This is Lean: Resolving the Efficiency Paradox

by Niklas Modig

Processes are defined from the flow unit’s perspective

A flow unit can be material, information, or people:

Taking the perspective of the flow unit enables us to understand a subtle but important difference between resource efficiency and flow efficiency.

Value is always defined from the customer’s perspective.

Instead of being about cutting hair faster, it is about reducing the waiting time for the client.

When it comes to the value-adding activities, flow efficiency emphasizes identifying the “right” speed. What is right for the customer? What is right for the employee? The intention is to maximize customer value by striking a good balance.

The first condition for bottlenecks is fulfilled if the stages in the process must be performed in a certain order.

If lean is defined as methods, the use of these methods tends to become a goal in itself.

Confusing means and goals often causes an organization to overlook why it is going through a change process. Instead, the organization places too much importance on the specific means being used. When asked whether the organization works with lean, the proud answer is: “Yes, of course! All our departments have now put up a visualization board, and we gather around it every morning for a meeting.” The means have become the goal. The organization sees itself as “lean” just because it successfully implemented a specific tool or specific method. The goal behind the implementation of the tool or method is lost.

Sounds a lot like agile "transformations"

Researchers and practitioners alike often see lean as the solution to all problems. But if lean is the answer to all problems, then what is lean not? If lean is everything that is good, and everything good is lean, what is the alternative? If lean solves all our problems, do we need anything else?

The problem with current definitions of lean, as with many of the conclusions we draw regarding how successful organizations run their businesses, is that they are trivial.

In order to maximize flow efficiency, there needs to be free capacity in the organization’s resources. Flow is efficient at the expense of an efficient use of resources.

The key to the difficulty of reaching the perfect state is variation.

Variation affects the possibility of combining high resource efficiency and high flow efficiency.

Which is why I question if Lean and software development are compatible.

the efficiency frontier is pushed “inwards” as the level of variation increases. Being pushed inwards means that an organization facing high variation will find it harder to combine high resource efficiency with high flow efficiency than an organization facing low variation.

The better an organization is at developing capabilities to handle the two conditions, predictability of demand and flexibility and reliability of supply, the further out the organization will move towards the star in the perfect state.

Lean is great for manufacturing or services that are or can be standardized. But I question if software is a good fit.

Many organizations say that they want to implement continuous improvement. Based on the discussion in chapter 7, this is a trivial statement. The efficiency matrix enables us to be much more concrete and require those organizations that claim to have a strategy of continuous improvement to define the direction in which they intend to improve. Movement in the matrix can occur in two dimensions: Resource efficiency can be increased or decreased. Flow efficiency can be increased or decreased.

Resource efficiency can be increased or decreased, and flow efficiency can be increased or decreased. There is no “best” solution; it all depends on the organization, its competitive environment, its customer needs and, particularly, its business strategy – what value does the organization want to provide?

In brief, lean is an operations strategy that prioritizes flow efficiency over resource efficiency.

By focusing on flow efficiency, an organization can also reduce a lot of superfluous work and waste.

A focus on flow efficiency therefore fosters an improvement of resource efficiency.

a lean operations strategy involves focusing on flow efficiency before resource efficiency, not the other way round. Focusing on resource efficiency first tends to create efficient but sub-optimized islands. Superfluous work and waste often occur between the islands. A focus on flow efficiency means an integration of the separate islands into one system. This integrated system serves as the basis for increasing resource efficiency. Resource efficiency is improved at a system level, not at the level of individual islands.

Today’s organizations are built like a soccer field covered in hundreds of small tents, where matches are played with many different balls at the same time. The players are rewarded for kicking the ball as many times as they can, and think they score a goal when they succeed in kicking the ball out of their own tent. They play at different times and barely know the names of the other players. No one sees the big picture. No one hears the whistle.”

”Just-in-time is about creating flow, while jidoka is about creating a visible and clear picture so that anything that happens to, hinders or disturbs the flow can be identified immediately. The principles are two sides of the same coin

In order to create and – most importantly – maintain an efficient flow, the flow must be standardized at some point so that everyone can have the same understanding of how a task should be carried out.

Software mismatch.

In order for means to realize a lean operations strategy, the intention must be to eliminate, reduce, and manage variation,

Software is variable and complex.

By training employees to respect each other and work as a team, these values become integrated in an organization.

lean is not a static state to reach. It is not something you complete. It is a dynamic state characterized by constant improvement.

it is crucial to understand that the realization of a lean operations strategy is a journey that never ends.

Taking the dynamic view means that an organization sees the realization of a lean operations strategy as a constantly changing state, not as something static.

The only way of determining whether an organization is lean is by comparing how an organization operates at two separate points in time. The organization is in a dynamic state if it can show constant improvement.

Everyone can always improve their fishing ability, as there will always be new fish. Large and small. Fast and slow. Easily caught and not so easily caught. What is central is the organization’s ability to fish. So if there is to be a beginning and an end in an improvement project, the focus would be on the ability to fish, not on the fish itself. Before embarking on a change process, it is important for an organization to ask itself what view it has of improvement. “How should we think about improvement? Shall we catch the big fish or shall we learn to fish?” Anyone can catch the big fish. Learning how to become a “self-fishing” organization is something completely different.