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The Nolan Company is a management consulting firm comprised of highly experienced and exceptionally knowledgeable industry experts. As trusted advisors to our clients, we frame, simplify, and solve complex and multi-dimensional operational and technical challenges.
August 2014
Don't Take Lean Too Lightly
George Krempley, Principal Consultant
Steve Discher, Executive Vice President


Like other contemporary management models, Lean can be a powerful tool for affecting positive change. Like other theories, it has taken time for Lean to catch on --- especially in organizations outside of manufacturing. Yet while Lean is here to stay, there's still plenty of confusion about where to start; how to make it work; and even 
whether it can be effective for certain businesses. That hasn't stopped some organizations from running headlong into Lean thinking. Companies have launched Lean initiatives. Banners have been printed. Emails have been sent. Orientation programs have been scheduled. Business leaders are proudly proclaiming, "We're on our way to becoming a Lean Organization."

 

The problem is that organizations aren't taking the time to fully understand Lean and how it can apply to their situations. Instead, big businesses are jumping ahead to tactics that promise a quick fix. Perhaps even worse, many small businesses are staying away from Lean altogether. They're convinced it's far too complicated and costly --- so they're missing out on the potential benefits. And frankly, many organizations are simply in denial about whether there's any waste (a key Lean concept) to be eliminated. In any case, companies run the risk of underestimating the cultural shift that's required to make Lean truly effective.

 

Essentially, learning and applying Lean is much more difficult than many business leaders recognize or even imagine. Going Lean is a serious commitment. The concepts are not intuitive. Lean must be internalized, not just understood. Of course, the process must be actively managed.

 

In this article, we'll define a few basic Lean principles and share some lessons learned so you can see how Lean can work in your organization.

 

Lean Lessons:

  1. Waste is everywhere: Lean is brutally honest in its definition of waste (or "muda" in Japanese). According to Lean guidelines, there are very few activities within a service business that can't be viewed (at least in part) as wasteful. So upon seeing the initial assessments, many business leaders are shocked, and even put off. Lean is very good at showing organizations just how prevalent waste is. The good news is that Lean can be just as effective at eliminating it.
  2. WIP kills: The idea of "Work in Process" (WIP) may not seem relevant to an insurance company. But viewed through the lens of Lean, it shows up as waste. WIP is anything you're working on that's incomplete: new business quotes, renewals, claims, billing inquiries, agent calls, product development, hiring, performance reviews, or monthly reports. As an item passes through the organization, it gets "processed" or "touched." Whether it's for one minute or a matter of days, the amount of time the item sits at any one point is critical. Each time a new person has to pick up the item, get up to speed, and perform the next step, there's an incremental stoppage. Unless there's a "flow," there will be queues, bottlenecks, or "in-buckets." These increments can, and do, add up. That's the nature of WIP.
  3. The customer is waiting: If it takes two hours to process a new business quote, then why would an organization make a prospect wait ten business days for it? In a world where mobile, informed, and impatient consumers can get three competing car insurance quotes in 15 minutes or less, businesses have to get Lean.
  4. Seeing is believing:  Make the problem visual with real numbers and other meaningful data. When people can see the waste and its impact on the business, they take notice, and they can start to imagine the desired end-state.
  5. Skip ahead:  You can get to Six Sigma Quality faster by using Lean to eliminate unnecessary steps. According to Lean, there are three ways to cut waste: 1) Reduce WIP; 2) Eliminate holding bins; and 3) Remove steps that don't add measurable value. Example: If you have a 20-step quoting process, with each step operating at 4σ, then the yield would be 88% (.99379)20.

Five Steps to a Leaner Organization

  1. Breathe in: Learn about Lean and Six Sigma. Internalize it. Look at the nuances, and get a sense of how the principles can apply to the business. The essence of Lean is about streamlining to improve efficiencies. That's why companies of any size can benefit from Lean thinking.
  2. Ask questions: Define your strategic objectives for going Lean. Why make the investment? How will we know it's working? Who's doing it well? Who can help? Clarify the vision, and then focus on the actions.
  3. Design the answer: Let the concepts of Lean inform and shape a program that reflects your organization's unique situation and objectives. The solution lies in the problem, so choose tactics that serve the stated goals.
  4. Commit: A Lean initiative can be deceptively simple. It is not a band-aid. But with the right objectives and a proper level of understanding, Lean can create dramatic impact for organizations that are willing to take it seriously.
  5. Measure, manage, and repeat: Lean and Six Sigma aren't one-time initiatives. The decision to go Lean requires a philosophical shift at the highest levels of the org chart. Then, once the plan is in place, Lean requires intensive maintenance to prevent old habits (and waste) from resurfacing.

The reality is that Lean can be extremely effective for all kinds of organizations. It just takes defining the business objectives and then planning how to apply the concepts. It's the difference between watching an on-line tutorial and enrolling in a post-graduate program. A Lean master has not only memorized the theory, but also mastered the practice through countless and varied experiences.

 

Is Lean right for your business? It is for many. But before you print the banners and send out the press release, take the time to fully understand the required investment and the real potential. 


 

 
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IASA Executive EDGE Conference

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Nolan is a sponsor of the 2014 IASA EDGE Conference which is an event designed for insurance senior executives.  Nolan's Rod Travers will be a panelist on the session, INDUSTRY PULSE CHECK: Insurance 2014 & BeyondDavid Walker, former head of the Government Accountability Office spanning two presidential administrations, is keynote speaker.
 

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