Notes

1 Systemic Change

1. The information about and descriptions of Ariens Company in this chapter are taken from research and case studies supported by the Air Force Research Laboratory (under agreement number FA8650–05–2–5706) and a consortium of other government and aerospace industry members. Telephone calls, a visit to Ariens operations in Brillion, Wisconsin, and discussion with Ariens managers included their review and approval of the case study working paper. Papers associated with these research activities include J. Hartwell and G. Roth, “Ariens Company: A lean enterprise change case study,” unpub-lished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA, August 4, 2006; J. Hartwell and G. Roth, “Doing more with less at Ariens: a leadership and transformation case study,” Organization Management Journal, 7 (2010), 89–109; and G. Roth and J. Hartwell, “Comments on ‘Off the rails: under-standing the derailment of a lean manufacturing initiative,’” Organization Management Journal, 7 (2010), 135–140.

2. In 2008, a McKinsey survey of 3,199 executives around the world found that only one transformation in three succeeds. Source is C. Aiken and S. Keller, “The irrational side of change management,” McKinsey Quarterly 2 (2009): 100–109. Similar statistics were found by R. T. By, “Organisational change management: A critical review.” Journal of Change Management 5 (2005), 369.

3. Specific statistics taken from quote, “Between 1999 and 2005, productivity increased over 200%, inventory turns improved over 300%, safety incidents had been halved (from their 2001 peak), sales increased over 200%, and profits improved by a factor of 10,” in J. Hartwell and G. Roth, “Doing more with less at Ariens: a leadership and transforma-tion case study,” Organization Management Journal 7 (2010), 93.

4. J. Womack, D. Jones, and D. Roos, The Machine That Changed the World: The Story of Lean Production: Toyota’s Secret Weapon in the Global Car Wars That Is Now Revolutionizing World Industry (New York: Macmillan, 1990), 13.

5. Comments by George David, at the time UTC Chairman and CEO, in Dean’s Innovative Leader Series, MIT Sloan School of Management, February 22, 2007; accessed at http://video.mit.edu/watch/insights-on-leadership-at-united-technologies-corporation-9224/ on June 25, 2014.

6. David, Dean’s Innovative Leader Series.7. Improvement statistics are based on changes from earlier ACE Bronze site measure-

ments. The source of these ACE Bronze to Gold improvements is from “ACE and Operations,” internal presentation made to UTC Board of Directors, September 13,

240 Notes

2006. ACE Gold certification requires achieving monthly goals for 12 straight months, and these goals includes operational and financial measures (along with safety, process, and employee measures). Business measures are a part of ACE Gold criteria; therefore, a correlation between business results and ACE certification levels is expected. These data and quote from G. Roth, “United Technologies Corporation Achieving Competitive Excellence (ACE) Operating System Case Study,” working paper, Massachusetts Institute of Technology, Lean Aerospace Initiative, November 30, 2010.

8. J. MacDuffie and S. Helper, “Creating lean suppliers: The Honda way,” California Management Review 39 (1997), 123.

9. J. MacDuffie and S. Helper, “Creating lean suppliers: Diffusing lean production through the supply chain,” in Liker, J. M. Fruin, and P. Adler (eds.), Remade in America: Transplanting and Transforming Japanese Management Systems, (New York: Oxford University Press, 1999), 160.

10. J. Pfeffer and R. Sutton, The Knowing-Doing gap: How Smart Companies Turn Knowledge into Action, (Boston, MA: Harvard Business School Press, 2000), 15.

11. A. Kleiner, “Climbing to greatness with Jim Collins,” strategy+business 25 (2001).12. C. Ackman, “The 20 most influential management books” Forbes Magazine, March 9

(2002), downloaded from http://www.forbes.com on April 18, 2010.13. Collins’ nine well-known management practices are 1) having outspoken industry

as well as company leadership, 2) linking executive pay to company performance, 3) developing well-articulated, long-term strategic plans, 4) focusing on “what to do,” 5) using technology to drive change, 6) igniting transformation with mergers and acquisitions, 7) focusing management team efforts on motivating and aligning peo-ple, 8) creating revolutionary tag lines, launch events, and programs for transforma-tion, and 9) repositioning the company into promising, high-growth industries. See J. Collins, Good to Great: Why Some Companies Make the Leap and Others Don’t, (New York: Harper Business, 2001).

14. See Jim Collins interview, “Web-exclusive interview: good questions, great answers,” Fast Company, September 30, 2001, downloaded from http://www.fastcompany.com /magazine/51/goodtogreat.html on March 27, 2009.

15. Los Angeles Times, “Dilbert’s creator strikes a believable pose in hoax” November 16, 1997, downloaded from http://articles.latimes.com/p/1997/nov/16/news/mn-54489 on March 26, 2009.

16. “Dilbert creator fools executives” Associated Press, San Jose, CA, November 15, 1997; downloaded from web.mit.edu/jcb/humor/scott-adams-mgmt-consultant on March 26, 2009.

17. De Geus calculates the average life expectancy of Fortune 500 firms to be 40 years, or about half the average life expectancy of human beings (Arie De Geus, The Living Company [Boston: Harvard Business School Press, 1997]).

18. Perot became nationally famous several years later, in 1992, when he became known for his outspokenness, in running as an independent party candidate for president of the United States.

19. Perot, who remained outspoken, using the seat he gained from the EDS sale on GM’s board as his bully pulpit, left with a controversial $700 M buyout in 1986. With ongo-ing tensions in technology and corporate cultures, GM spun off EDS in 1996. While GM ventures into other industries provided gains for shareholders, its core business automotive market share fell from 60% to 28% between 1960 and 2000. GM purchased EDS for $2.5 billion in 1984, and its stock was valued at $27.5 billion when spun off in 1996. Hughes Aircraft was purchased for $5 billion, and sold in pieces for $9.5 billion to Raytheon in 1997, $3.75 billion to Boeing in 2000, and $26 billion to EchoStar in

Notes 241

2001. In 1988, Perot started another endeavor, Perot System, which Dell Computer bought for $3.9 billion in 2009. Hewlett Packard purchased EDS for $13.9 billion in 2008 (D. Hakim, “With Hughes sale, G.M. buries a discarded strategy” New York Times, October 30, 2001), downloaded from www.nytimes.com on January 6, 2010.

2 Excellence Made Possible

1. In 1984, Business Week ran a cover story article on how 14 of the 43 excellent com-panies identified by Peters and Waterman “had lost their luster” in just one year (“Who’s excellent now?” Business Week, November 5, 1984). Collin’s Good to Great identified Circuit City as one of only 11 great companies out of the population of 1,435 Fortune 500 firms (J. Collins, Good to Great: Why Some Companies Make the Leap . . . and Others Don’t (New York, NY: Harper Business, 2001). Several years later, in 2008, Circuit City, the second-largest electronics retailer in North America, filed for bankruptcy. Failing to reorganize or find a buyer, the court liquidated its assets (K. Jacobs and E. Chasan, “Circuit City to liquidate, shutter stores,” Reuters.com, accessed June 26, 2014, http://www.reuters.com/article/2009/01/16/us-circuitcity-idUSTRE50F1VW20090116).

2. J. Womack and D. Jones, “From lean production to the lean enterprises” Harvard Business Review March-April (1994), 93.

3. The plants that opened in the 1980s included Honda plants in Marysville, Ohio (1982), East Liberty, Ohio (1990), and Allison, Ontario (1986); Toyota plants in Fremont, California (1984), Georgetown, Kentucky (1988), and Cambridge, Ontario (1988); a Mitsubishi plant in Bloomington, Illinois (1988); a Nissan plant in Smyrna, Tennessee (1983); an Isuzu plant in Lafayette, Indiana (1988); a Mazda plant in Flat Rock, Michigan (1987); and a Suzuki plant in Ingersoll, Ontario (1989).

4. When testing for correlation between productivity and quality across automotive plants, the researchers “found almost no relationship.” J. Womack, D. Jones and D. Roos, “The IMVP World Assembly Plant Survey in summary,” in J. Womack, D. Jones and D. Roos, The Machine That Changed the World (Cambridge, MA: MIT Press, 1999), 91–93.

5. Womack et al., The Machine That Changed the World, 13.6. This 1990 book was written to explain findings from MIT’s International Motor Vehicle

Program (IMVP) to general management audiences.7. Within five years of its release, The Machine That Changed the World was translated into

11 languages and sold over 600,000 copies.8. A search on June 26, 2014, of “lean” in business and management books on Amazon.

com produced a list of 929 titles.9. S. Spear and K. Bowen, “The DNA of the Toyota Production System” (Harvard Business

Review Sept-Oct. 1999), 99.10. The term “lean enterprise” was in the title of a 1994 Harvard Business Review article,

“From lean production to the lean enterprises” (Womack and Jones, “From lean produc-tion to the lean enterprises,” 93–103). In that article, the authors describe how lean meth-ods applied to more than a single company and to the value stream that crossed many companies and created and required a new organizational model: a lean enterprise.

11. “Episode 403—NUMMI” This American Life, March 26, 2010, accessed March 28, 2010, http://www.thisamericanlife.org/radio-archives/episode/403/nummi.

12. A specific quote is from P. Adler, “The ‘learning bureaucracy’:New United Motor Manufacturing, Inc.,” in B. Staw and L. Cummings (eds.), Research in Organizational Behavior (Greenwich, CT: JAI Press, 1993), 185: “William J. Usury, Jr., an arbitrator who helped establish the terms of the Letter of Intent, has also been quoted to the effect

242 Notes

that Toyota would have preferred to hire none of the GM-Fremont workers and indeed to avoid UAW involvement altogether.”

13. Adler, “The ‘learning bureaucracy,’” 119.14. From J. Krafcik, “Learning from NUMMI,” internal working paper, International

Motor Vehicle Program, Massachusetts Institute of Technology, 1986), 36.15. Graphs created from Krafcik’s data, in J. Krafcik, “Comparative Analysis of Performance

Indicators of World Auto Assembly Plants,” (Master’s Thesis, Massachusetts Institute of Technology, January 15, 1988).

16. A. Inkpen, “Learning through alliances: General Motors and NUMMI,” California Management Review 47 (2005): 118.

17. Economic statistics based on report by H. Shaiken, “Commitment is a two-way street: Toyota, California and NUMMI,” a white paper prepared from the “Toyota NUMMI Blue Ribbon Commission,” March 3, 2010, downloaded from http://www.treasurer .ca.gov on July 29, 2010.

18. T. Abate and D. Baker, “Tesla joins with Toyota to reopen NUMMI plant,” San Francisco Chronicle, May 2010, accessed on July 29, 2010, http://articles.sfgate.com.

19. M. Lifsher, “Tesla gets state tax break” Los Angeles Times, December 19, 2013.20. Adler, “The ‘learning bureaucracy,’” 113.21. Inkpen, “Learning through alliances,” 12022. See Inkpen, “Learning through alliances,” 122, for description of learning mechanisms

GM developed and their results.23. The MIT researchers who wrote The Machine That Changed the World interviewed

General Motor’s Framingham plant management team shortly after their return from a NUMMI tour.

24. These were comments captured and recorded by MIT researchers who interviewed GM personnel after returning from a visit to NUMMI (Womack et al., The Machine That Changed the World, 77).

25. It was not only difficult for those visiting NUMMI to see what was different, but the attitude within GM made it risky to promote new ideas. To facilitate learning from NUMMI, GM established an office at the plant and temporarily assigned middle man-agers there. These middle managers were liaisons and gave tours to visitors. When they returned to their positions, they were to write and circulate a white paper about what they learned. After their NUMMI assignment, however, the rumor within GM was that these managers, because they advocated NUMMI’s ideas, no longer advanced in their careers. There were few volunteers for NUMMI assignments after the initial man-agers returned, and those who did go no longer circulated white papers. G. Ranney, “Remembering NUMMI,” The Lean Thinker, January (2009). Accessed on Oct. 8, 2009, http://theleanthinker.com/.

26. The concept goes back to a quote by Charles Darwin’s friend and advocate, the British statesman John Lubbock, who said, “What we see depends mainly on what we look for.” Accessed on June 26, 2014, http://www.brainyquote.com/quotes/quotes/j/johnlub-boc107112.html.

