What Is Lean Management? Basics Explained.

Lean Management Definition

Lean management is a systematic approach to optimizing efficiency by minimizing waste and maximizing value for the customer. Originating from the Toyota Production System (TPS), it is characterized by a relentless pursuit of improvement and a focus on value creation through waste elimination.

The main goal of Lean management is to improve efficiency and effectiveness by reducing the time spent on non-value-adding activities and optimizing the flow of work. Such waste in Lean can include overproduction, waiting time, unnecessary transportation, excess inventory, unnecessary processing, and defects. 
 
The Lean concept is successfully applied to any business or production process, from manufacturing to healthcare, engineering, and software development. 

Lean pillars

The Birth of Lean Management

Lean management has its roots in the Toyota Production System, which was established in the late 1940s.
 
In the late 1940s, when Toyota put the foundations of Lean manufacturing, they aimed to reduce processes that don’t bring value to the product. By doing so, they succeeded in achieving significant improvements in productivity, efficiency, cycle time, and cost efficiency. 
 
The success of the TPS at Toyota led to the spread of Lean thinking and the implementation of Lean principles around the world. Today, Lean management is used in a wide range of industries and organizations and has evolved to include a variety of tools, techniques, and approaches.  

Indeed, the term "lean production" was made up by John Krafcik (former CEO of Google’s self-driving car project Waymo) in his 1988 article "Triumph of the Lean Production System". His studies formed the data behind James P. Womack’s 1990 book "The Machine That Changed the World: The Story of Lean Production". 

What Are the 5 Lean Management Principles?

Five Lean principles

1. Identify Value

What does every company strive to do? To offer a product or service that a customer is ready to pay for. To do so, a company needs to add value defined by its customers’ needs.

The value lies in the problem you are trying to solve for the customer. More specifically, in the part of the solution that your customer is actively willing to pay. Any other activity or process that doesn’t add value to the product is considered a waste.

In Lean, value is the first thing you need to identify. So, first, decide what you want to deliver, then move on to the next step.

2. Value Stream Mapping

This is the point where you need to map your company's workflow. It should include all actions and people involved in delivering the product to the customer. By doing so, you will be able to identify which parts of the process bring no value.

Applying the Lean principle of value stream mapping will show you where value is being generated and in what proportion different parts of the process do or do not produce value.

When you have your value stream mapped, it will be much easier for you to see which processes are owned by which teams and who is responsible for measuring, evaluating, and improving those processes. This big picture will enable you to detect the steps that don’t bring value and eliminate them.

3. Create a Continuous Workflow

After you master your value stream, you need to ensure that each team's workflow remains smooth. Keep in mind that it may take a while.

Developing a product or service will often include cross-functional teamwork. Bottlenecks and interruptions may appear at any time. However, by breaking down work into smaller batches and visualizing the workflow, you can easily detect and remove process roadblocks.

4. Create a Pull System

Implementing a pull system guarantees a stable flow of work and enables teams to complete tasks more swiftly and easily. As a lean strategy, a pull system reduces waste in the production cycle by initiating new tasks only when there is a clear demand. This lets you optimize resources’ capacity and deliver products or services only if there is an actual need.

Let’s take a restaurant, for example. You go there and order a pizza. The baker pulls your order and starts making your pizza. He doesn’t prepare tons of dishes in advance because there isn’t actual demand, and these tons of dishes can turn into a waste of resources.

5. Continuous Improvement

After going through all the previous steps, you have already built your Lean management system. However, don’t forget to pay attention to this last step, probably the most important one.

Remember, your system is not isolated and static. Problems may occur with any of the previous steps. This is why you need to make sure that employees on every level are involved in continuously improving the process.

Different techniques encourage continuous improvement. For example, in Businessmap (previously known as Kanbanize), all our teams have a daily stand-up meeting to discuss what has been done, what needs to be done, and possible obstacles - an easy way to process improvements daily.

What Are the Benefits of Lean Management?

Lean management can help organizations and teams create a stable work system with a higher chance of improving overall performance. Here's a list of the major advantages you can benefit from when introducing Lean.

• Increased employee engagement and focus: Lean encourages employees to identify and solve problems leading to increased engagement and focus on activities that bring value.

• Improving productivity and efficiency: By eliminating waste and streamlining processes, Lean management can help organizations become more efficient and productive, allowing them to produce more with the same or fewer resources.

• Faster time to market: By establishing a pull system, a Lean management system helps organizations deliver work only if there is actual demand and reduces their lead times.

• Improved quality: Lean management places a strong emphasis on identifying and eliminating defects, which can help to improve product and service quality.

• Continuous improvement: Lean management is built on a culture of continuous improvement, enabling organizations to adapt to changing market conditions and stay competitive over the long term.

Common Challenges When Implementing Lean Management 

While Lean management has many benefits, it is important to also consider the potential disadvantages, which can include:

• Resistance to change: Implementing a lean management system can be a significant change for an organization and may be met with resistance from employees who are used to more traditional ways of working.

• Difficulties in implementation: Implementing a lean management system can be complex and challenging, requiring significant investment in training, infrastructure, and culture change.

• Risk of over-focusing on data: Lean management relies heavily on data and metrics to measure performance, which can lead to a focus on short-term results at the expense of long-term goals or strategic planning. 

Lean Management Examples 

Lean Software Development 

In 2003, Mary and Tom Poppendieck published their book "Lean software development: an Agile Toolkit". The book describes how you can apply the initial principles of the Lean methodology to software development. 

At the end of the day, Lean software development comes down to 7 principles. In the beginning, it didn’t gain popularity, but a few years later, it became one of the most popular software development methods. 

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The Lean Startup

Eric Ries, an engineer and serial entrepreneur, developed a methodology based on the Lean principles to help startups succeed. In 2011, he packed his ideas into a book called "The Lean Startup". The concept consists of 5 basic principles that aim to help startups be more flexible and responsive to changes.

From a business point of view, Lean is to shorten product development cycles and rapidly discover if a given business concept is viable. This methodology is also employed by government structures, marketing professionals, and others.

Lean Accounting

Lean accounting refers to the application of Lean management principles, such as a focus on delivering value to the customer and waste reduction to managing financial practices and processes. The approach allows organizations to streamline their operations and align them with the strategic goals of the organization.

Furthermore, by promoting Lean thinking in accounting, companies can make financial information easier to understand and more relevant across an organization’s teams and departments.

Lean Management Applied in Healthcare

Lean management principles find an increasing application in healthcare institutions to improve patient care, service quality, healthcare workers’ satisfaction, and cost-effectiveness.

What Are the Different Tools of Lean Management?

Some of the most common lean tools and techniques used by organizations and teams new to the Lean philosophy include:

• Value-Stream Mapping (VSM): for visualization, analysis, and improvement of all the steps in a product or service delivery process.
• 5 Whys Root Cause Analysis: for uncovering the root cause of process bottlenecks and constraints.
• Kanban: for defining, managing, and improving services that deliver knowledge work.
• 5S Method: for workspace optimization to reduce waste and streamline processes.
• Gemba Walk: the main idea of the Gemba walk is for managers and leaders on every level to take regular walks around the shop floor and be involved in finding wasteful activities.
• Andon: a system developed to alert operators about an issue on the production line in lean manufacturing.
• Continuous Flow: allows you to move a single product through every step of your process instead of grouping work items into batches.
• Heijunka: reduce unevenness and minimize the risk of overburdening in processes.
• Hoshin Kanri: a 7-step planning process used to communicate strategic goals across the company.