Lean Principles & Business Process Improvement

Peter F. Drucker once stated:

There is nothing so useless as doing efficiently that which should not be done at all.

Processes lie at the heart of every organization and nearly every product or service is created as a result of a process or a combination of processes. Organizations often run processes which involve steps that can be improved, redesigned or even eliminated to ensure increased customer satisfaction. Research reveals that only a small fraction of the total effort and time spent running the business actually adds value to the end customer. To ensure the efficiency of existing processes, they should always be designed with value as a core objective. The successful application of lean thinking leads to the introduction of more efficient processes, saves valuable company time and increases customer satisfaction.

One of the 5 key principles of Lean is identifying customers and what constitutes “value” for each customer category. In applying lean principles to the improvement of business processes, it’s necessary to be able to distinguish between value-added and non-value added activities. A value-added activity refers to any activity the customer is willing to pay for. It follows naturally that any activity the customer is not willing to pay for is classified as non-value added.

The objective of any business process improvement effort should therefore, always be centered on eliminating, reducing or simplifying non-value added activities. If you understand lean principles and are able to examine the business from the customer’s perspective, you start to understand what adds value, what doesn’t add value and can discuss along these lines with stakeholders on how improvements can be made.

There are 3 types of activities that can be found within a process:

Value-Added Activities – These are activities that add value to the customer and for which the customer is willing to pay. They are done right the first time.

Pure Waste/Non-Value Added Activities – These are activities that consume resources without creating any direct value for the end customer. Examples are on the diagram below:

Non-Value Added Activities

Incidental Waste - These are wasteful activities that must be performed. For example, auditing and saving records for a specific period of time due to legislative requirements.

To find out which activities are value-added and which are not, ask these questions:

1.   Does the customer care if the activity is performed? Would they pay for it? If the answer is yes, then the activity is value-added. The next step is to brainstorm on more economic and efficient ways to execute it. 

2.   Does it convert input into an output directly? If yes, the activity is value-added. 

3.   Are we doing this for compliance reasons? If yes, the activity is an incidental waste. If not, consider eliminating the step or seeking ways in which its performance can be improved.

The most dangerous kind of waste is the waste we do not recognize - Shigeo Shingo

Value Stream Mapping and Process Mapping are two common techniques for understanding and highlighting the different steps of a process to identify where improvements can be made.

In order to identify opportunities for improvement, it’s also important to observe the entire process from start to finish, take notes, ask questions and be prepared to discuss findings with stakeholders to generate the right debate that will bring about necessary process improvements.

Useful Links

Understanding Value - Beyond Lean
Lean Principles by Jerry Kilpatrick
Lean 101 Booklet - Lean ONLINE