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:

 

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:

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

 
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