Lean and Industry 4.0:
Adapting the organizational culture for a
successful integration
Master Thesis
Britt Horstink
Master Thesis – MSc Supply Chain Management University of Groningen – Faculty of Economics and Business
b.horstink@student.rug.nl – S2660946
January 27, Groningen
Word count: 12,026
ABSTRACT
Lean companies are characterized by a specific organizational culture, a lean culture, which stimulates employees to behave towards organizational goals and contributes to performance improvement. However, lean companies now have to face new challenges because of a new promising, but conflicting concept: Industry 4.0. This paper contributes to the current literature by examining the role of organizational culture and, to what extent, a lean 4.0 culture, in terms of principles, practices, and the GLOBE model, adapts because of the newly implemented concept. A multiple case study is performed, and primary and secondary data is gathered by semi-structured interviews and supportive reports, respectively. Results show that organizational culture, in terms of eight GLOBE constructs, of lean firms changes because of Industry 4.0 principles, practices, and characteristics. Besides the theoretical contribution, this study provides information for managers as they might adapt their firm’s organizational culture in order to further increase performance.
TABLE OF CONTENT Preface 5 Introduction 6 Literature review 8 2.1 Organizational culture 8 2.2 Lean 9
2.3 Organizational culture and lean 10
2.4 Industry 4.0 12
2.5 Cultural change 14
Methodology 14
3.1 Research design 14
3.2 Case study selection 14
Appendix 1: Interview protocol 45
Appendix 2: Questionnaire 46
Appendix 3: Coding tree 48
Appendix 4: Table in-vivo codes – companies 67
PREFACE
INTRODUCTION
“Your company’s culture is your operating system.”
Lean, the concept introduced by Toyota and popularized by Womack and Jones in the early ‘90s (Dahlgaard & Dahlgaard-Park, 2006), is adopted in a lot of different industries over the last three decades (Rossini, Costa, Tortorella & Portioli-Staudacher, 2019). It is one of the most promising improvement methods for exceeding others (Mackelprang & Nair, 2010; Netland, 2016) in terms of a better firm position (Rasmussen & Tanev, 2015) while focusing on reducing waste – muda (Ingelsson & Mårtensson, 2014), satisfying market needs, and reducing costs (Bortolotti, Boscari & Danese, 2015). Besides lean, another key concept that has been investigated extensively and that also influences the performance of a company is organizational culture (Abdul Rashid, Sambasivan & Johari, 2003; Deshpandé, & Farley, 2004; Sadri & Lees, 2001). Organizational culture defines the strategy through which a firm tries to achieve its goals. So, it is crucial for top management to develop a ‘strong’ corporate culture that employees will support in order to attain good organizational performance (Barney, 1986; Gordon & DiTomaso, 1992; Lee & Yu, 2004; Marcoulides & Heck, 1993). When companies change from traditional to lean, a radical organizational change within the organization is required (Ahmad & Azuan, 2013; Dahlgaard & Mi Dahlgaard-Park, 2006). The aforementioned key concepts are often seen together and are known as 'lean culture.' Lean culture can increase the chances of performance improvements when employees behave according to their culture and when practices do fit with the organizational culture (Bortolotti et al., 2015; Paro & Gerolamo, 2017). However, today companies face new challenges regarding this fit because companies have to deal with a new emerging topic: the fourth industrial revolution. The term, also described as 'Industry 4.0', was first introduced in Germany between 2011 and 2013 (Ustundag & Cevikcan, 2017). This relatively new concept is characterized by advanced digitalization, personalization, and flexibility of products, services, and machines, together with the use of real-time interactions between those machines, people, and products during the manufacturing process (Zhou, Liu & Zhou, 2015). Due to the use of this new type of technology, higher operational productivity of manufacturing processes can be accomplished (Dalenogare, Benitez, Ayala & Frank, 2018).
2017; Satoglu, Ustundag, Cevikcan & Durmusoglu, 2018). One example of differences that might cause conflicts is embedded in the strategic approach. Lean firms strive to reduce complexity as much as possible, whereby Industry 4.0 does the opposite and increases complexity (Sanders, Subramanian, Redlich & Wulfsberg, 2017). This contradiction raises the question of whether the ideal culture that is associated with a lean company needs to change or not to be fully applicable to a lean 4.0 firm. Thus, what the role of organizational culture within this change is.
Previous literature focuses mainly on the integration, the similarities and differences, and thus to what extent we can complement these two concepts into ‘lean 4.0’. No researchers have investigated before which constructs of the organizational culture of lean firms might adapt for the correct integration with Industry 4.0.
Lean, as well as Industry 4.0, are promising concepts for firms operating in this current environment because both concepts’ techniques and methods contribute to higher organizational performance. It will be necessary to consider and investigate to what extent companies, who already were successful in implementing lean, should adjust their organizational culture, in order to also be successful in the implementation of Industry 4.0. This issue leads to the following research question: If it is necessary to change the organizational
culture of a lean firm in order to introduce Industry 4.0 methods and techniques, how does it need to be adapted, and what will be the consequences?
Industry 4.0 is a relatively new topic compared to literature about the practices and the management of lean. This research paper contributes to the current literature on both by deepening the relationship with organizational culture. Besides the theoretical contribution, this study also offers practical knowledge for managers. This paper describes how the implementation of Industry 4.0 affects the corporate culture and how management might need to analyze and adjust the organizational culture of their firm to be able to successfully implement and work with Industry 4.0 while being lean at the same time.
LITERATURE REVIEW
A literature review will be conducted to provide an answer to the research question. This literature review focuses on three main concepts: organizational culture, lean, and Industry 4.0. This section ends with a description of cultural change.
2.1 Organizational culture
Culture can be described as one of the most complicated words because a historical overview estimated that around 160 different definitions were used (Martinez, Beaulieu, Gibbons, Pronovost & Wang, 2015). Van der Post & De Coning (1998) make in their description a comparison between people and organizations to explain and clarify what culture exactly is. They state that organizational culture has to be seen as the personality of an organization. According to Schein (1985: 9) and Martinez et al. (2015), it can be best described as: “a pattern
of basic assumptions - invented, discovered, or developed by a given group as it learns to cope with its problems of external adaptation and internal integration - that has worked well enough to be considered … the correct way to perceive, think, and feel in relation to those problems.”
