Reference no: EM133395027

Scenario: Fostering Commitment and Ownership

As written by Richard Turner, Chief Operations Officer, JDR Cable Systems. (Partial case study; edited for content)

This case outlines the challenges faced by an offshore oil and gas (O&G) company - DUCO Ltd - to implement a continuous improvement methodology called Lean, which was originally developed by Toyota to reduce waste in the car industry.

Upstream in the O&G industry, away from the extraction and refining processes, there is an extensive supply chain of product manufacturers. One of the key products used in almost any subsea supply chain operation is an "umbilical". The umbilical provides a connection to key pieces of equipment on the seabed and connects the subsea architecture back up to the surface; it provides electrical power, hydraulics, gas, and data. Historically, the umbilical's market was fairly uncompetitive, with high market concentration and typical oligopolistic forces. In that environment, there was little stimulus for change or improvement. In the last 10 years, two things have really changed the dynamics in the market.

First, the market has become more competitive through a combination of an increase in the number of companies competing for work and also cost-reduction pressures from customers. Second, after a number of high-profile disasters, such as Macondo in the Gulf of Mexico, there has been a quality revolution in the industry whereby customary practices and the status quo have become unable to deliver what is required. Faced with these external factors, many companies have looked outside of the O&G industry and attempted to draw from established practices and principles from the automotive and semi-conductor industries, such as Lean.

A couple of years ago, DUCO Ltd, an umbilical manufacturer, followed this industry trend and engaged with a government-led organization called Manufacturing Advisory Service (MAS), whose consultancy was designed to support the implementation of Lean and Six Sigma practices while reducing the cost of implementation through government subsidies. This program appeared to be a win-win for the company, with free consultancy to help improve quality while reducing cost and improving on-time delivery. MAS agreed to run a pilot in the "stores" areas of the company. This area was badly in need of reform and had regularly been highlighted as an area of weakness in customer audits.

A team was assembled to be trained in the basics of Lean and that team would then implement these practices into their area through a blitz-style workshop designed to provide rapid and visible results. However, the project was quickly and dramatically derailed. The problems started on Day One of the workshop when the facilitator from MAS began to present generic "car plant" material to participants. This was immediately met with an "it won't work here as we don't make widgets" attitude from the team, which festered into an all-out row by the middle of the day. This resulted in the facilitator being physically removed from the building by a member of the company's senior management team, who had been completely unconvinced, and in fact, offended by the notion that they could - and that they needed to - learn from others using such a methodology. Everyone knew about this incident, everyone knew it was about Lean, and everyone knew that Lean would not work in umbilical manufacturing.

The Lean program was dropped until a year later, when the management team was restructured and new leaders were brought in, including those with expertise in Lean. The barriers to implement Lean were now even higher, as not only was it attempting to implement Lean in a different type of environment, but also the company still had a strong memory of the MAS incident.

The second attempt to implement Lean involved a totally different approach. Initially, a great deal of time and effort was spent doing nothing and focusing heavily on communication, mostly face to face. Over a period of a month every person in the business attended a presentation on the "Business Excellence Program". The content of the presentation was carefully crafted to take the key ideas, tool, and philosophies from Lean, but at the same time, internalizing them in order to make them relevant to the business and to the people who would be using it. This internalization process included the use of specific examples from within the business, but also comprised the use of imagery that was industry relevant, such as taking a textbook entitled "Lean Temple" and displaying it as a Lean oil rig.

The communication was extremely well received, and although it did not change the attitudes about Lean overnight, it did succeed in opening the ears and minds of the employees. It allowed them to understand first of all the need for change, but also, that by pragmatically applying tools and techniques from other industries in a way that was meaningful, relevant, and effective for the organization, there would be an improvement that would make their jobs easier.

Following on from the initial communications, an extensive value stream mapping (VSM) process was conducted. This involved taking a cross section of people from across the company and allowing them to map the current business processes, and also go out and talk to people in all departments in order to collect and collate ideas for improvement. These suggestions were then "baked" into the "future map state" that became the road map for the future.

In a similar way to the communication session, the VSM had a profound effect on the organization and helped to contribute to creating a state of readiness for change. At the start of the mapping exercise, the team dynamic was a little awkward, and everyone thought they knew the answers. As they went through the different steps of their end-to-end business processes, many, if not all, people involved were surprised, if not totally shocked, by what they saw and what they learned. The VSM process is often referred to as "learning to see", which was definitely evident in this case. The process really opened the participants' eyes to the fact that they had the need and, importantly, the possibility to make significant changes for the better.

Following on from the VSM, a number of projects were launched across the business, which delivered significant and measurable results. The tools used were the same Lean tools that were intended to be used a few years earlier; the difference was in the approach. By identifying the stimulus for change, by showing the vision for the future, by internalizing the content, and by allowing people to actively participate and contribute to the planned activities, the status quo was unlocked, resistance all but eliminated, and readiness for chance was achieved. Ultimately, the change was successfully delivered.

1. Explain why the initial attempt to introduce Lean failed.

2. What would be your recommendations for a successful Lean integration?

3. Identify what cultural barriers may have impacted the Lean integration.