When many people think about Lean processes and management, they assume that the goal is to optimize each process with a step-by-step approach to reduce waste and implement incremental improvements.
Some people even assert that Lean principles are the opposite of innovation because innovation is often considered the result of the invention that disrupts operations. On the other hand, Lean manufacturing is based on sticking to well-defined processes and standard work and figuring out how to make them better one small change at a time. Innovation, some assume, happens when current operations are upended and ignored.
However, we have seen that when companies embrace the synergies between Lean business processes and innovation, they can soar past the competition. Why? Because people who innovate have bold ideas, but it's Lean thinking that turns fantastic ideas into realities. Organizations that understand the process-driven Lean manufacturing model and are ready to engage in experimentation unlock the key to competitive advantage.
What is Lean Innovation?
Lean innovation is a product development approach that is focused on the following three steps:
- Define the minimum viable product.
- Develop a prototype quickly and test it with customers, if possible in a real-world competitive situation.
- Repeat these steps until the product bests the competition or determine that a new approach is needed.
Lean innovation principles prioritize experimentation above complex planning, and they prize continuous incremental improvement. New opportunities to develop new solutions or improve an existing product are identified with the use of design thinking. Fewer resources can develop, test, improve, and validate solutions that bring value to the customer. Finally, the bureaucracy that often hinders innovation and increases waste is eliminated.
Lean innovation is not new. Henry Ford introduced the first moving assembly line in 1913. This new manufacturing approach reduced the assembly time for a single automobile from 12 hours to 90 minutes. By reducing the time, cost, and human labor required to build a car, Ford, in turn, was able to reduce the cost of the Model T from $850 to less than $300. This was an essential element of making cars more accessible to large numbers of people. The approach increased efficiency, reduced waste, and improved the customer experience all at once. It's hard to find a better example of how to apply Lean principles. Of course, Toyota later built on Ford's original principles and developed the Toyota Production System. Other business models, including Lean manufacturing and Six Sigma, have added tools and techniques to structure both process improvement and Lean innovation.
Design Thinking and Lean Innovation
Design thinking is a customer-focused method for brainstorming new ideas and problem-solving. The process starts with the pain points that customers have experienced. Next comes an evaluation of how they are currently addressing the problems. Finally, by observing customers in their real space, organizations get better insight into their customer's needs and develop observations that can lead to new business opportunities.
The Hasso Plattner Institute of Design at Stanford University explains design thinking with five phases:
- Empathize: Observe and engage with customers to discover their actual needs.
- Define: Determine the problem as the customer understands it.
- Ideate: Brainstorm potential solutions to the problem; keeping in mind there's no wrong answer at this point.
- Prototype: As a team, select the most promising idea based on pre-determined criteria and start building, even if it's just using paper and pen.
- Test: Put the prototype in customers' hands and improve based on their feedback.
By employing design thinking, organizations gain a deeper understanding of their customers, explore new ideas, and build products smarter and more quickly with negligible prototyping costs.
Lean Startup Method
The Lean Startup approach was popularized by Steve Blank, a Silicon Valley entrepreneur. It builds on the ideas of design thinking and allows companies with few resources to develop rapidly, prototype, validate, and improve business solutions.
The premise is a "build, measure, learn" feedback loop with the goal of producing a minimum viable product (MVP). The MVP is the most simplified version of a product or application that early adopters can test. It has the core functions that make the product useful, but it acts as a guide for future development. Once the MVP is in the customer's hands, innovators can quickly find out what's working and what isn't and improve based on that knowledge. The end result is a product that the customers actually want without the waste of over-processing.
While software companies are probably the first to mind when thinking about lean startups, the approach works in other sectors as well, including consumer goods, education, construction, and healthcare.
Why Adopt Lean Innovation Management?
The Lean innovation model empowers employees to test their ideas and build products that customers value faster and with fewer resources and less expense. In addition, it challenges organizations to constantly test assumptions and iterate their product offers. Finally, with Lean innovation thinking, executives never become too comfortable with their organization's current success.
Modern companies need to be fast-moving, and employees and managers alike must get comfortable with accessing the competitive landscape and taking the risk that change always entails. Lean innovation puts organizations in the position to follow more opportunities, test them with minimal cost, and determine if they are worth further investment.
Thinking about innovation through the lens of Lean is a way to put the focus on products and activities that customers most value. When the customer is the highest priority, process development is streamlined, and employees can concentrate on finding a more effective way to solve customer problems. Although Lean is often associated with manufacturing and engineering, it can benefit any type of organization.
Value-based Customer Feedback
In order to determine what elements of a product deliver the most significant customer value, organizations must understand the ask of their customers. Asking for customer feedback often produces a number of new ideas that haven't been tried before. Many companies have tools for gathering customer feedback, but it is rarely focused on value. Survey results can provide some insight, but live conversations lead to deeper understanding and richer knowledge.
With Lean innovation, every employee can contribute to the development and iteration of new products. In addition, your employees are a valuable source of information about your customer and how they use your products and services. Involving employees is a way to connect them with the purpose of your organization and create an emotional investment that leads to better decisions, more input, and a drive to delight each customer.
Many leaders say that creating a culture of innovation is a high priority, but in practice, innovation often is an intangible goal that is hard to define. Lean innovation offers the missing implementation piece of the puzzle that so many organizations seek. The step-by-step process of identifying value and finding ways to deliver it allows and encourages team members to think imaginatively, and it gives them the opportunity to exercise problem-solving skills. When applied consistently, employees build the ability to work creativity and innovation into their daily habits. As a result, a cultural shift happens, and continuous improvement becomes routine.
Lean innovation reduces the overall research and development risks while at the same time improving the organization's competitive advantage. It's hard to find a downside to that.
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