TABLE 2.1.1
GLOBE - Culture constructs and definitions OC constructs Definitions
Power Distance The degree to which members of an organization or society expect and agree that power should be stratified and concentrated at higher levels of an organization or government.
Uncertainty Avoidance The extent to which members of an organization or society strive to avoid uncertainty by relying on established social norms, rituals, and bureaucratic practices.
Assertiveness The degree to which individuals in organizations or societies are assertive, confrontational, and aggressive in social relationships.
Institutional Collectivism
(Collectivism I)
The degree to which organizational and societal institutional practices encourage and reward collective distribution of resources and collective action.
In-group Collectivism
(Collectivism II)
The degree to which individuals express pride, loyalty, and cohesiveness in their organizations or families.
Future Orientation The degree to which individuals in organizations or societies engage in future-oriented behaviors such as planning, investing in the future, and delaying individual or collective gratification.
Humane Orientation The degree to which individuals in organizations or societies encourage and reward individuals for being fair, altruistic, friendly, generous, caring, and kind to others.
Performance Orientation The degree to which an organization or society encourages and rewards group
members for performance improvement and excellence.
Gender Egalitarianism The degree to which an organization or society minimizes gender role differences while promoting gender equality.
Source: House et al. (2004)
2.2 Lean
Lean is a well-known concept and first developed by Toyota that used the Toyota Production System. In the early '90s, Toyota was not able to cope with the USA mass production systems. Therefore, it specialized in cost reduction through the overall elimination of waste (Lander & Liker, 2007). Later, the concept was more extensively developed by Womack, Jones, and Roos (1990: 13). In their book "The Machine That Changed the World," they describe lean as follows: “Lean production uses half the human effort in the factory, half the manufacturing
space, half the investment in tools, half the engineering hours to develop a new product in half the time.”
conditions, which reduces flexibility, complexity, and customization (Purvis, Gosling & Naim, 2014).
Research focusing on the implementation of lean shows many advantages with regard to operational processes. The most common benefits that companies obtain are reductions in manufacturing costs, cycle and lead times, and the well-known seven types of waste (Sternberg, Stefansson, Westernberg, af Gennäs, Allenström & Nauska, 2013). At the same time, performance measurements with a focus on quality and labor productivity are enhanced (Bhasin & Burcher, 2006; Melton, 2005; Shah & Ward; 2003). This superior performance results for many companies in a competitive advantage (Li, Rao, Ragu-Nathan & Ragu-Nathan, 2005; Pakdil & Leonard, 2015). However, most of the performance indicators expressed in papers are based on financial results and, thus, on hard measurements (Flynn, Sakakibara & Schroeder, 1995; Motwani, 2001). It is important to focus on soft measurements when firms apply improvement initiatives in order to complement papers within this research field (McAdam & Bannister, 2001).
2.3 Organizational culture and lean
The concept of organizational culture plays a key factor in lean processes (Bhasin & Burcher, 2006) as well in the implementation of lean (Achanga, Shehab, Roy & Nelder, 2006) because it regulates whether an employee acts towards or against an initial idea or process (Pakdil & Leonard, 2015). One of the pivotal causes of lean implementation failures is the organizational culture (Bhasin 2012; Bortolotti et al., 2015; Mejabi, 2003). If companies want to implement lean successfully, culture must provide support to these processes (Shook, 2010).
(Olivella, Cuatrecasas & Gavilan, 2008). The next one, future orientation, represents long-term planning, goals, and problem solving (Kull et al., 2014), which promotes continuous improvement actions (Martins et al., 2015). Therefore, a higher level of future orientation in lean firms is desired. The last construct related to a successful lean firm is humane orientation, which reflects that employees do not behave towards individual goals. They rather expose themselves to pursue the interests of the company in order to achieve excellent performance, which is fundamental for successful lean firms (Bortolotti et al., 2015).
Figure 2.3.2 presents the research framework that summarizes the principles, practices, and characteristics of lean. The influence of Industry 4.0 will be discussed in the next section.
FIGURE 2.3.1
Overview of OC constructs of successful lean firms
Low High Assertiveness Institutional Collectivism Future Orientation Humane Orientation
FIGURE 2.3.2 Research framework
2.4 Industry 4.0
Three revolutions have recently taken place in terms of mechanization, mass production, and digitization. In the present time, a new shift, named by Industry 4.0, is developing whereby a combination is created in the field of Internet of Things, Internet of Services, cyber-physical systems, and 'smart' factories (Roblek, Meško, & Krapež, 2016). This industry is characterized by a technology-driven design with key components as automation, sensors, big data, and 3D printing (Yin, Stecke & Li, 2018). These new technologies ensure a severe impact on small and large companies (Sommer, 2015). The overall goal of Industry 4.0 is to combine existing manufacturing processes with a higher level of automation (Roblek et al., 2016), which will ultimately result in increased operational productivity, efficiency, and complexity (Lu, 2017; Sony, 2018).
In the papers by Jazdi (2014), Roblek et al. (2016), and Slim, Rémy & Amadou (2018), several fundamental expressions and values are described. Industry 4.0 covers six principles: (1) interoperability, (2) virtualization, (3) decentralization, (4) real-time capability, (5) service
Organizational Culture § Power Distance § Uncertainty Avoidance § Assertiveness § Institutional Collectivism § In-group collectivism § Future Orientation § Humane Orientation § Performance Orientation § (Gender Egalitarianism) Principles of lean § Value § Value stream § Flow § Pull § Perfection Practices of lean § Cross-functional teamwork § Training employees § Supplier partnership § Customer involvement § Continuous improvement § Transformational leadership Characteristics of lean § Low variability § Low flexibility § Low customization § Low complexity § Low traceability § High decentralization § High cooperation Implementation of Industry 4.0 principles, practices, and
orientation, and (6) modularity. Besides these characteristics, this new industry also ensures that there will be an improvement in flexibility and dynamicity as companies can more easily obtain parts, modules and, services from a large number of suppliers allowing products to be more specialized and individualized (Jazdi, 2014). Machines will be connected to sensors, actors, and autonomous systems. When connected to sensors, communication will be more detailed, and equipment and manufacturing processes can enhance themselves because of autonomous decision-making and self-optimization (Roblek et al., 2016). Furthermore, Industry 4.0 companies are often represented as companies with a high degree of flexibility and decentralization. Employees can make their own decisions and work at any time and location. This right is also described as a flat hierarchy (Fettig, Gačić, Köskal, Kühn & Stuber, 2018). Because of the opportunities offered by automation and digitalization, many companies are looking at the costs that might be saved when implemented. Tasks that can be automated, and yield a considerable saving concerning employees, are significant opportunities for companies and therefore reduce the protection of employees for both low-skilled and high-skilled workers. Because of this low level of employment protection, an anxiety culture might be created, which deteriorates the employee's loyalty (Kovacs, 2018).
