learning from case studies - massachusetts institute of

Learning From Case Studies~ Enterprise Transformation at Rockwell Collins ~

George RothJayakanth

SrinivasanJanuary 21, 2009

web.mit.edu/lean © 2008 Massachusetts Institute of Technology George Roth/ 22-24 Oct 2008 - 2

Case abstracts athttp://lean.mit.edu

Company - organizational level and change

Summary

Case Study Timeframe

Garden State Tanning Plant case on leather automobile seats (Liker 1999)

Had fallen several months behind in production; first US supplier taught lean by Toyota engineers

4 years (1992-1995)

Delphi Saginaw Plant level case on automobile steering columns (Liker 1999)

Plant produced only for General Motors (GM), but because of quality and cost problems, GM was considering finding another supplier

7 years (1991-1997)

Donnelly (Grand Haven) Plant level case on automobile mirrors (Liker 1999)

Plant was launched to serve Honda, but subsequent delivery, cost and quality issues threaten Honda’s business

2 years (1996-1997)

Freundenberg NOK Company (multi-plant) case on automotive rubber and plastic parts (Liker 1999, Womack and Jones 1996)

Business was barely profitable and lean was seen as the way to become more profitable

5 years (1992-1996)

Western Geophsyical One production line producing underwater cables (Liker 1999)

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 (1991-1995)

Cedar Works Company (two plant) case on bird houses and animal feeders (Liker 1999)

Experiencing exponential growth, the small company could not keep up with demand

5 years (1993-1997)

Lantech Plant level case on pallet wrapping machines (Womack and Jones 1996)

The key patent of this founder-led company had just expired and the company faced competition for the first time

4 years (1991-1994)

Wiremold Main company plant producing wire management systems (Womack and Jones 1996)

Rising costs struck the once-profitable company; Art Byrne, who had previously learned lean from Japanese experts, took over

6 years (1991-1996)

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 (1991-1995)

United Electric Controls Plant level case on control and sensor production (Ryckebusch 1996)

Long lead times and high costs led to a record loss in 1987; a new VP of manufacturing, Bruce Hamilton, was appointed

10 years (19871996)

Gelman Sciences Plant level case on microfilter production (Liker 1999)

Did not want to fall behind the competition as US auto manufacturers had; adopted lean to become more generally competitive

5 years (1993-1997)

Porsche Assembly plant case (Womack and Jones 1996)

The strengthened Deutschemark led to decreased sales to its largest market – North America; sales plummeted

6 years (1992-1997)

Enterprise Change Case Studies

Raytheon & Paveway

Warner Robins ALC

Rockwell Collins

Ariens Company

Col. Guinn succeeded by Col. Swenson30 August 2005

HMMMV flow line operationalMay 2005

Lean launched on HMMMV RECAP programMarch 2005

$2.5 million total in refunds to Patriot & Avenger Reset programsAugust 2004

$0.99 million refund check on SOCOM GMVsFebruary 2004

$1.3 million refunds to Patriot RECAP programSeptember 2003

Lean launched on 3 other Patriot programsFeb-Oct 2003

Lean launched at LEAD on Patriot RECAP program*October 2002

Col. Guinn joins as Commander LEAD18 July 2002










LetterkennyArmy Depot

Finance case1. Leadership

developments at Letterkenny Army Depot (“LEAD”).

Cases builds off introduction of lean into Patriot missile recapitalization.

2. LEAD’s context: its work and the Army’s budget process.

3. LEAD’s finance innovations.

4. Extended enterprise implications of LEAD’s innovations.

testing predictiondescription theory

Research on

LeanResearch on

EnterpriseResearch on

Change

understanding description(understanding description) CEO

CFO

Quality/Manufacturing VP

George David

ACE Milestones

ACE-related Events

John Papadopolous

Fortune names UTC most admired in aerospace

UTC acquires Sundstrandforms Hamilton Sundstrand.

