The S-Curve Effect of Lean Implementation

There is currently no theory that explains the pattern of change in a plant's performance as it implements a lean program. Does it improve at a declining, increasing, or constant rate, or in some other pattern? We use empirical data from the implementation of the Volvo Group's lean program worldwide to develop a grounded theory to explain this pattern. We find that the pattern roughly follows an S‐curve shape: as a plant progresses in its implementation of lean production, its operational performance improves slowly first, then grows rapidly, and finally tapers off. The initial stage can be characterized by ‘exploration’, during which the plant is essentially discovering and experimenting with lean principles, and the later stages by ‘exploitation’, during which the plant is realizing their benefits. We derive the grounded theory from quantitative internal company data and find additional qualitative support for it from our visits to 45 Volvo plants on 5 continents and 210 interviews with employees in these plants and Volvo headquarters. The S‐shape pattern has important implications. Practitioners must assess a plant's maturity in lean implementation and adjust their targets, action plans, and expectations accordingly. Scholars must take the position of the plant on the S‐curve into consideration when they analyze the impact of lean programs.