Learning From Case Studies
~ Enterprise Transformation at Rockwell Collins ~
George Roth
Jayakanth Srinivasan
January 21, 2009
Enterprise Change Case Studies
Company
- organizational level and change
Garden State Tanning
Plant case on leather automobile seats (Liker 1999)
Case Study
Timeframe
Summary
Raytheon & Paveway
Delphi Saginaw
Plant level case on automobile steering columns
(Liker 1999)
Donnelly (Grand Haven)
Plant level case on automobile mirrors (Liker 1999)
Freundenberg NOK
Company (multi-plant) case on automotive rubber and plastic parts
(Liker 1999, Womack and Jones 1996)
Western Geophsyical
One production line producing underwater cables
(Liker 1999)
Cedar Works
Company (two plant) case on bird houses and animal feeders
(Liker 1999)
Lantech
Plant level case on pallet wrapping machines
(Womack and Jones 1996)
Wiremold
Main company plant producing wire management systems
(Womack and Jones 1996)
Pratt & Whitney
Plant level case on aircraft engine production
(Womack and Jones 1996)
Had fallen several months behind in production; first US supplier taught
lean by Toyota engineers
4 years
(1992-1995)
Plant produced only for General Motors (GM), but because of quality and
cost problems, GM was considering finding another supplier
7 years (19911997)
2 years (19961997)
Business was barely profitable and lean was seen as the way to become
more profitable
5 years (19921996)
Research on
Enterprise
Research on
Change
Rockwell Collins
Cables produced by Western Geophysical (WG) then used by WG service
crews; poor quality and lead times were hampering the success of service
crews
5 years (19911995)
Experiencing exponential growth, the small company could not keep up
with demand
5 years (19931997)
The key patent of this founder-led company had just expired and the
company faced competition for the first time
4 years (19911994)
Rising costs struck the once-profitable company; Art Byrne, who had
previously learned lean from Japanese experts, took over
6 years (19911996)
Competition with General Electric and Rolls Royce was heightening; fell
behind in engine market for single-aisle commercial jets
5 years (19911995)
Long lead times and high costs led to a record loss in 1987; a new VP of
Plant level case on control and sensor production (Ryckebusch 1996) manufacturing, Bruce Hamilton, was appointed
Did not want to fall behind the competition as US auto manufacturers had;
Gelman Sciences
adopted lean to become more generally competitive
Plant level case on microfilter production (Liker 1999)
10 years (1987
1996)
The strengthened Deutschemark led to decreased sales to its largest market
– North America; sales plummeted
6 years (19921997)
Assembly plant case (Womack and Jones 1996)
Lean
Warner Robins ALC
Plant was launched to serve Honda, but subsequent delivery, cost and
quality issues threaten Honda’s business
United Electric Controls
Porsche
Research on
Ariens Company
Letterkenny
Army Depot
5 years (19931997)
Finance case
1.
Leadership
developments at
United Technologies
ACE
Letterkenny Army
Depot (“LEAD”).
18 July 2002
Cases builds off
introduction of lean into
Patriot missile
recapitalization.
Lean launched at LEAD on Patriot RECAP
program*
2.
LEAD’s context: its
Customer
Focus
Employee Fulfillment
Quality Processes & Products
Financial Performance
Col. Guinn joins as Commander LEAD
Market
Feedback
Analysis
( MFA )
Establish Vision
PASSPORT
October 2002
Pratt & Whitney - 2001 Roadmap
Mech C
o mpone nts
TMC
3
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8
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6
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6
