Shipulski On Design

This is the third in a series of blog posts on transformation (changes that make a difference).  The first post described the power and benefit of focusing on the current state at the expense of the future state.  The second post described moving from dilution to distillation, where resources focus on fewer things to create intensity of resource allocation.  The topic of this third post is moving from process to product.

There is immense pressure on company leaders to grow their businesses.  And with new competitors and a faster pace of change, it’s harder than ever to grow. The growth from process-first thinking (Lean Manufacturing and Six Sigma) has reached maturity, and the returns have diminished.   It’s time to take a product-first approach.

Lean improves our processes by simplifying them; Six Sigma improves our processes by reducing variation.  But customers don’t buy our processes; they buy our products. Bad process and good product – sale.  Good process and bad product – no sale.  And more sales create top-line growth.

Products solve problems for customers and help them make progress, which is why customers buy our products.  Customers buy our products, not our processes, and that’s why I think we should take a product-first approach.

When your product works better than the competition, you sell more. When your internal process is better than the competition, customers don’t really care, and you don’t sell more.  Sell more, grow more.

The sales-driven growth described above is all about the top line.  And for top-line growth, I think product-first is far better than process-first.  But product-first is also far better for bottom-line growth.

Lean can reduce labor costs by 30%.  Labor cost is likely about 5% of your product cost.  Do the math, and that’s a cost reduction of 1.5%.  Note – labor savings can be realized only when people lose their jobs.  I won’t bother calculating the savings from Six Sigma because they are less than the savings from Lean.

Product simplification through part count reduction can reduce material cost by 20-40%, and material cost is likely around 80% of your product cost.  Do the math, and that’s a 16-32% cost reduction for the entire product.  This level of cost reduction can grow profit per unit by 50-100% (not a typo).  That is radical bottom-line growth.  Product beats process hands-down.

I bashed process-first thinking to make the point that product-first is more important.  But process thinking IS important, though I think it should come after product thinking.  Softening the message I delivered above, I think it’s product BEFORE process.

Here’s my recommendation.  Improve product function, design out half the parts, and introduce a low-waste design into the production system.  Then, use Lean to streamline the process, and then use Six Sigma to reduce variation.

Here’s the magic sequence that delivers growth: product function, product simplification, process waste reduction, process variation reduction.

This is The Way.

Image credit – Ray in Manila