27. Reference to these phenomena are reported in M. Sherif, The Psychology of Social Norms New York: Harper, 1936); S. Asch, “Effects of group pressure upon the modifica-tion and distortion of judgments,” in H. Guetzkow (ed.), Groups, Leadership and Men (Pittsburgh: Carnegie Press, 1951). Psychologists Muzafer Sherif, and later Solomon Asch, conducted experiments that illustrate people yielding the certainty of what they could plainly see to conform to judgments made by the group. In another example, it was hard to accept what was unmistakably found (R. Pirsig, Lila: An Inquiry into Morals, New York: Bantam Books, 1991), 116–117). When it was discovered in 1797

Notes 243

in Australia, the platypus set off a controversy among zoologists that lasted a century. The creature, having traits of reptiles, birds, fish, and furred mammals, was a paradox of nature. Scientists questioned its existence. The platypus and its anatomy were not the enigma; rather, it was scientists’ classification scheme.

28. The roundtable was part of the MIT Leaders for Manufacturing Program. In 1988, the MIT Sloan School of Management, MIT School of Engineering, and several industry partners, including the Boeing Company, Ford Motor Company and Digital Equipment Corporation, created the Leaders for Manufacturing (LFM) Program. The vision of the program was “to discover and translate into teaching and practice, principles that pro-duce world-class manufacturing and manufacturing leaders.” The program involves a joint engineering and management degree in two years, six months of which students spend in internships with sponsoring companies. The group included managers, faculty, research staff, and students working together to develop and test new ideas in manu-facturing companies. In addition to sponsoring student internships and their theses, roundtable members visited companies. The industry members attending this round-table meeting were managers from Ford, Eastman Kodak, Intel, United Technologies, AT&T, and General Motors.

29. The term “associates” was adopted for employees following a visit to a Milliken plant in South Carolina four years earlier.

30. These consultants were from Shingijutsu Consulting. They introduced these methods in the United States first in Connecticut, working initially with Danaher Corporation’s Jacobs Manufacturing Company, General Electric Corporation, Wiremold Company, and United Technology Corporation’s Otis Elevator, Pratt & Whitney, Carrier, and Hamilton Standard companies. It was through connections at a local business associa-tion that Critikon’s managers learned of and hired these consultants (see R. Emiliani, “Origins of lean management in America, the role of Connecticut businesses” Journal of Management History 12 (2006), 167–184).

31. These figures presented are similar to those presented in the plant visit but taken from an article written by two Critikon employees. (Cheryl Tanner and Ron Roncarti, “Kaizen leads to breakthroughs in responsiveness and the Shingo Prize at Critikon” National Productivity Review 13 (1994), 517–533.

32. The details they presented for how these team functioned was as follows: for the first half day, the eight- to ten-person team is trained in kaizen concepts, including meth-ods—identifying waste, making time observations, developing standard work and con-tinuous flow, calculating takt time, cycle time, and process capacity. Team members, who include associates from the areas being studied, use the background information and the new methods they learned to collect data. Based on what they observe and mea-sure, they gain insights, and propose improvements. This testing of improvement ideas often involves mock-ups and simulations of those changes, such as changing work flow, where machine are located, and who does and where tasks are done. Generally, there are four kaizen teams operating in parallel, with a kaizen sequence scheduled every six to eight weeks. At 4 p.m. each day, team leaders present status updates of their progress to one another, production managers, and experts who provide support, coaching, and advice. The leads meet with their kaizen teams, have dinner together, and work into the evening. They do more than study and propose but also make changes—moving equipment, modifying tooling, altering workflow, specifying task sequences and creat-ing standard work—and record results. They document their efforts, creating a presen-tation that tells what they did, and includes ideas for further improvements there and elsewhere. The kaizen teams make these presentations to the plant management team and consultants, who encourage and reinforce their efforts.

244 Notes

33. What we later saw in touring the plant was consistent with what we heard from the associates’ panel. The production area was clean and well organized. People smiled and talked to you as you toured. You could see their work, how they did it, and how it was to be done. The status and performance were visible. Worksheets were updated, and actively used. Marks on the floor in and between cells showed that the flow from incoming materials to shipping was clear, and there was little or no inventory on the floor. These are all the things that people see, which makes “lean” attractive. What can-not be seen is what happened to develop people, get them engaged in teams, learn and apply new methods, and be enthusiastic about making improvements and implement-ing changes.

34. Adler, “The ‘learning bureaucracy,’” 146, quoting NUMMI Stamping Department Manager Bill Borton.

35. Adler, “The ‘learning bureaucracy,’” 120.36. The actual statement in Appendix A of the 1985 collective bargaining agreement with

the UAW was: “Hence, the Company agrees that it will not lay off employees unless compelled to do so by severe economic conditions that threaten the long term viability of the Company.” (R. Austenfeld, “NUMMI—the great experiment,” Research Society of Commerce and Economics, 47 (2006), 60. Accessed on June 26, 2014, www.agileway.com.br/wp.../10/nummi-austenfeld-agileway.com.br.pdf.

37. Adler, “The ‘learning bureaucracy,’” 185. Quote by Mark Hogan, Comptroller and General Manager of General Affairs.

38. Adler, “The ‘learning bureaucracy,’” 148.39. Adler, “The ‘learning bureaucracy,’” 132.40. J. Sterman, “Learning in and about complex systems,” System Dynamics Review 10

(1994), 291–330.41. S. Spear, Chasing the Rabbit: How Market Leaders Outdistance the Competition and How

Great Companies Can Catch Up and Win (New York: McGraw Hill, 2008).42. Spear, Chasing the Rabbit, 77.43. Spear, Chasing the Rabbit, 77.44. Adler, “The ‘learning bureaucracy,’” 123. Quote of Gary Convis, NUMMI VP,

Manufacturing.45. G. Ranney, “Remembering NUMMI,” 1. At the time of this tour, in the early 1990s,

Ranney was Director of Statistical Methodology for General Motors Powertrain Group.

46. Spear and Bowen, “The DNA of the Toyota Production System,” 97.47. Spear and Bowen, “The DNA of the Toyota Production System,” 98.48. M. Polanyi, The Tacit Dimension, (Chicago: University of Chicago Press 1966), 4.49. An example is the knowledge that most people have for riding a bicycle—while they

cannot explain the principles of physics that guide bicycle riding, they can show and teach others to ride. This illustrates that ‘we can know more than we can tell,’ refer-ring to our ways of knowing that are beyond what we can reason, communicate, or teach (Polanyi, The Tacit Dimension). These ideas are also described in a model of orga-nizational knowledge creation (I. Nonaka and H. Takeuchi, The Knowledge Creating Company: How Japanese Companies Create the Dynamics of Innovation (New York: Oxford University Press, 1995).

50. Spear and Bowen, “The DNA of the Toyota Production System,” 99.51. One might wonder why Toyota works this way. Their approach to teaching takes longer

and consumes more resources, and seems counterintuitive when most other companies are using multimedia training approaches. Learning by doing, coaching, and mentor-ing is, however, an effective approach for sharing ways of thinking and tacit knowledge.

Notes 245

Tacit knowledge creates a deep and powerful understanding that surpasses what-to-do-next instructions but is based on the how and why elements that guide complex actions.

52. Adler, “The ‘learning bureaucracy,’” 122. Quote by Kan Higashi, NUMMI President and Chief Executive Officer.

53. Adler, “The learning bureaucracy,’” 129. Quote by Mark Hogan, NUMMI Manager, General Affairs and Comptroller, and senior General Motors manager.

54. See Murman et al. Lean Enterprise Value, 177–179 for a summary of lean enterprise developments, particularly the focus on value delivered to all stakeholders, or doing the job right through continuous improvement and doing the right job through making strategic choices.

55. Personal communication with George Roth, interview on April 6, 2009.56. Krafcik had used the adjective “fragile” to describe the high-performing Japanese com-

panies in his MIT thesis. In doing so, he referred to a paper by John Paul MacDuffie, an MIT labor relations PhD student, and Haruo Shimada, an economics professor from Keio University who was on sabbatical at MIT. Their paper contrasted labor relations in Japanese and American automotive companies. The Japanese compa-nies created a tight integration of technology such as robotics, and human resources. Whether located in Japan or the United States, the Japanese plants used less automa-tion to produce higher-quality cars, at lower costs, and with higher labor productivity than American plants. How did they explain higher productivity and less automation? There were few if any differences in their cars’ or plants’ technologies. The social organization of Japanese plants, which included quality circles, team spirit, and high participation, was different from American practices. Social factors, however, did not explain performance and quality differences between American and Japanese plants. These differences were not based on technology or social factors alone but on the inte-gration of human resources and hardware, what they called “humanware.” Japanese plants achieved these advantages by the way they configured the use of their pro-duction technology with and by people. (H. Shimada and J. MacDuffie, “Industrial relations and ‘humanware’: A study of Japanese investment in automobile manufac-turing in the U.S.” Massachusetts Institute of Technology, working paper 86–04 in the MIT-Japan Program, 1986.)

57. J. Krafcik, “Triumph of the lean production system,” Sloan Management Review Fall (1988), 41–52.

58. Acknowledging a weakness and working around it is an alternative tactic to the direc-tion that most managers and engineers take in using robust systems concepts. System engineers have developed the term “ilities” to refer to characteristics associated with robust systems, concepts such as reliability, adaptability, flexibility, and sustainability. Ilities are requirements of systems that are not necessarily part of their fundamental functions, but are associated with malleability, and hence longevity and lifecycle attri-butes. It is an approach that envisions and incorporates current and future adaptations into the design of complex systems. For experts who create and represent designs, it is a different orientation from what is implied by a fragile system.

59. The depiction that all Japanese production systems were “fragile” and all Western sys-tems were “robust” was a generalization. There were examples of Japanese companies that relied on in-process inspections, and Western companies that worked with low inventory levels (Krafcik, “Comparative analysis of performance indicators of world auto assembly plants,” 22–23).

60. De Geus, The Living Company.61. Shimada and J. MacDuffie, “Industrial relations and ‘humanware,’” 13.

246 Notes

62. H. Johnson, Relevance Regained: From Top-down Control to Bottom-up Empowerment, (New York: Simon & Schuster, 1992): 1.

63. H. Johnson and A. Broms, Profit Beyond Measure: Extraordinary Results through Attention to Work and People (New York: The Free Press, 2000): 51.

64. Ranney, “Remembering NUMMI.” The comment as to why NUMMI didn’t use com-puterized systems was more severe, in that Toyota had found that these systems “lied.” When vehicles are built to sales forecasts that are overly enthusiastic, extra parts are ordered. Extra parts are also ordered to buffer against contingencies. If there is a failure in one part of the production line, other parts continue to produce and make spare parts. These companies then find one day that their production lines are halted for lack of the right parts, even though there are hundreds of thousands of parts in inventory. The companies then find that they have a very difficult time matching the records of inventory in their information system with the actual physical inventory because their records are incorrect, or their computerized systems “lied.”

65. Johnson and Broms, Profit beyond Measure. 29–30. Johnson uses Toyota to illustrate management by means. Toyota attains great results because its managers focus on operating and improving a system of activities. Each worker interacts with an inter-nal or external customer. By organizing production as a continuous f low, thousands of internal customer relationships link workers to customers. This system of linked activities provides immediate feedback, and that information is used to improve customer relationships and work standards. Workers set and maintain standards for their customer relationships and every step of their work. The linked activities and feedback insure that internal units address their customers’ needs and that the system ultimately fulfills final customers’ needs. In contrast, American compa-nies, including automotive manufacturers, use a management-by-results approach. Managers impose external order by breaking overall company goals into unit goals and schedules. As units produce more, they can exceed goals and achieve ever-lower costs. As inventory grows, it buffers overall production from the disruptions that occur when units have problems. Managers use internal accounting to guide unit production and assess units’ contributions to the company’s overall financial results. While decomposing work into tasks and guiding them with unit goals is logical, Johnson shows that controlling results with accounting information is not only erroneous but also possibly destructive to long run operations. The delays in accounting information distort people’s decision-making, increase the complexity of their interactions, and create nonlinear feedback loops that produce reactive, overcompensating, and wholly destructive behaviors. Based on Johnson’s account-ing knowledge and company studies, managers should pay attention to how people operate rather than manage results, or shift their thinking from management- by-results to management-by-means.

66. Adler, “The ‘learning bureaucracy,’” references from pages 120 and 124.

3 Promoting Enterprise Awareness

1. R. Dore, British Factory, Japanese Factory: The Origins of National Diversity in Industrial Relations (Berkeley: University of California Press, 1973).

