NATAN: Jorg, how are you doing?


JORG: Very well. Thank you, Natan.


NATAN: Awesome. It's great to have you on Augmented. This is maybe an unconventional way to start, like, a very technological enterprise-driven type of podcast. But do you believe in serendipity?


JORG: Actually, I did not so far, but after the story, you will tell, I thought about probably [laughs] yes.


NATAN: So, for people joining us, Dr. Jorg Gnamm he's a Partner and the Global Head of Manufacturing and Digital Operation at Bain. How did we meet in person?


JORG: Yes, it was very funny. We did meet first time at the Hannover Messe.  And that was really a funny thing because I was presenting about the factory of the future concept, where we talk about in a minute and the deep belief and our production system of the future setting. And I had a presentation at the Hannover Messe on the main stage there, and then afterwards, came to you and talked with you about that. 


I mentioned to you that, by the way, the concept I'm talking about there were already roots in the past about the '90s on factory of the future. And then I said, "But, you know, Natan, very, very, like, you do not know that anyhow."


NATAN: [laughs]


JORG: And then you started saying [laughs] that, but that's the book I read. And probably you should now continue because The Fractal Factory was a book which I had co-written as an author.


NATAN: Yeah, we indeed met in Hannover Messe, I think, in April, right? 


JORG: In April. Yes. 


NATAN: But really, we met maybe a decade ago when I started reading this book that I believe was published 1992 or '93? 


JORG: Yes. 


NATAN: Basically, when I reference this book, I've never met a certain person who actually read it [laughter], let alone the person who wrote it. So, in fact, we met so many years ago. In the context that we were talking about, the book...because I also authored the book—and we'll include all the links in the comments and stuff—called Augmented Lean. And I was like, look, let me explain this concept, and lean needs to change and really has a dialogue with this book called The Fractal Factory, which is really trying to capture where industry is going. 


And, to me, it was prophetic, I believe, is the word I used. Because when you think about it, it's almost what? It's coming on 30 years. And it was such a moment that you kind of had to be there. And Eddy on my team and Gaby on my team was sitting there, and they were like, "What the hell is going on here?" [laughs] Like, you can't invent this kind of meeting. And it was, like, really great. Then we decided we're going to tell that story. 


But we're going to tell it, like, through the discussion of all those books. So maybe, like, for the benefit of the listeners who haven't been exposed to the ideas in Fractal Factory, you know, can you take a minute or so and, like, maybe try and summarize it as a core theme for our listeners. And then let's dive on, like, the implication of lean today and production systems evolutions ever since.


JORG: Absolutely. And I was a co-author. So, the author and inventor, if I want, was Professor Warnecke, a professor from Stuttgart, a very famous one. So, kudos to him. And what was the thinking? It was at that time the objective was, how can we maintain competitiveness in the 21st century as industrial companies?


NATAN: And this is written in the 20th century.


JORG: Exactly. It's written in the 20th. The first book was published exactly 1992.


NATAN: Does that mean the future of manufacturing is now? 


JORG: Yes, it's now. 


[laughter]


NATAN: Okay. We are in the future. Good to know.


JORG: And the funny thing, let me tell you three characteristics, which was taken up at the beginning. The first one was self-similarity. The second one was self-organization. And the third was dynamic and resiliency.


NATAN: Can you tie it into this very mathematical while visually understood idea of a fractal? Like, why fractal?


JORG: Exactly. That's the characteristics of fractals is self-similarity and self-organization. Therefore, the link to fractals and Fractal Factory and then added was the dynamic and resilience. And then, there were rules, by the way, and one rule was, for example, simplify by keeping the characteristics. 


The whole logic was, why don't we build up factories like fractals with these characteristics as a competitive unit and build that up? And we come in a minute of about the new characteristics of how we think about factory of the future at the moment, and I think about it, and, similarly, you do with Augmented Lean. But one element is factory of the future, and [inaudible 04:46] production system should be systemic, should be inclusive and systemic. And this was already the key thinking of The Fractal Factory.