Moreover, specific information, in forms of electronic documents, simulation models, conditions, and tools, is used to support chosen decisions (Hermann, Pentek & Otto, 2016). Employees can often make decisions because of decentralization and a flatter hierarchical structure. Workers obtain besides more responsibilities also higher action competences, and therefore, it is expected that less leadership is required (Fettig et al., 2018). Due to the automation of processes, decision-making also becomes more assertive and agile (Tadeu, Duarte, Taurion & Jamil, 2019). Companies also need to make sure that data, those required for decisions, is available across the boundaries of their firm in order to fully optimize their processes (Brettel, Friederichsen, Keller & Rosenberg, 2014). However, it is possible that collaboration can be obstructed when there is a lack of willingness to cooperate or when there is not a common way of thinking across the supply chain (Horváth & Szabó, 2019).
2.5 Cultural change
In every organization, there is a possibility that organizational change, and thus a change in culture, is required. Hence, it is imperative for managers to deal with any obstacles and challenges that may arise during or because of the change. When managers fail to respond to these problems, they may lose their employees, shareholder support, or even market share (Self & Schraeder, 2009). According to the research of Markus (2004), the most common problems where managers need to deal with, are resistance to change, a misfit with values, uncertainty, and pressures.
METHODOLOGY
This section argues why the used research method is most suitable for data collection. It will also explain why specific cases were chosen. Subsequently, a measurement description will be given. The methodology section will be closed with a description of the data analysis.
3.1 Research design
An inductive case study is conducted to provide an answer on whether it is necessary and how Industry 4.0 adapts the organizational culture of a lean firm. After the analysis, a theoretical conclusion is drawn based on the collected data. According to Yin (1994: 9), case study research is most suitable when “a how or why question is being asked about a contemporary set of events
over which the investigator has little or no control.” Due to the use of this type of research
design, researchers are able to investigate a phenomenon in its context (Rowley, 2002) and can attain insights into cultural values and attributes (Howard, 1998). Case studies are often used to uncover organizational members’ expectations and perspectives attributed to the environment and how those are constructed (Ogbonna & Wilkinson, 2003). Thus, a case study approach is most suitable for answering the research question since the complicated concept of organizational culture is related to cultural values and attributes. In addition, organizational culture is placed in a new context in this paper.
3.2 Case study selection
replicated, which fosters triangulation (Yin, 1994), reinforces internal validity (José Martínez-Jurado, Moyano-Fuentes & Jerez Gómez, 2013), it augments external validity and helps to guard against observer bias (Karlsson, 2016). The results will also be compared with the answers given by the interviewees of the consultancy company as this firm typically implements the concept and related practices of Industry 4.0 within companies.
The included companies, represented in table 3.2.1, were chosen because of four different selection criteria. First, all companies can be classified as lean. The degree varies from low to a high lean level within firms. The firms must be familiar with it and, at the same time, have to be successful in it. Otherwise, it cannot be concluded whether a lean culture needs to be adapted or not. Secondly, the included firms should also be classified as (newly) adopted Industry 4.0 firms in order to investigate the change. A distinction is made in the table based on the digital maturity level (DM level) displayed in the article by Von Leipzig et al. (2017).
TABLE 3.2.1 Included cases
Company A Company B Company C Company E Company F Industry Steel
processing Pipe manufacturer Electronics Automotive Electronics
Number of
employees 50-99 200-499 100-199 >500 100-199
Lean level Low Medium High High Low
DM level Conceptual Integrated Integrated Transformed Defined
Reasons for implementation • Competitive: utilization • Long-term vision • Employee motivation • Competitive: utilization, efficiency • Competitive: flexibility, efficiency • Competitive: flexibility • Long-term vision: better tactical and operational focus • Competitive Characteristics of lean 4.0 • High variability • High customization • High variability • High customization • High formalization • High variability • High customization • High formalization • High variability • High customization • High variability • High customization 3.3 Data collection
Data is mainly collected through semi-structured interviews. First, broad and open-ended questions were asked. When more information was needed or when the interviewee had difficulty in finding an answer, the questions were guided by specific terms that are represented by bullet points. This form was chosen to make sure that interviewees could openly express their opinions and guide them when this was necessary.
mentioned GLOBE constructs, the culture after the implementation of Industry 4.0, and thus how and why each construct might have changed.
The interviews are held with managers, supervisors, and employees who guide the rest of the organization at the time of implementation and integration. The number of interviews within a case was dependent on the size of the firm, whereby a total amount of twelve individuals is interviewed over seven interviews in total. A list of all interviewees can be found in table 3.3.1. Moreover, the length of each interview varied between 60 and 90 minutes, and all conversations were recorded in English in December 2019. Other sources of data are used to ensure data triangulation. Annual reports, websites, and other reports that support and add value to the information within this investigation were studied. When a meeting was scheduled, the interview took place on location. With this, a short tour and thus an observation would provide more in-depth insight into the company concerned.
TABLE 3.3.1 Overview interviewees
Interviewee Company Position of the interviewee
1A A Supply chain manager
1B A Quality manager
1C A Intern
1D A Process improvement employee
2A B Manufacturing director
3A C Engineering manager
3B C Lean engineer
4A D Director
4B D Senior consultant
5A E Managing director continuous
improvement
5B E Vice-president
6A F Innovation manager
3.4 Data analysis
single database afterward. When all interviews were transcribed, the coding process of Strauss and Corbin (1990) was applied using the ATLAS.ti software.
