Developing Capabilities for Lean Enterprise Change

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(1)Developing Capabilities for Lean Enterprise Change George Roth April 24, 2008.

(2) Enterprise Change Challenge • Adapting to ever-changing external environments • Managing increasing technological complexity • Coordinating across multiple stakeholders and interfaces • Working through collaborative networked enterprises. MOVING FROM THE PAST (vertically integrated) organizations. TOWARDS THE FUTURE (networked) enterprises. 2.

(3) Good Leadership Practices Survey: Which of the following good leadership practices do you find in your company? 1. 2. 3. 4. 5. 6. 7. 8. 9.. becoming an outspoken and charismatic company and industry leader paying-for-performance to ensure results emphasizing good strategy and well articulated long-term plans creating a relentless focus on “what to do” (core competence) using technology to drive change letting your mergers and acquisitions ignite change focusing your mgmt team on managing change, motivating people, and creating alignment using convincing names, tag lines, and launch events for change programs positioning yourself in promising, high-growth industries. Y/N Y/N Y/N Y/N Y/N Y/N Y/N Y/N Y/N. What is your organization’s score? _____ Nine “good” management practices not found in great companies (from Collins 2001: 10-11) 3.

(4) Collins’ findings 11 out of 1435 public companies (Abbott, Circuit City, Fannie Mae, Gillette, Kimberly-Clark, Kroger, Nucor, Philip Morris, Pitney Bowes, Walgreens, and Wells Fargo) changed into companies that produced sustained great results: – – – – – –. Level 5 Leadership First Who... Then What Confront the Brutal Facts The Hedgehog Concept A Culture of Discipline Technology Accelerators 4.

(5) Limitations of Planned Organizational Change Multi-organization Focus is onform: single enterprise • organizations: New organizational •forms Our correlate opportunities with are. CEO Executive Board 3 3 7 3. broad and can not be high performance addressed by single organizations. • •. 5 4. 2 3 3. 7. 3. 7. 2. 63 3. 3. 3. 7. 6 2. 6 5 5. 1. Single organizations are: Enterprises are: Hierarchical • •Poly-centric Highlyrelationships organized • •Multiple Tightlycoupled coupled • •Loosely. 51. 5. 2. 4. 2. 3. 7. 2. 2. 6. 1. 2. 1. 37. 73. 33. 3. Product 4 Development 3 7 3 Teams. 3. 3. 7. 6. 6. 1. 3. 33. 7. 1. 5. 5. 2. 3. 37. 2. 1. 1. 1. 1. 1. 6. 6. 5. 5. 4. 4. 3. 3. 2. 2. 1. 1. 1. 4. 3. 3 2. 2. 1. 2 1. 2. 5. 2. 3. 6. 5. 5. 42. 24 2. 3. 3. 2. 2 1 1. 1. Sales Engineering. 1. Product Division. 23 432. 3. 7. 6. 3. 5 5 24. 2. 2 2. 1. 1. 1. 1. 1 1 11. 1. 1. 3 7. 6. 6. 5. 5. 2. 4. 3 2. 7 3. 3. 4. 2. 3 2. 1. 23423. 6. 2 1. 1. 2. 1. 3. 3. 2. 2. 1. 1. 1. 1. 2. 1. 2 3. 3. 3. 7. 3. 1. Manufacturing. 5. 1. 4. 4. 2. 2. 4. 1. 2 2. 2. 3. 4. 2. 2 3. 3. 3. 1. 2 2 1. 1 1. 1. 2. 1 1 1. 6. 5. 3 2. 1. 2. 2 4. 2. 2. 1. 2 1. 6 5. 5. 4 3. 1. 1. 5. 22. 2. 1. 6. 7. 6 1. 2. 3 4. 3. 3. 7. 5. 3. 4. 3. 5. 7 3 37. 6. 2. 24. 3. 6. 2. 5. 2. 1. 1 3. 7. 3. 6. Product Division. 1 1. 7. 3. 7. 3. 7. 1. 2. 6. 1. 5. 2. 1. 3. 1. 1. 3. 3. 3. 7. 3. 2. PTM. 6 2. 4 Product 1 Division 3. 3. 6. 1. 1. 1. 1. 27. 3. 2. 2. 2. 3. 1. 33. 3. 7. 2. 3. 1. 4. 73. 6. 2. 1. 2. 1. 4. 2. PTM. 5. 1 4. 2. 1. 2. 3. 3. 7. PTM6. 2. 4. 1. Vice President Finance. 2. 5. 2. Vice President Materials Management. 1 2. 6. 5 5 2. 2. 4. 3. 7. 3. 1 1. 2. 6 6. 2. Vice President Manufacturing. Sales and Marketing. 6 5. 4 2. 3. 2Vice President. Vice President Research and 3 7 3 Development. 5. 2 3. 3 3. Functions. 3. 1. 2. CEO. 4. 2. 6. 4. 2. 1. http://lean.mit.edu. 3. 76. 1. 1. 1. 2 1 1. 1. 1. 1 1. 1. Purchasing Research and Development. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 5.