NATAN: Yeah, if we're back in the '90s, like, one additional point of this detour to the past, what was the landscape of lean? When you're thinking about your younger self graduate student working on this very exciting operational research, how does that translate in your brain as you're working on digital factory? What kind of dialogue you had with that field at the time.


JORG: Lean was dominating somehow, the Toyota lean system, which was all over the place, and everybody said, "This is the standard."


NATAN: So, it was already...back then when you were working on this, Toyota Production System is a reality, well-understood concept yet, and not fully adopted everywhere. But it was in the collective psyche of operation, research, and practitioners.


JORG: Exactly. It was already well-adopted. And The Fractal Factory, at that point, we already at that time said, "It's not enough." There need to be more this systemic thinking. And I can tell at the minute how we think about it at the moment, but that was already there.


NATAN: That's actually a perfect segue. We both know that fast forward 30 years, you know, my personal view, very briefly, is that, you know, lean or the practice of lean, whether you do it formally or less formally, is well understood and more or less a ubiquitous reality, meaning that people are thinking in the form of, yeah, we need our inventory to be just-in-time, and, like, we need to go to Gemba to see the thing. So, all these, like, principles it doesn't matter if you have a production system or not. You're still behaving like that. So, that's one thing. 


But the other thing, and that's sort of, like, the core element of Augmented Lean...and I don't necessarily want to focus on Augmented Lean. I just want to shine a quick light because what we really want to understand is, like, how this framework, like, from fractal translates into how you view production systems today, and we'll get there in a second. 


But, you know, the core thing about Augmented Lean is, like, you know, that Lean is not broken necessarily. It just has not been adapted over time. So, at one point in time, we adapted to the reality now, and then we're done. And we add all sorts of things, like, digitally and all that kind of stuff. But at the end of the day, I think my personal belief is that Lean missed the digital revolution. It created some sort of discontinuity. 


And the reality of this, not be very fluffy, is, like, there are people who believe that still, you know, lean with whiteboard is the only way to do, and they are ultra-orthodox lean people. And then there are people who are, like, kind of in between. And, in a way, the human element of, like, focusing on lean practice when everyone becomes knowledge workers and works with data and apps and things like that, it's just, like, not supported as it stands today in the traditional sense of lean. So, I stop there.


But how do you...and maybe you could describe a little bit about your work because this is sort of, like, the part that our joint interest in collaboration overlapped on. How does that create new types of production systems that focus on not just on tasking around in measurement but, like, really embedding the people into a production system in a way that changes continuous improvement in the traditional sense to something that is more sustainable?


JORG: We are fully aligned on the insufficient starting point, where maybe I should start with an interesting interview setting and diagnosis we did. We did interview over 300 COOs globally and ask them about the status of operations of the future and ask them, to what percentage would you say your company is in experimental stage? And to what extent you would say we have impact at scale already achieved with kind of how we feel about operations of the future? And the result was scary. 60% said that they are in a kind of experimental stage. But there were some in-between answers, and that 8% only were saying that they achieved impact at scale.


NATAN: That's amazing. You know, when you think that industry 4.0 as we know it for the past decade-plus change, and that's the result you have from the operation leaders, it's, like, scary, I think is the right word.


JORG: Yeah, we were puzzled...How can that happen? And exactly as you said, if I look in these companies, and as a global production head of manufacturing of Bain, I see a lot of companies in production. I would say 85%-90% are still production systems fully based on lean.


NATAN: And paper, therefore.


JORG: Fully based on lean and not embedded the new perspectives we need, such as industry 4.0, circularity, and human centricity. This is one of my key points that you call it tasking, but we see in the companies a lot of tasks going on top of lean. And you can imagine it's, like, you have lean, and aside, you do a digital task force, and aside, you do a circularity task force, and aside, you do a human-centric task force. And we see that all the time. And our core belief is this is not what at all is leading to full potential; to full potential is require the systemic approach of integrating all that in a systemic way in a production system.


NATAN: It's not surprising to me that, you know, with an operation practice like Bain has, this type of enterprise perspective emerges. The thing that I'm intrigued with, it's like, when you have to go up to the C-suite and say, "Hey, this is what we found," how do you help the CEOs understand that they actually have this reality where the task force, task force, task force, but it's really not embedded in there so to speak? 


