Digital Transformation vs. Lean Transformation

dt ltWill digital transformation of business doom Lean transformation? It might, for certain businesses, perhaps large corporations, but maybe less so for small- and medium-sized businesses that are more people-dependent and whose leaders understand the importance of having a human-centered management system.

Corporate investment is increasingly shifting from traditional machinery and employees to robots and software. Why? Because CEOs think data and digital transformation will be sources of competitive advantage. And it is a transformation that they think they can execute more rapidly compared to Lean transformation. CEOs also think that automation and artificial intelligence will take on greater roles, while the work of employees will take on less significance over time. They think technology is becoming more valuable than employees.

Digital transformation has emerged as a major sub-component of corporate strategy, while data analytics has emerged as a new pathway for problem recognition, problem-solving, and decision-making. Lean, it seems, is being displaced, and, in some cases, moved significantly down or even off the list of corporate priorities.

Interestingly, digital transformation of a business forces other people to change, such as customers, while Lean transformation requires managers to change. It seems clear, given the long history of technology in business, that managers vastly prefer other people to change. Changing someone else’s routines is much easier than changing your own routines because the value proposition is clear in the former and unclear in the latter. Business transformation succeeds when others must change. Business transformation typically fails when managers must change. 

CEOs see technology as becoming the major corporate asset, while employees are an asset to the extent that they contribute to innovation. Innovation may be the business need that helps Lean management survive; especially, kaizen. Perhaps kaizen, more than any other aspect of Lean management.

While nobody can predict the future, it seems that the current path we are on is one in which the leaders of large businesses favor investment in software and analytics over traditional machinery as a source of competitive advantage and productivity improvement. Investments in traditional, large capital equipment will be left to supply chains. There will be exceptions however, particularly among those businesses who view manufacturing as a capability worth saving and developing, as part of its long-term strategy for survival; as a means staying close to customers, both humanly and digitally, and satisfying customers by giving them what they want, when they want it, and in the amount wanted.

Unless great care is taken, digital transformation seems likely to make an organization less flexible and less able to adapt to changing circumstances, at least in the near term. It will be the result of designing systems where people are driven to serve machines, when, instead, machines must serve people. Artificial intelligence may (or may not) correct that in the not-too-distant future. Regardless, the current groupthink among business leaders is that the talents of employees are not so important in a digital future (a odd perspective given that humans create digital technologies). They also think that data analytics can identify and help correct shortfalls in employee performance. 

In part 2 of this blog post, I will describe how Taiichi Ohno thought the Toyota production system and computer information systems could work together in harmony.

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