Lean thinking to streamline work that does not add value – and find opportunities for revenue generation
One of Merom’s first consulting assignments, years before he ventured out and founded his own firm, was with a famous potato chip manufacturer in Central Pennsylvania. Ask any Baby Boomer who grew up within a 4-hour radius of their factory and they’ll remember the brown and yellow cans delivered to their home or office with different flavours and varieties of chips (or, in some countries, crisps).
The potato chip factory was a hive of activity. Trucks backed up to one loading dock and emptied potatoes into a hopper, where a few inspectors picked out rejects and let the good potatoes roll down the chute into the slicer, where they were inspected again, and then to the fryer, where another crew of inspectors picked out the burned chips before they moved down the conveyor to be seasoned before they cooled.
On another loading dock on the opposite side of the factory, a crew unloaded empty brown and yellow tins onto a conveyor that took them to the Can Wash room. Three big can wash machines took in the empty tins, washed them and sent them on their way through a narrow hole in the wall to the filling room. When the Can Wash Department was humming, cans backed up on the conveyor. Two workers took the extra cans off the belt and stacked them onto a trolley next to the narrow hole in the wall.
On the other side of the 3-foot (1-metre) thick stone wall, cans moved down the conveyor to a machine that placed a plastic liner in each can and then to a gravity-feed machine that filled each can with crisps. In this Filling Department, there often was a gap in the flow of empty cans. They had 2 workers assigned to walk around to the large sliding door that led into the Can Wash Department, wheel full trollies into the Filling Room, and place them on the conveyor.
Everyone in the plant took pride in their jobs. They worked hard. They were smart. Each department was equipped and trained to optimize production – within the walls of washing cans, filling cans and frying/seasoning chips. But their vision was restricted by the walls that separated the three production departments – Can Wash, Frying and Seasoning, and Filling.
Work that can be eliminated – to reduce waste
It didn’t take a genius to PowerUP Brilliance™. All it took was to map the flow, in a way that removed the walls. Everyone gasped when they saw what we saw. By simply shutting down one of the giant can wash machines and by adjusting the speed of the fryer, 5 full-time workers were freed for more value-adding work, burnt rejected chips were cut by 30% and damaged cans were reduced by 35%. Two of the departments produced less, but overall production was up 20%. You can do the math and figure out what this company saved in manufacturing costs.
Revenue opportunities
In other projects where we’re mapped work-flows end to end, we’ve found revenue opportunities waiting to be seized. Many customers will pay a premium for reduced waits, for expert advice, for bundled ready-to-use packages or for walk-you-through set up and activation support. Or for the flexibility to last-minute changes that used to drive up your costs, by making field engineers cool their heels and wait until you were ready to let them work on your equipment. Others will gladly take a cost savings, by switching to a do-it-yourself or an off-hours service option which takes them out of your high-demand queue.
Just as there were one-metre (3-foot) thick walls between Can Wash and Filling, there often are thick walls between Operations and Marketing. Operations can analyze the wait-times and categorize the customer problems that arise. But it takes a savvy marketer and business analyst to figure out when today’s inconvenience – or mistakes – are tomorrow’s revenue opportunities. Look at the merchandise available for sale while you wait in line for Starbucks or consider the add-on profit earned for expedited AppleCare service. Upon arrival to Auckland’s international arrivals hall, tea service is available to travellers who are queued up waiting to get through passport control and New Zealand’s rigorous “no-foreign-contamination” agricultural inspection.
So, when you map your processes and spot the delays, inconveniences, error-prone customer (or employee decisions) and other glitches, ask yourself, “Is there a revenue opportunity hidden in plain sight – waiting to be discovered and seized, to turn something negative into an experience that delights your customers?
How to do it
You don’t necessarily need an outside innovation consultant to help you get started. What you need is the right experts in the room, who know their own part of the process end-to-end and the interdependencies with other work groups or departments. And you need a facilitator who will aggregate that input and map the flow, using an in-the-cloud collaboration platform like GroupMind Express, or an open wall with post-it notes.
