by Jeffrey Ries
Methodologies: There are two main ways to get the most out of Six Sigma, DMADV and DMAIC.
DMAIC is an acronym that is useful when it comes to remembering five phases that can be useful when it comes to creating new processes.
Define what the process should do based on customer input.
Measure the parameters that the process will adhere to and ensure it is being created properly by gathering relative information.
Analyze the information you have gathered.
Improve the process based on the analysis you have completed.
Control the process as much as you can by finding ways to reliably decrease the appearance of delinquent variations.
DMADV, on the other hand, also has five phases that correspond to the DMAIC phases.
Define the solutions the process should be providing.
Measure the specifics of the process to determine its parameters.
Analyze the data you have collected up to this point.
Design the new process using your analysis.
Verify the results as needed.
Deciding if Six Sigma is the right choice: While the Six Sigma system has something to offer teams of all shapes and sizes, that doesn’t mean that it is going to be the best fit for all of them. This is especially true as implementing it successfully depends on numerous different specifics, starting with the conviction of those who are looking to implement the system in the first place as well as the company’s overall culture. This is why it is best to start with something less high-impact like 5S as a way to ease your team into things that are more of an overall change like Six Sigma.
When deciding if a Six Sigma transition is feasible, it is important to ensure that it is not seen as a fad and can instead be seen as an evolution of the ideals already in place. Generally speaking, the more involved the team leadership is from the beginning, the more onboard the rest of the team will be as well. It is important that the company culture is perceived to be one that supports this sort of positive change and to remember that if the management team can’t come to a consensus on the new program, then it is sure to be dead in the water. This doesn’t mean that absolutely every member of the team needs to be committed to the idea of Six Sigma from the start, but it does mean that the change needs to be institutional so the public front always needs to appear united.
After all, Six Sigma was founded on the idea of leaders mentoring those beneath them in order to ensure Six Sigma works as it should, but this need to be a full-time job for some people, at least until the new habits start to solidify among the team as a whole. Once this occurs, you can then count on the team members to keep one another on track. To ensure they get to this point, you are going to want to let them know that their progress is being tracked so that every team member constantly feels as though they are improving up until the point where they internalize the Six Sigma principles.
Conclusion
Thank you for making it through to the end of Lean Enterprise: The Complete Step-by-Step Startup Guide to Building a Lean Business Using Six Sigma, Kanban & 5s Methodologies. Let’s hope it was informative and able to provide you with all of the tools you need to achieve your Lean implementation goals. Just because you’ve finished this book doesn’t mean there is nothing left to learn on the topic. Expanding your horizons is the only way to find the mastery you seek.
When it comes to implementing Lean techniques successfully, it is important to be realistic when it comes to the timeframe required to not just ensure the entire team is up to speed, but that they have internalized the core Lean principles you are trying to instill. You will need to take a long hard look at your team and your business as a whole and decide where the most work is going to need to take place. Every business has limited resources, after all. It is important to think wisely prior to allocating them.
While you can easily get sucked into a pattern of changing everything, in order to ensure your business really is as Lean as possible, you should keep in mind that discretion is the better part of valor and you should be sure to start by focusing on those things that will end up doing the most good before moving on from there. Don’t forget, change for the sake of change won’t do anyone any good and will likely serve to create more waste than it will eliminate. Ultimately, it is important to remember that creating a Lean business is a marathon, not a sprint, which means slow and steady wins the race.
Finally, if you found this book useful in any way, a review on Amazon is always appreciated!
Lean Analytics
The Complete Guide to Using Data to Track, Optimize and Build a Better and Faster Startup Business
Introduction
Congratulations on getting a copy of Lean Analytics: The Complete Guide to Using Data to Track, Optimize and Build a Better and Faster Startup Business and thank you for doing so.
The following chapters will cover everything you need to know to get started with the process of Lean Analytics. The Lean Support system is a great way to ensure that your business is as efficient as possible by eliminating the amount of waste that is present. The Lean Analytics section is going to help with data collection and analysis. Thus, you’ll determine where the waste is present, and this will help you to pick the right metrics to implement.
This book will discuss Lean Analytics and how its processes can help you reduce waste and find the best strategy to improve your business. It is just one step in the Lean Support System, but it is an extremely critical step. This guidebook will provide you with the information that you need to get started so that you can become an expert in Lean Analytics in no time.
