Beyond the Lean Revolution: Achieving Successful and Sustainable Enterprise Transformation

Why Enterprise Transformation?

The whole is greater than the sum of its parts.

—-Aristotle1

PERHAPS YOU and your company are standing at the edge of the

proverbial cliff. Challenges beset you from within and without.

The competitive environment is changing. Your R&D organization

has an idea that has great promise, but you just can’t find a way

to capture the opportunity. Employees are finding it difficult to be

heard when they have ideas for making the business run more efficiently.

A supplier has advised you about a problem with providing

your manufacturing organization what you need, and you can’t figure

out where in the business that problem originates. How do you fix

something you can’t find?

Or perhaps you and your company are not standing at the edge

of the cliff. Maybe everything is humming along, but the general sense

is that the organization is not coming close to meeting its potential.

Even though you’ve been trying to improve your business processes,

things aren’t making it to the next level. All those Six Sigma black belts

are helping run projects, but the incremental changes don’t seem to

amount to very much. You’re not achieving the kind of total benefit

you thought you would.

We encounter businesses and organizations all the time that are

facing one or all of these challenges. Many of them have been working

hard to change. Again and again, though, they tell us they are failing

to sustain change. They feel as if they are taking two steps forward and

one step back. Their improvement projects suffer from false starts. Or

they get only so far, and then whatever they were changing plateaus

and cannot reach a higher level of efficiency or effectiveness. The bottom-

line effects are just not happening.

Why do improvement efforts so often fail to provide all the benefits

expected? Typically, it’s because businesses are trying to do things

in a piecemeal fashion—in silos. They spend a lot of time on things

that do not affect the bottom line or that are not linked to the company’s

most important strategic objectives. They may not even know

that their efforts are disconnected.

To be sure, you can make some improvements through these

sorts of efforts, and your company might even realize some big benefits.

However, the best opportunities to transform an organization are

usually found somewhere other than in the silos. Often, they are found

in the interfaces. They become clear only when you look at the entire

enterprise—a complex, integrated, and interdependent system of people,

processes, and technology that creates value as determined by its

key stakeholders. A stakeholder is any group or individual that can

affect or that is affected by the achievement of the enterprise’s objectives.

Value is the particular worth, utility, benefit, or reward that stakeholders

expect in exchange for their respective contributions to the

enterprise.

Enterprise transformation is the taking of an enterprise from its

current state to an envisioned future state, a process that requires a

significant change in mindset, the adoption of a holistic view, and execution

to achieve the intended transformational goals and objectives.

Transformation requires that you know the enterprise. You have to take

a step back and look at the big picture. You need to gain a deep

understanding of where things stand. What are your strategic objectives?

How are you currently performing against those objectives? How

should you be performing? How will you close the gap? What is the

current state of the different key components and levers that comprise

your enterprise?

We have seen many organizations undertake improvement projects

with a lot of fanfare but with little or no sense of the big picture.

We have seen them adopt lean—a term describing the philosophy centered

on minimizing resources and eliminating waste to create value.

We’ve seen improvement projects on the shop floor aimed at reducing

overall company costs by, say, a stated goal of 20 percent. Only after

later analysis did the businesses discover that less than 5 percent of

company costs could be attributed to direct labor. Talk about failing to

see the forest for the trees!

Why does this happen? It has to do with how the business world

has embraced concepts from lean manufacturing. All too often, we hear

senior business leaders talking as though all they have to do is figure

out a way to adopt the Toyota Production System (TPS, to which lean

traces its origins), and Toyota-like results will fall into place. This perspective

is very narrow and tends to miss the strategic element. Many

organizations embrace TPS but apply its concepts only to certain operations

in the organization, such as manufacturing, but not to others,

such as the leadership and enabling operations: Together, these constitute

the whole organization. Still others apply lean principles and TPS

to their manufacturing operations quite well, but they never look beyond

their internal organizations to embrace a broader perspective that

might include, for example, suppliers or other stakeholders. People in

business also tend to think that TPS is a bottom-up miracle worker,

missing the fact that it is driven strategically from the highest level of

the Toyota enterprise. It is only a means to enact the enterprise’s strategy,

not the strategy itself.

When we visit companies, we often see telltale signs that the

focus of change efforts is askew. One day, when we were invited to

visit Mega-Corp (a pseudonym for a company that makes aerostructure

parts and components and that employs some ten thousand people), a

group of managers presented the firm’s improvement plan. It sounded

plausible enough, but there wasn’t a senior leader of the company in

the room. That was the first clue that something was amiss. Then we

were given a tour that began in the manufacturing area (a typical starting

place, we’ve found). On bulletin boards, we found performance

measures posted, but they were either not very current or partially obscured

by other postings. In the office areas and elsewhere, we saw the

same thing. It was obvious that these metrics—the objective, quantified

data or information that an enterprise collects to support decision

making—were not at the heart of people’s daily work lives. No one was

paying much attention to them.

The types of metrics were telling too. Mega-Corp was measuring

machine and operator utilization on its manufacturing line, as well as

the quality of parts coming in from its suppliers. But where were the

metrics about Mega-Corp’s performance with respect to its suppliers?

When we visited the engineering department, we found nothing about

how well the company was supplying specifications to its suppliers.

On top of all that, no one in manufacturing or engineering

could explain how what he or she did on the job worked toward achieving

any vision or strategic objective. Yet Mega-Corp had a full-blown

set of improvement projects underway.

Build-Create Corp. (a pseudonym for a five-thousand-employee

firm in southern California that makes space system components) told

a different story. A worker on the manufacturing line described how

his work was part of the larger process and how people in his organization

had redesigned some of the process flow. He cited some specific

reductions in costs and cycle times that had been achieved and explained

where the company stood with respect to work-in-process. The

worker put everything he told us in a context that sounded like a strategic

objective that the enterprise expected to achieve four or five years

down the road. A production manager introduced us to someone on

his team who turned out to be a supplier. An engineer in Build-Create’s

R&D group explained how they had reduced their cycle time for new

product development.

The differences between Mega-Corp and Build-Create were palpable.

At Build-Create, everyone was enthusiastic about transforming

the enterprise. The employees used a similar vocabulary to talk about

change and improvement, suggesting to us that they were all on the

same page. They could share insights into processes, metrics, stakeholders,

resources, and other aspects of their enterprise, implying that

they had been part of figuring out analytically where things stand.

With ease, they put what they were doing into a larger context and

explained how it fit with a vision of the future.

At Mega-Corp, the senior leaders could go on and on about how

they are transforming their enterprise. But we saw no evidence beyond

some disconnected change initiatives related to lean.