LEAN Misconceptions – Part 3

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LEAN Misconceptions – Part 3

In Part 2 we shed light on the fact that Lean is not a process to reduce the number of employees, which followed from the initial myth that was debunked being that Lean is all about cost reduction. In this article we explore the myth that Lean is only applicable to manufacturing.

Misconception # 3: Lean is only applicable to manufacturing organisations

The origins of Lean can be traced back to Henry Ford in the 1920’s when he developed the assembly line for the Model-T Ford. In the 1950’s, we then had the quality crusade driven by Deming and Mitrofanov’s Group Technology which was further enhanced by Burbidge in the 1970’s. In the 1980’s the Just-in-Time, Zero Inventory and Total Quality Control (JIT/TQC) era rose to the forefront, and finally Lean took center-stage with Ohno and the development of the Toyota Production System (TPS) in Japan. So while neither Ford, Deming et al, called their methodologies ‘Lean’, their approach always focused on the elimination of all forms of ‘waste’…the very essence of Lean. It was only in the 1990’s that these various approaches to process improvement were finally amalgamated and called ‘Lean’. Read more →

Lean Myths & Realities – People

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LEAN Misconceptions – Part 2

In Part 1 we debunked the myth that Lean is all about cost reduction. In this article we explore the myth that to be Lean a business has to cut staff.

Misconception # 2: Lean is a process to reduce the number of employees

As discussed in “Misconceptions # 1”, reducing the non-value added components or waste, capacity is increased (diagram 1), and increasing capacity is the REAL purpose of Lean.

Lean Misc Image #2

Diagram 1

By creating this additional capacity, the organisation now has the opportunity to either:

a) Reduce the number of employees.
Using this approach will invariably result in the following:

  • The process of continual improvement which is fundamental to Lean, coming to an instant halt. After all, which employee wants to reduce waste and make improvements to the organisation if it means that either he or his peers will then be without a job?
  • A huge decrease in employee morale.
  • Stagnant/declining productivity with the possibility of implementing any future improvement program/s being slim.
  • Stagnant growth and process improvement, thereby allowing the competition to catch-up and finally overtake the organisation.
  • Distrust between management and the employees, perpetuating the “us vs them” culture.

b) Utilise the employees to increase output and/or add greater customer value.
Using this approach will have the exact opposite effect to that of (a) above. Read more →

Risk of Too Few Customers

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Concentration Risk! Not a risk with concentrating so hard your brain hurts, but the risk associated with your business being reliant on too few customers.

For many businesses, once they win the first BIG deal there is a feeling of excitement and achievement. You’ve finally got that deal that will deliver the revenue you have been chasing and allow you to set in place the business operations and processes to deliver the profits you have been targeting. The problem for most businesses is the fact that this win often drains resources and there is little or no follow-up to generate more significant sales. The risk is obvious, if this customer leaves, for whatever reason, your business is vulnerable.

Read more →

Lean Business – Myth or Reality?

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LEAN Misconceptions – Part 1

The Lean Philosophy has been around for many years, but unfortunately it is not always understood, predominantly because Lean is thought to be:

  1. A cost reduction exercise
  2. A process to reduce the number of employees
  3. Only applicable to ‘manufacturing’ organisations
  4. An ‘operational’ issue that can be solved by the ‘operations people’
  5. Only for ‘big’ organisations.

Nothing could be further from the truth!

In this series of articles, I will discuss each of these misconceptions and demonstrate that Lean is about business; any and every business. A Lean business strives to understand what the customer really values, and then maximises customer value. Lean is not a short-term fad, but a long-term commitment towards continual improvement that involves every system, every process, every department and every employee within the organisation, irrespective of it’s size. Read more →

Business Strategy Consulting

Can You See Your Vision?

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It’s not just a marketing plan, although these plans have to be based on an appreciation of a vision for the firm. The irony is that a vision is something that never exists in the physical sense – it simply can’t be seen with the eyes.

A vision is a product of the imagination. It can be reduced to writing but that’s only a summary of something much more vital.

One way of defining vision is: “What the business will be in three years’ time”. It’s obviously not a part of the here and now but rather something that is going to happen in the future. Here are the elements of the vision for a firm: Read more →

Business Strategy Consulting

SMART Goals To Motivate Your Team

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Goal setting is a great way to motivate your staff in either the long term (financial year) or short term (project).

