Lean6Sigma and operating models

I was stimulated by a LinkedIn discussion about how to ensure the customer is part of thinking about waste.  The answer of course is obvious – the customer is at the heart of all judgments about waste.  If an activity does not contribute to the value proposition that the customer is receiving, it is waste.  If the activity costs more than the benefit that the customer gets it is waste.

This then caused me to reflect on how to make some of these judgments especially in situations where the customer does not pay for the service being provided: a common situation between internal functions or in public sector activities and charities.  Here all of the tools of marketing and product development and service design need to be brought to bear: focus groups, indifference curves, observation, surveys, enthnography, etc.  Which is one of the reasons for the Lean guidance “Go to Gemba”.

I then began to consider what factors other than judgments about “customer value” and “cost” should influence judgments about waste – and where “strategy” comes into the equation.

Strategy defines who the target customer is and what needs of these customers are being addressed and what needs are not being addressed.  If Lean work is done without defining in advance who the customer (or beneficiary) is and which of these peoples’ (or organisations’) many needs are being addressed, it is easy for the work to lose direction.

But I also realized that there is another constraint on judgments about waste – the operating model.  Whether you consider the operating model to be part of strategy or not, it is still something that needs to be decided before work on lean process design begins.   The operating model is the collection of processes, types of people, organisation structures, IT systems, locations, suppliers and management systems chosen as the best means of delivering the value proposition.   When “leaning” each process, black belt experts need to consider how that process fits into the larger operating model and avoid eliminating activities that may not deliver to the customer of the process, but may be important to the integrity of the larger operating model.

In practice, this is achieved by recording the “stakeholders” of the process – not just the customer; and recognising that the process must deliver value to all of its stakeholders.  As a result, an activity in the process may be necessary even though it does not deliver value to the “customer”: it may be delivering value to another stakeholder.

A simple example is the annual report that companies produce.  This adds no value to customers – but is required by law, and adds value to shareholders and debt holders and those who make contracts with the company.


About Andrew Campbell

Ashridge Executive Education Focus on strategy and organisation Almost retired!
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