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Joshua Zloof's Blog

Defining Lean: A beginner's guide to Lean Management

Joshua Zloof

Lean + (Business Term) = Success

Over the last couple years, I've heard a lot of people refer to their startup as Lean.  Outside of San Francisco, there are many other organizations and industries that have converted or are trying to convert their processes to Lean as well - Lean Retail, Lean Finance, Lean Services, etc.  When I ask people what it means, I sometimes hear a lot of misinformation: cost-cutting, running a tight ship, layoffs, lasting 3 years on seed-round funding, etc.  All of these ideas sound pretty scary, and luckily they are dead wrong.  Despite it's name, Lean does not mean operating with little or fewer resources.  Furthermore, Lean is not a cure-all for all business problems in all industries, rather it has a specific purpose with pro's and con's.  After spending a few years consulting for companies on Lean best practices while at McKinsey and the last couple applying the same principles to the tech world & product development within Breadcrumb, I want to give my take on the subject.

Lean Manages Uncertainty

Lean is a management philosophy designed to help organizations cope with a high degree of uncertainty and continuously help them improve at a steady rate.  It was made popular by Toyota as a manufacturing method in the 80's and 90's.  At it's core, Lean is about make a series of small bets and iterating very rapidly, in contrast to committing to a large planning process and investing in large bets.  Lean is perfect if you're unsure of what's coming next and you need to maintain your agility to turn on a dime - it lets you move forward, pause, react, adjust your strategy, and move again.  Below is a more illustrative example based on my favorite hobby - surfing.

SOURCE: The Atlantic

SOURCE: The Atlantic

Finding a surf spot with Lean

Traditional Method

Goal

Find a great spot to go surfing

Pre-Work (2 hours)

  • Spend time researching great surfing spots
  • Get out a map and figure out the exact route to get there
  • Research weather conditions and pick a day when weather is supposed to be good
  • Fill up your gas tank

Work (2 hours)

  • Get in the car and drive along the pre-determined route
  • After surfing, drive back
Route to Pacifica - a well known surf spot

Route to Pacifica - a well known surf spot

Outcome

  • No waves

For those of you who've been surfing, you know that there is a decent chance that even with all the research, there still won't be waves.  You may invest 2 hours of research, 2 hours of driving  back and forth, and get no return.

Advantages

  • Certainty - I know how long it will take me to get there and how much gas I'll need - I can have a budget
  • Optimized - I can take the perfect route from the start

Risks

  • No outcome - You spend all you resources for no return, what-so-ever

  • Too much planning - You get stuck spending a lot of time planning up front and don't even make it outside the house

Lean Method

Goal

Find a great spot to go surfing

Pre-Work (0 hours)

  • None - just get in the car

Work (Unknown)

  • Drive west 5 miles, towards the coast
  • Stop, get out ask someone to point you in the direction of the best beach
  • Drive in that direction for 5 more miles
  • Repeat
  • Stop, now you can tell that you're right near the water - ask someone with a surfboard where there are good waves
  • Drive there for a few more miles
  • After surfing, drive back

Route to a new beach in the Sunset

Outcome

  • You found some decent waves
  • You ended up in a place you've never been before

You are guaranteed to eventually find waves in this scenario because you are continuously collecting data and moving closer and closer towards good waves.

Advantages

  • Handles moving targets - If waves are moving throughout the day, I'll still find a good beach
  • Guaranteed outcome - I won't stop until I find a beach that meets my needs
  • Potential for faster return - If there are a lot of local maximas, I may find a beach I didn't even know about in a lot less time

Risks

  • Run out of resources - I may run out of gas or time - In this example, the route was shorter, BUT it may have taken a lot longer (8 hours) to find a good beach - no up front plan means you can't plan resources
  • Analysis paralysis - If you have a weak process, you might spend more time asking for directions than driving
  • Local maxima - You get stuck at a local maxima (decent waves), but you never get to the pinnacle of surfing (Mavericks)

What's better?

It depends.  I purposely chose this example because you could really go either way.  Lean Management is really great for managing uncertainty.  If you want a guaranteed return, even if its a smaller one, Lean is a solid platform - it will get you a fun day of surfing.  On the other hand, if you are going after a very specific, big hairy goal - surfing Mavericks or landing on the moon - Lean may take a lot longer to get there and be a lot more expensive.  Lean is also useful if your primary aim is to get better (continuous improvement) versus if you're working in a completely new space and still need to build a foundation.

Peter Thiel gave an interesting talk on managing with a deterministic attitude vs an uncertain attitude at SXSW 2013.

So why Lean now?

So why is everyone switching to Lean in droves?  It's not a random trend.  It's about data.  The rapid increase of real-time data has enabled a Lean revolution.  40 years ago, it could take weeks to figure out what your sales were for the month.  The process of 'asking for directions' i.e. analyzing your data was too expensive to do more than 3-4 times a year.  Lean was simply not feasible.  Today, realtime, automated dashboards - the equivalent of GPS in the surfing example - make it possible to see where you are on a daily basis with no overhead.  The rapid access to data makes Lean widely accessible in industries where it was previously impossible.

What do you need to implement Lean?

Stay tuned...I'll be writing a follow-up to this post explaining what you need to be successful with a Lean approach.