In the first phase, also known as 'open coding,' associated and corresponding statements of the interviewee are merged and labeled. The in-vivo codes, presented in the left column of the coding tree (appendix 3), are transformed into first-order categories. These categories should be kept as close as possible to the original text because of the inductive design. Within the second phase, described as 'axial coding,' similar categories were aggregated together into second-order themes. The 'selecting coding' phase is the last phase of the coding process. In this phase, the second-order themes are linked to core dimensions that are identified. The core dimensions can be found in the right column of the coding tree.
FINDINGS
The results that are obtained with the interviews will be discussed in this section. The constructs will be described separately for each company. Within the construct description, the situation at the time of lean and lean 4.0 is described.
4.1 Company A
Power distance. Based on the information gathered from the tour (Intern & Process
Improvement Employee, personal communication, December 2, 2019), employees were mainly concerned with their own tasks at the time of lean, and there were no multidisciplinary or cross-functional teams where employees had any form of responsibility. The use of Industry 4.0 created a flatter organizational structure within the company as meetings are held in which both employees and management are present. On their website (Company A, n.d.), they state that they have department meetings every week, and they send a newsletter with updates every month. Every six months, the management provides an update, and every year, employees do have a coach conversation where they discuss their functionality. They also work with cross-functional teams where employees have been assigned different tasks. Consequently, employees do have more responsibility: “And also give them some kind of responsibility
towards it, as well” (1C).
Uncertainty avoidance. At the time of lean, the company was not afraid of uncertainty. The
environment where they adapt quickly: “No. I also see it as a journey instead of that it could
be the source of this because it did not work out” (1D).
Assertiveness. At the time of lean, people did not resist as they did not fear the loss of their jobs
due to new technologies since these were not incorporated. Now, management sees a small change in this because some of the employees are inclined to display a higher degree of resistance because they are afraid of the new technologies and way of working: “I think you
want to implement it gradually, incremental steps, because I think that is also the only way it will work" (1D).
Institutional collectivism. As described earlier, employees were mainly concerned with their
own tasks and, when deemed necessary, there was cooperation between employees. The company mentioned that it now has more cooperation. However, this collaboration only focuses on collaboration between employees and robots: “We hope that we can facilitate our growth in
a company with some more cooperation between the robots and the employees” (1A).
In-group collectivism. As mentioned before, people were more committed as they did not fear
the loss of their jobs and encountered fewer changes. The degree of employee commitment changes due to the implementation. Managers expect that not all employees are committed, as they need to be trained to stay committed. This remark is also seen as a requirement by the company to be able to continue working: “They need to be prepared, and they need to be
educated, and those who are willing to do that can stay, of course, in the long term” (1A).
Future orientation. There were separate departments when the company was focused on lean,
so there was no mutual connection and, therefore, no good interaction between planning and production. Industry 4.0 has a small influence on future orientation. Employees have a bit more influence on the planning as they can make suggestions during meetings. Besides this, departments are interconnected and can check every database: "And every department is
connected, and they know the same stuff as well" (1D).
Humane orientation. Based on the website of company A (Company A, n.d.), they did change
company culture whereby employees have an annual meeting about their position within the company (Company A, n.d.).
Performance orientation. Employees are compensated based on a general rewarding system.
So, individuals get rewarded for their improvements, but the amount is not related to any individual measurements. The compensation system has not changed with the introduction of Industry 4.0. However, Industry 4.0 enables new opportunities, and the company is thinking of showing individual performance: “We have thought about gamification and showing them the
results of the order they have been working on, but we have never implemented it. What we have thought about is to let them see how productive they are, where they lost order, and what the day results were” (1A).
4.2 Company B
Power distance. The lean company was centralized and had a low degree of formalization. It
was also focused on actions and results rather than on its employees: “I would say company B
was a very action-driven company. So, were there a lot of actions running? Then it was okay. We were not always questioning whether they were the right actions. So, there were no clear standards and all this kind of things” (2A). Company B describes herself now as a lean 4.0
company where they use several employee engagement tools as they have day-to-day contacts, surveys, training, Intranet, and the unions and works councils (Company B, 2014). Employees have a short daily morning meeting, and every week there is more extensive meeting for the more prominent discussions and problems.
Uncertainty avoidance. At the time of lean, the company was forced to take some risks since
decisions were based on employees' interpretations. By using Industry 4.0, the company is able to make fact-based decisions based, which avoids uncertainty: “I think you take less risks
because you rely much more on fact-base decision-making. We have much more facts at the table when you take a decision. I like fact-based decision-making instead of emotional-based decisions. This will support a lower amount of risk” (2A).
Assertiveness. Employees felt they were less observed at the time of lean. Due to this,
more observed: "Things get more transparent, and people, in general, do not like that because
they feel that are more observed, and they feel less freedom” (2A).
Institutional collectivism. Company B states that the use of new technologies greatly increased
cooperation. From this, it can be concluded that there was less cooperation between employees and departments before the implementation. Departments were seen as separate entities: “I
would say you would have found departments in factories as a separate entity” (2A). In
addition, the company has implemented Industry 4.0 because of continuous improvement that also affects employees. Employees must continuously improve themselves through training courses. Furthermore, the company also works more closely with customers and suppliers based on e-commerce and an automatic ordering system. So, Industry 4.0 increases cooperation within this company: "By introducing lean 4.0, you have kind of daily meetings, weekly meetings,
monthly meetings that are structural implemented. You get a kind of certain base, and by introducing daily meetings on department level, but also on plant level, you get much more team making cooperation" (2A).
In-group collectivism. Before the implementation, the company had loyal and committed
employees. The new technologies do not affect this because of the long track record of their employees: “People were always committed to the company. A lot of employees have a long
track record with the company and are very loyal and committed to deliver” (2A).
