20081103 Mck on Serviceops

McKinsey on Service Operations

4 Bringing the lean revolution to services

12 Toward a leaner finance department

17 Applying lean to application development and maintenance

24 Lean cuisine

26 The choreography of expertise

32 Lean in media: The art of making creative work efficient

The next revolution in lean services

Autumn 2008


is written by consultants in McKinsey

& Company’s operations practice

together with other McKinsey colleagues.

Editorial contacts:

Keith Gilson

([email protected])

Scott Hensel

([email protected])

Editor: Thomas Fleming

Design and Art Direction: Delilah Zak

Managing Editor: Drew Holzfeind

Editorial Production: Sue Catapano,

Lillian Cunningham, Roger Draper,

Mary Reddy

Illustrations by Mick Wiggins

Copyright © 2008 McKinsey & Company.

All rights reserved.

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26The choreography of expertise

Even steps that require customization and expert judgment can be streamlined effectively.

32Lean in media: The art of making creative work efficient

Companies can ferret out waste and variability— without damaging creativity. A customized approach to lean can help.

12Toward a leaner finance department

Borrowing key principles from lean manufacturing can help the finance function to eliminate waste.

3 Introduction

24Lean cuisine

Proven techniques from manufacturing might be the recipe for improving productivity in restaurants.

17Applying lean to application development and maintenance

To make application development and maintenance more productive, IT managers are getting lean.

4Bringing the lean revolution to services

Yes, it’s hard to increase the efficiency of highly variable operations that require the constant exercise of judgment. But they can be made not only more efficient but better.


The next revolution in lean services

2 McKinsey on Service Operations Autumn 2008

3

It’s a lean world. Lean manufacturing, the operational and organizational innovation Toyota Motor pioneered in the second half of the past century, has spread in recent years from its industrial origins to a range of service environments. Today, companies in sectors as diverse as airlines, banking, health care, insurance, IT services, and retailing—among others—benefit from the now-classic approach of eliminating waste, variability, and inflexibility.

Nonetheless, we find that many organizations struggle to maximize the value they get from “leaning” their service operations. Standardizing work to reduce its variability, for example, is hard in service environments because the nature of the tasks their employees perform may vary widely from one customer to another. Matching customer demand to the supply of workers is notoriously tricky as well: unexpected troughs or spikes can arise on a moment’s notice—something that vexes the managers of hospitals and IT help desks alike. Finally, in many service settings, the very concept of a service

“product” is tightly bound up with the perception that customers gain from their interaction with frontline workers, the public face of a service operation. In fact, it’s no exaggeration to say that these workers are the real product. They represent a critical source of competitive advantage, or disadvantage, if managed poorly.

Yet a handful of leading companies are mas- tering these challenges and getting more—in some cases much more—by applying lean to services. In the articles that follow, we examine both their innovative practices and the strategic principles they apply to create sustainable and scalable lean operations. Their experiences, we believe, offer lessons for senior executives across the landscape of services, including pure service businesses, traditional product companies with service units, and the business support functions in global organizations.

These stories sketch a picture of lean in tran- sition. Some forward-looking practitioners are generating new insights into the applica-tion of these principles to traditional services, such as insurance claims or retailing, with their discrete, transactional activities. Others are applying them in novel areas, such as less standardized project-based work, including the development and maintenance of IT applications, and even media and entertainment. Together, these operations are extending the boundaries of lean as a management discipline and setting the stage for the next phase of the lean revolution in services.

Introduction

Keith Gilson and Scott Hensel

Keith Gilson ([email protected]), director of knowledge for McKinsey’s service operations

practice, works in the Toronto office; Scott Hensel ([email protected]), a principal in the Stamford

office, is the global knowledge leader of the service operations practice. Copyright © 2008 McKinsey & Company.

All rights reserved.

4

Bringing the lean revolution to services

Yes, it’s hard to increase the efficiency of highly variable operations that require the constant exercise of judgment. But they can be made not only more efficient but better.

Such operations are a vital part of any industry—either as a company’s primary business, in the services arm of a product company (installation, maintenance, and monitoring), or in business-support functions (accounting, human resources, and legal). Taken together, services drive more than $30 trillion, or roughly 70 percent, of global GDP. Companies across all industries have a tremendous opportunity to reap the benefits of the lean approach.

But adapting lean to services presents a challenge. These operations tend to be highly variable and thus difficult to standardize; indeed, many of the most

valuable activities in services require customization and expert judgment. Evaluating a commercial loan or shepherding a patient through an emergency-services unit, for example, requires many discrete steps and a degree of expertise. Demand in services is volatile; a hospital emergency room, for instance, can analyze patient flows over time and during particular months but cannot predict when a major accident will overwhelm it with new patients. Moreover, services are intangible—often a subjective experience in the customer’s mind. Because the frontline workforce is responsible for delivering this experience, success depends on highly skilled and motivated employees.

The principles of lean production, pioneered by Toyota Motor and then adopted throughout the manufacturing sector, are now applied routinely in many industries. Manufacturers dramatically improved their operations by driving out waste and variability, becoming more flexible, and instilling a culture of continuous improvement. In recent years, lean has moved beyond its manufacturing origins. Hospitals, retailers, airlines, banks, financial-services firms, technology companies, and governments are all finding ways to adapt lean techniques to their service operations.

Scott Hensel, Aditya Pande, and Vivek Sharma

5

These characteristics make service operations difficult to measure and manage.

So while many companies have successfully applied lean techniques to services, others have had only mixed success. Our experience suggests that service companies, after-sales service units, and business support functions still have significant opportunities to create value by “leaning” their operations. In fact, we have seen our clients not only raise the productivity of these operations by 20 to 40 percent but also substantially improve their quality by applying the lean approach.

Successful companies comprehensively apply four core principles to address the challenges: find innovative ways to manage demand, optimize the way you process it, balance it with supply by implement-

ing flexible labor practices, and build a high-performing frontline workforce.

The opportunity In the next ten years, as more markets mature and resources continue to shift from manufacturing and agriculture to knowledge-based activities, services will probably account for about 75 percent of global growth (Exhibit 1). Emerg- ing markets, in particular, are poised to lead the pace, with China, India, and Russia expecting compound annual growth rates of 8.5, 7.0, and 6.7 percent, respec- tively, in the service sector (Exhibit 2).

Efficiency isn’t the only consideration. The ability of companies to deliver high-quality labor-based services plays a critical role in determining the ultimate winners and losers in any industry. Companies

Web 2008Lean Services Exhibit 1 of 2Glance: Services will continue to constitute a high proportion of world economic output. Exhibit title: A world of service

Source: Global Insight World Industry Service Navigator

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2015

85

90

80

75

70

65

60

55

50

45

0

Worldwide

United States

India

China

Russia

Brazil

Service sector's share of world economic output, %Exhibit 1 A world of service

Services will continue to constitute a high proportion of world economic output.


must strive to increase not only the productivity but also the quality of their service operations to improve their overall performance. Productivity creates significant value for shareholders and raises the bottom line; quality improves the customer experience and strengthens a company’s overall brand and image. Better service performance also produces broad social benefits in operations that provide critical community services, such as government agencies, as well as hospitals and other health care providers.

Companies beyond the service sector also have much to gain by reducing the cost, raising the productivity, and improving the quality of their service functions. OEMs, product distributors, and value-added resellers, for instance, derive much of their revenues and profits from installing, monitoring, and maintaining equipment. The productivity and quality of these services are key drivers of success. Similarly,

the cost of business support functions at all US midsize and large businesses equals 8 to 15 percent of their revenues. Companies can realize substantial savings by making these functions more productive.

In the past five to ten years, many companies have taken advantage of offshoring opportunities by shifting some service operations to low-cost countries. In this way, these companies have not only saved money but also made the global economy more efficient—for instance, by creating jobs for skilled workers in developing economies and shifting the workforce of mature ones into higher-value activities. But while the cost savings have been substantial, the advantage is fleeting. Going forward, companies won’t be able to extract the same level of savings year after year, because the price of labor in low-cost economies is even now rising as a result of their economic maturation and increased global demand. The companies that come out ahead in

Web 2008Lean Services Exhibit 2 of 2Glance: Services become more important as economies grow richer.Exhibit title: Richer countries demand more services

Source: CIA World Fact Book, 2007; Global Insight World Industry Service Navigator

India Russia

Brazil

China50

60

70

80

90

00 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

Developed countriesService sector’s share of GDP, 2007, %

GDP per capita, $

United Kingdom

United StatesFrance

Developing countries

Exhibit 2 Wealthier countries demand more services

Services become more important as economies mature and grow richer.


the future will make sustainable and last- ing gains by using lean principles to raise productivity and quality throughout their businesses, both on- and offshore.

The services challenge Despite the potential opportunity, many companies struggle to implement lean services successfully. Three characteristics make them challenging: high variability, volatile demand, and dependence on a highly skilled and motivated workforce.

One of the core tenets of lean is the importance of minimizing and, if possible, eliminating variability. Yet the processes involved in delivering most services are highly variable because the work depends on the circumstances of a specific customer’s situation. The time that a bank, for example, takes to evaluate and process loans can vary significantly; each of them may involve dozens of steps and hundreds of permutations. These characteristics make it difficult not only to establish standardized practices for service products but also to sell, market, and price them consistently.

Likewise, demand for services is volatile, which makes it difficult to manage capacity, response times, and quality. Manufac- turing and assembly managers have ways of accurately predicting and managing the demand coming into their plants. Even manufacturers who use build-to-order models have implemented supply chain practices that let them plan ahead of demand. Thanks to the relatively stable lead times of established products, managers can mini- mize disruptions and shortages.

