By Dr Anupama Prashar
Globally, manufacturers have acknowledged Lean management principles and digitalization technologies as pivotal for improving operational performance. Despite this, many former Lean manufacturers have started investing in digitalization, with over 70% of these digital investments failing, according to recent Boston Consulting Group (BCG) report. Based on the Toyota Production System (TPS), Lean management emphasizes continuous incremental improvement rooted in Japanese psychology. Manufacturers deploy the lean management philosophy through a bundle of social and technical practices such as Kaizen, Just-in-time (JIT) system, 5S (Seiri-Seiton-Seiso-Seiketsu-Shitsuke), autonomation, and kaizen. Past literature on lean shows these social and technical practices of Lean lead to a learning system in organizations. Specifically, studies on lean bundles posit human resources management as a significant factor for an organization’s success, strongly establishing lean as a human-centric learning system.
Acknowledging the new era of Industry 4.0, digitalization has disrupted the ways of working across manufacturers. It is an integrative bundle of base technologies such as IoT devices, and Big Data, and front-end technologies like sensors and machine-to-machine communication which contributes to higher productivity and quality benefits. Seen as a strategic imperative, digitalization requires continual innovation, fostering agility and flexibility, and demands a cultural shift towards a digital-first ethos. While manufacturers must not limit digitalization efforts to implementation of cutting-edge technologies alone, recognizing the organizational learning is crucial. Though, there is lack of empirical evidence regarding whether the learning emerging from digitalization is genuinely human-centric and enables operational performance. Given the critical role of organizational learning systems on performance, it is vital to explore the impact of lean practices and digitalization on learning within organizations.
An empirical investigation was conducted to examine the independent and combined effects of lean practices and digitalization that may either show synergies or inefficiencies in the organizational learning system. The research questions addressed were: (1) How do lean practices and digitalization associate with organizational learning systems? (2) How do learning systems mediate the effect of lean practices and digitalization on operational performance? (3) How do the interconnected effect of lean practices and digitalization, and the emergent learning system affect operational performance? The analysis was based on primary data collected from 209 manufacturing firms listed in the Global Manufacturing Competitive Index database reported by Deloitte, from 12 emerging economies along with archival data downloaded from the Orbis database and test the hypothesized relationships. A combination of SPSS AMOS 26, and Hayes’ Process 3.5 macro for SPSS was to estimate the structural model and test the moderated mediation effects.
The findings showed a significant positive effect of lean practices on the organization learning systems. Also, the mediated effect of the learning system on operational performance was positive and significant. But, in the case of digitalization, the results do not show any significant impact on learning, both in terms of digitalization system impact on learning system and the indirect effects via learning system on operational performance. This understanding emphasizes that manufacturers should not be executing digitalization as an independent program. This finding has strong practical implications as the current digital era imposes the digital ’fashion’ that traps organizations into poor performance rather than good performance in several instances. Additionally, when the interaction of lean practices with digitalization was tested, statistical evidence of positive effects on learning was found. This finding implies that the emergent learning system is prominent when digitalization is applied to lean organizations. Thus, it is argued that lean practice deployment and digitalization must be interconnected and seen as a single learning system. Also, the results indicate that manufacturers must understand and be able to assess the current state of leanness in their operations to make strategic choices concerning digitalization. Another key finding from this study, important for practice, is to recognize that digitalization does not always lead to enhanced learning and, thereby, operational performance in firms. his implies that digitalization without lean leads to a lack of organizational learning in the long run. While managers deploying digital technologies get carried away at times by their initial success, it is important not to trade off on learning, as these temporary digital endeavours may fail with time.
In sum, this study provides three important key takeaways for managers. First, the study emphasizes the need for lean practices alongside digitalization efforts, without which digital efforts and investments may not reap a full harvest of desired outcomes. Second, viewing lean and digitalization as antecedents to the organizational learning system is essential, and the emergent learning system that integrates leanness and digitalization is vital for improving operational performance. Third, we prescribe digitalization as a strategic resource for lean organizations. A high level of digitalization blended with lean practices results in better operational performance, and vice versa may not be a good investment for firms.
(The author is an Associate Professor from Management Development Institute, Gurgaon.)