Production system or the journey to production system is actually...it's like you're on five different roads that go each in five different tracks, trying to get to the single point at the same time, with different drivers in different cars. I don't know if that's a good metaphor to the phenomena. But how do you explain that to the CEOs and tell them what to do about it?


JORG: We need to rapidly bring to their mind that the productivity improvements they achieved in the past were really low compared to in other areas out of production, what can happen.


NATAN: It's a little bit like telling the parents, look, you know, not your baby is ugly, but I guess your baby needs more work. [laughs]


JORG: It needs more work. You're–basically, you're screwing your resources because you did not focus on going in the same direction for everybody. And you do not take all the resources you have to their full potential. It's like helping them with a mirror on what is possible. We can talk later a little bit about how we do that. 


But we did build up a system where we have a very nice assessment system for this systemic approach. And we have done a heat map, a kind of heat map how we can display that. And this is then kind of mirror where they say, "Oh my God, you're right. First, we are not at all systemic. We have not an integrated system. We are far beyond full potential." So, this is the kind of starting point.


NATAN: So, you see this response and, you know, what I've seen move folks on the C-suite from our perspective of what is Tulip's reason to be, you know, we're trying to help organizations change how they work. I don't think necessarily it's a different definition than what you do. But we just do it from a technology platform perspective, right? 


So, the thing I've seen move C-suites is KPIs, everybody KPIs, KPIs, KPIs. When they finally understand, then they go, "Oh my God, we need this system approach." And by the way, we will include a link to some of the great work that was published by Bain in the talk, and people can kind of refer to it later. You know, the KPIs, you know, everybody is like swimming in KPIs. But, like, from your experience, what are the important KPIs that people are like, okay, I got it? How do you present them, and what are they?


JORG: We would really start from the top and say, at the end, it starts with productivity KPIs across the board, or along the whole value chain, on factors like new dimensions. And this is, like, how smart are your production processes? Is their organization self-learning? How advanced are your material flows? How synchronized are your flows? How resilient are your value chains? So, these kind of additional new dimensions.


NATAN: So, they understand those KPIs. And if I'm going to play my inner enterprise CEO character here for a second, when they come to you after that, and then they understand the framework, now they understand the KPIs, and they say, "Well, how do I start?" What's the brief answer to that? What do you recommend them to do? 


JORG: Strategy consultants would say, "You need to start first with a strategy. You need to have your manufacturing strategy in place." And this is things like, what is your should cost? What is your make-buy strategy? What is your network strategy? First. 


Then second, I would say, do an assessment. Where are you currently? Where do you want to be? And then, you need to think about the technology. What technology is needed to support that? Because very importantly, technology and digitization should not be a task in itself. I always keep saying you should digitize where you have a positive business case. And sometimes, this is forgotten. I see a lot of companies who just say, "We need to digitize everything." We think that is not right.


NATAN: So, you know, if I tie it to some practical things we thought about as takeaway from this...but often, I see people struggling with taking the first step. Let's just say, for the sake of our discussion, they had good first steps around strategy, like you suggest as a first step. But I want to push you a little bit because, like, the point that you're making, which I, by the way, agree, so I'm pushing you because I want you to explain it to people. It's like, they don't finish the strategy and then flip a switch, and the new class of production system emerges. It is a journey. 


So, how do you practically recommend post the, okay, we understand our strategy. Hey, take the first step towards factory of the future systematic approach or a production system. Like, what do you tell them practically they need to do?


JORG: Yeah, practically, we would say after that strategy, which it is should be an umbrella, do this diagnostic but on a detailed level along the value chain. And we propose that along something like 30 to 40 criteria in the value chain, do a diagnostic. Then start with a pilot. I like to call it a lighthouse. And then, from there, form an interdisciplinary team, which is often not being done, and then start to implement it, then scale.


NATAN: Yeah. So, let's talk about that for a second. And I want to bring in another thing that I'm hearing a lot, and I'm sure you have a perspective on. What we do is create a platform that gives tools to empower the frontline workers, engineers. And they can build applications with no code and low code and get data and all those kinds of things. And really, where it ties into in the context of an organization and transformation, let's just say, is this thing called the IT/OT divide. You know, where, okay, IT is one side [laughs], OT is another side, yet we need to build a production system of the future, right? 