Service operations are quite different: there is virtually no lead time to deal with volatility, so demand in services is notoriously difficult to predict. Managers in such

diverse settings as restaurants and hospitals, for instance, can track activity and estimate demand for their services during particular days of the week or certain times of the year. But both kinds of operations must be prepared to handle unexpected peaks in demand. This kind of volatility can slow down the delivery of services and ultimately undermine customer satis- faction—or, in a hospital’s emergency room, lead to physical harm. Service companies, unlike manufacturing ones, can’t hold inventory to smooth supply and demand; customers expect fast, if not immediate, service.

What’s more, the “products” of service operations are to a considerable extent intangible, which makes it hard to manage quality and track output. The quality of a service product depends on the subjective experience of its customers—how well it fulfills their highly variable, highly unpredictable needs and expectations. The frontline workforce (the public face of the company) interacts directly with customers and must use its technical and personal skills to tailor services to their customers’ whims. In fact, these employees actually are the product and the fundamental source of competitive advantage or disadvantage in any service operation. Elusive qualities such as attentiveness and a willingness to spend time with customers are critical.

People, of course, bring unpredictable differences in experience, skills, and motiva- tion to their jobs, so it is difficult to manage productivity and quality in a consistent and measurable way. Managers responsible for services must standardize them enough to reduce these natural differences while keeping costs sufficiently low to meet the budget. Yet waste is hard to find and address quickly because the product is intangible:


there is no manufacturing floor, with its clear view of bottlenecks, equipment downtime, and unused inventory.

Further, many companies lack effective performance-management systems that can identify problems in the delivery of services and sustain the impact of improvement initiatives. Companies do track and report vast numbers of performance metrics, but they continue to operate in a fire-fighting mode: for services, “not broken” is supposed to imply good performance. Meaningful metrics and targets are either unknown or invisible on a regular basis—and even when metrics are available, they are often complex and therefore hard for employees to act on.

Bringing the lean revolution to services The first step in designing a lean delivery model for services is to understand what gives them value to customers—a particular service level or the way they are accessed, for example. The best way of determining the right targets is to engage customers in a dialogue about what they value most and then to focus on the areas most important to them. Companies that don’t rigorously gather and use insights from customers to develop a service model will either overdeliver in unimportant areas or miss opportunities to capture new sources of value for companies and customers alike.

Once the things customers value are clear, and targets have been set to meet their expectations, companies can use four core

principles to apply lean principles in service environments.

Find innovative ways to manage demand The ability to ensure adequate capacity, fast response times, and high quality depends, first and foremost, on managing demand effectively. It is critical to understand the nature of incoming demand and to take the necessary steps to manage it proactively. For efficiency’s sake, companies should automate some processes through customer self-service and alternative channels. Grocery stores provide a good example. Store managers don’t know the exact patterns of foot traffic in their stores, when lines will build up at the cash registers, or when customers will seek assistance. To address some of these uncer- tainties, they have adopted specialized checkout lines—for limited items, cash only, and self-service—to handle peak periods without adding to their workforce.

Alternative channels allow companies to route and manage demand flexibly through efficient delivery channels designed specifically to handle particular services. Retail banks, for instance, have created a full suite of self-service channels, such as sophisticated ATMs that can handle certain transactions, phone-banking alterna- tives that provide an extensive menu of options to complete tasks, and a variety of online-banking options accessible through computers and handheld devices.

Companies should also examine their demand drivers and seek opportunities to reduce waste, which in a services context means time spent unproductively. Field service agents, for example, constantly arrive at the addresses of customers only to find them busy or absent. Compan- ies can analyze this type of unproductive demand using historical data and then

Companies that don’t rigorously gather and use insights from customers to develop a service model will either overdeliver in unimportant areas or miss opportunities to capture new sources of value


take steps to reduce it as much as possible—for instance, by implementing call-ahead programs, giving priority to responsible customers, or adding service fees to discourage multiple visits.

Optimize the processing of demand Different services have varying degrees of complexity and therefore require quite different amounts of work. The response times that customers expect may range from a few minutes for one type of request to a few weeks for another. In a large or complex operation, what the customer perceives as a single service may actually involve many work streams, each comprising a number of tasks or activities, as well as numerous variables that can change from one situation to the next. It’s an enormous challenge to assign work to the service operators who have the right skills to complete a task or series of tasks in an efficient and cost-effective way.

Successfully managing this variability hinges on the managers’ ability to segment incoming work by complexity and expected service levels quickly and accurately and then to route it to the most appropriate channel. Companies should isolate complex tasks that require special attention or expertise and then standardize processes for tasks that are relatively simple or involve repeatable sequences. A commercial loan–processing operation, for instance, segmented incoming loan applications by size, complexity, and the level of expert attention required to create standardized processing tracks for them. Bankers with basic expertise easily and quickly process small loans to regular, credit-worthy customers. Senior specialists handle large loans with complex deal structures that require further examination and expertise. Thus, the lender standard- izes processes for a majority of loans and

now provides special treatment only for highly customized ones.

Making this kind of segmentation succeed in practice depends on the skill of the router: the person or system dispatching work to the appropriate channel. In hospital emergency rooms, for instance, the triage nurse segments the patients by determining how urgently they need medi- cal attention. Call centers, in particular, segment customers successfully by using both keypad- and voice-activated menus based on an algorithm that gathers the required information, analyzes the nature of a problem, determines how to address it, and routes the caller to the appropriate delivery channel.

First, however, companies must determine the optimal segmentation, which estab- lishes a rhythm for taking in work without making it excessively hard to do or sustain. Often, companies either fail to develop meaningful segments or have segments too complex for routers to interpret, thereby burdening frontline employees with unsustainable, burnout-inducing performance requirements. Fine-tuning the segmentation scheme should be a collaborative process between management and the front line.

After segmenting the workflow, managers should develop standard operating procedures where possible and make sure that frontline employees understand and use them. Call center reps, for example, follow standard scripts for common problems to ensure consistency. Field technicians follow standard steps to identify and fix specific problems. Other service businesses, such as restaurants, retailers, and hotels, have also adopted standard operating procedures to ensure consistent processes across their wide range of locations.


In our experience, intelligent segmentation and the standardization of processes make frontline workers significantly more productive. When they use standard procedures to undertake similar tasks with a similar degree of difficulty, they become highly proficient and therefore deliver better customer service more productively. To sustain consistently high service levels, companies should also develop strong metrics for individual performance and encourage regular performance dialogues.

Balance supply and demand Another core lean concept is the importance of maintaining a continuous flow of productive activity. Companies make this idea work in a services environment by actively balancing the availability of frontline operators (supply) with the volume of incoming work (demand). Managers should develop well-structured capacity-management models to direct that work through the system efficiently and in real time, while maintaining a high quality of service. One way of accomplishing these goals is to ensure a flexible supply of labor by adopting adaptable shifts, assigning temporary workers to peak periods, or developing networks of subcontractors to handle excess or specific types of work.

Another way of creating flexibility to manage volatile demand is to pool tasks across work units. Large companies often manage support functions by assigning frontline workers to specific business units or subfunctions. This structure makes it impos- sible to exploit economies of scale. Some companies instead cross-train certain groups of employees and use them as “swing” capacity either for similar functions or for the same function in different work units.

Build a high-performing front line In any service operation, frontline employees are the most important asset. Since they

interact regularly with customers, their mind- set and behavior play a huge role in shaping the customers’ perceptions and ultimate experience. The customer-facing element of service operations makes it essential to develop the “softer” skills of the front line— in fact, improving its underlying culture is at least as important as improving its operational procedures. A disgruntled floor worker in an assembly plant may do poor work, but quality control teams will probably identify the resulting defects before products leave the factory. By contrast, disgruntled call center reps or bank tellers interact directly with customers and can alienate them beyond recall. The company may be none the wiser.

The attitudes of frontline employees also determine the impact and sustainability of efforts to improve operations. Our experience has shown us that systematic talent development across all roles is a key requirement for changing mind-sets and behavior. Companies should invest in capability-building programs to ensure that frontline employees have the skills they need to be successful. Frequent and rigorous training, coupled with active performance management, helps to give these employees the service-oriented mind-set suited to a service operation’s overall delivery strategy. Despite the obvious benefits, some organizations refuse to invest sufficient resources in developing the front line’s skills, because the impact isn’t always immediate. Management must take a long-term perspective, because these investments pay off substantially over time.

Performance-management systems in services must also be highly personal. Frontline managers should not only manage the workforce as a whole to meet its targets and performance levels but also coach individual workers to ensure

11

they meet their individual targets. In services, first-rate oversight of frontline employees depends heavily on direct, face- to-face interaction between them and their managers. That is particularly difficult to achieve in a geographically dispersed workforce; effective performance management requires rigorous, daily, and onsite involvement with the front line. We find that organizations are increasingly adopting sophisticated tools and online systems to facilitate remote management, but our experience suggests that simple face- to-face approaches, such as a daily 15-minute team huddle, are much more effective.

Finally, superior frontline performance management requires clear expectations and a frequent and transparent evalua- tion process. As a general rule of thumb, managers should make sure that frontline employees have clear and consistent answers to four key questions: What metrics will measure my performance? What are the targets for them? Are my team and I currently meeting them? What is the plan to close the performance gap if one exists? Regular discussions around

these questions provide the foundation for the individual coaching that is needed to help frontline employees meet their own expectations and develop a continuous-improvement mind-set.

