Lean or Agile? The right answer may be both
Updated: May 20, 2021
Through thoughtful design, agile and lean management can be the perfect match for companies in search of lasting performance improvements.
The mistake we find many leaders and organizations making is believing that they need to choose between the two. Not only is choosing unnecessary, but the two methodologies complement one another in ways that increase their impact and speed up digital transformation. Top-performing companies combine tools, ways of working, and organizational elements from each to form a customized solution that meets the company’s unique needs more completely and quickly than would have been possible if they had only been based on either Lean or Agile.
One idea harbored by many is that Agile is used for creative processes and that Lean is used more for statistical processes, manufacturing etc. This is a natural interpretation because the very definition of value is different in manufacturing than it is in creative processes. In a manufacturing process, “rework” is seen as non-value-creating. But the truth is that in a product development process, “rework” can be highly value-creating. This is valued in both Agile and Lean.
To successfully combine these two methods, we need to understand the similarities and differences between the two methods’ fundamentals.
Background
Lean has its roots in the Japanese manufacturing industry. There is no distinct definition on what Lean is, although most people believe that it has its origin in the TPS (Toyota Production System). The credo is simple: be better by optimizing the flow and minimizing the waste.
Agile hasn’t got a distinct definition either. However, one can argue that a method that calls itself agile must follow the “Agile Manifesto”. Even here, the main idea is simple: communication and collaboration create more value for the customer than a tightly controlled plan.
Both Lean and Agile need to focus sharply on the customer’s needs, and value creating work maximizes what is actually important: the result. However, there are some fundamental differences between the two.
Lean is based on the premise that:
The work can be divided into process steps, which are essentially the same every time an entire process is run.
The customer knows what they want, and each process-step creates an increment on the way to the end result.
It is possible, in theory, to draw up an optimal process.
In addition, Lean applies a mindset of continuous improvement and flexible work processes where all employees contribute new ideas and suggestions, so that the organization gets better over time. By removing non-value-generating work, employees focus more on what is important to the customers.
Theoretical framework
Lean is based on queue theory, which is deterministic; i.e. there is an objective truth, which is possible to know; The behavior in a system depends on its components, it is possible to add one variable/component at a time, and it is possible to extrapolate new situations from the system, based on previous observations.
Agile, on the other hand, is based on complex systems theory, which claims that complex systems are not as easily predictable. A perfect, correct answer may not be possible, but one should instead focus on test-learn-modify (empirical process control)
An example:
In Lean, we want all work steps to be standardized and the technology to be well-proven. In Agile, the focus is instead on experimenting with new methods and making sure that the feedback loops are so short that the cost of making mistakes is as small as possible.
View of human beings
Lean is partly about respecting people, but in Agile, people are at the very center. Already in the four values in the Agile Manifesto, two are about people and collaboration; Lean, on the other hand, is based on the process. Agile methods try to achieve success by means of communication and collaboration, Lean by optimizing the process. Ken Schwaber, one of the original authors of the Agile Manifesto and one of the founders of ‘Scrum’, describes the differences as follows:
“Lean […] transparencies and metrics allow frequent adjustments to optimize productivity. […] People are working like cogs in a machine, and their work is optimized at the bit level, rather than being aggregated into the value level.
God help us. People found ways to have slack in the waterfall, to rest and be creative. With Lean and Kanban, those hiding places are removed.
We now have a progressive death march without pause.
‘Scrum’ is intended to be a place where enthusiastic people can work closely with their customers to derive the most valuable, creative products possible.”
Measurement values
Perhaps as a result of its focus on processes, measured values are also more important in Lean, especially the time of a cycle. In Lean, shorter cycles are seen as a critical step in increasing the delivery value, ie Lean optimizes the time and assumes that this automatically drives up the parameters you want to optimize (delivered value).
In Agile, measurements such as velocity (how fast something is completed) are first and foremost tools to facilitate sprint planning, for example, but there is no intrinsic value in increasing your velocity. There is also no assumption that optimization automatically leads to better outcomes.
Many similarities Despite all these differences, there are still many similarities between Lean and Agile
Value focus
Long-term sustainable work rate
WHAT over HOW
small batches (sprints)
Continuous improvement
The performer rather than the boss knows how best to do the job
Respect for people
But still: Lean and Agile are based on fundamentally different ideas and are not at all synonymous. However, Lean and Agile can complement each other at different levels of an organization. It is common for Lean, with its focus on a holistic view, to be used for overall governance, while agile methods are used by individual teams that develop and manage products, systems and services.
Below, we describe two simple examples of how organizations have combined Lean and Agile.
Example 1: Customer Service
A finance company had problems with its customer service. Their contact center took too long to resolve inquiries - up to eight weeks in some cases - in part because the specific teams were overwhelmed by the large number of customer inquiries. In addition, they did not have a designated owner for the entire customer service journey. The requests were sent from one function to another without anyone taking responsibility for the whole process. Each function worked independently, and follow-up and measurements were made only for each part of the process/respective function. No one looked at the whole experience from the customer’s perspective.
To improve customer service, the company used a combination of lean management and agile tools. From Lean, the company used value-stream mapping and Design Thinking to completely reconsider and restructure the customer experience for a given transaction or process. It also improved key performance indicators to better reflect specific goals, such as how quickly a customer can get their question resolved. From Agile, the company uses the idea of self-governing, cross-functional teams with overall responsibility for given transactions/processes. Employees now had the opportunity to handle customer inquiries from start to finish. Management also established a single point of contact for each process to reduce the number of internal handovers and improve customer engagement.
Overall, this approach led to a 90% reduction in the average time required to resolve a customer problem. Not surprisingly, customer satisfaction results increased by 30%, as did employee engagement. The reorganization meant that teams no longer got stuck in bureaucracy and downpipes, but could instead see how their individual contribution had a direct result on the customer experience, and thus on the company’s overall results.
Example 2 - An industrial company creates increased commitment and innovative power
In the second example, a global industrial company used Lean management tools in frontline units for more than a decade with significant success. The customer-oriented businesses have several characteristics, e.g. a constant workflow, predictable customer specifications and repeatable processes, making them ideal for a Lean approach.
Commitment, development and progress had, however, decreased drastically in recent years and the company began to lose market share to its competitors. To quickly turn around this negative trend, the company began testing agile tools and working methods with cross-functional and self-governing teams. The company also selected some specific agile tools and integrated them into their daily, lean-managed operations. As an example, they introduced four-week sprint cycles. At the beginning of each sprint, all teams gathered to review the plan for the next four weeks and identify key activities and important events, as well as to agree on key improvement activities. Similarly, at the end of each sprint, the teams held a retrospective session to reconcile and analyze the results, compare them to the goals of the current sprint, and identify what improvements they could make to the next sprint. Daily stand-ups were also introduced within each team. They also created a cross-functional “fuel and energy” transformation group that aimed to increase the commitment and participation of employees.
This relatively simple change - combined with a renewed focus on current leaders - led to an increase in employee engagement of over 90%. During the first three months, about 130 incremental improvements were also delivered. The Agile cross-functional teams delivered impressive results: the speed of technology development increased by 200%. The company also experienced an increased power of innovation in the development of new products and services. The agile transformation simply contributed to improving and strengthening the existing lean way of working in the company.
Summary
As these two examples show, lean and agile management are both powerful systems, and companies do not have to choose between the two. Rather, companies can choose the tools and working methods from each method that are most relevant to their needs and thus generate even greater improvements throughout the organization.
To become better at what we do, it is important to start from how we create more value for the customer, regardless of whether we follow the Agile Manifesto or Lean Thinking, or choose parts of both.