Next frontiers for lean

Next frontiersHere is a brief excerpt from an article written by Ewan Duncan and Ron Ritter for the McKinsey Quarterly, published by McKinsey & Company. They explain how and why Lean-production techniques have been revolutionizing operations for 50 years. Advances in technology, psychology, and analytics may make the next 50 even more exciting. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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When the first issue of McKinsey Quarterly rolled off the printing presses, 50 years ago, nearly everyone in senior management thought that manufacturing operations had been perfected. Henry Ford’s great innovation, the moving assembly line, had been refined over the previous five decades, had served as the arsenal of democracy during World War II, and by the mid-1960s was operating efficiently, at great scale, in a wide range of industries around the world.

Quietly, though, in Nagoya, Japan, Taiichi Ohno and his engineering colleagues at Toyota were perfecting what they came to call the Toyota production system, which we now know as lean production. Initially, lean was best known in the West by its tools: for example, kaizen workshops, where frontline workers solve knotty problems; kanban, the scheduling system for just-in-time production; and the andon cord, which, when pulled by any worker, causes a production line to stop. In more recent years, this early (and often superficial) understanding of lean has evolved into a richer appreciation of the power of its underlying management disciplines: putting customers first by truly understanding what they need and then delivering it efficiently; enabling workers to contribute to their fullest potential; constantly searching for better ways of working; and giving meaning to work by connecting a company’s strategy and goals in a clear, coherent way across the organization.

Lean is one of the biggest management ideas of the past 50 years. No less than Ford’s original assembly line, it has transformed how leading companies think about operations—starting in assembly plants and other factory settings and moving more recently into services ranging from retailing and health care to financial services, IT, and even the public sector. Yet despite lean’s trajectory, broad influence, and level of general familiarity among senior executives, it would be a mistake to think that it has reached its full potential.

Indeed, we believe that as senior executives gain more exposure to lean and deepen their understanding of its principles and disciplines, they will seek to drive even more value from it. The opportunities available to them are considerable. For example, powerful new data sources are becoming available, along with analytical tools that make ever more sophisticated frontline problem solving possible. Similarly, leading-edge companies are discovering that lean can supply strong insights about the next frontiers of energy efficiency. Toyota itself is pushing the boundaries of lean, rethinking the art of the possible in production-line changeovers, for example, and bringing customer input more directly into factories. And leading service-based companies such as are extending the value of lean further still, into areas beyond manufacturing (see “When Toyota met e-commerce: Lean at Amazon”).

What’s more, new technologies, new analytical tools, and new ways of looking at customers are making it possible, with greater precision than ever before, to learn what they truly value. The implications are profound because one of the primary constraints on the ability to design a perfect lean system in any operating environment has always been the challenge of understanding customer value, lean’s ultimate “north star.” In this article, we’ll highlight the advances that could make it possible to translate what customers value into additional improvements and help to bridge the age-old gaps among operations, marketing, and product development—groups that have historically occupied separate silos.

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The future of lean is exciting. Its tools for eliminating waste and for increasing value as customers define it are being enhanced by huge gains in the volume and quality of the information companies can gather about customer behavior, the value of the marketing insights that can be integrated with operations, and the sophistication of the psychological insights brought to bear on the customer’s needs and desires. These advances bring new meaning to the classic lean maxim “learning to see.” The contrast between where companies are now and where they’ll be 20 years on will seem as stark as the difference between a static color photograph and a high-definition, three-dimensional video.

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Here is a direct link to the complete article.

Ewan Duncan is a principal in McKinsey’s Seattle office, and Ron Ritter is a principal in the Miami office.

The authors wish to thank Jeff James, vice president of the Disney Institute, for his contribution to this article.

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