Make sure your team are fully involved in the process of setting their goals.

If you simply tell them “these are your goals for today” they won’t respond, whereas if they have set the goals themselves they will be more motivated to reach them.

The goals they set need to be SMART so they can see easily if they have achieved them. Read more →

Business Strategy Consulting

The purpose of your Business

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People often stumble over the question of their ‘purpose’ in life, but in business there can be no question. There is absolutely no room for confusion on this issue. The purpose of any business is precisely this: to serve a well-satisfied customer.
Sure, you want to make a profit. Of course, you want to serve your customer in ways that are convenient, satisfying and (obviously) legal and moral. But the bottom line is always the same — to serve a customer.

So the first and primary question for any business is: what exactly do you do FOR your customers?
Some restaurants provide meals that are fast or inexpensive, that have particular ethnic or nutritional styles, or that are conveniently located. No restaurant can be all things to all people, but every restaurant has one main purpose.

McDonald’s provides predictability and speed. Hungry Jacks provides “better burgers”
Dominoes delivers pizza in 30 minutes or less. Pizza Hut provides variety (now it’s pizza and pasta)
Telstra sell “more coverage and less drop-outs”. They have the most extensive mobile network and that is what they are marketing.

On the other hand, other service providers try to differentiate on their applications and service as they lack the coverage of Telstra.

Your business has only one primary purpose.
When you are clear about that and clearly communicate it in every message.
It’s all about knowing your value proposition, identifying the market that needs this most and planning.

Business Strategy Consulting

Top Tips for Business Buyers and Sellers

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Some businesses are in greater demand than others. This means they’ll sell quickly and the vendor will receive a good price for the sale. First we need to look at those things that make a business marketable; not many businesses will have all these characteristics but the more a business has the greater will be its appeal to prospective purchasers.

Characteristics of a marketable business

  • It is well-established and has a good trading history with at least three years of detailed financial records including tax returns that are in agreement with the books of the business.
  • It is not dependent on the skills of the vendor, nor on relationships between the vendor and customers.
  • It can demonstrate growth in revenues and increases in profitability over the past three years.
  • It is in a market that is growing and provides opportunities for the business to grow further.
  • Key personnel will remain with the business after the sale.
  • The owner can work reasonable hours and no more than five days a week.
  • Premises, fixtures, fittings, plant and equipment are in good condition.
  • The inventory (if applicable) can be verified and accurately costed and all stock is of reasonable age and is in saleable condition.
  • Tenancy of the premises is secure for at least three years and the cost to the business reflects market levels or less.
  • The location is suitable to the operation of the business and will not be difficult for employees to reach.
  • The customer base is diverse without over-reliance on just a few major customers.
  • The vendor will provide transition assistance and some finance if required.

Those are characteristics of the business itself, but what can the vendor do to help ensure a trouble-free sale process? Here’s what the vendor can do to make selling a business easier: Read more →

Business Strategy Consulting

It’s Time to Review your Strategy

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Monday, 27 June 2011 14:29 | Written by Eric de Diesbach

The end of the financial year is a god time to review your business strategy and ensure that you are “Set for Success” over the new financial year and years to come.

Let’s recap on the strategic planning process based on the “KISS” principle…….

 

Stage One – Review Your Current Situation

  • Define what the business does – this appears simple but putting this in words and writing it down will provide the clear statement required to move forward. “We provide a short lead time printing service to metropolitan based advertising agencies”
  • Define Targets – the business owner must state what the targets are going to be for the foreseeable future. “We will double the number of clients over the next twelve months and achieve sales of $2.5 million per year.”
  • Define what is influencing the business – what is happening in our market, our competitors, our suppliers which will influence our business and our targets. This is where you need to get very good information on what is going on around you. You sales people will have good information, industry associations will have reports and newspapers/journals will be another source of information. Summarise this down to around five critical “things” that you will need to consider.
  • Define what needs to happen within your business in order to achieve the target. This could be production related; numbers of staff; skill development; bonus and pay rates for staff; etc, the list goes on. Make sure that you test each of this as being critical to achieving the target, if they are not, get rid of them.

Look back over the last twelve months and question what has been done and achieved; what has worked well and what has been slow to get moving. Are your assumptions backed up with facts and data; does anything sound too farfetched or unrealistic. It is never too late get the strategy right.

