Building Lean Startups and SMEs: Why Early Adoption Matters for Businesses of All Sizes

Table of Content:

Introduction

Advantages of embracing Lean

How to get started

Kaizen

Challanges – Examples and possible solutions with kaizen

Conclusion

In the business world, Lean principles have gained traction but often face criticism due to implementation challenges and misinterpretation or misuse. Over the years, I've seen various "Lean" approaches, and I believe the key is to embrace core Toyota principles like Kaizen. When this principle is genuinely adopted, businesses across industries can transform, fostering success and resilience.

People often associate Lean with popular elements like Just-in-Time, Minimum Viable Product (MVP), and rapid customer feedback integration or Kanban although, it is much more than just its discrete elements. This is a way of managing a business, it is a system that anybody can utilise, especially SMEs or startups as an effective management system. Ultimately, an SME or startup isn't just about the product; it's an institution requiring a modern management style that addresses its specific needs and circumstances.

Introduction

For startups and small to medium-sized enterprises (SMEs), embracing lean from the outset offers numerous advantages:

1. It sets a solid foundation for growth: By starting with lean, you can create a culture that values efficiency, innovation, and customer satisfaction. These values will serve as a strong base as your company grows and faces new challenges.

2. It helps to avoid painful transformations down the road: Established companies often struggle to implement lean practices due to ingrained habits and resistance to change. By incorporating lean from the beginning, you can sidestep these difficulties and build a more agile and responsive organisation.

3. It attracts and retains top talents: A lean culture emphasises employee engagement, continuous learning, and empowerment. These qualities are highly attractive to today's workforce, enabling your business to draw in and retain skilled employees.

While early adoption of lean practices is beneficial to companies of all sizes, each type and size of company may face unique challenges in implementing these principles. For startups, the focus is often on establishing a clear direction and validating their business model. While this may can also be true for smaller companies, SMEs with more employees may face different challenges.

Micro and small SMEs with 10-50 employees might struggle with limited resources and expertise, whereas medium SMEs with 50 or more employees might find it challenging to change existing processes or manage more complex operations...

To overcome these obstacles, startups should emphasise learning and experimentation, while SMEs should prioritise communication, change management, and adaptability, with an increasing focus on these aspects as the size and complexity of the organisation grow.

Let’s see how to get started:

1. Cultivate a lean mindset: Understand the core principles of lean management as a whole system, rather than just a set of tools for specific situations. Encourage your team to embrace this mindset as well. The lean approach should permeate every aspect of your business, from strategy to day-to-day operations. This way, your organisation can fully benefit from the transformative power of lean management.

2. Implement relevant lean processes: Adapt lean tools and techniques to suit your business, such as value stream mapping, visual management, and continuous improvement initiatives like Kaizen. Keep in mind that these elements are part of a larger system. Embracing the entire system rather than focusing solely on individual components will ensure a more effective and scalable strategy. By thoughtfully applying these processes, your organisation can fully realise the benefits of lean management.

3. Develop a supportive leadership team: Ensure your leaders embody the principles of lean and serve as role models for your employees. Humble leadership, open communication, and a commitment to growth are essential for a successful lean transformation. Moreover, it's crucial for leaders to physically be present in the workplace, whether it's a shop floor or an office environment. This visibility not only allows leaders to gain first-hand knowledge of what's happening but also makes them more accessible to their team members. Practicing the concept of 'Genba' (Japanese term for "the actual place" - a.k.a. where the work is done) and being on the floor with your team can greatly contribute to effective leadership.

I get it, you're thinking, "How does all this 'lean' stuff help me with my real issues?" You're dealing with things like cash-flow, burnout, production scaling, and inventory, not some abstract "lean" problem. You might even be stressing about financing for more inventory to keep customers happy. But is stocking up the answer? Don't worry; there are solutions for you. Let's tackle your problems together! Below, I've listed some common issues for both startups and SMEs, along with suggestions on how to approach solving them using Kaizen.

(Keep in mind that this is just one blog post, and each issue can't be solved in detail here. I plan to create individual posts for each problem and more, so be sure to check back for in-depth solutions in our blog!)

What we are doing to find solutions to these problems? It's called Kaizen. What is Kaizen, you ask?

Kaizen – The Art of Making Things Better, Bit by Bit!

Ever heard the saying, "slow and steady wins the race"? Well, Kaizen is a bit like that! It's all about making small changes over time to make things better in the long run. It is like giving little "tune-up" every now and then to your business.

The best part about Kaizen is that it's not rocket science – anyone can do it! All you need to do is:

1. Look Around: Observe your work processes and notice any areas that could be improved.


2. Brainstorm: Get your team together and come up with ideas on how to make things better using methods like the 7-way idea development. Remember, every idea counts!


3. Try It Out: Select the solutions identified during the 7-way idea development process and put it into action. Don't worry if it doesn't work out perfectly – that's part of the process!


4. Review & Repeat: See how your small change affected the bigger picture. If it worked, great! If not, that's okay too. Learn from your experience and try something new.


Kaizen is like a friendly reminder that even small steps can lead to big improvements. So, let's roll up your sleeves and embrace "try-storming" – a term I learned from one of my mentors. Try-storming involves going directly to where the work is done (genba) and collaborating with those doing the work to find solutions, instead of being stuck behind a computer in an office. It's about getting your hands dirty and trying out different ideas rather than sitting around a table, talking, and having refreshments. It may start on paper, but it's all about being on the ground, whether that's on the factory floor or in a hospital surgery room. With try-storming and Kaizen, we can have fun making things better, one step at a time!

