Defining Value Added

In the lean lexicon there is a lot of talk of removing waste from processes.  Waste is anything that is not value added.  There is the problem.  What is value added?

In my work, I ask people to define value added for me.  It seems like a simple question, but I get numerous blank stares and answers rarely match across the team or organization.

So if can’t give a standard definition of value added, then what is waste?  How do you look for it?  How do you know what to keep and what to eliminate?

Here is the definition I learned long ago and it never fails me:

1. The customer must be willing to pay for it
2. It changes the form, fit, or function of the product or service
3. It must be done right the first time

ALL THREE MUST BE MET TO BE VALUE ADDED!!!

A customer may find something interesting but isn’t willing to pay the extra price for it.  An example may be an optional built-in DVD player in the mini-van.  Some may find it of value and pay extra for it, while others may not.

A change must be made to the product or service.  Inspection stations on an assembly line are a good example of something that violates the definition.  It may be needed because that is better than a bad product getting out.

Which leads to the last point.  If it isn’t right the first time then it is a defect which is one of the seven types of waste.

Next time you are looking for waste, bounce it against this definition of value added.  You may be surprised to find waste that you haven’t considered before.

Advertisement

Engage People Using a Benefits Map

Businesses typically care about only three things: 1) Increasing Revenue, 2) Reducing Cost, and 3) Cost Avoidance.  But it isn’t always easy to connect the work to one of these three outcomes.

Reducing scrap.  Reducing lead time.  Decreasing accidents.  Making quicker decisions.  These are things it is easier to connect to our work.  These are outputs.

So how do the outputs tie to the outcomes?  That is where a benefits map can help.

The benefits map takes the deliverables of the work (on the left) and ties them to the outcomes (on the right) by way of the outputs (in the middle).

Properly designed work has known deliverables.  Getting to how theses deliverables are going to change known metrics connects them to the outputs.  Then it is working with the customer to think about how changing those outputs will create a better outcome for the business.

The last step is to quantify the benefit to the outcome.

There are two positives to this method.  The first is the team has to stop and think about how the work will benefit the business.  Just the awareness alone creates teams that more in touch with how they are affecting the business.

The second is the people doing the work become more engaged int he work.  They can see a visual of how they are making an impact.

Understanding how your work is helping the business is a key component in employee engagement.  The Benefits Map is a simple but effective tool to help engage people.

Who is Your Real Customer?

Lean is focuses on adding value for the customer.  But, who is your real customer?

Many groups will talk about supporting another group within the organization.  The focus is on making the internal customer happy.  Delivering what they need and want.

Internal customers are important.  As a supplier, the focus should be on delivering what the internal customer wants.  But, they are not your real customer.  The real customer is still the end user or the consumer of the organizations product or service.  That never changes.

Even if a group never touches the value added processes making the product or service, the group should be focused on the end customer.  As the group works with the internal customer, questions should be asked if what the internal customer needs/wants lines up with adding value for the end customer.

Common thought is it’s not the support group’s job or position to ask because the internal customer group is assumed to already know what is being asked for is adding value.

Amazon.  Zappos.  Danaher.  Safelite.  Organizations that have figured out it is EVERYBODY’s job to focus and ask questions about what adds value to the end customer have a significant competitive advantage.