3
83%
13%
22%
1 00%
25%red
Cost of
Quali ty
E&D
Rework
25% red
Cost of
Quali ty
SRR
TBD
6S
$0. 6M
$0. 3M
$2. 3M
$1.7 M
$5.2 M
$2.3 M
$0.7 M
30 August 2005
100%
11
97%
Test Hrs
Training perEn gin e
Mnth
20hrs
30 hrs
17
97%
19
95%
99%
16
11
99%
21
2
2
82%
93%
3
22
29
94%
94%
12
10
C ust om er Scorecard > 5. 5
QU ALITYPROCESSES &
P RODU CTS
Ac hi eveNex tL evel of ACE
30 % reduc ti on n
i Es capes
M ee t Fi na nci al Co m mi t me nts
Sa le s = $7 .8 B*
F INANCI AL PERFORMANC E
Change the G am e:
Be One Co mpan y
• PW Cdem o nst rat es AT FI & secures l aunch cust omer
• Sp acesu cc es sful ly m
i ple ment s new acqui si ti ons
• PW PSg rows i nn ew mark et se gm en t s
• PW ASe xpands N os e-t o- Tail ca pa bil ti y and achi ev es
f ina nc a
i l t arge st
• CE B cert i fi es P W60 00 & a
l unch es G P7000
• ME deplo ysF1 19 & i nit iat es JS F Eng n
i eering &
Ma nuf ac t uri ng D evel op m ent
• Ex ecu te key a cquisi t ions &v en t ures
• Su cce ss f ulyl comple te res tru ct u rin gp rogra m s
2001 Goal
• T arget 40% diversity ca nd d
i a tes on a l sl ates
• A chi ev ee ng n
i eeri ng restr u ct uri n gpr oducti vi ty
• E arned va lue man agement syst em ( EVM S) imple ment ed
• Ut il ize strate gic so urcing t odrive mate ria ld efl ati on
• S hare info rmat o
i n wi t hemplo ye es i na nop enan dt im el y
m an ne r
• A chi ev eI SO14001t a rget s
• M od ule Cen ters will achie vecos t& product i vi ty t arget s
• E xpand A C
E in th esuppl y ba se
• E xecut ey ea r 2001p hases of ERP
• A n e-b usi nes s portal in place for every cust omer
ME TRICS
* E xclude s m aj or ac qui si t o
i ns
23
„3
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„6
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„6
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„1 00% „$0. 1M
„83% „$0. 7M
„13%
„$5. 2M
„22% „$ 25 . 4M
„1 00% „$0. 0M
Let The Eagle Soar
5
Define Metrics
Monitor Progress
Relentless
Root Cause
Analysis (RRCA)
P ri ori tiz e
O pp or tu ni ti e s
De fin e
DEF N
IE
P ROJE CTS
1
2
1975
1976
Set-Up Reduction
Process Certification
Mistake Proofing
Standard Work
1979
Key business
events
1988 Yoshiki Iwata
demonstrates Kaizen
at Danaher’s Jake
Brake in CT seminar
VER IFY
S OL U TIO N
3
ENSURE
I MP RO V EMENT
4
I nv es tig ate
V e rify
E nsu re
L ev erag e
S ucc es s
10/3 0/0 1
Pag e2
Continuo us Imp o
r vement f or B usiness Resul t s. ppt
Execute Projects
UTC acquires
Sundstrand
forms
Hamilton
Sundstrand.
1988 Nippon Otis
problems teach
Matsushita’s
methods
Quality
Clinic
Process
Charting
(QCPC)
Dis ci pline d Appro ach to Pr ocess Improve ment
I NV EST IG AT E
CAUS ES
United Aircraft
becomes
March 2005
May 2005
Staffi ng
0
$2. 4M
Total Productive
Maintenance (TPM)
September 2003
August 2004
10
Mon h
t
FETT
$1. 2M
$0 0
.M
N
o Data
$0. 1M
$0. 7M
$5. 2M
$25.4M $2 2.5M
$0. 0M $1 3.7M
I m pr oveE m plo yee S co re card by 0. 5
i nf oc us ar ea s
EMPLOYEE FULFI LLMENT
Off Plan
StdWork Cost of
al tiy
Acti on Qu
Warr anty
Closure Provision
25%red
0%
0
0
0
28
0
Pr oducts &
Services
30%red
3
Space
Modu e
l Cen e
t rs
CA N
CS MC
EngCent er
Meet EH&S 10X Objectives
On-time
TurnProd. Rev. Class I
backs Escapes A
ction Item E C
's
Closure
2 001 Goal
Sys e
t msEng n
i eeri ng
SDC
I
PS A
MPE
CU STOMER FOCUS
OnPlan
Lean launched on 3 other Patriot programs
Af termark etServci e s
February 2004
Five related
case studies
Process
work
and the Army’s
1. ACE Operating System
Management
and its history
budget
process.
$1.3 million refunds to Patriot RECAP
3. program
LEAD’s finance 2. HMI: ACE in Production
innovations.
3. Internal Audit: ACE in
$0.99 million refund check on SOCOM GMVs
4.