There are plenty of books on this subject on the market, so thanks again for choosing this one! Please enjoy!
Chapter 1: What is Lean Analytics?
The central idea behind Lean Analytics is on enabling a business to track and then optimize the metric that will matter the most to their initiative, project, or current product.
There is often a myriad of methods to improve your product, but you may not have the time to work on all of them. With Lean Analytics, you will learn how to find and address the one thing that will make the biggest difference.
Setting the goal of focusing on the right method will help you see real results. Just because your business has the ability and the tools to track many things at once, does not mean that it would be in your best interest to do so.
Tracking several types of data simultaneously can be a great waste of energy and resources and may distract you from the actual problems. Instead, you will want to focus your energy on determining that one vital metric. This metric will make the difference in the product or service that you provide.
The method in your search for this metric will vary depending on your field of business and several other factors. The way that you’ll find this metric is through an in-depth understanding of two factors:
The business or the project on which you’re presently working.
The stage of innovation that you are currently in.
Now that we have a basic understanding of Lean Analytics and what it means let’s take some time to further explore and see its different parts.
What is Lean?
Lean is a method that is used to help improve a process or a product on a continuous basis. This works to eliminate the waste of energy and resources in all your endeavors. It is based on the idea of constant respect for people and your customers, as well as the goal of continuously working on incremental improvements to better your business.
Lean is a methodology that is vast and covers many aspects of business. This guidebook will spend sufficient time discussing a specific part of Lean, Lean Analytics. Here, you can learn how to make the right changes. Of course, you will need a working understanding of where to start, and Lean Analytics can help.
Lean is a method that was originally implemented for manufacturing. The idea was to try to eliminate wastes of all kinds in a business, allowing them to provide great customer service and a great pr
oduct while increasing profits at the same time. Despite its beginnings, the Lean methodology has expanded to work in almost any kind of business. As long as you provide a product or a service to a customer, you can use the Lean methodology to help improve efficiency and profits.
For instance, how will you determine which metric will help you succeed? Which metric will prove to be the best and result in the most improvement compared to others? How will the metric help, how should it be implemented, and how can you ascertain if it’s successful in the end? Lean Analytics can help you gather the necessary information to find and work with the right metric.
Lean Analytics
Lean Analytics is part of the methodology for a lean startup, and it consists of three elements: building, measuring, and learning. These elements are going to form up a Lean Analytics Cycle of product development, which will quickly build up to an MVP, or Minimum Viable Product. When done properly, it can help you to make smart decisions provided you use the measurements that are accurate with Lean Analytics.
Remember, Lean Analytics is just a part of the Lean startup methodology. Thus, it will only cover a part of the entire Lean methodology. Specifically, Lean Analytics will focus on the part of the cycle that discusses measurements and learning.
It is never a good idea to just jump in and hope that things turn out well for you. The Lean methodology is all about experimenting and finding out exactly what your customers want. This helps you to feel confident that you are providing your customers with a product you know they want. Lean Analytics is an important step to ensuring that you get all the information you need to make these important decisions.
Before your company decides to apply this methodology, you must clearly know what you need to track, why you are tracking it, and the techniques you are using to track it.
Focus on the fundamentals
There are several principles of Lean that you will need to focus on when you work with Lean Analytics. These include:
A strive for perfection
A system for pull through
Maintain the flow of the business
Work to improve the value stream by purging all types of waste
Respect and engage the people or the customers
Focus on delivering as much value to the customer as effectively as possible
Waste and the Lean System
One of the most significant things that you will be addressing with Lean Analytics, or with any of the other parts of the Lean methodology, is waste. Waste is going to cost a company time and money and often frustrates the customer in the process. Whether it is because of product construction, defects, overproduction, or poor customer service, it ends up harming the company’s bottom line.
There are several different types of waste that you will address when working with the Lean system. The most common types that you will encounter with your Lean Analytics include:
Logistics: Take a look at the way the business handles the transportation of the service or product. You can see if there are is unnecessary movement of information, materials, or parts in the different sections of the process. These unnecessary steps and movements can end up costing your business a lot of money, especially if they are repeated on a regular basis. This will help you see if more efficient methods exist.
Waiting: Are facilities, systems, parts, or people idle? Do people spend much of their time without tasks despite the availability of work or do facilities stay empty? Inefficient conditions can cost the business a lot of money while each part waits for the work cycle to finish. You want to make sure that your workers are taking the optimal steps to get the work done, without having to waste time and energy.