The application of lean principles gives companies in many industries an opportunity to deliver better services more efficiently. Lean principles can be applied to achieve scalable benefits in on- and offshore service operations alike. The key to success is a rigorous, consistent, and daily approach to the execution of lean techniques. Sustaining their impact calls for active performance management, a substantial investment in frontline capabilities, and an emphasis on a culture of continuous improvement.

Scott Hensel ([email protected]), a principal in McKinsey’s Stamford office, is the global knowledge

leader of the service operations practice; Aditya Pande ([email protected]) is an associate

principal in the Silicon Valley office; and Vivek Sharma ([email protected]) is an associate principal

in the Chicago office. Copyright © 2008 McKinsey & Company. All rights reserved.

Bringing the lean revolution to services

12

Toward a leaner finance departmentBorrowing key principles from lean manufacturing can help the finance function to eliminate waste.

The impact is significant. In a exercise that benchmarked efficiency at consumer goods companies, the best finance function was nine times more productive than the worst (exhibit). Production times also varied widely. Among the largest European companies, for example, it took an average of 100 days after the end of the financial year to publish the annual numbers: the fastest did so in a mere 55 days, while the slowest took nearly 200. This period typically indicates the amount of time a finance department needs to provide executives with reliable data for decision making. In our experience with clients, many of these differences can be explained not by better IT systems or harder work but by the waste that consumes

resources. In a manufacturing facility, a manager seeking to address such a problem might learn from the achievements of the lean-manufacturing system pioneered by Toyota Motor in the 1970s. Toyota’s concept is based on the systematic elimina- tion of all sources of waste at all levels of an organization.1 Industries as diverse as retailing, telecommunications, airlines, services, banking, and insurance have adopted parts of this approach in order to achieve improvements in quality and efficiency of 40 to 70 percent.

We have seen finance operations achieve similar results. At one European manufacturing company, for example, the number of reports that the finance depart-

Waste never sleeps in the finance department—that bastion of efficiency and cost effectiveness. Consider the reams of finance reports that go unread and the unused fore- casts, not to mention duplicate computations of similar data, the endless consolidation of existing reports, and mundane activities such as manually entering data or tailoring the layout of reports.

Richard Dobbs, Herbert Pohl, and Florian Wolff

1 See Anthony R. Goland, John Hall, and Devereaux A. Clifford, “First National Toyota,” The McKinsey Quarterly, 1998 Number 4, pp. 58–66; and John Drew, Blair McCallum, and Stefan Roggenhofer, Journey to Lean: Making Operational Change Stick, Hampshire, England: Palgrave Macmillan, 2004.

13

ment produced fell by a third—and the amount of data it routinely monitored for analysis dropped from nearly 17,000 data points to a much more manageable 400.

Borrowing from lean In our experience, the finance function eludes any sort of standardized lean approach. Companies routinely have different goals when they introduce the concept, and not every lean tool or principle is equally useful in every situation. We have, however, found three ideas from the lean-manufacturing world that are particularly helpful in eliminating waste and improving efficiency: focusing on external customers, exploiting chain reactions (in other words, resolving one problem reveals others), and drilling down to expose the root causes of problems. These concepts can help companies cut costs, increase efficiency, and begin to move

the finance organization toward a mind-set of continuous improvement.

Focusing on external customers Many finance departments can implement a more efficiency-minded approach by making the external customers of their companies the ultimate referee of which activities add value and which create waste. By contrast, the finance function typically relies on some internal entity to determine which reports are necessary—an approach that often unwittingly produces waste.

Consider, for example, the way one manufacturing company approached its customers to collect on late or delinquent accounts. The sales department claimed that customers were sensitive to reminders and that an overly aggressive approach would sour relations with them. As a result, the sales group allowed the accounting

e x h i b i t

Considerable variation in efficiency

MoF Leaner finance Exhibit 1 of 1 Glance: to come

Index: industry average = 1.0

Number of finance and accounting FTEs1

Invoices peraccounting FTE1

1.8

Consumer goods

0.2

1.8

Services

0.2

1.5

Chemicals and basic materials

0.6

1.4

Retail

0.6

1.4

Assembly

0.6

1.6

0.4

1.7

0.3

1.5

0.5

1.6

0.4

1.6

0.4

1Full-time equivalents.

Worst companyBest company

Exhibit Considerable variation in efficiency

Finance and accounting efficiency varies considerably among industries.


department to approach only a few, mostly smaller customers; for all others, it needed the sales department’s explicit approval—which almost never came. The sales department’s decisions about which customers could be approached were neither challen- ged nor regularly reviewed. This arrange- ment frustrated the accounting managers, and no one would accept responsibility for the number of days when sales outstanding rose above average.

The tension was broken by asking customers what they thought. It turned out that they understood perfectly well that the company wanted its money—and were often even grateful to the accounting department for unearthing process problems on their end that delayed payment. When customers were asked about their key criteria for selecting a manufacturing company, the handling of delinquent accounts was never mentioned. The sales department’s long-standing concern about losing customers was entirely misplaced.

In the end, the two departments agreed that accounting should provide service for all customers and have the responsibility for the outstanding accounts of most of them. The sales department assumed responsibility for the very few key accounts remaining and agreed to conduct regular reviews of key accounts with the accoun- tants to re-sort the lists.

Better communication between the departments also helped the manufacturing company to reduce the number of reports it produced. The company had observed that once an executive requested a report, it would proceed through production, without any critical assessment of its use- fulness. Cutting back on the number

of reports posed a challenge, since their sponsors regularly claimed that they were necessary. In response, finance analysts found it effective to talk with a report’s sponsor about just how it would serve the needs of end users and to press for con- crete examples of the last time such data were used. Some reports survived; others were curtailed. But often, the outcome was to discontinue reports altogether.

Exploiting chain reactions The value of introducing a more efficiency-focused mind-set isn’t always evident from just one step in the process—in fact, the payoff from a single step may be rather disappointing. The real power is cumulative, for a single initiative fre- quently exposes deeper problems that, once addressed, lead to a more comprehensive solution.

At another manufacturing company, for example, the accounting department followed one small initiative with others that ultimately generated cost savings of 60 percent. This department had entered the expenses for a foreign subsidiary’s transportation services under the heading

“other indirect costs” and then applied the daily exchange rate to translate these figures into euros. This approach created two problems. First, the parent company’s consolidation program broke down transportation costs individually, but the subsidiary’s costs were buried in a single generic line item, so detail was lost. Also, the consolidation software used an average monthly exchange rate to translate foreign currencies, so even if the data had been available, the numbers wouldn’t have matched those at the subsidiary.

Resolving those specific problems for just a single subsidiary would have been

15Toward a leaner finance department

an improvement. But this initiative also revealed that almost all line items were plagued by issues, which created substantial waste when controllers later tried to analyze the company’s performance and to reconcile the numbers. The effort’s real power became clear as the company implemented a combination of later initiatives—which included standardizing the chart of accounts, setting clear principles for the treatment of currencies, and establishing governance systems—to ensure that the changes would last. The company also readjusted its IT systems, which turned out to be the easiest step to implement.

Drilling down to root causes No matter what problem an organization faces, the finance function’s default answer is often to add a new system or data warehouse to deal with complexity and increase efficiency. While such moves may indeed help companies deal with difficult situations, they seldom tackle the real issues. The experience of one company in the services industry—let’s call it ServiceCo—illustrates the circuitous route that problem solving takes.

Everyone involved in budgeting at ServiceCo complained about the endless process loops and the poor quality of the data in budget proposals. Indeed, the first bottom- up proposals didn’t meet even fundamental quality checks, let alone the target budget goals. The process added so little value that some argued it was scarcely worth the effort.

Desperate for improvement, ServiceCo’s CFO first requested a new budgeting tool to streamline the process and a data warehouse to hold all relevant information. He also tried to enforce deadlines, to

provide additional templates as a way of creating more structure, and to shorten the time frame for developing certain elements of the budget. While these moves did compress the schedule, quality remained low. Since the responsibility for different parts of the budget was poorly defined, reports still had to be circulated among various departments to align overlapping analyses. Also, ServiceCo’s approach to budgeting focused on the profit-and-loss statement of each function, business, and region, so the company got a fragmented view of the budget as each function trans- lated the figures back into its own key performance indicator (KPI) using its own definitions.

To address these problems, ServiceCo’s managers agreed on a single budgeting lan- guage, which also clearly defined who was responsible for which parts of the budget—an added benefit. But focusing the budget dialogue on the KPIs still didn’t address the root problem: middle management and the controller’s office received little direction from top management and were implicitly left to clarify the company’s strategic direction themselves. The result was a muddled strategy with no clear connection to the numbers in the budget. Instead of having each unit establish and define its own KPIs and only then aligning strategic plans, top management needed to link the KPIs to the company’s strategic direction from the beginning.

Getting to the root cause of so many problems earlier could have saved the company a lot of grief. Once ServiceCo’s board and middle management determined the right KPIs, the strategic direction and the budget assumptions were set in less than half a day, which enabled the controller’s office and middle management to


specify the assumptions behind the budget quickly. The management team did spend more time discussing the company’s strategic direction, but that time was well spent. The result was a more streamlined approach that reduced the much-despised process loops, established clear assumptions for the KPIs up front, and defined each function’s business solution space more tightly. The budget was finalized shortly thereafter.

Getting started Introducing lean-manufacturing principles to a finance function takes time—four to six months to make them stick in individual units and two to three years on an organizational level. A new mind-set and new capabilities are needed as well, and the effort won’t be universally appreciated, at least in the beginning.

