Today, ultimate Purpose of any Organization is to CREATE VALUE which surely is not limited to profit or shareholders value but a much broader term. Value is not limited to how we can create economic value but also to create social value, environmental value, value for our customers, for our employees, for our suppliers, for our partners, for the communities we operate in, even for government. As long as an organization is creating value, they actually can create revenue but once value creation is stopped, the revenue dries up and thus Value creation is a truly sustainable strategy and which can be in any form. For a customer, Value can be the emotion when they do the transaction in exchange of Tangible Value of the money which they give and receives a tangible product which gives you some intangible emotion. This emotion is based on various factors but majorly on Product, Price during the transaction and then performance after usage of the products.
Taiicho ohno a Japanese businessman was creator of the Toyota Production system(TPS)which was later named as Lean Manufacturing in the United States. It became famous and really useful for Business and Organizations. Jeffry liker mentions in his book The Toyota way that the view of management at Toyota is that they build people not just cars. The Lean Philosophy mainly circles around three basic concepts as below and if I put that in the concepts of Simon Sinek Golden circle, it will look like as below.
Create Value (WHY) – This is the Purpose of any Business which defines why does it exist and what problem they want to solve thus create Value .The business model should creates value for both customers – which can be both internal(Employees )and external( Stakeholders, Shareholders , Community, Environment , Government etc) and business itself. Cultivating your Purpose has become more important than ever which reflect the reason of being and how does it contribute back. In 2018, Lary Fink-CEO of BlackRock, an American multinational investment management corporation makes a bold and high-profile call for more purposeful business and mentioned about a new model for corporate Governance and mentioned ” Without a sense of purpose, no company, either public or private, can achieve its full potential. It will ultimately lose the license to operate from key stakeholders. It will succumb to short-term pressures to distribute earnings, and, in the process, sacrifice investments in employee development, innovation, and capital expenditures that are necessary for long-term growth.
Reduce Waste (HOW) – First step towards reduction of waste is to identify it and identification can only happen if Purpose of an organization is well thought of and defined. Value added and Non Value added activity purely depends on what Purpose an Organization stands for. If your customer only focus on lower price but sustainability is not priority for them then any upcharge due to sustainability will be non value added for them. For many customers both price and sustainability are of equal importance and thus they are more than happy to pay upcharge to support. Cultivating and Defining a Purpose really helps an Organization to segregate Value added and Non Value added activities. Once identified it becomes easier to prioritize and eliminate all activities which does not support the purpose and not creating the Value in the entire Value chain. This is a continuous process.
Improve Flow (WHAT) – Flow becomes the byproduct of the reduction/elimination of non value added activities as explained in previous step. Flow becomes more and more smoother as the activities are chosen and decided according to the Purpose defined. There is another approach to make the Flow better if we remove or reduce the constraint or bottlenecks as per Theory of Constraint by Eliyahu. M. Goldratt in his book The Goal.
In this VUCA (volatility, uncertainty, complexity and ambiguity) world with exponential growth and unpredictable disruption, Organization must adapt to ongoing change to thrive in the business with an intention to create Value for the customers. World needs support from more than ever where humanity is at the edge of extinction and thus involvement from each organization is important . The impact will be bigger and effective when Flow of the Value chain is better which is solving problems and helping society a little better each moment. In other words Business needs to define their PURPOSE and apply LEAN principles to make their effort more impactful.
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