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Research paper
Lean competence: integration of theories in operations management practice
Glenn Parry
Bristol Business School, University of West of England, Bristol, UK
John Mills Institute for Manufacturing, Department of Engineering, University of Cambridge, Cambridge, UK, and
Celine Turner WMG, University of Warwick, Coventry, UK
Abstract Purpose – This paper aims to develop a methodology for lean implementation that reduces the risk of damaging a company’s key resources and abilities through the application of core competence theory. Design/methodology/approach – Academic literature provided background conceptual understanding of lean and core competence theory for an industrial working party of domain experts from 15 major aerospace companies in the UK to develop a methodology for lean implementation that would not damage firm’s competences. The methodology was trailed through cooperative inquiry in a business unit of a leading global aerospace company using a case study approach. Findings – An accessible definition of core competence that captures academic theory was proposed through an industrial working group. Further a methodology for lean implementation, drawing upon core competence theories was developed. The method comprised four tools: market analysis, the visible value stream, customer value analysis, and financial modelling. Tools drew upon established practice and their joint application is intended to safeguard a company’s key resources and capabilities from loss or impact during lean implementations. Application in a single case study company and the effects observed over a number of years indicated the methodology, though developmental, was capable of significant positive effects. Originality/value – The paper provides a practical definition of core competence and application of theory within a lean implementation, trailed and validated in an industrial setting. Competence theory has previously been described as “lack-lustre” due to the abstract nature of the ideas.
Keywords Competences, Aerospace industry, Lean production, Business process re-engineering, Business process re-engineering, United Kingdom
Paper type Research paper
1. Introduction
In this paper we investigate the relationship between lean
strategies and core competence theory. Working in
partnership with industry, we have developed and trailed
a methodology for lean implementation within a specific
strategic context that seeks to protect a company’s
key resources and abilities by drawing attention to
their importance. UK aerospace companies are increasingly
focussing on strategies for removing waste from
their processes, maximising the utility of their own resources
and outsourcing inefficient activities to the supply chain
(AeIGT, 2003). The lean approach to manufacture
has become an accepted paradigm since it aims at
delivering customer value with minimum waste (Womack
and Jones, 1996). A firm’s key resources are related to
their critical or core competence(s) and are often discussed
in the context of outsourcing decisions to try to ensure
they are not undermined (Bettis et al., 1992; McIvor, 2000;
Parry et al., 2006; Zhang et al., 2006; Roehrich, 2008).
The work presented is the result of a study carried out
within the UK aerospace industry by the UK Lean
Aerospace Initiative (UK LAI), a partnership between
universities and over 44 aerospace companies. Industrial
representatives[1] joined a working party and contributed
quarterly for the two years of the study to guide and shape the
research.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-8546.htm
Supply Chain Management: An International Journal
15/3 (2010) 216–226
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598541011039974]
The authors would like to acknowledge the support of the staff of DPRO, in particular Marc McLening, Paul Price, Jonathan Chesney and Mike Burden. The authors would also like to thank the UK Lean Aerospace Initiative member companies, Society of British Aerospace Companies and The Engineering and Physical Sciences Research Council. In addition they would like to acknowledge Professor Mike Lewis of University of Bath, Mike James-Moore of WMG, the University of Warwick and Judith Jordan and Professor Mohammed Saad of the University of the West of England for their input, critique and support during the development of this paper.
216
The paper proceeds in six stages: 1 Literature review. 2 Development of practitioner-friendly definitions of key
terms. 3 Development of a process methodology. 4 Trial case. 5 Methodology review. 6 Conclusions.
2. Literature review
The review is divided into two sections – lean thinking, and core competence and resource-based theories.
2.1 Lean
Lean is based on learning from Toyota who increased market share by improving their processes, most notably on the shop floor, but also in design and development, by the application of process rigour (Ohno, 1988; Monden, 1983). Lean is “value stream” focussed encompassing the focal company, customers and supply chain partners (Lewis, 2000). Womack et al. (1991) used the term “lean” to describe the approach they observed as Toyota endeavoured to eliminate waste and to improve efficiency (Womack and Jones, 1996). They identified five “lean principles”: 1 Specify value. Value can only be defined by the ultimate
customer. It is specified in terms of satisfying customers’ needs by providing products and/or services with desired capabilities at a competitive price and lead time.