My view is that this is a lot about a new type of operation stack and architecture that enables you to do all these connections. Where is this coming from? Why do you need this substrate? Because we're talking about continuous improvement at the end of the day [laughs], you know, kind of back to first principles but in the speed of technology. 


And, like, you talk about lighthouse, and I talk about greenhouse. Why? Because, to me, a greenhouse is a really interesting metaphor. You can take different scales. You can have a greenhouse in the desert, and you can have a greenhouse in a jungle. And you can grow tomatoes and radish, and you can grow lettuce and, I don't know, corn. 


And this is sort of, like, a way to think about horizontally scalable lighthouses that I think platforms kind of lend itself, and this is especially in multinational large-scale enterprises that are complex. So, I'm wondering how you see it and if there's, like, a perspective from the CIO, CEOs. Are they seeing this, or is this not translated as one might want?


JORG: More, I think, the latter. I think it's not yet translated. And we see them a lot in silos and, again, in a tasking mode rather than an embedding mode. And our recommendation would really be, again, do the strategy, think through what your production system is, then think through what is needed as an IT/OT architecture, but then make it a common architecture across the company and across the factories. That is immensely important. And then, we really recommend putting together the CIO, the COO, and actually, the CHRO --


NATAN: Amazing. 


JORG: In the same team and developing this common platform.


NATAN: Yeah, this is really tracking to what I've been seeing, that a lot of my very recent interesting conversation start now in the room. From the first moment, there's a CIO and a COO, not often the CHRO. So, this is encouraging to hear that you're seeing that. And they just start thinking about the problem differently from step one. 


So, Jorg, this has been quite a journey here we had in our episode. First of all, really appreciate it. Typically, we try and end on some takeaways and call for action. Do you want to take a stab? What do you think is the key points from your end? And then maybe I can add a couple.


JORG: Of course. Maybe before I enter there, let me also say what I just told about our new production system and factory of the future is not just a vision, but we really implemented it already. So, it has proof points. And one of them is we did it together with Bosch at Neom.


NATAN: Oh wow.


JORG: New city in the Middle East, which is the largest manufacturing greenfield project in the world. It's really working. Therefore, to build on that the takeaways: one is moving from this silo tasking to embedding in production systems. Second, measure and understand where your starting point in those is. Third, move from piloting to scaling, so find the right lighthouses, greenhouses, and then scale it up. You remember the survey I talked about at the beginning? And then fourth, by doing so, always have the business case in mind, not just digitizing or technologizing everything.


NATAN: I think that's a great summary. I'd love to learn more about this project you mentioned with Bosch in the Middle East. But the number that you shared that, you know, ten years later, you talked to 300 COOs, and only 8% feel that they actually scaled with digital operation is, like you mentioned, concerning but eye-opening, and, like, we need to understand more. So, that's an amazing set of data that maybe our community could help figure out at some point. 


On top of your great takeaways, I like to finish with call to actions. We started on agendas that were crafted even 30 years ago or more around Toyota Production System. And we touched Fractal Factory, and fast forward to today to Augmented Lean. The thing that moved forward any sort of real impact on industry is communities coming together, not just companies in a commercial motion but in the true sense that, you know, you extend the body of knowledge in here. We're extending talking about lean. 


And we kind of took different paths in our own personal stories and careers and ended up thinking along very similar lines because these problems, like, I believe, span. And so, we're looking for people, and if they have the same drive and inspiration and want to help build, like, we'd love to talk to you. And we'd love to find more collaborators, you know, sort of a reference architecture for the future of production system. 


And I'm not sure what exactly are the next step, but I think every type of these kinds of efforts, now that we have the bliss of the internet and instant communication, that's how it starts. You put it out there. And so, Jorg, we're putting it out there. I'm looking forward to see you in a few months, and maybe you look back into it and see who is responding to our call. So, I want to thank you so much for joining and sharing your work on this episode and truly appreciate it.


JORG: Thank you so much for having me here.