Agile@Scale for the Manufacturing Industry
The manufacturing industry has always been the origin of lean thinking. Lean Manufacturing started by Ford in 1920 and evolved into the Kaizen method at the Toyota Motor Corporation. The key principles of the Lean way (value for the customer, value stream approach, continuous improvement, delegation, participation) are clearly embedded in today’s agile@scale frameworks.Authors: Günther Lemmens & Sonja Noben
While the manufacturing industry has applied for decades already the lean principles to their production and supply chain processes to obtain operational excellence, it is rarely observed to accelerate innovation and change delivery processes.
In this article, we will address the typical challenges that the manufacturing industry needs to face in the coming years and how an agile@scale approach can give a real boost time-to-market of innovations and digital change.
Today’s challenges for the manufacturing industry
The production processes have been functionally digitised during the last years, the next step in digitisation that is being taken is the creation of smart interconnected factories, within manufacturing this is known as Industry 4.0.
Industry 4.0 leverages the great potential that lies in the massive load of previously unlocked data that are captured continuously in smart machines, products and services. All these are interconnected via the iIoT (Industrial Internet of Things) and create an integrated smart factory. Using advanced analytics on all these data, every activity and step in a production process can be monitored, analysed and preventive maintenance actions can be suggested.
The next step in Industry 4.0 is to connect these smart factories with other intelligent factories, supply chains and customers to maximise build & supply to order and eliminating any waste in the transaction chain.
The additional high potential value lies in the intelligent use of the data captured in smart products and services to enrich and integrate these with new digital solutions in the customer’s ecosystem that exceed their expectations and create new or upgrade existing business models.
Organisational structure difficulties constrain the realisation of iIoT. Many manufacturers are functionally organised while iIoT asks for a value stream approach across functions within the organisation and across companies between suppliers and manufacturers. Without action on their organisation, the manufacturers will fail to deliver at a higher speed and become genuinely responsive to customers’ needs.
Leading manufacturers are starting to master new agile ways of working and at scale
A handful of leading manufacturers are already on their way starting mastering new agile ways of working. They recognise the associated benefits for innovating their business (better & smarter products, accelerated speed to market, cost savings, lower risk through shorter order to delivery cycles).
To take one example, Daimler is implementing a “swarm organisation” for innovation, with swarms being cross-departmental agile teams that autonomously and connected deliver innovative capabilities. The future of mobility in automotive guides these swarms: connected, autonomous, shared & electric. One hundred eighty of these swarms were operational in 2019 with the ambition to scale up to 60.000 employees. Similar stories can be observed at Volkswagen, Bosch, Royal Philips, Sony, Saint-Gobain, and others.
Knowing that the manufacturing industry consists of a series of strongly interconnected Original Equipment Manufacturers (OEM) and Suppliers (OES) this new agile way of working will collaterally impact all partners in an ecosystem. For the ecosystem to work, the different OEM and OES in it need to cooperate in an agile way to accelerate innovation. Those who fail to do so will experience difficulties to collaborate and possibly risk to fade out or to be replaced by more innovative and agile newcomers or competitors.
The agile@scale manufacturer
The strength of the newcomers that threaten the running parties in the manufacturing ecosystems lies in their ability to work cross-functional and customer-centric leveraging a smaller network of people. They are lean by nature, low cost and digitally reliable.
Many of the manufacturing organisations had once that same strength but lost it through growth that introduced more substantial company structures with strong functional hierarchies. Focus has since been on operational excellence executed and steered by the functions, mostly top-down articalting the what and the how. This hierarchic way of working has slowly killed that initial network of customer-centric and cross-functional people, has created a distance with the customer and lost the value-stream oversight.
The solution is not to throw away the current operating model and start over. We at DigitalScaler strongly believe that manufacturers need to introduce agile networks of people, that are customer-centric and cross-functional around the value streams. Any manufacturing product is the result of different functions working together as neural networks in a human brain (e.g. Marketing, Engineering and Software Development).
The role of the functional hierarchy shifts towards developing the capabilities, the skills and competencies needed to feed the networks and keep the organisation competitive Günther Lemmens
Agile cross-functional networks bring the customer-focus, the agility and resilience back in the company Günther Lemmense
We at DigitalScaler have the experience that the scaled agile frameworks such as SAFe® for Lean Enterprises 5.0, Scrum@Scale, LeSS… have the right and necessary constructs such as ScrumXP/Kanban to create successful agile networks of people.
In Manufacturing, SAFe® does have the advantage :
- SAFe® supplies options for scaling around the more complex solutions across multiple contributing parties, typical for the OE ecosystems. The solution level (cf. picture below) combines the planing & synchronised delivery of solution development within the OEM with the agile solutions delivered by the OES.
- SAFe® also offers an Agile Portfolio level with lean governance that comes close to the stage-gate decision processes Manufacturing is used to have.
- Here SAFe® does make it different to stage gating in the way it allows to organise and execute portfolio goverance, by applying also here lean decision making principles (pivot & persevere) and through giving direction with strategic theme- and guardrail-based decisions instead of project based decisions.
- It does respect that certain major decisions such as substantial investments in factory equipment (High investment enablers) are made at a different more senior-level. In contrast, more low impact and returning investments can be decided at lower levels.
- SAFe® organises for regular inspection and adaption of the strategy to changing customer markets instead of strict adherence to multi-year project plans. This eliminates the waste of unnecessary deliverables otherwise created in the context of the projects.
That is why SAFe® is that successful at Daimler, Porsche, Volkswagen, Royal Philips, Bosch, Lego and many other manufacturers in the sector.
The biggest challenge is how to organise around radically new solutions where exploration, prototyping is required to come to a solution iteratively. Specific methodologies such as Model-Based Systems Engineering (MBSE) combined with User-Centric Design & Design Thinking are often a right answer to such exploratory and severe challenges.
The agile transition brings the company a new lean-agile culture
The transition towards an agile way of working is a change that happens at all levels of the company. It is more than switching a governance method from projects to strategic themes and having teams organise themselves with ScrumXP.
The visible methods and tools are just the tip of the iceberg. The real challenge to make it a success is below the waterline where a cultural shift is done based on new values, principles and changed behaviour.
Agile is a cultural change leveraging on the known lean principles and adding agile values and principles to it.
It is a change that touches every actor in the company: leaders and workforce (individuals and teams) need to change the way they behave and work.
Guided by the agile-lean values and principles, leaders must show the right behaviours to influence the rest of the organisation positively.
There are great opportunities for Manufacturing companies in scaling agile and making the cultural shift to lean-agile. The benefits will be in increased speed-to-decision and speed-to-deliver.
DigitalScaler has the expertise to help your company implement such an agile@scale way of working. Every company has its specific culture and needs; we tailor the agile@scale approach of working to your particular situation as to fit it in culturally.
Feel free to contact us for a first inspiring consult or a C-level or leadership workshop to kick start your transformation.