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.

 

The limits of Lean Management

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.

 

Is there a point of intersection between Lean and Innovation?

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:

Crossovers between Lean and Innovation Management

 

Evidence of how an “Innovation Orientation” benefits Lean

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:

Critical factors shared by Lean and Innovation Management

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.

 

Diana Neves de Carvalho, Exago’s CEO
Francisco Bernardes, Exago’s Head of Innovation Services

 
READ MORE:
How can Lean and Innovation make your business evolve to 4.0?

Good news for medium enterprises looking to innovate

Medium enterprises fit right in the middle of the innovation spectrum, between the resources of large multinationals and the flexibility of its smaller peers. Size does matter. They face several barriers in their path to good innovation management, such as limited resources to invest, lack of incentives and innovation infrastructure, and shortage of innovation specialists. But there is some good news, too.

If you are leading innovation management efforts in a medium company, remember that the following is playing in your favour:

  • Medium companies still have flexibility in their structures;
  • You have more resources than smaller companies – and research has shown that radical innovations can also occur within a context of tight slack resources, without requiring a full team devoted to innovation;
  • Your company can also be more open to risk (but judiciously);
  • Your reality often boasts close ties to your workforce, whether the company stems from a family business or a strong connection with the local community, making it easier to reach them.

The following table sums up this reality:

Corporate innovation per company dimension

Taking all this into consideration, there is no single bulletproof formula for companies to innovate, but rather multiple possibilities. Very diverse companies find their own ways of bringing about fresh, impactful ideas, based on past experiments and all the knowledge gathered across industries.

All in all, innovation is not a pure science, and must be tailored to the size and reality of each company, founded on industry best practices.

Learn how to leverage them and read more about the 4 myths keeping medium enterprises from innovating here

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

In innovation management, size doesn’t matter… or does it?

A medium-sized company employs up to 250 people and has an annual turnover of up to €50 million. It has neither the resources of large multinationals or the flexibility of its smaller peers. If you are leading innovation management in a medium company, the fact that size doesn’t’ matter is the first myth to overcome for a successful programme.

On the one hand, large-scale companies find it more difficult to make more drastic changes because they have more at stake. On the other hand, if they are willing to invest, they have the resources necessary to really encourage and implement innovation, and may also be less risk-prone.

Standing on opposite sides of the spectrum
Corporate giants such as P&G, General Electric, Nike and IBM remain some of the most innovative companies in the world, because they recognise that investing in innovation is the only way to survive. These companies can explore all branches of innovation, both incremental and disruptive, by hiring specialised people such as Chief Innovation Officers, creating devoted teams, and investing in R&D labs and partnerships with universities.

When innovations fail, they are able to absorb losses. In fact, rather than substantiating the idea that big companies are resistant to change, studies suggest that large organisations with high level of complexity and differentiation possess higher motivation to adopt innovative behaviour.

On the other end of the spectrum, small companies have fewer resources but are more agile to experiment and discuss new approaches particularly when it comes to startups.

While the more traditional businesses remain the same or grow progressively over the years, the ones that do scale (and tend to be more risk-prone) often experiment and try faster. This means they will also fail faster and often, in what Silicon Valley calls “failing forward”, leading to faster growth rate.

Where do medium enterprises fit in?
Medium enterprises fit right in the middle, between two very different realities. And so there are several barriers that these companies face on their path to good innovation management, such as:

  • Lack of budget/limited monetary resources
  • Lack of innovation infrastructure
  • Shortage of innovation specialists
  • Lack of incentives for innovation
  • Resistance to change (in top-down initiatives)
  • The high cost of new tools and processes

For these reasons, these firms are more at risk of falling behind because they are not investing enough to meet the challenges brought on by new technology. Adjustments must be made to adapt to technological change and disruption, but most companies are less able to invest and experience day-to-day struggles amid weak business growth.

But it’s not all bad news and some advantages are playing in your favour.