2 Identify the value stream. The set of all of the actions required to bring a product through problem-solving, information management, and physical transformation tasks. Here, value refers to the nature of activity being carried out. The value stream is the set of actions that transform a product or service.
3 Make the value flow. By reducing cycle times and batch sizes to the absolute minimum, ensuring each operation is visible, defined, and has a visible status to eliminate possible stoppages in the production process.
4 Let the customer pull. Processes or products are to be produced and delivered on-demand from the customers.
5 Pursue perfection. Even if the other four lean principles are followed, if the mindset for pursuing perfection has not been developed across the enterprise, any improvement will only deliver a one-off benefit.
Both industry and academia has focussed upon internal lean transformations of manufacturing processes and development of supporting toolsets, e.g. value stream mapping, 5S, 5-whys. This myopic focus on the shop floor has brought many benefits but only addresses the second and third of Womack and Jones’ (1996) lean principles. It largely ignores the first lean principle, how practitioners or academics are to accurately identify customer value or identify and protect their core competences during process changes. While the lean approach may bring process improvement, it could damage customer value or a company’s competitiveness if, for example, process changes effect or lead to the outsourcing of core competence activities (Moody, 1997; Cusumano and Nobeoka, 1998).
2.2 Core competence and resource-based theories
The Austrian School of Economics (Jacobson, 1992) believed that the source of a firm’s competitive advantage lay in the
unobservable factors (viewed from outside the firm) rather
than observable strategic factors. Core competence theories evolved through the resource based view (RBV) of strategic management (Penrose, 1959; Wernerfelt, 1984; Barney, 1991), characterised by the achievement of higher sustained
returns than rivals through the operation of combinations of resources forming unique competences (Rugman and Verbeke, 2002). This characteristic has resonance with the lean principles, particularly understanding customer value and aligning resources to allow value to flow. The dynamic
capabilities view (DCV) extended the RBV by recognising that resources and capabilities must vary over time in response to changes in their environment (Teece et al., 1997; Eisenhardt and Martin, 2000). Both DCV and RBV
begin within a firm and build outwards (Binder and Clegg, 2007). This endogenous approach needs to be balanced against changes in market and competitive rivalry, through complementary approaches such as those proposed by Porter (Porter, 1998; Cousins and Crone, 2003) and transaction cost
economics (TCE) (Williamson, 1990). Definitions of “core” or important competences and resources that should be protected and held in-house have been debated frequently in academic literature (Barney, 1991; Foss and Knudsen, 1996)
but for practitioners the straightforward view of Prahalad and Hamel (1990) has penetrated most deeply. Three identifying factors of core competence are given, namely, they provide access to wide variety of markets, they make significant
contribution to the perceived customer benefit of the end product; and they should be difficult to imitate. However application of competence theory in practice has
been lack-lustre (Williamson, 1999), a problem compounded
by the abstract nature of the idea (Mills et al., 2003b). When working with industry, a clear definition of competence is an essential starting point. A number of attempts have been made to integrate definitions and capture the perspectives
from academic sources (Snow and Hrebiniak, 1980; Hitt and Ireland, 1985, 1986). A definition typical of those in the academic literature describes core competence as:
A central set of problem-defining and problem solving insights that enable the firm to create potentially idiosyncratic strategic growth alternatives and to enact, at least partially, its environment (Lei et al., 1996, p. 550).
Whilst specific, the language used is not easily accessible to the layman. Prahalad and Hamel’s (1990, p. 82) definition provided greater clarity:
Core competencies are the collective learning in the organisation, especially how to co-ordinate diverse production skills and integrate multiple streams of technologies.
However, their approach and hence definition is endogenous,
involving internal company studies of senior management perceptions and is thus incomplete for studies exploring both firm and market factors. Whilst many texts have provided theoretical illustrations of
core competence, an auditable, validated practical methodology to identify core competence linked to customer value appears to be lacking (Mills et al., 2003a). Hitt and Ireland (1986) collected data on competence using the self-typing approach of Snow and Hrebiniak (1980) and debated the best method of external validation, electing to measure the effectiveness of a firm’s competence by quantification of shareholder value based on market return
– too broad a measure to prove a direct link to individual competence. Both Javidan (1998) and Lewis (2003) propose
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
217
methods that involve core competence identification through
expert interviews alone, but rely largely on internal
management sources as opposed to the external customer
and provide no financially linked validation for this method.
