13 Ways to Apply Lean Principles to a Small Business

A lot of people register on my site to get access to the wide range of free Lean information I offer. Some of the organizations they work for are easily recognizable as Fortune 500 companies. But many of the visitors to my site come from companies that are not as well known, and likely have only a few people.

That tells me that there is a thirst for knowledge about Lean from small businesses all over the world.

That suspicion was reinforced by a conversation I had with an old friend earlier this month. She owns a small business, and as we spoke, it became clear that we are both facing many similar challenges in growing our companies. I suspect that the large number of people from small businesses that visit my site are seeking answers to some of the same problems.

So, this month’s featured article from my Maximize Your Lean Success newsletter is about how to apply Lean principles in an organization with just a single owner or only a few employees.

1. Develop a Continuous Improvement Culture.

Big companies have the option to pull people out of their work areas to participate in projects that require their full attention, such as kaizens. Large teams have the ability to back people up when they are absent. In small companies, there is often only one person doing the work, so everything grinds to a halt if the person is gone.

But that does not mean that small companies should neglect continuous improvement. In fact, if anything, it means that small companies should be even more diligent about allocating time to making improvements.

Start each month by putting continuous improvement time on your calendar. If you don’t specify the time, other things will invariably overshadow it. I tend to recommend about 10% of your time be spent on process improvement.

As the month passes, feel free to shift those appointments around when the opportunity presents itself. Having a slow afternoon? Move an hour from later in the month to right then. The more opportunistic you become, the less likely it will be that you will have to actually use one of your originally scheduled time slots, which will increase your flexibility. Just make sure you don’t delete appointments, and never skip them.

The key to this suggestion lies in having a good list of high-payoff projects ready to go at a moment’s notice. (Hint: That means planning ahead so you have all the continuous improvement materials you need for the project ready to go.)

It will seem painful to book over two full days a month to work on projects, but you’ll thank yourself for doing it when you start seeing the return on that investment.

2. Gain Lean Skills

Large companies often have resources to arrange training, or they have in-house experts who can help teams develop their Lean skills. Small businesses, on the other hand, not only have fewer resources, but they also have the problem of not knowing what they don’t know.

I recommend finding mentors or support teams who can add to your knowledge. You may have a support group in your area that can serve this purpose, or you may use a tool like LinkedIn or Facebook to try to connect with an expert. You’ll find that people are surprisingly free with their knowledge and like helping each other.

Another method is to find self-paced ways to study. Videos are more readily available now than ever. Forbes Magazine (p14, February 28, 2011) even claims that there is a “startling fact that people retain more information via the Internet or videos than they do when sitting in a classroom.” (Learn about our Videos and Webinars. Velaction’s videos and webinars are part of our modular Velaction Training System. It lets you get just the information you need, right when you need it. The VTS is a low-cost, high-value way to build Lean training capabilities in your company.)

In addition to paid training, forums and blogs give you an opportunity to ask questions in an unprecedented, and free, way. Just be careful about the source of the information. There is little quality control on open forums, and many of the responses tend to be from companies pitching their own solution, even if it is not a perfect match to your problem.

Finally, consider working with several other small business owners and take turns hosting training events. If you get a dozen people working together, and do a monthly event, you’ll get twelve sessions for the price or effort of one.

3. Clearly Define Your Strategy

Probably the biggest problem many small business owners face is deciding exactly how they want to compete in their market. They try to do everything that their big competitors do, and end up spread too thin to be effective.

Strategy deployment is often neglected in small companies. Because there is nobody to deploy the strategy to, and because of the time commitment, small business owners often skip this step.

That is a big mistake. Strategy deployment is not just about who, but also about what. It clarifies what process you need to develop to hit your goals, and it highlights your strengths and weaknesses.

In addition, it will cascade down to your operational metrics that you should be tracking to see if you are doing the right things right. If you don’t have clearly defined goals, you won’t know if you are competing successfully.

4. Set Priorities

Another benefit of having clearly defined metrics is that you will better understand the drivers of success for your company. For example, my Velaction Training System sales are related primarily to three factors: visitors to my site, conversion rates, and the number of products I offer.

