# Lean at the center: How lean principles can boost digital transformation
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2018-03-22
Category: TECHNOLOGY
Category URL: https://financedigest.com/category/technology
Meta Title: Unlocking Radical Performance: Integrating Lean Principles
Meta Description: Discover how integrating lean management can propel your digital ambitions forward, achieving radical simplification and performance growth.
Tags: featured
Tag URLs: featured (https://financedigest.com/tag/featured)
URL: https://financedigest.com/lean-at-the-center-how-lean-principles-can-boost-digital-transformationhtml

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_By **Bernd Schreiber**, Willem Romanus and Yong Lee, Arthur D. Little_

It is common among companies to want to be through with the lean approach and embrace digital transformation. [Digital is new and exciting and offers](https://www.financedigest.com/digitization-to-offer-stewardship-to-the-robotic-surgery-market.html "Digitization to offer stewardship to the Robotic Surgery Market") radical improvements on the results of traditional analog processes. However, abandoning lean principles entirely can be risky to the organization, and even hinder the success of [digital transformation](https://www.financedigest.com/digital-transformation-for-the-world-of-finance-the-rise-in-collaboration-tools-and-saas-applications.html "Digital transformation for the world of finance: The rise in collaboration tools and SaaS applications ") projects. Many companies have found success by embracing both – placing lean management at the center of their [digital transformations](https://www.financedigest.com/how-to-create-value-in-digital-transformations.html "How to create value in digital transformations"). In this article we discuss how to overcome lean “fatigue” and use the approach as a springboard into your digital ambitions.

[**Moving to digital**](https://www.financedigest.com/the-dark-chocolate-market-to-move-towards-digital-health.html "The Dark Chocolate Market To Move Towards Digital Health")

The potential of [digital technologies](https://www.financedigest.com/the-digital-ir-revolution-how-new-technology-is-bringing-companies-and-shareholders-closer-together.html "The digital IR revolution: how new technology is bringing companies and shareholders closer together") to transform performance is now widely recognized. However, most companies struggle to find the right approach to [effectively grasp the benefits of this digital](https://www.financedigest.com/cost-effective-digitized-innovation-to-drive-the-immune-thrombocytopenia-treatment-market.html "Cost-effective Digitized Innovation to drive the Immune Thrombocytopenia Treatment Market") promise. Indeed, choosing from among the plethora of new options provided by [digital technologies](https://www.financedigest.com/the-advanced-wound-management-technologies-market-to-grow-based-on-customized-digitization.html "The Advanced Wound Management Technologies Market to grow based on customized digitization") is a real challenge. Typically, it is unclear where to start and how to prioritize a company’s efforts and resources to drive tangible results. While some companies have been able to achieve radical performance increases of up to 50 percent or more, many have become stuck in a situation in which initiatives happen in silos, efforts lack coordination, and successes are limited or even non-existent.

Recent experience has shown that integrating lean principles into digital transformation can be a highly effective way of achieving radical simplification of the process.It allows companies to identify and apply the most effective levers for the digital journey.

**Performance boost from lean principles**

Companies that rely on lean principles achieve relatively high performance levels compared to their competitors.A recent Arthur D. Little automotive study classified the lean lifecycle into three phases and determined [annual company growth rates](https://www.financedigest.com/aerospace-bearings-market-to-register-stellar-compound-annual-growth-rate-through-2026.html "Aerospace Bearings Market to Register Stellar Compound Annual Growth Rate Through 2026") in each phase. Using a [key automotive](https://www.financedigest.com/automotive-actuator-market-key-manufacturers-development-trends-and-competitive-analysis-2028.html "Automotive Actuator Market Key Manufacturers, Development Trends and Competitive Analysis 2028") productivity indicator (“hours per vehicle”) as a measure, the correlation with lean implementation was analyzed. (See Figure 1.)

Performance growth of up to 8 percent was common during the Lean Exploitation phase. This decreased as [performance improved](https://www.financedigest.com/panasonic-delays-production-of-new-tesla-battery-to-improve-performance.html "Panasonic delays production of new Tesla battery to improve performance"), and tended to stabilize at around 1 percent in the Lean Excellence phase. [Digital technologies](https://www.financedigest.com/increasing-private-and-public-investment-in-digital-imaging-technology-particularly-in-the-field-of-healthcare.html "Increasing private and public investment in digital imaging technology particularly in the field of healthcare") have the potential to make a further step-change across all phases.