2. R. Dore, “Goodwill and the spirit of market capitalism” The British Journal of Sociology 34 (1983), 459–482.

3. A student of the Toyota Production System might find it interesting that the wealth created by these British mills funded what became Toyota Motors. In 1930, Sakichi Toyoda, inventory and founder of Toyoda Automatic Loom Works, Ltd, sold the patents

Notes 247

for an automatic high-speed loom to Platt Brothers of Oldham, England, at the time one of the world’s biggest manufacturers of textile machinery. Sakichi Toyoda used the £100,000 from the sale of his patent to fund his eldest son, Kiichiro Toyoda, to establish an automobile department. This department, in 1937, was spun out as Toyota Motor Co., Ltd.

4. The term was originally used in reference to environmental problems, as a way of guid-ing local action with an awareness of broader ecological consequences. It was coined by Rene Dubos as an adviser to the United Nations Conference on the Human Environment in 1972. See R. A. Eblen and W. Eblen, The Encyclopedia of the Environment (Boston: Houghton Mifflin Company, 1994).

5. The view of organizations and economies as governed by firm resources was first proposed by the British economist Edith Penrose in her 1959 book The Theory of the Growth of the Firm. In a study she conducted on firm growth while at John Hopkins University, Penrose found existing economic theories inadequate. Economists studied economic growth and development, but no economist had developed a theory for how the firms that make up these economies grow. Her theory proposed internal firm factors (such as administrative planning, central decision-making, and adaptation to change) combined with firm production processes (based on services rendered from physical and human resources) guided profit motives (required investment returns) in determining firm growth. See E. T. Penrose, The Theory of the Growth of the Firm (Oxford: Oxford University Press, 1959).

6. J. Womack and D. Jones, “From lean production to the lean enterprise” Harvard Business Review March-April (1994), 93–103.

7. J. Dyer, “Does governance matter? Keiretsu alliance and asset specificity as sources of Japanese competitive advantage,” Organization Science 7 (1996), 649–666.

8. This definition is developed from the lean studies and discussed in Murman et al., Lean Enterprise Value, 159, in which it is stated, “A lean enterprise is an integrated entity which efficiently creates value for its multiple stakeholders by employing lean principles and practices.”

9. Economists use the phrase “private enterprise” to refer to unregulated, moneymaking activities with capitalistic motives. Bureaucrats use “enterprise” for commerce beyond that of a single organization, such as an industrial complex, a regional economy, or an industry segment. All of these conceptions, however, essentially use the term enterprise to mean a large undertaking with great scope, complexity, and risk.

10. Note that depicting organizations as pyramids in Figure 3.2 make them appear out of place on the value streams that define enterprises. This visually awkward appearance represents a lack of alignment. A large organization uses vertical differentiation (func-tional departments) and horizontal integration (hierarchical reporting) along with teams and liaison roles to align activities. These organizational structures focus on internal operations: obtaining and controlling access to resources, ensuring the efficiency and effectiveness of conversion processes, and developing markets or obtaining contracts for products and services, treating customers as well as partner and supplier organizations as fixed entities that are part of the organization’s environment. Examining the value stream reveals an alternative unit for organizational analysis, one that is based on opera-tions across organizations, is less focused on their internal operations, and is attuned to the overall effectiveness in the sequence of conversion processes that deliver products and services to customer. A value stream approach reveals the activity sequence and flow, and creates a focus on the relationships between organizations that enables them to autonomously add value and collectively cooperate to improve both their individual contributions and their overall effectiveness.

248 Notes

11. Definition from Peter Senge, The Fifth Discipline, 7. There are numerous definitions of “systems thinking” from different disciplines that have developed over time (see H. Davidz, “Enabling systems thinking to accelerate the development of senior systems engineers,” (PhD dissertation, Massachusetts Institute of Technology, 2006, 34–40). Rather than examine and argue about these differences in these approaches, we base the explanation of systems thinking on what they have in common.

12. Jay Forrester was part of the MIT team that developed the ENIAC, the first large-scale digital computer, and a co-inventory of magnetic core memory. The development of digital computers enabled the SAGE air defense system for North America, a radar-based system designed to provide early warning in the event of a Soviet nuclear strike. Forrester went from these technical contributions to become a professor at MIT’s School of Industrial Management. He developed methods that applied the computational abili-ties of digital computers to economics and management, inventing the field of system dynamics.

13. The Beer Game dates to the late 1950s and the beginning of system dynamics. It has been used for five decades to introduce and illustrate systems thinking, dynamics, com-puter simulation, and management principles. For a bibliography of the beer game and related articles, see John Sterman, “The beer distribution game: an annotated bibliog-raphy covering its history and use in education and research,” July, 1992, downloaded from http://www.damas.ift.ulaval.ca/~moyaux/bibtex/sterman92.html on March 3, 2006 at 8:11:53 a.m.

14. The following references provide these insights: P. J. Turnbaugh, R. E. Ley, M. Hamady, C. M. Fraser-Liggett, R. Knight, J. I. Gordon, “The human microbiome project,” Nature 449 (2007), 804–810; “Humans have ten times more bacteria than human cells: how do microbial communities affect human health?” ScienceDaily, downloaded from http://www.sciencedaily.com/releases/2008/06/080603085914.htm on September 1, 2010; and Glausiusz, J. 2007 “Your body is a planet, 90% of the cells within us are not ours but microbes,” Discover Magazine, June 19 (2010), downloaded from http://discoverma-gazine.com on September 1, 2010.

15. This diagram and insight were shared by Fred Kofman, who was heading up a set of projects in the MIT Center for Organizational Learning on learning across the supply chain. The figure presented is taken from Sterman’s description of this project, and has been slightly modified from the original to protect the company’s confidential informa-tion. See John Sterman, “Learning in and about complex systems,” System Dynamic Review 10 (1994), 291–330.

16. Charles C. Snow, Raymond E. Miles, and Henry J. Coleman, Jr., “Managing 21st cen-tury network organizations,” Organizational Dynamics 20 (1992), 5–20.

17. Marshall van Alstyne, “The state of network organization: a survey in three frame-works.” Journal of Organizational Computing, 7 (1997), 83–151.

18. J. Dyer, Collaborative Advantage: Winning through Extended Enterprise Supplier Networks, (New York: Oxford University Press, 2000).

19. Dyer, Collaborative Advantage, 3.20. Dyer, Collaborative Advantage, 15.21. Jeff Dyer, ”Specialized supplier networks as a source of competitive advantage: Evidence

from the auto industry,” Strategic Management Journal 17 (1996), 271–291.22. Dyer, Collaborative Advantage, 16.23. Mary Walton, Car: A Drama of the American Workplace (New York: W. W. Norton &

Company, 1999).24. See Amos Tversky and Daniel Kahneman, “The framing of decisions and the psychol-

ogy of choice,” Science 211 (1981), 453–458.

Notes 249

25. Mark Granovetter, “Economic action and social structure: the problem of embedded-ness,” American Journal of Sociology 91 (1985), 481–510.

26. J. Moreno, Who Shall Survive? Foundations of Sociometry, Group Psychotherapy, and Sociodrama (Beacon, NY: Beacon House, 1934).

27. Interview with Chris Cox, Facebook’s head of product development, in “Google vs. Facebook search” segment on CBS 60 Minutes, December 5, 2010, downloaded from www.cbsnews.com on December 9, 2010.

28. Mark Granovetter, “The strength of weak ties”, American Journal of Sociology 78 (1973), 1360–1380. Granovetter found that people were three times as likely to find jobs through personal contacts than through advertising or other formal means, and that 80 percent of these contacts were people they saw “occasionally” or “rarely,” which is why Granovetter called these “weak ties.”

29. Brian Uzzi, “The sources and consequences of embeddedness for the economic per-formance of organizations: the network effect,” American Sociological Review (1996), 674–698.

30. Uzzi, “The sources and consequences of embeddedness,” and Brian Uzzi “Social structure and competition in interfirm networks: the paradox of embeddedness,” Administrative Science Quarterly 42 (1997), 35–67.

31. Uzzi “The paradox of embeddedness,” 35.32. Dore, “Goodwill and the spirit of market capitalism”; S. Helper and M. Sako, “Supplier

relations in Japan and the United States: are they converging?” Sloan Management Review 36 (1995), 77–84; J. Lincoln, M. Gerlach, and C. Ahmadjian, “Keiretsu net-works and corporate performance in Japan,” American Sociological Review 61 (1996), 67–88; Mark Lazerson “A new phoenix? Modern putting-out in the Modena knitwear industry,” Administrative Science Quarterly 40 (1995), 34–59.; A. Zaheer, B. McEvily, and V. Perrone, “Does trust matter? Exploring the effects of interorganizational and interpersonal trust on performance,” Organization Science 9 (1998), 141–159 find that trust between buyers and sellers favorably affects costs. Dyer (in J. Dyer, “Effective interfirm collaboration: how firms minimize transaction costs and maximize trans-action value,” Strategic Management Journal 18 (1997), 535–556) comes to the same conclusion about the automobile industry. The presence of trust not only reduces trans-action costs but also results in value creation through greater information sharing, a lon-ger payback period, and more optimal investments in specialized assets (E. Zajac and C. Olsen, “From transaction cost to transactional value analysis: implications for the study of interorganizational strategies,” Journal of Management Studies 30 (1993), 131–145). Ahuja (in Gautam Ahuja, Collaboration networks, structural holes, and innovation: A longitudinal study,” Administrative Science Quarterly 45 (2000), 425–455), study-ing innovation of firms in the chemical industry, finds that firms benefits from both “direct” and “indirect” ties. “Direct” relationships encourage collaboration and resource sharing, while “indirect” relationships provide abundant access to information.

33. Susan Helper, “Comparative supplier relations in the US and Japanese auto industries: an exit-voice approach,” Business Economic History 10 (1990), 153–162; Andrea Larson “Network dyads in entrepreneurial settings: a study of governance of exchange processes,” Administration Science Quarterly 37 (1992), 76–104; Lazerson “A new phoenix.”

34. Dore, “Goodwill and the spirit of market capitalism,” 463.35. J. Hoffer-Gittell, The Southwest Airlines Way: Using the Power of Relationship to Achieve

High Performance (New York: McGraw-Hill, 2005).36. Uzzi, “The sources and consequences of embeddedness,” 674–698.37. Brian Uzzi and Jarrett Spiro, “Collaboration and creativity: the small world problem,”

American Journal of Sociology 111 (2005), 447–504. These two measures for the 315

250 Notes

musicals examined in that periods were .56 correlated. Both outcome measures are needed because there were shows critics berated that were hits, and shows that critics applauded that were commercial flops. In addition to outcomes for individual musi-cals, Broadway musical industry statistics were also calculated (these statistics were the annual hit percentage, rave review percentage, and review averages).

38. Uzzi and Spiro, “Collaboration and creativity,” 447–504. The analysis of Broadway musicals is based on bipartite-affiliation networks. When people collaborate within project groups, it is similar to directors on the same board within the wider network or authors on the same paper within the wider citation network. In bipartite-affiliation networks, all actors in the network are part of a fully linked cluster (e.g. all people work-ing on a musical are linked directly to each other).

39. Uzzi and Spiro, “Collaboration and creativity,” 447–504. This was calculated by using a small world quotient or Q statistic. The Q is calculated using the ratio of local clustering to global separation of the teams in a network of actors. Local clustering is the fraction of an individual’s collaborators who also collaborate with others. Global separation is measured by the average number of intermediaries between all pairs of actors in the net-work. The clustering and separation measures used to calculate the small world quotient (Q) are both ratios, where the clustering and separation values are ratios of what was measured relative to what would be measured in a random network of similar size. The Q is therefore a ratio of ratios, varying in this study between 1.5 and 3 (G. Davis, Mina Yoo, and Wayne Baker, “The small world of the American corporate elite, 1982–2001.” Strategic Organization 3 [2003], 301–326 and L. Amaral, A. Scala, M. Bartelemy, and H. E. Stanley, “Classes of small-world networks.” Proceedings of the National Academy of Science 111 [2000], 49–52 present values across a range of networks).