Integration tools can be borrowed: in particular, a value stream map can help managers document an entire accounting process end to end and thus illuminate various types of waste, much as it would in manufacturing. Every activity should be examined to see whether it truly contributes value—and to see how that value could be added in other ways. Checking the

quality of data, for example, certainly adds value, but the real issue is generating relevant, high-quality data in the first place. The same kind of analysis can be applied to almost any process, including budgeting, the production of management reports, forecasting, and the preparation of tax statements. In our experience, such an analysis shows that controllers spend only a fraction of their time on activities that really add value.

The challenge in developing value stream maps, as one European company found, is striking a balance between including the degree of detail needed for high-level analysis and keeping the resulting process manual to a manageable length. Unlike a 6-page document of summaries or a 5,000-page tome, a complete desk-by-desk description of the process, with some high-level perspective, is useful. So too is a mind-set that challenges one assumption after another.

Ultimately, a leaner finance function will reduce costs, increase quality, and better align corporate responsibilities, both within the finance function and between finance and other departments. These steps can create a virtuous cycle of waste reduction.

Richard Dobbs ([email protected]) is a director in McKinsey’s Seoul office, Herbert Pohl

([email protected]) is a principal in the Dubai office, and Florian Wolff ([email protected])

is a consultant in the Munich office. Copyright © 2008 McKinsey & Company. All rights reserved.

Every activity should be examined to see whether it truly contributes value—and to see how that value could be added in other ways

17

Applying lean to application development and maintenanceTo make application development and maintenance more productive, IT managers are getting lean.

Labor costs make up more than 80 percent of application development, so many organizations have already reduced head counts or labor expenses where possible. Now they must begin to focus on improving the productivity of their development and maintenance staffs. In the past, companies have tried many methodologies, with mixed results (see sidebar,

“Software-development productivity: Traditional methods”). Companies that apply the time-tested principles of lean manufacturing, which hunt for and eliminate waste from the production process (Exhibit 1), are seeing a significant impact within a matter of months.

Although lean principles were originally developed for manufacturing environments,

they are increasingly (and successfully) being applied to service businesses, especially those with many routine processes. Application development and maintenance is a prime candidate for lean methods not only because it involves a great many processes with the potential to be opti- mized, but also because large differences in productivity among organizations suggest that some are far less efficient than others. In our experience, applying the principles of lean manufacturing to ADM can increase productivity by 20 to 40 percent (Exhibit 2) while improving the quality and speed of execution.

Each category of waste in manufacturing has a counterpart in ADM, which can be thought of as a kind of factory that

Burdened by high costs for application development and maintenance (ADM),1 many businesses have offshored up to half of their application development to low-cost locations, renegotiated rates on outsourced projects, and tightened the governance of new projects. In spite of these efforts, the costs of developing and maintaining applications now account for about half of the average IT budget and continue to rise.

Noah B. Kindler, Vasantha Krishnakanthan, and Ranjit Tinaikar

1 Application development and maintenance (ADM) is the part of IT that works closely with the business to develop new software, keep it running, and make ongoing improvements. Within this part of IT, business analysts and software developers communicate with executives on the business side to understand their requirements for new and existing applications. In most companies, ADM teams are organized around application areas (for example, customer relationship management) rather than business functions.


Exhibit 2

Lean with IT

Companies can reduce application-development and maintenance (ADM) costs by up to 40 percent.

develops new applications according to business requirements. Changes to an application’s requirements are one common source of ADM waste, causing many of the classic varieties identified in lean:

Waste in application development and maintenance (ADM)

Type Example

MoIT 11 2007Lean ADMExhibit 1 of 3Glance: The time-tested principles of lean manufacturing can be applied to rooting out and eliminating waste from the application development and maintenance production process. Exhibit title: Waste land

Overproduction/overprocessing Fulfillment of requests that won’t be used within next 3 months Unnecessary functionality

Rework Changes in business requirements during development Application bugs

Wasted motion Requests not tied to business priorities Ineffective prioritization of maintenance requests Unplanned task switching

Wasted intellect Limited cross-training of developers across different applications Poor usage of employees and offshoring resources

Wasted time Key resources not available Developers idling because of incomplete information on the request

Inventory waste Maintenance backlogs Many partially completed requests

Exhibit 1

Wasteland

The principles of lean manufacturing can be used to root out and eliminate waste from the application-development and maintenance (ADM) production process.

Application-development and maintenance (ADM) costs, %

US retail bank European retailer

MoIT 11 2007Lean ADMExhibit 2 of 3Glance: Companies can reduce application development and maintenance costs by up to 40 percent. Exhibit title: Lean with IT

Application maintenance 60 65

Application development 35 35

Total 100100

Management of relations with internal customers 5 Included in above

–16 to –27

–8 to –12 –8 to –15

–1 to –2

–25 to –41 –20 to –40

–12 to –25

Productivity improvement (cost reduction through lean)

Costs without lean

designers rework their specifications, coders wait for specifications to stabilize, testers overproduce as their testing environments have to be set up repeatedly, and unmet requirements pile up in a large backlog. As

19

•Standardization is common in most application-development organizations but can be more widely applied to reduce the waste that results when requirements are defined in an ad hoc way.

•Segmentation of projects by complexity eliminates waste by helping managers to route projects to the proper resources and by avoiding unnecessary overhead for simple tasks.

•Quality ownership should extend beyond the testing group to encompass the business (which must increase its discipline in specifying project requirements), the designers (who must build “use cases” fully aligned with business needs), and the coders and testers (staff resources that

Over the past three decades, organizations have tried various methods to boost productivity in application development. Those efforts can be grouped into three categories:

1. Process. Standards from the International Organi- zation for Standardization (ISO) and Carnegie Mellon’s Capability Maturity Model (CMM) index help organizations to improve quality by following uniform processes. They address one of the drivers of waste in application development: process inconsistency. CMM and other standards don’t address other sources of waste, such as ineffective alignment between business and IT, the unavailability of the right resource at the right time, or architectural complexity.

2. Metrics. Measuring function points assumes that the output of any application-development project can be standardized in much the same way as businesses measure productivity—for instance, the

volume of calls an agent can handle or the number of applications a loan agent can process. While such metrics may be helpful in environments with stable frameworks (say, embedded-systems development or mature and well-documented applications), they don’t measure the waste that can occur in the early stages of development, such as the definition and design of requirements.

3. Technology. Techniques such as computer-aided software engineering (CASE) can help eliminate wasteful activities by automating some aspects of code generation, document management, and version control. However, these techniques are limited in that they do not address the fundamental behavioral and cul- tural changes necessary to improve productivity (for example, working with the business to improve its understanding of IT).

Software-development productivity: Traditional methods

in manufacturing, systematically eliminating these sources of waste improves the delivery time, quality, and efficiency of the ADM end product.

Just as each element of waste has a counterpart in ADM, so too does each of the traditional principles for reducing waste:

•Flow processing reduces overcapacity or excess inventory by aligning the rhythm of output with the flow of production. A release schedule helps prioritize projects, so it prevents the waste inherent in delays to accommodate new requests.

•Load balancing forces the organization to make use of development staff across several locations, as well as outside vendors.

Applying lean to application development and maintenance


system (changes to tools, methodologies, standards, and procedures), the behavioral system (convincing staff of the value of these changes), and the management system (new roles, metrics, and incentives to encourage the shift).

A lean transformation demands a substantial investment of time, as well as a sus- tained focus from upper management and an ongoing revision of incentives and metrics. Implementing the lean philosophy is a continuing and long-term goal that can deliver some results quickly, but it may take years before the approach becomes a core aspect of an organization’s culture.

Applying lean A lean transformation begins with a diagnostic phase that estimates the level of waste in ADM processes. Since most ADM organizations don’t track waste, the

must be allocated more flexibly). Unfor- tunately, in most application-development groups end-to-end quality ownership remains fragmented across multiple functional silos and is hardly ever tied to end- to-end performance incentives.

Each of these principles requires not only changes in processes (the technical part of the equation) but also shifts in behavior and new management tools. To improve the way project requirements are communi- cated, for example, the business must make experts available to IT. But IT’s access to these experts often takes a backseat to more pressing priorities. Similarly, with flexible staffing, ADM managers must share personnel—a practice that individual managers might resist because they have learned to rely on certain people over the years. Thus, a lean transformation requires simultaneous changes in the technical

Exhibit 3

Where’s the fat?

An analysis of the steps in the application-development process reveals opportunities for improving productivity by up to 50 percent.

MoIT 11 2007Lean ADMExhibit 3 of 3Glance: An analysis of the steps in the application-development process reveals opportunities for improving productivity by up to 50%.Exhibit title: Where’s the fat?

Time spent as % of total time in process

Stages in application development

Share of activity in category that does not add value, % Sources of waste

5 20Initial user request

• Lack of guidelines, so business user struggles to describe what is wanted

10 50Single point of contact

• Ambiguous or incomplete maintenance requests that must be clarified and finalized

15 20Technical analysis

• Need to clarify technical aspects of maintenance requests

5 50Prioritization• Frequent reprioritization of projects because of lack of

clear rules or canceled requests

10 0Planning and design

40 20–25Building• Requests for clarification of requirements too late in process • Failure to bundle similar requests

10 50Testing• Lack of bundling, resulting in repeated test setups

and quality testing for each individual request• Poor quality assurance specifications

5 25Release• Release overhead from repeating

release setup each week

21

assessment is based on interviews and ques- tionnaires asking how information (such as the requirements for new applications) and materials (such as the code under development) move through the system. In the parlance of lean, this diagnostic method is called a “materials and information flow analysis.” One of its goals is to discern how much time is spent productively and how much is wasted. The wasted time is then examined to discover the root causes and to determine the opportunity for improving productivity (Exhibit 3).