**Developing the three “lean pillars”**

Whatever the industry, [outstanding lean organizations](https://www.financedigest.com/organic-rice-syrup-market-to-witness-an-outstanding-growth-by-2030.html "Organic Rice Syrup Market to Witness an Outstanding Growth by 2030") tend to be strong in the three “lean pillars”:

_Pillar 1: Leadership and culture_

Whether in daily routine or in times of transformational change, leadership and distinct roles and responsibilities provide the cornerstone for effective collaboration. Clearly formulated expectations, derived from [top management’s](https://www.financedigest.com/tinnitus-management-market-to-top-us-3-2-bn-driven-by-growing-burden-of-hearing-disorders-fmi.html "Tinnitus Management Market to Top US$ 3.2 Bn Driven by Growing Burden of Hearing Disorders: FMI") vision and based on a cross-functional understanding, help to make management and delegation effective. This mind-set nurtures the culture of continuous improvement.

_Pillar 2: Targets and performance management_

Continuous improvement and transformation start with setting clear targets. These targets need to be designed both vertically (the organizational hierarchy) and horizontally (reflecting the required end-to-end value-stream orientation). Performance management [assures the effectiveness of measures taken through better leadership quality](https://www.financedigest.com/the-neurotrophic-keratitis-treatment-market-to-stand-on-quality-assured-digitization.html "The Neurotrophic Keratitis Treatment Market to stand on quality assured digitization") and clear focus on the waste-free value stream.

_Pillar 3: Kaizen platforms_

Lean is not only about methods and tools, but also about addressing the right problems and using the right [set of employees with the right problem-specific approach](https://www.financedigest.com/uks-finance-minister-sets-out-new-economic-approach-to-finance-bosses.html "UK’s finance minister sets out new economic approach to finance bosses"). Continuous improvement can be seen as continuous training, and is a sustainable way of developing employees. The Kaizen platforms, whether for self-contained improvements, problems within a defined organization unit, or cross-functional/cross-site problems, need to be integral, not additional, to the design process.

However, despite the widespread understanding of these principles, many lean journeys fail. Companies often focus too much on tools rather than philosophy, and on waste removal rather than [customer value](https://www.financedigest.com/cracking-the-code-of-customers-future-value-in-retail.html "Cracking the code of customers’ future value in retail"). Disappointing incremental improvements and lean “fatigue” are common symptoms of this failure.

**Identifying the organization’s technological** [building blocks](https://www.financedigest.com/innovation-to-be-a-building-block-of-the-automotive-glass-market.html "Innovation To Be A Building Block Of The Automotive Glass Market")

Each company needs to configure its own [set of technological](https://www.financedigest.com/the-technologies-set-to-boost-the-finance-sector-in-2022.html "The technologies set to boost the finance sector in 2022") blocks to address its organizational characteristics and priorities. Five categories of technological building blocks are defined in Arthur D. Little’s digitalization framework, “Future of Operations”. This classification helps companies to trace operational needs to the relevant building block: cognitive, connected, virtual, human centered and value-add.

These building blocks are interconnected and therefore need a [holistic and integrated design approach](https://www.financedigest.com/a-holistic-approach-to-esg-is-the-best-chance-of-success-in-a-competitive-private-equity-investment-market.html "A holistic approach to ESG is the best chance of success in a competitive private equity investment market"). They apply across the organization, in both core operational functions such as manufacturing and logistics, and support functions such as [robotics process automation](https://www.financedigest.com/the-implantable-biomaterials-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Implantable Biomaterials Market to move ahead on RPA (Robotic Process Automation)") (“RPA”) in production planning and finance.By adopting lean principles, it is much easier to [identify the right areas](https://www.financedigest.com/identifying-areas-of-vulnerability-why-cybersecurity-shouldnt-be-an-afterthought-for-financial-organisations.html "Identifying areas of vulnerability: Why cybersecurity shouldn’t be an afterthought for financial organisations") and the levers to make the change. (See Figure 2.)

