Has there even been a time when customers were more demanding of the companies serving them? Industry 4.0 technologies—many barely imaginable only a decade ago—have already enabled genuine breakthroughs in cost, convenience, and customization, creating extraordinary value for buyers while raising the performance bar for producers ever higher.

And then there’s the volatility that never entirely disappears, flaring up in crises that can upend everything from supplier relationships to entire business models—all prevalent in today’s current landscape as Covid-19 creates widespread disruption. It complicates leaders’ efforts to make lasting changes in their organizations—efforts that historically have required years of sustained effort to take root.

Institutions ranging from aerospace manufacturers to tax authorities have nevertheless persisted, focusing their efforts on lean management and agile. Both methodologies have proven their worth as integrated systems for helping improve performance.

The mistake we find many leaders and organizations making is believing they need to choose between the two. In fact, that’s not true. Not only is choosing unnecessary, but the two methodologies complement one another in ways that increase the impact they generate, often by deploying Industry 4.0 technologies to speed transformation. Under this best-of-both approach, top-performing companies combine tools, ways of working, and organizational elements from each to form a custom solution that meets the company’s unique needs more completely and quickly than has been possible.

Lean’s legacy, agile’s momentum

Lean management has helped organizations create value for over 70 years. Starting in the 1940s with its roots in the Toyota Production System, lean management has spread from manufacturing to service operations and just about every other department and function at companies, governments, and non-governmental institutions around the world. Lean organizations seek to identify and eliminate activity that is not valued by the customer or end user. This systematic analysis of processes and value streams to reduce waste, variability, and inflexibility boosts performance in cost control, product quality, customer satisfaction, and employee engagement—often simultaneously. Moreover, these companies apply a mindset of continuous improvement and flexible working processes in which all employees contribute new ideas and suggestions, so that the organization becomes better over time. Freed from non-value-generating tasks, people focus more on what matters to customers.

Agile is more recent, originating in software development in the 1990s accelerating after the release of the Agile Manifesto in 2001. Over the past decade, agile has rapidly expanded into other industries, such as telecommunications and banking—and, more recently, heavy industries such as mining and oil and gas.

Rather than the traditional process of developing a new product or service—which used to be highly sequential and time-consuming—agile is much quicker and more flexible. Agile models call for iterative development that aims to get an early prototype of a new product or service out into customers’ hands as quickly as possible. Teams then capture feedback and iterate via quick cycles, refining the product or service over time. Agile approaches have since expanded beyond the realm of product development, and companies are increasingly organizing for agility across all their activities.

Better together

A common misconception is that lean management and agile are mutually exclusive, based on fundamentally different principles and approaches and applicable for very different types of activities. Lean management is for routine, repeatable operations, this thinking goes, while agile only applies to projects or creative tasks. Therefore organizations, departments or functions need to pick one and focus on it exclusively.

However, that argument reflects a fundamental misunderstanding of both lean management and agile. In reality, both systems have been successful across a range of environments, and both share a similar set of foundational objectives: to deliver value efficiently for a customer; discover better ways of working to continuously learn and improve; transparently connect strategy and goals to give teams meaningful purpose; and enable people to contribute and lead to their fullest potential (Exhibit 1).

These objectives apply to any team or activity across an organization. There are, however, different ways of achieving them. Both lean management and agile provide team models, ways of working, and toolkits that can be deployed in any way that makes the most sense for an organization (Exhibit 2). The fact that the two systems build on the same foundational beliefs makes their elements highly complementary. Morever, operational excellence often cannot be achieved through lean management or agile exclusively but rather through the combination of both systems, using associated toolkits.