Lean Manufacturing brings Stability, but Innovation Drives Growth December 21, 2010 RICCentre By Glenn Laba Has Lean Manufacturing run its course? Innovation is the natural stepping stone to growth. The patient has been stabilized, but where’s the rehab? According to Industry Canada’s November Ontario Economic Review, the manufacturing sector is losing some of its momentum for a recovery from the recent recession, because of a modest 1.7% increase in GDP in Q2 2010 compared to a gain of 5.0% in Q1. The health of Ontario’s manufacturing sector is still fragile. It might be out of intensive care, but it still needs help to leave the hospital. The important question remains: what prescription is best for the health of Ontario’s manufacturers? Lean manufacturing has become the mantra of many Ontario companies, enabling them to reduce costs and maintain profit margins. In doing so, their health has become stabilized. The first question I pose is: how much more will lean techniques help manufacturers recover? Pareto’s Law holds that eighty percent of all problems are the result of twenty percent of the major causes. So once Lean techniques have overcome those major causes to manufacturers’ problems, there will be diminishing returns to their Lean efforts to remain competitive. The second question I pose is: do “Lean” techniques help manufacturers increase sales? Generally speaking, the answer is no. Lean helps maintain stability, but it does not stimulate growth. From his study of fifty plants in six industries, Wickam Skinner pointed out “there are many ways to compete than producing at low costs”. Manufacturers that have achieved “Lean” manufacturing ideals must now come up with new and better ways to design and manufacture products. They have to innovate. Manufacturers must now try to balance their diet between Lean and Innovation. Because innovation requires resources be freed from other tasks, early adopters of Lean principles have moved on to adopt new technology, create new products, develop new ways of marketing and build global relationships. Only in doing so, can Ontario manufacturers leave the hospital with renewed strength to compete globally. Glen Laba is the newest member of the RIC Centre Team. In his role as an Entrepreneur-in-Residence, his aim is to provide personalized support to SMEs in the manufacturing sector to help them innovate and grow their business. The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.