Extended enterprise office work
4. Turbine Module Center:
$2.5 million total in refunds to Patriot implications
& Avenger Resetofprograms
LEAD’s innovations. ACE in engineering
EngineeringControlTower
MetricsSummaryChart
April2001
Feb-Oct 2003
Business Ethics Always
Case abstracts at
http://lean.mit.edu
Fortune
names UTC
most admired
in aerospace
Chubb
acquired
Kidde
acquired
Rocketdyne
acquired
divests
automotive
businesses
Lean launched on HMMMV RECAP program
Operations
Transformation
新技術研 究所
Shingijutsu at
Otis
Shingijutsu at
Pratt & Whitney
ACE-related
Events
3/07:
CEO & President commit
to UTC as 70% ACE
Silver and Gold sites by
end of 2009
7/98: Ito
University
launched
Yuzuru Ito
moves to
CT
HMMMV flow line operational
Flex mfg
program in
North
Berwick
ACE
Milestones
Transformation at
P&W North Berwick
Develop
program for
all P&W
“ACE”
started in
P&W
ACE
ACE in cells
across
UTC UTC ACE
Council
Created
ACE at site level
Pratt
formalizes
Supplier
Gold
Col. Guinn succeeded by Col. Swenson
12/06:
35 ACE
Gold
Sites
5. Deficiency Reporting:
Pratt & Whitney, USAF,
and DCMA crossorganizational
improvement
understandingÅdescription)
description ÆtheoryÆtestingÆprediction
(understanding
UTC Corporate Leaders
Robert Daniell
CEO
George David
Steve Page
CFO
Dave Fitzpatrick
Operations /Supplier Management VP
Jim Geisler
Jothi Purushotaman
Tesfaye Aklilu
ACE Director
web.mit.edu/lean
Greg Hayes
Steve Page
Kent Brittan
Quality/Manufacturing VP
Tony Black
John Papadopolous
Ralph Wood
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 2
Science & Technology VP
Michael
Robert Hermann
1992
1993
1994
1995
1996
John Cassidy
1997
1998
1999
2000
2001
2002
2003
McQuad
2004
2005
2006
2007
Lean-centered Success
•
Eight-year strategic initiative at Rockwell Collins (COL)
branded as Lean ElectronicsSM.
• “Operational Excellence through Lean ElectronicsSM” is a
strategic frame.
Interwoven improvement efforts, Lean and complementary to it.
•
•
•
•
Enabled successful responses to “burning platforms”:
• 1998 cost reduction challenge by Boeing
• 9/11/2001 airline industry reversal.
Said to have enabled its well-regarded operational and
financial performance.
Study finds continued applications and successes, but
challenges still exist.
web.mit.edu/lean
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 3
Successful Performance
≈1996 to 2005
•
•
•
•
As sales (+22%) and
headcount (-2%)
rebounded after 2001,
net income* (+205%)
soared.
Inventory turns
increased from 3.9x to
5.0x (28%).
Customer value
metrics trend to
“perfection”.
Peer comparisons are
favorable: 4th quartile.
3.50
3.00
2.50
Year-end employ
2.00
Sales / employee
1.50
Net income / eee
1.00
0.50
0.00
2001
1. 20
2002
2003
Cust Accept
2004
2005
On-time Deliv
Material Flow
1. 00
0. 80
0. 60
0. 40
0. 20
0. 00
2001
2002
2003
2004
2005
Goal
P e r c e nt s of 2 0 0 1 l e v e l s
* Following 9/11-related charge.
web.mit.edu/lean
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 4
5. Joining vision with analysis: creating the structure to endure
4. Moving to an enterprise level: new challenges
2. Outrunning a bear:
crisis to continuous improvement
3. Alignment or overalignment:
the relentless pursuit of improvement
1. Branding lean creates the score: Lean ElectronicsSM
1960s
1971
1996
1997
Rockwell
International Sale of Rockwell
acquires
Int’l’s defense
Collins
businesses to
Collins
Radio
Boeing
Radio as
technological
Merger of Rockwell
innovator
Collins commercial
& defense
businesses
ERP efforts start
Start of cross
functional teaming
efforts
1998
2000
Lean
ElectronicsSM
begins
210
28
kaizen
events
2001
870+
kaizen
events
Visit to Boeing:
“produce for less”
2002
Renewal of
Vision
Lean
Roadmap
and
Scorecard to Enterprise
guide efforts Scorecard
600
kaizen Value Stream
events Mapping and
kaizen
events
Start of Strategic
Sourcing
Leadership team
offsite:
“create something
special”
Lean activities
explored in
manufacturing
web.mit.edu/lean
1999
Rockwell Advanced
ERP
Collins Spin
off
2003
2004
2005
Life Cycle Value
Stream
Management
Launch
Lean Cost
Accounting
Engineering
CMMI
Cycle Time
Level 5
improvement
Certification
CMMI
Six Sigma
Level 3
Program
9/11 results in
15% workforce Certification
reduction
Vision and
Values
First SAP go live Shared
Roadmap
Services
Core Process Reorganization
Optimization
begins
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 5
Lean ElectronicsSM
at Rockwell Collins
•
•
Continual focus on improvement and waste
reduction.