Learn how to leverage them and read more about the 4 myths keeping medium enterprises from innovating here

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

Why your idea management programme is so helpful for strategic cost-cutting

As business models are being challenged, organisations need to be more adaptable and resilient, naturally also by becoming more efficient and cutting inadequate costs. This change must happen from the bottom up, with the right leadership and sponsorship, to define the areas of improvement clearly and separate the good costs from the bad at both micro and macro levels. Innovation managers can, and should, lend a hand to address this shared challenge.

A well-structured innovation management programme for strategic cost-cutting and improvement is useful to get employees identifying ground-level enhancements, with several additional advantages:

BUILD A COST-CONSCIOUS CULTURE
Involving employees and challenging the organisation’s cost and waste culture will help you develop a cost-conscious culture for a more sustainable business approach. Keep cost optimisation as a strategic priority, even when there is no immediate pressure on costs;

AN ONGOING AND RESILIENT PROCESS
Having your cost-cutting and improvement strategy embedded in your innovation management programme will bring you continuous results, building a sustainable process and putting more robust and flexible foundations in place before introducing transformational initiatives.

EASILY UNCOVER BAD COSTS AND INEFFICIENCIES
Engaging and empowering everyone in the organisation, from shop floor to top management, will expose inefficiencies that would not usually be identified in a typical consulting diagnosis project. Your employees know more about your everyday business than anyone else, so tapping into their knowledge and efficiently getting everyone involved in signalling cost improvements will deliver interesting results for your strategy;

MORE DIALOGUE AND ENGAGEMENT
With effective and transparent communication regarding cost cuts and improvements, companies can face less resistance from employees and more easily ensure business management support. It can also bring higher employee engagement, as more frequent interactions are needed between finance and the operating managers and between managers and teams to keep costs aligned with business and to track results.

Strategic cost-cutting is, however, never blind cutting. It is in fact a method to accelerate the discovery of new and more effective ways of doing business, at a lower cost, which is even more relevant in difficult times. On the whole, it should be seen as a way of questioning how we do things – even why we do them – , exploring new innovative routes and building the foundations of tomorrow’s growth.

 

Andreia Agostinho Dias, Sales Executive
Diana Neves de Carvalho, Exago’s CEO

Get to know the Five Steps to Introduce Cost-cutting in your Innovation Agenda here

Launching your own innovation programme has never been this easy

Do you feel that your innovation programme is becoming too complex? That you are spending too much time picking the right software to support your initiative, instead of focusing on what your company really needs?

Exago Start, our new cloud-based idea management software edition, is here to simplify your job and change the way innovation is done.

Built to empower your teams with the tools to innovate, you can easily deploy it in one day to start solving your business challenges. Exago Start offers you:

 

SWIFT IMPLEMENTATION
Inspired by industry best practices, the new innovation software accelerates and facilitates the launch of your idea management programme, with:

  • Ready-to-go and field-tested configurations
  • Brand-framing options
  • Practical back-office
  • Quick Start Guide to launch your initiative

 

FAST ENGAGEMENT
Have your people share ideas and collaboratively improve colleagues’ ideas in a healthy competition environment, with:

  • Time-bound and/or permanent challenges
  • Call to action notifications and automated email updates
  • Social feeds and actions to engage the community
  • Idea co-creation and discussion forums to refine and develop ideas
  • Multi-level rankings to recognise participants for their valuable content creation, based on the quality and quantity of contributions

 

QUICK AND RELEVANT RESULTS
Effectively assess ideas along the funnel and gauge results with no additional effort, thanks to:

  • Field-tested idea workflow with different evaluation mechanisms per challenge (likes or voting based on single or multidimensional idea rating)
  • Decision panels to monitor and support idea evaluation (with pre-allocation of ideas to specific evaluators per challenge)
  • Complete reporting engine with exportable reports in different formats
  • News panel to share relevant information and celebrate results with your community

 

Launching your own innovation programme has never been this easy. Learn more about Exago Start to understand why.

 

Ask to see Exago Start Live