40. Uzzi and Spiro, “Collaboration and creativity,” 447–504. Performance, in terms of probability of both artistic and commercial success, improved to a point (to a maxi-mum of .25 to .3 for artistic and .35 to .4 for commercial success), or threshold level, after which it not only failed to improve further, but declined with increased embed-dedness. These estimates are taken from the scale on Figures 4 through 7 showing the relationship of Q to commercial and artistic success for musical and the industry season. Uzzi and Spiro looked at data outside the range for their more detailed analy-sis, and in the economic boom period of 1919 to 1930, Q increased to 4.8, and the probably of a f lop increased to 90%. For the period analyzed, from 1945 to 1989, the probability of a f lop was 75%.

41. Brian Uzzi and James J. Gillespie, “Knowledge spillover in corporate financing net-works: embeddedness and the firm’s debt performance,” Strategic Management Journal, 23 (2002), 595–618.

42. Adapted and extended from D. Whetten, “Interorganizational relations: a review of the field,” The Journal of Higher Education 52 (1981), 1–28.

43. See W. Bennis, “Leadership of change,” in M. Beer and N. Nohria (eds.), Breaking the Code of Change (Cambridge, MA: Harvard Business School Press, 2000): 113–121. Bavalas conducted this and other such experiments in a laboratory he had set up in the basement of, as it was called at the time, the Sloan School of Industrial Management. People sat at a round, ten-foot in diameter table. Partitions walled people off so that they could not see one another, and the only way that they could communicate was by mes-sages written on three-by-five cards passed through narrow slots in the partitions. These cards were color coded to enable the counting of messages and to indicate who sent them. The partitions were created to simulate these different organizational forms (the pyramid, or hierarchy, was not simulated as it is a form of the star, and does not allow for feedback). The task was to solve a simple problem: each position was given a box

Notes 251

with six different colored marbles. There was only one common color, and that color was randomly varied in each trial. The task was to identify that common color. As soon as a position identified what it thought was that common color, the marble of that color was dropped down a tube in the table. This enabled the experimenter to measure both quality (accuracy) and performance (time). A post-experiment questionnaire measured people’s morale and enthusiasm.

44. See A. Bavelas, “Communication patterns in task-oriented groups,” in D. Cartwright and A. Zander, Group Dynamics (1951), 503–11; Harold Guetzkow, “Differentiation of roles in task-oriented groups,” in D. Cartwright and A. Zander, Group Dynamics (1951), 512–26; H. J. Leavitt, “Some effects of certain communication patterns on group per-formance,” Journal of Abnormal and Social Psychology 46, (1951), 38–50.

45. From the 296 letters given to people, the mean number of steps calculated from those returned was a 5.2 (217 of those people getting letters sent them on, and 64 letter, or 29% percent, were received). See Jeffrey Travers and Stanley Milgram, “An experimen-tal study of the small world problem,” Sociometry 32, (1969), 425–443 and Stanley Milgram, “The small world problem,” Psychology Today 2 (1967), 60–67.

46. See Duncan Watts, Six Degrees: The Science of a Connected Age (New York: W. W. Norton & Company, 2003): 37–42.

47. For example, in Milgram’s experiment, one issue is the randomness of choices by the people in Nebraska, which raises the question whether the Nebraskans had largely simi-lar or different networks of acquaintances.

48. R. Burt, Structural Holes (Cambridge, MA: Harvard University Press, 1992); R. Burt, “The network structure of social capital,” in R. Sutton and B. Staw (eds.), Research in Organizational Behavior (Greenwich, CT: JAI Press, 2000).

49. See Malcolm Gladwell, “The law of the few,” The Tipping Point: How Little Things Can Make a Big Difference (New York: Little, Brown and Company, 2006): 34–38.

50. Burt, “The network structure of social capital.”51. The properties of interest for social networks in organizations include transactional

content (what is exchanged, such as affect, influence or power, information, and goods or services), nature of links (intensity, reciprocity, clarity of expectations, and multiplexity of roles), and structural characteristics (links to external and internal net-work, clusters within the network, and special nodes). See Noel M. Tichy, Michael L. Tushman, Charles Fombrun, “Social network analysis for organizations,” The Academy of Management Review 4 (1979), 507–519.

52. M. Gladwell, “The tipping point,” The New Yorker, June 3, 1986, 32–38.53. Gladwell proposes and illustrates three “rules” that govern these situations, which pro-

duce these conditions and behaviors: the Law of a Few, the Stickiness Factor, and Power of Context.

54. See A. Pettigrew, R. Woodman, and K. Cameron, “Studying organizational change and development: challenges for future research,” Academy of Management Journal 44 (2001), 697–713.

55. Brian Uzzi identified these conditions in a multi-year ethnographic study of organiza-tions and networks in the New York garment industry. Along with other co-investi-gators, he developed quantitative tests from settings where these data were available: Broadway musicals and their success, lending and bank loan rates, and collaborations in the scientific fields of social psychology, economics, ecology, and astronomy using citations.

56. M. R. Flynn, A. R. Kasimov, J.-C. Nave, R. R. Rosales, and B. Seibold, “Self-sustained nonlinear waves in traffic flow,” Physical Review E 79, (2009), May 26, downloaded from http://dx.doi.org/10.1103/PhysRevE.79.056113 on June 23, 2014.

252 Notes

57. S. Spear, Chasing the Rabbit (New York: McGraw Hill, 2009).58. M. Imai, Kaizen: The Key to Japan’s Competitive Success (New York: McGraw Hill,

1986).59. A. Larson, “Network dyads in entrepreneurial settings: a study of the governance of

exchange relationships,” Administrative Science Quarterly 37 (1992), 76–104.60. Womack, et al. The Machine That Changed the World.

4 Enterprise Systems

1. J. Muller, “Compaq will buy Digital in a record $9.6b deal,” The Boston Globe, January 27, 1998. Accessed February 17, 2011, http://www.boston.com.

2. H. Bray, “Digital effects, computer maker’s rise, fall still echo in Mass.” The Boston Globe, February 15, 2011. Accessed February 17, 2011, http://www.boston.com.

3. In 2002, the market capitalization, or value of all the outstanding shares, of Southwest Airlines represented 73% of the total value of all airline stocks combined. Jody Hoffer Gittell, The Southwest Way: Using The Power of Relationships to Achieve High Performance (New York: McGraw-Hill, 2003), 4.

4. C. O’Reilly and J. Pfeffer, Hidden Value: How Great Companies Achieve Extraordinary Results with Ordinary People (Boston: Harvard Business School Press, 2000), 46.

5. Kevin Freiberg and Jackie Freiberg, Nuts!: Southwest Airlines’ Crazy Recipe for Business and Personal Success (New York: Broadway Books, 1996).

6. Quote from airline industry analyst Harold Sirkin of the Boston Consulting group. O’Reilly and Pfeffer Hidden Value, 3.

7. Jody Hoffer Gittell, “Organizing work to support relational coordination,” International Journal of Human Resource Management 11 (2000), 517–534.

8. R. Dore, “Goodwill and the spirit of market capitalism,” British Journal of Sociology 34 (1983), 463.

9. W. Powell, “Neither markets nor hierarchies: network forms of organizations,” Research in Organizational Behavior 12 (1990), 295–336.

10. Susan Helper, “Comparative supplier relations in the US and Japanese auto industries: an exit-voice approach,” Business Economic History 10 (1990): 153–162; Andrea Larson, “Network dyads in entrepreneurial settings: a study of governance of exchange pro-cesses,” Administration Science Quarterly 37 (1992), 76–104; Mark Lazerson, “A new phoenix? Modern putting-out in the Modena knitwear industry,” Administrative Science Quarterly 40 (1995), 34–59.

11. Frank Romo and Michael Schwartz, “Structural embeddedness of business decisions: a sociological assessment,” American Sociological Review 60 (1995), 874–907.

12. The genesis of Enterprise Thinking was provided to us by Williams Bellows, a Senior Technical Fellow at Rocketdyne. As a member of the Deming Society, and with a PhD in statistics, Bellows has long worked in the field of quality control, statistics, and con-trolling variation. His work led him to a set of principles he terms “in thinking” in individuals, and “enterprise thinking” in organizations, and are the basis for his efforts to create high-performing enterprises.

13. In the workshop “Enterprise Thinking,” Bellows and his colleagues created a simula-tion that had managers competing between two hypothetical companies. His hypo-thetical companies followed from the insight in the Pipps experience in disassembling the Toyota truck and finding near perfect tolerances that made its parts “snap fit.” In the Enterprise Thinking simulation, two rival companies, Blue Pen and Red Pen, each make pens. Blue Pen, makes caps that fit tight on the pen yet are easy to remove. The

Notes 253

caps from the Red Pen company were often either loose and easily fell off or too tight that they were difficult to remove. Blue was selected as the color for the better company as blue is associated with Boeing, and Bellow’s goal was to use the simulation to teach people at Boeing to strive for snap fit quality.

14. David T. Kearns and James Harvey, A Legacy of Learning: Your Stake in Standards and New Kinds of Public Schools (Harrisonburg, VA: Donnelly and Sons, 2000), 75.

15. G. Jacobson and J. Hillkirk, Xerox: American Samurai (New York: Collins, 1986) and David T. Kearns and D. Nadler, Prophets in the Dark: How Xerox Reinvented Itself and Beat Back the Japanese (New York: Harper Business, 1992).

16. William Bellows, “Beyond the sub-optimization of interchangeable parts: the poten-tial for thinking together and leading together in the 21st century” (paper presented at Deming Research Conference, Fordham University, New York City, February 23, 2004).

17. George W. Casey, Jr., “The army of the 21st century,” Army Magazine, October, 2009, 25–40.

18. A. Dunwoody, “The evolution of the Materiel Enterprise,” Army Magazine, March 2009), 47–52. The Army Materiel Command has an annual $47 billion budget with over 61,000 employees operating depots, arsenals, laboratories, and installations in 149 locations across 36 states and 55 countries, and the Acquisition, Logistics and Technology organization has decision authority on a $34.4 billion annual acquisition budget.

19. This methodology was originally called “Enterprise Value Stream Mapping and Analysis,” or EVSMA. Through feedback from industry participants, the methods evolved and the name changed to “Enterprise Strategic Analysis and Transformation,” or ESAT. For further information, see the multiple materials posted on http://lean.mit.edu and descriptions of the planning process in D. Nightingale and J. Srinivasan, Beyond the Lean Revolution: Achieving Successful and Sustainable Enterprise Transformation (New York: AMACOM 2011). EVSMA and ESAT are methods that were developed and tested by MIT researchers through enterprise efforts with the US Air Force and aero-space companies.

20. Robert Buderi, The Invention That Changed The World (New York: Simon & Schuster, 1996), 28–51.

21. Earl Murman et al., Lean Enterprise Value: Insights from MIT’s Lean Aerospace Initiative (New York: Palgrave Macmillan, 2002).

22. Earl Murman et al., Lean Enterprise Value. Examples include lowered unit prices for the C-17 from $260 million to $178 million for the final 80 of 120 aircraft purchased, saving $6.5 billion; lead time for Atlas vehicle launch reduced from 48.5 to 18 months; and F/A18-E/F EMD completed on time and within budget while meeting or exceeding performance requirements.

23. “UT Trains Air Force Personnel to Streamline Operations,” in Tennessee Today, January 16, 2007, accessed from http://tntoday.utk.edu/2007/01/16/ut-trains-air-force-person-nel-to-streamline-operations/ on June 24, 2014.

24. Michael Marx, “Air force smart operations for the 21st century—AFSO 21,” iSixSigma, May 25, 2007, accessed at http://www.isixsigma.com/industries/military/air-force-smart-operations-21st-century-afso-21/ on June 24, 2014.

25. Details of the LAI status were given at http://ssrc.mit.edu/programs/lean-advancement-initiative-lai, download on June 24, 2014. Research papers and reports created by LAI’s faculty and students remain accessible at https://dspace.mit.edu/handle/1721.1/80738 (accessed on June 24, 2014).

26. Earl Murman et al., Lean Enterprise Value, 148.

254 Notes

27. See the website of the Lean Advancement Initiative at http://lean.mit.edu for informa-tion on the Lean Enterprise Self-Assessment Tool (LESAT).

28. Eric Rebentisch and R. Jobo, “Lean Now—Using a research community to under-stand change in the acquisition enterprise,” Defense Acquisition Review Journal (2004), 146–157.

