I think it was J.K. Galbraith, the economist, who pointed out the problem with trimming the fat in hard times. The image is of taking a slice of bacon and then cleanly removing the fatty rind with a sharp pair of scissors, just leaving the meat behind. In reality, the fat is marbled into your company’s flesh. There’s no easy way of getting rid of it. And, indeed, often you shouldn’t: it’s the fat that gives Wagya beef its flavour and keeps Eskimos warm in winter.
So what do companies do when they need to lose the flab? Unfortunately, a lot of them take the effective, if drastic, short-term weight-loss solution of cutting off both legs. Wouldn’t it be much better to be “lean”? As a Venture Hacks article in October explains:
“Lean” is the most capital-efficient way to run a business. Lean is the never-ending process of eliminating waste: finding every activity that does not create value for the customer and eliminating it. The two greatest wastes are overproduction (making things the customer doesn’t want) and inventory (making things that aren’t used immediately) [...] Lean startups eliminate waste: they eliminate every activity that is not necessary for creating customer value.
Sounds sensible, right? What can be wrong with eliminating waste? And ‘lean’ is such a nice word, with its connotations of health, lissomness, agility and athleticism.
But drill into it and the metaphor shatters.
Sure, ‘lean’ is good if you’re trying to build as many widgets as possible, in the fastest time and with the lowest defect rate; or if you’re trying to fly as many people from London to Paris as cheaply and efficiently as possible; or maybe even if you’re trying to ship a single product release with a given feature set as quick as you can. But creating a software business isn’t like running an assembly line or running a no-frills airline. It’s not about maximising measurable output and minimising inventory or aircraft turnaround times. It’s about creating an environment where highly creative people can thrive, and building products that your customers might not even know they need yet.
And what is “value for the customer” anyway? Value for the specific customers in your current customer base, right now? Or value for all your potential customers over all time? Or do you need to strike a nuanced balance between the two? And isn’t the “value” you can provide to your customer somehow correlated to the culture of your organisation? So how much time, and money, should you spend on that?
Earlier this year Red Gate hit a long-standing sales target. To celebrate, we hired out the local Apple store after hours, closed it to the public and gave everybody at Red Gate £300 ($600 at the time) of Apple vouchers. Was this an activity “necessary for creating customer value”? No. Was it a hell of a good thing to do anyway? I think so, and that’s because running a software company for the long term isn’t as narrow as shipping an individual product as quickly as possible with the minimum set of features to keep the maximum number of customers happy.
The Venture Hacks article goes on to quote Taiichi Ohno, the founder of the Toyota Production System:
True efficiency improvement comes when we produce zero waste and bring the percentage of work to 100 percent
Can you hear that rumbling noise? That’s Ohno turning in his grave. Sure, superficially, the Toyota Production System is about eliminating wastage and increasing productivity. But it’s deeper than that: it’s a product of the Toyota Way, which is not a set of processes but a philosophy. It’s about – among other things – being humble, reflecting on oneself, experimenting, iterating, learning and continuous improvement. Taking lessons learnt in one industry and blindly applying them to another would be anathema to Taiichi Ohno.
Hmm. Running a software company turns out to be a lot trickier than, paraphrasing, not spending time and money on worthless crap.
It’s almost the New Year, and Mark Dalgarno asks what are your New Year resolutions?
I’ve got three speakers signed up for BoS 2009 so far – Don Norman, Geoffrey Moore and Joel Spolsky. I’m hoping to announce some more soon.
Perry Ismangil is presenting to 7,000 people at a conference and would like to know how to maximise the opportunity.
I’m going to leave last week’s question of the week on who would you like to hear speak at Business of Software 2009 open for another week, and add a new QOTW for this week: what are your predictions for 2009? $20 of Amazon vouchers will go to the best replies on both posts.