Challenges more specific to startups:

1. Product Development: A startup might face difficulties in developing a product that meets customer needs and differentiates itself from competitors, leading to poor adoption rates and potential product failures.

• Example: (Health-tech startup): Have regular chats with users to see what app features need a little love. Work together to come up with fixes and try them out one by one. Keep improving and soon your app will be fully adapted to your customers' needs.

2. Marketing and Customer Acquisition: Startups might have limited resources and expertise in marketing, making it challenging to create effective strategies for customer acquisition and brand awareness.

• Example: (Sustainable fashion startup): Experiment with different ads each week, like a social media makeover! See which ones get the most attention and use that style more often. Soon, customers will be flocking to your eco-friendly fashion!

3. Cash Flow: Startups may face cash flow problems due to limited funding, delayed payments from customers, or high expenses, making it difficult to cover operational costs and invest in growth.

• (Subscription-based startup): Take a peek at your billing process once a month to spot any hiccups. Try offering a little something for early payments or send friendly reminders. Your cash flow will be smoother than a river in no time!

4. Burnout: Startup founders and employees might experience high levels of stress and burnout due to intense work pressure, long hours, and the need to wear multiple hats within the organization.

• Example: (Startup founder): Find ways to lighten the workload by automating tasks or sharing responsibilities. Talk openly about the importance of breaks, and have weekly chats to check-in. You'll be happier and more productive!

SME-Specific Challenges:

1. Challenge by AI: An SME might face difficulties in adopting and integrating AI technologies into its operations, leading to inefficiencies and reduced competitiveness.

• Example: (Small e-commerce company): Introduce AI product recommendations slowly, like a new recipe. See how customers respond and tweak the system accordingly. Soon, your online shop (for example) will feel like a personal shopper!

2. Company Culture: A significant challenge in an SME could be establishing and maintaining a positive and productive company culture, leading to disengaged employees and high turnover rates.

• Example: (Small digital marketing agency): Plan fun team activities every so often to get everyone chatting and working together. Encourage everyone to share their ideas for making the company better (employee idea initiative). Watch your “work family” grow closer and stronger!

3. Burnout: Employees working at an SME also experience high levels of stress and burnout due to heavy workloads, limited resources, and work-life imbalance.

• Example: (Manager at a local manufacturing company): Streamline your production process by reorganizing the workspace and simplifying tasks. Regularly check in with your team to ensure they're happy and not overwhelmed. Develop a wellbeing strategy for the company and gather feedback on its effectiveness. As a small business leader, your team will appreciate it if you lead by example and prioritize work-life balance. Embracing rest and psychological safety doesn't mean you're not working hard for success; it means you recognize the importance of well-being for your team and business to thrive.

4. Managing Growth / Scaling Production: Managing rapid growth and scaling production can be a significant challenge. SMEs need to ensure that scaling doesn't lead to operational inefficiencies, increased costs, or compromised product quality. Achieving a balance between growth and maintaining high standards is crucial for sustainable success.

• Example: (Organic skincare SME): Look for bottlenecks in your production line, like as if you were the ‘Sherlock Holmes’ of the assembly-line! Assess the current situation, identify opportunities for improvement, look for stoppages, waiting, material piles (the 7 wastes), and make small adjustments where it makes sense to help your team work more efficiently. You'll be ready to handle growth like a pro!

5. Inventory: SMEs can face difficulties in managing inventory levels effectively, leading to stock-outs, overstocking, and potential financial losses.

• Example: (Family-owned production company): Make a habit of reviewing your stock regularly (think more often than just once a year). Keep things visual by using handy systems like 2-bin and information cards to signal when and what to order. Use those sales data (you've got them!) based on customer demand, so you know exactly what and how much to stock. By harmonizing production with demand, you'll have inventory levels just right – and hey, who doesn't love some extra cash flow?

6. Digital Transformation: Keeping up with the rapidly changing digital landscape can be challenging. While adopting digital technologies and processes might not be simple for SMEs, it's a necessary step to remain competitive in a fast-paced, technology-driven market. Although the transition may be complex, embracing these changes is crucial for long-term success.

• Example: (Small Vet Clinic CRM): Identify which process needs to be transformed first. Choose the right environment, e.g. in-house data storage, cloud storage. Make sure that the software you choose is as much as possible built around or adapted to the needs of the business and not the other way around, especially if this is the first time a software package is being brought into the business. If you can, get a custom-built application (ensure long term support is available). The worst thing a company can do with its digital transformation efforts (and will most likely regret later) is to create nonsense work processes just because the software company says "it can't be done that way..." hint: it can, it always can... go find another software company! And just like any other transformation you do, do it step by step, continuous improvement helps to avoid disasters, makes it easier to identify problems during implementation, and if something goes wrong, the whole business doesn't stop all at once, you can continue to serve your customers in the traditional way.

A word of caution and personal experience: do not digitalise a process just for the sake of it. Fix and optimise the process first, then digitalise.

Other challenges where Kaizen can help:

- market fit, competition, funding, legal compliance, etc…

By embracing Kaizen, you can scale and adapt as your business grows, maintaining efficiency, and customer focus while fostering a culture of continuous improvement.

In conclusion, lean management is a powerful approach for startups and SMEs alike. By adopting these principles early on, you can establish a solid foundation for growth and create a business that is responsive to customer needs, attracts top talents, and remains agile in a competitive market. So why wait? Start exploring Kaizen today and unlock your business's full potential!

Interested in learning more about Lean Management and how you can utilise it in your business? Dive deeper into the fundamentals and see how Leanoft's Roland Kiglics can support you.

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