Definition: A lean business model is a business strategy that strives to eliminate waste in product and processes while satisfying customer wants. By satisfying customer wants, the business will receive more positive returns like increased sales and goodwill. This happened in the 1990s and 2000s in the automotive industry. Japanese companies dominated the American auto market because they adopted lean business models and became customer oriented. It took the better part of a decade for American auto companies to regain their lost market share.
What Does Lean Business Model Mean?
A traditional lean business model includes lean business practices like continuous improvement, total quality management, and just-in-time inventory systems. All three of these practices help companies to cut wasteful spending and increase quality and productivity. This only makes sense that companies that produce better quality products at cheaper prices with smaller shipping times will be more successful in the long run. A positive return from customers is the end goal of a lean business model.
Most companies today emphasize the customer in their business practices. This is often called being customer oriented. This wasn’t always the case. Henry Ford is famous for his quote that customers could have any color car they wanted as long as it was black. In other words, Ford didn’t care what customers wanted. He was going to make what he wanted to make. In retrospect this sounds like a stupid philosophy, but many companies practiced this way. As companies started to turn more customer oriented they started to develop lean business practices or a lean business model.