Lean principles have their roots in manufacturing with successful applications in other industries. With the advent of digital, there is an emerging trend where organizations are treating digital as the successor to lean. The idea behind this thinking is that digital does what lean does, only better. By replacing lean with digital, organizations hope to reap rewards that lean promised but may not have delivered. But this may not be the right approach to extracting real value from digital.
To put things in perspective, consider a situation where a retailer is considering whether to replace its physical branches with an e-commerce platform. Pure lean thinking would say keep the outlets but make them as efficient as possible. Pure digital thinking would say replace the branches with a digital marketplace. In both cases, there are gains to be achieved. It is arguable that pure digital thinking may have significantly more gains.
However, what would a combination of both look like? In this case, the retailer would opt to keep the branches open, but replace the human employees with smart digital assistants, allowing the retailer to maintain its footprint while offering customers a delightful digital/physical hybrid experience. Amazon did exactly this when it launched Amazon Go, physical stores that the retailer says use the most advanced shopping technology to deliver no lines and no checkout.
To dig deeper into this synergy between lean and digital, we look at four traits of an effective lean digital transformation roadmap.
1. Maps the Customer Journey
Digital transformation is often conflated with the wholesale replacement of non-digital processes with digital ones. However, this thinking often leads to a misguided focus: digital product development. Digital product development in an age of accelerated digital technology advances has never been easier. However, what has increased in complexity is understanding and mapping the customer journey. An effective lean digital transformation roadmap efficiently and accurately maps the customer journey for better customer insight discovery.
Mapping the customer journey using lean digital principles means eliminating waste and noise from multiple digital channels to isolate important and actionable feedback. For example, with so much chatter happening on social media, a lean approach to mapping the customer journey would be to implement a sentiment analysis algorithm to sift through thousands or even millions of messages to extract meaningful data. Combining these insights with value chain insights would provide a single view of the customer journey, something many organizations currently struggle to achieve. By combining lean with digital in this case, the organization can focus on meeting customer needs faster and more effectively.
2. Uses Design Thinking
Design thinking follows three steps during product development: understand, explore, materialize. By approaching digital transformation from a design thinking perspective, organizations can tap into the cognitive and emotional motivations behind customer decisions. Purely lean thinking focuses only on the elimination of waste, something that can only help make an existing process perform better but not necessarily improve. Similarly, purely digital thinking can lead to the development of products that disinterest customers.
Combining lean and digital from a design thinking perspective enables an organization to focus on what customers need, and then using lean principles combined with digital tools, figuring out how to effectively meet and exceed these needs. For instance, fintech startups like Lending Club use lean principles to eliminate unnecessary bottlenecks in consumer loans and then harness digital to deliver these gains to customers. By continuously iterating value delivery based on customer feedback, Lending Club can develop increasingly customer-centric products with little wastage.
3. Enables Agile Deployment
Lean digital transformation thrives in an agile environment. Because of the fast pace of technology today, it is unfeasible for organizations to spend months developing new products and bringing them to market. By the time they do so, the market may have already moved on. This is especially the case in digital transformation where technologies assimilated may change before the organization has fully harnessed its potential. However, the solution is not to divert significant resources from the core business to support digital transformation as this would threaten the existing business. The solution is to use agile tools like prototyping, iteration and sandbox environments to deploy experiments in small batches.
Consider a situation where a competitor has launched a digital product that threatens an existing business unit. Rushing to deploy a similar product may seem pragmatic but may not yield desired results. Instead, consider a scenario where through rapid prototyping, a similar or better product is deployed to a sandbox environment, thoroughly tested and then deployed in a matter of weeks to a small customer segment. With just a fraction of the budget the competitor used, you can derive the same insights they have and determine whether to deploy the product on a large-scale basis, reserve it for a niche market, or pass it up altogether.
4. Leverages Big Data and Analytics
As processes within the value chain become increasingly digitized, data becomes an increasingly important component of an organization’s competitive advantage. Lean principles focus on comparing data thus generated against historical data to find opportunities to boost efficiency. However, with digital transformation, this means of retroactively analyzing data may prove useless because of how quickly the market and technologies change. Data modeling that made sense two years ago may have lost its relevance today due to emerging technologies and other market advances.
The right posture in data modeling is to treat data collected as a black box that can hold astonishing insights into your business. By combining big data and analytics, a business can not only find efficiency gaps in their digital infrastructure but discover entirely new opportunities to pursue. Think of a company like Tesla that is effectively using all the data generated by its vehicles to influence design and manufacturing decisions for subsequent models. By leveraging big data and analytics, Tesla eliminates waste through its entire value chain to launch products backed by billions of data points.
Lean Digital Startups in Silicon Valley
Digital transformation is crucial for any business concerned about the disruption happening across industries. Threats and opportunities abound but can only be harnessed through the right approaches. Faced with diverse technologies like blockchain, AI, robotics, drones, and others, organizations must employ a lean digital transformation agenda to reduce wastage and derive maximum value from initiatives undertaken. To gain a greater understanding of this balance, senior executives are encouraged to visit Silicon Valley and interact with startups that have perfected the lean-digital balance. Through this immersive experience, executives will learn lean digital insights and gain experiences that help them to lead lean digital transformation in their organizations.