Enterprise Integration for
Value Creation
Professor Debbie Nightingale
November 20, 2002
Deborah Nightingale - 2 ? 2002 Massachusetts Institute of Technology
Define Enterprise in a Lean Context
“A lean enterprise is an integrated entity
that efficiently creates value for its
multiple stakeholders by employing lean
principles and practices.”
Source: Murman et al., Lean Enterprise Value, Palgrave, 2002
Deborah Nightingale - 3 ? 2002 Massachusetts Institute of Technology
Customer
Product
Development
Supplier Network
Product Support
Finance, H/R,
Legal, etc...
Manufacturing
Operations
Integrated Enterprise
Deborah Nightingale - 4 ? 2002 Massachusetts Institute of Technology
Lean Enterprise System
A Lean Enterprise Requires the Integration of
– Processes
– People / Organization
– Information
– Technology
– Products
Holistic View
Enterprise as a System
Deborah Nightingale - 5 ? 2002 Massachusetts Institute of Technology
What Does It Mean to Integrate?
Why Integrate?
Where in the enterprise should
integration take place?
How much integration?
Who needs to be involved in the
integration process?
Deborah Nightingale - 6 ? 2002 Massachusetts Institute of Technology
Enterprise System Issues
Standardization
– Across products, processes, technology and
information management
Integration
– Within and across enterprise boundaries
Leadership
– Required for complex transformation
“Enterprise Engineering”
– New expanded tool set required
Deborah Nightingale - 7 ? 2002 Massachusetts Institute of Technology
Leadership Issues
Optimization across multiple stakeholder
objectives
Global communication and seamless
information flow
Change management and enterprise
transformation
Enterprise “value metrics”
Organizational effectiveness
Deborah Nightingale - 8 ? 2002 Massachusetts Institute of Technology
Multi-program Enterprises add Value beyond
that Created by Programs in Isolation
Multi-program enterprises can:
– Increase scope of possible value creation
activities by allowing specialization and
integration of expertise
– Enhance productivity through coordination
and creation of enabling infrastructures
– Manage knowledge creation and reuse to
achieve economies beyond those found in
markets
Deborah Nightingale - 9 ? 2002 Massachusetts Institute of Technology
A Key Issue in Multi-Program Enterprise Design is
Balancing Demands of Local Performance with
Enterprise Integration/Capability
Program enterprises typically
generate revenue streams
Multi-program enterprise typically
provides enabling infrastructure as
a service
Overhead policy provides support
for enterprise infrastructure
– Dilemma: how to prioritize
allocation of enterprise resources
between “direct” and “indirect”
functions
Important multi-program enterprise
value creating activity is integrating
knowledge and processes across
multiple enterprise boundaries
Deborah Nightingale - 10 ? 2002 Massachusetts Institute of Technology
Example of One Challenge……
Value Streams, Processes & Program Phases
F-16
Customers
C-130
Customers
F-22
Customers
JSF
Customers
New
Business
Product
Development
Product
Build & Deliv.
Product
Support
F-16
C-130
F-22
JSF
F-117
Customers
F-117
ADP
Customers
ADP
“J ”
Gov’tInt’l
Progr
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Mat’l. Mgmt.
Enabling Processes
Financial Integrity
Staffing, On-Boarding & Retention
Information Management,…
Gov’t
Progr
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“Standardize”
Deborah Nightingale - 11 ? 2002 Massachusetts Institute of Technology
3 Approaches to Enterprise Integration
Directive control: prescribe enterprise
behavior by policies, rules, and resources
Managing the architecture: direct enterprise
behavior when a few but not all stakeholders
are under direct control
Collaboration: influence key stakeholders’
behavior when they are outside direct control
Source: “Lean Enterprise Value”, Murman et al., Palgrave, 2002
Deborah Nightingale - 12 ? 2002 Massachusetts Institute of Technology
Directive Control is Used when Key
Enterprise Stakeholders are Under a Single
Management Structure
Have direct control over organizational and
aspects of enterprise and technology
architecture
Classic hierarchy structure
Top-down definition of roles, responsibilities,
policies and procedures, and incentives
Examples from product development starting
with the front end and running through design
Deborah Nightingale - 13 ? 2002 Massachusetts Institute of Technology
A High-Performing PD Front End Relies on
Deliberate Analysis Embedded in
Organizational Capabilities
Source: Wirthlin, J.R., “Best Practices in User Needs/Requirements”, Master’s Thesis, MIT, 2000
People and Organizational Culture
Fundamental Business Environment
Process Enabler
Process Enabler
The User Needs/requirements Discovery Process
(Prior to a Business Case Decision)
Requirements
Identification
Initial
Screening
Concept
Development
Business
Case
Development
Feedback
Process Flow
Deborah Nightingale - 14 ? 2002 Massachusetts Institute of Technology
Building Product Line Engineering
(PLE) Capability in Enterprises
Strategic Characteristics
Political
Characteristics
Cultural
Characteristics
PLE goals and metrics focus behavior;
resource and technology sharing designed
into organization and product architecture
Enterprise leadership
plays a key role in
defining responsibilities
and incentives;
consistency and follow-
through on PLE strategy
execution
Communication and training ensure that
employees can execute to PLE
objectives
Source: Beckart, Michelle, “Organizational
Characteristics for Successful Product Line
Engineering”, Master’s Thesis, MIT, 2000
Deborah Nightingale - 15 ? 2002 Massachusetts Institute of Technology
Co-Location Improves Integration
Category % Reduction
Cycle-Time
Process Steps
Number of Handoffs
Travel Distance
75%
40%
75%
90%
Scope: Class II , ECP Supplemental, Production Improvements,
and Make-It-Work Changes Initiated by Production Requests
Value stream simplified, made sequential/concurrent.