29. K. Bowen and S. Spear, “The DNA of the Toyota production system,” Harvard Business Review September-October, (1999), 97–106.

5 Installing Innovation Sets

1. Michael Hammer, “Reengineering work: don’t automate, obliterate” Harvard Business Review July-August (1990), 104–112 and Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution (New York: Harper Business Books, 1993).

2. A 2008 survey of 3,199 executives around the world found that only one transformation in three succeeds (C. Aiken and S. Keller, “The irrational side of change management,” McKinsey Quarterly 2 (2009), 100–109); and Rune Todnem, “Organisational change management: a critical review,” Journal of Change Management 5 (2005), 369.

3. Thomas Davenport, “Reengineering—the fad that forgot people,” Fast Company November (2005), accessed at www.fastcompany.com on August 18, 2004.

4. John Paul MacDuffie, “Human resource bundles and manufacturing performance: organizational logic and flexible production systems in the world auto industry,” Industrial and Labor Relations Review 48 (1995), 197–221.

5. See pages 63 to 77 in John Paul MacDuffie, “Beyond Mass Production: Flexible Production Systems and Manufacturing Performance in the World Auto Industry.” (PhD dissertation, MIT Sloan School of Management, 1991).

6. Womack et al., The Machine That Changed the World, 112 and following.7. Page 181 in P. Milgrom and J. Roberts, “Complementarities and fit: strategy, structure,

and organizational change in manufacturing,” Journal of Accounting and Economics 19 (1995), 179–208.

8. P. Milgrom and J. Roberts, “The economics of modern manufacturing: technology, strategy and organization,” American Economic Review 80 (1990), 511–528.

9. See R. Hayes and R. Jaikumar, “Manufacturing’s crisis: new technologies, obsolete organizations,” Harvard Business Review September-October (1988), 77–85; John Paul MacDuffie and J. Krafcik “Integrating technology and human resources for high- performance manufacturing: evidence from the international auto industry,” in T. Kochan and M. Useem (eds.), Transforming Organizations (Oxford: Oxford University Press, 1992); and R. Parthasarthy and S. P. Sethi, “Relating strategy and structure to flexible automation: a test of fit and performance implications,” Strategic Management Journal 14 (1993), 529–549.

10. Susan Helper and D. Levine, “Supplier participation and worker participation: is there a linkage?” Industrial Relations Research Association Proceedings, (1994), 12–25; Susan Helper, “Complementarity and cost reduction: evidence from the auto supply industry” National Bureau of Economic Research May (1997) Working Paper No. 6033.

11. Erik Brynjolfsson and L. Hitt, “Paradox lost? Firm level evidence on the returns to information systems spending,” Management Science 42 (1996), 541–558.

12. Andrew Pettigrew et al., Innovative Forms of Organizing (Thousand Oaks, CA: Sage, 2003).

13. Data is from Table 7.3 in S. Massini and A. Pettigrew, “Complementarities in organiza-tional innovation and performance: empirical evidence from the INNFORM survey,”

Notes 255

in A. Pettigrew et al. (eds.), Innovative Forms of Organizing (Thousand Oaks, CA: Sage, 2003), 144.

14. Data is from Table 7.3, from S. Massini and A. Pettigrew, “Complementarities in orga-nizational innovation and performance,” 144.

15. Data from Table 7.10, from S. Massini and A. Pettigrew, “Complementarities in organi-zational innovation and performance,” 167.

16. S. Massini and A. Pettigrew, “Complementarities in organizational innovation and per-formance,” 167.

17. A. Pettigrew and E. Fenton, eds. The Innovating Organization (Thousand Oaks, CA: Sage, 2000) and A. Pettigrew et al., eds. 2003 Innovative Forms of Organizing (Thousand Oaks, CA: Sage, 2003), 19.

18. Pettigrew and Whittington, Innovative Forms of Organizing.19. Pettigrew, et al., Innovative forms of Organizing, 185–186.20. Pettigrew and Whittington, Innovative forms of Organizing, 192.21. CNN staff, “BP chief to Gulf residents: ‘I’m sorry’” CNN, May 30, 2010, accessed on

May 25, 2014, http://www.cnn.com/2010/US/05/30/gulf.oil.spill/22. Emily Gosden, “BP warns Gulf spill costs will exceed $42.4bn as compensation costs

rise,” The Telegraph, July 30, 2013, accessed on May 23, 2014, http://www.telegraph.co.uk/finance/newsbysector/energy/oilandgas/10210318/BP-warns-Gulf-spill-costs-will-exceed-42.4bn-as-compensation-costs-rise.html.

23. Pettigrew and Whittington, Innovative Forms of Organizing, 197.24. Pettigrew and Whittington, Innovative Forms of Organizing, 198–199.25. Phil Mirvis, Karen Ayas and George Roth, To the Desert and Back: The Story of One of

the Most Dramatic Business Transformations on Record (New York: Jossey-Bass, 2003).26. Pettigrew and Whittington, Innovative Forms of Organizing, 205–206.27. N. Repenning and J. Sterman “Nobody ever gets credit for fixing problems that never

happened,” California Management Review 43 (2001), 64–88.28. Pettigrew and Whittington, Innovative Forms of Organizing, 189.29. Pettigrew and Whittington, Innovative Forms of Organizing, 204.30. Alfred Sloan, My Years with General Motors (New York: Doubleday, 1964).31. Jack Welch, with John Byrne, Jack: Straight from the Gut (New York: Grand Central

Publishing, 2001).32. Louis Gerstner, Who Says Elephants Can’t Dance? (New York: Harper Business, 2002).

6 Power in a Flywheel

* The description of efforts and programs at Warner Robins is based on research sponsored by the Air Force Research Laboratory (under agreement number FA8650–05–2–5706) and a consortium of other government and aerospace industry members. MIT faculty and students made successive visits to Warner Robins, Georgia, to study and work with per-sonnel there. The working papers of the case studies associated with these research activi-ties include George Roth, “Case Study Report: Lean Enterprise Change at Warner Robins ALC,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, June 1, 2006; Betty Barrett and Lydia Fraile, “Lean at the C-5 Galaxy Depot: Essential Elements of Success,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, March 23, 2005; John Dickmann, “Lean Change at a Crossroads: C-130 Depot Maintenance at Warner Robins ALC,” unpublished work-ing paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, February 28, 2005; Jessica Cohen, “Warner Robins and the Buy Purchase Request Process,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, December

256 Notes

10, 2004; Jessica Cohen, “United States Air Force Air Logistics Centers: Lean Enterprise Transformation and Associated Capabilities,” unpublished master’s thesis, Massachusetts Institute of Technology, August 12, 2005.

1. The count of events, projects, and activities shows the progression only through September, 2003.

2. Materials in this subsection are based on Betty Barrett and Lydia Fraile, “Lean at the C-5 Galaxy Depot: Essential Elements of Success,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, March 23, 2005.

3. Quantitative information from Barrett and Fraile C-5 case, and Shingo Prize recipient information, downloaded from http://www.shingoprize.org/Media/2006PublicSectorRecipients/C5.htm on March 26, 2007.

4. Materials in this subsection are based on John Dickmann, “Lean Change at a Crossroads: C-130 Depot Maintenance at Warner Robins ALC,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, February 28, 2005

5. The AFSO21 program is an air force-wide enterprise initiative to coordinate operations improvements. It was mandated by US Air Force Chief of Staff Gen. Mosely and Secretary of the Air Force Michael Wynn in November of 2005. Based on efforts like those of Warner Robins, this program involves training and improvement efforts across all elements of US Air Force operations. While AFSO21 is about 80% comprised of lean efforts, it also draws on “Theory of Constraints, Six Sigma, BPI [Business Process Improvement], MBO [Management by Objectives], TQM [Total Quality Management], OR [Operations Research] tools and other management science tools.” The AFSO 21 Playbook, an internal over 300-page US Air Force publication, spells out this approach and provides informa-tion on these methods. For details, see Marx, “Air force smart operations for the 21st cen-tury.” A 2008 version of the AFSO21 Playbook is available at http://www.au.af.mil/au/awc /awcgate/af/afd-090327-040_afso21-playbook.pdf (accessed on June 25, 2014).

7 Balancing Push and Pull Change

1. Representative and well-known books that are classics on managing change include: W. Bennis, Changing Organizations: Essays on the Development and Evolution of Human Organization (New York: McGraw Hill, 1966); R. Beckhard and R. Harris, Organizational Transitions: Managing Complex Change, second edition, Reading, MA: Addison-Wesley 1987); R. Kanter, B. Stein, and T. Jick, The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It (New York: Free Press, 1992); N. Tichy and S. Sherman, Control Your Destiny or Someone Else Will (New York: Harper 1993); J. Kotter, Leading Change (Boston: Harvard Business School Press: 1996); N. Tichy with Eli Cohen, The Leadership Engine (New York: Harper Books, 1997); R. Miles, Corporate Comeback (San Francisco, CA: Jossey-Bass, 1997); D. Nadler and M. Nadler, Champions of Change: How CEOs and Their Companies Are Mastering the Skills of Radical Change, (San Francisco: Jossey-Bass,1998).

2. Kanter’s et al., The Challenge of Organizational Change: 383.3. Kotter, Leading Change.4. K. Lewin, Field Theory in Social Science (New York: Harper and Row, 1951) and K. Lewin,

“Group decision and social change,” in G. Swanson, T. Newcomb, and E. Hartley (eds.), Readings in Social Psychology, rev. ed., ( New York: Holt, 1952).

5. Drawing upon multiple sources, George Roth created this diagram for a class presenta-tion to illustrate commonality across multiple change methods. For additional infor-mation on the Lewin/Schein model, see E. Schein, “Models and tools for stability and

Notes 257

change in human systems,” Reflections, 4, (2002); for the Kotter change model see Kotter, Leading Change, and for a general change model, see Beckhard and Harris, Organizational Transitions and T. Cummings and C. Worley, Organization Development and Change (8th ed.) (Mason, OH: South-Western, 2005).

6. This template is typical of those used in planned change efforts in which George Roth was involved as part of MIT’s LAI work in large government organizations. The design of each template was modified in consultation with leaders, so they included informa-tion required by top officials in considering and approving proposed plans.

7. G. Roth, “In Search of the Paperless Office: The Structuring of Waves of Technological Change” (PhD dissertation, Sloan School of Management, Massachusetts Institute of Technology, 1993).

8. Work flow mapping is an approach that documents the flow of work, in this case docu-ment processing, through all steps, and provides a visual way to assess and improve the organization of tasks.

9. Womack and Jones, Lean Thinking propose the five lean principles to be 1) specify value by specific product, 2) identify the value stream for each product, 3) make value flow without interruptions, 4) let the customer pull value from the producer, and 5) pursue perfection

10. Klein’s insights into lasting changes came from over two decades of studies in three dif-ferent, but related areas: 1) implementing lean methods in manufacturing companies, 2) comparing the effectiveness with which large companies were able to utilize the new knowledge of their MIT-trained Leaders for Manufacturing manager, and 3) employ-ing virtual collaboration methods across global teams. See Klein, True Change: How Outsiders on the Inside Get Things Done in Organizations (San Francisco: Jossey-Bass, 2004).

11. A condition for the publication of Car Launch, a book by Roth and Kleiner, was to disguise the name of the company. In that book they used the term AutoCo as a pseud-onym; we use that same name here as well.

12. The methods included concepts from Senge, The Fifth Discipline, many of which are described in Senge et al., The Fifth Discipline Fieldbook. For details on learning labo-ratories and their agenda, see Box 4–1 and Box 4–2 in Roth and Kleiner, Car Launch, 54–56.

13. Developing a new car is a complex task that requires teams to work on components and subassemblies independently. They coordinate their efforts by creating plans and specifications. At specific milestones, all the parts come together in prototype builds, and everyone can see how their part works with the others. These prototype builds—the mechanical prototype, evaluation prototype, validation prototype, and production prototype—each have successively more stringent requirements. When engineers build and test prototypes, they often surface previously unknown issues.

14. See “Combining engineering innovation with human relations: the harmony buck,” in Roth and Kleiner, Car Launch, 73–83.

15. See J. Piaget, Play, Dreams and Imitation in Childhood (New York: Norton, 1962) and D. Winnicott, Play and Reality (London: Tavistock/Routledge 1971) for descriptions of transitional objects in developmental psychology, and S. Papert, Mindstorms: Children, Computers, and Powerful Ideas (New York: Basic Books, 1980) for references in cognitive science.

