For larger companies, technological advances make lean operations easier than ever, thanks to access to relevant data.
Still, there are owners who may just be focused on growing the biz, and figuring they’ll deal with quality issues later. That’s fine. However, the LaManna Alliance’s go-to Lean Operations guru Ed Klaczak tells us that you can – and should - initiate lean operations no matter what state of growth you’re in to achieve some spectacular results.
Lean Operations in a Start-Up
Ed notes that in start-up mode, most businesses are so focused on getting new clients and boosting revenue, they never even consider their internal processes. It can be addressed in parallel, or more accurately, the foundation can be laid for future quality improvements.
For example, if you’re launching the business and cultivating the customers, put some elementary operational goals in place. As you define these goals, take time to document the results (metrics) and the processes you use to reach them. It will make your continual growth slightly more methodical, but it has tremendous advantages in the long run.
Once you reach the point where lean is required (and everyone does), if you have most of your processes documented, you’ll find it much easier to find and reduce the hidden waste. In the best-case scenario, if you’ve been documenting as you grow, you have already started to improve inefficient processes as you grow – a kind of “clean as you go” mentality.
Lean Operations in Mature Companies
People who buy bigger houses are always astounded how, after several years, all the newly acquired room is suddenly inundated with new clutter and stuff.
Many businesses are the same way. During each growth cycle, lean can be applied to help clean out the clutter in your processes. As businesses get bigger and bigger, however, the ability to effectively grow gets harder and harder – so lean process optimization actually provides a more reliable way to improve your bottom line.
That’s why Ed insists lean should be treated the same as a sales growth. Why is a 50% increase in cost-savings any different that a 50% increase in growth?
When should a mature company go lean? The sooner the better. With a mature company, the plane doesn’t turn all that quickly. So get the process started now, as it may take months to see results.
Lean Operations in Companies for Sale
Isn’t it funny how when you’re selling a car, you always clean it up? The same principle applies to businesses that are for sale, although I’m astounded why owners don’t clean up their processes earlier and reap the rewards in the present day.
Nevertheless, you can realize instant bottom line growth by initiating lean processes, which, depending on the size of the changes, actually influence your multiples.
Lean operations can also make a business more attractive if you’ve chosen similar ERP technologies as the acquiring or partnering company. Not having to revamp systems and buy new technologies could result in huge cost savings and an accelerated integration schedule. Again, this is all dependent on the parties involved in the M&A, but it could definitely speed up the process.
Is there a perfect moment to launch lean – i.e. is there a point when you need it most?
Waiting for the perfect moment to launch lean processes can be difficult. As Ed notes, “How you run a $2 million business is very different from a $20 million, which is very different from a $200 million.” If you’re working at a company that is making those big (10X) revenue leaps, quite often you don’t have time to take a look around and spot the inefficiencies, you’re busy “shipping orders and/or reducing backlog.” That’s why you need to start now, instead of waiting for the issues to pile up.
Owners, especially at small to mid-size companies will argue they simply don’t the time to initiate any lean processes. They’re too busy trying to make payroll or provide services. They believe they don’t have the resources that a big company might bring to the table as it creates its own lean focus.
Again, this isn’t the correct way to approach lean. Quality improvements should not be considered an expense – they will result in a costs savings. The bottom line will be healthier for it. Pursue it with the same passion you chase new business. You’ll be just as happy – if not happier – in the end.
Photo by: Norio.NAKAYAMA
Rock LaManna is the President and CEO of the LaManna Alliance. The LaManna Alliance helps printing owners and CEOs use their company financials to prioritize and choose the proper strategic transition – including mergers, acquisitions, organic growth, and exit / succession plans.