How Lean can help startups – Do not repeat mistakes of established companies 1/2

If there is one way Lean can help startups, it is to provide guidance or “Lean inspiration” from the very beginning and prevent them reproducing the same mistakes of long-established companies.

>Lisez cet article en français

Most established businesses are built on an outdated model in most cases: the mass production of low variety products, regardless of the actual reality of their business.

This model is characterized among other things by:

  • an organization built on functional silos
  • hypertrophy of overhead functions called “support”
  • a pyramidal hierarchical structure
  • an obsession about lowest unit cost
  • seeking economies of scale

This set of characteristics influenced the structure, management procedures and the rules of the organization.

Yet most startups are preparing to face a demanding market awaiting highly customized products in small volumes, possibly with specific additional services. They may go for pure services e.g. mobile apps, something relatively new compared to established businesses settled before the Internet or mobile phones even existed.

Consumption patterns have greatly changed. Owning something in full property is no longer the single or even principal modality in some cases, think about pay per view, download on demand, rental, subscription and freemium for example.

Thus, a business in creation must adopt a structure fit for the different upcoming challenges:

  • customer satisfaction, which notably includes timely access to services they request; pre-sale consulting, delivery, after-sales service, installation assistance and / or operation, maintenance, etc.
  • the satisfaction of stakeholders, the partners, suppliers, investors, employees, possibly residents, local authorities, etc.
  • the satisfaction of regulatory and legal requirements, including tax, accounting, social, etc.

and all this in a sustainable way.

This structure will evolve over time, because the requirements are not the same depending on the size of the company, its markets and business volumes.

The difficulties that established companies face when looking to return to leaner structures, should encourage entrepreneurs to remain vigilant and embed Lean into the Vision from the start.

It starts with thinking in terms of value-creation flows rather than operational subdivisions. It is often related to as “value chains” or “value streams” that are built specifically to quickly deliver the value expected by customers, without being disturbed nor burdened by artificial , expensive “additions”, without significant contribution to value creation.

The examples which we can think of are:

  • tending over complicated dashboards and lengthy reports
  • installing quality controls to filter and retain defective products
  • granting statutory functions, well paid but non-contributory
  • multiplying hierarchical levels

Experience shows that once such structures are in place, holders, beneficiaries and “supporters” will find ways and means to justify their continuation and even strengthening them, this is Parkinson’s Law.

It is therefore easier to be vigilant and to control the development of such (often called supporting) functions:

  • put in place only what it is a strictly necessary condition for the satisfaction of non-negotiable demands or requirements, by customers, markets or regulation
  • keep them “minimum” from the start rather than fighting desperately to restrict them later
  • do not hesitate to dismantle or convert them if the original requirement disappears or can be satisfied by a more flexible, more efficient or cheaper alternative

>Move on to part two


Bandeau_CH38 View Christian HOHMANN's profile on LinkedIn

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