Lean Thinking is a design philosophy and method based on an approach pioneered by Toyota after World War II. In their book “Lean Thinking”, published in 1996, James Womack and Dan Jones defined a new way to organise the provision of goods and services, away from the ‘mass production’ of Henry Ford to what they (and others) termed ‘lean production’.
At the heart of Lean Thinking are five lean (design) principles. A central theme of each of the lean principles is the removal of ‘waste’ – defined by Womack and Jones as “any human activity which absorbs resources but creates no value”.
Womack and Jones defined this as the critical starting point for Lean Thinking. Value can only be defined by the ultimate end customer. And this value is only meaningful if expressed in terms of a specific product and/or service, which meets the customer’s needs at a specific price and at a specific time. Providing the wrong product and/or service in the right way is a form of waste.
The Value Stream
Having defined the value, the next step is to analysis the ‘value stream’ – the set of specific actions to create the product and/or service and deliver the value to the end customer. It is within the value stream that enormous amounts of waste can exist, or be introduced through poor design.
Womack and Jones defined three types of actions that can occur along the value stream:
- those actions that unambiguously create value
- those actions that create no value but are unavoidable, e.g. due to regulatory requirements, current technologies and existing assets – type one waste
- those actions that create no value and can be eliminated – type two waste
In analysing the value stream, Womack and Jones emphasised the importance of going beyond the firm and looking at the whole – the entire set of activities entailed in creating and producing a specific product and/or service – the ‘Lean Enterprise’.
Once value has been precisely specified, the value stream fully mapped and any wasteful steps eliminated, the next design principle is to make the remaining value creating activities ‘flow’.
Flow turns convention on its head. Rather than grouping the value creating activities by type, or function, and processing work in batches, flow achieves much greater efficiency by organising the activities in a continuous flow around the product or service. Lean focuses on the efficiency of flow, not resource utilisation, to achieve optimum productivity.
The next design principle is to let the customer pull the product or service from you, rather than pushing the product or service onto the customer. This is achieved by designing your production or service operation such that it can respond quickly to different customer needs. For Toyota this meant build to order, for a service organisation this means being able to absorb the variation in demand as part of each customer transaction.
The achievement of perfection is the final design principle. With the other design principles applied, “this becomes an achievable goal, rather than a distance possibility”. With a process capable of providing the customer what they want, when they want it, there is no end to the process of reducing effort, time, space, cost and mistakes:
The four initial principles interact with each other, in a virtuous circle. Getting value to flow faster always exposes hidden waste in the value stream. And the harder you pull, the more the impediments to flow are revealed so they can be removed. Dedicated product and service teams in direct dialogue with customers always find ways to specify value more accurately and often learn ways to enhance flow and pull as well.
Womack and Jones defined transparency as perhaps the most important spur to perfection. In a lean system everyone – customers, employees, suppliers and distributors can see everything. Through transparency, the system as a whole can be more easily studied and improvements identified.
The Lean Enterprise
Womack and Jones emphasised the importance of going beyond the immediate boundaries of the firm and looking at the whole – the entire set of activities entailed in creating and producing a specific product and/or service – what they referred to as the Lean Enterprise.
Value creation often flows through many firms. Each one tends to define value in different ways to suit its own needs. When these differing definitions are added up, they often don’t add up. Each firm specialises for its current task, only looking at its own operational efficiency, whilst no one is looking at the whole through the eyes of the customer.
Womack and Jones defined a set of principles to guide joint behaviour:
- value must be defined jointly for each product or service, along with a target cost based on a customer’s perception of value
- all firms along the value stream must make an adequate return on their investments related to the value stream
- the firms must work together to identify and eliminate waste to the point where the overall target cost and return -on-investment targets of each firm are met
- when cost targets are met the firms along the stream will immediately conduct new analyses to identify remaining waste and set new targets
- every participating firm has the right to examine every activity in every firm relevant to the value stream as part of the joint search for waste
They acknowledge that creating a Lean Enterprise is not easy. But the rewards can be significant.
At the end of their book, Womack and Jones freed themselves of all practical, real world constraints, and dreamed about how a range of activities might be conducted in a truly lean enterprise. In a service design context, the medical care example (paraphrases here) is particularly informative – and note how little has changed:
The Healthcare System
When we visit our doctor we enter a world of queues and disjointed processes. The focus is on utilisation. Each of the centres of expertise in the health care system – the consultant physician, the single purpose diagnostic tool and centralised laboratory – is extremely expensive. To get full utilisation, it is necessary to route us around and over schedule to make sure they are fully utilised.
How would the healthcare system work if it embraced lean thinking? First the patient would be placed in the foreground. By contrast, conventional thinking places the organisation in the foreground, to be efficiently managed. Time and comfort is included as a key performance measure. These can only be addressed by flowing the patient through the system.
The medical centre would re-organise much of its expertise into multi-skilled teams. When the patient enters the system, they would receive steady attention and treatment from this co-located team.
To do this, the skills of nurses and doctors would need to be broadened (in contrast to the narrow deepening of skills encouraged by the current system), so that a smaller team of more broadly skilled people can solve most patient problems.
At the same time, the tools of medicine would need to be ‘right-sized’, so that they are smaller, more flexible and faster, with the full complement of tools dedicated to every treatment team.
Finally, the patient would need to be actively involved in the process and up-skilled – made a member of the team – so that many problems can be solved through prevention, or addressed from home without the need to visit a medical centre.
Lean and Service Design
Lean Thinking makes an important contribution to the design of services. It provides an important set of design principles, that play out well within a Service context.
Although not expressed in Systems Thinking terms, Lean shares a number of important characteristics. These are re-enforced and strengthened when we view Lean through the lens of Systems Thinking. It introduces greater depth of thinking – a greater recognition of the dynamics and interaction between the different parts of the system; and helps to retain a focus on the philosophy and principles of Lean – somewhat lacking in much common practice.
Perhaps the most important contribution of Lean, is the concept of the Lean Enterprise – to look beyond the immediate boundaries of the firm and act on the system as a whole.
On this you need to tread with care. Most books (and indeed training courses) are about applying the specifics of the Toyota Production System (TPS), on which Lean is based. There is a world of difference between this and the application of the underlying lean design principles as expressed here, particularly in relation to Services.
James P Womack and Daniel T Jones, Lean Thinking: Banish Waste and Create Wealth in Your Corporation, 1996
The basis of this article and of Lean itself, a must read.
James P Womack and Daniel T Jones, Lean Solutions: How Companies and Customers Can Create Value and Wealth Together, 2005
This is quite thought provoking. It explores the application of Lean Thinking to the way we increasingly consume products and services today and the challenges firms face to meet the expectations of the modern day consumer.
Considered the father of the Toyota Production System, the value of this book, which is based on a series of interviews, is the thought processes behind TPS that it reveals – far more important, useful and transferable than the physical tools and techniques that people tend to focus on. You do get a sense that he was having a bit of a go at much of the industry that has built up around Lean. A wise man indeed. It’s one of those books to dip in and out of over time, as you develop your own lean thinking.
An essential read on the application of Lean Thinking to Services, re-casted within a wider systems thinking approach, for which John is a leading authority and exponent.
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Last updated: 12/09/2013