Future orientation. This company was characterized by non-interconnected departments where
they had different goals: “So, they did not work as a team because they were driven by separate
KPIs” (2A). When the company changed to lean 4.0, they also increased interaction between
departments and planners. Every month, a so-called sales-and-operation-meeting is planned in which the planning for the coming month is discussed with the sales, operations, and supply chain department. Besides this, the new technologies also helped improving focus: “You get
much more alignment of priority. The different departments have the same priorities instead of having all their own priorities” (2A).
Humane orientation. Because the company now strives for a more open leadership style, it can
when they experience problems. Together with this, an open culture is required: “I would like
to get a more open and transparent leadership style” (2A).
Performance orientation. People on the shop floor were paid based on a general rewarding
system due to collective labor agreements. Managers receive an additional reward when they achieve specific goals. The rewarding system did not change after the implementation. Employees are still paid according to a general rewarding system as it is not allowed to pay them based on individual performance: “So, I would say for people working in production and
shift leaders; it does not influence it that much. You are legally not allowed to do that because of collective labor agreements” (2A).
4.3 Company C
Power distance. The company describes itself as a directive company with a top-down structure
at the time of lean: "We were a very directive organization from top-down to bottom” (3A). Nevertheless, Industry 4.0 changed company C to a company with a high degree of decentralization. It has a bottom-up structure with weekly meetings where they provide and discuss input. It works with an A3-A4-A5 structure. The A5 provides an improvement within five days, A4 within four weeks, and an A3 within three months. In this way, everyone in the company is able to pitch their improvement. What is also central, are the multidisciplinary teams where employees from different departments closely work together: "Everyone is
allowed to pitch their ideas, and they are discussed within those multidisciplinary teams. And who is going to do it. So yeah, everyone is encouraged to come up with any form of improvement" (3B).
Uncertainty avoidance. The company is very clear about avoiding uncertainty. Before and after
Industry 4.0, it avoids uncertainty as much as possible because of restrictions. It needs the customer's permission at all times because it must meet strict quality requirements. Therefore, the company takes no risks: “So, in that case, product-wise, we cannot take any risks because
our customer demands that we deliver a certain product with specification” (3B).
Assertiveness. Because the company was not changing, there was no reason for employees to
group of flex workers. The introduction of Industry 4.0 makes the flex workers anxious since they do not understand the impact: “So, I think the big challenge is when you do not see the
need of coaching at specific milestones. Because then you will get resistance of people that do not understand it” (3B).
Institutional collectivism. Since communication and the level of data transfer within the
company reduce after the implementation of Industry 4.0, it can be expected there was a higher level of communication, teamwork, and cooperation before the implementation. With regard to lean 4.0, the company focuses more on the entire supply chain and strives for close supply chain cooperation, where mutual dependency is essential (Company C, 2018). As mentioned above, miscommunication and overall communication within the company decreased: “A lot
of data transfer is reduced” (3B).
In-group collectivism. Employee commitment was higher prior to the implementation as flex
workers see the introduction of the new technologies as substitutes that might replace them in the long term: "We are in a really volatile market, so we have a flex group of people which is
not so committed to the organization as the people with a full contract" (3A).
Future orientation. The planning department were solely responsible for making the planning.
Employees were not able to do their planning. So, there was less interaction between the shop floor and the planning department before the change. Since every database is connected due to Industry 4.0, employees have more responsibility. They must report any changes to the planning department by themselves: “And now we implemented a process where the operators, who built
the cabinet, are responsible of having all the modules and they need to discuss that with planning. They really are becoming more and more involved and taking full responsibility of that process” (3B).
Humane orientation. Company C promotes fairness across the entire company. In their annual
report (Company C, 2013), they stated: "The company has an open culture that makes it
possible to report possible irregularities without jeopardizing the legal position of the person concerned.” The extent to which fairness is stimulated has not changed with the introduction
of the organization, such as engineering and logistics, is more flexible, more open, and there is more coaching” (3A).
Performance orientation. Again, employees are paid based on a general rewarding system as
everyone is part of an improvement: “So, we do not have a specific reward system based on
individuals because everyone is involved with an improvement” (3B). There is no change in
this specific payment method. Employees are not paid and rewarded based on individual or team performance, but on the overall performance of the entire company.
4.4 Company E
Performance orientation. Company E characterized itself as a hierarchical firm with a focus
on actions when they were fully lean. There was a high degree of centralization and the company had a top-down structure: “So, a very hierarchical organization, technology-driven,
and people are just a result” (5B). The company has been decentralized and thus flattened
after the implementation of Industry 4.0. Now, it has a bottom-up structure where employees have more tasks and improvements must come primarily from the shop floor: “As part of this
culture change, we implemented agile and scrum technology. Flattening the organization. Getting rid of hierarchy. So, we create scrum teams, cross-functional teams with the product owner in the business” (5B).
Uncertainty avoidance. In the past, the company used to be more dependent on the
interpretations of employees and less on facts as they mentioned: “In the end, you will be less
dependent on interpretations” (5B). Due to the implementation of Industry 4.0, they can make
better fact-based decisions, and they avoid more uncertain challenges that have fewer facts.
Assertiveness. Because employees did not have to deal with any changes, there was also no
resistance. Employees used to have a greater sense of freedom before Industry 4.0, as these new technologies ensure that employees experience less freedom: “It also restricts the freedom of
people.” Additionally, they feel they are monitored and controlled, which causes resistance: “The biggest resistance is that people sometimes say ‘I avoided because you are controlling.’” (5A).
Institutional collectivism. Cooperation and teamwork, both encouraged by the management,
a standardized way. The company mentioned the following about the importance of teamwork:
“Lean can only work if you have a team. So, they must work together” (5A). After
implementation, the company also introduced agile and scrum technology and cross-functional teams. It enhances teamwork within the firm and across the entire supply chain. These cross-functional teams include product owners that work together with employees of the company. Suppliers are also using more integrated technologies, for example, G.P.S. tracking: “And what
you see nowadays with I.T. implementations is that you also want to track the whole supply chain exactly by kilometer at G.P.S. tracking with transport companies. So, this whole chain will be more transparent” (5B).
In-group collectivism. Because good and consistent collaboration is vital for lean, the company
implemented core values. These are cooperation, enterprise, respect, dedication, integrity, appreciation, and flexibility (Company E, n.d.). So, employees had respect for each other, and they also helped others when needed: “And that is why we have those core values. You need
respect for each other. And even if one makes a mistake, the team has to say okay we will help” (5A). However, employees are starting to show forms of resistance after the implementation.