A large financial institution going through a lean transformation of its application-development department discovered two primary drivers of waste within application maintenance. First, the process for defining project requirements was chaotic and inefficient, involving more back and forth than it would in organizations where processes were more efficient. IT had no standard procedure for obtain- ing a comprehensive description of the business’s requirements for maintenance requests, so developers had to keep going back to the business to clarify requirements— an approach resulting in delays and a lot of rework. Furthermore, there was no clear and effective way to prioritize projects. As businesses requested exceptions (for example, rush jobs), developers had to shift focus from one application to another, and some projects were never completed. The ADM department measured a project’s cost and staffing, but not waste, and had no specific goals to improve productivity. There appeared to be little quality ownership and scant incentive for individuals to exert extra effort.

After the diagnostic phase, the financial institution decided to launch a pilot program to learn how to implement the

lean philosophy and to create momentum for a broader transformation of the entire ADM organization. The pilot managers, basing their moves on the diagnostic findings, decided to apply three lean principles that would help reduce waste: a process redesign for improved flow, load-balanced work groups, and end-to-end performance management.

Redesign processes to improve flow In the pilot program, the team redesigned the application maintenance process to improve the way work flowed through the system. First, they set a schedule of bimonthly releases with clearly defined steps and a fixed capacity based on available resources (that is, designers, coders, and testers). Deadlines for final requirements from the business were clearly spel- led out, as were the dates for finishing the development of code and delivering applications. This predictable schedule allowed the business to plan for current and future releases and diminished the tendency to rush late requests into the process.

The team then replaced the ad hoc prioritization practices with a formal process that involved regular meetings between the business and IT. The team also established a more formal set of procedures for handling any exceptions, such as high-priority changes that might come in after deadline.

Balance the load of work groups This aspect of the pilot solution was based on a more flexible definition of work groups. Developers and testers were cross-trained so that they could work on projects throughout the organization, not just within the group they had focused on. This move allowed managers to use these people more efficiently; for example, when a group was particularly busy, it could



borrow developers or testers from another group with available resources. Managers could also tap offshore resources and the staffs of third-party vendors to meet peak demands without hiring additional personnel in the more expensive locations.

Manage performance across the entire process New metrics to track performance at the group and individual levels focused on measuring and reducing waste. A new management “dashboard”—essentially a spreadsheet that tracked performance and highlighted trouble spots—allowed managers to identify potential problems before they happened. In one case, managers saw that a particular task was taking longer than estimated, so they redistributed that developer’s workload and minimized the disruption. The tracking of individual performance encouraged developers to take on more tasks, since their efforts were now more visible.

The pilot surpassed expectations, boosting productivity in the targeted application maintenance areas by 40 percent in less than two months. Furthermore, IT’s business counterparts were more satisfied with the process, and employee morale was up. As a result of this successful pilot, the company rolled out process redesign, load-balanced work groups, and performance-management systems to the rest of the application maintenance organization over the following year. In addition, the champions of the successful pilot helped to extend it to other parts of IT, including

the development of new applications and infrastructure provisioning, further broadening the impact of the initiative.

Overcoming stubborn resistance Applying lean to an application-development organization is a substantial transformation taking two to three years. From discussions with chief information officers (CIOs) and other executives at 30 companies across a range of industries, we have learned that three challenges are the most difficult to over- come: changing behavior, broadening the focus from specifics to general principles, and setting up the right incentives.

Perhaps the most difficult part is changing the behavior and convincing the staff and managers of the value of lean approaches. The key to making the case for change is to demonstrate positive results in a pilot program, generally undertaken in an area open to change. The financial institution in the earlier example publi- cized the results of the pilot in a series of company meetings that created support and momentum for a broader initiative. In another organization, management decided to emphasize the importance of the program by appointing a senior executive, who reported directly to the CIO, as the manager of lean transfor- mations. It also assigned specialized teams to help implement lean efforts across the organization.

A common pitfall can be fixating on the specifics of a particular lean implementation rather than the more widely applicable lean principles. At the financial institution, the bimonthly release schedule is one such specific change. Two- month release schedules may not be appropriate for dynamic environments requir-

The key to making the case for change is to demonstrate positive results in a pilot program, generally undertaken in an area open to change

23

Addressing the barriers to change is no small feat and requires management to sustain a commitment to change. Given the urgent need to improve productivity and the opportunity at hand, a lean transformation is a journey well worth the effort.

Noah Kindler ([email protected]) is a consultant in McKinsey’s New York office, Krish

Krishnakanthan ([email protected]) is a principal in the Silicon Valley office, and Ranjit

Tinaikar ([email protected]) is a principal in the Mumbai office. Copyright © 2008

McKinsey & Company. All rights reserved.

ing shorter times to market, but the underlying principle—establishing predictability and eliminating delays caused by the ad hoc definition of requirements— still applies. Segmenting projects by com-plexity and flexibility will help IT determine the appropriate implementation program for achieving alignment with the business.

Finally, no transformation can sustain itself without the proper metrics and incentive systems that ensure change. In application development, “function points” measure the level of effort devoted to a project. A successful lean transformation requires new metrics to identify waste and set goals for reducing it. Leaders must adjust incentive programs, including financial awards and public recognition, to track and reward managers and staff for meeting goals on both measures.


24

Lean cuisine

Proven techniques from manufacturing might be the recipe for improving productivity in restaurants.

40 percent. Meanwhile, labor costs dropped by 15 percent and service times improved by one-third. Best of all, sales increased by 5 percent and margins on affected products more than doubled, since employees could spend more time influencing customers and less time apologizing to them.

Beset by waste and operational variability, food service operators are taking a page from industrial manufacturers and applying lean-production approaches to their own operations. Lean techniques seek to improve product and service quality while simultaneously reducing waste and labor costs.

John R. McPherson and Adrian V. Mitchell

For food service operators, the additional trick is to link such improvements to customer loyalty. For one operator, this effort meant tackling unpredictable demand and excessive error rates and wait times (ten minutes for simple sandwiches) on orders. The operator mapped daily changes in demand to highlight fluctuations, intro- duced a self-service counter, and redesigned kitchen and food preparation procedures to standardize sandwich making and eliminate waste, which consequently fell by

25

Exhibit A recipe for change

Standardizing procedures saves time.

John McPherson is a director and Adrian Mitchell is an alumnus of McKinsey’s Dallas office.

Copyright © 2008 McKinsey & Company. All rights reserved.

Before improvements

Service steps for fulfilling order (example: hot chicken sandwich)

Q1 2005Lean foods FOBExhibit 1 of 1Glance: Standardizing procedures saves time

Phone, fax

Sink

Soup Bread Toaster Oven Proofer (thaws food)Warm prep/food station

Trash

Samples Coffee stationPrep stationPastriesRegister

After improvements

Phone, fax

Sink

Soup Toaster Oven Proofer

Trash

Samples Coffee stationSelf-service case‘Cockpit’ prep station

Time to prepare before/after improvements, minutes, seconds

Breakfast sandwich

BeforeAfter

2:15

1:24

Lunch sandwich

BeforeAfter

3:10

1:59

3

1 2 13 11 6

871251094

2 4

1 3 5


The choreography of expertise

Even steps that require customization and expert judgment can be streamlined effectively.

In recent years, financial institutions have dramatically improved many of their operations, enhancing speed, quality, and customer experience even while reducing costs. These breakthroughs owe much of their success to the creative adaptation of lean principles, first developed in the manufacturing world. Institutions found that any process that could be standardized—from check processing and insurance claims reviews to loan originations and customer care—could also benefit from lean.

Dan Devroye, Andy Eichfeld, and Franklin Garrigues

But some of the activities that add the most value to a company require customization and expert judgment and thus resist standardization. For a sophisticated undertak- ing, such as a corporate loan in the aviation industry, there may be dozens or even hundreds of identifiable steps. Even for projects in the same workstream, the sequence of required actions may differ significantly from case to case. Any particular expert— say, an attorney—may find herself weigh- ing in at multiple stages; moreover, her contribution may change depending on input from other experts, such as underwriters or engineers.

These sorts of convolutions often produce high costs and disappointing outcomes.

Senior leaders are frustrated as they get beaten to market by a faster competitor, or hear that their teams must run a gaunt- let of approvals to close every deal, or find their company’s growth limited by an inability to scale up their experts’ contributions. And leaders see little promise in applying lean methods to these activities. They rightly recognize that complex tasks cannot be standardized, so they doubt the benefits of using an assembly-line model.

Yet despite the obvious differences between customized, highly skilled activities and the traditional lean environment, we have found that lean principles do, in fact, apply to complex operations. The approach we use, which we call “expert choreography,”

27

addresses the shortcomings that plague workstreams that depend on expertise—workstreams that too often lack urgency, predictability, clear authority, and a sense of common purpose. The model bears some similarity to the lean work cells that have achieved dramatic results in repetitive-process contexts—but the complexity of the problems means that the solution must be even more flexible and tailored (see sidebar “Expert choreography in product development”).

The essence of expert choreography is to assemble experts into a new type of team, with a new champion-based leadership

structure; standardized tracks to create adaptable yet consistent processes; and a pacing mechanism to ensure that the team meets its commitments for quality, quantity, and speed. The approach has already had a dramatic impact in helping financial-services providers increase their output from high-value processes whose inefficiencies had become suffocating.

The expert conundrum The credit analysts, lawyers, product managers, technology specialists, and other experts whose contributions are so important to so many profitable lines of business also pose some of the most significant

The challenge for data services company “SpeedData” was to fulfill its CEO’s publicly stated promise that a certain share of the company’s revenues would accrue from new products. Management’s initial response was a textbook stage-gate product-development process, which clearly defines the roles for the necessary experts (product management, operations, technology, finance, etc.) along with the milestones that any new concept would have to clear.