Kothari and Lackner (2006) provide a value-based
management approach that links competencies and
capabilities to a company’s financial flows, but they do not
provide a validated case example. There remains a need for a clear definition of core
competence that facilitates understanding of the concept and
that has been applied and validated through industrial
practice.
3. Development of practitioner-friendly definitions
At the initial working party meeting, in line with previous
practitioner/academic collaboration (Lewis, 1995; Mills and
Lewis, 1997), academic theories were presented and
discussed with industry executives. Consensus was reached
that definitions of core competence were not clear enough for
effective communication and use throughout an enterprise. A
simple definition was required, which all employees could use
without further explanation. To arrive at a practical definition
the attributes of a core competence were discussed, including:
attitudes of the staff; skills within the company; value
delivered; market requirements met; best in class; product
or service differentiator; difficult to imitate. Based upon these,
and with recognition of the academic contribution, a
definition for core competence was developed and agreed:
Core competence is a skill/asset/technology that underpins the growth of the
business and differentiates the business from its current and future competitors.
This definition combines both RBV attributes identified by
Rugman and Verbeke (2002) and the DCV in looking to
future competitors (Teece et al., 1997; Eisenhardt and
Martin, 2000); and the competitive aspects of Prahalad and
Hamel (1990). The link to markets and customers is
reinforced by making growth an inherent attribute of a core
competence (Williamson, 1990). The recognition of the
importance of underlying, micro level resources to core
competence(s) was recognised through the use of skill/asset/
technology (Scarbrough, 1998). The macro, market level of
competence as competitive rivalry, is reflected in the
differentiation of the offering (Porter, 1998). This definition
therefore appears to capture the breadth and depth of
academic theory and in addition the language used is
straightforward, facilitating wider understanding. In working party discussions on core competence
individuals used their experience of their company’s strategy
and the complex interaction that existed between strategy and
competence. Business strategy may address either current or
future core competencies. When core competences are
perceived to exist within an enterprise competence directs
strategy; when they need to be developed, strategy directs
competence. In addition, threshold competences were
discussed, identified as the common skills and capabilities
required to compete in a market (McIvor, 2000). The
industrial group recognised that many core competences
“degraded” over time, becoming threshold competences as
competitors developed competing capabilities (Figure 1).
Recognition of the dynamic nature of competences protects companies from viewing them as rigidities that direct strategy (March and Sproull, 1990) and reflects the operational realities of imitation or substitution that bounds the time dimension of competencies that confer competitive advantage (Williams, 1992). In this context, the working group defined strategy as “the management of core competence”.
4. Development of a process methodology
Having reached a clear definition of core competence and its relationship with strategy, a methodology was developed that drew upon theory and industrial practice to make a process “leaner” whilst seeking to protect key competences. The methodology and findings were presented and reviewed quarterly by the UK LAI working party to improve the reliability and validity of the results (and to clarify potential differences in interpretation). The project was also presented to industry and academic professionals at a UK aerospace workshop in March 2004 (103 attendees), the annual US Lean Advancement Institute Conference organised by MIT in March 2005 (250 attendees), and an international aerospace maintenance, repair and overhaul workshop in London in January 2008 (300 attendees). The full study took two years to implement and a further two years to validate. Four tools within the overall method are described as
follows.
Market analysis
Defining the market place and company performance required a macro view of an organisation and its context, examining its products, services provided, and how the market and the offerings had developed over time. This task was based on Porter’s five forces model of strategy development (Porter, 1998). Competitive factors including market trends, the geographic position of the company and its competitors, and financial data (including comparative analysis of profit, revenue and accounting ratios) are analysed to explain trends and differences. Market trends indicated potential growth areas and market segments in which revenues may be reducing; these are factors which may impact upon a firm’s strategy and resource utilisation, hence influencing the resource characteristics of the firm (Williamson, 1990). Company profiles also identify the current and potential future competitors in the market. This
Figure 1 Interaction between competency and strategy and its degradation over time
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
218
facilitates inter-firm analysis of the effectiveness of resource
utilisation through high level marginal cost comparison
(McIvor, 2000) that, whilst simpler than other studies, e.g. Chen and Liaw (2001), uses readily available data to make
comparisons. It also identifies future threats or potential allies who might present learning opportunities (Hamel and
Prahalad, 1994). However, in isolation the work does not identify core competences, only relative market position and
differences in product/service offering.
