We need to bring to [the CEO’s] mind that the productivity improvements they achieved in the past were really low compared to in other areas out of production. It's like helping them with a mirror on what is possible.

Dr. Jörg Gnamm
Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice, Bain & Company

In a thought-provoking episode of the Augmented Ops podcast, Dr. Jörg Gnamm, Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice at Bain & Co., delved into the historical evolution of lean manufacturing in the context of digital technology. The episode, titled “Transforming Manufacturers’ Organizational Strategy,” revealed the ways in which lean manufacturing principles are being adapted for the era of Industry 4.0.

The Genesis of Lean Manufacturing

Deeply rooted in the Toyota Production System, lean manufacturing emerged in the 20th century as the gold standard for improving efficiency and achieving operational excellence. Despite its widespread adoption, however, Gnamm recognized the need for an expanded view, explaining that "It's not enough. There needs to be more systemic thinking."

This precipitated his initial research into a more holistic approach to lean manufacturing. On the podcast, Gnamm describes his work on the concept of a ‘Fractal Factory,’ which mapped out a new course to take industry into the future. Published in 1993 as part of “The Fractal Company”, this groundbreaking research outlined the concept of factories operating like fractals — self-similar, self-organizing, and systemic — and laid the groundwork for the advancements we’re now seeing as part of the Fourth Industrial Revolution. He explains that “at that time the objective was, how can we maintain competitiveness in the 21st century as industrial companies?”

Operators on an assembly line

The Cracks in Lean’s Foundation

Fast forwarding to the present, lean manufacturing faces a pivotal moment. Gnamm elaborates on the current state of the industry, indicating that while lean principles are well-understood and ubiquitous, they have failed to adapt over time, particularly in embracing the kind of systemic approach to digital transformation he argued for in his original research. This has created a discontinuity where the traditional lean practices do not support the workforce since they haven’t evolved to account for the abundance of digital technologies that can be used to empower frontline workers.

Focusing on lean practice when everyone becomes knowledge workers and works with data and apps and things like that, it's just not supported in the traditional sense of lean.

Dr. Jörg Gnamm
Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice, Bain & Company

In order to illustrate the scale of the problem, Gnamm describes a recent survey he conducted with Bain & Co., in which they sought to gauge how the industry as a whole has been dealing with this pressing challenge of digitally transforming their operations.

“We interviewed over 300 COOs globally and asked them about the status of operations of the future and asked them, ‘to what extent would you say your company is in an experimental stage? And to what extent would you say we have impact at scale already achieved with operations of the future?’ And the result was scary. Sixty percent said that they are in a kind of experimental stage, there were some in between answers, and then 8% only were saying that they achieved impact at scale," Gnamm says as he describes how shocked he was at the results.

Gnamm elaborates that as Global Head of Manufacturing and Industry 4.0 Practice at Bain, he has had the opportunity to visit many different manufacturing operations around the world. What he saw in person confirmed the survey results — nearly all manufacturers were still stuck trying to optimize their processes with 20th century methodologies.

I would say 85–90% are still using production systems fully based on lean.

Dr. Jörg Gnamm
Senior Partner & Global Head of Manufacturing and Industry 4.0 Practice, Bain & Company

Given this context, he emphasizes the need for a shift in mindset that embraces a systemic approach to the integration of digital technology into lean practices, stating, "We need to rapidly bring to their mind that the productivity improvements they achieved in the past were really low compared to other areas out of production."

This transition is not just about the adoption of new tools, but represents a paradigm shift in how manufacturers think about their production systems as a whole.

DMG Mori operator engaging with display device

Augmented Lean: A Systemic Path Forward

While Gnamm believes that lean is not fundamentally broken, his insights suggest that the future of manufacturing lies in the concept of 'Augmented Lean' — fusing traditional lean principles with the latest digital technologies in order to empower frontline workers.

Just as with his original work on ‘The Fractal Factory,’ he emphasizes a systemic approach that incorporates these new technologies into the existing lean framework — rather than having each be a separate, siloed effort. This aims to enhance productivity and efficiency, not simply through process optimization, but by empowering the workforce at the center of the manufacturing process with digital tools and data-driven insights.

In the conclusion of the episode, Gnamm recommends a structured approach for manufacturers embarking on this journey:

  • Transition from Siloed Tasking to Systemic Integration: The first step in digitally transforming manufacturing involves moving away from isolated, siloed tasks to a more holistic, integrated approach in production systems. This shift is about seeing the bigger picture, understanding how different processes and departments are interconnected, and ensuring they work cohesively rather than in isolation. It’s a change from task-oriented to system-oriented thinking, recognizing that the sum of these interconnected parts can drive greater efficiency and innovation than each part operating alone.

  • Assess and Understand Your Starting Point: Before embarking on any transformation journey, it's vital to measure and understand where you currently stand. This means conducting thorough assessments of your production systems — identifying areas of strength and those needing improvement. Understanding your starting point helps in setting realistic goals and KPIs, and in charting a clear and strategic path forward. It’s not just about adopting new technologies; it’s about knowing how and where they will make the most impact.

  • Progress from Piloting to Scaling: Finally, the move from piloting small-scale projects to scaling them across the organization is critical. Identify your 'lighthouse' — those that serve as successful models or test beds — and use the insights gained from these to expand and implement changes more broadly. Scaling up successful pilots ensures that the benefits of digital transformation are not confined to small pockets of the organization but are felt across the entire company.

  • Emphasizing the Business Case: Throughout this process, it’s imperative to always keep the business case in mind. Digital transformation should not be pursued for its own sake but should be driven by clear, tangible benefits to the business and its processes — whether that’s increased efficiency, cost savings, improved product quality, or enhanced customer satisfaction. Focus on the lowest hanging fruit that will result in the greatest gains, rather than chasing vanity metrics.

As we now find ourselves well into the era of the Fourth Industrial Revolution, Gnamm’s message to manufacturers is clear: To find success in digital transformation, embracing this systemic approach is no longer an option, but a requirement.

Transforming Manufacturers’ Organizational Strategy

Check out the full podcast episode for even more actionable insights that you can apply in your operations today.

Day in the Life Illustration