Lean, meaning “the absence of waste,” is a term coined by John Krafcik to convey the essence of Toyota’s manufacturing processes. Krafcik learned about lean in the 1980's when he worked at MIT as an automotive production researcher; his studies became the basis of Womack's book, The Machine That Changed the World, a study on “lean production”. Today Krafcik is CEO of Waymo, the self-driving subsidiary of Google.
You may ask, what do lean car manufacturing processes have to do with software companies?
Here’s the link: your number of sales reps has increased and sales are growing well, with your customer base growing in number and complexity. A larger sales team needs to rely on efficient operations, also known as sales support, to keep pace with growth. If you're like many scale-up companies, your sales operations, order management and legal are at risk of becoming bloated with redundant processes that lead to contract churn and longer sales cycles. Quarterly revenue targets could start to slip as reps struggle to get new business quotes approved, and deals signed; your customer experience may suffer.
How could you find a way to significantly reduce the time it takes for an opportunity to progress to a closed deal to revenue coming in the door? Enter “Lean” operations.
Lean has evolved beyond the factory floor to apply to knowledge work. Tech companies have embraced the concept for well over a decade as a critical capability for high growth scale-ups. It is an organizing principle that engages people in creating and delivering the highest possible value through the pursuit of “better.” Processes are streamlined and problems are solved, with the goal of freeing customers and internal personnel from the “tyranny of excessive complexity”.
The reason is simple: excessive complexity kills the entire experience from every perspective, exhausting capacity and throughput of people, processes and systems while draining your resources, and leaving you vulnerable to a competitor with a leaner offering. Companies with high value products may fail because their processes are inefficient and their customer experience is poor.
Organizations don’t set out to create complexity. Through working with Insight Partner’s portfolio of software companies we’ve observed that this complexity builds up over time. Companies that are doubling their growth need to move quickly and make fast decisions. In practice, this means that resources come and go, new tools are added, processes are re-done, exceptions are made. These decisions add up and a few years into the company’s evolution, we see that time to revenue has become an issue.
Lean centers on the philosophy that less is best and employs a “subtractive approach” to continuously improving and simplifying the most complicated workflows. You start by defining the ideal, then, little by little, remove anything that blocks the path to achieving it. Done right, it’s a never-ending, continuous endeavor. It’s also a different way of thinking and demands a mindset shift.
As a case in point, this is exactly what the leadership team at one of Insight’s portfolio companies knew they needed. The company had expanded internationally, acquired a second product and grown to multiple locations. Processes were slow and contracts were bogged down. The quote-to-cash cycle (CPQ) had lengthened to more than a quarter.
The team gathered a critical mass of key business functions (Sales, Legal, Finance, Customer Success) for a two-day workshop to rethink their quote-to-cash process. Approximately twenty people participated across geographies and functions.
During the first part of the workshop, participants were introduced to lean thinking through a Toyota Production System (TPS) simulation, enabling them to observe and experience lean principles in action. This created the required mindset for eliminating waste.
During the second day, the team applied those principles by mapping out their existing processes, and identifying “pinch points,” or bottlenecks, and other sources of quantifiable waste. Then they designed solutions intended to improve workflow across all aspects of the sales process. Finally, they voted to deploy one of two processes as a pilot before implementing the process change across the entire company.
The results have been very positive: they were able to reduce the sales cycle by 22% or 31 days. This will have a very significant impact on time to revenue. The company also saw a 67% reduction in email traffic between resources involved in the workflow as a result of optimized processes.
They are now fully implementing this MVP across the company as a new standard operating procedure.
Results can be dramatic when Insight brings Lean Operations Methodology to the forefront. We recommend companies pause and evaluate their pre- and post-sales processes to implement lean optimization and remove waste. For long-lasting results, companies must change their mindset and continually work towards lean principles. Improving efficiencies is an ongoing quest as companies scale-up revenue and operations.