Arise2Live Podcast
Transcript for Episode #156 ‘Improve Your Company’s Performance with Lean Business Systems’
Host: Scott Weaver
Date April 6, 2022
Intro: Welcome to episode 156 of the Arise2Live Podcast, Having good business systems really help a company grow and maintain sanity. Scott talks about 3 key principles of a lean system that you can use to bring clarity and perspective to improve performance. Let’s get started.
Scott R. Weaver:
I trust that y’all are having a good day today. My name is Scott Weaver, the Arise2Live business coach for business owners and leaders wanting to grow their business without the overwhelm.
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In the previous episode, I talked about how business systems are actually simpler than what a lot of people make it out to be. Today’s episode takes it one step further, about how a lean system approach can improve your business operations and reduce costs.
My approach is straight forward. Once you know the timeless principles of business systems or process, you can run pretty fast with them to improve your company’s performance and you can better pick the methods that work best for you among the many tactics and software solutions out there.
This topic on business systems came about when I was recently talking with a friend. He is a software developer and working on a project to help a fast-growing construction remodeling company design patio deck replacements all on the computer. My friend was striving after the holy grail of a construction company — the owner does everything on the computer—the design and job costing, the supply orders, scheduling down to the 15 minute mark, virtually everything but actually hammering in the nails. Then all the money pours in.
Now I’m all good with applying technology, but in my engineering experience, a computer cannot do it all. My friend’s approach had a fundamental flaw in it. You see, every customer’s house is different and needs to be customized. The crew on the job site needed to be empowered to do the right thing for the customer. So it seems that reality starting to infect the perfect world of computer land.
It was a very interesting discussion with my friend and a sign of the times. Three different worlds were colliding: the construction world, the software engineering world, and the business world. How are all these different worlds going to play nice together?
Well, one the way to get them to play nice is to intentionally develop business systems, or processes – I will use those terms interchangeably.
Good processes greatly reduce the stress inside the company and for the owners, they can save a lot of time, money, and effort. It makes the owner look like a better boss and there are rewards in time freedom and increased profits.
Now I don’t know what industry you are in, so I need your help. I’ll present the key principles of Lean Systems so that you can apply those into your company. Principles that are applicable to small businesses and give you a competitive edge. However, it’s up to you to come up with a practical manner to use these principles in your company. That really can’t be done in a podcast. That’s where I ask you to take the extra step and apply it yourself. If you need help applying this, please contact me.
From the last episode, that is episode 155, there’s a link in the show notes, we covered two key points of a business system. First, a system is key to improve growth and smooth operations and second, a business system is a collection of tasks that is intentional and predefined to get repeated results that you desire and to make life easier. Again, a business system is a collection of tasks, repeatable, and gets results.
From my friend’s conversation, the writing on the wall is that advanced computer technology is coming to the smaller trades and construction companies. It’s been my experience that when this happens, a tool, or a method, called Lean Systems will follow close behind. This is my opinion that I feel very strongly that all business owners need to be familiar with the concept and principles behind it.
A Lean System is an approach, almost a philosophy, of how to have very effective and efficient systems in business and manufacturing. It can be a very powerful tool to reduce costs, improve quality, and increase employee productivity, three things that have a positive impact on the bottom line and profits.
If you go online and look up lean systems, you’re gonna get thousands and thousands of pages, most of them have gone off the deep end and really complicated things or apply to a specific company or industry. I’m here to simplify things to its core principles and get to what really matters, the ‘why’ and focus behind it. That way you can do further research or do a software lean system that actually will work for you and your company.
I’m not trying to go all geeky on you, but one of my advantages of being a business coach is that I have formal training in business at the graduate level. I realize that most of the stuff I learned was geared for large corporations and how to make them successful. However, I’ve learned that when applying core business principles, timeless principles, to small businesses, a lot of good things can happen. Today’s episode on Lean Systems falls in this category. I took several graduate level courses on Operations Management and today you’ll benefit from them.
So Where Does Lean System Come From?
It is important to know a little of the history because this will really help you to understand and apply lean systems into your company and get the most benefits out of it. I’ve seen a few companies misapply the principles and get themselves in trouble. I don’t want that to happen to you.
The history of the Lean System approach comes out of the Toyota car company and from a lead engineer and manager named Taiichi Ohno. His name will come up later in this episode.
Toyota is actually an old company and in the nineteen fifties and sixties, they were trying to improve their car sales, but at the time they had some major competitive disadvantages and manufacturing issues. Now these days it’s hard to believe that Toyota once was a 3rd tier car manufacturer, but their success is largely due to their Toyota Production System (TPS), which often is another name for Lean Manufacturing. The system worked for Toyota and works for thousands of companies today.
At the time, Toyota managers came to America to see how the world’s best manufacturing was being done. Coming out of World War two, American Manufacturing was the world’s best, by far, and had plenty of easily accessible resources and to do batch manufacturing very efficiently. To their disappointment, Toyota determined that they were not able to duplicate what was going on in America because they were doing low volume and lacked resources.
Now please don’t overlook this. The Lean System approach came out of a business environment of limited resources and low volumes. Sound familiar to us small business owners? We don’t have lots and lots of resources and products and services are generally at low volume.
The point here is that Lean System principles are usable and important to small businesses.
A word of caution, lean systems were originally developed in a manufacturing setting, inside a controlled, repeatable environment. Many of you business owners do not have the luxury of having a controlled environment, so don’t take today’s advertised lean systems approach too far. Still the basic philosophies and principles can help small businesses a lot.
OK so here are the three key principles of a Lean system.