 

This ensures that your strategy is “EVERGREEN” and is always up to date and relevant.

 

Stage Two – Plan to Implement

I will simply say here, you need to involve all your people and suppliers/customers to implement your strategy. Detail out your actions using the simple steps to project management. Get the actions and outcomes owned by individuals in your team. You can get basic planning tools from the internet to assist with this step.

 

Stage Three – Keep in Touch with Progress

This is a vital step in your business strategy process. This is where it can all fall down. As the business owner it is up to you to monitor progress, measure results and drive the fine tuning of the implementation while continuing to communicate the goals you want to achieve. Also, this step is essential to react to dramatic changes in costs, orders or anything else which comes along to challenge your business. I would strongly recommend a quarterly review – where you involve your key staff and measure performance and fine tune direction.

 

All the best for the NEW Financial Year.

Business Strategy Consulting

Your Business Transition Strategy

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Tuesday, 20 September 2011 14:27 | Written by Wayne Moloney
At some stage every business owner must sell or pass on – transition from – their business. Many ‘transitioners’ have predicated their post exit plans on having a nice nest egg from the sale of their business. But here’s the hurt – it is estimated that as many as 40 per cent of baby boomer owners plan to leave within the next five years, and over 80 per cent in the next 10 years.
That means we may see a glut of small businesses for sale making it increasingly difficult for SME owners to sell their business at the price they had been counting on.
The fact is, ‘hoping’ is not a strategy. Hoping won’t create value in the business. A strategy involves actually being in control of your business, being aware and goal focused, and having a plan for an organised and profitable ending.
So what will it really take for a business owner to successfully extract themselves from their business? To leave under their own terms; when they want to; and get the price they need?
Strategically decide WHAT you want to have happen
You can’t develop a transition plan without having your end objectives in mind. You need to start by considering your endgame and making some specific decisions:
  • How you would prefer to transition – sell, pass on to family, etc
  • What you want to do after transition – specifically, so you can set a budget for it
  • Just how much money you will need to leave with to make your post transition plans a reality – not just ‘as much as I can get’
  • When you want to go – this determines how much time you have left to make things happen in the business Plan HOW you are going to make it happen

Strategies need to be assessed and specific plans developed for how they will happen. For instance, precisely how to structure the sale to a third party for top price after taxes; or just how you will transfer your business to family members, co-owners, or employees while paying the least possible taxes and receiving the greatest financial security.

The obvious option may not necessarily be the best. Structured withdrawals staggered over a number of years where the owner takes less than market price up front but remains under contract for some time to help out during changeover, maybe in a part time capacity, can add up to a bigger sum than simply taking the first cheque offered. That’s the value of planning things out.

Actually GET ON with making it happen
Making it happen means taking each of the strategies in the plan and implementing what needs to be done to achieve it. Typically the major one will be to increase the value of the business. Can you imagine putting your home on the market without getting it ready? Not likely – you know it needs to look good and be in good repair to bring the best price. The equivalent with businesses is called grooming for sale. Grooming means looking at ways to improve the value of the business – developing a bigger market share for instance and improving productivity.
Secondly, the business needs to be in sale ready condition. At the time of sale the buyer will run a thorough due diligence check of your business records to satisfy themselves of the viability of the business and the validity of the claims you have made about it. You need up to date financial records and several years’ backup records that all make the business look good.
The third key factor is taking YOU out of the business. If most of the value of the business is predicated on your involvement – your own knowledge of processes, your own ways of doing things and so on – then it isn’t worth much without you. Instead, you have to be able to demonstrate that yours is a turnkey operation that the buyer can run as effectively as you. One way to do this is to have trained employees and systemised processes in place that allow the business to run without your constant oversight.
Transition planning can bring immediate benefits too
Even if retirement seems a long way off and even though some things are going to change your ultimate goals as time goes by, the fact is that because transition planning revolves around taking steps to improve the value of your business there will usually be some immediate benefits from starting the process.
  • More profit
  • Higher efficiency
  • Greater peace of mind
  • Clearer focus

To develop a viable transition plan professional guidance is essential. At Inform Consulting Group, our Business Transition Program can help you plan for your smooth and profitable exit from your business.