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Akhilesh Gulati

Quality Insider

Thinking Beyond Lean

Focusing on nonvalue alone is not the answer

Published: Wednesday, September 26, 2012 - 12:00

Terry had been using lean techniques to improve his company for quite a while now. He’d held kaizen events, reduced inventory, provided training for his employees, and was quite pleased with the progress his organization had made.

However, he felt it was time move beyond this type of transformation—which was to provide his products and services more efficiently and effectively. While Terry and his organization were busy reducing nonvalue-added activities and increasing efficiencies, his competitors were busy rolling out an improved product by adding more value to it. He wanted his organization to be more innovative and constantly seek ways to improve or augment solutions for customers. Immediately, Apple came to mind; he wanted his people to exceed clients’ expectations by adding more value than expected. He had to get his organization to eliminate not only nonvalue-added work, but also act in ways that would significantly benefit clients’ businesses.

How should he do this? His organization needed to interact with its clients to understand their needs, and in some cases help them to become aware of their needs. Helping them understand the overall solution would be valuable and might offset their focus on simply reducing costs. This meant his people would have to delve into clients’ decision-making process early on, and to do this they would have to meet with various levels of management to define and identifying value in their terms, and then create solutions that mirrored their needs.

To proceed with these solutions, Terry’s employees had to identify viable opportunities, examine the accounts thoroughly, qualify the opportunities, and capture business intelligence about clients. His salespeople, R&D team, and design and production engineers would all have to work together to diagnose a client's problems and offer solutions the client never thought possible.

It is relatively easy to identify, reduce, and eliminate wasteful practices and improve on past mistakes because they have happened and have been evaluated. We know what to look for, and we have learned from many industry examples. However, it is much more difficult to plan for something that has never happened; we don't know what additional value to add or to anticipate what customers want. Apple has been a game changer again and again, creating what customers value, which has allowed the company to charge higher prices. Could Terry learn from organizations such as Apple?

Although focusing on removing nonvalue activities is required to operate in today’s global markets, it should not be at the expense of creating value for customers. Reducing nonvalue-added activities is relatively easy; creating value takes a lot of work. You must understand customers’ needs and wants that are not yet identified. Focusing on creating value helps identify new product or service opportunities and enhances current product offerings. Organizations that do this distinguish themselves from others in the marketplace. As more companies become lean, cost advantages will diminish. Focusing on customer value creation, on the other hand, will keep an organization from becoming complacent and will support its innovation efforts.

The challenge, however, is how to infuse “value creation” into the organization’s DNA. All employees need tools for innovative thinking, a practical framework, access to a methodology that can be learned easily and builds on previous successes, and a culture that promotes adopting and adapting from each other in a competitive yet collaborative way. Not too tall of an order. The intent would be to create superior customer value—be it at the functional, symbolic, or experiential level.

For example, instead of focusing on cutting costs in the supply chain, look with equal fervor at the value chain (e.g., design, production, marketing) that reflects where value is created within the organization. When performed together, creating value while reducing nonvalue creates a tremendous competitive force.

Even though its product quality is a given, Nordstrom goes further by focusing on creating sensory value: aesthetics, ambiance, courtesy, and ease of doing business. Disneyland focuses on creating emotional value: pleasure, enjoyment, excitement, fantasy, and adventure. Professional organizations focus on socio-relational value: networking, professional development, connectedness, and developing trust or commitment.

While eight specific types of nonvalue-added activities have been defined (i.e., defects, overproduction, overprocessing, transporting, underutilizing employees abilities, unnecessary inventory, unnecessary motion, waiting), isn’t it time we started thinking of value creation with the same enthusiasm? This focused attention, much like what happened with the lean movement, would identify many more opportunities, integrate various disciplines, and formalize methodologies (e.g., TRIZ) for the concept of innovation. And it is the novel development of unique solutions that will create value and take organizations to their next level of performance.

What is your organization doing to go beyond lean transformation and create value?

Discuss

About The Author

Akhilesh Gulati’s picture

Akhilesh Gulati

Akhilesh Gulati has 25 years of experience in operational excellence, process redesign, lean, Six Sigma, strategic planning, and TRIZ (structured innovation) training and consulting in a variety of industries. Gulati is the Principal consultant at PIVOT Management Consultants and the CEO of the analytics firm Pivot Adapt Inc. in S. California. Akhilesh holds an MS from the University of Michigan, Ann Arbor, and MBA from UCLA, is a Six Sigma Master Black Belt and a Balanced Scorecard Professional.