The number of visitors to my site has gotten to a critical mass. Adding content is necessary to keep things fresh for my thousands of registered users, but as the site gets bigger, each new page has a diminishing percent impact on traffic. Most of my new visitors now find my site through work that has already been done. They hear about it through word of mouth, or find pages on search engines. Spending much time adding new content, beyond what I need to do to keep providing my subscribers with fresh content, is no longer the most effective use of my time in terms of sales growth.

What give me a higher impact now is adding new products to my site, and improving how I present their value to my readers. The time I spend doing these things makes my sales go up faster than the time I spend adding new content pages to attract visitors does. Where do you think I should spend the majority of my time? I now focus on the specific actions that improve my conversion rate and get new products posted ready for sale.

In your small business, you have to identify the drivers that will get you closer to your targets, and spend the majority of your time on those things.

5. Make Friends with Mr. Pareto

Because small business owners know their processes so well, they often assume they also know what is wrong with their processes. Unfortunately, this is not the case. Time and time again when I am helping someone with a problem, I see the ‘Aha moment‘ when they realize that they were wrong about what they thought the root cause was.

Getting to the bottom of a problem can require a formal data collection effort. Don’t skip this step. Even if you are right in what you believe, tracking your business from time to time will force you to really look at the details of what you do. Turning over rocks never hurts your company.

With your data in hand, pull out all the problem solving tools at your disposal to get to the root cause. Though this section’s header only mentions the Pareto chart, you can also use flow charts, run charts, the 5 Whys, cause and effect diagrams, and many others to gain a deeper understanding of the problem. (See our individual Lean PowerPoint presentations)

Don’t think of this problem solving effort as time as being spent. Think of it as an investment that will eventually pay off.

6. Outsource

Outsourcing has a negative connotation to it, and rightfully so in some cases. But at its heart, outsourcing is the key to a successful economy. In fact, we all do it in our personal lives as well. My family, for example, outsources almost all of our surgical needs, no matter how minor.

The fact is that most small business owners have areas of specialty. They can free up a lot of time by offloading work that is not their strong suit, such as accounting or legal stuff. That doesn’t mean sending it overseas. It means finding an expert in the field, whether big or small, near or far, who can do the things that you don’t know how to do.

Or, you can even find someone who can do the things that don’t make the best use of your time. Staples, for example, does a lot of my printing and binding work. Could I do it? No problem. But the time spent on that routine task is not as important as, say, recording a new DVD.

Be creative in what you offload. I have also used virtual assistants to do things like online research for me, and I hired a designer and an editor when I wrote my book, Whaddaya Mean I Gotta Be Lean? Small businesses also commonly outsource accounting work, especially taxes.

You should focus on doing only the tasks that nobody else can do for you , or the tasks that you like doing. But find a good supporting team to do the rest of your work.

7. Stabilize and Document Processes

Of course, you can’t outsource tasks that are not well defined. For example, now that I am selling more books and more physical items to my product line in addition to digital sales, it won’t be long until I outsource my distribution. To do that, I’ll need some good processes in place, and having them written down will let me communicate those processes quickly and effectively.

Because small business owners tend to do most of their work themselves, they often neglect to write things down. Big mistake, especially on infrequent tasks. For example, I now have my newsletter process well-documented. Every month, I add to the process, improving it further. Because of this defined series of steps, I seldom make mistakes, which makes production go smoothly. It was not like that in the early days of my newsletter. Before I had the process recorded, I had to relearn it every time I wanted to send a new issue. Even now, a few years into my publication, I still identify steps that I would have missed if I wasn’t using my checklist.

As a small business owner, the time spent recording a process can seem like a waste. But it will pay off in the long run whether you keep doing the task yourself, or decide to offload it to someone else.

8. Map the Value Stream

Another serious oversight on the part of a small business owner is neglecting to map out their value stream. The two main reasons for this are that there is often nobody to communicate the information to. After all, a value stream map is, in large part, a communication tool to get everyone in agreement about what the value stream looks like now and what it should look like in the future.