**Implementing a design approach to realize full digitalization potential**

The full [digitalization potential of the value stream may be derived using a design approach based on two key](https://www.financedigest.com/b2b-specialist-pr-agency-the-digital-voice-announces-four-key-account-wins-as-it-celebrates-its-tenth-birthday.html "B2B specialist PR agency The Digital Voice announces four key account wins as it celebrates its tenth birthday") questions:

_1)     Which physical [process steps can be automated](https://www.financedigest.com/the-aquaculture-feed-and-pharmaceutical-market-to-move-ahead-on-rpa-robotic-process-automation.html "The Aquaculture Feed And Pharmaceutical Market to move ahead on RPA (Robotic Process Automation)") by mature and proven technologies?_

First, design a lean value stream on the greenfield. Simplify the value stream radically by eliminating interfaces through consolidation and integration: make the value-add visible.

For each process step, especially for the non-value-adding ones (“waste”), ask why this step needs to be processed by an employee, and with what technology it should be automated. The immediate use of mature technology building blocks on standardized processes will deliver more reliable processes with less failures. Significant increases in [productivity are the result of shifting the focus from eliminating waste to creating](https://www.financedigest.com/creating-a-positive-and-productive-culture-within-the-workplace.html "Creating a Positive and Productive Culture Within the Workplace") value-add.

The greenfield value-stream design will differ radically from the current value stream: it reveals its digital potential.

_2)     Which remaining non-physical (information) process [steps can be radically digitalized](https://www.financedigest.com/the-binocular-microscope-market-to-step-up-the-innovative-digitization-ladder.html "The Binocular Microscope Market to step up the innovative digitization ladder")?_

Second, automate and [digitalize manual information processing and standard](https://www.financedigest.com/standard-chartered-rolls-out-digital-bank-in-hot-singapore-market.html "Standard Chartered rolls out digital bank in hot Singapore market") decision-making. Strive for a fully automated target condition in which the employee is just monitoring and confirming automated quality gates. Reduce manual intervention to zero.Especially for high-frequency routines, in which employees transfer data between programs, or even for very complex decisions, RPA, [artificial intelligence and decision-supporting systems radically simplify](https://www.financedigest.com/how-artificial-intelligence-is-simplifying-sanctions-screening-for-insurers.html "How Artificial Intelligence is Simplifying Sanctions Screening for Insurers") administrative information flows.

Digitalized information flow does not only produce less failures and accelerate workflows, but also creates new value and optimization [opportunities through the digital](https://www.financedigest.com/an-analysis-of-vc-investment-in-the-defence-sector-and-the-mods-readiness-to-exploit-digital-opportunities.html "An analysis of VC investment in the Defence sector and the MOD’s readiness to exploit digital opportunities") visibility of big data.

**[Developing a digital](https://www.financedigest.com/the-recombinant-parvovirus-antigens-market-to-be-on-an-auto-development-mode-with-digitization.html "The Recombinant Parvovirus Antigens Market to be on an auto-development mode with digitization") mind-set**

The ability to effectively and efficiently digitalize an organization’s value stream is, unquestionably, a source of future [competitive advantage](https://www.financedigest.com/ai-holds-the-key-for-both-competitive-advantage-and-risk-mitigation-in-2022.html "AI holds the key for both competitive advantage and risk mitigation in 2022").Identifying and integrating the most appropriate [digital technology into the value stream](https://www.financedigest.com/coca-cola-digital-ad-campaigns-use-seenthis-streaming-technology-to-avoid-excessive-carbon-footprint.html "Coca-Cola Digital Ad Campaigns Use SeenThis Streaming Technology to Avoid Excessive Carbon Footprint") requires a profound understanding of all related business processes, as well as sound understanding of the technologies on offer and their relative maturity.

As with lean management, [developing the required capabilities and establishing the necessary mind-set throughout the organization](https://www.financedigest.com/the-decyl-oleate-market-gloat-over-organic-development.html "The Decyl Oleate Market Gloat Over Organic Development") remain top-management issues. The more employees and managers adopt this new lean digital mind-set, the sooner efforts to [digitalize will succeed in delivering](https://www.financedigest.com/taming-the-new-wild-west-how-biometrics-can-help-the-ecb-deliver-a-secure-digital-euro.html "Taming the ‘new wild west’: how biometrics can help the ECB deliver a secure digital euro") step changes in business performance.


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