Journey to Lean Continuous Improvement Supported By

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Making Leaders Successul Every Day

Agst 2, 2010

Y Jey T Lea: CtisIpeet Sppted By Tlsby Aleade Petes, Ph.D.

Bsiess Pcess Pessials

http://www.forrester.com/



© 2010, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Inormation is based on best availableresources. Opinions refect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar,and Total Economic Impact are trademarks o Forrester Research, Inc. All other trademarks are the property o their respective companies. To purchase reprints o this document, please email [email protected]. For additional inormation, go to www.orrester.com.

F Bsiess Pcess Pessials

ExECuTIvE SummArY

Forrester interviewed the executives responsible or the deployment o the Lean continuous

improvement initiative at Wipro echnologies, a global supplier o technology services. Te case

study shows that Lean can become an important dierentiator or I service organizations, striving to

partner with their business customers and increase the stake in business transormations. Organizations

embarking on the journey to Lean should ollow Wipro’s staged approach centered on the deployment

o a Lean productivity team (or center o expertise) and unied Lean tool kit and perormancemeasurement system. But in addition to these tangible steps, many organizations will need to push aside

a ew so barriers that risk making Lean eorts stagger or stall: 1) skepticism about what Lean really is;

2) lack o leadership; and 3) silo culture.

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© 2010, Feste reseach, Ic. repdcti PhibitedAgst 2, 2010

Y Jey T Lea: Ctis Ipeet Sppted By Tls


2

BARRIeRs TO LeAn

Lean’s dual ocus on increasing business value and eliminating waste made it one o the most

popular business perormance improvement approaches o the last decade.1 Lean’s most amous

case study, the oyota Production System (PS), has been broadly studied and celebrated as

paradigm change rom Ford’s mass production to PS’ mass customization in the automotive

industry.2 Since its original publication in 1990, Lean’s continuous improvement process and

tools have been adopted across dierent industries as diverse as chemicals, nance services and

healthcare — with dierent degrees o success. In particular, the sustainability o the Lean in

industries with predominantly human-centric activities and/or less mature business processes has

been a continuing debate. Research supported by examples rom companies o dierent sizes and

operating in dierent sectors — rom global manuacturers to local providers o public services —

has identied a ew common barriers to Lean:3

· Skepticism about what Lean really is. Lean best practices emphasize continuous improvementat all levels o the organization. Yet case studies reveal broad skepticism about how executives

and sta perceive Lean: Sta workers see it as just cutting headcounts and reducing costs.

Managers and “middle” managers, busy with day-to-day operations, perceive it as a distraction

rom “real work”. And senior executives, instead o getting involved, delegate the responsibility

or Lean initiatives to consultants and methodology experts, who oen have limited inuence in

the organization.

· Lack of leadership. When the link between Lean’s implementation and the organization’s

strategy is weak, the embedding o a continuous improvement process cannot succeed in the

longer term. Case studies reveal that the goals o many Lean programs are not clear, and the

basic questions that senior managers should answer upront are not addressed: why Lean is

implemented; what drives the initiative; what change to the process is expected; and what

commitments management is prepared to make.

· Silo culture and measures. Perormance management systems based on individual and

departmental indicators encourage sta and managers to ocus on local optimizations and

compete internally, rather than collaborate or the benet o customers and the organization.

Te case studies show that disengagement and attempts to undermine continuous improvement

are higher in rms, which operate with compartmented structures and measures, than in

organizations that encourage collaboration and improvement as the means to an end.

WIPRO DemOnsTRATes HOW TO ImPLemenT LeAn AnD OveRcOme ITs BARRIeRs

Forrester conducted research to understand how executives implement Lean-style perormance

improvements around the delivery o I services. In an October 2009 Forrester report, “What

CIOs Should Know About Lean,” we discussed how several CIOs approached Lean to streamline

captive I organizations and eliminate waste; however, those CIOs did not reveal any spectacular



© 2010, Feste reseach, Ic. repdcti Phibited Agst 2, 2010



3

oyota-style implementations o Lean.4 But the Wipro echnologies (“Wipro”) case study presented

in the next section deals with a ull implementation o Lean. It is the story o a large I services

organization that adopted Lean as a source o competitive advantage to sustain its low-cost, high-

quality strategy while growing rapidly.

