As everyone pursuing the lean path has known for as along as they have been on the path, the heart of it all is eliminating waste – and waste is everything that does not create value for customers. The challenge is often getting management to honestly determine what creates value and what doesn't. In areas such as finance and accounting, sales and marketing, HR and administration little or no value is created in the eyes of customers, yet in many companies these organizations yield quite a bit of power and influence. So getting them on board with the notion that the company needs less of them is culturally a tough nut to crack.
Nonetheless, the company with the best value proposition wins – the one that delivers the most value for the price charged, and the one that spends the greatest percentage of its total cost on activities that create value. Whether management understands and accepts that or not, it is a fundamental reality; and nowhere is it more apparent than in the news business.
I read 31 news sources every day. I can't say I read any of them from cover to cover. More honest to say I skim the headlines from 31 sources and read the few stories in each that grab my attention. I do not have a single newspaper or magazine delivered to my home, however. There is no need. The value is the the information – and money spent on paper and logistics to transport the paper to me is pure waste. It does not make the information I am looking for any better. In fact, it would detract from it because the time required to put the information on paper and transport it to me slows down the news delivery process. Newspapers across the country are filing for bankruptcy – most of them going through a restructuring of some sort or another as the owners deny the reality that they add no value, and rationalize keeping the waste of paper, ink and delivery alive.
It is also obvious to just about everyone when it comes to music, movies and books.The value of music is sound – a physical CD is complete waste – if anything the sound degrades in transferring the digital recording to a physical medium, then back to sound. More significant in the music industry, with the advant of iTunes and Walmart music downloads no one has to waste their money buying the 8 songs on a CD they don't like in order to get the 2 songs they do. The utter waste of 80% of the music we used to buy is disappearing, and artists are increasingly being paid only for their true value creation – only those songs people like.
Blockbuster Video is on life support for the same reasons. Even Redbox is a temporary phenomena. Who needs them when movies are increasingly available via download to any number of devices?
The last book I bought cost me $5. I went to Amazon, downloaded Kindle for my laptop for free, then bought the book and was reading it a few minutes later. Amazon's deal is that authors of Kindle books get 60% – so the guy who wrote the book made three bucks on the deal, and I got a $30 book for $5. What many people don't know is that author's royalties are usually 10%. So if you buy Simple Excellence for $38, Adam Zak and I arm wrestle for who gets the $3.80. We make about the same royalty for the print book as the guy who wrote the Kindle book I just bought. That $3-4 is close to the real value of either book. The money you spend on our book over and above that amount is the pure waste of paper, printing and logistics, along with marketing expenses the reader could care less about.
As the book industry evolves to one that is substantially a better value proposition for customers, however, those folks who just can't wrap their minds around the core concept of value are dying hard, trying to keep brick and mortar bookstores, selling paper and ink books alive.
For most manufacturers, the product is not something that can clearly be delivered in electronic form, and the waste of the physical carriers of electronic products is not so obvious. But the principles are exactly the same. I cannot tell you how many companies I visit that do not want to be bothered by vague theories of value propositions and customer defined value. They want me to jump right in and start kaizening something. They believe their lack of substantial improvement is the product of poorly executed improvement efforts. More often than not, however, the real problem is attempting to improve something that should not exist at all. No amount of kaizen can make a corner video store or a print newspaper hurled by some kid onto a front porch valuable.