Lean is Waste Reduction
Revenues – Expenses = Profit
This is the standard business formula agreed upon the world over. Microeconomics 101. From this formula, you could (reasonably) determine that there are only 2 ways to grow profits:
- You can increase revenues, or
- You can decrease expenses.
And most people assume that’s it. They assume wrong. I discovered why… and my mission is to spread the word to CEOs, COOs and CFOs everywhere. Let’s take a closer look at the formula:
Revenues – Expenses = Profits.
You can increase revenues or decrease expenses to boost PROFIT.
However, there is ONE MORE way to increase profit, and it’s hidden in the MINUS SIGN between Revenues and Expenses.
How often when you’ve reviewed your personal checking account have you been surprised, upset, or embarrassed about what you discover? Perhaps you found a subscription you did not cancel, a charge you did not authorize, expenses you forgot about, or something you forgot to return? These are not expenses; they are “waste”; waste of your money. The same idea applies in business.
Every business has UN-necessary expenses that drain money each and every day.
Redundancies. Returns. Defects. Mistakes. Penalties. Delays….
While they are all accounted for as expenses, this is a HUGE mistake, because they add no value to the process, to the employees or to the end user. These are WASTE. And since they’re obviously not revenues, and now we’ve determined they’re not really “expenses,” then the only thing left is the MINUS SIGN.
The Minus Principle is all about finding that waste and eliminating it.
Defects – Are you tolerating a higher level of defects than necessary? What process do you have to correct them? RED ALERT – Have you increased headcount to correct defects?
This is where The Minus Principle™ applies 100%
Could this process cost less?
Is this a necessary process?
For those of you unfamiliar with the technical term “Stupid Stuff”, here are some examples:
- Redundancies – i.e., duplicate people or departments, duplicate processes or efforts.
- Defects – Are you tolerating a higher level of defects than necessary? What process do you have to correct them? Have you increased headcount to correct defects?
- Waste – i.e., overproduction, inventory, over-processing, corrections, waiting, excessive product or people movement, running reports no one looks at.
If you have waste hidden in your business and you want to eliminate the waste then I can help.
Schedule a Strategy Session to determine if/how you can reduce waste and increase profits by eliminating unnecessary expenses from your operations. These sessions are 45 minutes long and the best way to initially consult with me.