(6) Challenges of Enterprise Change CEO Executive Board 3. 7. 3. 6 CEO. 3. 3. 7. Functions. 3. 5. 3. 7 6. 6 Vice President Sales and Marketing. Vice President Research and 3 7 3 Development. 5. Vice President Manufacturing. Vice President Materials Management. Vice President Finance. 5 4. 2. 6. 3. 2. 4. 2. 2. Product 4 Development 3 7 3 Teams. 2 3. 3. 3. 7. 6. 2. 3 2. 5. 3 3. 6 6 5 2. 3. 2. PTM6. 1. 5. 2 PTM. PTM. 4. 2 3. 1. 1. 1. 3. 2. 4 2. 4. 1. 1. 3. 7. 2 5. 2. 1. 2. 2. 4 Product 1 Division 3. 3 3. Product Division. 3. 7. 7. 1. 6. 2 2. 1. 1. Manufacturing. Purchasing Research and Development. 1 Sales Engineering. 1. 1. 2. 1. 6. 6. 6. 6. 5. 5. 5. 5. 5. 4. 4. 42. 242. 24. 3. 3. 3. 3. 3. 2. 1. 1. 2. 2. 2 1. 1. 3. 1. 6. 2. 3. 1. 73. 7. 7. 3. 3. 2 1. 1 1. 1. 5. 1. 1. 37. 2. 3. 1. 1 1. 3. 2 3 3. 7. 2. 6. 1. 5. 3. 5 2. 1 1. 3. 6. Product Division. 2 2. 3. 3. 7. 5. 4. 2. 1. 1. 3. 5. 7 3. 2 2. 6. 5. 5. 4. 2 3 2. 1. 1. 1. 1. 1. 3 7. 6. 4. 2. 4. 2. 3. 6. 2 1. 7. 2. 4. 2. 1 3. 3. 7. 3. 2. 2. 1. 1. 1. 2 4. 2. 2. 3 3. 3 2. 2. 4. 3. 2. 3. 2. 2. 1. 2 1. 1 1. 1. 1. 1. 1 1. 1. 1. 1. • • Different assumptions about organizational • Enterprisescontext are: Organizations are: •. • Hierarchical Should assume • Highlynot organized • Tightly coupled. that we can. • Poly-centric bootstrap knowledge • Multiple past relationships • Loosely coupled. • Need a theory of change built upon premises of working both within and across organizational boundaries http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 6.

(7) Understanding Lean+Enterprise+Change. What can we draw upon?. Research on. Research on. Lean. Enterprise Research on. Change. •. Books/documented studies • Toyota and “lean” – i.e. The Machine that Changed the World, • • •. •. The Toyota Way, Remade in America, Collaborative Advantage Management/leadership – i.e. Built to Last, Good to Great, Execution, The Leadership Engine Corporate/leadership – i.e. Jack, Who Says Elephants Can't Dance? Strategy/Change – i.e. The Innovating Organization, Leading Change, Breaking the Code of Change, The Dance of Change. New case studies that develop and test concepts – successful “lean” change. http://lean.mit.edu. lean+change. change+enterprise. lean+ enterprise+change. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 7.

