Lean thinking in IT is the key to innovation and weathering this economic storm, according to experts and practitioners at several companies that have employed Lean principles during the past several years.
Lean thinking, a term coined by James P. Womack and Daniel T. Jones, means incorporating Lean principles into an enterprise. The goal for companies implementing Lean thinking is to eliminate waste in processes and procedures and maximize the value they're delivering to customers and the business.
Some of the companies successfully using Lean thinking in IT include TransUnion LLC, Harley-Davidson Inc. and Flextronics International Ltd. IT executives at each of the companies told their story and offered advice on getting Lean at Forrester's Business Technology Forum in Chicago last week. Here's a look at the three companies and how they're using Lean thinking in IT.
TransUnion: Leverage the recession to focus on better return on IT
In 2007, TransUnion, one of the three big credit bureaus, had seen 30 years of uninterrupted steady growth. But based on the credit information the company was collecting, executives there also saw the recession coming earlier than most companies.
As a result, the leadership team decided it needed to get IT adding more value to the business, plus a better return on IT investments. It also wanted to focus more on growing revenues and margins through IT investments.
John Parkinson, chief technology officer at Chicago-based TransUnion, described IT at his company as an information commerce business. TransUnion maintains credit histories for an estimated 500 million customers globally, processes billions of updates each month and provides solutions to more than 50,000 businesses worldwide. IT was extremely busy keeping systems running and always available. The group did not have time to respond to opportunities that the business wanted to pursue that were not in the anticipated growth plans.
So Parkinson and his IT organization adopted new tools, including some Lean principles, to detect where their work added value and where it had waste. "We needed to find every piece of waste we could take out," said Parkinson, "and determine if we [could] redirect that to revenue growths and margins."
Adopting Lean was a challenge and also a grass-roots effort. Employees wanted to do it but didn't want it to become a religion of sorts. They invested in Lean green belt certification for some of their employees to understand the theory of Lean and its tools, practices and concepts, and then pragmatically rolled out some of the Lean principles. The goal was to make life better for the 35% of company associates who work in IT and also offer better results to the business.
Two years into implementing Lean principles, they are beginning to build a set of habits. "We're using Lean thinking to answer questions like 'What is taking longer than it should? Where can we automate and standardize?'" said Parkinson.
TransUnion is also using the Agile methodology to adopt new technologies, like cloud computing and virtualization. The Agile methodology is often used in conjunction with Lean, as they are both methods for improving the effectiveness and performance of work processes. "We've built an expectation that when things improve, we'll respond quickly and effectively to new things in the market," said Parkinson. "Agile has helped us do that."
Flextronics: A Lean culture in manufacturing and IT
At Flextronics, a $31 billion electronic manufacturing services company that offers design, engineering and manufacturing services, adopting Lean principles for IT was an easy transition. Lean got its start in manufacturing, where companies used it to improve the production process and customer satisfaction, and Flextronics has a strong Lean culture across the 160,000-employee organization.
Strategies for Lean IT
In IT, CIO David Smoley leads the Lean thinking effort, tapping its principles both to answer strategic questions like how IT can bring value to the business and to help IT operations eliminate waste.
For example, Lean thinking has helped IT analyze the computing infrastructure and services it offers, to avoid (or remove) duplications and redundancies. Lean thinking also helps with speed to market. Lean is about cutting cycle times and eliminating waste, so Smoley's IT shop uses Lean principles to avoid lengthy implementations. "You don't want to get into a six-month analysis and review [of a new technology or upgrade]," said Smoley. Instead, IT seeks to stay agile through adoption of computing models like cloud computing.
It also needs to make some tough decisions. "You need to be willing to write off old assets and throw things out," said Smoley. He challenges his team members to consider what they can throw off the boat to get new things on board.
Yet even with a culture steeped in the Lean tradition, engaging the team can be difficult. "Lean is a mind-set and takes a long time," said Smoley. "You have to start one step at a time and focus on the return to the business."
Since implementing Lean as a process improvement methodology in 2007, Flextronics has seen a 36% reduction in IT operating spend, while still implementing a new supply chain tool, a single global human resources system, a wide area network refresh, a data center refresh and a global service desk. (For more of Smoley's advice, see sidebar.)
Harley-Davidson: Focus on community and customers
When you think Harley-Davidson, you think motorcycles. But at the Milwaukee corporate offices of Harley-Davidson, the focus in IT and the business is not on the bikes, it's on community, according to Jim Haney, vice president and CIO at the $5.6 billion company.
Harley-Davidson is using Lean thinking to take advantage of this down economy so it can position itself as a market leader when things rebound. For the IT part of this effort, Haney and his team are aligning IT projects with the business' strategic direction, running IT like a business, and organizing themselves to maximize their most valuable assets -- their people.
"Being Lean is being a good business person," said Haney, in his presentation at Forrester's forum. "It's common sense."
Haney and his team started their Lean efforts by looking at the individual IT systems that support the lines of business. Using Lean, they identified huge areas of duplication, silos and inefficiencies.
Then they did some consolidation. For instance, they consolidated 14 data centers into one virtual data center with two physical locations. These changes resulted in faster, better machines that cost less and offer higher availability.
When measuring what IT can bring to the business, Haney and his team do not measure in terms of percentage of revenue saved. Instead, they "talk the talk the business wants to hear" -- things like "How much [cost] can we take out of every motorcycle we sell." Then, when IT efforts help the company increase revenue, they can add cooler features to their motorcycles -- things their customers are asking for.
People are also a critical part of Lean thinking at Harley-Davidson, which has more than 10,000 employees. "You need to organize around skills and capacity," said Haney. Collaboration and advocacy play a big part in getting people on board and aligning IT with the business. "You have to have effective communications," said Haney. "Some people won't answer email or phones, but will do IM or virtual meetings."
Finally, "You have to listen to what the business wants," said Haney. "Sit in on business conversations and be part of the five- to 10-year planning process." By doing this, IT can start to see themes across various business units and come up with ideas to bring value to support all the units in a faster, cheaper and more efficient way.
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