An introduction to Lean Business It's time to revolutionise your approach to efficiency in your business with this introductory guide. Written by Stephanie Lennox Updated on 12 September 2023 Our experts We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality. Written and reviewed by: Stephanie Lennox Writer As we all know, understanding core business principles is vital for sustainable growth and success. And so, this is why today we want to introduce you to the practices of Lean Business: where efficiency is the name of the game, and success is built on doing more with less. If you're an entrepreneur or small business owner with a passion for making your endeavours work like a well-oiled machine, Lean Business is a concept you'll want to embrace. In this article, we will explore the concept of Lean business, its origins, key principles, and how you can apply them to your own small business for business success. Startups “lean business” series Our insightful Lean Business series is where we unravel the secrets of efficiency, innovation, and sustainable success. Whether you're a seasoned entrepreneur or just starting your business journey, these articles will serve as your roadmap to understanding and applying the principles of Lean thinking in practical ways.We'll delve into the core concepts, share real-world examples, and offer actionable tips to help you streamline your operations, eliminate waste and extraneous costs, and cultivate a culture of continuous improvement.Join us as we embark on a journey to transform the way you think about and run your business, one Lean concept at a time. For all posts in the series, click here. In this guide, we will cover: What is Lean Business? Lean Business: the benefits for small business owners Lean Business: how it works Conclusion Lean Business: The Story Lean business (also known as Lean thinking or Lean management), is a management philosophy that originated in manufacturing but has since been widely adopted across various industries. It aims to streamline operations, eliminate waste, and optimise processes to deliver greater value to customers and achieve business excellence Picture yourself transported to a bustling factory floor in post-World War II Japan, where innovation was the most pressing priority. It was in this dynamic environment that the roots of Lean business were firmly planted, originating from the minds of the Japanese automaker Toyota in the 1950s and 1960s.Toyota was faced with a pressing challenge: how to boost efficiency and eradicate wasteful practices within its manufacturing processes. This necessity spawned the creation of the Toyota Production System (TPS): a revolutionary approach to production that would lay the foundation for Lean principles we know today.In this period of innovation and transformation, two prominent figures, Taiichi Ohno and Shigeo Shingo, emerged as the architects at Toyota. They embarked on a mission that went beyond mere cost-cutting – it was a quest for continuous improvement, a profound respect for people, and a commitment to delivering unparalleled value to customers.Central to Toyota’s production system were three guiding principles that would ultimately pave the way for lean thinking. First, there was the unwavering commitment to continuous improvement. Every facet of the production process was scrutinised, tweaked, and perfected, no matter how minor the adjustment might seem. This relentless pursuit of perfection became the cornerstone of Lean philosophy.The second principle revolved around respect for people. Ohno and Shingo recognised that the true power of an organisation lies in its people. Employees were not mere cogs in a machine but active participants in the journey towards efficiency and excellence. This emphasis on empowering the workforce through methods such as leadership delegation would become a defining characteristic of lean business practices.Lastly, Toyota’s new system placed paramount importance on delivering value to customers. It wasn't just about manufacturing products; it was about crafting products that precisely met the needs and desires of customers. This customer-centric approach elevated TPS from a set of manufacturing techniques to a philosophy that transcended industries.As the years passed, these principles evolved and expanded beyond the confines of manufacturing. The seeds sown by Taiichi Ohno and Shigeo Shingo blossomed into a comprehensive approach to business.This transformative ideology could be applied not only to the factory floor but to every facet of an organisation, from administrative processes to service industries. Lean business had become a way of thinking and operating, one that held the promise of greater efficiency, reduced waste, and continuous progress. The ideals: value, respect and continuous improvement In the world of business, where profit margins, efficiency, and bottom-line results often take centre stage, it's not uncommon for discussions of company values such as “respect” and “continuous improvement” to be dismissed as mere abstractions. Or, worse yet, as distractions from the real pursuit of profits. While these principles may appear abstract or even “fluffy” at first glance however, they are, in fact, indispensable and highly practical components of the Lean business approach.Value to customersLean businesses prioritise understanding and meeting customer needs precisely. This means tailoring products or services to offer the highest quality and utility at the lowest cost. By doing so, businesses can build strong customer relationships, enhance brand loyalty, and capture market share. Mission-driven brands and businesses thrive in today's competitive landscape, where discerning customers seek providers who not only meet but exceed their expectations.Respect for peopleIn a Lean business, respect for people extends to both employees and customers. By empowering and respecting employees, businesses tap into their creativity and expertise, fostering a motivated and engaged workforce. Empowered employees often bring innovative solutions to the table and contribute to increased productivity and morale. Similarly, showing respect for customers by actively listening to their feedback and addressing their concerns builds trust and loyalty, driving repeat business and positive word-of-mouth referrals and is way more efficient than neglecting this part and having to deal with chargebacks, refunds and complaints.Continuous improvementContinuous improvement is not just a buzzword; it's a pragmatic approach to refining processes and operations. In a Lean business, every employee is encouraged to identify inefficiencies and propose improvements, no matter how small. Over time, these incremental changes lead to streamlined operations, reduced waste, and increased efficiency. This iterative process ensures that a business remains adaptable and responsive to changing market conditions, ultimately enhancing competitiveness and profitability.In practical terms, these Lean principles actively help a business by optimising resources, improving employee satisfaction and retention, and ensuring that products or services evolve to stay aligned with customer demands. The benefits of Lean Business for small business ownersIn an era marked by economic uncertainty, small business owners face an unrelenting barrage of challenges, ranging from the post-pandemic fallout to the current cost of living crisis in the UK. The world is in a constant state of flux, with inflation rates rising and consumer expectations evolving rapidly. In this tumultuous environment, adopting lean business