(8) Successful Enterprise Change So, what does it take? …beyond basics: consistency, people, training & metrics. • Rethinking organizational boundaries • View own organization with suppliers and customers as a contiguous value stream • extend the domain to include organization’s environment. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 8.

(9) An ‘enterprise’ is a set of connected organizations. Small, local businesses. Centralized hierarchical organizations. o. o. o. o o. 1900. o. o. o. o. o o. o. Complex networked enterprises. o. o. x. o o. o o. o. o. o o. o. o. 1950. Source: Thomas W. Malone, 2001 “Inventing the Organizations of the New Economy”. 2000.

(10) Enterprise Value Stream •. A portrayal of the relationships of the organization in its external environment. Value Value Value. and the general ordering of high-level processes across that organizational environment. Value Value Value Value.

(11) Enterprise Value Stream Enterprise Leadership & Governance Processes. Enabling Infrastructure Processes. Enterprise Leadership & Governance Processes Enabling Infrastructure Processes. Life Cycle Processes. Life Cycle Processes.

(12) Enterprise thinking What is outside my organizational (or functional) boundaries is not beyond my influence… or improvement ability! Product Product Markets Markets. Customer Markets. Capital Capital Capital Markets Markets Markets. … rethinking organizational boundaries. Integral Modular Modular (Lean) (Mass (Mass)). Enterprise Enterprise Enterprise Supplier Markets Supplier Supplier Markets. Markets. Labor Labor Labor Markets Markets Markets.

(13) Enterprise thinking… … evolving from lean improvement efforts Raytheon. Warner Robins ALC. Rockwell Collins. Ariens.

(14) Searching under the light.

(15) Successful Enterprise Change So, what does it take? …beyond basics: consistency, people, training & metrics. • Installing sets of organizational innovations • Complementarities of practices • extend the scope to include sets of changes as coherent programs. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 15.

(16) “Lean” as a system that extends beyond organizational boundaries MacDuffie (1995):. •. Combination of HR practices (bundles) and flexible production system technology (organizational logic) that explains economic performance. • Bundles: elements in an internally consistent HR system • Organizational logic: combination of use of buffers and work systems for mass, transition, or flexible production systems. MacDuffie & Helper (1998):. •. Honda’s supplier support system (“BP”) at Capitol, Progressive, Tower, Donnelly, SEWS & GTI:. • • • • • • •. Developing lean suppliers to support their lean production system Consistent with internal practices and philosophy Encourage fresh thoughts and engagement Gather data and keep records of production system changes Root cause (5 why’s) method Develop contextual knowledge (“go see”) Smooth flow and eliminate waste.

(17) New organizational forms • The ‘N’ Form or Network Form • The Horizontal Corporation • The Boundaryless Organization • The Cellular Form The Innovating Organization. • The Federal Form • The Virtual Organization. (Eds) Andrew Pettigrew and Evelyn Fenton London, Sage, 2000. • The Learning Organization • The Web. Innovative Forms of Organizing: An International Perspective (Eds) Andrew Pettigrew et al.. London, Sage, 2003 * Based on work by Andrew Pettigrew, University of Bath.

(18) European, Japanese and US Comparisons 1992-1997 • Overwhelming Finding (1,500 companies) – Common direction of change, but from different starting point and some variation in pace across the 3 regions.. • Evidence of parallel organizational change, but little evidence to support the thesis that firms are converging towards: • A Single Type, or • A Set of Organizational Practices. • Across the 3 regions is greater evidence of boundary and process changes than structure changes in the period 19921997.. 18. * Based on work by Andrew Pettigrew, University of Bath.

