The pressure to perform: Innovation, cost, and the lean revolution

There has been a revolution in global manufacturing in the past 25 years. The fronts in this revolution have included quality, product innovation, technology, cost, globalization, and new human resource practices that together make up the ‘‘lean’’ paradigm. At the same time, manufacturers in the developed world have experienced increasing cost pressures from their competitors in the developing world, where labor costs are lower. However, manufacturers in those regions with an advantage in labor costs have often also been able to implement lean practices and benefit from them, increasing the intensity of competitive pressures in all segments of the global manufacturing sector. What is the story that these innovations tell? By looking at the pattern of innovation adoptions in a plant over time, we can learn a great deal. In this article, we consider the impact of both the lean revolution and the challenges presented by the cost pressures faced by the developed world, using data from an international study of 236 manufacturing plants in eight countries. The lean revolution has put a premium on a plant’s ability to innovate, and adopt new practices and technologies, to meet the changing needs of its markets. Manufacturing plants competing in global industries are continuously faced with pressures for change in their external environment, so theymust innovate to survive.We seeplenty of evidence that the plants in our study have been subjected to these sorts of pressures to innovate.