The Downturn: Thinking Smaller and Smarter

As the global economic downturn deepens, cash-strapped companies are looking for ways to cut costs and increase cash flow. The principles of lean align well with this agenda, since their focus is on eliminating waste, improving productivity, and increasing agility. But although most companies have formal lean programs in place, these don’t always deliver significant results. That’s unacceptable in today’s challenging environment. For this reason, it is critical for companies to take a closer look at whether their lean initiatives are really generating cash and improving the bottom line.

Our experience shows that well-executed lean programs can cut production cycle times and quality costs by half, increase productivity by 10 to 30 percent, and reduce inventories by 30 to 50 percent. What’s more, quick wins can deliver a large share of these savings. The problem is that lean efforts are rarely implemented thoroughly and effectively, and companies often slip into costly bad habits that prevent them from achieving or sustaining results.

To get your lean efforts back on track, refocus on the basics and correct the bad habits that are undermining results. Besides generating much-needed cash, you’ll make your company stronger and better positioned for the upturn. Here are six actions to take now.

Acknowledgments

Nearly 3,000 executives from around the world, representing all major markets and industries, responded to BCG’s 2008 Senior Executive Innovation Survey. We thank them sincerely for their participation. We would also like to thank the entire BCG team that drives and supports the annual survey, with particular thanks to James Stark.