In the second in a series from Enterprise Ireland, Richard Keegan explains how the lean methodology can help Irish SMEs brace for Brexit.
It was Nobel prize-winning economist and New York Times columnist Paul Krugman who wrote, in 1994: “Productivity isn’t everything in business but, at the end of the day, it almost is.” For Irish businesses facing into a post-Brexit world, his words ring especially true.
Exporters to the UK know they are faced with competitiveness challenges. It is why Enterprise Ireland has launched its Brexit SME Scorecard, an interactive online platform that can be used by all Irish businesses to assess their exposure to the departure of our main trading partner, the UK, from the EU.
The Brexit SME Scorecard helps management assess their business under six pillars: strategy, operations, innovation, sales and marketing, finance, and people management. Of these six pillars, operations is the one that focuses on productivity, and productivity is the key to competitiveness.
‘Where operational excellence might have been an aspirational “nice to have” for many Irish management teams, it will be a “must have” post-Brexit’
That’s not business jargon. It is rooted in practicalities. If we are not effective or efficient in our businesses, how can we hope to address the challenges we are now facing, such as the additional cost of shipping stuff further? If we are struggling to compete in the ‘war for talent’ – which is particularly true of our tech companies – then how can we manage this valuable resource better, to ensure we are not wasting it?
Keep it lean
Of course, we need to tackle Brexit by developing new markets, new products and services, and new sales. But we also need to get the most value we can from our operations. The desire to do that is what underpins the lean management approach.
Put simply, ‘lean’ is about using all the resources we use in our business more efficiently. It has applications for businesses of all sizes, across all sectors. Whether you operate in manufacturing, services or even the creative sector, striving for operational excellence will be an invaluable part of the toolkit you use to tackle the Brexit challenge.
In fact, where operational excellence might have been an aspirational ‘nice to have’ for many Irish management teams, it will be a ‘must have’ post-Brexit. Irish businesses must use all the resources they have more efficiently to take on this challenge.
Cometh the hour, cometh the solution.
Enterprise Ireland has been helping Irish businesses apply lean thinking to their operations since 2009. Since then, 958 lean projects have been implemented, helping businesses run a slide rule across all elements of their activities, benchmarking them with international best practice, looking for ways to make improvements and then implementing them.
The results are impressive, and independently verified. The Department of Enterprise and Innovation (formerly the Department of Jobs, Enterprise and Innovation) engaged an assessor to measure outcomes where companies had engaged in lean methodologies and compare these against a control group of companies that had not accessed lean supports. What it found was proof positive that lean goes straight to the bottom line.
The independent assessor found lean companies experienced a 40pc increase in sales, a 20pc increase in productivity and an 11pc increase in employment. Lean works.
What’s more, it leads to improvements in every nook and cranny of a business. It allows a company assess every function, from its back-office administration to its logistics and sales functions, with a view to making them more effective and efficient.
‘It’s not just millennials who want to feel engaged, challenged and listened to by their employer, we all do’
Crucially, it provides management with a tool to critically assess inefficient practices that have evolved organically over time. It roots out good to make it better. It identifies the ‘hurt points’ across all roles, systems and processes; the things that make it harder for each of us to do our job, the overlooked stumbling blocks that impede peak performance.
Lean’s core value is that it is not a methodology that is applied from the top down, or by ‘experts’. With lean, everyone in the organisation gets to buy into it. Such organisations are a sight to behold, where all people are involved, engaged, respected and challenged to make things better.
That makes it a powerful tool for delivering continuous, incremental improvement. It also makes it a valuable tool for staff retention. It’s not just millennials who want to feel engaged, challenged and listened to by their employer – we all do.
Yes, implementing lean practices in your business will cost money. It’s an investment, both of time and resources. But Enterprise Ireland can help. We have a range of transformative supports, including LeanStart, Lean Plus and LeanTransform.
Enterprise Ireland’s website has invaluable information to help you understand more about what it means to be lean. It has more than 60 case studies showing lean transformations in action in businesses across Ireland, ranging from very small micro-businesses to indigenous SMEs and large multinational businesses.
This month saw the launch by Enterprise Ireland and the IDA of Lean Business Ireland, too. An online community and resource, it includes case studies from lean business practitioners; lean supports from Government agencies; access to academic researchers into lean, representative bodies such as Ibec and Lean Construction Ireland; and a directory of consultants with lean expertise.
The aim is to provide any business that wishes to pursue lean with a comprehensive source of information, leadership and direction.
Right now, Brexit is the major event facing us. It is both a challenge and an opportunity. The way to grasp both is to first understand how to do your business more efficiently and more effectively. And the time to do that is now, while the Brexit negotiations are ongoing. Canny businesses will use this hiatus to prepare their business for whatever outcomes await.
Right now, we can’t plan. But we can prepare. Enterprise Ireland’s online Brexit SME Scorecard is where those preparations should start.
Richard Keegan is manager of the competitiveness department at Enterprise Ireland and adjunct assistant professor in the Business School at Trinity College Dublin.
Enterprise Ireland’s Brexit SME Scorecard and more resources can be accessed at www.prepareforbrexit.ie.