(19) Systemic change: Europe, Japan and US, 1992-1997 Europe. Japan. US. Structure (S). 30.3%. 6.2%. 16.5%. Processes (P). 74.9%. 53.7%. 82.3%. Boundaries (B). 44.9%. 30.7%. 57.0%. System 1 (S+P+B). 13.0%. 1.2%. 8.9%. System 2 (S+P). 25.1%. 4.7%. 12.7%. System 3 (P+B). 34.2%. 18.7%. 46.8%. System 4 (S+B). 16.4%. 1.6%. 11.4%. The 3 Dimensions. The 4 Systems. Very few companies adopting whole system of change. 19. * Based on work by Andrew Pettigrew, University of Bath.

(20) Systemic change and performance*: Summary of regression results The 4 Systems System 1 (S+P+B) System 2 (S+P) System 3 (P+B) System 4 (S+B). Pooled Sample of Western Firms. UK. US. ++ -. + --. + --. -. One symbol, + or -, indicates weak positive or negative significance; two symbols, ++ or --, indicate strong positive or negative significance.. • The adoption of a full set of changes (System 1) increases the probability of improving corporate performance • The adoption of partial systems (System 2 and System 3) is likely to reduce performance 20 * ‘High’ performance companies are in upper quartile of sector adjusted Return on Capital Employed.

(21) Strategic complementarities “Doing more of one thing increases the returns of doing more of another” Milgrom and Roberts, 1995. • Investing in one practice makes more profitable investing in another, setting off a potential virtual circle of high performance The Positive Proposition: • Changing only a few of the system elements at a time may not come close at all to achieving all the benefits that are available through a fully co-ordinated move. The Negative Proposition: • Partial moves may drive down performance Competitive Advantage Grows Out of a System of Activities as a Whole 21 * Based on work by Andrew Pettigrew, University of Bath.

(22) Two big issues for leadership in complementary change Complementarities Traps •. incremental change might lead to sub-optimal performance. •. some performance improvement could result in being trapped in a sub-optimal success recipe. •. changing external and internal contexts of firm requires keeping the “virtuous circle of change turning”. J – curve: things may get worse before they get better… •. BP: Walters Æ Horton Æ Simon Æ Browne. •. Need for strong leaders to endure transition. 22. * Based on work by Andrew Pettigrew, University of Bath.

(23) Rockwell Collins: complementary and cumulative sets of changes. web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 23.

(24) Change in global enterprises We need a system that • extends beyond our own organization (i.e. suppliers, partners, and customers) and • manages improvement and change as a set across our structure, processes, and boundaries So… how do companies manage change, and what is unique in an enterprise context?. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 24.

(25) Approaches to organizational change Lewin’s Change Model. Unfreezing. Positive Model. Initiate the Inquiry. General Change Model Entering and Contracting. Action Research Model Problem Identification Consultation with a behavioral scientist. Inquire into Best Practices Diagnosing. Movement. Discover Themes. Envision a Preferred Future. Data gathering & preliminary diagnosis Feedback to Client. Planning and Implementing Change. Joint diagnosis Joint action planning Action. Refreezing web.mit.edu/lean. Design and Deliver Ways to Create the Future. Evaluating and Institutionalizing Change. Data gathering after action. © 2005 Massachusetts Institute of Technology George Roth/032205 - 25.

(26) John Kotter Leading Change: Why Transformation Efforts Fail (1996). Effective Change involves eight sequential steps 1. Establishing a Sense of Urgency 2. Creating a Guiding Coalition 3. Developing a Vision & Strategy 4. Communicating the Change Vision 5. Empowering Broad-based Action 6. Generating Short-term Wins 7. Consolidating Gains & Producing More Change 8. Anchoring New Approaches in Culture.

(27) Successful Enterprise Change So, what does it take? …beyond basics: consistency, people, training & metrics. • Pushing and pulling change • Set in place the structure and process that enables virtuous learning and change • extend the tools to integrate the divergent change approaches. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 27.

