Lean, SR&ED, and Innovation

Written by:
Henry Foppoli, P.Eng, Engineering Manager

Over the last century, Lean Six Sigma management principles have been successfully adopted by numerous companies of varying sizes and across diverse industries to gain an advantage in an extremely competitive environment by increasing efficiency through the elimination of activities that do not add value. The strategic elimination of waste that is involved in transportation, inventory, defects, employee motion, idle time, over production, over-processing and non-utilized skills can provide companies with improved efficiency, technology, and services, while also reducing cycle times and operating costs.

Lean Six Sigma constantly challenges the current state of processes in order to eliminate non-value add activities (waste), progress to the next level, and innovate a process or a product. In doing so, companies frequently have to undergo technological uncertainties and obstacles that can only be addressed by means of experimentation, which is where Lean Six Sigma overlaps with innovation and SR&ED.

The SR&ED policy is outlined by a five-step framework for performing experimental work which is grounded in the scientific method of problem solving. This includes developing the most logical and simple assumptions to explain or prove unknowns, and performing experimentation to test those assumptions. Lean Six Sigma implementation can strengthen and streamline SR&ED activities and application processes to provide applicants with a better return on their SR&ED time investment. When leveraged effectively, these resources can provide companies with a significant competitive advantage and enable them to maintain a high ongoing level of efficiency and innovation.

Business Innovation 'Tool Box'

Lean Six Sigma offers a wide and flexible ‘tool box’ that can suit all types of industries. All processes, regardless of the type of industry they belong to, have points where they can be improved. For example, one of the core Lean Six Sigma strategies, the ‘Define, Measure, Analyze, Improve and Control (DMAIC) method is a data-driven quality cycle for improving processes, which is applicable to all types of businesses. What will differ from one company to another is the type of tool that is more convenient for each situation, but the DMAIC method remains the same.

Another crucial Lean Six Sigma method, ‘Design of Experiment’ (DOE), is highly effective at ensuring that experiments are laid out in accordance with the scientific method, and in compliance with the five-step SR&ED eligibility criteria outlined in the CRA policy. This tool is also useful for maintaining contemporaneous records of all the hypothesis testing performed by the claimant, which is becoming increasingly important for demonstrating SR&ED project eligibility.

Business Innovation Culture

The role of employees is crucial in Lean Six Sigma implementation. The Toyota Motor Corporation, a champion of Lean management principles, is well known for recognizing this by insisting that “Before we build cars, we build people.” This came from a core belief shared by many corporate leaders that developing your people can add tremendous value to your organization. This means not only providing employees with the resources that they need, but also developing a culture that challenges the employees and encourages problem solving and innovative ways of thinking. Many Lean companies have implemented the Plan, Do, Check, Act (PDCA) cycle as a core principle for improving processes or products and growing an engaged, problem-solving workforce that is better able to stay ahead of the competition through innovative critical thinking. Furthermore, since the PDCA cycle is based on the scientific method, which consists of a hypothesis (Plan), experimentation (Do), observation (Check) and adjustment of hypothesis based on conclusions (Act), it is therefore highly compliant with SR&ED policy.

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