What lean business means (part 2)

In the second part of these blogs, Philip Letts talks about the traits of a lean business and what lies beyond. blur Group was a ‘lean startup’ and one of the most successful in Europe. Now blur Group has become an international business so it is developing the concept of ‘lean business’. One day it will be a ‘lean enterprise’. So what does lean mean and why is it important? Lean is a philosophy and set of business principles and processes. Lean does not equal mean. At its core lean requires that a business from day one should beat the most direct path to its core raison d’etre – which is to generate cash surpluses. Indeed, until a new venture has reached the point where it sustainably generates cash it is merely an interesting concept or project. It is not as yet a business. So how do you do lean: - focus on the process of building your business to profitability as rapidly as possible – not on the frills. At blur Group we went as far as publishing our manual – see http://innovate.blurgroup.com/ - be obsessive about the problem you will solve for customers and make sure that you solve the problem well enough that they will pay prices which include sustainable margins to enable you to generate the kind of cash you desire for the business - be obsessive about your customers, profitably acquiring them and servicing them - nail repeat business into everything you do - build great systems – cost efficiently - raise only as much capital as you need at every stage and always question hard whether and why you require this capital - rent everything - negotiate everything as cost effectively as you can. There is no such thing as being too cheap in a lean business - do not over engineer your products, processes, systems or contracts – you want to engineer your business just right for each and every stage of its growth - Always work on refining and tightening your business model and financials – be detailed and cautious - until you reach profitability do not plan or engineer yourself more than 6 months out - keep it simple: contracts, processes, procedures, systems, pricing, products, messages etc - ensure that your cost base is the absolute lowest it can be at every stage - plan everything to the extreme, top to bottom, inside out. You should never have a spare or under-utilised resource - ensure your organisational structure is a flat as a pancake and until you are profitable all managers must be player and coach. Each with tangible objectives - only hire exactly what you need, define roles clearly and take your time. Lean means you have to shop around diligently and fairly exhaustively - try and put the ‘viral’ into products, services, Websites and external comms - think scalability and efficiency in all you do - do not commit to overheads or long contracts of any kind until you hit sustainable profitability - be fit for lean – literally as it is a long, hard slog - teach lean to every employee, partner or supplier and ensure that it is cemented into all your core principles and processes - make sure all your management team and employees celebrate lean and are eternal advocates - cement lean into your core values - stay lean for the life of the business – never become fat - reward and celebrate activities that shift the profitability needle and not other needles - understand and measure any key metrics that will drive you along and beyond profitability – to the most optimized earnings growth possible - be ethical, diverse, up front, open, transparent and bold – lean means building a sustainable business - the more you grow the more you have to push lean to the very bowels of the business and back up to the very top. Building a lean business is not for everyone. Think hard about whether it is for you. If you are up for it then do it to the max. Lean has little room for compromise or deliberation. Lean is for ever – no gorging allowed. And lean is absolutely not for the feint hearted. For those that want to build a real, sustainable and profitable business lean is the most direct and authentic path. It can also be the most fun you will ever have. Definitely the most rewarding. Do you dare to embrace lean? Also read the article on this subject by Philip in Growing Business