Lean Office

With New Technology, Where Should We Go?

Avatar photo By Jon Miller Updated on June 20th, 2023

According to a Wall Street Journal article from September 15, 2011, With New Technology, Start-Ups Go Lean start-ups are purportedly adopting a lean approach with the aid of new technology. However, this claim can be deceptive if we interpret “lean” as simply indicating a reduction in the number of employees required, which is not our understanding. According to the article:

“New businesses are getting off the ground with nearly half as many workers as they did a decade ago, as the spread of online tools and other resources enables start-ups to do more with less.”

Start-ups and Job Creation: Technological Efficiency’s Double-Edged Sword

The number of new business start-ups has remained steady, but they have managed to generate 2.3 million jobs. However, this figure falls short by 700,000 jobs compared to the average annual job creation by start-ups prior to 2008. Considering that small businesses contribute to almost 65% of new job opportunities in the USA, this indicates a worrisome structural change in the economy.

This ability to start a business with an average of 4.9 workers instead of 7.5 workers is due to technologies replacing IT, accounting, and other business infrastructure services. These tasks can now be outsourced, automated, or performed with far fewer people via cloud computing. As a statement of fact, start-up businesses today are more productive thanks to these technologies.

Automation in Lean Start-ups: An Innovation Dilemma

However, are they in any way Lean?

You’re absolutely right. When it comes to Lean principles, the focus is not on the number of employees, but rather on identifying and reducing waste within business processes. Take, for example, a start-up with a team size of 5 instead of 8. By leveraging automation to eliminate delays, prevent errors, or eliminate paperwork, they may experience reduced waste. However, it’s crucial to note that in Lean thinking, automation should be considered the final step in the continuous improvement process, not the initial one. In some instances, technology-enabled start-ups that claim to be Lean may unknowingly entrench themselves in inefficient processes by immediately adopting outsourced automation without first optimizing their workflows.

A larger concern is the respect for humanity element of Lean. With the exception of certain not-for-profits and firms whose mandate job creation, start-ups do not have any social obligation to create any more jobs than are absolutely necessary. However both biological persons (entrepreneurs) and legal persons (corporations) bear certain social responsibilities, the opinion of certain Chicago school economists notwithstanding. The concern is that we may develop a generation of new business leaders who take it for granted that technology, not people, somehow creates value and get the job done. Left to its own devices, technology will initially disrupt the jobs, wages, and working conditions of people. Similar concerns drove factory workers to sabotage powered machinery during the early days of the industrial revolution. In some instances, displaced workers sabotaged entire social and political systems.

The Ripple Effect of Lean Efficiency on Job Creation in Start-ups

Productivity is a funny thing. Presumably, most of us who realize that the state does not owe us a living want to increase our personal productivity, if only to work fewer hours for the same pay. However, there are times when raising our productivity does us no good at all. For example, when demand for a product or service is limited and our ability to convert our time into other salable products is also limited, improving productivity makes us idle, or worse, redundant. In simpler terms, when you implement kaizen (continuous improvement) and require fewer employees to accomplish the same work, it becomes crucial to have additional work available. Otherwise, management will be confronted with the decision of either reducing the workforce to cut costs or retaining the employees and accepting the absence of cost reduction. Failing to plan in advance for redeploying people respectfully and productively has been the bane of many Lean implementations. Entrepreneurs harnessing new technologies to create these new “Lean” start-ups have been stealthily and unwittingly making changes to factors that underpin job creation in our economy.

Utilizing technologies like steam power and the internet, as well as implementing techniques such as kaizen and telecommuting, is highly beneficial when there is a stable and expanding market alongside an abundant resource that allows for increased labor productivity. This resource could take the form of arable land for food production or a product with a constant and growing demand.

Agricultural Revolution: How Technology Replaced the Traditional Farmer

An excellent example of the impact of technology on productivity can be observed in the increased efficiency of U.S. farms during the early 20th century. This improvement was achieved through the adoption of better equipment, enhanced yield management practices, and similar advancements. Such developments enabled farmers to effectively handle larger areas of land and produce more food per hour of labor. I have personal recollections of “walking beans” on my grandparents’ farm over three decades ago. This involved manually using a metal hook to remove weeds growing near the soybean plants, row after row, under the scorching summer sun until we were exhausted or finished. However, today, we have the convenience of using chemical methods to eliminate weeds, thereby providing a technological solution to the task at hand.

As the use of technology accelerated, farms became less reliant on individual farmers and more susceptible to management by corporations utilizing sophisticated technologies. Today we have so-called factory farms where satellite-guided combines are used for planting and harvesting. Human farmers are practically a thing of the past for anything but small-scale, boutique, or organic farms. Agriculture is about 1.1% of the US GDP today. At the dawn of the Internet age (1995) farm employment was 2.8% and today it is less than half of that number.

Our Role in the Technological Narrative: Job Killers or Creators?

It’s no surprise that machines have been gobbling up jobs. That’s nothing new. Technology itself is morally neutral, neither inherently positive nor negative (or at least that’s the narrative our wicked robot overlords would like us to buy into). It’s up to us to steer technology in the direction we desire. We have the choice to develop and utilize technology in self-centered and shortsighted ways, accepting the long-term repercussions such as environmental devastation, job loss, and the resulting social problems. Alternatively, we can guide the progress and application of technology toward nurturing job skills, fostering job satisfaction, and promoting job creation. The power to choose lies in our hands. With the arrival of new technologies, we seldom pause and ask ourselves “Where should we go?” Instead, we too often find ourselves being led down the road of unintended consequences when the possibilities of technology meet our short-term thinking.

Evaluating the True Costs of Lean in Start-ups

As a management technology, this is equally true of Lean. Like any technology, Lean must be used to create opportunities for people, not destroy them. Respect for humanity means developing greater thinking skills, job skills, and life skills through teamwork and problem-solving. The long-term performance of a “Lean” start-up, which relies on new technologies to operate with a team of 2 instead of 5, is yet to be determined. It remains uncertain whether this “Lean” approach will surpass the performance of a less “Lean” start-up in the long run.


  1. David Bueford

    September 16, 2011 - 10:14 pm
    Reply

    Lean (removing waste) from processes is nothing new. Henry Ford’s assembly lines were all about removing waste and increasing efficiencies. Naturally it has evolved but the premise has always been around. What we lack is the education to support the new global revolution. Until our public education model changes with the times we will lose jobs regardless. Children need to learn advance math and science along with a second language if we are to truly compete and grow. This will cost but we should invest.

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