(28) What kind of change process? Breaking the Code of Change Michael Beer, et al.. HBS Research Grant: conference in summer of 1998: 50 academics and 25 consultants and 6 CEOs, debating the different perspectives on change. comparative cases: Scott Paper, Champion Paper, Asda, GE Two dramatically different assumptions about the purpose for, and means of, organizational change emerged: • Theory E – based on Economic Value • Theory O – based on Organizational Capability. web.mit.edu/lean. Dimensions of Change. Theory E. Theory O. Goals. Maximize value. Develop capabilities. Leadership. Top down. Bottom up. Focus. Structure and systems. Corporate culture. Process. Programmatic. Emergent. Reward system. Financial incentives lead. Commitment leads and incentives lag. Use of consultants. Expert consultants analyze problems and shape solutions. Consultants support process to shape own solutions. © 2005 Massachusetts Institute of Technology George Roth/032205 - 28.

(29) What kind of change process? Theories E and O approach the problem of organizational change from two different, but equally legitimate perspectives.... neither achieves all the objectives of management in most cases! Dimensions of Change. Theory OE. Goals. Embrace paradox between value and organizational capability. Leadership. Set direction from top and engage people from below. Focus. Focus simultaneously on hard and soft. Process. Plan for spontaneity. Reward system. Incentives reinforce but do not drive change. Use of consultants. Consultants are expert resources who empower employees. We need to be both “pushing” (E) and “pulling” (O) change! web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 29.

(30) Frameworks for Lean Transformation: TTL Strategic/Episodic Learning & Change Long Term Cycle. Entry/Re-entry Cycle. Focus on the Value Stream. Adopt Lean Paradigm. Initial Lean Vision Decision to Pursue Enterprise Transformation Enterprise Strategic Planning. Challenge of understanding, enabling & managing flow-down and feed-back web.mit.edu/lean. Environmental Corrective Action Indicators Focus on Continuous Improvement. Outcomes on Enterprise Metrics. Develop Lean Structure & Behavior. Detailed Lean Vision. + Short Term Cycle Detailed Corrective Action Indicators. Create & Refine Transformation Plan. + Implement Lean Initiatives. Continuous/Process © 2005 Massachusetts Institute of Technology Learning & Change. Lean Transformation Framework. Enterprise Level Transformation Plan. George Roth/032205 - 30.

(31) Balancing Push & Pull Change: Using Force Field Analysis Social systems exist in a state of homeostasis - the ability or tendency of plans an organism to maintain equilibrium and I have Lean my Tools & Principles: hold to the status quo and priorities - We are all part of the same value canasI stream and each onlyHow as good maximize my our customers & suppliers. profit?. =. Change in the system comes from • Increasing enabling forces • Relaxing inhibiting forces web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 31.

(32) Successful Enterprise Change So, what does it take? …beyond basics: consistency, people, training & metrics. • Seeking growth opportunities • Project positive vision for continual renewal • extend the strategy to build in growth and development. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 32.

(33) Growth orientation We repeatedly find that: • Team and organizational development will get people • •. engaged and committed to improvement efforts People committed to improvements efforts can produce dramatic results Resources and opportunities to are needed to continue to vitalize development (feed growth) Strategic/Episodic Learning & Change. Enterprise Strategic Planning. Decision to Pursue Enterprise Transformation. Long Term Cycle. Entry/Re-entry Cycle. Focus on the Value Stream. Adopt Lean Paradigm. Initial Lean Vision. +. Environmental Corrective Action Indicators Focus on Continuous Improvement. Outcomes on Enterprise Metrics. Develop Lean Structure & Behavior. Detailed Lean Vision. Short Term Cycle Detailed Corrective Action Indicators. + Implement Lean Initiatives. Lean Transformation Framework. Create & Refine Transformation Plan. Enterprise Level Transformation Plan. Continuous/Process Learning & Change. web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 33.

(34) Growth orientation How do you balance pull change (continuous improvement, organizational capabilities, or theory O) and push change (strategic direction, economic value, or theory E)?. •. It is easier to align economic value creation and organizational capability development when there are growth opportunities.

(35) Growth orientation. web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 35.

(36) Growth orientation •. Warner Robins ALC. Suppliers Suppliers OEM Employees Share- Employees holders // Unions Unions. Zero Sum Game (Competition-based focus on splitting the pie) web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 36.

(37) Growth orientation. web.mit.edu/lean. © 2005 Massachusetts Institute of Technology George Roth/032205 - 37.

