Lean Manufacturing, Lean Production, Kaizen and Continuous Improvement (dear child has many names) have created buzz for many years. Originated with Toyota's production system, "Lean" was primarily created with manufacturing businesses in mind. Now, as manufacturing businesses are increasingly rendered by service and network businesses, can lean philosophies go beyond corporate assembly lines and keep up with the new economy?
The world has changed. From 1960 to 1999 manufacturing companies’ share of GNP in the US, as well as its workforce, fell from 30 per cent to 15 per cent, with the consequence that such businesses are now a minority of the S&P500. Banks, transportation, building, healthcare, research pharmaceuticals and other services companies have taken over. Strategic models of the world, however, have not changed. When managers develop strategies for their companies, they still use the tools and language of the manufacturing organisation.
In brief, the authors found limitations in applying Porter's Value Chain to other than traditional assembly line-based manufacturing businesses. Consequently, the authors extended the Value Chain to two more models; the Value Shop and the Value Network.
The Value Shop creates value by scheduling activities and applying resources in a fashion that is appropriate to the needs of the client’s problem (typically management consulting, lawyers and doctors). Value in a Value Network is created by linking clients or customers who wish to be interdependent (typically banking, social networks and dating venues).
When I joined my current employer to work on online startups, I did at the same time choose from working on continuous improvement at one of Scandinavia's leading media companies (see Bharat N. Anand's Harvard Business Review case). Regardless of my interests in innovation methods and owing my conviction to entrepreneurship, working with startup ventures rather than cutting down "corporate bacon". Later I discovered the Lean Manufacturing Startup, which basically adopts lean thinking and agile development to startup ventures.
Although Lean Startup principles are argued to be generally applicable, it mainly has been applied to enterprise- and consumer software cases. Yet, as far as Microsoft creates value by linking consumers with third party software developers, and Google links consumers with advertisers, the software business generally acts as a value network. Hence, I believe that we start to see cases with the lean paradigm being adopted to the connected, networked economy.
In this manner, I assume that the new schools of lean methodologies not only help traditional management thinking avoid cramming business models with manufacturing approaches, but also preserve new-product introduction and disruptive innovation alongside continuous improvement.