Although in principle everyone in the company approved of the process, the few new products that it produced were late and poorly received. Dissatisfied with the results, the company’s top executives sought to review every idea, further diminishing output and slowing the progress of promising concepts.

Our diagnosis revealed that the four common challenges applied to this case and that the most important was a lack of end-to-end leadership. The individual product managers tasked with leading the product- development effort often lacked not only sufficient time to devote to the project but also the necessary resources and authority. Consequently, new ideas failed to progress from one approval stage to the next, either because of inertia or internal opposition.

To solve the problem, SpeedData designed a version of expert choreography that focused on a small number of dedicated new-product champions who would manage portfolios of new concepts, assuming responsibility for all stages of their development. For each new concept, the champion would assemble a team with appropriate resources from all relevant functions—each of which now had its own “coordinator” to ensure that the resources would actually be available. Senior executives would then assign the concept to one of three tracks, based largely on the concept’s sophistication and expected cost; the three tracks in turn defined the depth of analysis and level of approval required at each stage of the process. To ensure pacing, champions would hold weekly in-person team meetings, even though not all of the team members were colocated.

The new structure would reduce new-product cycle times by some 40 percent. By focusing resources on the most important tasks and reducing time spent on small or less important projects, the new approach put SpeedData on a path to double the share of its revenue generated from new products, in line with the CEO’s aspiration.

Expert choreography in product development


operational challenges. The very characteristics that enhance an expert’s worth can impede coordination to a much greater degree than in simpler operations. Four related issues form the core of the problem.

Silo mentality. By nature, experts tend to focus primarily on their own experience and skills—a habit developed over years spent learning from others in the same field. This focus allows experts to maintain an independence that can be crucial for tasks such as assessing credit risk. But another consequence is that unlike, say, account executives whose credibility depends on closing deals, experts may have no stake in a particular deal’s outcome, much less in the effectiveness of an overall process governing many deals. And even if the experts can see the flaws in existing practices, they may have little reason to collaborate with the rest of the group to devise solutions.

Unclear leadership. Complex efforts also tend to suffer from a leadership gap. In many cases, these workstreams have no end- to-end leader; responsibility changes hands as the work moves from one expert function or specialty to another. But even in cases where there are nominal leaders for a workstream, they may have limited or no authority over team members and thus little power to ensure that the work is completed at all, much less in a timely fashion. Instead, each team member reports to a boss who is outside the team structure and who may have no direct stake in the team’s success. If no one makes an effort to coordinate the different functions at each stage, an important workstream can easily stall or die.

Lack of standardization. A critical driver of complexity is variability: in any work-

stream, the more variables there are that are subject to change, the fewer the opportunities for standardization—mean- ing there is more need for expertise. Only experts know how a seemingly minor change in a contract term could vastly increase a lender’s financial exposure or how a new line of software code could cause embarrassing privacy violations. The content of the expert’s contribution thus cannot be any more standard than the project itself. Moreover, in most organizations the process the expert follows is also nonstandard, leaving managers with no method to track progress or to make improvements.

Lack of flow. One of lean’s great insights is its focus on continuous flow rather than batch production. For example, an insurer responds to the ongoing demand to process claims in a timely fashion by creating a system that continuously pulls files forward to the next stage. But in projects with greater complexity and longer duration, bottlenecks and stalled work are less appar- ent, leaving the overall process more vulnerable to inertia. And because experts tend to focus on their own contributions, not on the process as a whole, they may not even realize that anything is wrong. Indeed, they may think that they are being effective even though their collective efforts produce more waste than results.

A lean solution Expert choreography is an approach for addressing the challenges of complex processes, with the goal of enhancing speed and productivity while delivering the highest-quality output. The approach typically involves four elements: a closely knit multifunctional team; a leader with cross-functional authority playing a coordination role; standardized tracks that accom-

29

modate variations while limiting waste; and a pacing mechanism to focus attention on process efficiency.

A new team. The first component is a stronger team dynamic. Companies have long been assembling disparate experts into multifunctional project groups, but few have managed to break the silos that keep these groups from working as genuine teams.

We have found that two basic factors are essential. The first is to sharpen the team’s focus, which must either be on a single, larger project or on a stream of smaller projects all requiring the same mix of exper-

tise. Second, the team must interact closely; if colocation is not feasible, there should at least be frequent interaction, such as establishing “office hours” for experts to come to work and holding daily or weekly huddles that involve all team members. This interaction is critical to foster the sort of collaborative behaviors and joint problem solving that result in continuous improvement.

A project champion. Expert choreography also requires a “champion,” typically a senior manager with a comprehensive view of the process. The champion bears ultimate responsibility for the team’s performance against key business metrics,

Specialized commercial lender “CreditCo” had made a significant investment to expand its sales force with the hope of fueling additional growth, but many transaction types were taking months to complete, limiting its capacity to absorb additional deals. The size of CreditCo’s deals—ranging up to about $500 million—and their complexity meant that each transaction could require upward of 40 internal handoffs among various experts.

Yet these very constraints became an opportunity. By reducing turnaround times, CreditCo could increase its capacity without increasing its head count. The key was to coordinate the various functions more tightly to address CreditCo’s top problems: siloed functions and lack of standardization.

Because the industries that CreditCo serves require an unusual depth of expertise, the first step was to establish separate expert-choreography teams for each major client sector. To foster buy in from the functions and ensure common practices among the teams, the client created a two-part leadership structure. First, each team had its own champion, responsible for overseeing the team’s day-to-day activities and

output. The champions then reported to a “new-deal committee” comprising senior executives from each of the functions represented on the sector teams.

Proposals would progress along one of four major tracks based on a combination of risk and regulatory factors. The new-deal committee would assign deals to tracks, and the champion would enforce the deadlines within each plan, calling on the new-deal committee’s authority to command resources as necessary. Daily huddles further reinforced pacing, while new communication protocols strengthened the team’s problem-solving capabilities.

The result has been a reduction of up to 60 percent in the time required to complete a transaction. Cus- tomers have been pleasantly surprised at the client’s newfound responsiveness, creating the potential for further increasing the client’s deal flow. Morale also has increased markedly.

Expert choreography in loan origination



such as the number of successful new products or deals completed under its workstream. Champions must therefore have sufficient top-level support to ensure adequate resources, to cut across traditional functional boundaries, and to exercise real authority over all experts on the team (see sidebar “Expert choreography in loan origination”).

These powers are especially critical for balancing the experts’ independence, but they can also lead to resistance. Two techniques have proven effective at foster- ing buy in. The first is vesting the authority in a committee of senior representatives of all functions; although this committee will itself need clear leadership, the structure ensures that each of the functions has a strong institutional voice. The second technique is revising the experts’ incentives. Rather than focusing only on the quality of the ultimate decision, evaluations should also assess how well team members are con- tributing to solutions and whether they are using their capacity effectively.

Standardized tracks. As in traditional lean, expert choreography seeks to smooth handoffs from one function to the next, all in the context of a complete, end-to-end process. But the complexity of an expert team’s activities means that a single, standardized procedure is usually neither possible nor desirable. Instead, the goal is to specify possible tracks for projects to follow, depending on key characteristics such as the level of risk involved in a project,

the expertise required to assess it, and the time required to complete it.

One possibility is to structure the tracks based on a combination of duration and complexity. In the new-products context, simpler ideas such as line extensions, entry into adjacent markets, and repackages of existing products would all move on a fast track, while long-term projects requiring extensive strategic planning would move on a slower track. Alternatively, tracks could correspond to any issues that might impede a project’s completion—the more serious the issue, the slower the track.

The track structure must also specify when and how functions can raise legiti- mate objections to a proposal. Most projects should be subject to at least two screenings. The first, a form of triage, is an initial quality check that weeds out the projects whose weaknesses are large and obvious; at this time, senior leadership (which may include the champion) clas- sifies the surviving projects into the various tracks. Each track can then include one or more opportunities for additional screen- ing to decide on a project’s outcome. Leadership should then give teams the flexibility—and the incentives—to manage projects according to each track’s requirements.

A pacing mechanism. What ultimately makes expert choreography tick is a mechanism for pulling projects forward in a timely fashion, a task complicated by the

31

fact that many complex projects lack obvious benchmarks for completion time. This issue can be addressed through two common lean techniques. The first is to make end-to-end progress visible to all by incorporating standard milestones and deadlines into each of the tracks des- cribed earlier. The project champion is then responsible for ensuring that the projects progress on schedule. The second technique is to adapt the visual management tools common in other lean solutions, such as real or electronic white boards, to track progress over longer time frames. What is important is not so much the tool itself but the team’s use of the tool to support its regular meetings, in which the core team identifies bottlenecks, develops and makes improvements, and then reports them to senior management.

Although designing and implementing expert choreography requires a substantial commitment, the rewards are well worth the effort. Based on our clients’ experiences, the first step in adapting expert choreography is to build a business case, identifying the most pressing customer and company needs that current processes do not and cannot satisfy because of complexity and waste. These may include a need for increased quality, quicker turnaround time, or greater productivity. Next comes an assessment of the key issues in the client’s current situation: To what extent is the

process hampered by a silo mentality, unclear leadership, a lack of standardization, or the absence of project flow? This assessment will in turn inform the design of a solution appropriate to the specific problem, drawing on some combination of multifunctional teams, project champions, standardized tracks, and a pacing mechanism. A pilot of the design allows for additional refinement before expanding the test to a larger subset of the business. The final (and most difficult) step is to implement the solution company- wide, incorporating further lean insights to achieve continuous improvement.