ACE across UTC

Yuzuru Itomoves to

CT

7/98: Ito University launched

20072004 2005 200620032000 2001 2002 20072004 2005 200620032000 2001 200219991996 1997 1998 19991996 1997 199819951992 1993 1994 19951992 1993 1994

Shingijutsu at Pratt & Whitney

新技術研究所Shingijutsu at Otis

ACE in cells ACE at site level12/06:

35 ACE Gold Sites

Chubbacquired

197919761976

Key business events

United Aircraftbecomes

1975

Tesfaye Aklilu

Ralph Wood

Dave Fitzpatrick Steve Page

Robert Daniell

divests automotivebusinesses

Kiddeacquired

Pratt formalizes Supplier

Gold

Tony Black

Flex mfg program in

North Berwick

3/07:

CEO & President commit to UTC as 70% ACE

Silver and Gold sites by end of 2009

ACE Director

Operations /Supplier Management VP

Steve Page Greg Hayes

Jim Geisler

Kent Brittan Jothi Purushotaman

Science & Technology VP Robert Hermann John Cassidy Michael

McQuad

Operations Transformation

Transformation at P&W North Berwick

Develop program for all P&W

UTC ACE Council Created

1988 Yoshiki Iwata demonstrates Kaizen at Danaher’s Jake Brake in CT seminar

1988 Nippon Otis problems teach Matsushita’s methods

“ACE”started in

P&W

UTC Corporate Leaders

RocketdyneacquiredRocketdyneacquired

Turn-backs Escapes

On-time Prod. Rev. Action Item

Closure

Class I EC' s

Std Work Action

Closure

Cost of Qual ity Warr anty Provision

Cost of Quali ty

E&D Rework

Cost of Quali ty SRR

10 Mon th FETT

Staf- fing

Train- ing

Test Hrs per En gin e

Mnth

30% red 95% 25% red 1 00% 25% red 25% red TBD 0 100% 20 hrs 30 hrs0.00%

3 3 0% 5 1 00% $1.2M 97% 17

0 0 0% 2 0% $2.4M 97% 190 0 100 % 0 1 00% $ 0 .0M 95% 160 1 No Data 3 71% No Data 99% 11

554 0 100 % 8 1 00% $0.1M $0.6M $1.7 M 11 99% 210 0 No Data 6 83% $0.7M $0.3M 2 82% 30 1 100 % 6 13% $5.2M $2.3M $5.2 M 2 93% 22

28 0 0% 6 22% $25.4M $2 2.5M $2.3 M 29 94% 120 0 100 % 3 1 00% $0.0M $1 3.7M $0.7 M 94% 10 23

5Aftermark et Service s

Sys tems Eng ineering2 001 Goal

SDCI

PSA

Modu le Cen tersSpace

Mech Co mpone nts

MPE

Eng CenterCSMC

TMC

CAN

Engineering Control TowerMetrics Summary ChartApril 2001

On Plan

Off Plan

Define MetricsMonitor Progress

Execute ProjectsPag e 210/3 0/0 1 Continuo us Imp rovement f or B usiness Resul t s. ppt

Define

Investigate

Verify

Ensure

DEF INEPROJECTS

INVEST IG AT ECAUSES

ENSUREIMPRO VEMENT

VER IFYSOL U TIO N

1

2

3

4

Disciplined Appro ach to Pr ocess Improvement

P riori tiz eO pp or tu nitie s

L ev erag eSucc es s

Financial PerformanceQuality Processes & Products Employee FulfillmentCustomer Focus

Financial PerformanceQuality Processes & Products Employee FulfillmentCustomer Focus

Establish Vision

Pratt & Whitney - 2001 RoadmapPratt & Whitney - 2001 Roadmap

Business Ethics Always

Business Ethics Always

Let The Eagle SoarLet The Eagle Soar

CU STOMER FOCUS

EMPLOYEE FULFI LLMENT

QU ALITY PROCESSES & PRODU CTS

FINANCI AL PERFORMANC E

C ustomer Scorecard > 5.5

Impr ove Emplo yee Sco re card by 0.5i n f oc us ar ea s

Ac hi eve Nex t L evel of ACE30 % reduc ti on in Es capes

Mee t Fi na nci al Co m mi tme ntsSa le s = $7 .8 B*

Change the Gam e:Be One Co mpany

Mee

t EH

&S

10X

Obj

ectiv

esM

eet E

H&

S 1

0X O

bjec

tives

• PW C demo nstrates AT FI & secures l aunch customer• Sp ace su cc es sful ly imple ments new acqui si ti ons• PW PS g rows i n n ew mark et se gm en ts• PW AS e xpands N os e-to- Tail ca pa bi l ity and achi ev es

f ina nc ial targe ts• CEB cert i fi es PW60 00 & launch es G P7000• ME deplo ys F1 19 & i nit iates JSF Eng ineering &

Ma nufac turi ng D evel op ment• Ex ecu te key a cquisi t ions & v en tures• Su cce ss ful ly compl e te res tru ctu rin g p rogra ms