Single-piece flow implemented in
co-located “Engineering cell”
Priority access to resources
849 BTP packages from 7/7/99 to 1/17/00
Deborah Nightingale - 16 ? 2002 Massachusetts Institute of Technology
Modern Tools Improve Cycle Time
Months from End of
Conceptual Design Phase
Staffing
Level
Forward Fuselage Development
Total IPT Labor
Prototype
3D Solid
Release
Prototype
Wireframe
Release
EMD Wireframe
with 2D Drawing
Release
? Modern Programs Feature DMAPS
Processes/Tools
? 3D Solid Model Master
Definition - No Drawings
? Detail Available Much Earlier
to Support Full, Data-Driven
IPT Decisions
? Daily VR Reviews
? Virtual Manufacturing
? Improved Supplier
Coordination and Concurrent
Procurement
Prototype
3D Solid
Release - 2000 *
* Indicates results from vehicle of approximate size and work content of forward fuselage
Deborah Nightingale - 17 ? 2002 Massachusetts Institute of Technology
Implementation of Shared Services
? Map the HR&A Value Stream
? Identify & Eliminate Redundant Processes, Procedures and Shadow
Organizations
? Standardize HR&A Processes Across the Sector
? Establish Pull by Providing Those Services on Demand
? Level-Load Processes
? Lower Costs
Source: Ellis, R. Northrop Grumman, “Lean Enabled HR&A” Presentation at LAI Executive Rountable, Dec 13, 2001.
Deborah Nightingale - 18 ? 2002 Massachusetts Institute of Technology
Source: Beckart, op. cit.
Observations on Directive Control
Approaches to Enterprise Integration
Senior management buy-in to phase gate or PLE
process essential
Continuous review of how projects line up against
enterprise strategy
Discipline required to ensure new products fit within
strategic plan
Formal product development processes defined
Formal portfolio management processes in place
High performance using directive control involves
deliberate organizational and product design
Deborah Nightingale - 19 ? 2002 Massachusetts Institute of Technology
Manage the Architecture when Key Enterprise
Stakeholders are outside Hierarchical Influence
Key stakeholders (product line managers, risk-
sharing partners, etc.) fall outside the domain of
control of enterprise leaders
Limited control over organizational dynamics
compensated by emphasis on control over product
architecture
Ex: Toyota product centers
Focus is to re-use knowledge, verified designs,
existing infrastructure, and enterprise relationships
Tradeoff is efficiency (enabled through reuse) with
performance (in meeting a specific customer’s
demands)
Deborah Nightingale - 20 ? 2002 Massachusetts Institute of Technology
Concurrent Technology Transfer in the Auto
Industry Demonstrates NRE Savings
Improvements a result of concurrent technology
transfer and multi-project management
0
10
20
30
40
50
Percent
Reduction
Eng. Hours Develop.
Cost
Lead Time No. of
Prototypes
Cusumano and Nobeoka, “Thinking Beyond Lean,” 1998 Data based on 6-year MIT IMVP study of
17 auto manufacturers, 103 new programs .
Deborah Nightingale - 21 ? 2002 Massachusetts Institute of Technology
Taking a Lifecycle View Requires Perspective
Across Multiple Enterprises and Stakeholders