It’s not enough to be Lean

lean

We often hear about the importance of Lean to cope with a tougher competitive climate. But only chasing efficiency and cutting costs are not enough for a company to survive and thrive in the long run.

The small venture company can build its business model by being the first to bring a new product to the market. If the innovation meets a strong need, and is sufficiently innovative, it can become an immediate sales success in today’s viral world, and the company could soon grow from nothing to maybe hundreds or more employees with sales on a global market.

Sooner or later, however, comes a point where other companies have noted the success and try to copy and improve the original idea and at a lower cost.

All well-established large companies have for long been in that situation. As soon as you are in a competitive market, you must, in order to maintain a high profit, increase your sales volumes (which becomes increasingly difficult with ever new competitors) or continuously cut costs and increase the efficiency.

For the latter, there are a variety of methods, of which perhaps Lean is best known. The method is based on how Toyota’s automotive plants managed to improve their processes, and thus profitability, by eliminating all factors in a production process that did not provide a direct value to the end-customer. The main principle for Lean is to remove all the waste (muda in Japanese) in the processes and constantly work with improvements in all aspects of production. This requires both systematics and creativity.

However, as Lean focuses on maximising existing value based on the resources used, one can not directly apply the method to the innovation work of the enterprise, as this is about identifying new values ​​that meet needs that the customers have not previously had.

This contradiction between Lean as a tool to streamline production and expensive but necessary investments to identify and create new values ​​is accentuated by the inherent driving forces of the stock market.

In former times, majority share holders, who many times had built a fortune within the same family, invested in a long-term value increase within their companies, which could sometimes be measured in decades. A good example is the Wallenberg family’s dominant role in Swedish business life throughout the 20th century.

However, this long-term ownership of families or individuals has increasingly been replaced by major institutional owners who are more interested in short-term return on investment, which at best could be taken home over a number of years, but unfortunately more often focuses on the forthcoming quarterly report.

With such thinking, Lean becomes very attractive, as costs can be reduced in the short-term perspective, while investment in innovations can rather be seen as a burden, as the immediate cost reduces the profit, and only delivers long-term dividends (and maybe not at all).

For the successful company that is struggling in a competitive market, both “be Lean” and innovative at the same time are required.

Lean is needed to increase the value of established production, and innovation is needed to create new values. One approach can not be done without the other – or as Warren Bennis expressed it, “ Managers are people who do things right and leaders are people who do the right thing.”

In recent years, however, the former firewalls between innovation and production have begun to be relaxed, and some of the principles of Lean have come to be applied to some of the phases of the innovative process.

Once the new customer needs have been identified and the process to develop products or processes to meet those needs have started, one can end up in situations where many people need to coordinate their efforts in the continued innovative work. In those cases, the creative process itself must also be systematised to maximise the creative effort.

The film company Pixar, with successes like “Toy story” and “Finding Nemo” has for example established daily meetings, inspired by the Lean methodology, where the team members share what they do, receive and give feedback, and together discuss how to get around problems that may arise in a very structured way. This way of working has proven effective in fostering real-time collaboration and speeding up the creative processes.

But the basic principle must always be that structure must support but never stand in the way of the creative process.

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Author: Karl Ekdahl

International public health leader and creativity blogger.

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