(38) Lean Timeline at LEAD. 18 July 2002 October 2002 Feb-Oct 2003 September 2003 February 2004 August 2004 March 2005 May 2005 30 August 2005 http://lean.mit.edu. Col. Guinn joins as Commander LEAD Lean launched at LEAD on Patriot RECAP program* Lean launched on 3 other Patriot programs $1.3 million refunds to Patriot RECAP program $0.99 million refund check on SOCOM GMVs $2.5 million total in refunds to Patriot & Avenger Reset programs Lean launched on HMMMV RECAP program HMMMV flow line operational Col. Guinn succeeded by Col. Swenson © 2008 Massachusetts Institute of Technology. George Roth 01/23/08 - 38.

(39) Lean Savings = “Refunds” to Customers. • • •. Lean reduces Utilized Labor expenses below their fixed-price allocations. Depot offers through MIPR* to perform Additional Work during current FY, at no added cost to Customer, which endorses and hands back its “refund check”. Additional work adds current FY labor demand and reduces its excess NOR. Lean Savings Returned to Customers * Military Interdepartmental Purchase Request, DD448. = $5.8M http://lean.mit.edu LEAD has changed the business by giving money back!. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 39.

(40) Successful Enterprise Change So, what does it take? …beyond basics: consistency, people, training & metrics. • Distributing leadership practices • Recognizing interdependent roles in a system of leadership • extend the leadership to all levels of the enterprise. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 40.

(41) Leadership Begins at Home. “Leadership is about capturing the imagination and enthusiasm of your people and turning that energy into action.”. “Make that action impress and astound your customers.”. Daniel Ariens.

(42) What did it result in?.

(43) Leadership Must Motivate Change Is This Enough Motivation?. China - $19.30 + Freight. USA - $31.47/Internal. APS/Lean - $15.72 One Piece Flow Cell.

(44) Leadership for Learning & Change Applying learning disciplines… …is leadership in learning organizations different from the leadership needed in organizations with other goals? Building an Ecology of Leadership What do we mean by leadership? CEO who drives change vs.. Human community capable of shaping its future (The Dance of Change, 1999).

(45) Fundamental Issues … paradox of the system… activities…are rigidly scripted, yet at the same time operations are enormously flexible and adaptive. … activities and processes are constantly being challenged and pushed to a higher level of performance, enabling the company to continually innovate and improve. … observers confuse the tools and practices … with the system itself..

(46) “Lean” cultural assumptions: 4 Rules at Toyota Rule 1: All work shall be highly specified as to content, sequence, timing and outcome Rule 2: Every customer-supplier connection must be direct, and there must be an unambiguous yes-or-no way to send requests and receive responses. Rule 3: The pathway for every product and service must be simple and direct Rule 4: Any improvement must be made in accordance with the scientific method, under the guidance of a teacher, at the lowest possible level in the organization Source: “Decoding the DNA of the Toyota Production System” Spear & Bowen, HBR 99.

(47) What is the “lean” culture? A culture is a set of basic tacit assumptions about how the world is and ought to be that is shared by a set of people and Artifacts storiesthoughts, people tell, determines their perceptions, feelings and behavior.. TOYOTA. visible organizational behavior, processes and structure (hard to decipher). Values strategies, goals, philosophies (espoused beliefs and justifications). Basic Assumptions (mental models) unconscious beliefs, habits, perceptions, thoughts, and feelings (ultimate source of values and actions). Culture manifests itself at three levels the level of the deep tacit assumptions that are the essence of the culture, the level of espoused values which often reflect what a group wishes to be ideally and the way it wants to present itself publicly, and the day to day behavior.

(48) Organizational Culture Model "occupational communities" generate cultures that cut across organizations. Artifacts. Operator sub-culture. Values. Executive sub-culture. Engineering sub-culture. stories people tell, visible organizational behavior, processes and structure (hard to decipher). strategies, goals, philosophies (espoused beliefs and justifications). Basic Assumptions (mental models) unconscious beliefs, habits, perceptions, thoughts, and feelings (ultimate source of values and actions).

