Digital Transformation : Lean as an Obvious Strategy

Surf Lacanau

(Version Française)

When I decided last year to take a new turn in my career, I was lucky enough to be able to choose from two different options, both very exciting: Enterprise 2.0 / Social Business on one hand , lean on the other.

After much thought, I have chosen the second option because it seems to me more deeply aligned with the challenges of today’s business, namely the need to navigate through the turbulences of our uncertain world. These turbulences and uncertainty are largely related to the digitization of our daily lives: the digital transformation of the organization therefore seems inevitable.

My hypothesis is that today, Lean is the obvious strategy to carry out this transformation, for the following reasons:

  1. digital transformation actually means a radicalization of the use of new technological opportunities,
  2. it’s all about management principles
  3. a model exists, embodied by the born digital companies (Google, Amazon, Facebook, Pixar, Twitter etc. …)
  4. their management cultures are explicitly or implicitly aligned with the principles of Lean.

(Warning, long truck ahead : more than 1800 words) …

A definition

To start with let’s agree on a definition of what digital transformation is and, just as importantly, what it is not. I can see two meaningful inputs for this.

The first is the definition given by Ludovic Cinquin the DG Octo France, in the interview he gave us last year [FR] :

“Digitization is the radical use of all the possibilities of Internet technology.”

Digital Illusion Vs Technology

A second perspective is that of Nicolas Colin, co-author with Henri Verdier of L’age de la Multitude [FR]. He brings this very important distinction:

“In France, we live on a big misunderstanding, regarding the digital technology (…) It is clear that new companies differ greatly in terms of financial literacy, human resources and industrial culture. Americans call a digital company, Tech Company, (…) It is to suggest that extraordinary cocktail of technology, design, culture of the user experience, agility, hacker culture, etc … (… ) A digital business is a business that has no choice but to always be in hyper growth to repel the onslaught of competitors. (…) And it is this hyper growth that explains the massive use of software to systematically relate with startups, deployment platforms, network effects we are trying to install in applications via the community effect.

We can see with this definition that the scope is much wider than Information System or Information Technology. We no longer solely talk about implementing processes into some kind of online spreadsheet (enterprise integrated systems – ERP, PLM, etc. …). We see a little further than an online vision of the client-server where the web is reduced to the role of relational database and the browser to that of a form.

The Born Digital models

A question one may ask is what do we want to transform our organizations into ? Born Digital companies are great organizations to be used as a North Star to prevent ourselves from getting into too much of intellectual speculation.

Consider the GAFA (Google, Apple, Facebook, Amazon) or more broadly the Web giants (with Twitter, LinkedIn, WordPress etc. …)  or even Pixar : they all implicitly or explicitly refer to Lean management principles. Pixar CEO Ed Catmull, openly describes in his autobiography (Creativity Inc.) how Toyota has inspired his leadership methods to foster creativity.

Yet, what I find quite fascinating is that most organizations IT departments, leaders still apply methods and principles of management that are at the exact opposite of the ones of these companies that have completely transform the digital industry. As Paul Sutton tweeted :

is simultaneously the thing that organization are running from and looking for.

Digitization: a matter of management

There are the good word famous Robert Solow :

“We see computers everywhere except in the productivity statistics”

which make us laugh in our organizations when we observe the ability of our IT department to create value.

Now, there is nothing laughable left with the productivity of these 21st century giants. Actually, that almost is getting scary. What is going on with these companies is just the second step in the adoption of innovation by Serge Soudoplatoff :

When an innovation emerges, there always are two steps. The first one consists in integrating the innovation in the way we work. The second one consists in transforming the way we work thanks to the innovation. Thus, people develop new skills and their role start to evolve.

Why do these new organization thrive in the digital world when large organizations are struggling to embrace this third industrial revolution as coined by Jeremy Rifkin ? MIT professor and co-author of Race Against the Machine, Erik Brynjolfsson, offers an explanation while describing what happened with the second one:

American factories began to electrify their operations 150 years ago igniting the 2nd industrial revolution. The amazing thing : productivity didn’t increase immediately : it took 30 years. 30 years that’s long enough for a generation of managers to retire. The 1st wave of managers replaced their steam engine with electric motors. But they didn’t redesign the factory to take advantage of electricity flexibility. It felt to the next generation to invent new work processes. And then, productivity soared, often doubling and even tripling.

Which brings us to another hypothesis of this article : the digital transformation is an issue of management.

If 150 years ago it was OK to wait 30 years to integrate an innovation, the brutality of today’s economy makes me think that this may no longer be the case : digitization of the enterprise can’t afford to wait for all managers to retire. Unless, as Ludovic quoting Shingo reminded us : “Death is an option.”

Digitization: a very lean management

If the heart of the digital transformation is a question of management, what direction should we take? Ludovic sheds another great light on that question :

“In my opinion, to be successful in the modern world, we need a management culture that respects three principles: a strong culture of measurement, short cycles, and finally, the empowerment of people. These are principles that resonate strongly with the Lean culture. “

The culture of the measure is not just about numbers & KPIs. It is most importantly an expression of a radical relation to reality and truth. This happens to be one of the main axis of the cultural construct of an organization (cf. Schein).