16. R. Hodgkin, “Cognitive objects,” Oxford Review of Education 14 (1988), 353.17. S. Star, “The structure of ill-structured solutions,” in M. Huhns and L. Glasser (eds.),

Reading in Distributed Artificial Intelligence (Menlo Park, CA: Morgan Kaufman, 1998); and P. Carlile, “Transferring, translating, and transforming: an integrative framework

258 Notes

for managing knowledge across boundaries,” Organization Science 15 (2004). Boundary objects provide common understanding on both syntactic and semantic levels, and they can be used to transcend pragmatic boundaries, i.e. they can be used between parties that must negotiate.

18. P. Carlile, “A pragmatic view of knowledge and boundaries,” Organization Science 13, 4 (2002).

19. Living examples can be used as boundary objects. When Ohno’s Toyota plant began operating its kanban system, he made invitations “to the cooperating firms from nearby to come, a few at a time, to study the system. For example, the outside die press peo-ple came to see our die press operation and the machine shop people came to see our machine shop. This way of teaching gave us the ability to demonstrate an efficient production method in an actual production plant. As a matter of fact, they would have had difficulty understanding the system without seeing it in action” (T. Ohno, Toyota Production System: Beyond Large-Scale Production [Cambridge, MA: Productivity Press, 1988]: 34). The example of the plant running kanban and having specialists see the function with which they were associated, provided methods for representing, learn-ing from, and transforming Toyota’s kanban knowledge. A shift in their thinking was required for suppliers to understand kanban and all its implications, necessitating the use of Toyota’s factory as a boundary object in this change process. The complicated adaptation of kanban in other companies’ environment required understanding and adaptation of Toyota’s knowledge, which was based on a pull change process. Ohno was familiar with internal efforts within Toyota to join different units in the kanban system, and had, in addition to the push change he made when he became plant manager, pulled many changes along internally.

20. J. Liker and D. Meier, The Toyota Way Fieldbook: A Practical Guide for Implementing Toyota’s 4Ps (New York: McGraw Hill, 2006), 399–401.

21. Liker and Meier, The Toyota Way Fieldbook, 403.22. It should be noted that Tenneco’s Smithville plant later made an important shift. It

started to use a value stream approach that emphasized information and material flow across processes to guide its improvement projects. The development of current and future state value stream maps identified gaps between actual and desired conditions, which directed where tools were used and projects carried out. The case’s authors point to value stream mapping and taking a more system-wide approach as important in achieving and sustaining further improvements (Liker and Meier, The Toyota Way Fieldbook, 415–416).

23. In addition to George Roth’s work with BP in Lima and Clark Refining, which became Premcor in Port Arthur, Texas, the BP Lima refinery is discussed in J. Linder, Spiral Up: and Other Management Secrets Behind Wildly Successful Initiatives (New York: AMACOM, 2007).

24. G. Roth and P. Senge, “From theory to practice: research territory, processes and struc-ture at an organizational learning center,” Journal of Change Management 9 (1996), 92–106, and B. Sugarman, “A learning-based approach to organizational change: some results and guidelines,” Organizational Dynamics 30 (2001), 62–76.

25. A detailed version of these comments appears in Kanter’s commentary, R. Kanter, “Why the battle was won but the war was lost,” in G. Roth and A. Kleiner (eds.), Car Launch: The Human Side of Managing Change (New York: Oxford University Press, 2000), 137–148.

26. Ohno, Toyota production system, 31–3727. Womack et al., The Machine That Changed the World, 82.

Notes 259

28. These characteristics have been noted by Richard Walton as symptoms of an organi-zation with dominant management practices of imposing control (R. Walton “From control to commitment in the workplace,” Harvard Business Review, April-May [1985], 77–84).

8 Culture Alignment

* The information and descriptions in this chapter are taken from research and case studies supported by the Air Force Research Laboratory (under agreement number FA8650–05–2–5706) and a consortium of other government and aerospace industry members. MIT faculty and students made successive visits to Raytheon, with a focus on its Tucson Missile Systems division and its Waltham headquarters, to study and work with personnel there. The working papers of the case studies associated with these research activities include G. Roth, “Case Study Report: Raytheon Paveway—Lean Enterprise Change,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. February 28, 2005; Justin Hemann, “Case Study Report: The Paveway Program Transformation,” unpub-lished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. February 28, 2005; and Justin Hemann, “Improving Complex Enterprises with System Models,” unpublished master’s thesis, Massachusetts Institute of Technology, May 23, 2005.

1. “And the Shingo goes to . . . ,” Business Week, 15 May 2000, 38.2. A summary of accomplishments was noted in Raytheon’s press release upon winning

the Shingo Prize. See “Raytheon Missile Systems wins top manufacturing award,” accessed June 2, 2014, http://investor.raytheon.com/phoenix.zhtml?c=84193&p=irol-newsArticle_print&ID=506891&highlight=.

3. “Defense News Top 100 for 2013,” Defense News, 2013. Accessed June 2, 3013, http://special.defensenews.com/top-100/charts/rank_2013.php?c=FEA&s=T1C.

4. G. Roth, “Case Study Report: Raytheon Paveway—Lean Enterprise Change,” unpub-lished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. February 28, 2005: 7.

5. “Reality bites at Raytheon” Business Week, November 14, 1999 accessed on June 3, 2014, http://www.businessweek.com/stories/1999-11-14/reality-bites-at-raytheon.

6. “Reality bites at Raytheon” Business Week.7. Daniel Burnham, “Raytheon Six Sigma,” Journal of Innovative Management, 8 (2002): 8.8. Blair and McKenzie, “Raytheon—new challenges, new solutions, and documented

results,” Defense Acquisition Review Journal, (2004), 195–211.9. Raytheon’s principles are similar to the Japanese principles that focus on value, improve

value stream, organize to flow, respond to downstream pull, and pursue perfection. See Womack and Jones, Lean Thinking.

10. Burnham, “Raytheon Six Sigma,” 8.11. “Black Belt” and “Green Belt” are terms associated with Motorola’s approach to devel-

oping and certifying people’s expertise in using Six Sigma methods by demonstrating project results. These were roughly equivalent to the Raytheon Expert and Specialist certifications.

12. William Swanson, “Letter to Shareholders,” Raytheon Annual Report (2005), 4.13. Burnham, “Raytheon Six Sigma.”14. Burnham, “Raytheon Six Sigma.”

260 Notes

15. This approach used by Raytheon was adapted from the Oregon Productivity Matrix developed through the research and teaching of a US government-funded program at Oregon State University. For more information on this program, see “Oregon Productivity Center,” at http://socialarchive.iath.virginia.edu/xtf/view?docId=oregon-productivity-center-cr.xml accessed on June 4, 2014.

16. The Missile Systems division held a structured monthly review process in which each program reported its Operations Performance Metrics to the division leadership team. Operations leaders of all 26 programs also met monthly. The focus of these meeting alternated on a quarterly cycle—the first month of a quarter focused on performance (Operations Performance Metrics summary, accomplishments, and issues), the second month on productivity (common process, R6σ™, and yield improvement), and the third month on people (development, recognition, training, attrition, succession, diver-sity, and safety). These meetings enabled people to learn from one another’s successes, develop common approaches, and share best practices across programs.

17. TOW is an acronym for the Tube-launched, Optically-tracked, Wireless-guided weapon system.

18. J. Hemann, “Case Study Report: The Paveway Program Transformation,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. February 28, 2005, 12.

19. IDIQ is an acronym for indefinite demand and indefinite quantity. These contracts are firm, fixed price, and allow ongoing ordering based on proposals and performance by approved suppliers.

20. Hemann, “Case Study Report: The Paveway Program Transformation,” 13–14.21. Lockheed Martin calls its program LM21, for Lockheed Martin in the 21st Century.

The goal of this program was to identify and share best practices to increase effi-ciency and improve financial and operating performance. It integrates lean methods from Toyota and other Japanese automotive manufacturers with quality methods, and puts an emphasis on benchmarking and transferring best practices along with mea-suring and reporting operational results. For details, see Joyce and Schechter, “The Lean Enterprise—A management philosophy at Lockheed Martin” Defense Acquisition Review Journal, (2004), 173–181.

22. In a review of information on contract awards for Paveway, Raytheon and Lockheed Martin continue to compete with a slight edge, or more than half of these awards, from the US Navy and US Air Force going to Raytheon.

23. Data has been obtained from Raytheon’s Annual Reports and 10-K filings for years 1998 to 2013. During that period there were adjustments for the sale of its executive airplane business, and changes to its accounting methods. The ROIC and EPS calcula-tions are made using figures provided in Raytheon’s reported Adjust Net Income figures in those filings.

9 Seeking Growth

1. J. Sterman, N. Repenning, and F. Kofman, “Unanticipated side effects of successful quality improvement programs: exploring a paradox of organizational improvement” Management Science 43 (1997), 503–521.

2. Sterman et al., “Unanticipated side effects of successful quality improvement programs.”

3. IQS: International Quality Study: The Definitive Study of the Best International Quality Management Practices (New York: Ernst and Young/American Quality Foundation, 1991).

Notes 261

4. Two other factors affected financial results. Analog Devices’ competitors also imple-mented TQM programs, often achieving similar results so that Analog Devices cost savings were no longer unique. Second, the excess capacity created by TQM altered the historic relationship between direct and indirect costs, leaving the traditional markup formula inadequate to recover overhead, driving down profitability and creating a repu-tation for poor cost control (from Sterman et al., “Unanticipated side effects of success-ful quality,” 504).

5. It is similar to the age-old question, “If a tree falls in the woods and no one hears it, does it make a noise?” If an improvement is made that is not utilized, is there a benefit? Like the tree in the woods, a noise only matters when it is heard, and an organization’s improvement creates benefits only if it is utilized.

6. The original reference to this improvement statistic comes from the finding of performance differences between Asian automotive assembly plants and their American and European counterparts that were described in Womack et al., The Machine That Changed the World. Statistics for improvement efforts reports in the case studies described in this book—at Ariens, Raytheon, Rockwell Collins, or United Technologies—find similar results.

7. W. Deming, Out of Crisis (Cambridge, MA: The MIT Press, 1986).8. The term “community of practice” was developed from sociological studies by Etienne

Wenger (E. Wenger, Communities of Practice: Learning, Meaning, and Identity (New York: Cambridge University Press, 1998) and J. Lave and E. Wenger Situated Learning: Legitimate Peripheral Participation (New York: Cambridge University Press, 1991).

9. Senge et al., The Dance of Change, 54.10. J. Forrester, World Dynamics (Cambridge, MA: Wright-Allen Press, 1971).11. Donella H. Meadows, Dennis L. Meadows, Jørgen Randers, and William W. Behrens

III, The Limits to Growth: A Report for the Club of Rome’s Project on the Predicament of Mankind (New York: Universe Books, 1972) and Donella H. Meadows, Dennis L. Meadows, and Jørgen Randers Beyond the Limits (Post Mills, VT: Chelsea Green Publishing Co., 1992).

12. George Roth was a contributor to this research and coauthor of Senge et al., The Dance of Change.

13. J. Sterman, Business Dynamics: Systems Thinking and Modeling for a Complex World (Boston: Irwin/McGraw Hill, 2000).

14. Senge et al., The Dance of Change, 28.15. Spear and Bowen, “Decoding the DNA of the Toyota Production System.”

10 A New Accord

* The information and descriptions in this chapter are taken from research and case stud-ies supported by the Air Force Research Laboratory (under agreement number FA8650–05–2–5706) and a consortium of other government and aerospace industry members. MIT faculty and students made several visits to Rockwell Collins and Letterkenny Army Depot to collect information, interview people, and discuss findings. The case studies that describe changes in detail, which were reviewed and approved for release as MIT working papers, include the following: George Roth and Chester Labedz, “Rockwell Collins: Lean Enterprise Change Case Study,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA., September 1, 2006; Katharina Helten, Eric Rebentisch and Josef Oehmen, “A Case Study on Sustaining Lean at Rockwell Collins: 2001–2002,” unpublished working paper, Lean Advancement Initiative, Massachusetts Institute of Technology, Cambridge, MA., December 10, 2012; Roger Harvey and Chester Labedz, “Letterkenny Army Depot: The Army Teaches Business a Lesson in Lean Six

262 Notes

Sigma,” unpublished working paper, Lean Advancement Initiative, Massachusetts Institute of Technology, Cambridge, MA., May 23, 2006; and Chester Labedz and Roger Harvey “Letterkenny Army Depot: Finance Innovations Support Lean Six Sigma Success,” unpub-lished working paper, Lean Advancement Initiative, Massachusetts Institute of Technology, Cambridge, MA., September 15, 2006.