And there is the fact that a value stream map with only one or two employees depicted on it doesn’t seem like much of a value stream—more like a value creek. And when the work on the page represents only a few cycles a month, it seems even more unnecessary.

But there is a benefit in a small business owner diving into a value stream. The data boxes require that the mapper gathers information about the processes. Just like in a large company, the numbers can be surprising and often eye-opening. Plus, recognizing where the delays in a value stream are can help with prioritization.

9. Manage Waste

In a small business, people who do a process are often the same ones who created that process. Waste can be harder for the developer to identify than for an outside observer to recognize. It is surprising how numb people can get to waste. Plus, when only one person sees a process, the number of improvement ideas tends to be limited. Waste can get firmly entrenched when only a single person ever sees the process.

This is another case where outsourcing can help. Small businesses probably can’t afford to bring in a consultant, but there are a growing number of Lean practitioners, myself included, who provide remote coaching services that require a much lower investment than getting onsite support. This extra set of eyes can provide new perspective that can help you eliminate waste that you might not otherwise recognize.

If you choose not to hire a professional ‘wasteologist’, tap into your network of fellow small businesses, and trade time with each other. Look over each others’ processes with a fresh set of eyes. In addition to drawing attention to the waste, you may even spot some best practices that you can incorporate into your own process.

10. Brainstorm

One of the most effective problem solving methods in Lean is simply harnessing the combined power of many people thinking about the same issue. Unfortunately, this is also one of the hardest ones to overcome for a small business. Social networks and online forums provide a good option here. A surprising number of people will be willing to meet with you in person or offer online advice about your problems.

Obviously, be careful about posting confidential information in an open forum, but you can often trigger a good discussion with a general question.

11. Manage Your Inventory

Small businesses often don’t buy enough materials to get special treatment from vendors. And because there is not as much economy of scale from consolidating orders, shipping constitutes a greater percentage of costs for small companies than for large ones. Fortunately, thought, many small businesses are constrained for space, so they will limit how much inventory they carry. That, plus financial constraints, tends to keep small businesses from ordering excessively to try to amortize shipping costs.

The bigger problem for small businesses is likely to be stock-outs. Because there is probably not a materials team when just a few people are working for a company, and because of financial need to carry very little inventory, a kanban system is essential. Keep it simple. Don’t worry about setting up a formal two bin systems. Often a kanban card in a Ziploc baggie with the reorder point inventory segregated from the main supply is enough to keep from running out of materials. Be creative, but be structured.

12. Implement 5S

For a small business, the benefits of 5S can be significant, but so can the costs. Consider the price of a good laminator and label maker, and setting up a 5S station with enough supplies to handle a range of contingencies. The cost could easily approach a thousand dollars or more. And to top it off, the station will be unused on most days.

For some small businesses, that seems like a lot of money to spend for equipment and supplies that will sit idle most of the time. In a big business, the station might be shared by 20 or 30 people, and will be in constant use. Small business may, instead, want to gradually stock their 5S station over time. The problem with that approach, though, is that if materials are not available right when you need them, you may skip making a change that could improve your operation.

In addition to material and equipment constraints, when there is only a single person doing a task, he or she often don’t feel like labeling and organizing is an effective use of time. Plus, people working in small businesses generally wear many hats. It would be hard to decide which task to optimize for.

Try this out to see what to do: For the next few days, write down every instance where you spend time looking for something, or have to reach to get it. Then use that information and your knowledge about what you do most frequently to come up with ideas on how to improve your workspace. You’ll probably come up with at least a few tweaks that can save you quite a bit of time over the long haul.

13. Level Your Workload

Small businesses are notoriously uneven in their workload. Business seems to come in waves. Consider how you can go about smoothing out your demand. It may come from offering variable pricing to get people to buy when you want them to, or it may come from filling the valleys with different types of work. In either case, limiting the spikes in demand will let you standardize your processes more easily. It also means better service to your customers.

Hopefully, these ideas will help you get the ball rolling in your company. I welcome your comments about the suggestions I made, but even more, I would appreciate any additional ideas on how to add muscle to Lean in small businesses.