La’ Fll Ipltatio At Wipro spport Bi expaio

Wipro, a global company headquartered in Bangalore, provides I services to 840 active customers

in multiple verticals including banking, retail, manuacturing, healthcare, energy, utilities, and

transportation. In 2009, the I services business crossed the 100,000-employee mark, tripling

the number o employees rom 2005.5 At that time, Wipro Chairman Azim Premji announced

that the company was implementing Lean and expected to derive competitive advantage rom it.6

History shows that Wipro was able to ulll its chairman’s expectation. Since 2004, the company

has continuously developed its own Lean ramework and has applied its continuous improvement

process and tools into a strategic capability with goals to:

· Dynamically reposition its portfolio of services for growth and innovation. Five years

ago Wipro competed as an outsourced provider o technical services, completing about 1,100

soware projects yearly — about 75% o them oshore and 25% at customer’s locations. Eighty

percent o these projects were perormed on a time-and-material basis, and 20% were xed-

price contracts. oday the company perorms more than 4,000 projects. Almost 45% o its

contracts are xed-price. But more importantly, the company is shiing its service ocus rom

executing soware projects to a consultative approach aimed to increase the share o system

integration, business process outsourcing and transormational engagements, a market where

the availability o Lean insights and capabilities is becoming a critical success actor.7

· Sustain its market position as low-cost, high-quality service supplier. At Wipro, compliance

with quality assurance standards has been critical or its reputation and success. o deend its

position against other Indian and international service companies competing on low wages,

Wipro has constantly renovated its delivery processes and trained its sta based on the most

advanced quality initiatives and control models o the time, such as ISO 9000, CMMI, and

Six Sigma.8 Since 2004, Wipro has continuously increased the number o Lean engagements

(see Figure 1). During a recent brieng, Wipro reported that or the I business, 30, 000 out o

approximately 55,000employees are covered through Lean, and or the BPO business, 4,000 out

o approximately 26,000 employees are covered through Lean.9






4

Fir 1 The nbe o Lea Egageets Ctie T Icease At Wip

Source: Forrester Research, Inc.57286

Cumulative Lean engagements since inception

2004-2005

54

2005-2006

315

2006-2007

743

2007-2008

1,044

2008-2009

1,401

2009-2010

1,645

Source: Wipro Technologies

La At Wipro spport Bi soltio Byod Otord softwar Dlopt

When the members o Wipro’s senior executive team decided to implement Lean in 2004, they

realized that the quality models used beore, such as CMMI and Six Sigma, were very good or

meeting soware specications but were less well suited or delivering business solutions. Te

Harvard Business School’s 2006 case study documenting the early stages o the rollout reveals that the

executive team correctly assessed Lean’s potential as a management paradigm changer and envisioned

its role as a sustainable process, rather than the next quality initiative.10 During a recent Forrester

brieng with Wipro, we learned that since those early experimentation stages, Wipro has developed

Lean through several development phases into a mature ramework consisting o a continuous

improvement process and customized tool kit applied to projects o dierent size and complexity:

· Phase zero: Experimenting with Lean. Te implementation o Lean began with the creation

o the Lean productivity ofce (PO). Te PO’s mission was to: 1) incubate the Lean concepts;

2) transcript Lean tools and practices such as Just-In-ime (JI), Visual Control Board, Value

Stream Mapping (VSM) automation, and leveling into the I space; 3) select a ew pilot projects

or experimentation and help the project managers implementing them; and 4) measure

the tools’ impact on perormance. Only projects that could demonstrate more than 10%perormance increases on prespecied metrics (schedule, eort, or quality), were labeled as

Lean. From 2004 to 2006, when the HBS case study was published, the number o Lean projects

at Wipro grew rom 54 to more than 300.






5

· Phase 1: Mainstreaming Lean. Closed projects with Lean were more successul and set the

stage or the executive team to deploy Lean on a larger and more ormal basis. Te sta in

the PO grew gradually rom 10 in 2005 to 25 today. Tis Lean center o excellence (CoE)

is responsible or: 1) leading the deployment o oyota’s Lean practices in I services”; 2)

championing productivity, cost containment, and delivery excellence; 3) guiding project teams

through the entire course o Lean deployment; and 4) providing statistical evidence o benets

accumulated. During mainstreaming, the PO mandated the implementation o Lean tools

across more than 1,000 large and midsize projects involving greater than 100 man month (MM)

o eort and tracked their perormance.

· Phase 2: Gathering Lean momentum. Te PO team started selecting larger and more complex

projects or Lean intervention, meaning projects involving more than 200 MM. Te statistic

measurements showed that in spite o the increase in size and complexity o the projects, Lean

continued to deliver sustained perormance improvements. During this phase, the PO dedicatedadditional eort to: 1) marketing Lean via deliberate evangelization campaigns supported

through newsletters; 2) orming communities o practice; 3) creating contextual and customized

Lean workshops to address specic business needs; and 4) creating customized training

modules to cover the entire organization.

· Phase 3: aking stock. As the Lean intervention gained momentum and touched a large

number o projects, the ocus o the PO turned to cross-utilizing Lean and Six Sigma and

integrating the combined approach with other established methodologies such as Agile, the

Wipro Quality Management System, and other practices. Te goal was to move away rom

silo productivity improvements to an integrated portolio o improvement tools and correlate

them through a unied improvement process as part o project execution. Te solution was thedevelopment and implementation o an excellence index (EI) model consisting o a customized

tool kit or various project types. Te PO selected and documented the tools based on

experiential data and ranked them using weightings based on the impact seen in past projects

(see Figure 2).

· Phase 4: Measuring improvement. Te PO employed the EI model to validate the coverage

and rigor o implementing Lean. It introduced and started tracking two metrics across the

entire organization: planned EI and actual EI. While doing so, it continued to: 1) guide project

teams in selection o suitable tools (planned EI); 2) provide assistance in deployment; 3) ensure

depth and rigor with requent tenet usage reviews (actual EI). From August 2008 to December2009, the number o Lean projects that could demonstrate perormance increases by more than

10% based on prespecied metrics grew. For example, it grew in the banking sector rom 51%

to 83% (large projects) and in the telecom sector rom 13% to 72% (or medium size projects).

In addition, the PO continued to monitor the impact o dierent tools. A ew tools, such as

dependency structure matrix (DSM), statistical analysis, and orthogonal arrays contributed

signicantly to increasing business value (see Figure 3).






6

· Te next phase. Te PO plans to continue capturing insights about the usage and impact o the

EI tool kit and to continuously improve the rigor o the Lean process. In addition, it plans to

enhance the tool kit by experimenting with new tools and also researching new methodology

or doing projects, like the Critical Chain Project Management (CCPM). Last but not least,

Wipro is planning to arm out a consulting practice based on its unique Lean insights and

use these insights as a dierentiation actor; the company is shiing its service ocus to a

consultative approach intended to increase the share o transormational engagements.

Fir 2 A Saple Ecellece Ide (EI) Tl Kit F Deelpet Pjects



Category Excellence tools Weight age Selected

Requirement prioritization Yes

Yes

YesYes

No

Yes

VSM Yes

Yes

Yes

Yes

Yes

0.05

Yes

Yes

SMED for test setup optimization No

NHPP Yes

Statistical tools Yes

FMEA No

No

Other Yes

0.15Optional tools

0.35

0.25

0.20

Test scenario sequencing

Impact analysisCompetency management

Forward engineering

Mistake proofing

Standardization/5S/automation

Visual controls

Workload leveling/concurrent engineering

Pugh/tradeoff matrix

Structured testing

Orthogonal arrays

Paired programming

Dependency

structure matrix(DSM)

Waste elimination

Design selection

Testing optimization






7

Fir 3 Peace Ipeets F A vaiety o Lea Tls Bee Ad Ate EI



Before EI

After EI

C a p a c i t y p l a n n

i n g

D S M

M i s t a k e

p r o o fi n

g

S M

E D

S t a t i s t i c

a l a n a l y s

i s

5 W H Y

/ fi s h b o

n e / P a

r e t o / F M

E A

F o r w a r d

e n g i n

e e r i n

g u s i n g L a

t t i x

P u g h

/ t r a d e o ff m a

t r i x

S t a n d

a r d i z a

t i o n / 5 S

/ a u t o m a

t i o n

S t r u c t u r e d

d e s i g

n / o r t h o g

o n a l a r

r a y s

V i s u a l c

o n t r o l s /

c o m p

e t e n c y m

a n a g e m

e n t

V S M /

i n f o r m a

t i o n fl o w

W o r k l o a d l e v e l

i n g /

c o n c u r r e n

t e n g i n e

e r i n g

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

r E C o m m E n D A T I o n S

YOuR JOuRneY TO LeAn Is ABOuT OveRcOmIng ITs BARRIeRs

Wip’s eaple shws that Lea ca wk ad bece a citical sccess act gaizatis

peatig with pjects t pide IT-based seices, whee sbstatial aiability i cste

dead, techlgy peeqisites, ad ha-cetic iteeti is c. The Po ad the EI

tl kit ae the isible eleets Wip’s Lea aewk, bt eqally iptat ae the iisible

pats: 1) aliget with the cpay stategy; 2) the tp-dw eableet thgh sei

aageet; ad 3) btt-p eplyee behai ad egageet. Wip wked bth

the isible ad the iisible pats. As y ebak y Lea jey, whethe y ae pat a captie seice it y gaizati cpetes i the IT seices aket, y will ey likely

llw the sae steps as Wip. Y sccess will deped ey ch the ability t psh aside

the baies that ake ay ipleetatis stagge stall.

· etablih a awar of La to oro kptii withi th oraizatio. Stat

by asseblig a tea sei pcess pessials, tiated ad ltidisciplied peple,

t the Lea Po cete ecellece (CE). Teach the abt Lea ad help the

fge t hw t pt it t y gaizati. Select pisig aeas ipeet ad






8

epeiet with Lea tls ad caelly it thei peace. Ecage shaig

ad leaig thgh tageted edcati ad epeietati i eal-lie pjects ad

pcesses ad ecage discssis abt ctis ipeet. Bt the st citical

step eais ig these isights t the CE tea it peatis. This will eqie: 1)

eta taiig ad e--e cachig iddle aages t icease thei Lea skills;

2) assiget Lea tls t eal-lie pjects ad ipact eases based cstized

idicats, siila t Wip’s EIs; ad 3) a dble-lp leaig pcess, which allws the

assesset the Lea tls ad scigs the peace idicats based eedback.

· Lad throh th li. Y sei eectie tea eeds t actiely sppt Lea’s

deplyet thgh its whle cse, statig with the ealiest phase, whe they st

idetiy cicate key gals. Cside Wip’s eaple that sed gaizatial ad

cpetitie challeges t deteie the gals a ew ipeet iitiatie bee

selectig Lea. Ate aticlatig gals, the eectie st pte the Lea deplyet,

sppt the CE’s ap p, ad keep cs eslts. mst iptatly, the eectie tea

st ake se that these eslts ae aliged with the gaizati’s stategy ad cstes’

epectatis by keepig cet what cstes wat i tes pice, qality, ad

deliey ad eadjstig the peace idicats whe eqied.

· Dlop a tro La coe to brak ltral ilo. The Lea CE is the egie y Lea

iitiatie. Deelp it thgh seeal stages it a shaed etepise capability espsible :

1) eseachig ad icbatig ew ccepts; 2) taslatig the ew ccepts it best

pactices; ad 3) eplicatig the acss the etie gaizati t beak sils ad establish a

clte high-peace. Whe the Wip leades selected Lea as the et qality

ipeet iitiatie i 2004, they destd the liitatis Si Siga ad decided t

deply Lea t icease the acceptace ctis ipeet acss the etie

gaizati.11 Histy They wee sccessl i this edea, bt it tk the seeal yeas

ad deelpet stages t t Lea it a ass cstizati pcess espsible css-

tilizig ctis ipeet tls badly acss the cpay’s IT ad BPo seice lies.

enDnOTes

1 Everyone wants to be lean these days, whether when stepping o a scale in the morning or reviewing the

cost o running a successul business. But just how do you dene “lean” — especially in the context o

business and technology? Do you think o Lean as a way to drive down costs or technology solutions? Or

does Lean conjure visions o streamlined business processes that deliver ever-higher levels o productivity

and quality? Or does Lean mean creating a Lean business that delivers more customer value and innovation

to compete in today’s Lean economy? We assembled some o our top analysts on this subject and put

them to the test in a no-holds-barred roundtable discussion. See the September 29, 2009, “Lean: Te New

Business echnology Imperative” report.

2 Source: James P. Womack, Daniel . Jones, and Daniel Roos, Te Machine Tat Changed Te World: Te

Story of Lean Production, Harper Perennial, 1991.










9

3 Sources: “Evaluation O Te Lean Approach o Business Management And Its Use In Te Public Sector,”

Te Scottish Government (http://www.scotland.gov.uk/Publications/2006/06/13162106/0); Steven J. Spear,

“Fixing Health Care From the Inside, oday,” Harvard Business Review, September 1, 2005; David Fine, Maia

A. Hansen, and Stean Roggenhoer, “From lean to lasting: Making operational improvements stick,” Te McKinsey Quarterly , November 2008, (https://www.mckinseyquarterly.com/From_lean_to_lasting_Making_

operational_improvements_stick_2254); Peter Hines, Pauline Found, Gary Grifths, and Richard Harrison,

Staying Lean: Triving, Not Just Surviving,, Lean Enterprise Research Centre, February 2008.

4 When applying Lean as a perormance-improvement strategy, CIOs should consider our essential practices:

1) speciy value rom a business perspective using ve principles; 2) dene improvement goals top-down

in terms o delivery, costs, and quality; 3) implement improvements bottom-up by eliminating waste rom

processes; and 4) synchronize the top-down and bottom-up levels. CIOs should apply these practices at the

right time in the lie cycle o the perormance-improvement program to ensure that Lean outcomes can be

dened and tracked against strategic business goals. See the October 27, 2009, “What CIOs Should Know

About Lean” report.5 For the scal year ended March 31, 2010, Wipro reported $4.5 billion in revenue, representing an increase

o 6% over the same period last year. EBI was $1.05 billion, representing an increase o 18% over the same

period last year. Source: Wipro (http://www.wipro.in/media/Financial_Reports/).

6 Source: Bradley R. Staats and David M. Upton, “Lean at Wipro echnologies,” Harvard Business Review,

October 16, 2006.

7 During the Wipro Europe Analyst Day in February 2010, Wipro told Forrester that it has recruited in

excess o 30 partner-level consultants with domain and industry experience to build its system integration

and transormational capability. Te company views Lean process optimization as one o our key building

blocks or transormation, productivity, and superior nancial perormance. Te other three are technology innovation, cost optimization, and a new generation o outsourcing/partnering agreements.

8 In 1995, Wipro was one o the rst soware companies certied as ISO 9000 compliant. In 1998, the

company became the world’s rst I services company compliant with the Capability Maturity Model

(CMM) level 5, and in 2002, it became the rst I services company to receive SEI’s new certication, CMM

Integrated (CMMI) level 5. Go to http://www.sei.cmu.edu/cmmi/ or more details on the CMM and CMMI

certications as dened by the Soware Engineering Institute (SEI) at Carnegie Mellon University. Around

2000, Wipro began also implementing Six Sigma. Source: Bradley R. Staats and David M. Upton, “Lean at

Wipro echnologies,” Harvard Business Review, October 16, 2006.

9 Source: Forrester brieng with Wipro echnologies, April 2010.

10 “Quality initiatives last eighteen to twenty-our months, maybe thirty-six i you’re lucky. Te reason

or this is that either each initiative ocused on more advanced control processes as compared to the

previous or on new techniques such as the use o statistical process control in Six Sigma and these each

provided diminishing returns over time.” Source: Bradley R. Staats and David M. Upton, “Lean at Wipro

echnologies,” Harvard Business Review, October 16, 2006.







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