Alternately vertical and horizontal in focus.
• Vertical: rapid process improvement events, core
•
•
process optimization, enterprise scorecard, lean
accounting, six-sigma, and rapid product development.
Horizontal: value stream mapping, integrated
performance management, LCVS management.
Contribution of Lean efforts: “priceless”:
• Costs not quantified.
• Part of how we work, not separate or dedicated
• Direct savings immeasurable but accepted.
• Mixed-in with other improvement efforts.
• Responsible for new business “wins”.
web.mit.edu/lean
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 6
Lean Enterprise Change
Company
- organizational level and change
Summary
Case Study
Timeframe
Garden State Tanning
Had fallen several months behind in production; first US supplier taught
lean by Toyota engineers
4 years
(1992-1995)
Delphi Saginaw
Plant produced only for General Motors (GM), but because of quality and
cost problems, GM was considering finding another supplier
7 years (19911997)
Plant was launched to serve Honda, but subsequent delivery, cost and
quality issues threaten Honda’s business
2 years (19961997)
Plant case on leather automobile seats (Liker 1999)
Research on
Lean
Research on
Enterprise
Plant level case on automobile steering columns
(Liker 1999)
Donnelly (Grand Haven)
Plant level case on automobile mirrors (Liker 1999)
Business was barely profitable and lean was seen as the way to become
more profitable
5 years (19921996)
Western Geophsyical
Cables produced by Western Geophysical (WG) then used by WG service
crews; poor quality and lead times were hampering the success of service
crews
5 years (19911995)
Experiencing exponential growth, the small company could not keep up
with demand
5 years (19931997)
Company (multi-plant) case on automotive rubber and plastic parts
(Liker 1999, Womack and Jones 1996)
One production line producing underwater cables
(Liker 1999)
Company (two plant) case on bird houses and animal feeders
(Liker 1999)
Change
Warner Robins ALC
Freundenberg NOK
Cedar Works
Research on
Raytheon & Paveway
The key patent of this founder-led company had just expired and the
company faced competition for the first time
4 years (19911994)
Wiremold
Rising costs struck the once-profitable company; Art Byrne, who had
previously learned lean from Japanese experts, took over
6 years (19911996)
Plant level case on pallet wrapping machines
(Womack and Jones 1996)
Main company plant producing wire management systems
(Womack and Jones 1996)
Pratt & Whitney
Plant level case on aircraft engine production
(Womack and Jones 1996)
Competition with General Electric and Rolls Royce was heightening; fell
behind in engine market for single-aisle commercial jets
5 years (19911995)
Long lead times and high costs led to a record loss in 1987; a new VP of
Plant level case on control and sensor production (Ryckebusch 1996) manufacturing, Bruce Hamilton, was appointed
Did not want to fall behind the competition as US auto manufacturers had;
Gelman Sciences
adopted lean to become more generally competitive
Plant level case on microfilter production (Liker 1999)
10 years (1987
1996)
The strengthened Deutschemark led to decreased sales to its largest market
– North America; sales plummeted
6 years (19921997)
United Electric Controls
What does it take?
Rockwell Collins
Lantech
Porsche
Assembly plant case (Womack and Jones 1996)
5 years (19931997)
Ariens Company
Letterkenny
Army Depot
Finance case
1.
18 July 2002
October 2002
… capabilities in each of the following areas
1. Rethinking organizational boundaries
Feb-Oct 2003
September 2003
February 2004
August 2004
March 2005
May 2005
30 August 2005
Leadership
developments at
Letterkenny Army
Depot (“LEAD”).
Cases builds off
introduction of lean into
Patriot missile
recapitalization.
Lean launched at LEAD on Patriot RECAP
2. program*
LEAD’s context: its
Col. Guinn joins as Commander LEAD
work and the Army’s
budget process.
finance
innovations.
4.
Extended enterprise
$2.5 million total in refunds to Patriot implications
& Avenger Resetofprograms
LEAD’s innovations.
