Towards Improving Banking Services Quality - 11 - Value in Lean Management

Towards Improving Banking Services Quality 

11.

Value in Lean Management

 

Introduction

 

Value is a cornerstone of Lean management and the foundation for achieving operational excellence. For any organization, understanding and delivering value is critical to fulfilling customer needs while maintaining efficiency and sustainability. This chapter explores the concept of value in Lean management, emphasizing its definition, significance, and application. Specifically, we focus on how identifying and delivering value can transform banking operations for greater customer satisfaction and business success.

 

Five Foundational Principles of Lean Management

 

The five principles of Lean management are:

 

1.       Identify Value

 

2.       Map the Value Stream

 

3.       Create Flow

 

4.       Pull

 

5.       Seek Perfection

 

Notably, the first two principles focus around the concept of value, highlighting its pivotal role. Let us dive deeper into the meaning of value and its implications for Lean management in banking.

 

Understanding Value in Lean Management

 

1.       In Lean management, value is always considered from the customer’s perspective. It encompasses everything that the customer is willing to pay for, expressed in terms of specific products or services that meet their needs and expectations at a specific price and time. Figure 3 reflects the customer-centric approach discussed in the chapter.

 

 

Figure 3 - Value in Lean Management

 

 

Key Elements of Value:

 

·       Customer Perspective: Value is defined by the ultimate customer.

 

·       Willingness to Pay: Activities or outputs must justify the cost to the customer.

 

·       Transformation: Value-added processes are those that transform raw materials, services, or information into something desired by the customer.

 

Value Proposition: Aligning Customer Needs with Offerings

 

As shown in Figure 4, value lies at the intersection of the organization's offerings and the customer’s needs and expectations. A strong value proposition requires a deep understanding of the customer and aligning organizational capabilities to meet those needs effectively.

 

 Figure 4 - Value Proposition

In case of banking, Organization’s offering may be stated as “Bank’s Offering” in Figure 4.

 

Applying Value Principles in Banking

 

1. Identify Value

 

This step requires understanding the customer’s perspective and determining what they truly value. In banking, examples include:

 

·       Convenience and Speed: Customers may value faster loan approvals or minimal wait times.

 

·       Personalized Services: Tailored financial advice or customized loan products may hold more value for customers than generic solutions.

 

2. Map the Value Stream

 

This step involves identifying all steps in a process, categorizing them as value-added or non-value-added, and streamlining workflows. In banking, examples include:

 

·       Loan Processing: Mapping the steps from loan application to approval, identifying delays, and eliminating unnecessary approvals.

 

·       Customer Onboarding: Streamlining the documentation process for opening new accounts to reduce bottlenecks and redundancies.

 

Types of Activities in Lean Management

 

1.       Value-Added Activities:

 

o   Directly transform inputs into outputs.

 

o   Examples: Processing customer transactions, providing financial advice, or disbursing loans.

 

2.       Non-Value-Added Activities:

 

o   Consume resources without adding value to the customer.

 

o   Examples: Excessive paperwork, unnecessary approvals, or duplicate data entry.

 

By eliminating or reducing non-value-added activities, organizations can optimize processes and focus resources on what truly matters to the customer.

 

The Formula for Value

 

Value can be expressed as: Value = Benefits – Cost

 

To maximize value, organizations should:

 

·       Increase Benefits: Improve services, enhance customer experiences, and increase perceived value.

 

·       Reduce Costs: Optimize resource usage and eliminate inefficiencies without compromising service quality.

 

Breaking Down Common Misconceptions About Value

 

1.       Not All Costs Are Waste: Lean management emphasizes removing waste but also recognizes the importance of essential costs that directly contribute to value.

 

2.       Value Evolves: Customer needs and market conditions change, making it essential for organizations to continuously revisit and redefine value.

 

Relevance of Lean Management in Banking

 

Lean management principles enable banks to deliver maximum value to customers while minimizing waste and inefficiencies. By understanding and focusing on what customers truly value, banks can differentiate themselves in a competitive market, build trust, and achieve long-term sustainability.

 

Conclusion

 

Value is at the heart of Lean management and serves as a guiding principle for organizations aiming to meet customer needs while driving efficiency. By identifying value and mapping the value stream, banks can deliver meaningful benefits to customers, reduce unnecessary costs, and streamline operations. For banking professionals, understanding and applying these principles is not just an operational need—it’s a strategic imperative for future success. 

I welcome your comments, questions and suggestions.

Warm regards,

Keshav Ram Singhal 

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