• T arget 40% diversity ca nd ida tes on a ll sl ates• Achi ev e e ng ineeri ng restru cturi n g pr oducti vi ty• Earned va lue man agement system ( EVM S) imple mented• Ut il ize strate gic so urcing to drive mate ria l d efl ati on• Share info rmat ion wi th emplo ye es i n a n op en an d t imel y

m an ne r• Achi ev e ISO14001 ta rgets• M od ul e Cen ters will achie ve cos t & product i vi ty targets• Expand ACE in th e suppl y ba se• Execute y ea r 2001 p hases of ERP• An e-b usi nes s portal in pl ace for every customer

* Exclude s maj or ac qui si t ions

0.0 0%3 0% 5 1 00%0 0% 2 0%

0 100% 0 1 00%1 No Data 3 71%

55

0 100% 8 1 00% $0.1M0 No Data 6 83% $0.7M1 100% 6 13% $5.2M

0 0% 6 22% $ 25 .4M0 100% 3 1 00% $0.0M

2001 Goal METRICS

Prod

ucts

&Se

rvic

es

Process Management

QualityClinic

ProcessCharting(QCPC)

Market Feedback Analysis ( MFA )

6STotal ProductiveMaintenance (TPM)

RelentlessRoot CauseAnalysis (RRCA)

Set-Up ReductionProcess CertificationMistake ProofingStandard Work

PASSPORT

Five related case studies

1. ACE Operating System and its history

2. HMI: ACE in Production3. Internal Audit: ACE in

office work4. Turbine Module Center:

ACE in engineering5. Deficiency Reporting:

Pratt & Whitney, USAF, and DCMA cross-organizational improvement

United Technologies ACE

Rockwell Collins

http://lean.mit.edu/


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.


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.0.00

0.20

0.40

0.60

0.80

1.00

1.20

2001 2002 2003 2004 2005 Goal

P e r c e n t s o f 2 0 0 1 l e v e l s

Cust Accept On-time Deliv Material Flow

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

2001 2002 2003 2004 2005

Year-end employ

Sales / employee

Net income / eee

* Following 9/11-related charge.


1. Branding lean creates the score: Lean ElectronicsSM

1996 1999

3. Alignment or overalignment: the relentless pursuit of improvement

2000 2001 2002 2003 20041960s

CollinsRadio as

technological innovator

1971

Rockwell International

acquires Collins Radio

2005

Sale of Rockwell Int’l’s defense businesses to

Boeing

Merger of Rockwell Collins commercial

& defense businesses

ERP efforts start

Start of cross functional teaming

efforts

Visit to Boeing: “produce for less”

Lean ElectronicsSM

begins

Start of StrategicSourcing

Leadership team offsite:

“create something special”

First SAP go live

Core Process Optimization

begins

Value Stream Mapping and Scorecard to guide efforts

Rockwell Collins Spin

off

9/11 results in 15% workforce

reduction

Renewal of Vision

Lean Roadmap

and Enterprise Scorecard

Advanced ERP

CMMI Level 3

Certification

Vision and Values

Roadmap

4. Moving to an enterprise level: new challenges

5. Joining vision with analysis: creating the structure to endure

Life Cycle Value Stream

ManagementLaunch

Lean Cost Accounting

CMMI Level 5

Certification

19981997

Lean activities explored in

manufacturing

2. Outrunning a bear: crisis to continuous improvement

Engineering Cycle Time improvement

Six SigmaProgram

Shared ServicesReorganization

210 kaizen events

870+ kaizen events

600 kaizen events

28 kaizen events

210 kaizen events

870+ kaizen events

600 kaizen events

28 kaizen events


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”.


Lean Enterprise Change

What does it take?… capabilities in each of the following areas1. Rethinking organizational boundaries

•

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”

Company - organizational level and change

Summary

Case Study Timeframe

Garden State Tanning Plant case on leather automobile seats (Liker 1999)

Had fallen several months behind in production; first US supplier taught lean by Toyota engineers

4 years (1992-1995)

Delphi Saginaw Plant level case on automobile steering columns (Liker 1999)

Plant produced only for General Motors (GM), but because of quality and cost problems, GM was considering finding another supplier

7 years (1991-1997)

Donnelly (Grand Haven) Plant level case on automobile mirrors (Liker 1999)

Plant was launched to serve Honda, but subsequent delivery, cost and quality issues threaten Honda’s business

2 years (1996-1997)

