LEAN and Digital Transformation in a nutshell

We are all in a sense fashionistas! Some of us are so caught up in fashion trends we can’t fill our shopping baskets enough. Others are continuously scouting for the latest articles and books to see what emerging concepts and ways of working are worth applying in our business. Today let’s talk about our business!

One of the more popular recent trends in business is Digital Transformation. There is so much buzz going on and almost every organization is trying to move in this area. However, in the last season LEAN was the most trending. So does this mean that LEAN is out of fashion?

No! LEAN thinking stays important if your organization looks at it as a permanent mindset, rather than a temporary fashion trend. The problem arises when an enterprise is working on being the most fashionable, instead of stylish! Fashion comes and goes away, but style is always here to stay.

In this article let’s discuss how Digital Transformation ties in with LEAN thinking instead of analyzing them as separate seasonal trends.

What is LEAN thinking and how does it differ from Six Sigma?

Although many of us use LEAN and Six Sigma interchangeably, it’s important to note the difference between these two terms. LEAN is about a set of principles which were developed by Taiichi Ohno in Toyota manufacturing plants after World World II to compete in the automobile industry, whereas Six Sigma is a statistical problem-solving tool well suited for complex problems.

This means that LEAN focuses on continuous improvement in CULTURE building within an organization instead of tools deployment. This is, in fact, the biggest failure of organizations, who look at LEAN purely from a tools perspective rather than an enterprise transformation. Yes! LEAN thinking has many handy tools, but they won’t work if you don’t embrace the principles behind this philosophy.

FIGURE 1: LEAN thinking   Source: “The Toyota Way” by Jeffrey K. Liker

LEAN thinking, particularly its just-in-time (JIT) operations strategy, forces companies to continuously identify and remove waste in processes. There are a number of key steps to achieving it:

–   Identify key business drivers from your customers’ point of view.

–   Define your value stream (i.e. the sequence of activities that add value to your customers) and non-value-added activities.

–   Make sure your activities flow without interruption.

–   Create a Pull system based on customer demand.

–   Continuously improve everything you do by building your people.

Digital Transformation is about reinventing yourself

While the Toyota LEAN thinking concept was developed in the 1950s and revealed to the public in the early 1990s, the Digital Transformation process is way more recent. Although digital technologies also last for many decades, increased discussion around this topic is relatively new.

So what is Digital Transformation? For me, it is all about how companies reinvent themselves by using digital technologies. This covers two areas:

1. Process Excellence. It’s all about how you redesign your business processes by using new technologies as IoT, robotics, big data, 3D printing or cloud computing.

Think of the Maasvlakte II container terminal in Rotterdam (The Netherlands) established in 2015, which is the most fully automated and advanced terminal in the world. If you visit the terminal, you can see how automated cranes are loading or discharging containers to or from a vessel.

2. Building digital value propositions. This relates to innovation development where data and technology are used to create new products or services.

For example, a traditional media company such as The Weather Company has transformed themselves from using data for its core operations i.e. providing weather forecasts on a TV channel to using data to create new services such as offering retailers sales forecasts based on weather patterns. This information allows retailers to adjust their advertising spend based on whether the sales are predicted to spike or slump.  

These days, companies are experiencing a sort of digital tsunami, if you will – being bombarded by data from all sides and applying it to solve new problems. Where previously, data was expensive and used in limited cases,  today’s data is being generated almost everywhere at a fraction of the cost.

This big shift towards digital transformation has been empowered mainly by recent trends such as a rise in unstructured data (e.g. social media), new tools and capabilities to analyze that data (e.g. machine learning algorithms) and cloud computing (e.g. public cloud providers which offer pay-per-use options).

Although digital is all about speed, digital transformation is a long journey

Digital Transformation is often associated with a flashy toys syndrome (i.e. AI, IoT, 3D, AR etc) but those technologies are moving so fast that they shouldn’t be your sole target. Instead focus on continuous learning to build your Digital IQ. It’s all about how you can drive meaningful innovation to generate healthy revenue streams, reduce operating costs and make your employees happy. And digital technologies can help if you start with a business objective and not a technology drive.

LEAN’s beautiful tango with Digital Transformation

The increased discussion about Digital Transformation doesn’t mean that LEAN is out of vogue and we should forget all the progress in embracing continuous improvement systems. Quite the contrary. I believe digital transformations have a higher chance of success if your company has already established at least the basics of LEAN.

How can you develop a successful digital value proposition if you are not clear about your voice-of-customer (i.e. customer feedback)? How can you automate a process which doesn’t have a standard in place? Or how can you expect operators to be aligned with each other if there is no visual management system on the shop-floor?

Digital technologies enhance LEAN transformations, providing access to new data and insights that can be used in the LEAN problem-solving process to increase customer satisfaction, reduce costs or make your employees happier. Often, digital technologies also help to automate routine and high-risk tasks. This means that employees have more time to get involved in more interesting and creative work, and are less exposed to unsafe tasks potentially damaging to their health.

These days it’s all about experimentation as you test your ideas quickly on the market, where you can learn immediately and adjust where needed. So engage your employees from the shop-floor, who typically have the most valuable on-the-job experience and knowledge instead of hiring expensive innovation gurus.

Remember, Digital Transformation, like LEAN transformation, is a long journey. Sometimes it’s like walking in a misty forest. You know it’s a thirty step journey, but you can see only the next five moves. So, asking your LEAN colleagues to walk with you is a wise choice.  Some paths are already well-explored by the LEAN travelers and you could use their help.

So don’t let your lack of clarity hinder you; instead start your journey right away. The sooner you finish your first five steps, the sooner you will see your next target. And sometimes don’t be afraid to be like Columbus – be prepared not to reach your intended destination, but rather give yourself leave to stumble upon something else no less valuable. Bon voyage!

Leave a Reply

Your email address will not be published. Required fields are marked *

You May Also Like