Making the value stream visible
Value stream analysis identifies the elements used to deliver products or services to market, identifying value adding
activity and flow (Rother and Shook, 1999) making visible the second and third lean principles and identifying the skills,
assets and technological resources. The maps include operational activity and the flow of data controlling
production, management interactions and customer contact.
The map brings process transparency, providing a tool for managers to reconcile operational and strategic complexities
and achieve a greater degree of control (Lewis, 2003; Scarbrough, 1998). This provides an audit trail, linking the
resources used to deliver customer value (Mills et al., 2003a). During the production of the map detailed information of
workforce skills and the knowledge of managers, operators and technicians that enable the process to flow, is captured.
Employee resources are assessed at one of three capability levels: “primary role”; “secondary role”; or “in training”. For
each role on the value stream the training time is also
recorded for both a skilled and unskilled operator. The skills matrix generated is related to the value stream to show how
these internal assets are employed to deliver value to the market. Thus the resource combinations of personnel,
equipment and technology that create competence are captured (Lewis, 2003). The matrix also provides some
protection from potential future loss or decline of competence by identifying weaknesses in human resource cover and the
lead-time required to train new personnel. This task demonstrates the interdependence of resources
and competences, coupling the tangible and intangible
resources that are used to create competitive advantage (Nanda, 1996).
Indications of customer value
Lean theory states that only the customer can specify value
(Womack and Jones, 1996). The third task must seek a strong customer input. We combined customer interviews with
company issued questionnaire data, providing a more objective understanding of the customer base and its needs
than normally achieved by internal interviews alone. This method is more likely to correctly identify the principles
clients and customers use to select one supplier over another (Lewis, 2000). It addresses directly the need for a better
understanding of customer value – the first lean principle.
Customer perceptions are taken from two sources to increase validity. First, telephone interviewing, undertaken by
academic researchers using a semi-structured questionnaire and without identification of the case study company, asking
general value and supplier selection questions. And second, a company issued questionnaire asking detailed value
proposition specific questions. Transcripts of customer interviews discussing their values in regard to service and
maintenance provision were analysed alongside the completed
company issued questionnaires detailing opinions of the
specific service provision of the case study company. Analysis
followed the guidelines of content analysis, a method that “classifies textual material, reducing it to more relevant,
manageable bits of data” (Weber, 1990). The data in this task
captured how and why customers selected their suppliers, giving details of the criteria and value propositions they
employed.
Cost centre analysis
This tool uses a value based management approach aiming to
identify where value is created and to financially quantify it
(Drucker, 1999; Rappaport, 1986; McTaggert, 1994). A cost model was developed based on the value stream maps, linking
activities to their cost and revenue. All over-head is
reallocated to product and process streams using the methodology of Walker and Wu (2000, pp. 105), creating
an activity based cost (ABC) model and a working case example for Kothari and Lackner’s (2006) work. This
provides a financial coupling of the structural processes that
deliver customer value and infrastructural processes supporting them. The value stream based cost model
identifies and quantifies resources that create and consume
financial value, providing an internal financial validation of competence. Pro-forma and guidance materials were developed for all
four tools; however, it is outside the scope of this study to display them here.
5. Case application and key learning
The methodology was trailed through cooperative inquiry (Reason and Bradbury, 2005) in one company using a case
study approach (Yin, 1981). The case was undertaken within
a UK LAI member company, Dowty Propeller Repair and Overhaul (DPRO), a Smiths Aerospace Company attached to
the original equipment manufacturer, Dowty Propellers. They
piloted and developed the process methodology on-site at their facility headquarters in Gloucester, UK. DPRO is a
service company with approximately 250 employees, with
sites in the UK, USA and Singapore, and focuses upon maintenance, repair and overhaul (MRO), with full in-house
repair and overhaul capabilities for both metal and composite
bladed propeller systems. The value stream studied was for a composite blade product, selected as a mid-life offering
typical of the company. Market analysis was completed by the academics using
internationally available corporate financial data,
supplemented with further detail of company and market provided by the company. Competitor businesses were
identified using both standard industry classification codes
and management input. It is not possible to get detailed comparative financial data for specific product lines so
pragmatically it is necessary to aggregate up to the firm level
as a unit of analysis. During discussion these data were treated within this context, and manager’s appreciated the relative
implications of findings. Referring to Porter (1998), it was believed that suppliers to
the OEM were not a significant threat. None were identified
as critical or without timely substitute. Managers recognised
the bargaining power of customers coupled with the threat of product substitution needed to be considered. Substitution
was not limited to the threat from other blade providers.
