Platt Perspective on Business and Technology

Developing a business to be both lean and competitive, and some thoughts on what that means

Posted in strategy and planning by Timothy Platt on August 5, 2011

I was recently asked a question that I found a bit startling, that I decided to more fully respond to here as a full posting. And I want to discuss both the question itself and my answer to it, and also my initial response of surprise. The question asked of me was “Is it possible for a business to be both lean and competitive?” My surprise from this stems from the fact that I automatically assume the answer to be yes and that I see that in a real sense as being obvious.

We all make assumptions and sometimes they are quite sound and robustly so. And sometimes they are not so much so. And even the assumptions that we make are sound when we make them, they might in fact only be contextually or situationally valid. But we all make assumptions and it is important for us to understand that – and to know what we automatically tend to assume and take for granted, and why. I assume, among other things, that a business can be lean and still be competitive and that a measure of well defined business leanness can and does contribute to effectiveness. My goal in this posting is to examine that assumption and to make note of possible situations and contexts where it might be valid, and where it might not be.

• “Is it possible for a business to be both lean and competitive?”

There are two sides to this question, one dealing with “lean” and the other with “competitiveness.” For the purpose of this posting at least I will take competitiveness as a quantifiably known entity, based on market share and on the accountant’s and bookkeeper’s top and bottom lines, and on figures such as sales totals and profit margins per unit sold that go into determining them.

• Competitiveness is a bottom line measure of how businesses compare as to these and related numbers when matched up with those of other businesses that seek to offer the same or similar products or services in the same markets. The business with better numbers is more competitive, and in a calculably replicable manner.

So answering this question is about what the word “lean” means and on how attempts to achieve it would influence or skew the numerical findings that go into determining competitiveness.

I have written a number of times about lean businesses and lean strategies, and in that regard I simply cite a 10 part series I recently completed with the general working title of Virtualizing and Outsourcing Infrastructure (see Business Strategy and Operations, postings 127 and scattered following.) I operationally define “lean” there and elsewhere in this blog entirely in terms of focus on core capabilities that directly support and are directly required by the business for providing its customer-facing products or services. And I further restrict this to most centrally including business resources and operations that would support its effectively bringing a unique value proposition to the marketplace.

Posited that way, it is impossible for a business to be lean and effective let alone lean and competitive if its owners and managers do not have a clear, well articulated, commonly held understanding as to what those core capabilities should be. Put slightly differently:

• A business cannot be lean and competitive if the people who run it do not know and agree on what lean should be for them and their context.

And this simply presents us with a puzzle to analytically reason our way through, which I touch upon here from the perspective of a business owner.

• What precisely are our business’ products and services? This requires two types of answer: one from the consumer perspective and according to how they do or do not see the value of what we offer in the marketplace to them, and the other from the business perspective and operationally as to how we develop and provide those products or services.
• What core capabilities in the form of in-house resources and operational processes do we have that support our being able to offer our products or services in the marketplace?
• I would argue that when we really know an optimized set of answers to that second bullet point, the two approaches to answering the first line up with each other but if we do not know what our core capabilities should be, our business will be building the wrong things for the wrong target consumer base.
• And if we have a misalignment there, any efforts to be lean will be off-base as we will be cutting in the wrong ways and in the wrong places and maintaining or even growing in the wrong ways and the wrong places.
• And the result will be that our lean attempts will not and cannot make us competitive and certainly where our competition is doing this right – an assumption that every business should make.

I will add here as a final thought that an unexamined assumption is a lost opportunity to learn, and that when we look more deeply into what we simply take for granted we gain new insight, and often from unexpected directions.

You can find this and related postings in Business Strategy and Operations.

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