Going Lean, Again

30. November 2016

Friedrich Arnold, Senior Project Manager at etventure, explains how manufacturers can embrace the Lean Startup methodology as the centerpiece of their Digital Transformation.

The Proud Leader

On a recent client visit to a German OEM of construction machinery, the CEO and the Head of Production gave me a tour of the shop floor – where the final assembly and inspection take place. I complimented the team on how calm the assembly line seemed to run – and how clean the workshop looked. Proudly, the Head of Production explained to me: “We use Lean Production – meaning we eliminate waste from our manufacturing process.” The CEO added that since 2010 his company had invested heavily in Lean Production initiatives, working with some of the best consultants from the automotive industry – where Lean Production had first been implemented, and perfected around the turn of the millennium.

The result was impressive: Suppliers deliver their pre-assembled components to the plant just-in-time and just-in-sequence. The workers on the assembly line optimize every step, using ergonomic tools that are customized for their needs. The only people who move quickly from one station to the other are delivering material based on a process called Kanban. “The switch from Push to Pull of materials had a big impact,” explained the CEO, “by delivering the right parts at the right time we cut our inventory in half.” I could see the excitement in the eyes of the CEO when he summarized the bottom line – the company had reduced production costs and decreased delivery times, while improving the quality of their products. The transformation to a Lean Production system has been a big success for the company.

Secret Worries

After the tour, back in the executive meeting room, I asked the CEO about his digital agenda and how content he was with his company’s innovation. Surprisingly, although the CEO just showed me the well-functioning centerpiece of his profitable business, he was still concerned about the future. The company was losing its technology leadership. Consequently, margins were shrinking. The smartest and brightest minds in the R&D department kept spending seven-figure budgets on new features – but customers still kept leaving.

The latest project, a condition monitoring system that was supposed to enable an improved customer service experience had been two years in the making. Unfortunately, the customers’ feedback at the latest trade show had been underwhelming. Now the Board of Directors was getting nervous – and the CEO felt rising pressure to prove his team is able to deal with digitization.

An Expensive Blind Spot

I thought a lot about what I saw and heard that day. In general, the CEO’s situation was no surprise to me – as many of our clients face the exact same challenges. I did find it fascinating though: why do Lean manufacturers invest in wasteful innovation?

From my perspective, in terms of innovation, the CEO wasn’t getting enough bang for the buck. So why did his organization master the Lean paradigm that is all about eliminating waste – but turn a blind eye to lean innovation processes? The company had lost its competitive edge due to the disproportionate amount of resources needed to achieve incremental improvements – simply to add new features to the existing product portfolio.

So here’s what I’d recommend to manufacturing CEOs who face a similar situation in their organizations.

Break the Rules

The need for digitization of your value chain is real. The bad news is that your company’s innovation approach is not lean enough to succeed (yet). Your costs are too high, your delivery time is too long and the quality of the outcome is underwhelming for your customers.

The good news is that you’re already familiar with the solution: you need to go Lean – again. Your organization managed to implement the Lean Production paradigm. Now it’s time to embrace the Lean Startup methodology, to steer your business model and your organization through the Fourth Industrial Revolution.

The Lean Startup is an innovation paradigm exercised by the most successful startups from Silicon Valley. In a nutshell, it is based on three core principles:

  1. Build a Minimum Viable Product that allows your team to test your design hypotheses with the least effort possible.
  2. Measure the effectiveness of your design by quantitative metrics of your users’ feedback.
  3. Learn from your users and systematically adapt your design in a way that allows you to test new hypothesis about the product and your business model.

In our projects at etventure we run through this learning cycle every day. We understand that agility is the most important factor when turning ideas into successful products. As radical as it may sound, our decision making in the early stages of an innovation project is based solely on the user’s reaction to our Minimum Viable Product. Our clients are often amazed that we can come up with working products within three months. However, this is all it takes to develop new products and services – once we eliminate unnecessary time killers from the innovation process, and focus on delivering value to customers.

Move Fast

Congratulations! You are still reading which means that you are one of the few who get it. You understand what’s at stake and you are looking for tangible, actionable steps. So here are the next steps to launching a Lean Startup test balloon in your organization within three months:

Step 1 – Set up an interdisciplinary team and send it on a mission – If you don’t have UX/UI and Design Thinking Experts, hire an outside partner like etventure who is experienced in the Lean Startup Journey.

Step 2 – Listen to your customers, develop and test your ideas – It will take about 50 interviews with actual customers to develop and validate promising ideas with real business potential.

Step 3 – Develop a Minimum Viable Product and ship it. Pick the “quick-win” idea from all the ideas your team was able to produce. Now, develop a feature that delivers value that your target customers are willing to pay for. No need for setting up a costly IT project. Your customers will forgive you the roughness of the first release – as long as you continue listening to their feedback.

Take a Breath

After finishing these three steps, give your team a break and reflect on your progress. You will certainly find things to improve in the future – and that’s OK, because it shows that you are moving fast enough. The learning experience will help you and your team to keep the momentum going, and tackle new innovation challenges.

What’s Your Big Idea?

Here’s the deal: If your organization has managed the transition to Lean Production, the Lean Startup method is the right fit for you.

Why? Our experience shows that clients from the manufacturing industry are ideally suited for Lean Startup – as it follows the same guiding principles as Lean Production: Bring an idea to market quickly, at minimum cost and with maximum customer satisfaction. Applying the Lean Startup approach to your corporate innovation efforts will take time – and a focused effort. In my experiences with many manufacturing digital transformation projects, a lot of management attention and true team effort are key success factors.

So step up to the plate, delight your board, and deliver a quick win. Even if Lean Startup is uncomfortable at first, if you approach it with the same disciple you applied to Lean Production, you will be successful.

Don’t lose another day, go Lean Startup today!

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Friedrich Arnold, Senior Project Manager in Berlin, writes about his experiences with the digital transformation of German manufacturers and plant constructors. Here, he combines his expertise as engineer and Co-Founder of several startups both in Germany and the Silicon Valley.

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