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
219
Many customers leased aircraft and could substitute the
whole aircraft for one with similar characteristics if operating
costs became uncompetitive or they perceived future
difficulties in supporting it. Market trends indicated UK Aerospace Industry turnover
had been growing, driven by the civil market, increasing 2.6
per cent year on year over the last ten years, though it fell 1.5
per cent in the last year. Illustrative analysis of key
competitors showed that one large competitor made pre-tax
losses during 1998 and 2000 and in 2000 received a
significant revenue injection from their parent company.
Their finances indicated they had been struggling in the
market, but were likely to remain a key player due to their
large size and the financial backing of their parent company. A
second much smaller key competitor had reduced their
gearing ratio by retaining the above average profits they
enjoyed in 2000. Whilst their finances indicated that they had
captured new contracts and were running financially
efficiently, they remained a relatively small player by market
value. These data provided profiles of current and potential future
competitors and facilitated benchmarking as it gave a simple
financial perspective on how effective at adding value the
study company was against its competition. As far as core
competence identification is concerned this work gave
pointers towards the market growth drivers and current and
future competition, providing competitive context. However,
without detailed access to the competitor companies the task
alone did not identify any core competences of DPRO, just
market and service differentiators.
Value stream analysis was conducted onsite in Gloucester.
A value stream map of the product process was produced
(Rother and Shook, 1999), but much greater detail was added
as the mapping was developed. Due to commercial sensitivity,
a simplified version is shown in Figure 2. The map identified the company’s assets and technology
and linked them to the process of value delivery, providing an
auditable link between resources, operational activity and
value (Mills et al., 2003a). As a development to the Rother
and Shook (1999) approach, a meta level map of the
communication and data flows was overlaid on the value
stream map (not shown in full). Due to the complexity of the
process flow, the propeller product is divided into process
streams during service, the map was also split into three
“swim lanes” named “propeller” “blades” and “hubs”. The
information flows were similarly divided; “shop”, data
travelling along the manufacturing/production process with
the product, normally as paper documents; “coms”,
information between production and management; and
“cust”, information between management and customer.
Information flow data were useful to the methodology as the
majority of bottlenecks occurred in communication.
Customer or supplier interactions were particularly
significant as time could be lost waiting for information
transfer or response. Using the map as a reference, the employee resource
information was placed in a simple matrix of job function
(skills) against employee name (Figure 3). This table made visible the skills required and identified
how many individuals currently held those skills. It also
Figure 2 Value stream image (inventory, cycle time and meta information flows removed)
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
220
highlighted areas with insufficient cover, identifying training
requirements. The steering group discussions revealed that
many companies believed they kept this information, but few
actually had these data. After performing the value stream analysis task, eleven areas
of process improvement became apparent and actions were
proposed. None gave rise to any significant cost or investment
requirement and all were actioned, e.g. two processes were
identified as having limited cover and required a long period
of training. Training could be provided by current staff to
additional personnel on the line as part of normal daily
activity. The process gave management full visibility of the
operations. Mapping the information transfers showed how
communication occurred between customer, management,
and production and identified bottlenecks. In facilitating core competence understanding this tool
revealed the resources, assets and technologies employed in
the value stream to deliver product and service to the
customer in the market. The cycle time gave metrics for
effectiveness that could serve as benchmarks against best in
class and act as competence indicators. Through the use of
the skills matrix, the personnel that provide the coupling
between tangible and intangible resource was identified.
