Watch Norbert's presentation session, 'Lean Driven Innovation', here, courtesy of the Business Transformation & Operational Excellence World Summit (BTOES18).
Industrial growth has two key components: grow the market and/or grow your share within a market.
For established companies like The Goodyear Tire & Rubber Company, market growth depends on population growth and expansions in developing countries. We, like most global companies, are doing a good job of developing market-growth opportunities.
When it comes to growing share in an existing market, there are two ways to go about it: become more efficient and offer more affordable products, or offer new and innovative products. Many industry leaders understand that lean can help companies improve efficiency, and have applied it to manufacturing environments for decades. But few realize that by moving lean thinking up the value stream, into innovation creation, they can generate benefits even greater than those experienced in manufacturing.
Unfortunately, most companies that have tried lean in R&D have used the principles to reduce product-development cost to become more efficient. That can work, but the return is neglible because the cost of R&D is relatively small compared to other business costs. The secret is to apply lean to the processes that R&D establishes and influences, which help the company create revenue (see R&D Cost vs. Profitability Influence).
R&D Cost vs. Profitability Influence[1]
Red portion of vertical bars = cost savings via lean efficiency improvements
Shadows = lean improvement impact on corporate profitability
Understanding this fundamental factor is important, but how do lean principles help R&D create more value for the customer and more revenue and profit for the company?
First, you must train your engineers to observe the customer, identify their needs, and develop technical solutions to eliminate sources of customer dissatisfaction. For example, customers don’t want to sit at the side of the road with a flat, so run-flat tires were developed.
The best idea is useless if nobody buys the product or if the product cannot be manufactured at the right cost. The secret is to develop product and all associated processes concurrently — with marketing, manufacturing, sales, and engineering all working on their pieces at the same time.
Leverage lean principles to make the innovation creation process faster. Speed to market has a lot of commercial advantages, but a company’s ability to develop fast and to learn faster than the competition constitutes a huge competitive advantage in the long run. Lean tools for speed are plentiful — concurrent development, single-piece flow, late start, fast project management, and managing projects in small increments are just a few of those we have used successfully. Rapidly building, testing, learning, and having a potentially shippable product ready after every development cycle has become a very popular method in the IT world (where it is called a “scrum”), and is gradually being adopted by many service companies and even the manufacturing industry.
Although some companies, like Goodyear, have had great success with lean thinking in R&D, the success rate across the industry has not been as good. One reason for inadequate returns is that companies failed to realize that changes like this require the full engagement of their own people. At Goodyear this was done by educating and empowering engineers with lean principles, and by showing respect for people — people’s talent is used to design superior products and to improve the processes by which products are developed. Since the debut of lean R&D at Goodyear in 2005, results have affected the entire company:
Goodyear is a leader in lean-driven innovation and product development, and has shared our learning through many channels, including conferences, articles, and a book (Lean-Driven Innovation[2]). We are not afraid to reveal the secrets of lean in R&D because it takes persistence, patience, and leadership support to work. Does that sound like your company?
[1] Norbert Majerus, Lean-Driven Innovation: Powering Product Development at The Goodyear Tire & Rubber Company, CRC Press, Boca Raton, FL, 2015.
[2] Ibid.