(49) Approaches to Managing Organizational Effectiveness. Approach. Goals to Set to Measure Effectiveness. Description. External resource approach [Executive culture]. Evaluates the organization’s ability to Strategy, Analysis secure, manage, and control scarce and valued skills and resources. Internal systems approach [Operator culture]. Evaluates the organization’s ability to be innovative and function Innovation, learning quickly and responsively. Technical approach [Engineering culture]. &. • Lower costs of inputs • Obtain high-quality inputs of raw Planning materials and employees • Increase market share • Increase stock price • Gain support of stakeholders such as government or environmentalists. • Cut decision-making time • Increase rate of product innovation and OD coordination and motivation of • Increase employees • Reduce conflict • Reduce time to market. Evaluates the • Increase product quality organization’s ability to • Reduce number of defects Lean, 6σ, TOC, re-engineering & CPI convert skills and • Reduce production costs resources into goods and • Improve customer service services efficiently • Reduce delivery time to customer from Organizational Theory by Gareth Jones, 1997.

(50) Leadership for learning “Where are we going?. from e g n a h c ul f s f s o e c s c m u r S o f : 4 ree h t t s a Premise e l t sa e r i u q e r learning p. i h s r e d a e l. What are we here for?”. Not Enough Time. Strategy and Purpose. “We keep reinventing the wheel!”. Chapter 12. “We don’t have time for this stuff!”. Chapter 3. Diffusion. No Help (Coaching and Support). Chapter 11. “Who’s in charge of this. Business Results. Governance. Chapter 10. “We have no help!”. Chapter 4 Credibility. “We don’t know what we’re. Personal Results. tional a z i n a g r g the o n i n i f e tion, d c e t s r o r e p d , a n issio tive le • Execu ent, offering perm that . t s x y environm e a t n w o n c i n, and anges o h i t c a g u l n i a roject, p v p o e l a e v d e n d u o aders vity ar True i e t l c e a n i g l n l i a z i • Loc Believers galvan , s t l u s e and Nonr . y e t i c l i b fusing a f i t d n produ Believers u d o n c a c a y munit aging m o c g n i do not d and man l i s r u e b d a s e r l he line etworke t n t l a a h t n r e e r t • In ing su k a m , e c experien . Assessment and Measurement act alone “They won’t give up the. R3. New Business Practices. R1. “This stuff isn’t. Networking and Diffusion. Enthusiasm & Willingness to Commit. People Involved. Not Relevant Chapter 5. R2. Walking the Talk. Learning Capabilities. “I have no idea what these people are. “They don’t understand us!”. “We have the right. Investment in Change Initiatives. Chapter 6 “They’re not walking the talk!”. (Am I safe? Am I adequate? Can I trust others? Can I trust myself?). Chapter 9. “They’re acting like a cult!”. “This stuff is______. “This stuff isn’t working!”. Fear and Anxiety Chapter 7. Chapter 8. …all are needed in order to initiate and sustain deep change.

(51) Approaches to Managing Organizational Effectiveness. Approach External resource approach [Executive culture]. Internal systems approach [Operator culture]. Technical approach [Engineering culture]. Goals to Set to Measure Effectiveness. Description Evaluates the organization’s ability to Strategy, Analysis secure, manage, and control scarce and valued N skills anderesources. &. • Lower costs of inputs • Obtain high-quality inputs of raw Planning materials and employees • Increase market share • Increase stock price • Gain support of stakeholders such as government or environmentalists. tw o o de ccu rk le ve pa ad lop tio e Evaluates • Cut decision-making time hie thein na rsh g organization’s ability to be • Increase rate of product innovation l c ip ra alilearning innovative and rc function o Innovation, and OD coordination and motivation of – • Increase g m h c n quickly and responsively ica m m ro employees l a en uni •ssReduce ing conflict ut t w tie • Reduce time to market ho i t s h rit o ut y Evaluates the • organization’s ability to Lean, 6σ, re-engineering• convert skills and • resources into goods and • services efficiently •. Increase product quality &Reduce CPI number of defects Reduce production costs Improve customer service Reduce delivery time to customer. from Organizational Theory by Gareth Jones, 1997.