They feel they are continuously monitored, which feels like a hindrance and a lower degree of freedom to them.
Future orientation. At the time of lean, employees were not involved in future-oriented
behaviors because upper levels made all decisions: “And then you then you see that higher
levels in the organization are starting to make decisions” (5B). Departments and employees
are now much more parallel due to internal connectivity offered by Industry 4.0. Employees are able to track every product in the line: “So, you see that the whole process support in the
production line is now depending on I.T. certainly” (5B).
Humane orientation. Afore Industry 4.0, leadership was mainly focused on managing actions
and final results because it was a very action-driven company. Nonetheless, the leadership style has adapted from a steering to a more coaching leadership style where the training of employees takes a central point: “We also reformulate our mission and vision, and people are put first and
Performance orientation. This company rewards its employees for their contributions based
on a general rewarding system. This reward system has not changed due to the implementation of Industry 4.0. However, the company does see a change in the long term. They expect employees will be rewarded based on team performance: “The rewarding system is basically
moving to the team result instead of individual results” (5B).
4.5 Company F
Power distance. When focused on lean, no use was made of self-steering teams. Therefore,
power was more centralized at higher levels in the organization. The firm states they are more decentralized because employees have more tasks and responsibilities since there are self-steering teams: "So, we have more self-steering teams at the shop floor, and they determine who is
going to work on what. 'Here are the orders for this week and good luck with it.'" (6A).
Uncertainty avoidance. Before the implementation, the company thought in terms of
opportunities instead of obstacles as the manager said: “If we really see opportunities, then we
will do it” (6A). Industry 4.0 did not change this perspective as the company still adapts easily.
Assertiveness. Within the company, employees did not resist as the company changed a lot, and
many of its employees were open and used to change: "I think in general they are quite open
for change because we change a lot, so they are helpful" (6A). However, the level of resistance
increased as the company stated that some employees are not fully open to changes anymore:
“But what do you see with the people is that some people are really fond of new things and are willing to try it and others are like uhm, no” (6A).
Institutional collectivism. Within the lean company, they made use of the 3-1-1-3 rule, whereby
employees were cross-trained and worked and collaborated in various places. Through the use of Industry 4.0 technologies, company F got more integrated supplier data. Moreover, the type of cooperation changed as there is increased cooperation between people and the machine instead of between employees. On the other hand, the level of communication decreased because of the implemented technologies: "So, before you had to go to person A and she had
In-group collectivism. Employees within this company were always loyal. Industry 4.0 did not
change this: “Are they loyal? Yes yes. Very loyal. Did it change because of Industry 4.0? No, I
do not think so” (6A).
Future orientation. Planning and production within this company were not fully aligned before
the change. Due to the implementation of Industry 4.0, departments became better connected and parallel: “We are working at a central hub to connect all data sources to one hub, and then
based on that hub, you can ask any information from any data source and do smart things with it” (6A).
Humane orientation. There was also no change within the level of humane orientation. The
company already had an open leadership style and did not change because of the implementation of Industry 4.0. If employees experience annoyances or obstacles, they can report it to the management: "Quite informal. Informal indeed. It is quite open, so if they
experience any obstacles, they can freely discuss it" (6A).
Performance orientation. The general rewarding system did not change. Employees are still
equally rewarded based on the overall business performance: “And did the reward system
change because of Industry 4.0? No. Still the same” (6A).
DISCUSSION
TABLE 5.0.1
Overview low-high level of GLOBE constructs per organization
PD UA A ISC
Intra ISC Inter (S) ISC Inter (C) IGC FU HO PO Company A Lean H L L L - - H L L H Lean 4.0 L L H L - - L H H H Company B Lean H L L L L L H L L H Lean 4.0 L H H H H H H H H H Company C Lean H H L H L L H L H H Lean 4.0 L H H L H H L H H H Company E Lean H L L H H L H L L H Lean 4.0 L H H H H H L H H H Company F Lean H L L H L - H L H H Lean 4.0 L L H L H - H H H H 5.1 Power distance
The construct of power distance can be classified as high when leadership is centralized and there is limited delegation within the firm (Fikret Pasa, 2000). Low power distance is represented by a high degree of decentralization, flatter hierarchy, and increased flexibility (Fettig et al., 2018). Interestingly, all companies characterize themselves as companies with a high degree of power distance at the time of lean. Three of the five companies mention centralization as their business characteristic prior to the implementation because the focus was more on actions instead of employees.
The change impacted the degree of power distance of all companies. One of the results of Industry 4.0 is the implementation of multidisciplinary and cross-functional teams: “As part
of this culture change, we implemented agile and scrum technology. Flattening the organization. Getting rid of hierarchy. So, we create scrum teams, cross-functional teams with the product owner in the business” (5B). Due to the use of these teams, the level of employee
and makes it easier to manage and coordinate information effectively: "And now we are trying
to go bottom-up. So, people have daily, and weekly meetings in a more Kaizen structure to give input, see the results, and discuss the results" (3A). Everyone in the organization is encouraged
to come up with new improvements and suggestions. All this represents a higher level of employee empowerment. Besides this, Industry 4.0 ensures that employees who are not participating in teams can also work more autonomously as they are able to access specific data that is stored in databases by themselves. This supports current literature because Stock and Seliger (2016) state that Industry 4.0 enables decentralization where employees autonomously consider information for decision-making.
Proposition 1. Industry 4.0 reduces the level of power distance because of the autonomous
work style and the need for teamwork.
