Lean enterprise is a practice focused on value creation for the end customer with minimal waste and processes. The term has historically been associated with lean manufacturing and Six Sigma (or

Lean Six Sigma Lean Six Sigma is a method that uses a collaborative team effort to improve performance by systematically removing waste and reducing variation. It combines lean manufacturing/lean enterprise and Six Sigma to eliminate the eight kinds of waste ( ...

) due to lean principles being popularized by

Toyota is a Japanese multinational automotive manufacturer headquartered in Toyota City, Aichi, Japan. It was founded by Kiichiro Toyoda and incorporated on . Toyota is one of the largest automobile manufacturers in the world, producing about 10 ...

in the automobile manufacturing industry and subsequently the electronics and internet software industries.

Principles and variants

Principles for lean enterprise derive from lean manufacturing and Six Sigma principles: There are five principles, originating from lean manufacturing, outlined by James Womack and Daniel Jones * Value: Understand clearly what value the customer wants for the product or service. * Value Stream: The entire flow of a product's or service's life cycle. In other words, from raw materials, production of the product or service, customer delivery, customer use, and final disposal. * Flow: Keep the value stream moving. If it's not moving, it's creating waste and less value for the customer. * Pull: Do not make anything until the customer orders it. * Perfection: Systematically and continuously remove root causes of poor quality from production processes. There are key lean enterprise principles originating from

principles. These principles focus on eliminating 8 varieties of waste ( Muda) and form the acronym Downtime: * Defects * Overproduction * Waiting * Non-Utilized Talent * Transportation * Inventory * Motion * Extra-Processing These 8 varieties of waste are derivative from the original 7 wastes as defined in the

Toyota Production System The Toyota Production System (TPS) is an integrated socio-technical system, developed by Toyota, that comprises its management philosophy and practices. The TPS is a management system that organizes manufacturing and logistics for the automobile m ...

(TPS). They are: * Transportation * Inventory * Motion * Waiting * Overproduction * Over-processing * Defects The 8th waste of non-utilized talent was not recognized until post-Americanization of the Toyota Production System (TPS). The

lean startup Lean startup is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-dri ...

principles, developed in 2008 from lean manufacturing, also now contribute to our understanding of lean enterprise: * Eliminate wasteful practices * Increase value producing practices * Customer feedback during product development * Build what customers want * KPIs * Continuous deployment process

History

Early 1900s: Ford, GM & Toyota Systems

Henry Ford Henry Ford (July 30, 1863 – April 7, 1947) was an American industrialist, business magnate, founder of the Ford Motor Company, and chief developer of the assembly line technique of mass production. By creating the first automobile that ...

developed a process called

assembly line An assembly line is a manufacturing process (often called a ''progressive assembly'') in which parts (usually interchangeable parts) are added as the semi-finished assembly moves from workstation to workstation where the parts are added in se ...

production. This is a manufacturing process in which parts are added as the assembly moves from work station to work station where parts are added in sequence until final assembly is produced.

Alfred Sloan Alfred Pritchard Sloan Jr. ( ; May 23, 1875February 17, 1966) was an American business executive in the automotive industry. He was a long-time president, chairman and CEO of General Motors Corporation. Sloan, first as a senior executive and l ...

of General Motors further developed the concept of assembly line production by building a process called mass production that allowed scale and variety. This process enabled large amounts of standardized products to run through assembly lines while still being able to produce more variety and compete against Ford's single offering.

Kiichiro Toyoda was a Japanese businessman and the son of Toyoda Loom Works founder Sakichi Toyoda. His decision to change Toyoda's focus from automatic loom manufacture into automobile manufacturing created what would become Toyota Motor Corporation. Toyoda ...

studied the Ford production system and adapted the process in order to have smaller production quantities. He built a production system called

Just-in-Time Manufacturing Lean manufacturing is a production method aimed primarily at reducing times within the production system as well as response times from suppliers and to customers. It is closely related to another concept called just-in-time manufacturing (J ...

for

along with

Taiichi Ohno was a Japanese industrial engineer and businessman. He is considered to be the father of the Toyota Production System, which inspired Lean Manufacturing in the U.S. He devised the seven wastes (or muda in Japanese) as part of this system. He ...

. It's worth noting too that kaizen, the process of continuous improvement, was developed in the 1950s by

Eiji Toyoda was a Japanese industrialist. He was largely responsible for bringing Toyota Motor Corporation to profitability and worldwide prominence during his tenure as president and later, as chairman. He was succeeded as the president of Toyota by Shoi ...

along with the

(TPS).

1980s & 1990s: Motorola

New innovations in lean enterprise moved away from machine technology to electronic technology. Another development was management techniques from

Motorola Motorola, Inc. () was an American multinational telecommunications company based in Schaumburg, Illinois, United States. After having lost $4.3 billion from 2007 to 2009, the company split into two independent public companies, Motorol ...

commonly referred to as Six Sigma. This management technique was built off of mass production principles with more focus on minimizing variability. Applying Six Sigma principles led to reduced cycle time, reduced pollution, reduced costs, increased customer satisfaction, and increased profits.

1990s & 2000s: Internet companies

New innovations in lean enterprise moved away from electronic manufacturing to internet and software technology. Before, during, and after the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Compo ...

, internet and software enterprises originally did not place emphasis on lean enterprise principles for efficient usage and allocation of capital and labor due to accessible funds from

venture capital Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...

and

capital markets A capital market is a financial market in which long-term debt (over a year) or equity-backed securities are bought and sold, in contrast to a money market where short-term debt is bought and sold. Capital markets channel the wealth of savers ...

. The idea of "build it and they will come" became common practice as a result. After the

, inspired by the

Agile Manifesto In software development, agile (sometimes written Agile) practices include requirements discovery and solutions improvement through the collaborative effort of self-organizing and cross-functional teams with their customer(s)/ end user(s), a ...

, internet and software companies began operating under agile software development practices such as

Extreme programming Extreme programming (XP) is a software development methodology intended to improve software quality and responsiveness to changing customer requirements. As a type of agile software development,"Human Centred Technology Workshop 2006 ", 2006, P ...

. Along with the agile software movement, companies (especially startups) applied both lean enterprise and agile software principles together in order to develop new products or even new companies more efficiently and based on validated customer demand. Very early practices of lean enterprise and agile software principles was commonly referred to as

. After 2010, more and more enterprises are adopting this new branch of lean enterprise (

) since it provides principles and methodologies for non-internet enterprises to enter in new markets or offer goods and services in new form factors with less time, labor, and capital. For internet and software enterprises (by tradition), the

Lean startup Lean startup is a methodology for developing businesses and products that aims to shorten product development cycles and rapidly discover if a proposed business model is viable; this is achieved by adopting a combination of business-hypothesis-dri ...

variant of lean enterprise enabled them to remain competitive with new technologies and services that are rapidly coming out to market without exclusively resorting to

mergers and acquisitions Mergers and acquisitions (M&A) are business transactions in which the ownership of companies, other business organizations, or their operating units are transferred to or consolidated with another company or business organization. As an aspect ...

, and being able to retain internal innovation ecosystem competency.

References