The Lean Enterprise 2.0

Those who were around in Enterprise 1.0 (and before) may recall that IT automation was only a part of the whole redesign of business information flow. Another key component was the whole "Lean Operations" concept - achieving smooth flow of goods and information, Just in Time. All the Lean techniques also relied heavily on information flow (without information flow, nothing flows) so its worth examining these areas in the light of the new technologies and opportunities that Web 2.0 brings. In this, our 3rd post on Enterprise 2.0, we look at whether the concepts it uses can have the sort of high impact that approaches like Lean operations have had.

For those who are only really familiar with Web 2.0, the point of this post is that unless these technologies - social media, wikis etc - actually do stuff that helps solve the real business problems that Lean operations address, they are at best second order considerations, at worst just toys - entertaining but ultimately of little lasting value to any enterprise.

Its also worth avoiding the buzzwords and multiple paths it all has taken since - Lean Telcos, Lean this, Lean that etc etc - and strip the concepts back to basics to understand how it may work today, as Web 2.0 represents a gear-shift in the way things can be done. As with any broad area, there are various flavours and schools and sects, but Lean can - broadly - be defined by 3 main concepts:



Flow

There are three key concepts in driving flow:

Kanban - literally the "card" that allows material to flow in the Toyota production system. But what this really represents is the way information is organised - Kanban cards only flow when material is required at the next workstation.

Just-In-Time (JIT) - the idea that not just production, but all material, is delivered "just in time" where it is needed. The main driver of the JIT process is that to make this happen, the systems have to be aligend so that all the items.

Kaizen - "continuous improvement" - understanding that any system is dynamic, and that the first steps will drive the next steps. In addition any system shifts over time, so needs to be altered rather than set in stone.

This is the "big picture" side to lean strategy- Attaining Flow:

"Just in Time" means connecting up the whole supply chain, so the information flows freely. In concept this means amalgamating the emerging Web 2.0 concepts (Trusted identity, social nets etc) being proposed in Vendor Relationship Management (VRM), Customer Relationship Management (CRM) - and not just for the enterprise, but along the supply chain. Old hands will recall the lessons of the Beer Game - if information only flows partially along the supply chain, imperfect decisions are made about ordering, provisioning, tinventory holding - leading to "boom-bust" cycles.

"Kanban" takes the concept into the Enterprise's "shop floor" - this is not just physical production, one of the benefits of digital information is that it is possible to track the production of digital goods too - the idea is to make workflow very clear, very visible so that if there are problems they can be rapidly acted on. In the Web 2.0 environment, this means allowing applications such as wikis to collate work, plus "user generated c" and cross- organisational "wisdom of crowds" to surface. Clearly internal social nets will be useful tools, especially given the structure of lean organsiastions around cell based workgroups (of which more later)

Kaizen - continuous improvement - is a philosophy rather than a technology, and maps closely to the Web 2.0 idea of the perpetual beta. In an Enterprise world the original offering probably has to be more complete initially than a consumer solution, however.

Eliminate Waste

At a tactical, executional level Lean Operations is all about the elimination of all wasted effort. There are three key concepts to Waste Elimination - muda or nonvalue-added work, muri or overburden and mura or unevenness.

Muda - Nonvalue added work, has 7 "deadly sins"

- Overproduction (production ahead of demand)
- Transportation (moving products that is not actually required to perform the processing)
- Waiting (waiting for the next production step)
- Inventory (all components, work-in-progress and finished product not being processed)
- Motion (people or equipment moving or walking more than is required to perform the processing)
- Over Processing (due to poor tool or product design creating activity)
- Defects (the effort involved in inspecting for and fixing defects)

Solving these issues relies on three capabilities - firstly, being aware of what is going on - ie creating visibility across the operational areas, secondly being able to collate the knowledge of staff (and the extended community), and thirdly being able to ensure that the enterprise can execute the changes.

Muri is defined mainly as the breaking down of tasks into their smallest constituencies, and standardising on how they are to be done before recombining them. The emergence of Open Source software, open standards, software libraries. This does not just apply to human work, but is also for example the underpinning of the low level XML transaction messages in a networked web service environment - in other words, the Semantic Web is unlikely to occur without a hefty dose of Muri across the information chain (It is for this reason that we believe the first Semantic Web execution will be in niche supply chains )

Mura refers to the need to make work flow from end to end by removing unevenness in the process rather than buffering it- the mathematics of parts flow in a factory, bits flow in an IP network, message flow in a commerce network are have the same basic systemic characteristics (and can be described by much the same maths). An interesting part of implementing this process is the use of "Andon" - lights - that signal where a process is under stress, and the process stops until this is fixed.

In Web 2.0 terms there are clear applications here for social networks, wikis, and any tool that allows information to move out of silos. The reduction in transaction and distribution costs in the broadband web also helps in this regard, as the economics of making information flow get to be increasingly better than the economics of storing it.

Organisation Design

The experience of early Lean Operation implementations taught enterprises that as well as the technical fixes, the organisation had to have the structures and culture to operate in this environment. Some of the main approaches used are:

WorkCells - teams are organised around the end to end task and are given the tools and training to all solve all the problems in the end to ned cycle, and are also usually kept in close proximity to minimise comms problems. The group is also made responsible for its own output. This combines forming social networks around tasks plus getting some form of "wisdom of crowds" effect to solve everyday issues. Use of ad-hoc tools in teams is also supported, which speaks to the ideas behind widgets, mashups and the like.

Quality Circles - much derided later, mainly because it was misunderstood, but the concept was to get the "user generated wisdom of crowds" effect in small scale (given only face to face comms were available) to fix problems. The Web 2.0 environment is a very effective way of allowing this to operate.

Lean Culture - In the West, Lean was seen as primarily tools and IT, in Japan it was - and still is - also seen as a way of working. Neglecting this has led to Lean operations in the West sometimes being discredited as just Taylorism gone mad, as it was too often used as a cost reduction tool without giving staff the tools (including rest and rewards) to do the job. Typically the culture has to be brought about by the correct performance measures, and in fact for system to work sustainably the organisation has to move away from highly heirarchical structures to more collaborative, knowledge based approaches.

In Conclusion

To have impact, Enterprise 2.0 tools need to show that they can bring new benefits to the major operational activities in enterprises. Lean Operations has been on of these high impact approaches.

Lean operations were developed in a world with far poorer information flows, so if Web 2.0 techniques can make it more effective, then clearly Enterprise 2.0 has a reason to exist apart from just being todays cool tech. This analysis suggests that Web 2.0 techniques can potentially add significant benefits.

That does not mean that some structural changes to move from consumer to enterprise grade, but it seems that there is useful potential.

It also does not mean that the Broadband internet will not change Lean Operatons , due to its own characteristics - after all, Kaizen is enshrined in the philosophy.