5.2 Uncertainty avoidance
Organizations with a high level of uncertainty avoidance prefer riskless situations and stability, and those with a lower level easily take risks and experiment with ideas (Wang, Su & Yang, 2011). Of the five companies in total, four indicated they previously had a low degree of uncertainty avoidance. Due to the implementation of Industry 4.0, the degree of uncertainty avoidance for companies with a higher level of digital maturity changed. Company B and company E, both companies with an integrated or transformed level of digital maturity, implemented the new technologies because they wanted to have more focus within their company as a higher level of digitalization is accompanied by a higher degree of uncertainty (PWC, 2013). Industry 4.0 contributes to this because there are more facts than there used to be, and there is thus more objective data available (Hermann et al., 2016). Companies gain a more comprehensive understanding of their environmental uncertainty and possibly appearing challenges. It helps organizations to make considerations that are supported by facts instead of making emotional-based decisions: “I think you take less risks because you rely much more on
fact-base decision-making. We have much more facts at the table when you take a decision. I like fact-based decision-making instead of emotional-based decisions. This will support a lower amount of risk” (2A). This corresponds to current literature as uncertainty within lean firms is
reduced by the use of advanced manufacturing tools (Ghobakhloo & Fathi, 2019).
changes: "Companies are very lean, and then something changes or something unexpected
happens, and you do not have any capacity to solve the problem" (4A).
Proposition 2. Industry 4.0 increases the level of uncertainty avoidance within higher
digitalized lean firms because of capacity restrictions and the need for more accurate decisions.
5.3 Assertiveness
Consensus is related to low assertive organizations, whereas individualism (Bortolotti et al., 2015) and self-decision-making are related to high assertiveness (Calza, Aliane & Cannavale, 2010). Successful lean firms are described in the current literature as organizations with a low degree of assertiveness (Bortolotti et al., 2015; Kull et al., 2014). This is also apparent from this study, as all interviewed companies have described a low degree of assertiveness before the implementation of Industry 4.0. According to the interviewees, the new technologies are supportive tools whereby the majority mentioned that it will not replace their employees because it is a concept that cannot be on his own, which helps employees to work faster, and prevents mistakes: “Lean 4.0 is to support the operator so that he does it in an even shorter
time and does not make mistakes” (3A).
Apart from the supportive element, all companies indicate there is resistance amongst their employees after the implementation. In the book "Cultures of Resistance in the Workplace" written by Courpasson and Dany (2009), stress and resistance of employees can be ascribed to a higher level of assertiveness within companies. Company B, company E, and company F state that resistance is caused by a higher degree of control within the company:
“The biggest resistance is that people sometimes say ‘I avoided because you are controlling.’” (5A). The same is confirmed by Trompenaars and Hampden-Turner (1998), as high resistance
and high control are both positively linked to each other. Industry 4.0 offers a high level of control as it ensures a higher level of transparency because everything is connected and everyone is able to access the databases (Dalenogare et al., 2018). Due to this and to add to current papers, employees feel they are more controlled since all data representing their task outcomes is recorded and stored, which impacts their privacy. The higher level of traceability is described as a restriction of freedom and increases assertiveness: “It also restricts the
freedom of people or makes it more transparent and better able to actually check what they do” (5B). In addition to this and the construct of uncertainty avoidance, Banerjee and Erçetin (2014)
companies, who describe a high degree of group control, can also be characterized as firms with a high degree of uncertainty avoidance.
The other two companies, company A and company C, describe that resistance is occurring because employees are not comfortable enough with the new techniques and do not fully understand the need and impact of Industry 4.0 which results in more anxiety within the firm: “Because then you will get resistance of people that do not understand it” (3B). All of this corresponds with the literature as Bovey and Hede (2001) state that resistance is caused by anxiety where employees are afraid of losing their job.
Proposition 3. Industry 4.0 increases the level of assertiveness because of employee resistance
and the need for more transparency.
5.4 Institutional collectivism
Within the construct of institutional collectivism, various findings are outlined. According to the article of Černe, Jaklič, and Škerlavaj (2013), a low degree is characterized by individualization and a reduction in communication. Whereas when institutional collectivism is high, collaborative relationships and teamwork are promoted (Naor et al., 2010). Based on the findings, all firms agreed that the training of employees is more crucial due to the intense complexity of Industry 4.0. Employees need to learn how to interpret the unknown facts and are more used to continuous improvement thinking because of the new concept that leads to a more skilled workforce. When looking specifically at intra-firm practices, company A and company F, both companies with a lower level of lean, noticed that the newly implemented technologies decreased the level of communication within their organization: “So, in that way,
the communication is less” (6A). Employees can work more autonomously as they are more
skilled and are also able to access the necessary data that other colleagues are also capable of reaching. Conjointly, the intensity and type of cooperation changed as there is more cooperation between employees and machines, which results in more individualization: “So, collaborative
robots working together with people” (6A). High individualism lowers the level of institutional
Proposition 4a. Industry 4.0 lowers institutional collectivism within low lean firms because of
the need for more autonomous intra-firm practices.
What is remarkable and also causes a shift in the degree of institutional collectivism, are the inter-firm practices within lean 4.0 firms. As mentioned earlier, Industry 4.0 firms need to make sure that data is available across the borders of the firm in order to stimulate the optimization of processes (Brettel et al., 2014). Company D also mentioned that Industry 4.0 induces communication. When considering internal relationships with suppliers, company B, company C, company E, and company F have shifted to a higher degree of institutional collectivism through the implementation of Industry 4.0. This because Industry 4.0 ensures that supplier data becomes more up-to-date, transparent, and integrated within their systems: "So, to get supplier
data, which is more automated into our system" (6A). The same applies to customer data as the
new technologies enable more customer involvement within company B, company C, and company E. Therefore, Industry 4.0 fosters supply chain integration that is related to a higher level of institutional collectivism. This is also confirmed by Tjahjono, Esplugues, Ares, and Pelaez (2017). Moreover, interpersonal relationships are also related to a higher level of assertiveness. Individuals seek to be together when they face a problem, as no one wants to take responsibility solely (Hofstede, 2001).
Proposition 4b. Industry 4.0 increases institutional collectivism within digitalized lean firms
because of the need for more supply chain integration.
5.5 In-group collectivism
High in-group collectivism is characterized by a high level of commitment (Naor et al., 2010). Even though the majority of companies indicate an ambiance where employees can freely provide insights and discuss experienced obstacles, company C and company E, both high lean firms, mentioned that after the implementation of Industry 4.0, in-group collectivism has lowered because the commitment of their employees has decreased. Employees, especially flex workers, see the new technologies as a hindrance: "We are in a volatile market, so we have a
flex group of people which is not so committed to the organization as the people with a full contract" (3A). As related to the construct of assertiveness, Industry 4.0 enables the
you get all the data” (5A). To add to the literature, Industry 4.0 ensures that a lower form of
in-group collectivism is experienced.
