Eliminate Waste with a Lean Business Model
"The most dangerous kind of waste is the waste we do not recognize."
– Shigeo Shingo
When you think of "running lean," what comes to mind?
For many entrepreneurs, running lean means producing great results on a shoestring budget. Traditionally, being "lean" has meant doing more with less. Lean business models are all the rage, especially for start-ups or for small regional firms. But recently, the concept has expanded.
Today, a lean business model is a strategy that uses continuous planning and streamlined processes to address customer needs rapidly. Here is one working definition:
A lean business model is a business strategy that strives to eliminate waste in products and processes while satisfying customer wants. In doing so, the business will receive more positive customer returns (like increased sales and goodwill) while expanding profit margins.
Lean businesses are those that recognize inefficiencies, adapt quickly, and continually prototype new options to accommodate shifts in demand.
Lean Business Practices in Action
One real-life example of a lean business strategy comes from the automotive industry.
In the 1990s and 2000s, Japanese companies dominated American auto sales by becoming more customer-oriented. Responding to market demand, Japan produced several high-quality, low-cost vehicles that were assembled in the U.S. This appealed to a niche in the market while significantly reducing development time and operating costs. Sales boomed, and it took the better part of a decade for American manufacturers to regain this lost market share.
It's easy to recognize the results of a winning approach, but what does a lean business model look like in practice? Here are three parameters to guide your thinking:
1. Make strategy the heart of your plan
Lean businesses are flexible, fast, and efficient.
Adaptable companies are those that can change tactics while keeping their strategy consistent. What (or why) does your unique business connect with your target markets? Keep this strategic focus consistent with staying intimately connected to your preferred buyers.
2. Track progress and focus on what works
Since lean business models respond quickly to shifting demand, your company must have an accurate pulse on what is working.
This may involve fast cycles of surveying customers, with corresponding numbers that are specific and measurable.
The most important part of tweaking a business model plan is your data. This includes regularly updated sales projections, detailed performance tasks, or timebound concept developments.
Lean businesses often find that monthly projections are essential, but trajectories beyond one year are usually a waste of time. The goal is not guessing "right," but to generate probable results and to make course corrections as you go.
3. Revise and Review
Managing a lean business model isn't something you do once, or even once a year. Like calorie counting, the key to staying lean is regular repetition over time.
In business, this means revising and tweaking your plan consistently, including a commitment to reward experimentation and to prioritize ideas based on their output. This can be painful. It may mean abandoning concepts you championed, or sacking projects you've invested months into. But isn't that better than losing time and money in the long run?
Whether you like it or not, the only constant thing in life is change. Running a lean business requires an agile mindset, a humble attitude, and a willingness to learn as you go.