Freundenberg NOK Company (multi-plant) case on automotive rubber and plastic parts (Liker 1999, Womack and Jones 1996)

Business was barely profitable and lean was seen as the way to become more profitable

5 years (1992-1996)

Western Geophsyical One production line producing underwater cables (Liker 1999)

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 (1991-1995)

Cedar Works Company (two plant) case on bird houses and animal feeders (Liker 1999)

Experiencing exponential growth, the small company could not keep up with demand

5 years (1993-1997)

Lantech Plant level case on pallet wrapping machines (Womack and Jones 1996)

The key patent of this founder-led company had just expired and the company faced competition for the first time

4 years (1991-1994)

Wiremold Main company plant producing wire management systems (Womack and Jones 1996)

Rising costs struck the once-profitable company; Art Byrne, who had previously learned lean from Japanese experts, took over

6 years (1991-1996)

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 (1991-1995)

United Electric Controls Plant level case on control and sensor production (Ryckebusch 1996)

Long lead times and high costs led to a record loss in 1987; a new VP of manufacturing, Bruce Hamilton, was appointed

10 years (19871996)

Gelman Sciences Plant level case on microfilter production (Liker 1999)

Did not want to fall behind the competition as US auto manufacturers had; adopted lean to become more generally competitive

5 years (1993-1997)

Porsche Assembly plant case (Womack and Jones 1996)

The strengthened Deutschemark led to decreased sales to its largest market – North America; sales plummeted

6 years (1992-1997)

Raytheon & Paveway

Warner Robins ALC

Rockwell Collins

Ariens Company



















LetterkennyArmy Depot

Finance case1. Leadership

developments at Letterkenny Army Depot (“LEAD”).

Cases builds off introduction of lean into Patriot missile recapitalization.

2. LEAD’s context: its work and the Army’s budget process.

3. LEAD’s finance innovations.

4. Extended enterprise implications of LEAD’s innovations.

Research on

LeanResearch on

EnterpriseResearch on

Change


Rethinking boundaries

Installing innovation sets

Pulling & pushing change

Seeking growth

Distributing leadership

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

The system of change

~ leads to a ~

lean enterprise system

testing predictiontheory(understanding description)

http://leanit.mit.edu © 2008 Jayakanth Srinivasan 12/12/08 9

Rockwell Collins has leveraged lean to support their enterprise transformation

… but…

Is Rockwell Collins a Lean Enterprise?


Sources of Secondary Data

Other PublicationsAcademic Publications

Annual Reports

Transcripts of Investor Calls

transcripttranscript

transcripttranscript

Newsletters

http://www.sae.org/


Source: Nightingale & Srinivasan

2008

7. Emphasize

organizational learning.

6. Cultivate

leadership to support and drive

enterprise behaviors.

5. Ensure stability

and flow within and across the

enterprise.

4. Address internal

and external enterprise

interdependencies.

3. Focus on

enterprise effectiveness

before efficiency.

2. Identify relevant

stakeholders and determine their

value propositions.

1. Adopt a holistic

approach to enterprise value

creation.

A Principles-based Approach for Understanding Enterprises


Holistic Growth Strategy

•

Balanced Portfolio

•

Mergers and Acquisitions

•

Stock Repurchase

“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


Meeting the Needs of Key Stakeholders

HUMAN CAPITAL•

Top Areas of Talent needs in A&D

•

Value proposition for people•

Redesigned Hiring Process in 2005•

Top Leadership Support

•

Climate of Organization Alignment•

Time-to-Fill to Time-to-Critical Skills Delivery

•

Ambassador –

Nan Mattai

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.•

Payroll deduction, donating unused vacation time

•

Contributed $2 million to local recovery efforts.

*Source: Conference Board Report on Strategic Human Resource Management, 2006

“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*


Focusing on Effectiveness: R&D

•

Rockwell’s R&D Budget in 2008-

827 million•

Expected 2008 expenditure –

950 million

•

2009 expenditure 925 mil. to $975 mil, updated from $950 mil. to $1 bil.

“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

http://www.lexisnexis.com/us/lnacademic/search/XMLCrossLinkSearch.do?bct=A&risb=21_T4965780489&returnToId=20_T4965787814&csi=6931&A=0.7025746860445572&sourceCSI=000000&indexTerm=%23CC0002OP5%23&searchTerm=Rockwell%20Collins%20&indexType=C


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

Open Innovation•

Initiated in 2005 to answer the question ofHow 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?


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

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