Proposition 5. Industry 4.0 decreases in-group collectivism within high lean firms because of
lower employee commitment due to the need for more control.
5.6 Future orientation
Prior to the implementation, all companies described a lower degree of future orientation because there was no good interaction between departments about the planning. The firms described themselves as organizations with separate entities with no internal connection. Future-oriented behavior is namely related to a higher level of future orientation because of better alignment and a more structured planning due to knowledge sharing and the involvement of employees (El-Mekawy & Rusu, 2011). After the implementation, the lean firms adapted to a higher level of future orientation since employees are more involved in planning processes:
"So, we have more steering teams at the shop floor, and they determine who is going to work on what. 'Here are the orders for this week and good luck with it.'" (6A). The companies indicate
that Industry 4.0 enables a higher level of internal connectivity and traceability as all data concerning capabilities, equipment, and targets is connected and can be accessed by every employee, department, and partner. Due to this, better priority aligned can be achieved: "Now
there is much more alignment on priorities, so there is much more discussion" (2A). Besides, a
higher level of utilization is also reached: “With Industry 4.0, you can better utilize your
equipment” (2A). Barreto, Amaral, and Pereira (2017) confirm this by describing that adequate
forecasts regarding available resources can be made by the use of Industry 4.0 systems. As described earlier within the construct of institutional collectivism, four out of five companies also describe that continuous improvement thinking is enhanced due to Industry 4.0, which again increases the level of future orientation (Flynn, Schroeder & Sakakibara, 1994).
Proposition 6. Industry 4.0 increases the level of future orientation because of the need for
priority alignment and a higher level of utilization.
5.7 Humane orientation
advanced data, technologies, and systems. For this reason, all companies strive for an open company culture where obstacles experienced by employees can be discussed freely. Additionally, all companies strive for fairness: "It is quite open, so if they experience any
obstacles, they can freely discuss it" (6A).
The leadership style that is exhibited by managers of lean firms is often described as
transformational leadership (Poksinska, Swartling & Drotz, 2013). This is limited to providing vision, stimulating innovation, and the idealization of influence (Bass, 1985), whereby stimulation of innovation is also an essential aspect of Industry 4.0 (Afsar, Badir & Bin Saeed, 2014; Lasi, Fettke, Kemper, Feld & Hoffmann, 2014). In order to stimulate successful integration, all companies mention that training courses are crucial. To provide even more support, company C and company E, both companies with a high lean level, changed to a more open and coaching leadership style: “So, the non-direct part of the organization, such as
engineering and logistics, is more flexible, more open, and there is more coaching” (3A).
Therefore, the leadership style within lean firms is moving to a style where both concepts are essential and thus shifts to a combination of transformational and transactional leadership, which is also known as knowledge-oriented leadership (Donate & de Pablo, 2015). This contributes to the article of Oberer and Erkollar (2018), as leadership style within the era of Industry 4.0 is focusing on innovation and the human side.
Proposition 7. Industry 4.0 increases humane orientation within high lean firms because of the
need for a more knowledge-oriented leadership style.
5.8 Performance orientation
Companies are characterized by a high degree of performance orientation if their employees focus on the company's goals and if those are rewarded for that. Low performance orientation organizations do not stimulate their workers to improve performance by the use of a compensation system (Bortolotti et al., 2015). Based on the cross-case analysis, all companies have a high degree of performance orientation. The introduction of Industry 4.0 did not affect this. Before and after the implementation, all companies paid their employees according to a general rewarding system, which is based on the overall performance of the organization: “So,
we do not have a specific reward based on individuals because everyone is involved with an improvement” (3B). Moreover, companies in the Netherlands are not allowed to reward their
collective labor agreements” (2A). Only company B explained that their management received
an additional bonus based on the achievement of their targets.
What might change is the way of compensation in the future. Two companies indicate that they have thought about showing and rewarding individuals or teams based on their performance as Industry 4.0 enables more data concerning individual performance measurements. In addition, the consultancy company also indicates that rewarding based on team performance would be more appropriate: "And when you think about the team effort, then
you should give the performance payment to the team" (4A). This payment method would result
in a more innovative and learning climate (Chen & Huang, 2009; Ma Prieto & Pilar Perez-Santana, 2014) which is part of Industry 4.0 (Lasi et al., 2014).
Proposition 8. Industry 4.0 does not affect the level of performance orientation because of
restrictive labor agreements.
5.9 Managerial implications
Many papers and publications can be found regarding the similarities and differences between lean and Industry 4.0. This study contributes to the current literature by supplementing information focused on how dimensions of the GLOBE model of House et al. (2004) adapt within successful lean organizations due to Industry 4.0. Aside from the theoretical contribution, this study also offers implications for managers. Managers might experience difficulties when they decide to implement Industry 4.0 as several constructs and practices are different compared to those of successful lean firms. In order to overcome this, it is fundamental for managers to analyze their situation in terms of organizational culture and decide whether they need to anticipate. When a good cultural fit between lean and Industry 4.0 is established, firm performance will increase further.
CONCLUSION
industrial revolution. Although it is a relatively new concept, it offers several opportunities for companies to further optimize their business processes. To ensure that lean firms are able to integrate both concepts, an analysis regarding the fit between a lean and lean 4.0 culture and how constructs might change is made.
Within this paper, organizational culture is measured by the GLOBE model developed by House et al. (2004). Only gender egalitarianism was left out. Successful lean companies distinguish themselves on four of these constructs: low assertiveness, high institutional collectivism, high future orientation, and high humane orientation (Bortolotti et al., 2015). What is clear from the analysis is that it is necessary to change the organizational culture of a lean firm in order to introduce Industry 4.0 as almost all GLOBE constructs changed to a lower or higher degree because of the implementation of the new technologies. These changes were noticed in companies that differ in the degree of lean and digital maturity. An exception to this was found in the construct performance orientation in which there was no change because of collective labor agreements.
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