(52) Distributed Leadership: Countervailing directions for leaders implies a system of leadership with distinct roles Executive leadership to design and implement complementary sets of innovations • Top-down, planned change (Theory E). Local leadership empowered to continuous improvements • Bottom-up change and development of. CEO. 3. Functions. 3. 7. 3. capabilities (Theory 0) Create culture of learning and commitment to continual improvement Evolve efforts based on past success and insight into new opportunities 7. • to drive economic value • Set market strategy and financial • targets • Arrange position within value stream • Make needed systems and structural changes Middle leadership to implement changes and 6. V ice President Research and 3 7. 3. V ice President. V ice President. V ice President. Sales and. Manufacturing. Materials. Marketing. Development. 5. V ice President Finance. Management. 5. 4. 2. Product. 2. 3. 3. 7. 2. 3. 3. Teams. 3. 7. 3. 6. 6. 5. 2. 5. 1. 4. 4. 6. PTM. 5. 1. 1. 4. 2. 1. 3. 3 1. 3. 7. 7. 2. 4. 2. Product 1 Division 3. 3. 3. Product Division. 37. 73. 6. 6. 3. 3. 7. 3. 1. 1. 3. 7. • • •. 5. 3. 3. 6. 7. 7. 3. 3. 3. 7. 3. 6. 6. 3 7. 3. 6. 2. 5. 1 4. 2. 1. 6. 6. 3. 6. 5 1. 1. 1. 3. 3. 7. 2. 6. 2. 1. 1. 3. 6. Product Division. 2. 2. 1. 1. 2. 3. 3. 2. 2. 1. 3. 7. 2. PTM. PTM 6. 2. 2. 1. 3. 7. 5. 2. 1. 3. 2. 3. 4. Development. 3. 5. 4. 2. 6. 2. 3. 6. 1. 2. encourage innovation 4. 2. 4. 2. 2. 3. 3. 3. 5. 2. Follow direction from top and engage people from below (Theory OE) Mentoring and coaching local leaders with directions from executive leaders Prophesize future opportunities and provide feedback on current realities 5. 5. 4. 4. 5. 5. 5. 5. 4. 2. 2. 2. 2. 2. 2. 42. 24 2. 24. 2 2. 5. 2. 3. 3. 3. 3. 3. 2. 2. 2. 2. 2. 1. 1. 2. 2. 2. 4. 4. 3. 3. 2. 2. 1. 1. 2. 2. 1. 3. 1. 1. 1. 1. 1. 1. 1. 1. 2. 1. 1. 1. 1. 1. 1. 1. 1 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. 1. Network leadership to connect resources with opportunities • Working across executive, local and middle leadership levels, creating communities • Developing, testing and refining shared vision and alignment of efforts • Finding needed resources inside and outside of organization http://lean.mit.edu © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 52.

(53) Distributing Leadership Who are your leaders? • What tools and methods do they use? • How are they empowered? • How do they facilitate learning and change?. Middle Management. Executive Leaders. Line Leaders. Network Leaders. How are leaders aligned and their efforts integrated? http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 53.

(54) Successful Enterprise Change Rethinking boundaries Distributing leadership. The system of change ~ leads to a ~. Installing innovation sets. lean enterprise system. Seeking growth. http://lean.mit.edu. Pulling & pushing change. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 54.

(55) Implications for Executive Leadership: Architecting an enterprise through a change system • Strong, competent, and enduring leadership at all levels • Bridging occupational communities to foster learning • Managing the contention in roles of executive, local, middle and network leaders. Improving, learning and changing their organization and enterprise through these five capabilities: • Enterprise thinking • Complementary approaches • Pulling of change • Growth orientation • Distributed leadership. Sharing authority by establishing principles and modeling practices that executives adhere to and expect from all other leaders.

(56) Questions?. Discussion. http://lean.mit.edu. © 2008 Massachusetts Institute of Technology George Roth 01/23/08 - 56.

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