Why It’s Time to Experiment with Lean Enterprise

by Barry O'Reilly

The use of software and digital services has exploded. It is now possible to build, evolve, and scale new products and services rapidly with little capital investment using technology and software. Startups target lucrative high-margin services, slowly eroding the profits of large enterprises that are unable to keep pace with the rate of change demanded by customers. This is driving established enterprises to re-examine their relationship and interactions with their customers and how they manage their people, products and processes so they can stay relevant and in business. Their search for continuous improvement has lead the market leaders to Lean.

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Simply put, Lean means creating more value for customers using fewer resources[1]. It focuses on the concepts of scientific experimentation, rapid learning cycles and adjustments that were pioneered by Toyota on their manufacturing floor. Today, more enterprises are using it in the context of information technology. Some have managed to improve value delivered through technology by applying the principles and concepts of Agile and Continuous Delivery. However, we find that there is still a gap in thinking about how to use technology as a strategic capability that prevents them from maximizing that value.

Too often we find IT is still viewed as an order-taking function or cost center to the business with no knowledge or relationship with the rest of the organization or customers. This lack of cross-functional collaboration and end-to-end thinking of processes and decision-making becomes a recipe for failure.

The most successful enterprises are those whose leaders focus on meeting customer needs by clarifying goals, shortening feedback cycles and measuring performance based on outcomes, rather than outputs.

We’re all in the technology business today. Even if our main business is tied to physical assets and people, it is technology the enables the delivery of our services to customers. Business leaders must have a good understanding of the capabilities of technology and create an environment that fosters learning and innovation to stay in the game. This requires fundamental changes in the way we manage and direct knowledge workers throughout our organization.

The most successful enterprises are those whose leaders focus on meeting customer needs by clarifying goals, shortening feedback cycles and measuring performance based on outcomes, rather than outputs. Failure to take an end-to-end view of business processes and how they affect all parties along the value stream results in an inability to adjust to customer needs in a timely manner, no matter how well your IT department performs. Rigid processes and structures designed to optimize functional silos such as finance, risk and compliance inhibit the ability of all teams to experiment and learn or prevent them from taking responsibility and accountability for the outcome of their work.

Lean thinking is a proven strategy that allows businesses to thrive in uncertainty by embracing change in a scientific and deliberate manner. The very heart of Lean thinking is to allow people to experiment to solve problems within the organization and improve the value delivered to customers. Set the direction you aim to go. Understand where you are and define a target condition to get to. We create an experiment to move towards that target condition. Finally, take the knowledge you learn to update your vision and inform your next step. It is an ongoing feedback loop and never stops, because change is always constant … as should be our evolution.

References

[1] http://www.lean.org/WhatsLean

[2] Originally posted for IBM Book Club#socbizbookclub #NewWayToWork  https://www.ibm.com/blogs/social-business/2016/05/09/why-its-time-to-experiment-with-lean-enterprise/

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