How Lean paradigms go beyond gorillas’ assembly lines

Lean Manufacturing, Lean Production, Kaizen and Continuous Improvement (dear child has many names) have created buzz for many years. Originated with Toyota’s production system, “Lean” was primarily created with manufacturing businesses in mind. Now as manufacturing businesses are increasingly rendered by service and network businesses, how does Lean paradigms go beyond gorillas’ assembly lines and keep up with the new economy?

In one of my favorite articles, Casting of the Chains (pdf) from 2003, authors Ø. Fjeldstad and E. Andersen make a fruitful observation.

The world has changed. From 1960 to 1999 manufacturing companies’ share of GNP in the US, as well as its workforce, fell from 30 per cent to 15 per cent, with the consequence that such businesses are now a minority of the S&P500. Banks, transportation, building, healthcare, research pharmaceuticals and other services companies have taken over. Strategic models of the world, however, have not changed. When managers develop strategies for their companies, they still use the tools and language of the manufacturing organisation.

In brief, the authors found limitations in applying Porter’s Value Chain to other than traditional assembly line-based manufacturing businesses. Consequently, the authors extended the Value Chain to two more models; the Value Shop and the Value Network. The Value Shop creates value by scheduling activities and applying resources in a fashion that is appropriate to the needs of the client’s problem (typically management consulting, lawyers and doctors). Value in a Value Network is created by linking clients or customers who wish to be interdependent (typically banking, social networks and dating venues).

Business Model Patterns on Value Chain, Shops and Networks

When I joined my current employer to work with the web and startups, I did at the same time choose from working on Lean methodology alignment with one of Scandinavia’s leading media companies (see also Bharat N. Anand‘s Harvard Business Review case). Regardless of my interests in innovation methodologies and owing my conviction to entrepreneurship, I wanted to work with growth ventures rather than cutting down “corporate bacon” (is that innovation?). Later I discovered the Lean Manufacturing Startup, which basically adopts Lean Thinking and Customer Development to early-stage ventures and startups.

Although Lean Startup principles are argued to be generally applicable, it has mainly been applied to Enterprise- and Consumer Software cases. However, as far as Microsoft Windows creates value by linking consumers with third party software developers, and Google links consumers with advertisers, the software business generally acts as a value network. Hence, I believe that we start to see cases with the lean paradigm being adopted to the new economy.

In this manner, I assume that new schools of Lean methodologies not only help traditional management thinking avoid cramming business models with manufacturing approaches, but also preserve new-product introduction and disruptive innovation alongside continuous improvement.

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4 responses to “How Lean paradigms go beyond gorillas’ assembly lines

  1. I think the main challenge for lean thinking is to make it more widely understood.

    There’s no reason that Lean can’t be applied to any sort of organisation. In the book ‘Lean Thinking’ the examples aren’t restricted to manufacturing companies. It even shows how hospitals and airlines can get leaner.

    I’d encourage anyone dealing with Lean to revisit this book, because it really is the bible of lean thinking, and with a bit of thought it can be applied to anything.

  2. Thanks for the input Daniel. I believe in seeing Lean thinking as more of a philosophy. Yet implementation of Lean in traditional manners is not necessarily an impetus to entrepreneurship. At least not when comes to searching an universal approach. That is often a weakness when come to “shopping” one theory over another.

  3. I think the biggest thing facing the lean start up model approach is that the education system in most major business schools is out of touch with the start-up community in it’s ability to adapt to a moving target that a start-up has become. I think that we need more passionate people to evangelize the lean start-up approach to the education community in order to keep this framework from falling off the rails. Let’s help reduce the risk of lean start up failures together

    • Hi Brian. Thanks for sharing your thoughts on this. I believe that you make an important point.

      Although business schools are staring to adopt entrepreneurship, many have a long way to go. Especially when it comes to Lean Startup and Customer Development thinking, I believe that the engineering perspective may be a challenge for business schools to overcome. On the other hand I find that the traditional engineering school can be reluctant to teach what they might see upon as simple technologies. This is because technology commoditization (a key tenet with the Lean Startup, you know) may be perceived as to undermine the role of technology in itself. At the same time it is the intersection between these two disciplines that makes the Lean Startup/Customer development so promising.

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