Have you bridged the gap between Business Strategy and Shareholder Value?

by Jim Leitch

Where would your Customers and Stockholders rank your company; do you satisfy them sometimes or always ... in terms of price, delivery, quality, profitability? Are they satisfied with the overall value you provide to them daily, or are they looking elsewhere?

The solution is the same, whether you are in the aerospace, automotive, or durable goods industries. The most critical element to success is how well your company's lean value chain operates and it must be driven by lean thinking organizations. After reviewing the following approach, ask yourself . . . is your company on the right path?

Initially, senior management establishes the strategic direction, goals, and vision for creating value for your customers and stockholders. Next, the leadership team tactically defines how to create value and achieve goals. The most successful companies are those which have the best lean value chains. Let's look at several key elements.

  • What is a lean value chain?
  • How do I transform my company?
  • What are the biggest challenges and risks?
  • What are the costs and benefits?
  • How do I ensure success?
What is a Lean Value Chain?
The term Lean describes a process that meets customer requirements without waste; eliminating items / costs that the customer doesn't want. Value is measured from the customer perspective, not your company's. The Chain depicts a series of links between customers, sales, engineering, planning, suppliers, production, distribution, and delivery. Creating a lean value chain is not only "the production department's responsibility", nor is it limited to inside your company's four walls.

How Do I Transition My Company?
The shortest distance between two points is a straight line in most companies. To transform your company you need to know where you want to be (future state) and where you are today (current state). Value stream mapping is one of the tools used to define your work processes and identify where your company has non value-added steps. (Remember, the customer doesn't want to pay for your waste.) Analyze where you are, then where you want to be; create an improvement plan to eliminate the waste and move toward only creating value.

Challenges & Risks
Risk comes in many shapes and colors; not recognizing you need to improve may be your biggest risk. Don't be complacent. Your competitors are taking action, are you?

Now that you are motivated to move forward with a lean value chain initiative, your first challenge will be creating an improvement plan that is right / fit for your company; cook book approaches should be avoided. The improvement plan sets the course for eliminating the roadblocks.

There are two greater additional risks, and they fall under the label of execution. First is the challenge of executing the improvement initiatives to transform your company from your current state to the desired future state. Implementing the changes necessary will not be easy, quick, or without significant investment. You will not be successful unless the people involved are trained, excited, and motivated; everyone should be involved in the transformation and the benefits. Second, and the most challenging, is the day-to-day execution of your newly created lean work processes. The analysis and planning described above set the foundation. Implementing the new work processes creates the bridge. Providing the leadership and management on a daily basis, and equipping your organization to use lean thinking throughout on a daily basis, enables your company to create value throughout and deliver value to your customers and shareholders!

Costs ... Benefits?
Cost should be viewed two ways. Certainly, you must invest in the knowledge transfer process, and train your people. The rearrangement of the production processes will require investment. Potentially, there will be modifications to your management procedures and systems, and, you will need to help your Tier 1 / Tier 2 Suppliers to improve. Collectively these costs are less than the cost of taking no action, which could lead to extermination. The benefits are clear and range from survival, to increasing market share by generating value that customers want, to pleasing your shareholders. The graphic summarizes the key elements and the value you can create.

Path to Success?
Recognize your company needs to improve; energize your company through executive management's direct involvement from Day One. Don't think... "we don't need it", or "we have already done all we can". You can be sure your competition is working on creating their lean value chain.

Don't fly blind. The transformation is difficult, multi-faceted, risky and can be very frustrating. The most successful companies obtain help from experienced professionals; be sure to select one that is results oriented and does not just "plan", but executes the plan. Choose a partner who will analyze your situation and create a tailored improvement plan; then, using leadership and coaching techniques, will focus the team's energy on execution.

Jim Leitch, Principal
Operations & Management
Fluor Consulting
1 (919) 349-8443