Building a Profitable and Sustainable Lean Organization with Profit Mapping (Jun 13, 2006)

One of the enjoyable aspects of our work is that we interact with a wide array of people in companies, ranging from the executive suite to the front lines. This is a great opportunity to understand the pulse and priorities in organizations from a number of often differing perspectives. Not surprisingly, Lean is one topic with a great deal of mindshare in companies today – and the focus of this article.

The range of opinions and comments we hear about Lean is quite fascinating. On the one hand are the “motherhood and apple pie” perspectives. For these practitioners, Lean is the be all and end all solution to their operational and business challenges. On the other extreme are those that definitively claim that “Lean doesn’t work.” Many more organizations are between the two ends of the continuum, including those who are just beginning their Lean journey and do not have enough data points to quantify their successes or disappointments.

Lean is a driver to improve your business just as Information Technology is a facilitator. Neither is the end game. Lean principles and tools are a wellspring of good ideas and practices. Keep in mind that even if Lean is a stated business objective for your company, it is to achieve a larger objective. Lean is one of many and not the only objective. You have other important objectives such as profitability, customer satisfaction, and so on.

You have to balance Lean with all the other unique objectives and priorities within your company. In fact, regardless of the specific strategy, successful companies emphasize building agile, profitable, and sustainable organizations to capitalize on ever changing opportunities in the global economy. Lean happens to be a part of this larger puzzle. Profit Mapping helps companies achieve their larger goals in conjunction with Lean, if Lean is desired. The goal is not to seek Lean impact, but the impact of Lean on the business objectives.

Lean principles are without question helpful to organizations that wish to reduce various forms of waste and deliver value to the customer. The plethora of Lean tools attests to its popularity. We have compiled upwards of 50 Lean tools available to the practitioner. Some of the more popular tools are 5S, Kaizan, Value Stream Mapping, Kanban, and Poka Yoke.

There are so many tools such that practitioners can get bogged down in tool implementations while losing sight of why they are using them. This is a forest and trees issue. How do you know what tool(s) make the most business sense to use for your company? When should they be used? What will be the overall impact of the outcome on the business? These are but a few important questions for any process improvement approach.

Fundamentally, Lean principles are sound. The challenge is in knowing how to translate sound principles into precise actions that make the most sense for your organization. Yet, actions alone are not enough. Every Lean action must be prioritized and directly connected to achieving your company’s overall business objectives.

In practice, what works for one company is not guaranteed to work for you. Each company has different products, processes, customers, strategies, and so on. Moreover, these factors are constantly changing. That is, your company will always differ in ways, large and small, from others.

You are not operating in a steady-state business environment. The business factors are constantly changing within and around your company. Copying the best practices from yesteryears of other companies is not enough; you have to know why those practices would be better than what you are currently doing given the unique capabilities and constraints of your company.

Since the business environment is inherently dynamic, both internally and externally, how should companies guide their Lean efforts – to ensure success from the outset? This creates a sizable challenge for knowing how, where, and why to implement any particular Lean tool in ways that will create the biggest business impact for the investment in time and effort. This requires the benefit of a structured methodology such as Profit Mapping to help you focus, prioritize, and align your Lean efforts with your business objectives.

Profit Mapping is an intuitive, systematic, and forward-looking methodology for business execution. It is a structured yet flexible approach that is highly complementary to Lean efforts. Specifically, Profit Mapping enhances Lean in the following ways:

• It integrates multiple perspectives, including cost, so that managers can assess the profitability of their Lean decisions. This gives managers critical insight that also helps avoid implementing Lean in ways that could potentially destroy profitability.

• It connects Lean thinking and tools to the business objectives by identifying the parameters that managers can control.

• It shows the impact of any particular Lean project or action across the business, not just in isolation of that segment of the process.

• It creates a roadmap to the desired future Lean state showing the precise steps and actions that will achieve the business objectives. If the future state is not achievable, it can show you what additional process changes, resources and/or investments are required to get there. No other methodology can do this!

• It helps identify which Lean tools are most appropriate to use in any given circumstance.

• It helps extend Lean into situations where multiple products are produced on the same line.

• It helps dynamically adjust and prioritize Lean efforts in relation to changing internal and external factors.

Lean is a way of thinking and Profit Mapping is the execution tool that helps you get the most out of Lean by connecting your efforts to the business objectives and quantifying the financial implications of your actions. Profit Mapping provides critical insight into which Lean actions will be effective and which will not. If your Lean actions are not producing the desired effects, Profit Mapping also shows you how to quickly correct course, avoiding mis-implementation of Lean principles.

Lean is a terrific way to come up with good ideas for reducing waste and focusing on value from the customer’s perspective. But Lean alone is not enough in today’s intensely competitive and dynamic business environment where companies must compete against world prices.

You do not have the luxury of implementing Lean programs and actions, and hoping they will have the intended business impact sometime down the road. You need to know now and in advance if and how successful your Lean initiatives will be for the overall business, not just on a process efficiency. Profit Mapping helps you do this.

Adam Garfein and Anil Menawat






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