ExecutiveChronicles.com | Agility Is Everything: How To Operate a Lean Business | If you are an entrepreneur or a business owner, you likely heard of the concept of running a lean business. What does this mean exactly, and how can it apply to your business?
It’s not a problem if you started a business without a lean business model in mind. There are still a lot of practical steps that your company can take to help transition your brand into a lean organization.
When you do this, it will be a major priority to make smart financial decisions both now and in the future.
Are you interested in starting or transitioning to a lean business model? If so, stick with us to find out how to operate a lean business.
What Is a Lean Business Model?
Before we jumped into the agile practices of a successful lean business, let’s take a look at exactly what a lean business model is.
To put it simply, lean businesses minimize waste and maximize value. By focusing on making improvements to processes across the value stream, lean operations can deliver the most possible value to the consumer while eliminating waste.
By following this type of business model, organizations and teams can reach the goals they have in a more sustainable and efficient way.
The manufacturing industry was the origin point of the lean business model. However, the concepts of this model can be applied to pretty much any industry. Rather than having rules that are set in stone, the lean business model is more a way of thinking rather than a specific dictum.
Take Advantage of the 80/20 Rule
The 80/20 rule, also known as the Pareto principle, the law of the vital few, or the principle of factor sparsity, is definitely something you’re going to want to learn about if you haven’t already heard of it.
The idea behind this idea is that 80% of outcomes come from 20% of causes for any event. This idea has been applied to business by trying to identify which 20% of your work produces 80% of your desired results.
It’s important to understand that this is not a hard and fast law of mathematics by any means. However, using this principle you can help narrow down your focus on the issues that cause the most problems and the processes that produce the highest return on investment.
In a lean business, everything unnecessary is disposed of. You trim away the fat from your business in order to focus on the few responsibilities and core tasks that really matter to the success of your business.
By eliminating waste, you can both set your business up for years of stability and growth while also keeping your customers happy.
Getting rid of waste doesn’t just mean not wasting money on services or products your business doesn’t mean. It can also mean spending too much time completing tasks or focusing on issues that aren’t your most important key issues.
Any activity that doesn’t create value for the customer, in a lean business, is highly scrutinized and likely eliminated.
Do It Yourself Before Outsourcing
One thing that many lean operations do is outsource as many tasks as they possibly can, so you and your team can focus on what really matters: creating value for customers.
While outsourcing is a great way to cut through the noise, it’s a good idea to always do tasks yourself before you outsource them. This is because outsourcing tasks before you understand what they entail can actually lead to spending more money than you would otherwise. It can also mean that expensive mistakes might be made because expectations are unclear.
On top of that, outsourcing before trying a task yourself can lead your business to become reliant on outsourcing. It’s important to understand what a task entails and how it can be done most efficiently before you hire it out to an outside company or individual.
Cut Overhead Costs
Your goal as a lean business is to be able to have smooth business operations while your overhead costs remain low. Whenever you are able to save one dollar in overhead costs, you can invest that same dollar into growing your company. When it’s time to trim the fat of overhead costs, take a look at some of the low-hanging fruit first.
Nothing is sacred when you are trying to cut costs. However, you want to make sure that you do not sacrifice employee happiness or comfort in doing so. If you cross that line, you might find yourself having a harder time retaining high-quality employees.
One of the first things you can look at our your utility bills. Instituting practices like powering down computers and other electronics at the end of each day and using a programmable thermostat can help you save money each month.
You can also save money by going entirely paperless. You can also use this cost savings technique as a marketing tactic by advertising your “green” practices.
You could also look into the square footage of the space you are using. Maybe you don’t actually need four conference rooms, or maybe all of your employees don’t need their own individual office. Cutting down on your square footage can seriously decrease your overhead costs.
When building an agile framework, you will also want to make sure that you’re making smart purchasing decisions. This is not necessarily mean spending the least amount of money on your office equipment, but rather, getting good prices for high-quality products that will last a long time. For example, take a look at these deals on Lenovo desktops.
Automate Everything You Can
One of the agile practices that lean businesses use is to automate absolutely everything that they can. Of course, you’ll want to do so with careful oversight.
There are so many time-consuming, mundane tasks that make up a part of the workload for all businesses. This means that your valuable employees are spending man-hours doing things that a computer might be able to do.
Consider automating things like email management, sales processes, client onboarding, and calendar management. You’ll be amazed at how much time can be put towards other things when you start automating repetitive tasks.
Prioritize the Culture Over the Perks
One trend that has been popping up at trendy tech startup in places like Silicon Valley are offering tons of perks including things like fully stocked bars, office nap pods, music recording studios, and free catered meals. If your goal is to achieve lean growth, you will not want to participate in this culture of office perks.
Not only are these perks very costly for your business, but actually most employees don’t really care that much about them at the end of the day. These perks might be appealing in a job description. However, the benefits that your business will reap will likely not outweigh the costs of offering extravagant perks.
Rather than going that route, instead, you should focus on creating a warm company culture that people naturally want to be a part of.
An important part of any business is attracting and retaining top talent. Your goal should be successfully creating a strong and welcoming company culture that people are genuinely excited about being a part of. Then you will be able to do so in a much more cost-effective way than offering a bunch of expensive perks.
Invest in Organic Marketing
Advertising and marketing are absolutely essential to any growing business. In this day and age, it’s easy to stand exorbitant amounts of money on marketing and still feel like you aren’t doing enough.
Rather than drawing a ton of money into advertising, put that money towards organic marketing campaigns. This will help you yield sustainable results rather than feel like you are burning money trying to get the word out.
For example, content marketing tends to be a better long-term investment than purchasing pay-per-click (PPC) ads. This is because content marketing helps to boost your SEO, lead generation, and traffic long after you have paid for the content to be produced.
Can Your Company Become a Lean Business?
When you aim to have lean operations at your business, it can help your company stay flexible and achieve the growth you are working towards. Understanding which processes add value to your customer base and which are nonessential is the first step towards becoming a lean business.
Did you find this article on running a lean business interesting? If so, be sure to check out the rest of our blog for more fascinating and informative content!