To mark Exago’s 11th anniversary, we have put together our clients’ pieces of wisdom to truly bring innovation together. This is lesson 5.
From the start:
Seeing innovation as a leverage for change, the Brazilian Fleury Group currently has 2,500 stakeholders involved in its innovation efforts. They have shared almost 3,000 ideas, of which close to a third have been implemented, generating 4.3 million reais of aggregated value in the last two years alone (approximately 900,000 euros).
The results were presented in a conference organised by the Fleury Group to discuss “Intrapreneurship and Open Innovation”, in São Paulo, on November 23rd. The company, one of the largest groups of clinical analysis services in Latin America, gathered key suppliers and several companies to share knowledge and experience on open innovation and intrapreneurship initiatives.
Spreading healthcare innovation
In 2011, the Fleury Group introduced Central de Ideias, an innovation program supported by an Exago solution, to unlock the innovation potential of Fleury’s workforce, aimed at improving internal processes, employee well-being and customer service, as well as its medical and technical procedures. Central de Ideias helped the Fleury Group reach the top 5 shortlist for the international 2015 IMP³rove Award.
In 2012, Fleury decided to also involve its suppliers in its innovation challenges, also using Exago. PERC, the Supply Chain Relationship Excellence Program, was developed to expand these efforts further, using a multicentric and multidisciplinary innovation approach. PERC ensures a closer relationship between Fleury and its supply chain, recognising the suppliers with the best performance over the course of the year.
With its comprehensive idea management programme, the Fleury Group seeks to apply practical and technical solutions that bring change to products, processes and services within the organisation or in specific areas that accumulate value – by generating revenue, reducing costs and improving people’s experience.
Founded in 1926, Fleury is one of the largest and most respected Brazilian healthcare companies. With close to 10,000 employees and more than 200 healthcare units across the country, the national leader of the premium segment in Diagnostic Medicine invests heavily in R&D and applying state-of-the-art technology across its business chain.
The reality of business today is very different to that of a few decades ago. The Fourth Industrial Revolution is accelerating competition like never before and moulding a very different reality, with the emergence and propagation of cyber-physical systems, the Internet of Things, cloud computing and other technological advancements. Leading organisations cannot take their positions for granted and must constantly adapt their operations and overall approach to keep the pace in a 4.0 era.
Once the go-to strategy for ensuring business efficiency and growth, in the context of the current reality, Lean Management has been branded by some as being outdated. But, in a more evolved form, this business approach has in fact shown that it can complement Innovation Management when it comes to company operations, and could be the answer for businesses to remain competitive in today’s world.
This ability to be lean while remaining innovative seems to be crucial for companies to continuously succeed.
Besides the technological updates required by firms in the age of 4.0 – and the tech talent that comes with them –, it has also placed a focus on operational efficiencies while maintaining a high level of quality and innovation excellence. To respond to these demands, and looking to reduce waste and increase profit simultaneously, many organisations have started to implement the strategies found in both Lean Management and Innovation Management.
The age-old desire to innovate continues to be a priority for leading companies. However, top-level executives have identified short-term focus and lack of resources as the largest barriers to innovation in their company – issues that are addressed by Lean Management.
When the principles of Lean are entrenched in a structured innovation programme, not only can it lend a hand in reducing costs and optimising operations, but it can also work to improve income sources.
Rather than aggressive cost-cutting tactics, a successful strategy that targets Lean goals will help organisations lower costs, focus on the aspects of business that are controllable and free up resources to fund transformation and future growth. In essence, it opens the doors for ongoing innovation. This application of the Lean philosophy should ideally come from the top, with leaders instilling the approach as part of the company culture.
There are three starting points to becoming Lean:
This process of incorporating Lean into an innovation programme should start by mobilising a company’s most valuable resources: people and their expertise, involving them in shared challenges.
Capturing the wisdom of each employee and of their collective intelligence, and aligning them with clear Lean Management objectives, enables companies to encourage a change in mentality and create a community in which innovation becomes second nature.
Once a culture of continuous innovation is instilled, innovating operations, processes and products become a systematic procedure, embedded within the walls of organisations.
Managers can focus innovation efforts to develop a Lean Management approach to business by:
Generally speaking, when employees are aligned with strategic and operational goals, they won’t be distracted by unclear tasks; they will be more productive and bring you more value. You get to mobilise your most valuable resource to make a joint effort to increase efficiency and, ultimately, drive business growth.
By stimulating the influx of fresh ideas and insights through Innovation Management initiatives, aligned with the ongoing Lean Management efforts, your people across different teams and locations can be actively engaged to improve your organisation’s operations.
Achieving a positive balance between Lean and Innovation, particularly within Collaborative Innovation initiatives, can help organisations move forward, by reducing costs, optimising operations and simultaneously improving revenues. Besides increasing revenues, this strategic combination can also instil creativity in the core of the workforce.