Overproduction: Here, you’ll need to take a look at customer demand and determine whether production matches this demand or is in excess. Check if the creation of the product is faster or in a larger quantity than the customer’s demand. Any time that you make more products than the customer needs, you are going to run into trouble with spending too much on those products. As a business, you need to learn what your customer wants and needs, so you make just the amount that you can sell.
Defects: Determine the parts of the process that may result in an unacceptable product or service for the customer. If defects do exist, decide whether you should refocus to ensure that money is not lost.
Inventory: Take a look at the entire inventory, including both finished and unfinished products. Check for any pending work, raw materials, or finished goods that are not being used and do not have value to them.
Movement: You can also look to see if there is any wasted movement, particularly with goods, equipment, people, and materials. If there is, can you find ways to reduce this waste to help save money?
Extra processing: Look into any existing extra work, and how much is performed beyond the standard that is required by the customer. Extra processing can ensure that you are not putting in any more time and money than what is needed.
How Lean can help you define and then improve a value stream
Any time that you look at the value stream, you will see all the information, people, materials, and activities that need to flow and cooperate to provide value to your customers. You need these to come together well so that the customer gets the value they expect, and at the time and way, they want it. Identifying the value stream will be possible by using a value stream map.
You can improve your value stream with the Plan-Do-Check-Act process. This strategy can be used upfront so that you can design the right processes and products before they reach their finished form. Additionally, the strategy helps you to create an environment that is safe and orderly and allows easy detection of any waste.
Another method of creating this environment is the 5S+ (Five S plus): sort, straighten, scrub, systematize, and standardize. Afterward, ensure that any unsafe conditions along the way are eliminated.
The reason that you will want to do the sorting and cleaning is to make it easier to detect any waste. When everything is a mess, and everyone is having trouble figuring out what goes where, sorting and cleaning can address waste quite fast. There will also be times when you deem something as waste and then find out that it is actually important.
When everything is straightened out, you can make more sense of the processes in front of you. Afterward, you can take some time to look deeper into the system and eliminate anything that might be considered as waste or unsafe, and spend your time and money on parts of the process that actually provide value for your customer.
Chapter 2: The Lean Analytic Stages Each Company Needs to Follow
To be successful with Lean Analytics, you’ll need to follow several different stages. You won’t be able to move on to the next stage if you do not complete the preceding step. There are five in particular that you will need to focus on to get work done with this section of the Lean support methodology. The five stages are:
Stage 1: The initial stage is where you will concentrate on finding the problem for which people are searching for a solution. A business that focuses on business to business selling is going to find this stage critical. When you address this problem, then you can move on to the next stage.
Stage 2: For this stage, you are going to create an MVP product that can be used by early adopter customers. This stage is where you are aiming for user retention and engagement, and you can spend some time learning how this will happen when people start to use the product. You can also learn this information based on how the customer uses your site and how long they stay. You’ll take some time at this stage because you will need to experiment and also may need to go through and choose from a few different products before you get the one that is right for you. Once you have this information, you can move on.
Stage 3: Once you find out how the early adopter customers are going to respond to a product or service, it is time to find the most cost-efficient way to reach more customers. Once you have a plan ready to get those customers, and then more of them start purchasing t
he product, then you can move to the next stage. You would not want to go with a product that may be popular but costs a ton of money, which will cut into your revenues and can make it difficult to keep growing in the future.
Stage 4: You are now going to spend some time on economics and focusing on how much revenue you are making. You want to be able to optimize the revenue, so you need to calculate out the LTV:CAC ratio. LTV is the revenue that you expect to get from the customer, and the CAC is the cost that you incurred to acquire that customer. You can find this ratio by dividing your LTV by the CAC. Your margins are doing well if you get an LTV that is three times higher than the CAC. The higher the margins you get, the better because that means you are going to earn more in profits from the endeavor.
Stage 5: In the final stage, you will then take actions that are necessary to grow the business. You can continue with your current plan if you are making a high enough margin from the previous steps, or you may need to make some changes to ensure that you can earn enough revenue to keep the business growing. You can also spend time making plans on where you would like to concentrate on in the future to increase the growth of your business and help it expand. The main goal for your business is to keep growing and increase revenue. This step helps you to reevaluate what you have in your current plan and decide if it is working for you or if you need to go with a different option.