Identification of the training time and cover for each
operation provided protection against potential future
competence loss. This link between value and resource gave
management the evidence to identify, justify and action
change. Indications of customer value involved the European
product operators and a small number of operators from
Asia, who were interviewed by academics as previously
described. Preserving the anonymity of the customer and
supplier facilitated objective discussion on the concept of
value. Upon completion of the interviewing the written
questionnaire from DPRO was issued which focussed on their
specific product offering and asked questions that could not
otherwise be examined without revealing their identity. Data
collected sought detail of value priority, allowing subsequent
analysis to place value in rank order. The aim was to move
beyond a generic customer “quality/cost/delivery”
requirement, which the industrial working party had
highlighted as lacking detail. Recognising the limited
resource available to drive change, the approach allows
sequential targeting of effort. An analysis of customer value
gave hierarchy of needs (Figure 4). Five levels were identified; the basic requirement was
accurate costing. Low cost was known by the customers to not
necessarily represent the best value, but cost, hence price, was
an order qualifier. Accuracy in costing was key. The customer
wanted to understand the cost breakdown of the job so that
they could understand the value being presented. The issue
with price was not the absolute level charged to the customer,
but the derivation of that price. Whilst absolute cost level was
the order qualifier for the customer, it needed to be accurate
and consistent for it to offer the customer value. The
customers also noted that if they rejected a quote from a
supplier it was common for that supplier to return
immediately with a much lower quote. From the supplier’s
point-of-view this was seen as securing business: from the
customer’s point-of-view this brought up questions of trust in
the pricing process. It also increased cost to the customer as
they knew that to ensure best value they had to engage in time
consuming price negotiation. Customers stated that the
suppliers who took time to communicate openly with them
ensured a long-term relationship. Second in the hierarchy
were safety and security; confidence in the future, achieved
with reliable turnaround times and consistent quality. The
Figure 3 Skills and competence matrix example
Figure 4 Value hierarchy of needs for product customer
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
221
aerospace service industry is dependent upon its suppliers to
deliver serviceable parts to a promised time. Failure to deliver
can result in the unscheduled grounding of an aircraft; an
outcome that may lead to significant cost penalties for the
operator. This led to higher level needs of single point
contact, rapid response and regular communication. Single
point contact and rapid response referred to the desire for a
rapid response during interaction between customer and
supplier; 24-hour response and a known person to contact
increase perceived value. The next level of need was regular
communication regarding procedures, ensuring a stronger
relationship. A communicative company who provided the
customer with updates on their work reinforced the
customers’ confidence in the relationship. Finally, relational
transparency (honesty between customer and supplier)
ensured trust and high quality, long-term relationships. Interviewees illustrated points in the hierarchy by reference
to details of their supplier’s products or service offerings and
the interaction with their company operations. This provided
a link between customer value and the resource bundles used
to deliver those products or services, locating customer value
to activity identified in the value stream maps. Cost centre analysis brought the focus of core competence
to the drivers of business growth; as to underpin growth the
business must make a profit. A cost model using internal data
was constructed with the help of the financial manager,
following the approach described in the literature (Kothari
and Lackner, 2006) and with reference to the value stream
map. This breaks down the standard accounting practice of
departmental silos for financial reporting and reattribute’s
finances to value stream flows, to the level of cell activity,
shown schematically in Figure 5.
Upon presentation of this work to aerospace industry
professionals in the USA (Parry, 2005) it was found the approach to cost modelling was being repeated by a large aviation systems integrator at one of their facilities in the USA. The company wished to remain anonymous, believing the model would offer significant competitive advantage. It was possible to compare and discuss the approach, structures and function of the two cost models and despite a significant difference in company size (1000s employees as apposed to 100s) they were very similar; the main difference being the US
model linked directly to an ERP system. The model gave an indication of where money was spent
and made along the value stream, providing an auditable link between resources, cost and revenue – hence what was underpinning the business and where true financial growth
may be located.