1. Roth and Labedz, “Rockwell Collins,” 10.2. Roth and Labedz, “Rockwell Collins,” 5.3. Roth and Labedz, “Rockwell Collins,” 15.4. Roth and Labedz, “Rockwell Collins,” 24.5. John Croft, “ARINC deal gives Rockwell Collins end-to-end communications link,”

Aviation Week, August 12, 2013, downloaded from aviationweek.com on June 13, 2014.6. Helten, et al., “A Case Study on Sustaining Lean at Rockwell Collins,” 4.7. Helten, et al., “A Case Study on Sustaining Lean at Rockwell Collins,” 8.8. Helten, et al., “A Case Study on Sustaining Lean at Rockwell Collins,” 7.9. The basis of the quotes and statistics for Letterkenny Army Depot comes from two case

studies: Harvey and Labedz, “Letterkenny Army Depot: The Army Teaches Business a Lesson in Lean Six Sigma,” and Labedz and Harvey “Letterkenny Army Depot: Finance Innovations Support Lean Six Sigma Success.” These two papers provide additional detail beyond what is presented in this section.

10. George Koenigsaecker, Leading the Lean Enterprise Transformation (New York: CRC Press, 2009), 50.

11. “Certifications and Awards,” Letterkenny Army Depot, downloaded from http://www .letterkenny.army.mil/awards.html on June 17, 2014.

11 Distributing Leadership

1. Collins, Good to Great, 21.2. A reader may find that a change case has veered from its success since our having writ-

ten about it. Fluctuation in performance should be expected and not seen as evidence of misunderstanding enterprise changes.

3. On Monday morning, Toyota announced the shutdown of 20 of its 30 assembly lines and those at contract assemblers the next day. By Wednesday, practically all of Toyota’s and its related firms’ plants were closed. Hundreds of suppliers were affected, including local electric, gas, and transportation companies.

4. Jeff Dyer has written about this in an article (J. Dyer and N. Hatch, “Using supplier networks to learn faster,” MIT Sloan Management Review Spring, (2004), 57–63) and in his book (A. J. Dyer, Collaborative Advantage: Winning through Extended Enterprise Supplier Networks (New York: Oxford University Press, 2000), which provides much greater detail on the mechanisms Toyota uses to develop knowledge in its extended enterprise.

5. J. MacDuffie and S. Helper, “Collaboration in supply chains with and without trust,” in C. Heckscher and P. Alder (eds.), The Firm as a Collaborative Community (London: Oxford University Press, 2006).

6. T. Nishiguchi and A. Beaudet, “Case Study: The Toyota Group and the Aisin Fire,” Sloan Management Review 40 (1998), 49–59.

7. These alternative management approaches and their implications for leadership are described in R. Walton, “From control to commitment in the workplace,” Harvard Business Review March-April (1985), 77–84.

Notes 263

8. H. Mintzberg, The Nature of Managerial Work (New York: Harper and Row, 1973).9. In their popular management book, Peters and Waterman used this expression to refer

to companies that stuck to what they did best (T. Peters and R. Waterman, In Search of Excellence [New York: Warner Books, 1982]).

10. Senge, The Fifth Discipline.11. Collins, Good to Great, 21.

12 Competitive Excellence

* The information and descriptions in this chapter are taken from research and case studies supported by the Air Force Research Laboratory (under agreement number FA8650–05–2–5706) and a consortium of other government and aerospace industry members. MIT faculty and students made visits to various UTC companies and facili-ties. The working papers of the case studies associated with these research activities include G. Roth, “United Technologies Corporation: Achieving Competitive Excellence (ACE) Operating System Case Study,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. November 30, 2010; G. Roth, “United Technologies Corporation: Internal Audit Department (IAD) Case Study,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. August 11, 2008; G. Roth and P. Colatat, “Pratt & Whitney Homogenous Metals, Inc. (HMI) Case Study,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. October 6, 2009; and P. Colatat, “Process Improvements in Pratt & Whitney’s Deficiency Report Investigation Process,” unpublished working paper, Lean Aerospace Initiative, Massachusetts Institute of Technology, Cambridge, MA. June 17, 2010. An article based on this research appeared in the 2013 Autumn edition of strategy + business (G. Roth, “An Uncommonly Cohesive Conglomerate,” strategy + business 72 (2013), 56–67.

1. Spear and Bowen, “Decoding the DNA of the Toyota Production System,” 97.2. Krauskopf, L. “United Tech CEO steps down,” Reuters News Service, Nov. 24, 2014,

downloaded from www.reuters.com/ on December 1, 2014.3. Comments from personal interview by George Roth of Louis Chênevert at UTC in

Hartford, Connecticut on May 6, 2009.4. Many facets of UTC’s performance outpaced other companies during the 2000s. Only

Caterpillar and 3M also had triple-digit percentage valuation gains; the Standard & Poor’s 500 index of leading American companies declined 10% over that ten-year period. (Source: Thompson-Reuters financial services data; indexed performance graph from 2.23.12 UTC presentation at Barclays Capital Industrial Select Conference down-loaded from http://ir.utc.com/events.cfm on May 1, 2012).

5. Comments made by George David, Dean’s Innovative Leader Series, MIT Sloan School of Management, February 22, 2007. See G. David, “Insights on leadership at United Technologies Corporation,” MIT Sloa School of Management, downloaded from http://video.mit.edu/watch/insights-on-leadership-at-united-technologies-corporation -9224/ on July 16, 2012.

6. The research related to the development and application of ACE in engineering areas was co-investigated with Eric Rebentisch, Research Associate in Lean Advancement Initiative and Sociotechnical Systems Center, Massachusetts Institute of Technology, Cambridge, MA.

264 Notes

13 A Shift in Focus

1. Welsh, Straight from the Gut, 432.2. An enterprise can perform at high levels because it is able to draw upon expertise and

resources from each participating organization without bearing the full costs of these spe-cialized assets, but as a system is flexible and able to be redirected as conditions change. An enterprise operates in effective and flexible ways when each organization or unit is highly responsive to the information and direction it gets from the other units.

3. R. L. Ackoff, Redesigning the Future: A Systems Approach to Societal Problems (New York: Wiley, 1974), 21.

4. Examples of these methods include improved workplace organization (5S), feedback on status and performance (visual workplace), identification of ancillary tasks and resources (waste elimination), rapid improvement for the better (kaizen) events, documentation and improvement of processes and tasks (standard work), reducing change over opera-tions (SMED – single minute exchange of dyes), operator responsibility for machine maintenance (TPM – total productive maintenance), and charting activities and their relationships (value stream mapping).

14 Keeping On

1. Andrew Pettigrew, “Longitudinal field research on change: theory and practice,” Organizational Science 1 (1990), 267–292 and Andrew Pettigrew, R. Woodman, and K. Cameron, “Studying organizational change and development: challenges for future research,” Academy of Management Journal 4 (2001), 697–713.

2. Carl von Clausewitz, On War, translated by J. J. Graham (Rockville, MD: Wildside Press LLC, 2009).

3. James Carse, Finite and Infinite Games: A Vision of Life as Play and Possibility (New York: Ballantine Books, 1986).

4. Andrew Grove, “How to make an American job,” Business Week July 5–July 11 (2010), 48–53.

5. Ralph Waldo Emerson, “Essay II. Experience,” Essays: Second Series, (Boston: James Munroe and Company, 1845), 65.

ACE (Achieving Competitive Excellence) program, 210–21

Adams, Scott, 15Adler, Paul, 32aerospace industry, 80–1, 168Air Force, US, 80–2, 97–9, 145, 146airline industry, 60. See specific companiesAisin Seiki, 166, 232Aklilu, Tesafe, 213–16ALC (Air Logistics Centers), 82Analog Devices, 151–3, 167architecting change. See under changeAriens, Dan, 3–5, 8, 47, 117, 165, 191Ariens Company, 3–10, 237

cells, 5–8complementary changes, 86, 89–90distributing leadership, 191–3promoting enterprise awareness, 47–9,

51–2, 71seeking growth, 155, 166, 167–8

Army, USLean Six Sigma program, 178–82MIT’s LAI consortium and, 78–9, 83

assembly lines vs. cells, 5auctions, reverse, 198–9authority, 189–93. See also hierarchical

organizations; push change. Compare enterprise leadership

AutoCobalancing push and pull change, 125pull change, 118–20

automotive industry. See individual companies

avionics industry, 99–100

balancing push and pull change (capability)chapter, 111–29definition of, 18–19at NUMMI, 42

Base Realignment and Closure (BRAC), 178–9, 182

Bavalas, Alex, 62The Beer Game, 52–3. See also bullwhip

effect; causal loop diagrammingbehavior, changing, 19, 33, 35–7,

200–1. See also unfreezing; change, architecting

Bellows, Bill, 75–7benchmarking, 186, 207. See also

occupational communitiesBennis, Warren, 62–3biases, effect on perception, 29, 55–6Big Three automakers, 12. See company

namesBoeing, 168–71, 175, 191, 195Bossidy, Larry, 138boundaries, organizational, 201–4boundary change. See under changeboundary objects, 121–2Bowen, Kent, 36, 207BP (British Petroleum)

balancing push and pull change, 123complementary change, 93–5installing innovation sets, 91–2

Broadway musicals, 61–2Browne, John, 91–3buffers

in fragile systems, 232in robust systems, 39–40

Index

266 Index

Built to Last, 14, 185bullwhip effect, 53–4Burnham, Dan, 136–43, 191

capabilities of enterprise change, 11, 16–20, 41–3, 47–8, 225, 229–30, 235–8. See also names of capabilities. Compare organizations, capabilities of

captains of industry, myth of, 205Car Launch, 118–20, 257n11–12, 257n14,

258n25Carse, James, 237Casey, George, 78causal loop diagramming, 53–4, 159cells, 87–9. See also Ariens; Johnson &

Johnsoncellular workflow. See Warner Robins Air

Force BaseChampy, James, 14, 86change

architecting and orchestrating of, 234–7boundary, 90capabilities for (see capabilities)complementary, 89–94, 109, 153–4efforts, 15–16, 161, 204–5enterprise (see under enterprises)forcing, 196iterative, 30management, 9, 15, 112–13, 118, 225–6measuring of, 34myths, 14–15organizational (see under organizations)prescription for, 14push and pull (see individual entries)sequencing push and pull (see push

change)spotlight vs. floodlight view of, 15, 17,

41, 48, 226systemic, 1–11, 219–21, 225–9, 231–8threatening conditions and, 237true, 118valence, 151, 163–6, 167

Cho, Fuji, 36Circuit City, 185collaboration. See interdependenceCollins, Jim, 14, 21, 185, 205Competitive Advantage, 14complementarity, 89–91, 94–5. See also

interdependence

computer industry, Boston, 72–3connectedness (network property), 62–4.

