Identifying Value With Lean

Lean is based on the creation of perfect value for the customer. It is said to be Lean’s core objective. As Sales and Marketing professional, you may think Lean has a limiting viewpoint of value. However, Lean has become successful for its ability to deliver recognizable value to the stakeholders. I addressed several of these issues with Dr. Womack in the preceding podcast and encourage you to go back and listen to both.

Can Lean be used on the consumption side? If you choose to view Lean as a collection of manufacturing tools it is hard to imagine Lean as a creator of wealth except from waste reduction or internal mechanisms. However, I view Lean as a Business Process (the way we do business). I also believe Kaizen (PDCA) is the cultural center of Lean. You can listen to Dr. Michael Balle (Lean Gemba coach at LEI), noted author, etc. discuss this; PDCA, Kaizen & Culture in a Lean Enterprise.

I bring it up when talking about identifying value because most people, even Lean Organizations, Lean Enterprises still do not believe in the power of Lean for the demand side. They are really not viewing an end to end value stream. They still feel better, faster, cheaper wins in today’s marketplace. You can (maybe) do that if you have excess demand. You can then try to improve efficiencies. However, most of us live in a world that supply exceeds demand. It is not about getting rid of waste. We have excess capacity. Tell me a company that won’t accept more prospects into their sales funnel or are refusing orders. In sales and marketing, you have to drive revenue. I believe that the role of continuous improvement and Lean lies in this area versus the area of waste.

To simplify the process, I will move forward with explaining Lean from the more traditional perspective. I intend later in the course to turn your thinking back to the demand or the consumption side of the equation. It is important to understand Lean from this perspective. So, how does traditional Lean thinking Identify Value:

  • Understand customers’ needs and wants
  • Identify key waste elements that affect the performance and quality of the service or product.

Waste reduction is the lifeblood of a Lean implementation (this thought does rub me wrong). We try to view every activity and process step to see if it adds value to the end product or service. Lean defines waste as any activity that adds time and cost but does not improve the fit, form, or function of the service or product that is delivered to the customer. We focus on shortening the timeline, improving the flow between the customer request and the delivery of the product or service by eliminating waste. We identify value by becoming Better, Faster Cheaper. In other words, to create we must improve quality, reduce delivery or be something a “Customer will pay for.”

The other way to Identify Value is by creating a term called “internal” customers. They are other people/departments within our organization that uses our outputs as their inputs to achieve business objectives. In many Lean applications, you will see the use of internal control points (another area that rubs me wrong).

Whether we are working with internal or external customers, we focus on these how well we satisfy the client which is a function of better, faster, cheaper and dependent upon process capability. The fundamental belief of Lean than becomes if we improve the process, we improve the value.

My understanding of value (before the influence of Service Dominant Logic) has been developed from the thoughts of these authors and practitioners:

Brad Gale: Managing Customer Value: Creating Quality and Service That Customers Can See

Eric Reidenbach: Value-Driven Channel Strategy: Extending the Lean Approach

Eric Reidenbach: Listening to the Voice of the Market: How to Increase Market Share and Satisfy Current Customers

Michael Treacy & Fred Wiersema: The Discipline of Market Leaders: Choose Your Customers, Narrow Your Focus, Dominate Your Market

Related Podcast: All Business901 Podcast are available at the Business901 iTunes Store or view the Mobile Version of Business901 Podcast

The Nature of Value Podcast with Dr. Eric Reidenbach

Interpreting the use of Data in Marketing

Best of Market eBook: Most manufacturers are product-focused and do not have the ability or the know-how to access the market for the crucial information they need to become Best in Market. Consequently, value is typically limited to value in the product or product features. Value has been shown to be the best leading indicator of market share and top line revenue growth. As manufacturers turn from cost cutting to revenue growth, understanding how targeted markets define value is essential.

Absent a direct link to markets, the idea of value has no real meaning – it’s simply an abstraction. Value creation and delivery is becoming critical in the global economy. And, while definitions of value will vary from market to market, the process of identifying, creating and delivering value is constant. Moreover, this process can be learned so that value creation and delivery becomes systematic and not random. Best in Market details a process for assessing how manufacturers targeted product/markets define value and how this information can be delivered to key operational and strategic areas of their business. Six Sigma Marketing – a fact based, disciplined approach for growing market share in targeted product/markets by providing superior value is the vehicle for achieving best in market status. Market share growth and best in market status is inextricably tied to value creation and delivery.

The eBook contains a number of comprehensive examples of how Six Sigma Marketing has worked in different manufacturing organizations and provides an easy to understand process for tapping into the voice of the market to drive operational and strategic value excellence.