Why Lean Fails: Insights towards effective Digital transformation
This article was first published on SmarterChains’ blog.
“Looking after and optimizing the car engine (manufacturing) is just one part of looking after and optimizing your car (the business)
EXECUTIVE SUMMARY
- Only 1% of Digital Transformation efforts achieve or exceed expectations. [1]
- And a surprising 60–90% lean improvement programs fail [2]
- Both types of initiatives are usually blocked by a narrow transformation approach, resistant executives, and an unengaged workforce
Top manufacturing companies share one trait: When leveraging new tools, they also integrate the thinking model and context that created those tools in the first place. However, evidence suggests that this holistic approach to business improvement still escapes many companies. For instance, even though the lean model has been widely adopted, its success rates remain abysmal: 60–90% failure rates are common for lean improvement programs. Similarly, history now repeats itself with Industry 4.0 programs and manufacturing digital transformation: specifically, only a shocking 1% of digital transformation efforts is expected to achieve or exceed goals.
The purpose of this paper is to make a direct comparison between lean and Industry 4.0 program failure rates, draw parallels, and extract useful insights to help readers overcome the transformation hurdle.
Why just getting the latest industry 4.0 technology can’t be successful
Simplified to its core, lean is about eliminating non-value adding activities. As waste is reduced, quality cost drops. Consequently, product quality and organizational agility improve, whereas production times shorten. The problem starts when executives try to narrow down these principles to the manufacturing and operations side of the business. Lean involves, or should involve, all other business aspects, as numerous manufacturing issues start elsewhere. In Jeff Williams words (Business Development Director): “Looking after and optimizing the car engine (manufacturing) is just one part of looking after and optimizing your car (the business). Therefore, a holistic lean transformation approach is necessary, which involves administrative processes, cultural change, human capital development and more.
The same concept applies to digital transformation. Narrowing down a plant’s transformation program to having engineering teams slap in the latest Industry 4.0 technology can’t be successful. The fourth industrial revolution has ushered in a new era, filled with innovative tools that open up a world of possibility. Companies looking to leverage these tools should first take the time to understand the context that created them, and second, undergo the end-to-end organizational adjustments their implementation demands.
How misuse creates the “in-vogue” barrier-to-change
The second lesson manufacturers can extract from lean transformation failures is how misuse breeds resentment and barriers to change. The wide-adoption of lean programs has led to immeasurable watered-down iterations, which fail to engage management and staff and inevitably lead to failure.
Similarly, digital transformation has now become the industry’s most widely adopted buzzword, leading to an “in-vogue” effect that’s non-conducive to real change. As most companies rush in to initiate Factory of the Future programs — $1.2 trillion spent worldwide, just in 2018 — preliminary results paint a clear picture: Precious few companies have the know-how to design effective transformation programs.
This situation results in executives and managers that are increasingly resistant to transformation. If past transformation efforts failed, why would a new one be any different? And if it’s not meaningfully different, why would plant teams engage and support them fully?
The answer to this problem is two-fold: First, an orchestrated company cultural change plan is necessary, powered by forward-thinking plant managers and disseminated into the rest of the organization. Second, a rigorous and practical approach to digital transformation must be adopted. Factories can truly own their transformation efforts when their leadership can answer the following three questions with clarity:
1. Where are we? (Factory of the Future maturity assessment)
2. Where to go? (Factory of the Future vision statement)
3. How to get there? (Factory of the Future roadmap)
Don’t just “do” Digital Transformation; Commit to the process fully
Perhaps the most important lesson to extract from lean’s failures, however, is philosophical in nature. Wanting to “do” lean is an entirely different matter than learning how to “be” lean, which is precisely what separates Toyota from its many imitators. Taking cost out of context, for instance, and regarding employees as expenses are guaranteed to backfire and eventually disengage the workforce.
Similarly, in today’s context, diminishing the innovation objective to just checking the digital transformation checklist is the path to disengagement. To leverage technology, Big Data, and power transformation projects that work, companies should be fully committed in order to fully engage the human factor.
At the end of the day, no matter how much technology progresses, no matter how much gets automated, and no matter how much companies like to think they’re ruled by data, it is always people that start the process: Deciding which technology to adopt, which process to automate and which data to collect.
Discover the 5-essential digital-ready mindset traits all engineering managers should develop.
SOURCES:
1. World Economic Forum: The Digital Enterprise: moving from experimentation to transformation