Understanding how an organization relates to reality starts with understanding its customer relationship. In an interview with #hypertextual,  Lean IT expert Steve Bell explains how digitization and social networks allow companies to establish a closer contact with their customers and shorten the learning loop: what the service supplier learns from customer feedback to improve. Most of Social Business thinkers, including Bertrand Duperrin also believe that digitization has much to gain by starting with the customer relationship.

In terms of agility (short cycles), it is embodied by small iterative projects rather than large five-year plans ; the right product developed in close collaboration with the client ; an evolutionary design and system sustainability guaranteed by automated tests rather than by long phases of study and analysis ; innovation through experimentation ; short iterations and analysis of data ; the will to resolve the issue of the day and not the hypothetical one of in 3 years (Agile Culture has a great principle for that : YAGNI!). And finally, continuous improvement through the development (and empowerment) of people.

Operator Culture

On this last topic (people development), there is another very important axis of Schein organization cultures : the operator sub-culture.

Schein identifies three types of sub-culture within the organization: Executive (suspicious, control, hierarchy and financial results), Engineer (abstract vision of an ideal system, procedure – probably the purest incarnation of the ideal Taylorism) and finally Operational (concrete, factual, managing the unpredictable and relationships).

Although consisting primarily of engineers, we feel that these large companies lean heavily towards the last sub-culture : the operator one. In this culture, ideas are cheap : what matters is the actual realization of something that works and is used, rather than the potential of an idea or concept.

A striking example is shown in this article from the Harvard Business Review on the management culture of Google where Google had to implement a strategy to sell the merits of management to engineers who see this activity as an impediment for productivity and innovation. Another enlightening example of the integration of management in this culture is that of Scott Berkun WordPress in Years Without Pants.

Oh, and a last point : Jeff Bezos, Larry Page, Sergey Brin, Mark Zuckerberg, Jack Dorsey, Matt Mullenweg, David Heinemeier Hansson : they are all coders. Not architect, not strategist, not business thinkers : they are coders. They do things. For real. They are operators. This culture is theirs.

Lean and Digital

Lean is so pregnant in Agile culture that many variations have been created in this entrepreneurial culture. Lean Startup by Eric Ries of course but also Lean UX (Jeff Gothelf), Lean Analytics, Lean B2B etc …

What is remarkable when you look more closely at these different approaches is that they all leverage the Lean radical ability to develop high velocity organizations through the elimination of waste, of course, but also experimentation and formalization of learning.

The Lean Startup is so eager to learn through experimentation (accumulating Validated Learning) that P (Plan) of PDCA just disappeared: there are only Build (Do), Measure (Check) and Act (Learn).

Digitization : 2 approaches to chose from

There are several strategy to initiate a digital transformation.

The first is to reduce the digitization to technologies and usages (the technological illusion Nicolas Colin above mentioned) and think that we can keep on working as before, with the same processes, the same organizations, the same management methods and, magically, at some point the miracle will happen. Joseph Juran called this  fanatics companies: those who repeat the same thing while expecting a different result. My 2 cents : hope is a bad strategy.

The second is to be inspired by Born Digital companies, i.e. the one who were built on these management practices and culture and who manage to leverage technology to a scale beyond last century companies wildest dreams. And those management principles proximity with Lean (whether in practices or results) are indisputable.

Digital Kaizen

Moving closer to the customer ; changing the posture of the manager who coaches and challenges the team rather than control them ; changing the posture of the leader so that she goes and sees to confront a stubborn reality and facilitates team alignment; resolving problems when they occur wherever they occur ; streamlining the value chain while removing waste and improving quality ; producing in small batches ; experimenting to innovate ; developing the ability of teams to learn in an uncertain world : this is the roadmap of digital transformation proposed by Lean.

When people suggest something related to this topic, I always invite her to benchmark the idea/proposal/decision with this question : What would Larry Page, Mark Zuckerberg, Steve Jobs, Jeff Bezos, Werner Vogels, Matt Muellenweg or Jack Dorsey say ? I’m pretty confident they would buy all the points above.

The stakes are high and the road is difficult. Through the projects I have carried out, I have accumulated evidences that Lean is a valuable strategy to achieve digital transformation. Small steps improvement carried out every day (Kaizen) a set of practices throughout the value chain and at every level of the organization, this makes the digitization objectives less overwhelming and more accessible.

Helping teams and organizations in implementing Digital Kaizen is the reason why I have decided to explore this career direction.

3 thoughts on “Digital Transformation : Lean as an Obvious Strategy

  1. There is a 3rd option. Why choose? I’m principally engaged in helping organizations implement improve business process with E2.0 social business process improvement. This is the art of engaging groups around reporting, communication, and task tracking processes that improve and enhance their execution of management goals.

    This may involve improving approaches to Quality Management (see – http://tractionsoftware.com/quality-management )

    And it may mean doing some Social Process Re-engineering (see – http://tractionsoftware.com/traction/permalink/Blog1316) which could involve implementing standard meetings, reporting process or issue tracking in social business software frameworks.

    Insofar as using Social business to support the whole process of evaluating and executing LEAN projects of all sorts, We’ve also developed an improvement module which spans opportunity evaluation to execution on PDCA, DMAIC and other types of projects.

    Companies are taking this on and showing great success. Its been excellent to be involved.

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