Lean launched on 3 other Patriot programs
$1.3 million refunds to Patriot RECAP
3. program
LEAD’s
$0.99 million refund check on SOCOM GMVs
Lean launched on HMMMV RECAP program
HMMMV flow line operational
Col. Guinn succeeded by Col. Swenson
• Long-term system view that includes relationships across units and with
suppliers and customers as a common value stream
2. Installing sets of innovations
• Complementarities of changes beyond process improvement
3. Pulling and pushing change
• Based on deeper cultural assumptions that enable a virtuous learning
process within a “community of scientists”
4. Seeking growth opportunities
• The positive vision for continual renewal
5. Distributing leadership
• Interdependent roles in a system of leadership
Calling these the “five capabilities for enterprise change”
web.mit.edu/lean
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 7
Capabilities for
Enterprise Lean Change
Capabilities…
• are resources, talents, and abilities of an organization and its people
• that have the potential for development and use, and in their use,
• create expected outcomes while further developing themselves
Rethinking
boundaries
Distributing
leadership
The system of change
~ leads to a ~
Installing
innovation sets
lean enterprise system
Seeking
growth
Pulling &
pushing change
(understandingÅdescription)ÆtheoryÆtestingÆprediction
web.mit.edu/lean
© 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 8
Rockwell Collins has leveraged lean to support
their enterprise transformation
… but…
Is Rockwell Collins a Lean Enterprise?
http://leanit.mit.edu
© 2008 Jayakanth Srinivasan 12/12/08 9
Sources of Secondary Data
Annual Reports
transcript
transcript
transcript
transcript
Transcripts of Investor
Calls
Academic Publications
http://leanit.mit.edu
Newsletters
Other Publications
© 2008 Jayakanth Srinivasan 12/12/08 10
A Principles-based Approach for
Understanding Enterprises
1.
2.
3.
Adopt a holistic
approach to
enterprise value
creation.
Identify relevant
stakeholders and
determine their
value propositions.
Focus on
enterprise
effectiveness
before efficiency.
4.
5.
6.
7.
Address internal
and external
enterprise
interdependencies.
Ensure stability
and flow within
and across the
enterprise.
Cultivate
leadership to
support and drive
enterprise
behaviors.
Emphasize
organizational
learning.
Source: Nightingale & Srinivasan 2008
http://leanit.mit.edu
© 2008 Jayakanth Srinivasan 12/12/08 11
Holistic Growth Strategy
“grow revenue organically by reinvesting capital into
innovation, research, and development, instead of growing
revenue at all costs through large acquisitions”
– Schwendinger, Kanter and Reopel, July 2007, in
•
Balanced Portfolio
•
Mergers and Acquisitions
•
Stock Repurchase
http://leanit.mit.edu
© 2008 Jayakanth Srinivasan 12/12/08 12
Meeting the Needs of Key
Stakeholders
“Rockwell Collins’s future depends on its ability to retain and develop people and
on the ability of those people to provide winning solutions for customers around
the world”
- Clay Jones*
HUMAN CAPITAL
COMMUNITY – Iowa Floods
•
•
Manufacturing and
administrative facilities were
located away from the flood
plain and "largely unaffected"
•
Established a fund to help
employees who have suffered
losses from the high water.
•
•
Top Areas of Talent needs in
A&D
Value proposition for people
Redesigned Hiring Process in
2005
• Top Leadership Support
• Climate of Organization
• Payroll deduction, donating
Alignment
•
• Ambassador – Nan Mattai
http://leanit.mit.edu
unused vacation time
Time-to-Fill to Time-to-Critical
Skills Delivery
•
Contributed $2 million to local
recovery efforts.
*Source: Conference Board Report on Strategic Human Resource Management, 2006
© 2008 Jayakanth Srinivasan 12/12/08 13
Focusing on Effectiveness: R&D
“A company that is hitting on all cylinders at the
operational level: Strong execution, steady growth in
operating profit margins, a disciplined acquisition strategy
and an innovative product pipeline underpinned by robust
R&D spending” - Anselmo, 2007 in
•
Rockwell’s R&D Budget in 2008- 827 million
• Expected 2008 expenditure – 950 million
•
http://leanit.mit.edu
2009 expenditure 925 mil. to $975 mil, updated from $950
mil. to $1 bil.
© 2008 Jayakanth Srinivasan 12/12/08 14
Addressing Internal and External
Dependencies for Innovation
The 10X program
•
•
•
•
Initiated in 2004 to foster disruptive thinking
Launched with a budget of USD 500,000 –
funded 8/46 ideas
Expanded to US Engineering in 2nd year with
USD 1 Million - 70+ ideas
Third year - 180 proposals
http://leanit.mit.edu
Open Innovation
•
Initiated in 2005 to answer the
question of
How do we collaborate smartly so
that we can take ideas and come up
with innovative solutions for our
customers problems, faster and
cheaper than our competitors?
© 2008 Jayakanth Srinivasan 12/12/08 15
Other On-Going Research
•
Case studies of software organizations across
software services, product development, and
telecommunications
•
Case study on open source software (with Danny
Gagne)
•
Boeing Phantom Works Project on Rapid
Certification
http://leanit.mit.edu
© 2008 Jayakanth Srinivasan 12/12/08 16