Whatever the right answer for a particular situation, success will depend on a thor- ough understanding of the challenge—and the courage to bring about significant change. Those who are willing to reexamine their operations from a new perspective stand to unlock significant value from even the most complex environments.

The authors would like to express their sincere thanks to Christian Johnson for his tremendous support in

preparing this article.

Dan Devroye ([email protected]) is a consultant and Andy Eichfeld (Andy_Eichfeld@McKisney

.com) is a principal in McKinsey’s Washington, DC, office; Franklin Garrigues is an alumnus of the Montréal

office. Copyright © 2008 McKinsey & Company. All rights reserved.



Lean in media: The art of making creative work efficient

Companies can ferret out waste and variability—without damaging creativity. A customized approach to lean can help.

Accordingly, media companies have long sought to improve their hit ratio, or batting average, with approaches ranging from innovative forms of audience testing to predictive modeling techniques. But these have failed to generate sustainable improvements. The problem with most of these efforts is that they strive to convert an artistic or creative process into a scienti- fic or analytical one.

A better alternative, we believe, is to get more hits by taking more swings. In media companies, as in baseball, batting averages tend to revert to the norm over time. Rather than trying to increase batting

averages, the key to getting more hits may simply be to get to the plate more often.

With cost pressures high and budgets fixed, how can companies finance these additional opportunities? Simple cost reductions will not help, and in fact often hurt, since cost-cutting efforts tend to be broad based and indiscriminate. With such gestures, it is possible to sacrifice unwittingly the next great show or movie. Instead, we believe that the best way to fund more

“at bats” is through productivity improvements. Of course, this is not easy. Crea- tive processes and people are notoriously resistant to standard approaches such

Since the rise of the mass market, the success of media businesses has rested on hits— and it still does. For senior executives of movie studios, publishing companies, television networks, music labels, game developers, and Internet companies, scoring a hit with audiences is the best way to increase financial returns. Indeed, there are few problems that a major hit won’t solve, at least for a while.

Rebecca Granne, Jon Wilkins, and Jennifer Wong

33

as Six Sigma. The blind application of these rule-based frameworks in businesses that thrive on creative judgment does not work.

In recognition of that reality, we have successfully customized the principles of lean manufacturing for the unique challenges posed by creative work. First, despite the obstacles, companies can in fact gain the trust and help of creative staff, a requi- site for this kind of transformation. Then, by examining the development process and separating the elements in which judgment and creativity are vital from those in which they are not, companies can identify places to expunge waste and variability safely, without damaging creativity. (These areas often lie in downstream stages of production and in distribution.) Simi- larly, companies can adopt a tiered content strategy, in which they allow brand- defining content its customary creative free- dom and make other, less essential products in more uniform ways.

Companies that have implemented a systematic, lean-based performance-improvement program such as the one we describe below have started to capture 10 to 20 percent savings on their end-to-end production costs, which represent 30 to 50 percent of total costs. Full value is expected to hit the bottom line in 18 to 24 months; in some circumstances, even greater savings have been achieved more quickly. These savings can be a valuable currency: Managers can use them to satisfy consumers’ seemingly infinite appetite for better quality and excitement, ever-escalating talent demands, and the dictates of the head office. The savings might also go to fund growth in new digital businesses, which many regard as

the future of the industry. The savings can be allowed to float through to the bottom line, improving current earnings. And of course, these funds can be plowed back into the production budget, giving the company those additional at-bats (new pilots, content for other platforms, offshoot publications, and so on) that are so critical to a hit-based business system.

Creativity, productivity—or both? Although lean manufacturing was pioneered as a technique for continuous performance improvements on Toyota Motor’s assembly line, it has since broadened into an operational-effectiveness discipline that has been put to powerful use in an array of industries, from hospitals to retail to government. Like manufacturing, these industries feature complex and costly operational systems, where improving core process efficiency can bring tremendous savings. Toyota and others have also managed to extract these efficiencies while actually improving quality: Toyota is consistently ranked first in quality ratings, even as it maintains the lowest cost structure in the business.

Efforts to apply these principles to media companies, though, have run afoul of four main challenges characteristic of the creative enterprise. First, media companies know which side their bread is buttered on and are loath to interfere with the creative processes, however disorderly, that ultimately deliver the goods. That spirit pervades many companies, and it protects not just the artists who may need it but also the artisans and even the regular business staff who do not. As a result, companies do not have a good sense of those activities that truly require creative flexi-


bility and those that are instead merely undermanaged. The often untested presump- tion that imposing process rules will only inhibit innovation results in variability throughout the production chain, even in many areas where variability brings little to no creative benefit (Exhibit 1).

Second, media companies suffer more than most from fragmented decision making, with many managers trying to accomp- lish similar tasks in different ways. This creates inefficiencies in coordination among

internal activities as well as with external providers of creative inputs, such as outside production companies and freelance journalists.

Third, many media companies fail to make those who manage creative processes accountable for process execution. This proves costly later: because of the unam- biguous need for error-free product, those at the tail end of the production process (for example, in distribution) scramble to correct upstream mistakes, almost always

Web 2008Lean MediaExhibit 1 of 3Glance: The assumption that imposing process rules will inhibit innovation can result in variabilitythroughout the production chain—at times, to no good effect.Exhibit title: Creative flexibility or ineffiency?

Green light Rework: ideas often handed over lacking details—eg, number of episodes, pilot requirements

Editing Excess motion: content is digitized and returned to tape several times during quality control and editing processes Overprocessing: frequent executive interference; lack of standards for appropriate executive involvement

Transport to uplink center

Rework: duplicate quality control required due to trucking fragile tapes

Master control

Log Rework: unclear ownership of and approval responsibility for log

Preproduction

Production Rework: producers pressured to begin shooting without contract and before idea is fully vetted, creating need to reshoot

Rework: high incoming failure rate; limited communication of standards to producers Overproduction: some contractually required products are made but go unused

Uplink Rework: international and new-media requirements often determined at end of process, driving reshooting and repurposing of existing footage

Step Inefficiencies

Process example, cable programmer

Incoming quality control

Outgoing quality control

Incoming quality control

Advertisements Overprocessing: frequent last-minute changes made by ad sales group; unclear whether added revenue exceeds change costs

Your TV

Development

Exhibit 1Sacrificing efficiency for creativity?

The assumption that imposing process rules will inhibit innovation can result in variability throughout the production chain—at times, to no good effect.

35

taking significant extra time and involving additional expense. When they succeed, as they usually do, the system is perceived to work. However, this approach bur- dens many production organizations with excess resources in areas that engage in very little creative work.

Finally, this state of affairs persists because of senior managers’ focus on trailing indicators of revenue (for example, Arbitron ratings, newsstand sales, and box office returns) and their lack of attention to operational productivity metrics. This oversight limits their ability to assess the true costs of content production and the corresponding return on investment of improvement efforts.

As a result of these barriers, few (if any) media companies have successfully applied productivity-improvement programs to their methods of content creation and distri-

bution. Pockets of process excellence sometimes exist within some functional areas. But at most companies, this part of the business has proved stubbornly resistant to even the most powerful tools.

Lean in media Lean can, however, be an effective approach for productivity improvement in media companies. And it can achieve this goal without inhibiting a company’s ability to create compelling content. Indeed, it can even enhance this ability by certifying the paramount importance of creativity in some processes and freeing companies to dedicate more resources to these areas (Exhibit 2). For lean to succeed, however, the company must customize it. Whereas classic lean manufacturing ruthlessly stamps out process variability wherever it exists, lean in media must instead acknowledge the unique characteristics of media companies and eliminate variability and waste only

Web 2008Lean MediaExhibit 2 of 3Glance: Process efficiency can fund more development.Exhibit title: Improved efficiency

Siloed processes High levels of variability Ad hoc efforts to use ideas and content systematically Suboptimal efficiency, pockets of waste

From

Development Preproduction Production Postproduction Transmission

Current time to air = 9 months

Streamlined processes Variability and flexibility purposely built in for truly creative activities Improved use of assets across platforms Faster time to air and therefore fewer active productions at any given time and lower overhead requirements

To

Potential time to air = 7 months

Development Pre-production

Production Post-production

Transmission

Exhibit 2

Improved efficiency

Process efficiency can fund more development.



where it does not compromise the company’s core competences—producing great movies, writing, games, and television shows.

One way to target areas suitable for lean is to examine processes carefully. In every production system, there are places (script development in film production, manu- script acquisition in book publishing) where it is important to have some flexibility, so seasoned executives can deliver creative input. But flexibility becomes simple inefficiency when creative judgment is not truly part of an activity; in these cases, companies can dispense with it. For cable networks, to take one example, this change could mean minimizing rework by producing the right cut-to-clock formats the first time, every time, and by reducing turnaround time for contracts. For magazine publishers, this could mean eliminating excessive rounds of editing and copy rereads and repurposing more “editing-room floor” material to online offerings.

A second way to make the distinction is to look across tiers of content. Every media company has some content whose success requires its full resources—especially the creative judgment of its managers and leaders. Likewise, every company has content that requires less creative review. A good example is the second and later seasons of a successful series. With the values established in the first season, later production runs can be made more efficiently.

Our work with publishing companies, film studios, television production companies, and others has helped us refine a six-

step approach to lean-based performance improvement in media.

