Benjamin Franklin, one of the founding fathers of the United States of America, wrote a book in the year 1757 titled ‘Way to Wealth’. In this book, Franklin offered some advice on how to make money, start a business and save for the future. Indeed, his philosophies about success are products of lean thinking and for over 200 years, Franklin’s adages in his book teach us that “success is just the consistent application of hard work and thrift”.
He also cautioned on how to prevent greed from trumping profitability. There are other several maxims in the book that individuals and chief executives of firms and states can imbibe to keep them focused in their businesses in contemporary times. Some of his maxims include “He that lives upon hope will die fasting” and “Industry pays debts, while despair increases them”.
Since 1757 an individual philosophized that hope cannot be the strategy of individuals, firms and states for economic survival. Hope cannot be a strategy of survival in austere times. No society can achieve economic development by hope as the dynamics of the global arena change rapidly. A nation cannot hope that the price of crude oil in the international market will perpetually rise. When there were obvious signs that the price of crude would drop, we were slow to act hoping that high price of the commodity could be sustained. It was Benjamin Franklin’s view, however, that a thriving industrial complex gives comfort to the people and ultimately the nation. In order to create wealth, we must find ways of understanding the complex interaction that exists between the society and the industry.
With the rapid decline in crude oil price in the international market, the austere time is here again. As we prepare for the new year 2015, individuals, firms and states are working on appropriate strategies for economic survival. The effect of the falling oil price will definitely have an impact not only on governance but also on the way businesses operate. This is because our dear naira has been devalued. The devaluation of the naira will give rise to surge in interest rates, foreign investors are likely to be attracted, exports will be cheaper but the productivity of the manufacturing industry will be weakened as more funds will be required for importation of raw materials. By implication, imports are likely to be expensive and this is likely to drive inflation as the economy is import-dependent. Consequently, purchasing power will drop, while the prices of goods and services are likely to rise.
The attendant consequences of the devaluation of currency are numerous but I am optimistic that we will survive this period of devaluation if we plan adequately. It is rather unfortunate that most states are not economically viable and they may find it difficult to implement either capital or recurrent expenditures in the new year. To this end, all state governments have been directed by the Ministry of Finance to have “contingency plan” in their respective budgets for 2015.
Contingency plan in itself “is a plan designed to take account of a possible future event or circumstance”. It is a process that prepares an organization to respond coherently to an unplanned event”. Contingency plan is often used for risk management as situation demands and it will be critical to the success of individuals, firms and states in the new year and beyond.
Those who do not have any plan to mitigate risks associated with devaluation of the naira may have themselves to blame. It is worthy to note that some states will not have contingency plan because they are economically unviable.
Due to current adverse economic situation, policy statements have been made to reduce budget deficits through spending cuts and tax increases on “luxury items”, amongst others. Austerity measures may usher in over-taxation and lack of incentives to industry. Conversely, it could also be a blessing for individuals, firms and states as this temporary negative economic condition may engender creativity for survival in a highly competitive landscape. According to Sinclair Lewis, “It isn’t what you earn but how you spend it that fixes your class.” The proliferation of tax collection agencies and increase in taxes will not make the nation prosperous unless accruable revenues from taxes are prudently managed to add value to the economy. It is germane for individuals, firms and states to either start or sustain lean thinking as a survival strategy for the future.
Lean thinking is an aspect of value management which is a holistic approach to business and public service improvement. It is neither a tactic nor a cost-reduction programme but a way of thinking and acting for the entire firm or state as the case may be. Waste reduction is a key component of lean thinking and in austere times you want to eliminate wastages. Wastages in most of our public offices and firms must be reduced to the barest level. A popular misconception is that lean thinking is only suited for manufacturing. This may not be completely true as lean thinking applies in every business and process. It was used by the British military in WWII, and the US Army in Operation Desert Storm to enhance logistic functions. Also it was used by firms to reduce waste and increase profit. Some of the firms include Henry Ford in 1908, Toyota of Japan in the 1980s, and the Vanguard UK in the 2000s, amongst others.
In austere times, we must avoid wastages, identify good ideas, avoid delays and poor decisions, while ensuring that we utilize our time and space efficiently to create wealth. Lean thinking will enable chief executives to add value, reduce waste and improve efficiency without compromising productivity. Through leadership’s long-term vision and plan, lean thinking will be beneficial to individuals, firms and states in austere times.
M.A. Johnson
