LEAN MANAGEMENT: FABBRICA INTELLIGENTE E NUOVI ORIZZONTI Arnaldo Camuffo Torino, 5 Luglio 2018
2 Lean thinking 4 Operational excellence 5 principles 4 dedicated basically to system design Value Value stream Flow Level pull 1 dedicated to learning Perfection But: Only some type of problems (and problem solving) acknowledged
3 ICRIOS-Bocconi Italian Lean Observatory Financial performance effects of lean thinking adoption Dynamics and intensity of lean thinking adoption Lean transformation dynamics Lean thinking and innovation
Financial performance effects of Lean Thinking 4 Initial dataset: Osservatorio AUB 1 Confindustria Primary sources Secondary sources FILTER Adjustments > 20M Operating in Italy Only certified sources At least 1 counterfactual Info on Lean transformation year Automotive sector removed Service sector removed Minor fine-tuning 171 Lean Companies 1) Database gathering financial, governance, ownership data on 15,495 Italian companies with 2016 revenues above 20M
The sample Overview 5 SAMPLE SIZE 3614 Italian firms Revenue > 20 m LEAN TREATED FIRMS 171 NON-LEAN COMPETITORS 3473 FINANCIAL DATA From 2000 To 2016 Lean firms by industry Lean firms by size Percentage of Lean firms by industry Keyword here Keyword here Keyword here
Face Evidence of abnormal returns to Lean Thinking Adoption ROIC - Return on Invested Capital 6 Hypothesis: ROIC Lean = ROIC Non-Lean T-TEST P-value < 0.000 T-TEST here MANN-WHITNEY-U P-value < 0.000 Keyword here Keyword here
Face Evidence of abnormal returns to Lean Thinking Adoption Net Financial Position / Ebitda ratio 7 Hypothesis: NFP/ EBITDA ratio Lean = NFP/ EBITDA ratio Non-Lean T-TEST P-value < 0.000 T-TEST here MANN-WHITNEY-U P-value < 0.000 Keyword here Keyword here
Regression Analysis 8 PPPPPPPPPPPPPPPPPPPPPP ii,tt = ββ 0 + ββ 1 LLLLLLLL ii,tt + CCCCCCCCCCCCCCCC + GGGGGGGGGGGGGGGGGGGGGGG FFFF # of Employees Family Business Listed District + CCCCCCCCCCCCCCCCCCCCCC FFFF + YYYYYYYY FFFF + εε
Results REGRESSION ANALYSIS PPPPPPPPPPPPPPPPPPPPPP ii,tt = ββ 0 + ββ 11 LLLLLLLL ii,tt + CCCCCCCCCCCCCCCC + GGGGGGGGGGGGGGGGGGGGGGG FFFF + CCCCCCCCCCCCCCCCCCCCCCFFFF + YYYYYYYY FFFF + εε 9
Results ROBUSTNESS CHECK PPPPPPPPPPPPPPPPPPPPPP ii,tt = ββ 0 + ββ 11 LLLLLLLL ii,tt + CCCCCCCCCCCCCCCC + GGGGGGGGGGGGGGGGGGGGGGG FFFF + CCCCCCCCCCCCCCCCCCCCCCFFFF + YYYYYYYY FFFF + εε 10
What drives the performance effects of lean thinking adoption 11 Hypothesis: Lean improves performance by reducing the duration of the commercial cycle. DDDDDDDDDDDDDDDD oooo oooooooooooooooooo cccccccccc dddddddd = aaaaaaaaaaaaaa dddddddddddddddd oooo aaaaaaaaaaaaaa rrrrrrrrrrrrrrrrrrrrrr + aaaaaaaaaaaaaa dddddddddddddddd oooo iiiiiiiiiiiiiiiiii aaaaaaaaaaaaaa dddddddddddddddd oooo aaaaaaaaaaaaaa pppppppppppppppp
Results MEDIATION ANALYSIS - ROIC 12
Results MEDIATION ANALYSIS Net Debt / EBITDA 13
14 The impact of the digital revolution Analytics Big data Sophisticated econometrics Computing power Inference power Predictive power New technologies Artifacts firms may want to use to create more value Might have +/- uncertainty Might require an experimental approach to be proven valid (problem validation, offer validation, solution validation) Powers-up the scientific approach (PDCA) To be evaluated/im plemented Using the scientific approach
15 Lean 4.0 Operational excellence pushed at its limits Additive manufacturing Machine-to-machine comunication (M2M) Big data & machine learning Wearables, Cobots & augmented reality AI & Bots EPEx/SMED SMED/EPEX Problem solving/tpm Standardized work/andon OEE/throughput times
Amazon ultrasonic bracelet 16 The proposed wristbands would use ultrasonic tracking to identify the precise location of a worker s hands as they retrieve items. Photograph: Amazon / USPTO
17 Lean thinking 4 Innovation The Scientific method (PDSA) even more important Focus on more complex problem solving
4 types of business problems Entrepreneurship New ventures Start-ups Corporate innovation New products/services/processes New business models Source: courtesy Art Smalley & John Shook
Design Thinking Copyright SDA Bocconi
Lean Startup Copyright SDA Bocconi
Agile development Copyright SDA Bocconi
22 Type IV problem solving Not explain as the world is, but how it could be...
23 Biases Believe that an event is more likely to occur than it is likely to occur Various sources of bias Ambiguity aversion Cognitive biases Anchor bias Overconfidence (underconfidence) Hyperbolic discounting... others Logical fallacies - «Since they opened a movie theater next to my commercial mall last year, sales in the mall have increased by 10%. It was a great idea to expand the mall last year. I will help the owner of the movie theater to promote her business so that we can increase our sales further.» (Reverse causality) - «Since they opened a movie theater next to my commercial mall, sales in the mall have increased by 10%. It was a great idea to expand the mall last year, and I was fortunate that a new freeway was built making it easier to connect to the city center. I will help the owner of the movie theater to promote her business so that we can increase our sales further.» (Omitted variable)
What do we mean by a scientific approach to entrepreneurial decision-making? The PDSA cycle Source: The Edward W. Deming Institute
The Galilean Manager: Intuition A scientific approach (PDCA) generates better predictions of the distribution of returns r, and therefore entrepreneurs/managers make better decisions But what do we mean by better decisions?
The logic of the approach in a nutshell «true» E(r) E(r scientist) E(r non-scientist) k r Reduction of type I error (false positives)
The logic of the approach in a nutshell E(r non-scientist) E(r scientist) «true» E(r) k r Reduction of type II error (false negatives)
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