The lean approach is a powerful strategy for eliminating unnecessary costs and improving customer satisfaction. Even though lean methodology was first developed while improving manufacturing processes, it is applied to a wide range of business functions today. With advances in technology, the method now helps companies satisfy today’s higher customer standards and detect unnecessary process steps to reduce costs.
What is the “Lean”?
The lean approach is a strategy for eliminating wasted resources and improving process performance by prioritizing the customer value in a business. The aim is to create more value for customers with fewer resources. The lean emphasizes on what the customer wants and values to improve their products and services and eliminates the wasted resources for increased efficiency. With this approach, businesses reduce their costs and improve their customer satisfaction rates.
Why and how did it get started?
The lean methodology was invented to reduce waste during manufacturing processes since the early days of automobile manufacturing. Labor and resources formed an important part of the cost base and rate of innovation was limited. Therefore, businesses needed to find ways to improve efficiency during manufacturing processes to compete.
In the early days of automobile manufacturing and postwar Japan, manufacturing processes were wasting too many resources like heaps of scrap metal and holding too many items in the inventory. While these costs were damaging manufacturing companies, resources were scarce for the Japanese economy, which started to rise after World War 2.
Taiichi Ohno, an engineer at Toyota, started to introduce new techniques to improve efficiency while maintaining quality, along with other engineers. Those techniques became the main principle of the lean approach: add value to processes by removing things that don’t add value. Today, the lean approach is used in not only manufacturing processes but all types of industries, including service-oriented ones.
Why is it important now?
The lean approach aims to reduce wasted resources while focusing on customer values. As this strategy is first started to eliminate unnecessary costs in processes, it is still a practical technique for businesses today. The lean approach is a useful solution to reach customers’ higher standards and maintain a stronger financial position. Below are the reasons explained:
Better product quality for today’s customers with higher standards
People have higher standards of products today. This means companies need to continuously improve their product quality to satisfy their customers’ standards and increase customer satisfaction. They can achieve this by applying the lean approach to their processes. Focusing on customer value will allow improving their product quality while reducing wasted resources.
More control in unstable economic environments
With today’s unstable economic environment, having full control over costs becomes vital. The lean approach helps businesses to prioritize what customers value while managing different aspects of processes. As a result, companies can improve customer satisfaction, which will also reflect on increased revenue.
After identifying the value, the lean approach ensures businesses to eliminate resources that don’t add value to processes. This elimination allows companies to reduce unnecessary costs and improve process efficiency. With increased profits, companies can find themselves in a stronger financial position in unstable economic environments.
How does it work?
Lean strategies allow businesses to offer what their customers want when they want while keeping costs low, having high flexibility and quality, and fast turnaround times. The lean approach looks for continuous improvement until it reaches the “perfect” process, meaning that it creates no wasted resources. The Lean Enterprise Institute defines a five-step process for the implementation of the lean approach:
- Specify the value of each product from your customer’s perspective.
- Identify all the steps in the value stream for each product and eliminate steps that don’t create any value.
- Create value-adding steps so the product will “flow smoothly” toward your customer.
- As you introduce the flow, let customers pull value from it.
- Repeat the steps above until you reach “perfection.”
How does the latest technology impact “Lean”?
With the latest technology in AI and machine learning, businesses can identify customer value more easily and accurately. The growing amount of data enables companies to know their customers better, and the latest machine learning algorithms can provide insights about customer value.
Another fundamental impact of machine learning is to understand the processes. As today’s business processes are more complicated, it is harder to perceive the full picture of the situation. Machine learning methods benefit from customer data and event logs to create cause-and-effect relations between different actions and provide what processes actually look like. As a result, businesses that adopt the lean approach can easily detect and eliminate unnecessary steps.
Besides machine learning and AI, you can find how process mining technology directly impacts the lean approach below:
Process mining is an emerging technology that reflects the business processes’ actual performance by a layer of software integrated into the company’s IT systems. By mining processes, businesses can understand what their “as-is” processes look like and how it differs from desired processes. These tools give data-driven insights about processes and connect process steps in a cause-and-effect relationship.
Using these insights, they help businesses to identify unnecessary steps that don’t add any customer value. As the elimination of these steps is one of the main principles of lean management, process mining supports this strategy to rapidly and accurately detect them and allow companies to reduce costs.
With process mining, businesses can also understand what steps are missing in processes for success and create value-adding steps instead of eliminating steps for process improvement. As an example, Piraeus Bank has managed to reduce the loan application processes from 35 minutes to 5 minutes by using QPR’s process mining tool. You can read more process mining case studies in our related article.
You can also read our in-depth process mining guide to understand how it works and why it is needed for process improvement.
If you have questions about how lean process approach can help your business, feel free to ask us: