Lean Working Machine

In my recent Internet meanderings, I ran across some intriguing organizational behavior research.

The objective of research in this cluster area is to develop concepts, frameworks, simulation models, tools and techniques that enterprise management can use to design and evolve efficient, adaptive, flexible, agile and reconfigurable enterprises for a new network-centric age (i.e., analogous to a new "enterprise flight simulator" capability). -- Lean Aerospace Initiative, MIT website

Organizations that make or use complex products with long product lifecycles invariably encounter problems of product support as technology progresses by leaps and bounds during the product lifecycle. The most famous examples are high performance defense products like fighter jets. Typical criticism looks something like this:

The Department of Defense, already infamous for spending $640 for a toilet seat, once again finds itself under intense scrutiny, only this time because it couldn't account for more than a trillion dollars in financial transactions, not to mention dozens of tanks, missiles and planes. -- San Francisco Chronicle

While waste is unfortunate, high costs for advanced weapon systems seem unavoidable. When an organization deploys a technically advanced product with low unit volume that requires worldwide support for twenty or thirty years, it is hard to imagine how to keep costs low. Keeping parts available for decades in a distribution system that meets combat requirements costs money. Consider that if any part in a fighter jet or space shuttle becomes unavailable, the manufacturing technology that made the original part may not exist. If any part is not available, the product probably won't work.

In the defense and commercial aircraft industries, two emerging ideas are "product as platform" and "organization as network". As an example of product as platform, consider the 747 jet aircraft, a product that costs $200M-300M. Boeing introduced the 747 in the 1970s, but has built on the product over several generations to meet market needs. Boeing has modified the 747 to carry passengers, cargo, and even the space shuttle. Here's a video that shows the next version of the 747, the 747-8 Intercontinental.



Modularity in everything from seating to entertainment systems allows Boeing to adapt the 747 product as technology evolves without sacrificing investments in airframe, regulatory compliance, and support systems.

Historically, complex products like aircraft were produced by vertically integrated organizations. More and more, though, these vertically integrated organizations have realized that they cannot afford to employ directly all the expertise for all the technology that goes into a complex product. Most have developed networks of suppliers to provide specialized parts like engines, weapons, avionics, and so on. This type of organization has a flexible enterprise architecture.

These organizational changes enhance the ability of long lifecycle products to incorporate new technologies, but introduce a new set of risks. First, suppliers may not provide parts as specified or on schedule. This can create significant financial strain on organization (usually a prime contractor or the product manfacturer) when it fails to meet delivery specs or dates.

Downstream risks are related primarily to product support. Suppliers need to meet requirements for parts stocking and logistics to support the product in the field. The primary organization must manage for the risk that suppliers may be acquired or shut down during the product lifecycle.

Researchers have suggested modeling these relationships as derivatives options. This diagram shows just how complicated these relationships become during a product lifecycle.


Besides managing risk, one of the other large hurdles in the flexible enterprise archtecture is cross-company IT (Information Technology) integration. A famous example of improperly managed cross-organizational IT risk occurred during construction of the Mars Climate Orbiter.

NASA lost a $125 million Mars orbiter because a Lockheed Martin engineering team used English units of measurement while the agency's team used the more conventional metric system for a key spacecraft operation, according to a review finding released Thursday. -- CNN

Cross-organizational IT risk applies not only to design, but manufacturing, logistics, pricing, and support. Again, large organizations building complex products with multi-decade lifecycles require innovative IT solutions to mitigate risks.

Successful introduction of new technology into the market has more and more to do with the capacity of people to provide efficient means to distribute that technology. For instance, Lumexis is a start-up that wants to replace airplane entertainment systems that use copper wires to distribute entertainment to the seat with an entertainment system that uses fiber optic distribution. Switching from copper wires to fiber optics reduces airplane weight so much that airlines would save $250k - $500k per year per plane in fuel costs. Such superior economic performance suggests that the slow adoption of Lumexis' fuel-saving technology is a human adoption problem rather than a technology or economics problem.

"Product as platforms" and "organization as network" are two principles that may help emerging technology, such as that from Lumexis, gain market share more efficiently.