Number one principle: Muda. I bet you didn’t expect that. Muda. M-U-D-A. It’s the Japanese word meaning wastefulness and uselessness. A lot of times, it is translated as waste. The concept behind muda is that anything that does not contribute value to the product or service is considered waste, and thus, should not be done and eliminated. Again, the key concept of muda is get rid of waste. If something is not of value, not contributing to the customer or the product or the process, it does not need to be done.
For example, having too much inventory is muda. Employees doing extra steps to do their job or tasks is muda, restacking materials and supplies over and over is muda. And of course, wasting money on non-productive software is muda.
So this principle is to get rid of any muda or waste in your process system and doing so, increases efficiency and lower costs. Every business is different, but there are always some areas where you could do better to increase efficiency and reduce waste.
As an example, over the course of a year or so, I had two roof replacements. The first one was to sell my house and put a new roof on, and six months after moving to TN and buying a house I had to put on a new roof on that house. Yeah, I wasn’t a happy camper about it and spent a lot of money, but at least I contributed to society by helping crews stay busy in the COVID pandemic. As a side note, this role of business owners of helping the community by keeping crews busy that’s actually an important role in society and is important in influence and contribution that business owners can make.
Anyway, one thing I noticed about the roofers, both of them, is how they handled the roofing material, perhaps we can say inventory. In each case, the crews actually putting the roof on did not have to deal with inventory—the roofing shingles, trimming, barriers, etc. all that stuff magically appeared on a truck in the exact amounts needed to finish the job. They didn’t have to wait around. This is how they reduced waste, eliminated muda, for their crews.
In fact, one of the roofing companies dropped off all the roofing supplies in my driveway on a Friday afternoon even though the crews were arriving Monday morning. I was pretty nervous about that being there over the weekend that I parked my car in front of it so nobody would just back a pickup in and take off with the stuff. Come Monday morning, everything was there so the crew immediately got to work and did a good job.
In the Lean System concept, everything, every process is inspected to see if there is any waste, inefficiencies that can be eliminated. In the roofer’s case, paying employees to wait around for supplies they need to do their job, well, would be a huge waste of money and time.
The second principle of the Lean System Approach is to utilize the full capacity of people and your suppliers.
Yes, the Lean System approach is people oriented. It fully recognizes that every employee contributes to the process, and this is important, every employee can contribute to developing better company systems. The thinking behind this is- who else better to ask how to do better than the person actually doing the work?
We business owners and leaders need to suck it up when the punk rookie rudely suggests an improvement on how to do something better. Yeah, I’ve been there and heard that. Controlling your ego does payoff in the long run.
I could go on and on the principle of fully utilizing your team and suppliers, but I’ll shorten to a few questions. Are you training your employees? Both in skill and understanding how to improve your process? Are you allowing your employees to think? How’s your coordination with your suppliers and deliveries? Are there any waste there you can remove? How about the paying process?
The third principle is to engage in continuous process improvements. Always learning. Always listening. Always improving. Always willing to make small changes.
I think most of us have already heard about continuous process improvements, but I do want to point out that this is the third principle not the first.
This is where a lot of business owners get the sequence wrong. Without first taking the approach to eliminate waste in the company or considering the capacity of people and your suppliers, continuous process improvements won’t work. It just won’t.
Take Action with an Ohno Circle
So how can we apply these three Lean System principles to your business? That is a little challenging because as a podcast host I don’t know exactly where you are today or what business you’re running. But I can say how important it is for you to figure it out. Not trying to be mean, but as a business owner, you are the leader of your company, sometimes you just gotta sit back and figure it out.
In the lean system, there is a practice or technique called the Ohno Circle, it’s named after Taiichi Ohno, accredited as being the founder of Lean Systems. What Taiichi Ohno did was to draw a circle in chalk on the manufacturing floor and then made a manager stand in the circle, can’t leave it, and to observe three things: the workers, the equipment, and the materials flowing through. The objective is to find muda, or waste, in the quantity being produced or the quality of the product being produced, and if there is wasted effort or motion in the workers, waste in time moving supplies from one place to the other.
That’s right. The manager had to stand inside a circle like a schoolboy who got in trouble and look for ways to improve things. I’ve heard stories of people standing there for hours and hours. It’s a challenging thing to do but it does pay-off.
Now, I don’t suggest that a roofer draws a circle at the job site and stands in it all day, but I do suggest that business owners get out to the job-site to see how things are going, how the process can be improved. Maybe, even pretending to do paperwork in your truck when you’re actually watching your crew or pretending to talk on your cell phone. Don’t be an undercover boss, but don’t interfere on how the work is actually being done. You want to see reality. Again, you’re trying to identify any muda, waste, not get people in trouble. You just might discover some training areas they need, or perhaps even more important, you learn from your workers on how to do things better. There’s an aspect of Lean Systems that empowers the workers to improve things on their own.
In closing, here’s a quote from the Taiichi Ohno, “Let the flow manage the process, not the managers administer the flow.”
The work that needs to be done defines the process. Remember that there is an order of the three principles of Lean Systems.
#1 – Identify waste to eliminate,
#2 – fully utilize people and suppliers, and
#3 – improve continuously.
I trust that this episode gives you a head start on what is likely coming down the pike into your industry and company. Applying these timeless principles in this episode and the previous one can be starting foundation to implementing some very effective systems into your business to decrease costs, increase efficiency, and reduce overwhelm that you feel.
I want to see you run fast, very fast on improving your company’s performance, so you can Arise2Live.
Today’s sponsor is Arise2Live Business Coaching. A professional and structured system to get business owners to grow and gain freedom from the chaos of running a business. Scott uses a proprietary 4 step system to get you the results you need. Start running a thriving business not a self-created job. Schedule or call today on the Arise2Live website.