principles can be a game-changer for small business owners seeking to not only survive but thrive.Post-pandemic resilienceThe COVID-19 pandemic was a wake-up call for businesses of all sizes. Many small businesses were hit hard, and some even faced the grim reality of closure or going into administration. In the aftermath of the pandemic, embracing lean principles can help businesses rebuild and fortify themselves against future disruptions. By employing lean business practices, small business owners can ensure they are better prepared for whatever challenges lie ahead.A startup's success often hinges on its ability to adapt swiftly to changing market dynamics and customer demands. Lean thinking encourages a culture of continuous improvement, where feedback and lessons learned are embraced as opportunities for growth. This agile mindset allows small business owners to respond promptly to evolving market conditions, fine-tuning their products or services to better meet customer needs and preferences.Conquering the cost of living crisisThe cost of living crisis, characterised by soaring prices for essentials like housing, business energy, and groceries, has left many individuals and businesses grappling with financial strain. Small business owners, in particular, have been facing the daunting task of balancing their own economic realities with those of their employees and customers. Lean business practices can provide a lifeline in this situation by enabling businesses to reduce costs without sacrificing quality or service.For a startup, where every pound and hour invested must count, this means optimising processes to achieve maximum output with minimal resources. Lean principles compel entrepreneurs to critically examine their operations, identify non-value-added activities, and streamline processes, ensuring that resources are used sensibly, and productivity is maximised.Rising above inflationInflation erodes profits and diminishes the purchasing power of your consumers, which always creates a stressful time for businesses. Small business owners can counteract the effects by optimising their operations through lean principles. Trimming excess expenditure, improving resource allocation, and fostering a culture of continuous improvement are all ways businesses can effectively weather the storm of rising prices.For a small business owner just starting out, lean business principles provide a framework for efficiency, adaptability, customer-centricity, and financial stability. These principles not only enhance the likelihood of survival but also lay the groundwork for long-term success and growth. Lean Business: how it works1. Defining valueThis principle focuses on identifying what the customer values and is willing to pay for. It involves understanding customer needs and preferences and aligning your products or services to deliver maximum value with minimum waste.Implementation for small business owners: Small business owners should start by clearly defining what “value” means to their customers. This involves understanding customer needs and expectations. Once the value is defined, focus on aligning all processes and activities to directly contribute to delivering this value. Eliminate any steps or activities that do not add value to the customer.2. Value mappingValue stream mapping involves analysing the end-to-end processes required to deliver value to the customer. This helps identify areas of inefficiency and waste (which is the antithesis of value), allowing for targeted improvements in the value delivery process.Implementation for small business owners: Small business owners can then create value stream maps that visually represent the flow of materials, information, and actions required to deliver a product or service. Identifying bottlenecks, delays, and inefficiencies in this flow enables the business to eliminate waste and streamline operations. Streamlined processes reduce lead times and increase responsiveness to customer demands.3. Eliminating wasteLean business identifies eight types of waste, often referred to as “muda,” that can plague business operations. These wastes include: OverproductionWaitingUnnecessary transportationExcess inventoryOverprocessingUnnecessary motionDefectsUnderutilised talentThe essence of Lean thinking is to systematically identify and eliminate these forms of waste, thereby optimising processes, conserving resources, and improving overall efficiency.4. FlowFlow refers to the smooth and uninterrupted movement of work or products through the value stream. The goal is to eliminate bottlenecks, delays, and interruptions to ensure a continuous and efficient flow of value.Implementation for small business owners: Small businesses can implement flow principles by organising work processes to minimise interruptions, delays, and backlogs. This might involve redesigning layouts, optimising supply chains, and standardising work processes. By reducing stoppages and enhancing the smooth flow of work, businesses can improve productivity and responsiveness.5. Pull SystemsPull systems involve producing or delivering products or services in response to actual customer demand, using the “just in time” approach, rather than pushing them into the market based on forecasts. This principle helps reduce excess inventory and minimise waste.Implementation for small business owners: Implement pull systems to manage inventory and production. Instead of pushing products into the market based on forecasts, allow customer demand to dictate production levels. Small business owners can use just-in-time inventory systems to order and produce only what customers need when they need it. This minimises excess inventory costs and the risk of unsold goods.6. Continuous improvementThis principle involves fostering a culture of relentless improvement where every aspect of the business is continually refined to eliminate waste, enhance efficiency, and better serve customers.Implementation for small business owners: Small business owners can establish consistent feedback channels, perform comprehensive root cause analyses, and entrust employees at every tier to spot and rectify inefficiencies. Through the steady incorporation of minor, incremental adjustments over time, the business can steadily advance and evolve. ConclusionLean business is not just a temporary fix but a fundamental shift in the way organisations operate and continuously improve. Implementing Lean management may require dedication and effort, but the benefits of streamlined operations and improved customer satisfaction are well worth the journey. Embracing Lean principles as a guiding philosophy can transform businesses and position them for long-term success in an ever-evolving marketplace. Share this post facebook twitter linkedin Written by: Stephanie Lennox Writer Stephanie Lennox is the resident funding & finance expert at Startups: A successful startup founder in her own right, 2x bestselling author and business strategist, she covers everything from business grants and loans to venture capital and angel investing. With over 11 years of hands-on experience in the startup industry, Stephanie is passionate about how business owners can not only survive but thrive in the face of turbulent financial times and economic crises. With a background in media, publishing, finance and sales psychology, and an education at Oxford University, Stephanie has been featured on all things 'entrepreneur' in such prominent media outlets as The Bookseller, The Guardian, TimeOut, The Southbank Centre and ITV News, as well as several other national publications.