Super7 operations builds on the principles of Lean. The recent succes of Super7 operations within Financial Services raises the question: is the LEAN-hype in financial services over, or are companies waiting for the next big thing: super7 operations?
My conslusion, after researching recent publications, is: no. Although the banking crisis forces banks to re-think their business, their proposition and their priorities, LEAN, with it’s core elements of continuous improvement, waste reduction, process thinking and customer centricity are still key elements in the strategy of a large number of leading banks.
In today’s global business world, companies are relentlessly looking for ways to cut on waste and gain an edge in an increasingly competitive market. Lean manufacturing practices have been successfully adopted by manufacturing firms with remarkable positive results in streamlining production processes. Nevertheless, as recent trends show lean strategies are no longer the preserve of manufacturing companies alone; service companies and innovation firms have picked up these tenets in order to eliminate process waste, enhance customer value and spur continuous improvement.
Adoption of Lean Strategies in the Financial Industry
Despite the numerous benefits that financial institutions can accrue if they adopt lean management strategies, in practice the uptake has been laggard. This can be largely attributed to the false perception held by most business leaders that lean concept, being process oriented, offers very few benefits for the service industry in general. Couple this with its Toyota Production System origins, and lean as a concept of production becomes ‘unattractive’ to most financial service industry leaders.
On the other hand, there has been tremendous hype on how lean manufacturing strategies can transform and reform the financial services industry into one that is more efficient and customer oriented. This statement should be viewed from an observer point of view to appreciate the predicament financial institutions are currently facing. These include increased calls for customer-focused services, efficient processes that lead to cost cuts, and increased demand by shareholders for higher cost-benefit ratios in investments.
Impact of Lean Management Strategies in the Financial Sectors.
According to a recent research conducted by The Boston Consulting Group, banks and other financial institutions that successfully implement lean programs record 15% to 25% improvement in overall efficiency. The study concludes that despite market jitters by financial institutions regarding lean practices, with time as more players in the industry discover and profess the benefits of lean operations- for instance reduction in costs, improved efficiency and faster service turn around- wide scale adoption is inevitable.
In order not to be left behind, banks, investment firms, credit unions and insurance firms are adopting lean practices. GE Capital, JP Morgan Chase, Citigroup, American Express, Sun Trust Banks and BNP Paribas are just a few of the financial institutions that have successfully implemented lean management strategies. Initially, lean practices were mostly deployed in call centers, customer delivery channels, and other back office operations. However, lean strategies are continuously moving up the value chain, and are showing remarkable application opportunities in trade processing and finance reporting sectors.
Supporters of the adoption of lean strategies in the finance industry argue that manufacturing and finance industries are not that different, since both depend on processes. In regards to this, a lean concept is not industry specific but process oriented, allowing multi-sectorial adoption. Basically, lean entails identifying and eliminating waste in processes leading to cost cuts and performance excellence. Waste is defined as anything that doesn’t add value to the final product or service. The seven types of waste that the concept recognizes are: overproduction, transportation, waiting, defects/rework, over processing, inventory and unnecessary motion.
Challenges of Adopting Lean Strategies in the Financial Industry
Implementing lean principles in the financial industry is not an easy task. However, implementers should focus more on people rather than processes, and adopt a top down performance improvement approach which is more programmatic. Nevertheless, lean principles have significant limits, especially when they are implemented in the financial industry. For instance operational systems in the financial industry are less standardized as compared to other industries. Take for example; customer service expectations vary depending on education level and income, this makes it difficult to establish standardization across all the branches. Another challenge is that adopting lean concepts in a service industry results in the customer being the driver of the service process. This inevitably complicates matters and at times causes unnecessary tensions between employees and customers.
As pointed out earlier, the lean agenda in the finance industry is market driven, leaving very little leeway for industry players to ignore. Without a doubt, lean strategies are moving up the value chain in the finance sector as institutions search to adopt next generation management strategies that lead to efficiency in work processes.