4 Tips for Running a Lean Company

You’ve gotten your small company up and running. Things are humming along nicely, but you know you need to keep the momentum going. That means creating enough value for your customers, growing revenues, and controlling costs. Embracing a lean business model can help you accomplish these objectives while finding effective ways to respond to change.

It’s almost a given that you’ll need to tweak the original plans you envisioned or that your company will face unexpected challenges. Organizations in volatile industries like auto manufacturing use lean business principles to alleviate the effects of erratic market forces. A lean model increases customer value to its fullest potential while reducing waste. Here are four tips on how to implement lean principles in your company.

1. Optimize Processes and Work Activities

Ideally, the processes and work activities employees participate in should add value to the product or service your customers receive. Some practices, such as code that brings a software app to life, benefit products directly. Other functions like brainstorming or marketing might add indirect value. Processes and actions that aren’t useful or take away from existing benefits represent waste.

For many businesses, unproductive meetings are a frequent and typical example of waste. Coming together without a meeting agenda and a lack of follow-through and accountability happens all too often. So do discussions that start and end late, causing participants to grow antsy and feel disrespected. Simple changes, such as outlining discussion and action items, can eliminate sidetracked conversations and dropped tasks or missed deadlines.

Examining internal processes and what employees do can identify opportunities to add value or cut out waste. In manufacturing and retail, excess inventory is inefficient. Expense and time have been put into making and distributing something that no one is buying. Manufacturers and retailers revamp production, distribution, and quality control practices to minimize loss. 

Knowledge-based organizations can use a similar approach by cutting duplicate and unnecessary activities or procedural steps. This could mean consolidating job roles, restructuring the flow of work assignments, or clearly defining the purpose behind group activities.  

2. Trim Your Operating Expenses

The old adage that it takes money to make money may have some truth to it. Startup owners often put their personal finances on the line to launch their business ideas. But it can take years of hard work and dedication before founders see a return on their investments.

To implement a lean business model, you need to know how much money is coming in and going out. Like someone who orders takeout every day, you might not know how much you’re spending on certain things. Not tracking what you’re allocating to keep your business running prevents you from pinpointing possible sources of bloat. Overlooking operating expenses also stops you from discovering and considering less costly alternatives.

For instance, it might be more cost-effective for you to work with independent contractors instead of full-time employees. Workloads may be sporadic or fluctuate according to individual project needs and scopes. Your company could also require the input of a consultant to acquire subject matter expertise and get things up to speed. In cases like these, paying salaries and benefits to generalists is wasteful and a disservice to underutilized employees.

3. Maintain Flexibility

The business plan you created before launch may not resemble the one you implement. Startups can fail in fast-moving industries like tech if founders become too attached to their original concepts. Not pivoting or responding to change, whether anticipated or unexpected, could lead to a dead end. A sizable 20% of startup failures are because the company was beaten by a competitor that successfully addressed a market need they didn’t.

Another business may disrupt the market, or consumer responses might stray from focus group results. Perhaps shifts in the economy or new regulations impact consumer buying power and demand. A willingness to change direction and abandon how you thought your ideas would materialize can help your company survive.

One of the principles of a lean business model is to establish pull. This means that there should be sufficient demand for the work you and your team do. As market dynamics and opportunities change, business owners have to be flexible enough to move to where demand exists. 

Establishing pull also means recognizing how to match your internal capacity with external needs. Examples are businesses that implemented curbside pickup and online fitness classes during the pandemic.

4. Look for Continuous Improvement Opportunities

Just because you optimize a work process or activity once doesn’t mean you can’t improve it again. As your business grows and new team members come on board, you’ll gain additional perspectives on your procedures and workflows. More complex product lines, novel customer segments, and resource developments might mean it’s time for process changes.  

Under a lean business model, those shifts should create or add customer value while getting rid of what’s unproductive. Now that your business has four product lines instead of two, you might need to separate employees into specialized teams. Separate workflows and assignments could help speed up production and delivery times.

Likewise, the acquisition of different consumer groups and technologies could call for new approaches altogether. You might need to map out fresh value streams or modify and extend existing ones. The integration of additional or updated tech tools could also call for training, employee input, and change management. Moving away from tried-and-true procedures takes buy-in, leadership support, and an open mindset.

Final Thoughts

Getting a business idea off the ground is difficult enough. But the real challenges often begin in the day-to-day operations of small companies. Unexpected obstacles and market changes can catch owners off guard and make original plans obsolete.

Organizations that turn to lean business practices like optimizing processes stand a greater chance of survival. Running a lean company takes a mentality that focuses on efficiently creating as much customer value as possible. That requires understanding that the definition and scope of that value may transform over time.