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Maximise Value not just Minimise Cost

23 July 2014

As a lean thinking specialist, I often have to spend a considerable amount of time making sure that lean is not perceived as simply “a waste reduction” methodology. The 7 wastes (identified by Taiichi Ohno, a key architect of the Toyota Production System) are an immensely useful guide at helping to identify problems within both manufacturing and service processes, but they are simply a vehicle to help you focus on the most important element of a work system, that of value.

Value is classically defined as “what the customer is prepared to pay for” … however, it’s often easier to think of this entity as basically “what the customer wants”. The beauty of truly understanding what customers want is that it ‘shines a light of simplicity’ onto the complicated tangle of activities and steps which exist within the majority of processes. For example, a woman walks into a College and asks:

“I’d like to learn French please”

What does basic value look like to that customer? Well 1) I’d like to attend French classes and I want the process to be quick, easy and simple and 2) I hope that the teacher is great and helps me to learn and 3) I want to enjoy it and take advantage of my new skill on holiday next year.

When you examine the internal process within a College or University, it can seem a great deal more removed from those simple desires. The initial request soon turns into queues of work and transfers between different departments and financial payment systems and student information systems and weeks of uncertainty and delays – in summary, the process is full of WASTE.

The wastes that Ohno identified are as follows: Transportation, Inventory, Motion, Waiting, Over-production, Over-processing and Defects. These wastes are often memorised using the acronym “Tim Wood”. They are a great help when examining the ‘French class administration process’ as you can start to challenge whether it’s good enough for the customer to receive confirmation that their payment has been processed 6 weeks after applying (Waiting). The customer doesn’t want to pay for the privilege of their details being entered 4 times into 4 different computer based systems (Over-processing) and so, by identifying teams to these problems, you can start to challenge the current practices that exist.

However, it’s dangerous to take a team through an improvement process that merely focuses on eliminating, reducing, or swopping the wastes that exist. This is important yes, but in order to delight our customers, we should focus on ensuring that value is enhanced through the delivery of the service requested. The key to maximising value here is to ensure that the teaching experience is great and helps the learner to learn. Within this example, it might actually be beneficial to think about doing MORE, not less, for the customer. Can we set up a facebook group for the French class, so that people can get to know each other and help each other out? Can we put on a French cheese and wine evening, to help students to practice ordering in a restaurant?

To merely focus on eliminating wastes within process prevents organisations from developing products and services that truly delight their customers. Focusing on value ensures that you develop the kind of customer loyalty that is essential for business growth.