Lean management or agile?

Industry 4.0 technologies have enabled breakthroughs in cost, convenience, and customization creating value for consumers and raising the bar for the producers. Customers have become more demanding than ever.

The market volatility has increased rapidly and the flaring up of the crisis like the epidemic that is raging now causes widespread disruption across all sectors. Companies are focusing their efforts on agile and lean management. Both methodologies have proven successful in helping improve performance. Many companies are trying to decide one over the other. However, the two methodologies complement one another.

Lean's legacy and agile's momentum

Lean management has been around for over 70 years. First introduced by Toyota Production System, it has spread from manufacturing to service operations and just about any unction across companies, government, non-government institutions. It seeks to eliminate activity that is not valued by the customer. This analysis of processes to reduce wastage boosts performance in cost control, product quality, customer satisfaction. It instills a mindset of continuous improvement and flexible working processes in which everyone contributes ideas.

Agile is more recent, starting with software development in the 1990s and rapidly expanded to other industries. Agile is more flexible and quicker and it calls for an iterative development that aims to get a prototype to the customer at the earliest. Teams capture feedback, iterate via quick cycles and refine the product. It has moved beyond product development and companies are using it across all their activities.

Better together

Lean management and agile seem mutually exclusive as they have different approaches for different types of activities. There is a misconception that lean management is for routine, repeatable operations while agile applies only to new projects or products, and hence one of them should be used exclusively.

In reality, both systems have been successful across different environments, and focus on delivering value to the customer, discover better ways to work and continuously improve, connect strategy and goals to give purpose.

Both provide teams with working models, ways of working, toolkits that can be applied as required. Operational excellence often can be achieved through a combination of both systems.

Connect talent and unlock value. lean management introduces team cell in which brings teams together and complete the work. Agile relies on cross-functional teams and flow-to-work pools which follow the same principle. 

New and better ways of working. Lean management includes integrated management practices and continuous improvements while agile emphasizes short development cycles, frequent releases. 

The right model will depend on the activity being conducted. While lean management was initially for highly repeatable and predictable processes, over time it has been applied to many diverse areas Similarly, agile started with creative, customer-facing environments but this concept has now been applied successfully to many other areas like call centers and back offices. The best selection of team models may be a combination of both lean management and agile.

The value of two

Many companies are getting better results by using the best practices of both methodologies than they could by using one alone. Two case studies to highlight this aspect

Financial Institution improves customer service dramatically.  A contact center of the institution was taking too long to resolve inquiries as the specialist teams were overloaded with requests. Also, there was no designated owner of the customer. In a traditional setup, the customer is passed on from one department to another, each operating independently and performance metrics only for their slice of work.

The company used a combination of lean management and agile tools to improve. It used lean management to rethink the customer experience for a given transaction. It revamped the performance indicator to reflect specific goals - how fast the issue is resolved. From agile, it created self-managed teams to improve collaboration and foster accountability. This team enabled employees to handle all types of customer requests from end to end. They also established a single point of contact to reduce internal handoffs and improve customer engagement.

This led to a 90% reduction in resolution time, customer satisfaction score improved 30% as did employee engagement. 

A mining company establishes a new operating system

A global mining company had been using lean management techniques among frontline units for a decade with great success. But commitment and progress had stalled. 

To restart the process, the company applied agile tools and team models. Cross-functional teams were created and dedicated teams increased the velocity by 200% and another team for fuel energy transformation delivered good savings and invigorated the program among front line units. The company selected a few agile tools and incorporated them into the lean management system.

The company established 4-week cycles. In the beginning, the team looked at the plan for coning four weeks and identify key elements along with two themes they want to focus their improvement activities. At the end of four weeks, the team holds a retrospective to analyze their performance and identify how they can work better in the future. This relatively simple change, combined with renewed focus led to a significant engagement among the workforce. 

The lean management and agile are both powerful systems and companies can choose both or a judicious mix of tools and techniques, that are most relevant for their needs and generate more improvements across the entire organization.

Lean management or agile? The right answer may be both

by Stefan de Raedemaecker, Christopher Handscomb, Sören Jautelat, Miguel Rodriguez, and Lucas Wienke McK 2020 Jul