Therefore, not only are Lean and Innovation Management not antagonists but, when done well, these seemingly opposing strategies have the potential to be symbiotic.
Contrary to some thoughts, Lean will not necessarily dampen the fire of Innovation, but rather help lay the foundations of a system that nurtures and encourages continuous, ambitious evolution in the 4.0 era.
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Is Lean Management doomed in the age of Innovation?
It has been 30 years since the term Lean Management – a long-term approach that seeks to achieve incremental process changes to improve efficiency and quality – was first coined. Some say that Lean Management has now become obsolete. Others talk about a ‘post-Lean’ world and say it is fated to die. Yet in other circles, Lean Management still seems to be alive and well, with its potential to be fully revealed. The likes of Nike, FedEx, Intel and other global leaders are strong advocates of the method, and credit their continued success to its defining principles.
Based on his master’s thesis, John Krafcik introduced the term in his article “Triumph of the Lean Production System” in 1988. It described the comprehensive, multidimensional management methodology that enables companies to achieve exceptional performance in all areas through small, incremental improvements. The author was inspired by the Toyota Production System (TPS). TPS was developed by Japanese industrial engineer and businessman Taiichi Ohno, when he worked at the company as a quality engineer.
The model, which aimed to focus on reducing waste to improve customer experience, was replicated by the likes of Honda and other Japanese manufacturers. Soon after, beyond manufacturing, it became the standard for management across various industries. As an approach, Lean seeks to remove any waste of time, effort or costs by identifying each step in a business process to then eliminate those that do not create value.
Lean Management isn’t a failsafe methodology though. It can encounter certain limitations. They include low productivity, prolonged cycle time, costly organisation, and so on. At a time when digital and technological transformation introduce new, better and speedier processes, maintaining this approach requires resilience and periodical reviews. As it focuses efforts on existing processes, rather than what could potentially be there, Lean Management has also been accused of deterring innovation.
It is, however, simplistic to narrow down Lean to flow charts, Total Quality Management (TQM) and Total Productive Maintenance (TPM), since it enhances the organisation’s capacity to evolve, creating a mentality of continuous improvement through incremental changes in all operations.
We must look at the bigger picture and focus on the ultimate goal of Lean: to deliver value to customers.
When it comes to ensuring the long-term survival of organisations, both Lean Management and Innovation have been touted as essential strategies to achieve that. Yet they seem to offer opposite paths, since Michael Porter divided the business world into cost-driven and innovation-driven models in his book Generic Strategies (1985). This classification still endures for many.
The argument goes that, on the one hand, being too lean may deteriorate the innovation capability of a company in the long run and hamper variation. On the other, focusing heavily on promoting personal creativity and innovative practices could result in high costs and excess waste for the company. In this sense, the approach adopted would be a reflection of very distinct company profiles, depending on each of their values and goals.
Nevertheless, others believe that, as “a practical set of principles and methodologies for continuously improving the operating performance of a company”, Lean is in fact process innovation. Process innovation is founded on improvement methodologies that extend across an organisation, with the goal of undertaking incremental processes by eliminating superfluous activities that do not add value. Essentially, it is about eliminating waste, continuously improving work processes and people – all of which is summed up in the Lean Management methodology.
So, can the two approaches be used simultaneously? Several authors and studies show that not only can Innovation Management (and particularly Collaborative Innovation) support Lean Management processes when the main goal is to ensure continuous improvement. But there are also other crossovers, at three different levels:
A study by leading academics in the field has shown that the strategies of Lean Management (LM) and Innovation Orientation (IO) – founded on activities such as leadership for innovation, knowledge management, organisational structure and processes – do share many cultural similarities. When exploring the effects of IO on the implementation of Lean in international manufacturing, the study also demonstrates that these are complementary, rather than contradicting, strategies.
On its own, Lean is not sufficient to predict innovation performance. Managers are therefore advised to focus on IO due to its beneficial impacts on both the continuous improvement initiatives of LM and innovation performance. This reinforces the belief that placing an emphasis on more radical, and thus innovative, improvement rather than strictly incremental improvement (such as LM practices) supports both continuous and innovative improvement.
But why is this? Collaborative Innovation Management does in fact create a structure, mobilising a series of factors that are also crucial for Lean Management. This allows companies to create a system that enables them to evolve in an agile, consistent and continuous way. Both Innovation and Lean Management share several critical factors:
Bearing this in mind, Lean Management does get stronger when combined with Innovation Management, something that managers have already understood. In a study to assess Lean’s impact on innovation processes, leaders showed a broad grasp of both the practical and theoretical approach to Lean and Innovation, along with greater reflection. It concluded that a positive combination of Lean and Innovation is possible. The consensus is that companies must achieve a balance between the two.
As the Fourth Industrial Revolution accelerates forward, this could in fact become the age in which Lean Management evolves to a new stage where it meets Innovation Management in company operations – benefiting both approaches and overall business results.