How to increase profit and company productivity? Implementing a lean management system
15 Jul 2019
Recently, while negotiating a project schedule, a client asked me, "What should I do to increase company productivity?" I said, "Implement Lean Management and develop Persona well."
I know there have already been several articles about why Persons are important, but due to my experience in Lean Management, I would like to look at the problem from the point of "Slim Management" of the company and expand the answer to the article's target question, i.e. how to increase productivity in companies.
What are the benefits of implementing Lean Management?
I would like to start by quoting the results of a survey, which I conducted among colleagues, i.e. Lean Managers. I asked them why they implement Lean Management into the company's organizational culture. I have always received answers such as:
- to eliminate waste in the company;
- to improve the quality of the final product;
- to avoid errors, defects and "fires";
- for employees to be more involved, etc.
I asked the same question to the president of an international company and, to my surprise, I got the same answers.
Everything is correct, but we do not run the company solely for the elimination of waste. Of course, we want to provide value to customers, and improve the quality of the product. But let's be honest, every entrepreneur cares about the company's primary goal, i.e. generating profit. Because nobody sets up a company in the hope that it will generate losses. It sounds a little romantic, but by generating more profit, we can spend it on development, bonuses for employees, or foundation support.
Let's return to the question of how to increase the company's productivity. And what is productivity?
For me, increasing the company's productivity is the same as increasing its profit. That is why we should ask ourselves how to increase the company's profit.
We can achieve this goal in two ways:
1) reducing the costs of producing products/services;
2) increasing sales.
It’s very obvious, but please believe that the company's employees are not oriented in this way. In my opinion, the Lean-based approach to business management is primarily based on common sense thinking, where we verify before undertaking any action by asking ourselves the following questions:
- Will it reduce my costs?;
- Will it increase my sales?
How to implement Lean Management in organizational culture?
Current Lean Management practice focuses on improving the company's manufacturing processes by eliminating waste, improving the flow through bottlenecks or implementing 5S. I will share with you a very important experience.
This approach can be used by a mid-level manager who is responsible for a specific segment of the process.
When properly implementing an enterprise management system based on the Lean philosophy, you need to look at all processes taking place in the company from a bird's eye view, for which a tool called Value Stream Mapping (VSM) is ideally suited.
For those who already know more about Lean, I am quoting the Toyota House as proof of this theory. Do you remember what the foundation of the Toyota Production System is?
It's standardization. Without standardization, conducting other activities is like shooting ducks blindfolded.
Why? Because if we do not manufacture products/services in a standardized way, the elimination of waste on the example of one event will not translate into the acquisition by the organization of knowledge that will be used in the future.
Therefore, processes leading to the production of our products and services should be subject to standardization. Therefore, each implementation of Lean Management should start with mapping the value stream. A separate VSM for each product/service family.
After establishing a standard process of providing added value to the customer, we can begin to analyze this process and look for bottlenecks and signs of waste.
Then we create an improvement plan, we appoint people responsible for its implementation and set deadlines. During the implementation of the plan, standard operating procedures (SOPs) should be written down, which will constitute the company's knowledge base. The knowledge base is an extremely useful collection of procedures, instructions and ready - made templates that should not be underestimated.
Why do I need a knowledge base in my company?
Imagine a situation where an employee's suddenly absent from work, or worse, is poached by a competitor. Thanks to the knowledge base, employee experience stays with us. In addition, the knowledge base is a great source of information for a new employee.
The knowledge base allows us to structure the knowledge possessed in the company, share it between employees (leveling), and significantly facilitates improvement based on already developed instructions. The knowledge base is also a guarantee that in the absence of the CEO, the company can continue to function, which contributes to decentralization of management.
What are Personas and why should they be used?
Let's come back to the final question of the article, how to increase the company's profit. I just described how work on reducing enterprise costs should look using lean management techniques. Now I would like to talk about the second method, how to increase the company's sales.
First of all, you need to consider what we offer and who we offer it to. It’s very important to know who our customer is. For this purpose, defining Persona is a very useful tool. A detailed description of how to identify your persona and what a detailed persona consists of can be found on our blog in the article " Persona, or how to make a sales funnel ".
For the purposes of this article, I would like to describe the values for the company that depends on the proper development of persona. Among them are:
- Correctly identify our customer segments;
- Learning about customer problems related to the purchase of our product/service;
- understanding the motivations customers follow when making a purchase decision;
- constructing the Road Maps, or a list of places (physical and online) where we can meet representatives of the persona group .
This information is collected in a special workshop, which should be attended by persons who have previously had direct or indirect contact with the customer, e.g. sales representatives or people dealing with complaints.
What we learn during the workshop can be verified through in-depth interviews. We recommend that they be carried out by a blood and bone researcher who can apply qualitative methods.
As a result, an expert report should be created that verifies hypotheses from the workshops in a zero-one way. Finally, the acquired insights are used in all communication with the client (social media, phone conversation script etc.), and even in brand communication (brand language, brand identity).
The sooner a company correctly identifies its customers, the faster it will communicate with them - i.e. it will learn to use its advantage to strengthen the motivation to buy.
At the end of my article, I would like to point out that the standardization of enterprise processes with the VSM method is impossible to carry out if the company does not have a standardized product or service.
We invite you to read our article on business ideas (how to choose a niche market).
Title photo: Kenny Cole / Flickr.com