Melnyk argues that to compete, Western companies will have to do so based on innovation – in some cases “radical innovation.”

“For a product to differentiate itself in an increasingly crowded marketplace, it must be new and aesthetically pleasing,” he writes. “The outsourcing of manufacturing and other "mechanical" tasks to Asia means that companies in North America and Europe must focus on creative thinking rather than on routine problem solving. They must also address the whole, rather than looking at specific components of a problem in isolation. Finally, automating the routine allows the focus in business to shift from cost leadership to the different and the creative.”

Radical innovation offers the potential for commanding premium prices and enjoying higher profits, making it more difficult for counterfeiters to copy new products, and often providing legal protections (through patents), among other benefits.

However, Melnyk adds, “Companies that are good at being Lean may not be good at radical innovation.”

Slack in Necessary for Innovation

In classic Lean thinking, any “slack” and variance in a system are considered evil, to be driven out through process re-engineering focused on “value streams.”

These attitudes are highly appropriate if our goal is to reduce variance and waste, Melnyk says, but “They serve us poorly, however, if our goal is radical innovation.”

“To succeed as radical innovators, companies must recognize and cope with the challenges that come with the territory. They need a broad portfolio of product - and process-related projects. Lead times for successful radical innovations may span months or even years,” he adds. “Making things more challenging is the fact that performance measures for radical innovation are difficult to determine in advance. Unlike the outcomes of projects developed under a lean system, the outcome certainty of radical innovation projects is very low. It is difficult to know if you are working on the next iPod or the next "clear beer" (a famous product failure; it appears that American drinkers want their beer to look like beer, not like water).”

Slack is important in this process, to nurture the many ideas from which only a small number may actually have a big market impact. It is also necessary to allow companies to make mid-course corrections in the product or process.

Melnyk argues that across a wide variety of factors, Lean thinking and radical innovation are very much opposed – meaning Western companies that emphasize too much Leanness in the short term may, in fact, be very much damaging their longer terms prospects.

Can Lean and Innovation Co-Exist?

So, can companies chart a course that allows them to be both Lean and innovative?

Yes, but only if companies fundamentally recognize the different strategies, requirements and resources needed for the different approaches to succeed, Melnyk says.

“If these two approaches are to "live" together, a company must separate the system it relies on to foster innovation and the development of new products from the system that it uses to drive out waste and variance and to standardize products and processes,” he writes. “Each system needs its own resources and its own controls. The innovation system can then become the "feeder" for the lean system. That is, once a new product has been found to be economically and strategically viable, it is then passed to the Lean system for production.”

The Bottom Line: Companies cannot allow Lean strategies to stifle innovation by transforming radical breakthroughs (something that Lean has difficulty handling) into incremental breakthroughs (something it can deal with). Companies that are competing in an environment that rewards innovation must ensure that their supply chains support and facilitate flexibility.

Can Lean be the any of innovation? What is your take on Dr. Melnyk’s perspective? Do we need separate “supply chains” for mature and innovative products? Let us know your thoughts at the Feedback button below.