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/ tiistai, 11 huhtikuu 2017

How to Apply Lean Thinking in Innovation, Product and Service Development

Sure, there's Lean Startup, but how does Lean Thinking apply in innovation and R&D?

The term “Lean” pops up a lot in the context of innovation, product and service development (referred to as R&D in this text). Lean started to get mass appeal in R&D after the Book “Lean Startup” was published in 2011 by Eric Ries. He refers to Lean manufacturing as the origin of his innovation model for IT and software startup’s. More generally, companies are continuously looking for ways to increase customer value and shorten R&D lead-times as markets evolve and move fast. Lean shares the same purpose. All in all, Lean has more to offer for R&D than increased speed, or the Lean startup specifically. It is a concept that helps you increase value for customers and make the process more efficient, while shortening the idea-to-market time.

Lean production meets R&D

Lean production seeks to increase flow (not resource) efficiency by reducing waste. Flow efficiency is calculated by dividing added value time with total time. The usual situation is that companies focus on resource efficiency rather than flow efficiency of a certain project. Thereby flow efficiency factors are typically <1% in R&D. Most times ideas and projects are waiting for approval or stuck in a work queue. The process is flawed and wasteful. R&D projects often proceed through a rigorous management approval process, require continuous customer and technical testing and need work input from several organizational functions (operations, sales, marketing etc.) prior to market-readiness. There characteristics cause waste and bottlenecks in the process. Companies operations models are usually built for running daily business, not for new developments. Rough terrain makes it hard to achieve high customer value, continuous flow and short time-to-market. But certainly, these are key targets for any development project.

Applying Lean tools to R&D

Lean production (or Lean office) is difficult to apply to R&D in detail. There are way too many iterations in the design and development phases, and at the on-set of the design project, you are not sure what the solution will be. In simple terms, R&D process output is not fully specified. As an example, consider taking five different R&D projects (product upgrade or line extension, new service launch, technological breakthrough etc.) and make a single detailed Value Stream Map (core tool in Lean) from them. It is pretty much impossible to do this so that it becomes meaningful. However, you can sketch out some phases and name them, the ones that each project go through (by the way, this is your “in-action innovation process”), but not enough platform to apply all of the specific Lean tools and techniques.

Albeit some major setbacks, the principles of Lean are helpful also in R&D. Increased customer value and short lead-times, to name a few. Short lead times not only make you reach markets faster, but they also increase the efficiency of the R&D process and unit. After learning the concept and principles of Lean, the next thing is to learn to identify and eliminate waste. Waste is an activity that does not add value to customers.

Learning to see waste in the R&D process

The original 7 wastes of Lean (or Muda, in Japanese) are as follows: overproduction, inventory, waiting, motion, transport, rework and over processing. Waste seems like a simple thing to see and eliminate, but some of it is hard to pinpoint and even more difficult to eliminate. Waste and bottle-necks keep changing from project to project and some waste comes from the way the whole company is managed and organized.

The biggest waste is to design and produce a new product or service, which nobody wants to use or pay for.

Let’s consider each of these waste types in R&D. For the simplicity of writing, I use the term product below, but it might as well be a service or new business model.

  1. Over production: A product is designed and produced ahead of its time, before the customer demand is there, or planned for greater demand than what is realized. Simply put, a lot of effort is placed to design and produce a product that nobody wants. This is the biggest waste there is.
  2. Inventory: Work-in-progress is projects, concepts, ideas that have not been commercialized (or terminated). Too much inventory causes efficiency losses and secondary needs. Teams and individuals jump between projects, requiring set-up time and secondary needs like excessive portfolio management systems and design reviews jam the flow even more. It just gets confusing and inefficient to have too much unfinished projects lying around.
  3. Waiting: A form of waste that cripples process flow efficiency. There is unfortunately a lot of waiting going-on in R&D, especially in large organizations with a rigid organisation and management framework. R&D usually operates via a matrix with no direct power over line functions (marketing, operations etc.) whose work input is needed. Typically in R&D, the development team either waits for a management-decision (Do we proceed?) or for work input from some person in a line function. Or then they are waiting for a prototype to be built, test (customer or technical) to be finished, or production investments - you name it. Decreasing waiting time should be a top item on the improvement list.
  4. Excess motion and transportation: these are more typical wastes in traditional production than R&D. Still, development teams and R&D units should reflect on their ways of communicating and working from time to time. For instance, team meeting and product training protocols should be reviewed. Communication and information flow should be open, precise and timely. So perhaps waste can be seen (and eliminated) in ways of working as well. However, since co-creative face-to-face workshops are at the heart of innovation, I would be careful to to cut down on these sessions.
  5. Rework: Rework is needed when you do not get it right the first time and must do a task all over again. Now, this is interesting from design methodology point-of-view. In fact, designers and product developers are so used to not getting it right the first time, to an extent that we have learned to embrace the iterative nature of design – “fail fast to succeed soon”. Consider the basic operation model of Lean startup for instance. Build-Test-Learn. Similarly, the Design thinking model is built to embrace speedy design cycles and design teams are fully happy to make iterations to get the product right in the concept phase. These cycles are done to get early customer feedback and decrease uncertainty and risk of building a product, which no one wants. However, from Lean point-of-view, rework is waste. Tough one, but worth consideration in each context.
  6. Over processing: This means processing the product beyond the standard need of the customer. The product has features that the customer does not need or is not willing to pay for. Usually these features increase development time, add to cost and price and make the product complex. An important form of waste, whose elimination can increase speed and make the process more efficient while maintaining customer value.

As a summary, Lean is a great framework for R&D process development. The focus of Lean is on increasing customer value and process flow efficiency (time-to-market) by decreasing waste. To apply Lean thinking in R&D, first get to know the concept and principles and then learn to see waste and eliminate it.

Matti Perttula (D.Sc.) is an Innovation Consultant at Innotiimi-ICG (Helsinki, Finland). He believes that a modern innovation model combines best practices of classical innovation management frameworks with the new "Lean & Agile" innovation models. Twitter @matti_perttula

Matti Perttula

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