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Book Notes from 'This is Lean' By Niklas Modig 

Two Forms of Efficiency Differ in Terms of Dependence

  • Subtle but important difference between resource efficiency and flow efficiency.
  • Fulfils the needs of its patients involves a transfer of value.
  • A value transfer occurs when one side adds value and the other side receives value.
  • High resource efficiency means the resource adds as much value as possible
  • High Flow efficiency means the flow unit picks up as much value as possible.
  • Resource efficiency focuses on the utilization of specific resources, while flow efficiency focuses on how a particular flow unit moves through the process.
  • In resource efficiency it is more important to attach work to people.
  • In flow efficiency it is more important to attach people to work - ensure that each flow unit is always being processed  by a resource.


System Boundaries define throughput time

  • An important characteristic of a process is that you can define its start and end points however you want.
    • You determine the system boundaries.
  • Throughput time is simply the time it takes for the flow unit to move through the whole process, as defined from start to finish.


Classifying Activities in the Process

  • All processes consist of a sequence of activities in which the flow unit is processed.
  • Two underlying dimensions of these categories are particularly important for understanding flow efficiency - value and needs
  • Value Adding Activities
    • The concept of value adding activities is critical to understanding flow efficiency.
    • Activities add value when the flow unit receives value - when it is being moved forward.
    • Value adding activity is one in which the flow unit is being processed.
  • Need Defines Value
    • Value is always defined form the customers prospective. -
    • The concept of the customer can be problematic - who is the customer.
  • Direct and InDirect Needs
    • To be clear about the difference between direct and indirect needs.
      • Direct needs are about creating a concrete outcome.
      • Indirect needs are about the experience.
    • Look at direct and indirect needs, even though the main focus is often on direct needs.
    • In business - strategic choices determine what needs are put in focus.


Flow Efficiency is value adding activity in relation to the throughput time.

  • Having a defined throughput time and value adding activities we can provide a precise definition of efficiency.
    • Flow efficiency is the sum of value-adding activities in relation to throughput time.
    • Throughput time in itself is often an indicator of value.
  • The need always dictates what value-adding activities are and therefore what flow efficiency is.


Flow Efficiency is the density of value transfer

  • Flow efficiency is not about increasing the speed of value-adding activities. It is about maximizing the density of the value transfer and eliminating non-value adding activities.
  • When it comes to the value adding activities, flow efficiency emphasizes identifying the 'right' speed.


Organizations consist of many processes

  • There are many misunderstandings about processes.
  • The word process is used to describe formalized work routines.
  • Processes are the cornerstones of all organizations; these are where organizations do what they do.
  • The number of processes in an organization depends first of all on how the system boundaries have been identified.
  • The number of processes also depends on the level of abstraction.
  • An organization can been seen as being made up of a few main processes, each of which is made up of various sub-processes.


What Makes a Process Flow

  • Processes operate according to certain laws.
  • Three laws, each of which illustrates how processes work and explains why it is difficult to achieve high flow efficiency.
  • These laws dictate how all processes work.
  • Little's Law
    • Little's Law at security checkpoints
      • You wanted the shortest throughput time - so you chose the shortest line.
      • Throughput time is dependent on the system boundaries we have set.
      • Where we have decided the process starts and ends.
    • What is important is that the laws apply regardless of where we set the boundaries
    • Flow units in process are all flow units within the chosen system boundaries.
    • Cycle time is the average time between two flow units completing the process and refers to the pace at which flow units move through the process.
    • Little's Law and throughput time.
      • Little's Law shows us that throughput time is affected by two things :
        • The number of flow units in process
        • Cycle time
      • Having flow units in process increases throughput time.
  • The Bottleneck Law
    • The second law - bottleneck law : helps us to understand how processes work & what prevents organizations from increasing flow efficiency
    • Stages in the process in the form of sub-processes or individual activities that, like the neck on a bottle - limit the flow.
    • Bottleneck lengthen throughput time
      • Bottleneck law states that throughput time in a process is primarily affected by the stage of the process that has the longest cycle time.
      • Processes with bottlenecks have two key characteristics
        • Immediately prior to a bottleneck, there is always a line.
        • The stages of activity after the bottleneck must wait to be activated.
    • If we strive for high flow efficiency, we will want to avoid bottlenecks in our processes.
    • Why bottlenecks appear?
      • There are two reasons
        • First condition for bottlenecks is fulfilled if the stages in the process must be performed in a certain order.
        • Second reason bottlenecks exist is variation. There needs to be variation in the process
Posted on Wednesday, August 24, 2016 9:54 AM Agile | Back to top

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