1. Work with the creative front line to gain

trust. In our experience, frontline personnel are willing to engage in efforts to improve content creation processes and maximize their time for creativity. Working up front to win the support of staff members and to ensure their true ownership of all process changes is crucial to success. Creative personnel such as development executives, producers, and marketers readily recognize the longer-term benefits of realizing productivity improvements. They want to spend their time creating content and building audiences, and processes that impede creativity lead to extremely high frustration levels. Freeing people to focus on the part of the job they love is its own incentive.

2. Understand the entire content produc-

tion process. Given the fragmented nature of many production organizations, most large media companies do not have a comprehensive understanding of how their content is made and what truly drives economic performance. Companies should map their content production process from idea to delivery, including every step, handoff, and loop. Costs for each step can be derived from financial systems; a consistent logic should be used in allocating overhead expenses (Exhibit 3).

3. Define activities that should be vari-

able. As discussed, not all activities in the content-generation process are creative— in fact, the majority are not. Organizations can drive efficiency by differentiating tasks that take an uncertain amount of time to complete (for example, graphics, editing, writing) from those whose completion time it is reasonably possible to plan (for instance, quality control, encoding, printing). This step will help companies

Flexibility becomes simple inefficiency when creative judgment is not truly part of an activity

37

make sure that variability is concentrated where it should be—in development and in the most creative steps of production.

4. Define content whose production should

be variable. Inherent differences in content translate into process differences. Studio-produced shows are created dif- ferently than documentaries; a magazine’s special editions work on different time- tables and with different processes than its weekly publication; and so on. Identify- ing these differences is one way to review content for suitability to lean.

Companies should consider other factors as well. For example, strategic importance is a critical driver of process choices. The bigger the hit (or the bigger the perceived

chance of a hit), the higher the level of permitted variability in lead times, editorial and creative-management review, and rework cycles. We estimate that at many creative enterprises, only 10 percent of the content rises to this level. Much of the rest, while creative, is nonetheless working to an established set of values. And some content, especially on television, is truly

“C level” material. With this content, companies are filling air time and trying to monetize their channel position and brand, rather than the content itself.

5. Identify variability and waste. In the processes and content types for which variability is not necessary, companies should look for sources of variability and waste. Bottlenecks often include inputs from exter-

Exhibit 3 A complete picture of costs

Companies should map their content production process from idea to delivery and examine costs for each step.

Web 2008Lean MediaExhibit 3 of 3Glance: Companies should map their content production process from idea to delivery and examine costs for each step.Exhibit title: A complete picture of costs

1Figures do not sum to 100%, because of rounding.2On cash basis, including both operating and capital expenditures before amortization.3Not amortized.

9.1 2.7

72.5

12.0 3.8 100

Content production spending for midsize cable network,1 %

Network general and administrative Network compensation and benefits

Development

Legal Business affairs Production-managementdepartment Finance

Preproduction

Program spendingwith third-partyproductioncompanies2

Production

In-houseproduction Languagecustomization Library Content, footage Space2

Televisionoperations group3

Broadcastequipment3

Postproduction

Playback, uplink Space2

Televisionoperations group Broadcastequipment

Transmission Total ($1 billion)



nal content providers (for example, production companies), superfluous editorial oversight and approvals, and the recent need to support fast-changing multiplatform distribution initiatives.

One television company found inefficiencies and waste along its entire system. In development, the disparate production groups rarely shared ideas. As a result, the company missed easy opportunities. Some development ideas were incompletely thought through; these proved difficult and expensive to produce. In preproduction, negotiations and budgeting often drag- ged on for months. In production, episodes often failed the company’s stringent quality controls. Late and incomplete deliveries resulted in last-minute, budget-busting fire drills. And in postproduction, many functions were overresourced, given the flow of work.

Companies will also have to review interactions with external providers such as independent production companies, as these processes, too, can be ripe for operational improvements. Just as a company’s own inefficiencies can have a negative effect on its commercial relationships, external providers’ problems can wreak havoc on a company’s internal flows.

A magazine publisher worked with editorial staff and found a number of ways to remove inefficiencies. The company insti- tuted new spending guidelines for photos, with different maximums depend-

ing on content type and page size. It staggered the close of its various publications and created a new role, “closing manager,” to ensure that this process was supervised effectively. It redesigned sections in several of its titles to expedite layout creation and approval. It elimi- nated top editing for a few sections that could bear a slightly lower level of quality. And editors agreed to begin working across related disciplines to improve flexibility. In these ways and others, the company saved more than $20 million across three titles, equivalent to about 15 percent of its total content production costs.

6. Embed the approach for continuous

improvement. While media companies launching lean-based improvement programs typically find “quick wins” in areas such as temporary staffing levels, the greatest gains usually demand sus- tained effort, which requires mechanisms for tracking progress over time and for rapidly identifying deviations from expected results. Companies must build skills and cultivate lean practitioners in a variety of places in the organization. They should change performance management systems to include achievements in removing waste and variability. And there are many other steps they can take to build a culture that celebrates and rewards continuous improvement.

Successful application of this approach does not come easily. It requires commitment from management, active participation of people throughout the organization, and a minimum of 12 to 18 months. As noted, this kind of performance transformation includes significant changes to the fabric of

Just as a company’s own inefficiencies can have a negative effect on its commercial relationships, external providers’ problems can wreak havoc on a company’s internal flows

39

Rebecca Granne is an alumnus of McKinsey’s Stamford office, Jon Wilkins ([email protected])

is a principal in the Washington, DC, office, and Jennifer Wong ([email protected]) is a consultant

in the New York office. Copyright © 2008 McKinsey & Company. All rights reserved.

organizations, from incentive plan adjustments to wholesale shifts in skill levels. Media is likely to remain a hit-driven industry in which one year brings blockbuster financial results and the next is less successful. The temptation is always to retrench during off years, cutting development and slashing production budgets while hoping for a better bat-

ting average—another hit. We believe that a program that substantially enhances productivity will deliver what constitutes any player’s best chance at a hit: more swings at the plate.



Service strategy/customer experience

The ‘moment of truth’ in customer serviceMarc Beaujean, Jonathan Davidson, and Stacey Madge

Focus on the interactions that are important to customers—and on the way frontline employees handle those interactions.

A better hospital experienceKurt D. Grote, John R. S. Newman, and Saumya S. Sutaria

Hospitals must learn what commercially insured patients and their physicians look for when choosing facilities—and how to deliver it.

The right service strategies for product companiesByron G. Auguste, Eric P. Harmon, and Vivek Pandit

As products evolve into commodities, services become more important. But companies that play this new game must understand its rules.

Frontline/field service delivery

Improving field service productivityTimothy D. Morse, Mitesh Prema, and Jonathan Shulman

Real-time information can help companies manage “invisible” employees.

Measuring performance in servicesEric Harmon, Scott C. Hensel, and Timothy E. Lukes

Services are more difficult to measure and monitor than manufacturing processes are, but executives can rein in variance and boost productivity—if they implement rigorous metrics.

Transforming sales and serviceThomas Baumgartner, Roland H. John, and Tomas Nauclér

Incumbents can serve the whole market—without getting stuck in the middle.

Related thinking on mckinseyquarterly.com

Customer care

Getting more from call centersKeith A. Gilson and Deepak K. Khandelwal

A good customer service strategy should balance costs, quality, and revenues. Companies that restructure call centers in this way can often cut their costs.

A call center’s last line of defenseAdam Braff, Zakir H. M. Gaibi, and Jon C. Garcia

All save desks are not created equal: the best help companies to cut their churn rates, become more profitable, and even develop new products.

Using call centers to boost revenueAndy Eichfeld, Timothy D. Morse, and Katherine W. Scott

Many companies can turn their inbound call centers into powerful engines for growth.

Business support functions

Getting more out of offshoring the finance functionMichael Bloch, Shankar Narayanan, and Ishaan Seth

Companies aren’t getting the most out of their offshoring programs. Key design changes would help.

Managing IT for scale, speed, and innovationSam Marwaha and Paul Willmott

Companies must govern IT as they govern their businesses: with different rules and metrics for different parts of the organization.

Recent articles include: The race for supply chain advantage: Six practices that drive supply chain performance Excellent supply chain management helps leading companies around the world achieve better service, lower costs, lower inventory, and ultimately competitive advantage. Our research shows that the best organizations are creating this advantage by using six valuable practices.

Thinking lean, acting lean Transforming mind-sets and behaviors is often the biggest challenge banks face on their journey to lean. However, it’s also the new ways of thinking and acting that often have the most impact on operational improvement.

Supplier development: Staying close to home Low-cost country sourcing has been the method of choice to cut supply costs in many industries of late. But sometimes it makes more sense to develop local suppliers.

Designing the value in Relentless focus on product cost reduction can be a one-way street to lost profits. Instead, companies should concentrate on the cost-effective delivery of the features that their customers value most. New techniques allow different functions to work more effectively together in order to achieve this.

Case study: Uncovering the hidden plant—Leaner operations in the chemical industry By focusing on improving the performance of its five existing facilities, a medium-sized chemicals company hoped to improve throughput and increase competitiveness. The result, achieved by applying lean-manufacturing techniques across its production and maintenance processes, was additional capacity equivalent to an entirely new plant.

Introducing McKinsey’s Operations Extranet

McKinsey’s Operations Extranet is a global platform dedicated to exploring the latest developments in manufacturing, product development, supply chain management, procure- ment, and other operations topics.

We invite you to apply. Qualified applicants enjoy access to an exclusive, online global community of operations professionals. Members can participate in conversations with peers at leading institutions to test and shape opinions, grapple with shared operational challenges, and broaden their professional networks. Members also receive exclusive articles, commentary, and analysis from experts in McKinsey’s operations practice.

To apply, follow this link: http://operations-extranet.mckinsey.com

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