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The 7 Wastes of Lean: How to Optimize your Business for Growth

Noah Parsons

4 min. read

Updated March 24, 2025

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Understanding the 7 Wastes of LeanLeveraging Business Planning and Tracking to Eliminate WasteGetting Started: Your 30-Day Action Plan

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Understanding the 7 Wastes of LeanLeveraging Business Planning and Tracking to Eliminate WasteGetting Started: Your 30-Day Action Plan

All business owners who are working hard to grow their businesses are more than aware of the constant battle against inefficiency and waste. There’s that subscription service that you’re no longer using, or a business process that just isn’t running as efficiently as possible. Every business has waste and inefficiencies that are slowing down growth.

The Lean methodology, originally developed in manufacturing, identifies 7 key areas of waste that can drain resources and stifle growth. In this post, we’ll explore how identifying these wastes and implementing effective business planning and tracking processes can help unlock growth.

Understanding the 7 Wastes of Lean

Originally developed by Toyota as part of their Toyota Production System, the 7 Wastes (or “Muda” in Japanese) represent activities that consume resources without adding value for the customer. Let’s examine each waste and how it applies to small businesses:

1. Transportation

In manufacturing: Unnecessary movement of materials between processes. 

In your small business: Redundant approval chains, a poorly laid out warehouse, or physical movement of documents and products that could be streamlined.

Solution: Map your information and product flows to identify unnecessary movement. Implement digital workflows that reduce handoffs and ensure that you minimize the movement of products as you create, store, and ship them to customers.

2. Inventory

In manufacturing: Excess stock or materials. 

In your small business: Overstocked products, unused licenses for software, or even excessive email backlogs.

Solution: Develop inventory management processes as part of your business plan, with specific targets for turnover rates and safety stock levels. Track actual inventory levels against planned levels to identify discrepancies before they become costly.

3. Motion

In manufacturing: Unnecessary physical movements by employees. 

In your small business: Inefficient office layouts, excessive meetings, or poorly designed digital interfaces that require extra clicks or effort.

Planning solution: Track time spent in meetings versus productive work and establish benchmarks for process completion times. If your employees travel to job sites, optimize the schedules so travel time between jobs is minimized.

4. Waiting

In manufacturing: Idle time between production steps. 

In your small business: Delayed approvals, slow software, waiting for information from teammates, or bottlenecks in your workflow.

Solution: Map out your business processes to identify delays and highlight bottlenecks. Work to streamline bottlenecks.

5. Overproduction

In manufacturing: Making more product than needed. 

In your small business: Creating excessive reports no one reads, developing features customers don’t want, or ordering marketing materials that go unused.

Solution: Adopt just-in-time principles in your business. Create production schedules based on actual customer demand rather than forecasts alone, and regularly track output against actual consumption or usage.

6. Overprocessing

In manufacturing: Unnecessary steps or features beyond customer requirements. 

In your small business: Excessive paperwork, unnecessary approval layers, or adding features to products that customers don’t value.

Solution: Document core processes and regularly audit them against customer requirements. Gain a deep understanding of customer needs and don’t develop features that have low value. Track the value-add of each feature or process you develop to identify unnecessary complexity.

7. Defects

In manufacturing: Quality issues requiring rework. 

In your small business: Errors in deliverables, customer service issues, or poor communication that leads to misunderstandings.

Solution: Develop a quality management process with specific metrics for acceptable error rates. Track defects systematically and implement root cause analysis as a standard practice. Understand what causes repeat customer complaints and address those issues.

Leveraging Business Planning and Tracking to Eliminate Waste

Now that we’ve identified the 7 Wastes, let’s focus on how robust business planning and plan vs. actual tracking can help eliminate them:

Develop a Waste-Conscious Business Plan

Your business plan should explicitly identify potential sources of waste and include strategies to minimize them. Include:

• Clear process maps that identify value-adding and non-value-adding activities
• Resource allocation plans that minimize excess inventory and waiting time
• Quality management protocols to prevent defects
• Communication flows that reduce unnecessary motion and transportation

Implement Rigorous Plan vs. Actual Tracking

The key to continuous improvement is measuring your actual performance against your plan:

1. Set clear metrics: For each waste category, establish KPIs that you can track regularly.
2. Create visual management systems: Use dashboards to make waste visible to everyone.
3. Conduct regular reviews: Hold monthly reviews to compare actual performance to planned targets.
4. Implement root cause analysis: When actuals deviate from the plan, dig deep to understand why.
5. Adjust and improve: Use insights from your tracking to refine your business plan and budget continuously.

Case Study: How Plan vs. Actual Tracking Transformed a Small Marketing Agency

Consider a small marketing agency that implemented Lean principles:

• By tracking planned versus actual time spent on projects, they identified that client revisions were consuming 40% more time than planned.
• This led them to implement a more structured revision process
• After six months of tracking, revision time decreased by 60%, allowing them to take on more clients without adding staff.

Getting Started: Your 30-Day Action Plan

1. Week 1: Identify one waste category that's most problematic for your business.
2. Week 2: Develop specific metrics to track this waste and establish a baseline.
3. Week 3: Implement one improvement initiative and document it in your business plan.
4. Week 4: Begin tracking plan versus actual performance and make adjustments as needed.

The 7 Wastes of Lean provide a powerful framework for optimizing your growing business. By incorporating waste reduction strategies into your business and diligently tracking plan vs. actual performance, you can create a culture of continuous improvement that scales with your business.

Remember that eliminating waste isn’t a one-time event but an ongoing journey. Every monthly review offers an opportunity to refine your processes and get closer to operational excellence.

Noah Parsons

Before joining Palo Alto Software, Noah Parsons was an early Internet marketing and product expert in the Silicon Valley. He joined Yahoo! in 1996 as one of its first 101 employees and become Producer of the Yahoo! Employment property as part of the Yahoo! Classifieds team before leaving to serve as Director of Production at Epinions.com. He is a graduate of Princeton University. Noah devotes most of his free time to his three young sons. In the winter you'll find him giving them lessons on the ski slopes, and in summer they're usually involved in a variety of outdoor pursuits. Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.