Why lean?

Because there's too much clutter out there.

Clutter means 3 things. Number one, you are invisible because there are too many around you, of all colours: you must have a differentiating colour or resign to the idea of passing unnoticed. Number two, it's not easy to find what you want or need because there is too much around you: a staggering and overwhelming amount of physical artefacts and information. Unless you develop an optimum filtering ability you are doomed to drown in the ocean of ambiguous, proliferous, tautological, contradicting and self-replicating information. Third, it's not easy to move in any direction in such a dense and gluey environment.

Lean is a superb metaphor: by getting rid of the useless pounds of "fat" you learn how to develop muscle and become more vigorous. You come closer and closer to the axis of vigor. Being lean enables you to achieve more things in a light way. Are there things you can eliminate? How about tasks that you can automate? Could there be some activities that you can delegate? Are there some areas in your business you can afford to let go, in order to profit more from one area? It's all about being lean.

As Gary Hamel wittingly puts it, "Right now, your company has 21st-century Internet-enabled business processes, mid-20th century management processes, all built atop 19th-century management principles."

The dynamics with which the world develops puts businesses on moving sands: they must quickly adapt or simply start floundering. The increased complexity inevitably leads to system bloat, dependency management and inefficiency at all levels. On the other hand, maintaining effective communication within large teams consumes enormous amounts of capacity on large projects. Therefore keeping processes streamlined and straightforward is paramount.

What to avoid

Complexity leads the human brain in several directions simultaneously. Whether you perform a relatively well defined activity or try to build a new product or service meant to achieve a certain impact, this can have a major de-focusing effect. That natural trend of human brain leads to what is known as scope creep, the constant enriching of our primary goal by adding more and more dimensions, and layers, and features to it. It puts us in a death spiral where time passes, cost accumulates but a tangible "thing" is never ready.

A second evil comes in line here. Due to a cognitive bias known as the planning fallacy, executives tend to "make decisions based on delusional optimism rather than on a rational weighing of gains, losses, and probabilities. They overestimate benefits and underestimate costs. They spin scenarios of success while overlooking the potential for mistakes and miscalculations. As a result, they pursue initiatives that are unlikely to come in on budget or on time or to deliver the expected returns - or even to be completed." (Kahneman, D. (2011). Thinking, Fast and Slow)

Another dangerous trap is the human propensity to overvalue output. "More work done" is quite wrongly assumed as valuable because of the indeed valuable time, and efforts, and money invested into it, whereas it can actually mean exactly the opposite, namely a significant waste of resources into a product or project with limited or zero actual "sales" value. Productivity measured on output rather than outcomes is a major flaw: it creates a sham "hero" culture praising the hard work and high utilization rates per se without considering the only valid benchmark: the value it brings to the customer.

How to avoid it

We should develop sensitivity to the efficiency of our work. Always keep in mind that we operate within a very short time frame and that time is actually the ultimate limited resource (and constraint). Working with and within an existing business model - even if proved sucessful - is not sufficient any more. We must constantly improve and innovate. Toyota Production System has the approach to innovation as part of daily work. A good balance between exploiting and exploring business models has to be maintained at all times. It means keep doing what generates a "proven" income but at the same time invest time to both improve the existing process and investigate new ventures. It's like a speedy journey when you must definitely spend time to pick all rewards along the road but definitely not waste too much time staying at the same place and keep moving ahead.

Learning is in every step of the the process that leads to the result but also within the result itself (be it deceptive or exhilarating). It interferes with and reflects not only on our actions (single-loop learning) but also on the initial beliefs which provoke those actions (double-loop learning). Acknowledgments to Chris Argyris for this insightful illustration.

When dynamics is high big plans don't work. We need a narrow focus and incremental process improvements - small but numerous and frequent. Working in small batches allows us to quickly (and cheaply) develop, evaluate and adjust. To achieve a narrow focus and maximum execution quality try to limit the work in process and avoid frequent shift of context or moving people across several tasks. This practice saves substantial time and increases throughput.

"The quality of decision is like the well-timed swoop of a falcon which enables it to strike and destroy its victim", states Sun Tzu. Our actions achieve an incredibly strong effect when we manage to sense the right moment. The just-in-time philosophy consists in making only what is needed, when it is needed, and in the amount needed.

If a direction proves to be wrong don't hesitate to change course right away. The sunken cost fallacy, or the inclination to cherish a project or a course of action just because of the resources and energy invested into it so far is an insidious trap that must be avoided at all times. Agile methodology helps minimize the sunken cost itself by precipitating "the moment of truth".

Work in small cycles but don't lose sight of the entire value stream. Experience has shown that significantly improving the efficiency of individual process blocks does not have a dramatic effect on the efficiency of the overall process because it creates conditions for rework and increased wait times at other critical points. The process needs to be agile across all functions. It also needs to be resilient and "anti-fragile" in the sense of the term coined by Nassim Taleb, i.e. it should gain and benefit from external concussions and changes, for example changes of the customers requirements or customers behaviour. Customers must act as co-creators of value.

What to measure

Measures matter only when they lead to change (or, extremely rarely, to confirmation) of either actions or beliefs. Measuring past performance matters as long as it helps taking current decisions which impact future results. Vanity metrics characteristic for new startups, like number of homepage views, downloads, or registered users may signal just a momentary traction and the old school "monthly sales growth" would be certainly a more convincing KPI. But the truly meaningful KPI would be something like "monthly sales growth for product X after implementing feature Y".

Predicting the future is helpful and desirable without any doubt but spending considerable time and resources to create a detailed old-school budget tends to be a sheer waste when parameters are highly inter-dependent and volatile. Funding innovation needs a more pragmatic, lightweight and ad-hoc approach. Changing parameters are better handled through dynamic resource allocation within short horizons and necessitates great sensitivity and discipline.

The effect of constant learning and improvement which underlies the lean philosophy must also be measured. It comes after a precious investment of time and can be quantified and made clearly tangible through activity accounting by measuring the cycle time, the gains from reducing time spent serving failure demand, without even counting the positive effect on people's general aptitude and motivation.

The big dynamics of (business) environment adds new items on our to-do lists at very high speed. Concentrating on some items inevitably causes delay in others but the weight of opportunities and money lost due to delaying some items instead of others is not the same. The classical way to establish priority indices is by dividing the cost of delay by the duration (estimated time for developing and delivering a feature). The items with the higher index receive a higher priority on the to-do list. Addition of new items dynamically re-arranges the priority. Moreover, the cost of delay is seldom constant over time because tasks may dynamically receive a different urgency profile according to emerging new circumstances.