6. Post case methodology review
In Spring 2009 a post case review was carried out with the DPRO senior management team and those involved with the implementation using semi-structured interview approach described earlier. Platts (1994) four characteristics of
methodologies for strategy formulation (procedure, participation, project management and point of entry) were used as the basis for semi-structured interviews, with an additional question exploring impact and outcome. A total of 12 months after the end of the intervention the
case study company achieved growth in European aftermarket share from 5 to 50 per cent in the product platform studied. This growth continued steadily over the following year as Dowty engaged with fully developing strategy that delivered to the customer requirements identified. Such growth was not previously experienced as DPRO had seen reductions in
Figure 5 Schematic of financial model that attributes cost and revenue to value stream activity
Lean competence: integration of theories
Glenn Parry, John Mills and Celine Turner
Supply Chain Management: An International Journal
Volume 15 · Number 3 · 2010 · 216–226
222
revenues from mid to end of life products. Previously, they
focussed on supporting newer products and older products
were left for service competitors. Through this work they
recognised and had evidence that this was potential revenue
they could access. Senior management stated:
. . . That growth came following the intervention. There were some other factors around our desire to expand in this market, but this formed the core of our strategy . . . the findings from this linked into what the strategy becomes . . .
They changed their approach and offered ongoing customer
support to mid/end of life and captured market share, which
provides our causal link, internally validating the process. The
timeliness of the company’s engagement with researchers, at
the point they wished to grow market share, may reduce the
veracity of this validation. They would have not have engaged
without some desire to drive change. Full internal validation
can only be resolved through future applications with other
firms. External validation from market growth demonstrated
that the lean approach may have had a positive influence upon
processes and strategic management of the company,
providing support for our hypothesis that successful lean
operation must demonstrate an understanding of and provide
strategies for the management of core competence.
6.1 Procedure – the steps taken
The interviews found broad acceptance of the process steps
and their integration. In reviewing the methodology and
resource requirements for application the data requirement
for the value stream process stages was a focal point of
discussion. The working party companies stated that they
held the data specified for the various tasks, task times,
inventory levels, line items costs etc. Upon application of the
processes within DPRO it was found that, for this tool in
particular, some of the required information was not “at
hand” and required considerable effort to generate. Reflecting
this back to the working party, many of the industrial partners
conceded that they too would struggle to produce the dataset
required to complete this task. DPRO saw this as a benefit of
the process as it highlighted the data deficiency in this area
and enabled them to drive change into the business:
. . . the information we actually asked for, should be easily available . . . the fact it wasn’t, shook people up . . . the information is notionally easily available . . . In one way, that’s the benefit of this process, because it’s identifying what should be available, even if it’s not . . .
Despite the data issue and concern around individual
capability (see later), the overall process was viewed as
relatively simple to implement in a timely manner. An
improvement to the procedure would be to provide a link
between the outputs and the business strategy to better deploy
the results into the company’s action plans:
. . . Did it provoke action? Some, but nowhere near as much as it should have
. . . we didn’t engage enough and didn’t provide the action plans, and didn’t do the strategy piece, which we know now we should have done . . . was it actually any more work really? It’s just we didn’t do it, because we didn’t know . . .
6.2 Participation – who should be involved?
Initial discussions focussed on the capability of those
company individuals charged to lead the process
engagement. The combine application of such a broad
range of tools required a diverse skill set to implement. Whilst
it was thought that senior managers would gain benefit and
insight from the results of the work, there was an
acknowledgement that it may appear a daunting task:
. . . Managers can support in terms of the ideas, but some of them might be sitting there thinking how on earth do I do that? And scared of how do they get there? They might like the end result . . .
Having implemented the process, DPRO managers felt
confident that such an activity could be repeated and they would know which people would be best selected to lead and
carry out activities. In future, to gain greatest benefit, it was suggested that individual’s functions are linked to process
outcomes such that they become stakeholders in driving change as a result of the work done. In addition, a longer
period of active engagement post implementation would have facilitated greater impact:
. . . almost holding hands for a bit longer before you start breaking away . . .
6.3 Project management: how should the process be
organised?
There are several references related to improving project management in earlier sections – from better definition of
roles, to integration with the business strategy process and flowing the results of the study into implementation. It is
believed that this would be improved by addressing the early issues of communication of the aims and objects more broadly
and establishing a team that is incentivised to succeed. The process was seen to be feasible as it had been implemented
and the outcomes were deemed to have been positive and interviewees were confident with the outputs:
. . . The implementation phase of these projects is always difficult and usually needs significant effort and monitoring to ensure progress is made . . .
