Womack et al. (1990) presented the transition from mass to LP by dwelling on the systematic extension of the lean principles from the final assembly to product design and development, the supplier network and customer sales. Their approach made a two-fold contribution to the lean research. First of all, it hailed LP as a total operations management system. Secondly and perhaps most importantly, it laid the foundations for what constituted the next performance leap for lean adopters.
Global economic competition coupled with open market trade agreements and technological advancements in transportation and communication systems created a new array of challenges for contemporary manufacturers. Reliable and highly customised products are new customer priorities which require high levels of manufacturing flexibility, responsiveness and modernisation of product delivery methods. Unable to withstand these immense pressures alone, manufacturers
engaged in strategic alliances with partners across the supply chain in order to improve their performance and competitive advantage (Browne et al., 1995).
These partnerships led to the emergence of a novel business model, the extended enterprise. Extended enterprises transcend organisational barriers and seek to integrate all those functions performed at various stages of the whole product life cycle including procurement of materials, product development and engineering, fabrication and assembly, sales, distribution, after-sale customer services and finally, disposal and recycling (Jagdev and Browne, 1998).
Building an extended enterprise requires a thorough review of business-as-usual operations as well as a commitment to open communication, innovation and technological change by all allied partners. Advancements in Business Process Reengineering (BPR) facilitated most of these requirements and sparked further interest in the extended enterprise model (Childe, 1998). However, proponents of the model identified intra-enterprise integration of all the functions within an organisation as the main precondition for its further integration with external allies (Jagdev and Browne, 1998).
The LP model imposed a similar requirement for the holistic adoption of the lean mantra by all sections and departments within the organisation. Nevertheless, Womack and Jones (1994) argue that for lean adopters this is not the end of the road. A new improvement path can be created by integrating the breakthroughs of individual companies upstream and downstream the supply chain. According to the authors, the next leap in performance can be achieved by embracing the lean enterprise organisational model which they envision as “a group of individuals, functions, and
legally separate but operationally synchronised companies” (ibid, p.93).
Jenner (1998) outlines the main principles governing the establishment and operation of extended enterprises. Building an enterprise involves substantial organisational restructuring so as to create closely linked flattened processes which facilitate coordination and flow of materials and information. The removal of middle management layers and the creation of multi-functional, self-managed teams enable the delegation of authority to lower echelons which have direct access to process-related problems and issues. Decision-making across the enterprise is subject to the process of amplification with different layers contributing to the assessment of choices with knowledge and information available at their level. Common focus and goals are identified as the key ingredient that holds enterprise partners together. Womack and
Jones (1994) propose that sharing the same business vision enables the group of allied companies to focus on maximising value for the customer.
Womack and Jones (2003, p.277) recommend that the fundamental LP principles of value and value stream will need to be jointly revisited by allied partners so as to be elevated to the enterprise level. They proceed to suggest that value should be linked to the target cost that is, the price the customer is willing to pay for the product. The target cost will in turn determine the level of profit. Iterative re-examination of the value stream will remove waste, minimise cost and thus maximise each partner’s share in the return-on-investment.
Having discussed what enterprises constitute, it is imperative to also clarify what they are not. Womack and Jones (1994) insist that despite being often compared to virtual corporations, lean enterprises differ dramatically from the former as they rely on long- term relationships between partners whereas the composition of virtual corporations is only temporary. Bititci et al. (2005) explain how extended enterprises differ from supply chains with the latter mainly focusing on maximising individual corporate goals whereas the former focus on maximising the performance and thus the competitive advantage of the overall extended enterprise.
Following a period of significant defence spending cuts, a similar programme to the IMVP was launched in the U.S. in 1993 focusing on the application of LP concepts in the field of aerospace. The Lean Aircraft Initiative (LAI) was organised as a consortium between the MIT and a range of collaborators including the US Air Force, the US Department of Defence and major US military aerospace contractors (LAI, 2012.). Its mission was to research, identify and disseminate best practice supporting the lean enterprise transformation which was deemed critical for the future prosperity of the sector.
From the early years of the consortium’s existence, its main academic collaborator, the Lean Advancement Initiative (LAI) based at MIT, published a series of publications providing guidance on the implementation of lean techniques including manuals and self-assessment tools for lean adopters (Nightingale, 2009). A key reference model supporting the transformation to the Lean Enterprise is presented in Volume II of the “Transition-to-Lean Roadmap” guide (Bozdogan et al., 2000). The guide organises transformation activities into three basic cycles depending on whether associated decisions and actions are strategic or operational, they involve external or internal stakeholders and require short or long-term implementation.
Figure 2.2 illustrates a schematic representation of the most up-to-date version of the transformation roadmap (Nightingale et al., 2010). In this version, the Entry/Re-entry, Long Term and Short Term Cycles of the original model are depicted as the Strategic Cycle, the Planning Cycle and the Execution Cycle respectively.
Source: Nightingale et al. (2010)
Figure 2.2 LAI Lean enterprise transformation roadmap
The Entry/Re-entry cycle describes actions resulting from the strategic decision to adopt the lean paradigm and transform to a lean enterprise. These include the creation of a new vision, focusing on the lean principles and securing top management support and commitment. The Long Term Cycle is concerned with all the preliminary preparation and change of internal environment conditions the organisation should carry out before embarking on the more detailed planning and implementation of the transition. The main actions performed in this cycle concern mapping the value stream so as to eliminate non-value adding activities from all business systems of the
Implementation Results Short-term Corrective Action Determine Strategic Imperative
Articulate the Case for Transformation & Convey Urgency
Focus on Stakeholder Value Leverage Transformation Gains STRATEGIC CYCLE
Cultivate Enterprise Thinking
Obtain Executive Buy-in Establish Executive Transformation Council Engage Leadership in Transformation Understand Current State Perform Stakeholder Analysis
Analyse Processes and Interactions Perform Enterprise Maturity Assessment Assess Current Performance Create Vision of Future State
Perform Gap Analysis Between Current and Future States Architect “To-Be” Enterprise Align Enterprise Structure & Behaviours Reconcile Systems, Policies & Vision Align Performance Management System Align Incentives Empower Change Agents Capabilities and Deficiencies Identified Enterprise Vision Create Transformation Plan
Identify Improvement Focus Areas
Determine Impact on Enterprise Performance Prioritise, Select and Sequence Project Areas Develop and Synchronise Detailed
Implementation Plans Transformation Plan EXECUTION CYCLE Envision & Design Future Enterprise Implement & Coordinate Transformation Plan Nurture Transformation and & Embed Enterprise Thinking
Monitor & Measure Outcomes
Nurture Transformation Embed Enterprise Thinking Capture & Diffuse Lessons
Learned Synchronise Strategic Strategic Implications of Implementation Communicate Transformation Plan Commit Resources Provide Education &
Training
Implement Projects & Track Progress
Long-term Corrective Action
enterprise and internal restructuring in order to replace silos of authority with horizontally linked functions performed by empowered teams. The Short Term Cycle comprises the detailed actions that need to be implemented to actually achieve the transformation. These actions need to be monitored and re-evaluated so as to take corrective actions in line with the lessons learned or adjust to dynamic external conditions. The key feature of this cycle is the focus on continuous improvement, the introduction of lean systems and tools in addition to personnel training.