‘Lean Thinking’—the best defence against an economic downturn?

Author Tim Baker Published 20 October 2009

One of my customers is the CEO of a significant organisation in Australia. This business is a wholly owned subsidiary of a multinational organisation operating throughout the western world. He was hired three years ago. He knew when he joined that the business was profitable and performed as well as most of the other subsidiaries in the corporation. But he quickly learned that the business lacked the flexibility to meet the evolving needs of his customer base. He realised that in the longer term he was liable to lose his market leading position.

The root cause of this lack of flexibility was the structure and application of the worldwide computer software that drives the business. This together with the structure of the core business processes that had evolved over time to feed the computer system resulted in an excessive administrative burden to deliver his array of customer services.

He decided that he should embark on a program to define the evolving needs of each segment of his existing customer base and understand any frustrations they may experience. He was then able to define the way he should service his existing and potential customers in the future.

His next step was to define the organisation's existing core and subsidiary processes. He used external consultants and an internal team of the smartest and most flexible-thinking employees from across the company. All the process flows where then redesigned to match the needs of customers. But the corporation's computer software remained a major limitation. As a result two stages of change were identified: utilising the existing software and redesigning that software. Clearly stage one was in his control; however, stage two required the corporation to agree to the change.

Over this three year period no other subsidiary was keen to follow the path taken by the Australian subsidiary – they were comfortable with their systems and profitability. Today, however, they have all felt the effects of the global financial crisis.

Today the Australian subsidiary is clearly the most profitable business in the corporation. It is the only subsidiary that has increased its market share during the last twelve months. Stage one was challenging but effectively implemented. Stage two – the new computer system – is about to go live. The Australian subsidiary is confident that it will meet the changing customer needs.

You could well argue that the best defence against economic downturn is 'lean thinking' principles in times of economic growth. After all, trying to apply them as your revenue is vanishing and your margin is shrinking is even more challenging. What do you think?