How Lean helps businesses grow: examples from IKEA, Starbucks, Amazon and ZARA
The inventor of the Lean methodology, the Japanese company Toyota, is a world leader in car sales, margins, and revenue margins. For businesses, particularly small and medium-sized ones, this is an incentive to take similar approaches. Today, 74% of all American companies use Lean methods, said the president of the Lean Institute Ukraine Serhiy Komberianov during a speech at the GET Business Festival.
The main principle
The main principle that is embedded in Lean techniques: 90% of everything you do, all your activities, and the actions of your employees — loss. Your actions do not benefit the client, so they are useless.
The main difference between Lean and other business methods is that it does not offer the entrepreneur to buy a new machine, new software, or invest money. In terms of Lean, this gives minimal results. Instead, Lean offers to work with 90% of the losses mentioned above. The effect will be +50% of useful activity, +50% of revenue, margin, etc.
“Toyota says: start with people! If your employees are full of inspiration, if they think about customers, success is guaranteed.”
Work with employees should be conducted in such a way that they create effective processes on the ground. If the processes satisfy the customer, profit will be inevitable.
"So efficiency doesn't start with thinking about profit, but with thinking about how to inspire staff."
The process, not the result
Another principle on which Lean is based is the focus on the process, not the result. What is needed is a process that will give a good result, not a result that is given at any cost.
Let’s say you have a football team and you tell it, “Win at all costs! It doesn’t matter how you do it, how you prepare but win!” As a result, the team won, but the next day it was disqualified for doping. Do you need such a result? Hardly.
IKEA: sales
Aggressive sales — when managers are fully charged with sales — lead to the customer being imposed a service or product that he does not need. The client is dissatisfied. If you build the process so as to get the customer who needs you, everyone will be satisfied.
At IKEA, sales managers do not receive a percentage of sales at all. They receive a fixed salary. Why? Because IKEA does not want their products to be sold to those who do not need them. For them, such reputational losses are much more expensive than one-time profits.
Starbucks: operating system
Few people know that about 10 years ago Starbucks was on the verge of bankruptcy. They developed intensively, opened new coffee shops, but the processes in the company were not established. The company could not provide the required level of service and quality of its products.
What did Lean offer Starbucks? Lean offered to pause: stop expanding and open new stores, and start dealing with people who would solve problems on the ground.
Everyone knows McDonald’s. It’s a cool business that is expanding through a tough, well-executed franchise. What did Starbucks do? They said, “We don’t have a tough franchise. We want every coffee shop to adapt to its customer.” That is, if you have a coffee shop in the center of Kyiv, then your customers are wealthy people, businessmen, and office workers from neighboring locations — adjust to them. If your clients are grandmothers from the sleeping area, also adjust to them.
Amazon: salaries
When Amazon became interested in Lean, they were invited to visit the Toyota plant. After the visit, they said, “Listen, your Lean is nonsense. Employees of our logistics centers have a salary 50% lower than yours. It is economically unprofitable!” They believed that people should not be overpaid if they could be persuaded to work for less.
“But it turned out that Amazon employees made far more mistakes than Toyota employees. And their mistakes cost more than 50% of the salary difference.”
No one ever counts how many mistakes an untrained, dissatisfied employee and company makes. If you count everything, it is sometimes more profitable to create normal working conditions and pay more.
This is one of the main tasks facing Ukrainian companies today. We constantly hear: “Our best employees go to work in the Czech Republic, in Poland. What shall I do?”. This problem exists and it is very common.
ZARA: flexibility
Another interesting example is ZARA. They also apply the principles of Lean. ZARA has followed a path that most garment companies do not use.
What do most clothing brands do? They sew their products somewhere in Sri Lanka or China, where they are transported for a very long time. This makes manufacturers very inflexible. What does Lean teach instead? Do not lose on processes, including transportation. That’s why ZARA has built plants in North Africa and Spain to manufacture products where they are sold. As a result, the company became so flexible that it was able to change any of its collections at once. That is, say, customers have complained about ugly buttons, and in two weeks the company will put in stores a model with updated buttons. If a little sewn — can sew more at once. While the rest order products at a factory in China.
This flexibility is the secret of ZARA’s success.