Chapter 1: Defining Value - A Lean Imperative

Chapter 1:  Lean Principles, Defining Value and the Eight Wastes

I recently delivered, on a behalf of a client, a two-day “Introduction to Lean” session.  In an effort to make sense of the client’s training content, I scratched out three flip charts to help summarize for the students what Lean is all about.  200+ slides now condensed into three flip charts.  Overproducing, one of the eight wastes I’ll cover in a subsequent blog, applies equally to training materials.

“Lean is easy to understand but very hard to do”, is a phrase I often employ at the beginning of these introductory sessions.  What I believe is important is that the concepts, tools, methods and even language of Lean be tailored to the audience (industry sector, type of services and products represented, etc.).  “Adopt” and “Adapt”, and on rare occasions, “Abandon” decisions need to be made so the “clothes” offer a better “fit” when applying Lean.

This first in a series of blogs will examine each of the key elements of Lean, perhaps providing additional insight for those new to Lean, and a chance for more seasoned practitioners to also share their thoughts – all ideas and advice welcome.

Today we explore the important initial step for any Lean journey:  “Defining value”.

DEFINING VALUE

The first of five key Lean principles, a concise and unambiguous definition of value provides a shared compass in a Lean organization.  A compass that all team members can use, from senior management to front-line staff, whether considering short and long-term strategy, day-to-day assessment of performance and operations, or focused continuous improvement (project) efforts.

Similar to crafting “mission, vision, and values” (MVV) statements, defining value is an incredibly important first step in any Lean journey.  Although they should be aligned, the Lean definition of value should not simply be a replication of MVV.  Lean is an enabler of goal achievement and strategy, not a strategy in and of itself.

The purpose of meticulously defining value is to create an overarching statement that can be employed by every person in an organization, and extended into the supply chain, providing a universal compass for assessing the work they are doing and the resources being consumed, including time.

“LEAN THINKING”

James P. Womack and Daniel T. Jones, in their seminal book, “Lean Thinking”, (ISBN 9780743249270), include the following definition of value;

Value is defined by the customer (externally focused) and is only meaningfully expressed in terms of a specific product that meets the customer’s needs at a specific price and specific time. A common error in traditional manufacturing operations is to define value internally (internally focused) and, if the customer fails to respond, the product is modified or the price is adjusted or a different marketing strategy is tried. Lean Thinking must ignore existing assets and technologies and rethink the business on a product-line basis with strong dedicated product teams. It must also redefine the role of the technical experts and re-evaluate where to create value for the customer.

While many organizations have adapted (and shortened) that definition over the decades, the intent remains unchanged… focus on value from the customer’s perspective.  Here’s one example offered by a US government agency;

Value: A capability provided to a customer at the right time at an appropriate price, as defined in each case by the customer.

And another definition offered by Quality America Inc.;

Value-Added:  An activity is value-added if a customer is willing to pay for; it changes form, fit or function of a product or service; it converts input to output; it is not waste.

If you search the internet, you will find many examples, each with its own “spin” on what value is.

Defining value… how hard can that be?  Aren’t we already focused on the customer?

But… value can easily be confused and distorted within organizations and across their respective supply chains as the processes of designing, sourcing, producing and delivering products and services can be complex with many tasks, activities, and associated consumption of resources with no value added for the customer whatsoever.

These non-value adding activities are the focus for continuous improvement and improved design as organizations try to “lean out” their value streams – the chain of activities that a firm performs in order to deliver a valuable product or service for the market.

When engaging with clients that are considering the deployment of Lean, I ask them to think about their definition of value, explaining why this has to be their first step in what will be a never-ending journey… a way of conducting business and delivering products and services.

For those clients that have already “deployed” Lean, I typically find that they have NOT crafted that definition!  How do they possibly expect their entire organization to navigate the waters of Lean, in the same direction, without that all-important compass?

As mentioned previously, I encourage, in fact, challenge organizations to craft that all-important definition of value, adapting it to best fit their environment, yet staying true to the intent advocated by Womack and Jones.  Here are some examples for you to consider;

Manufacturing:  Any process step, activity or task that transforms the deliverables of a process such that the customer is aware of it AND is willing to pay for it.  Value is always stated in the eyes of the customer. 

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