See also enterprise, metaphysics ofconsensus decision making. See UTCcoping, adaptive, 194. See also efficient

producercore firms, decline of, 72cost reduction, 92Critikon Vascular Access plant visit,

29–31customer value. See value stream mapping

Danaher Corporation, 233The Dance of Change, 161, 162David, George, 11, 191, 208–11, 213–20DEC (Digital Equipment Corp.),

72–3DeGeus, Arie, 39Delphi, supplier, 199Deming, Edward, 36, 75–6, 158destination thinking, 235–7Dilbert (comic character), 15distributing leadership (capability)

architecting systemic change and, 236chapter, 186–205definition of, 18, 19“doing what we know best,” 192–3, 194,

196–203, 207efficient producer, 193–4, 198–9, 202–3,

207fragile excellence (see separate entry)interdependence and, 225at NUMMI, 42“pioneering new ways,” 193, 194–5,

200–2Dore, Ronald, 47, 60Dover Service, push change, 114–16Dyer, Jeff, 58

economic downturn. See the Great Recession

EDS (Electronic Data Systems), 20efficient producer. See under distributing

leadershipEllington, Donna, 144–5embedded relationships. See networks,

configurations of; tiesemergence (network property), 65emergent behavior, 232

Index 267

enterpriseawareness, 17, 47–56, 67, 71, 75change, 83–4, 186–7, 227–9, 231–2

(see capabilities; change valence. Compare organizations, change in)

definition of, 50–1excellence, 21–43, 83–4extended (see networks)fragile, 196leadership, 108–9, 204lean, 38–9metaphysics of, 68–70orientation, 225–6

epidemics. See tipping pointsequilibrium of systems. See under systemsESAT (Enterprise Strategic Assessment &

Transformation) methodology, 78–9excellence, 235. See also fragile excellence;

enterprise excellence

fashion industry, New York City, 60feedback, delay of. See The Beer Game;

fragile excellenceFerguson, Thomas R., 79–80The Fifth Discipline Handbook, 52, 118, 202firm performance, 60, 90flow charting, method of, 115–16Ford Motor Company, 57–8, 76–7Forrester, Jay, 52fragile excellence, 193–203

acceptance of fragility, 10, 226, 232production systems and, 39relationships and, 41

fragile systemsneed for systemic change in, 232vs. robust systems, 38–40working on, 157

gainsfrom change, 157–8short-term vs. long-term, 14–15, 60,

122–3games, finite vs. infinite, 237General Dynamics, 135–6, 137Gerstner, Louis, 94Gladwell, Malcolm, 65–6goals. See destination thinking

growth and, 158in push change, 112–16, 120–2, 124–6

sequencing push and pull change with, 124–6, 128–9

success of, 40–1systemic change and, 197–8, 200

Good to Great, 14, 21, 185, 205government, US, 50, 78–80, 81–2, 112,

135GM (General Motors), 20, 138, 198–9,

208. See also DelphiFremont plant, 24–8, 32

Granovetter, Mark, 59The Great Recession, 175–6Groundhog Day, 13Grove, Andy, 237growth. See also change valence

at Letterkenny Army Depot, 160–1reinforcing, 151–60, 160–1, 164

Guinn, William, 178–83, 91Gunning, Tex, 165–6

Haines, Dennis, 100–3, 108Hamel, Gary, 21Hammer, Michael, 14, 86harmony buck, 119Hayward, Tony, 92hierarchical organizations. See also

textilesdescription of, 56vs. enterprise network, 204, 227

Hoffer Gittell, Jody, 73–4, 84holes (network property), 64–5Honda

BP supplier program, 13promoting enterprise awareness, 11–13

Horton, Robert, 91–4Hughes Electronics, 133, 135–6, 138,

144human resources, 19, 39–40, 237

improvementcontinuous, 98, 177, 204, 225 (see also

lean)initiatives, 56, 152, 162–4, 165of processes, 18, 159, 163programs, 159, 180, 186, 190–2, 201,

204improvement approaches. See under

distributing leadership; fragile excellence

268 Index

independence in industrial societies, 10. See also core firms. Compare interdependence

individualism, rugged, 16information, diffusion of, 66. See tiesinnovation, 159, 195–6, 201–2, 219–20innovation sets, 18, 85–6, 168, 236installing innovation sets (capability)

architecting systemic change and, 236chapter, 85–95definition of, 17–18Rockwell Collins and, 168

interdependence, 225–6. See also networks, organizational; relational contracting; buffers; fragility of relations

inventory management, just-in-time. See kanban; lean methods

Ito, Yuzuru, 209–11, 213–14

Jack: Straight from the Gut, 14, 94Johnson, Tom, 40–1Johnson & Johnson, 29–31

cells, 29–30Jones, Clay, 169–70, 172–3, 175, 191, 195

kairos. See kronoskaizen, 30–1, 170. See Toyotakanban, 126–8Kelleher Herb, 73Kern, Paul, 179–80Klein, Janice, 118Kotter, John, 13, 112–13Krafcik, John, 38–9kronos, vs. kairos, 127

lay offs, 151–2, 158leadership. See also change, architecting

of complementary change, 93–5consistency of, 103–4, 157–8continuity of, 92of enterprises (see under enterprise)inconsistency of, 161–3Level 5, 185, 205in push vs. pull change, 117–18, 121security for, 177systemic, 207–8, 219–21, 232–4

leancommon concerns with, 162events, 100–1gauging of, 81

growth, 154, 157–8methods, 39–41, 70, 81, 229–30

(see also boundary objects)origin of term, 23–4organizational logic of, 87–9philosophy of, 38pull change and, 117–18

Lean Advancement Initiative. See MITLean Enterprise Value, 80Lean Six Sigma. See under Six SigmaLear Company, 58learning

enterprises, 159–63, 196–203fragile vs. robust systems and, 40for growth, 152–4, 196–203organizational, 123–4, 139, 159–60,

162–3, 227in pull change, 18–19, 116–19sequencing push and pull and, 123–5

Letterkenny Army Depot, 168, 177–83, 191

Level 5 leadership. See under leadershipLewin, Kurt, 112–13, 115LM (Lockheed Martin), 81–2, 142, 146–7

LM21 program, 147Logitech, 15looking under the light, phenomenon

of, 56

Magna, 50management

change (see under change)systemic change, 225–9traditional, 227, 235

market conditions, 202–3mass production, 22–3, 88Matsushita Corporation, 209, 211, 216McKinney, Pat, 144–5means, vs. ends, 9measurement systems, 39–40mess, system theory of, 229metaphysics. See under enterpriseMilgram, Stanley, 64Milgrom, Paul, 89Miller, Steve, 179–80mission statements, 15. See boundary

objectsMIT

LAI (Lean Advancement Initiative), 78–83

Index 269

Organizational Learning Center, 118, 123

Radiation Laboratory, 80Moreno, Jacob, 59Moss Kanter, Rosabeth, 112, 125Motorola, 131–2, 134mutual assistance. See relational

coordination; interdependence. Compare core firms

NASA (Ntl. Aeronautics and Space Admin.), 82–3

National Science Foundation, 112Navy, US, 146networks

configurations of, 60–5, 70morale in, 62–3organizational, 57–8 (see also textiles;

enterprise awareness)properties of, 63–4 (see under names of)social, 59, 65

Nightingale, Debbie, 82Nippon Otis, 209–11nonlinear dynamics, 52NUMMI (New United Motors

Manufacturing Incorp.), 21–9balancing push and pull change, 128capabilities of enterprise change, 42–3fragile production system of, 38–9union relationships of, 25, 32–3

occupational communities, links between, 203–4

Ohno, Taiichi, 126–8Olsen, Ken, 72–3orchestrating change. See under changeorganizations

capabilities of, 48change in, 9, 13–14, 112, 123–4enterprise change and, 227–30optimal design, impossibility of, 235systemic change and, 157–8

Otis Corporation, 209

Papadopolous, John, 216, 218PATRIOT missile system, 178, 181–2Paveway missile program, 133–7, 142–7peloton, 204Perot, Ross, 20Peters, Tom, 21

Pettigrew, Andrew, 91–2Pfeffer, Jeff, 13phantom traffic jam, phenomenon of, 67phase changes (network property), 66–7“pioneering new ways.” See under

distributing leadershipPipp, Frank, 76–7plants, company. See under companiesPorter, Michael, 14Prahalad, C.K., 21P&W (Pratt & Whitney), 211–14, 217–18problem solving, 67. See relational

contractingprocesses, change. See push change; pull

changeproduction distribution. See The Beer

Gameproduction systems. See under fragile

excellenceproductivity

change valence effects on, 163–6ways to increase, 40

profitability, in relation to growth, 163–6promoting enterprise awareness (capability)

chapter, 47–67definition of, 17–18enterprise systems and, 71as interdependence, 225metaphysics of enterprise and, 70

pull change, 18–19, 112–13, 116–18, 120–2, 128

push change, 18–19, 112–16, 120–5, 128, 159, 229

vs. pull, 123–5, 167, 225, 228, 234and pull (see balancing push and pull)sequencing push and pull, 122–8

rational actor assumption, 59Raytheon, 131–49, 155, 190–2

complementary change, 131–3push change and restructuring of, 135–8Six Sigma (see under Six Sigma)

Rebentisch, Eric, 83The Red Pen & Blue Pen Company

Exercise, 76re-engineering, 87–9refreezing, 113, 125relational contracting, 47–8, 74–5relational coordination, 74–5restructuring, 70, 89–90, 113

270 Index

Roberts, John, 89robust systems. See under systemsRocketdyne, 216

enterprise thinking, 75–8Rockwell Collins, 168–77

complementary change, 172–3, 175customer-facing approach, 172distributing leadership, 191, 195installing innovation sets, 168, 233Lean Director, 170Lean Electronics program, 168–73,

176–7Lean Renewal, 176tiger teams, 169

Roth, George, 71, 93, 114, 147, 219

seeking growth (capability)change valences and, 167, 183chapter, 151–66definition of, 18, 19at NUMMI, 42

Senge, Peter, 118, 202sequencing push and pull change. See under

push changeShingijutsu Consulting, 211, 216Shingo lean manufacturing awards, 21, 132Simon, David, 91–3Simpler Consulting, 101, 109, 179six degrees of separation. See connectednessSix Sigma

Lean Six Sigma, Army, 179–82Raytheon Six Sigma, 131–2, 134–9,

141–3Sloan, Alfred, 94small world, phenomenon of, 64Smith, Roger, 20snap fit, 75–7sociometry, 59Southwest Airlines, 73, 75, 84Spear, Steven, 34–6, 67, 207Statler, Kent, 176stress, 118–19supplier relationships, 188–9. See also

relational contracting; auctions, reverse

suppliers, external, 57supply chain, 63. See The Beer Gamesusha, project leader, 89Sutton, Bob, 13swarm, 67

systemic change. See under changesystems

dynamics, 52equilibrium, 112–13robust vs. fragile, 38–40 (see buffers)thinking, 52–6working on vs. working in, 192–4

tacit knowledge, 36Taguchi, Genichi, 76takt time, 156teaching, 36. See distributing leadership;

pull change; architecting and orchestrating

Tenneco Automotive, 122–3Tesla Motors, 27textiles, British vs. Japanese, 47–8, 60,

74–5The Machine that Changed the World, 23,

80The Tipping Point, 66The Toyota Way, 36, 233, 258n20–2threatening conditions. See under changeTI (Texas Instruments), 133–8ties, 59–61, 64time, concepts of. See kronos; takt timetipping points (network property), 65–6, 85Toyota, 22–42, 58, 76, 83–4, 89. See also

NUMMIbalancing push and pull change, 125–9distributing leadership, 199–200seeking growth, 41–2, 155–7supplier relationships, 165–6, 187–90The Toyota Way, 36–7, 122–3, 233Toyota Production System, 127, 207

transitional objects. See boundary objectstrust. See interdependence

UAW (United Auto Workers), 25, 32uncertainty, dealing with, 157–8. See also

push vs. pull change; systems, fragile vs. robust

unfreezing, 112–13Unilever, 92–4, 165–6

complementary change, 93upstream requests, 118UTC (United Technologies Corp.),

11, 207–21. See also P&W; Otis Corporation

ACE program (see ACE)

Index 271

consensus decision making, 219–20Employee Scholars program, 220fragile excellence, 208–9Operations Transformation, 215productivity, 211, 214promoting change, 186promoting enterprise awareness, 191Supplier Gold program, 218–20The Presidents Council, 213the Way (see ACE)

Uzzi, Brian, 60, 72

value chain, 195value stream mapping, 87Van den Burg Nederland, 165variation, in products. See snap fitvertically integrated organizations. See

hierarchical organizationsvisits, company. See benchmarking;

Critikon Vascular Access plant visitVisteon, 57, 199von Clausewitz, Carl, 235vulnerability, value of, 226

Waldo Emerson, Ralph, 238Walters, Peter, 91Warner Robins Air Logistics Center,

97–107balancing push and pull change,

111cellular workflow, 104change agents, 108–9complementary change, 97–8lean methods, 97–103, 104–9tail teams, 88, 104–7

Waterman, Robert, 21The Way, organizational tool, 232–4Welch, Jack, 14, 95Wetekam, Don, 102–3, 108–9, 117, 191Womack, James, 179workers

fragile production systems and. See under fragile excellence

inspiration of, 120–2morale of, 62–3response to change myths, 14–15

World War II, 237