Lean Business Technology

Clayton Locke, Managing Director Virtusa

A "Lean" approach to business process improvement and information technology drives superior business performance

In the 1940s, Toyota began implementing a new approach called Lean Manufacturing across its operations. Lean manufacturing helped create a culture of excellence at Toyota and eventually revolutionized the automobile industry. Applying fundamental concepts of waste elimination, quality management, measurement and continuous improvement across its operations has helped Toyota to out-perform their competition and become the most profitable automobile company in the world.

Lean manufacturing enabled Toyota to produce the highest quality automobiles at the right price, turning the old adage that there has to be a trade-off between quality, cost and speed on its head.

Many other businesses have now adopted Lean into their operations. For most industries, Lean is now table stakes to remain in competition. The principles of the Toyota Way, including Total Quality Management and a culture of Continuous Improvement, are recognised as absolutely essential to modern manufacturing and most service industries.

IT operations within these organisations also need to establish Lean principles as fundamental business technology practice. There is much to be gained: faster concept-to-market, reduced cycle time in business processes, improved quality of service and superior customer experience.

Lean Business Technology (LBT) can drive continuous improvements in business performance - and become as much a competitive asset for a firm as Lean manufacturing proved to be for Toyota.

What's new about Lean Business Technology?

Before diving into what is meant by a Lean approach to business and information technology, we should pause to consider why LBT has only recently moved beyond manufacturing and into the IT domain. What is currently opening up the possibility for applying Lean principles to IT? The short answer is Service Oriented Architecture (SOA) - but short answers never give the full picture. At a high-level, what is new is that business and IT are becoming component-based. To stay competitive business must be able to quickly assemble new products and services from process and IT components that already exist. When a new product is brought to market, a competitive business can no longer afford to create a new product silo of supporting processes and systems. They must re-use existing assets, or risk the higher costs of redundancy in their operations.

Software assembled out of re-usable components has been a theoretical concept for years, but only now is becoming a feasible reality. Where automobile manufacturing relies on re-using common standard components in an assembly, building complex software applications out of re-usable components has long been the issue. A service-oriented platform architecture makes this possible.

Years ago most automobile companies moved away from building cars out of parts designed for a single type of car, to component based assemblies. Components are typically combined into platform sub-assemblies (the chassis or engine, for example.) The final product is a complex assembly of interworking platforms, with components re-used across multiple products that are designed to use common platforms. Component based assembly enabled Toyota and other companies to focus on improving the quality and inter-operability of each component. Not all at once, but in a continuous and iterative cycle of improvements happening within a quality-oriented culture guided by Lean manufacturing methods.

LBT is now feasible because business and technology are becoming more component based. Component based assemblies of business process and technology, within a supporting business culture of change and quality, are now enabling modern businesses to step up to higher levels of performance. Businesses that do not adopt a Lean approach to IT risk rapidly falling behind their more agile and higher quality competitors.

How does LBT benefit business?

The overall objective of LBT is to make a business more agile and responsive at a lower cost to serve. These benefits are underpinned by IT simplification. Many businesses today are constrained by the complexity of overweight application portfolios. Overweight IT slows business down because of the high level of effort required to make changes to complex systems. Shifting to a Lean approach allows businesses to benefit from a simpler IT estate that enables higher performance core process. The proof-points are the benefits Lean concepts have brought to manufacturing processes - the challenge is in adapting Lean to the core process and systems of other industries.

A Lean approach also makes it possible for business and technology to take advantage of that seemingly unreachable goal of re-usability. A service-oriented enterprise is component based; core processes are assembled from the common capabilities of the business. For example, "Take-Customer-Order" is a capability of the business that can be used for each product or service sold to a customer. In a Lean approach, this common capability is assembled into the end-to-end customer process "Lead-to-Cash", which allows it to be continuously refined and improved. The software components are aligned to these common capabilities, so that the components can also be re-used to support any customer process that requires it.

System complexity and cost is often the result of redundancy - multiple applications that do the same things. When functional redundancy is eliminated, cost is reduced and the business and technology become Lean.

What is the scope of LBT?

LBT encompasses three key areas, these are: 1) Core Business Process, 2) Platform Architecture and 3) Lean Methods. Let's look in detail at what is involved in each of these areas and how together they drive superior business performance.

Core Business Process

The start and end point of LBT is the customer. A business that can deliver a superior experience to their customer, consistently and over time, will be the winner in their market. The customer experience of a business's product or service is ultimately the result of the core processes within the business that provide all of the interactions that the customer has with the business and its products or services.

LBT sets out to improve the customer experience by continuously improving how core process provides service to the customer. Taking a page from Lean manufacturing, continuous improvement is accomplished by setting out a core process framework for the business and measuring the quality, timeliness and cost within that core process to find areas for improvement.

With each new release of improved core process, the performance bar is raised and business technology teams reveal further areas for improvement. Rather than unrealistically setting out to re-engineer an entire core process in a once and done transformation, LBT establishes a culture of continuous incremental improvement that is more flexible and responsive to the changing priorities of the customer and business.

The core processes of a business are assembled from a set of common capabilities, each with a well defined service that it provides to the enterprise. Common capabilities are linked together under a business process management framework to provide the end-to-end customer services delivered by a core process. By measuring and continuously improving the performance of each capability, overall business performance, and thereby, customer experience is improved.

Attaining business improvement practically depends upon component-based IT that is architected along these same lines. A common capability often relies on IT systems to support its service provision - in an LBT approach these component-based systems form the platform architecture underpinning the core process of the business.

Platform Architecture

A common capability approach to building the enterprise requires a similarly component-based IT architecture, with Service-Oriented Architecture (SOA) being the common paradigm. Built out of components that provide well-defined standard services to the enterprise, service-oriented applications have the flexibility to enable the continuous improvement of LBT. Many businesses have siloed systems built up over the years - systems that are not connected easily and contain redundant functions that make the overall IT estate more complex and costly to maintain.

In a platform architecture, new and legacy systems are organised into a set of core platforms that provide a well-defined set of services to the rest of the enterprise. Within a core platform, redundancy is driven out by rationalizing systems to a single set of components - where each component provides a unique service for the core platform.

To be continued