Should I believe the hype about Lean?

Should I believe the hype about Lean?

As you research what to expect from Lean in terms of specific performance increases, you will undoubtedly come across a glut of claims.

The thing to keep in mind is that many of these claims come from sources that benefit from the improvement being as large as possible. Authors want Lean hyped so you will buy their books. Consultants want you to believe that massive gains are possible so you can justify the expense of hiring them. Content producers (like myself) are vested in you believing that purchasing our materials will make you get those same gains.

So, what should you believe? Well, I am generally a believer that people are good at heart, so I don’t think the gains you come across are, for the most part, lies. They are instead selective results.

For example, a consultant who has a long-term working relationship with a company may list four or five project results for the company as examples. These may show 60% reductions in inventory, or 74% productivity increases. What they seldom show is the overall profit margin change for the company over that same period.

That’s because Lean is hard and takes a lot of projects with big gains to move the bottom-line dial.

So, what should you expect, bottom line wise? Well, the first thing to consider is that Lean can help with that by beefing up the top line. In truth, this is often the bigger benefit. When you improve quality or reduce lead time, or are able to compete on cost with better products, you’ll see growth. Even if you don’t see much movement on margin, selling more with the same margin still means more profit.

Anecdotally, Lean can deliver a several point increase on profit margin. If you are at 8%, getting to 12% or 13% is not uncommon. And some companies can even get up into the high teens. Keep in mind that this is an estimate. There’s no data I could find that actually lists the results of Lean implementations. Also keep in mind that this is for the companies that are successful at implementing Lean. There are a lot of companies that abandon Lean because it is hard and takes longer than they expect. Only about 1 in 4 companies get what they thought they would out of Lean.

Now, most of the gain you will get depends a lot upon how much you commit to Lean. If it is haphazard and isolated, the gains will be minimal. It takes a companywide commitment to get the biggest impact. So, as you try to project your own gains, it will be directly correlated to the level of enthusiasm of the top-level executives.

So, should you believe the hype? I’d say yes, but…

Make sure to read the fine print. Know what the gains are listing. If they show single project results, ask for average project results. Most consultants won’t have a long history with their clients, or won’t be immersed enough in their operations to take credit for the overall gain, but it still might be a good idea to ask how their clients have grown their profit and profit margins during their tenure. The short of it is to use the claims as a data point but conduct thorough research before settling on who you want to get help from.