Then comes the creative part – not just thinking out of the box but also looking inside the box for bold breakthrough opportunities that have been hiding in plain sight. Professor Jacob Goldenberg calls it the art of subtraction, division, multiplication and combination:
– Subtraction. Look for redundant checks, mistakes to fix and double loops that can be eliminated. Can steps be pulled out of the process altogether, without losing anything at all? One pharmaceutical R&D company we advised looked at ways that they could improve case records before the data were reported and saved months of labor and lost revenue by speeding medical records submission.
– Division. Look for ways that different customer segments can be served differently, rather than offering a one-size-fits-all offering. Like the airlines, who charge a premium to join a Club that gives you fewer queues and choice seats. Or SaaS companies, who offer a premium subscription for time-pressured users to receive just-in-time technical support. Or a government agency that charges a premium for expedited passport service or for expedited new-product regulatory approvals.
– Multiplication. In the potato chip company’s second factory, located 1000 miles away from Central Pennsylvania, we discovered they were frying crisps 10° C above the Pennsylvania factory – and were discarding far more burnt chips than the HQ location. But employees of the factory took the chips home and served them to family and friends as a delicacy. They didn’t fit the original recipe. But they had a unique flavor made them marketable as a specialty product – multiplying the product line.
– Combination. When you map your processes – and look across the stone walls of operating divisions and lines of business – you might find some interesting opportunities. Until they looked for combination products across divisions, Johnson and Johnson never thought of sutures or stents as a drug delivery device. Coating sutures with antibiotics cut post-surgical infections dramatically and gave them a value-adding unique product. ARAMARK, the multi-billion-dollar managed service company, called combination products an unlimited partnership – offering customers who were receiving one of their services (e.g., uniforms) the benefit of intimate knowledge of their operation to upgrade janitorial services, security services, building engineering, foodservice and other offerings in their portfolio.
– Inversion. One of our previous clients, EBI, a workers compensation company, transformed their “loss control” (or, for non-insurance people, safety engineering) function from a cost-of-doing-business compliance function into an added-value advisory function. They stopped selling insurance and started selling what they called the Zero Accidents Program, bundled with required-by-law workers compensation insurance. They expected their customers not just to pay for insurance coverage, but also to invest in operational improvements to protect worker safety. Why inversion? Because it inverted the typical power-hierarchy in the typical insurance company – by giving the loss control engineers far more hegemony than anyone else in the industry. Teva did the same with patent attorneys – who, instead of being deployed to protect company assets were deployed to find loopholes in patents that would allow them to reformulate and manufacture expensive patented medications and sell those bio-similars for a greatly reduced price.
– Specialization. Rather than doing it all yourself, you might profit from outsourcing – to a specialist who can deliver what you’re doing in-house better leaner faster, because it’s what they do for a living. Or by upgrading a department that’s been “making do,” by hiring world-class talent for that function.
The strategic discoveries aren’t enough. Execution delivers the value.
Great ideas – like balancing the flow between Can Wash, Filling and Frying/Seasoning – mean little unless they are executed effectively. The Can Wash Manager was threatened by the loss of equipment and the number of employees no longer needed in his shop. So was the plant manager at the Southwestern satellite factory, who no longer could offer his employees burnt chips as a performance incentive. And we can’t tell you how many promising combination products we’ve seen shelved, because line-of-business Managing Directors couldn’t figure out who should take credit for the R&D and the eventual sales.
Lots of other insurance companies saw what EBI was doing – and how the focus on safety improvement, not just underwriting, was boosting their profits 300-400% higher than the industry average. They tried to market the same product. But they couldn’t pull it off, because the departments who held power were less willing to invert hegemony and share power like EBI did in its account teams.
And, it take training for workers to know how to support each other, how to operate equipment smoothly, how to talk to customers who complain about completing their case reports or following other procedures that make it possible to streamline your operation and give them what they need better faster and leaner. And how to work out the bugs and refine the models.
What a great adventure – that starts by breaking down the walls and taking a fresh look at how you do business. And PowersUP Brilliance™ moving from great ideas to pressure-testing those ideas and getting them ready for pilot-testing – and then to roll-out and execution. Let us know if we can help with a note to info@courageadvisors.com
