The Lean Edge: Capital is a resource of last resort

by Jamie Flinchbaugh on 03-15-11

I have a new post published on The Lean Edge. See the full article on that site.

The question asked was “what is the lean approach to capital?” In some ways, this is the wrong question. The reason is that the lean organization and the lean thinker is not looking to put capital to work. Capital is just a solution to a problem. Capital is not just another budget line item that must be consumed and deployed.

It starts with the ideal state. When a team has a vision of the ideal state for a process, it seeks any solution that gets it closer to that solution. When a team lacks such a vision, it reaches and grasps. Spending capital is one of those straws that’s easy to grasp. Anyone can write a check, but it feels like progress when you’re doing it.

On the way to the ideal state, there are many paths and many solutions. The lean thinker always pursues creativity over capital. Capital is one resource that the more you use it, the less you have. Creativity is one resource that the more you use it, the more you have. The lean thinker will explore every option with creativity before leveraging capital.

Once capital must be spent, there is a lean way to put it to work. First, you must test the solutions before committing the capital. All the promise of new technology, equipment, or software isn’t worth a thing; only it’s proven capabilities can provide us value. The lean thinker will find any means possible to validate the effectiveness of the solution before committing the capital.

Second, when the opportunity arises, the capital will be deployed in cycles. If we can spend a little, learn a little, spend a little more, and learn a little more. When done in this way, the last dollars of capital spent are sure to be more efficient dollars than the first one.

Yes, capital isn’t to be avoided, but it shouldn’t be sought as a solution. It’s a solution of last resort. Use intellectual capital before financial capital. Use the mind before the wallet.

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