What is the lean business model, and what are its benefits?

26 September 2019

Even if you’ve heard the term lean with regards to business models, what it entails may be unclear to you. But as it implies, businesses that use this methodology strip away the unnecessary elements, needing only the essentials that suit them and their customers and using them to grow.

And it’s been shown to be a methodology that can yield many benefits for small businesses when implemented correctly. Here, we’ll delve into the definitions of the model and its numerous advantages, providing valuable, professional insights along the way.

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What is a lean business model?

A lean business model means making continuous improvements in a business operation, and the implementation of processes to guarantee optimum business efficiency. This can be achieved by changing or removing ineffective practices, identifying and getting rid of unprofitable products and measuring and improving the productivity of teams.

Sometimes recognised as operational excellence or continuous improvement strategies, the model is centred around identifying the areas which are not aiding business growth and addressing them effectively. Doing so offers significant benefits to both the business and their customers – with improved operation affording increased growth and better quality output.

lean business model

Many businesses now implement the lean business model, using either in-house professionals or employing the assistance of external consultants. However, many businesses find the former more conducive to success – due to the ongoing and ever-changing nature of achieving a truly lean business.  

How to implement a lean business model

The biggest hurdle to overcome for many businesses considering a lean business model is ensuring that their new processes and new model won’t have a negative impact upon their customers. Changing certain teams, products or services may seem a profitable move, but could impact a significant section of the customer base in the immediate or distant future – something which could have disastrous long-term effects. 

So, the first step for any business looking to implement the lean model is to fully identify and understand the operation’s processes and how they match what the customer base demands and wants.

Identify the start-to-finish process of building services and products to delivering these to the customers – can any sections of the process be streamlined or cut completely without affecting the delivery stage? If the answer is yes, these sections could be the focus for those responsible for the lean implementation.  

What are the benefits of lean business models?

The lean business model offers a series of benefits to businesses of all sizes in both the short term and long term.  

Improved leadership skills

From top-level directors to middle managers and shift supervisors, lean encourages a more pro-active and considered approach to management, demanding that non-beneficial practices scrapped.

With the lean model in place, every level of management will begin to identify where their part of the business could be made more effective to ensure greater efficiency, quality and profitability. Having a clear goal in mind can add clarity to a management role, helping managers develop their own skills and work towards creating a more harmonious and effective team.

lean business model

Engaged employees

Within the lean model, employees can see their value to the wider team, engaging their attention and encouraging increased participation.

Employees who can identify that they’re part of a well-oiled team are more likely to buy into the business’ aims and targets. Share what your efficiency goals are for your business with all colleagues as early as possible because communication is key. And involve everyone, the performance of a business is dictated by the performance of everyone in it.

Employees will recognise that the wider business is efficiently managed and operated, encouraging them to match this in their own output.

Continuous growth

Because lean businesses are concerned with the essentials, any business using this methodology functions almost holistically. That is to say, it shines a more well-rounded spotlight on the business. It allows the people who are responsible for a business’ effectiveness and quality of output to proactively seek out and eliminate non value-adding waste from the work they do. Whether it’s leadership skills, employee engagement, individual process efficiency or customer value, lean businesses support growth in all areas.

Put customers first

It allows you to get into your customers’ shoes in order to find out what matters to them. By valuing their feedback and thoughts, and acting on it, it puts the customer journey at the heart of everything a business does. Understand the customer’s needs from the very beginning; spend time with them, use surveys, hold forums and events. Everyone is different – it’s important to meet those individual needs.

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It’s easy to implement

Even if you don’t go entirely lean, elements of the model can easily be introduced through small, continuous improvements to your business. Giving every member of your organisation the power to think lean is an important attribute. A switch to a leaner way of doing things can deliver immediate and measurable results across a range of KPIs quicker than you think. 

For example, at Gazprom Energy, we are targeting eight types of waste we are looking to reduce: Transport, Inventory, Motion, Waiting, Over-production, Over-processing, Defects and Skills. Using the acronym TIM WOODS, the business remains mindful of examples of these types of waste, along with their potential solutions around the workplace. 

These quick-to-implement changes are ‘Kaizen’ (change for better) events, and can be things as simple as standardising current processes, providing consistent training to a team or rearranging work areas to improve process flows and communication.

Larger-scale changes require more input. The Plan, Do, Check, Act methodology is something many businesses use to ensure improvements are being properly realised and – more importantly – your colleagues are continuously improving.

lean business model

The Plan, Do, Check, Act methodology

An iterative approach to continuous improvement of products, people and services, it consists of four stages that are as follows:

1. Plan

As the name suggests, this stage involves planning what needs to be done. Depending on the size of the project, it can be a major part of the process, but it’s an important element in defining what the project’s scope is.

In determining a plan, ask your team some of the following questions:

  • What is the core problem that needs solving?
  • What resources do we need?
  • What resources do we have?
  • What is the best solution for fixing the problem with the available resources?
  • In what conditions will the plan be considered successful?

2. Do

Apply what was considered at the planning stage and put things into action. You may encounter problems here, which is why it may be a good idea to try out your plan on a smaller scale in a more controlled environment.

3. Check

Considered the most important part of the cycle, the check phase ensures your plan is clear, reduces the number of mistakes and maintains continuous improvement.

Audit your plan’s execution and see if your initial plan worked. It will become clear what the more problematic parts of the process are, which can be eliminated later down the line.

4. Act

Depending on the outcome of the check step, this final part involves deciding what to do next. If everything went according to plan, then you can create a standardised, stabilised process than can be successfully integrated. If things didn’t go so well, you’ll need to begin the cycle again.

Optimise your agility

Within a lean framework, you’re free from the more established structures and processes that large organisations function in. As a result, there’s less of the time-draining bureaucracy those kinds of businesses deal with. In its place is more direct contact, less lengthy planning horizons, and an ability to respond to opportunities more readily without fuss. 

After all, lean is not about reinventing the wheel, it is about promoting simple yet effective working practices at every level of the business and at every stage of the process.

Have you enjoyed this article? Don’t forget to check out the rest of the Gazprom Energy blog and newsfeed for more of the latest articles and features. Alternatively, to find out about our range of business energy services, visit the homepage or call us today on 0161 837 3395. 

The views, opinions and positions expressed within this article are those of our third-party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.

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