6.4 Point of entry: how can the process be “sold”?
Upon examination of the way the process was introduced to the company, interviewees highlighted that a broader “sales”
job would have facilitated application. In particular there was some question over whether such an application would appear
“too difficult” and therefore be rejected at the proposal stage:
. . . I said, “OK, well, let’s use us as a case study”. We then had to sell it. Now, we sold it to the Managing Director, but we didn’t really sell it to the whole team . . . it’s hard to sell at the start but was O.K. once on site . . .
. . . the ones who have embraced it . . . they’re going to take it to another level
. . .
7. Conclusion and future work
Due to the nature of academic specialisation the operational basis of competence and lean had become disparate. Clarity
and transparency were forefront in the revision of the definition of core competence by practitioners, which
incorporated much of the theoretical base: core competence is a skill/asset/technology that underpins the growth of the
business and differentiates the business from its current and future competitors. However, the criticism of tautological
logic and interdependence of competences (Lewis, 2003) has not been fully addressed in this work on definition. Through pragmatic integration of theories from
organisational competence and lean domains a methodology
for “lean implementation” consisting of four tasks was developed in collaborative research with industrial experts.
The tasks: a market analysis; making the value stream visible;
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Supply Chain Management: An International Journal
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customer value analysis; and financial modelling; provided an
integrating framework relating resource bundles to the lean
principles. External validation for the methodology was
provided by the market. A longitudinal analysis of market
share growth of the product platform studied proved
significant as it rose from 5 to 50 per cent in the 12 months
following the end of the intervention and subsequently
continued to slowly increase. Internal validation came from
management who stated that the intervention made formed
the core of the strategy for achieving the observed growth.
The impact of other contributing internal factors, particularly
the company’s reason for engaging in the research, a desire to
grow market share, creates ambiguity. We cannot know what
the outcome would have been without our intervention.
Further internal validation will be sought through future
process applications within other firms. The study had formed part of the re-examination of the mid
to end life part of the companies product portfolio and
highlighted the opportunity to continue to gain revenue. It
provided DPRO with a greater understanding of the
customer’s use value for the later life product and helped
them gain market share. It showed how they may exploit their
position as propeller OEM, providing confidence to aircraft
operators of continued support. It is recognised that the case study application had
limitations as DPRO, though part of a global company,
operates as a small business unit and the close scrutiny of their
product was noticed throughout the company; providing any
business such detailed attention over time may positively
influence performance (Scarbrough, 1998). However, our
contact time was brief and the outcomes were realised and
sustained over a long period which brings some veracity to the
process. In isolation none of the tasks identify core competence
though each made contributions to management practice.
Due to the diverse nature of the tasks none are optimised
leaving significant scope for improvement. Planned additional
applications of the tasks in other companies and industries
will develop the method as well as further validate the
findings. However, the main contribution is the combined
application of the four tasks, focussed within industry upon a
single value stream. This provided the basis for lean
implementation that facilitates core competence
understanding. The growth in market share reported
provides some evidence that lean and core competence
theories are closely linked and “lean” companies, consciously
or otherwise, employ strategies that co-ordinate their
competences to deliver customer value and attain
competitive advantage. In addition we contribute to
competence application, previously described as “lack-
lustre” due to the abstract nature of the ideas (Williamson,
1999; Mills et al., 2003b), with our industrial application.
Note
1 The UK LAI New Product Introduction Working Party;
Airbus UK, Auxitrol Technologies, BAE SYSTEMS,
Dowty Propellers, Dowty Propellers Repair and Overhaul,
FR-HiTEMP, Goodrich, Messier-Dowty, Muirhead
Aerospace – an Esterline Company, Rolls Royce, Smiths
Aerospace, Thales, Westland Helicopters, Weston
Aerospace.
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About the authors
Glenn Parry is a Principal Lecturer in Strategy and Operations Management at Bristol Business School, UWE.
His work is focussed on business transformation in three key
industries, aerospace, automotive and construction. He is
currently engaged in the S4T programme that aims to inform
and lead the continuing transformation of the UK economy
towards increasing value generation from complex engineering service provision. Within aerospace he worked
as part of the UK LAI on lean process improvement, strategy,
core competence and currently maintains a longitudinal
programme of study into the challenges of ERP software
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management. He was a Core Team member for the e16M EU Intelligent Logistics for Innovative Product Technologies (ILIPT) automotive project. He was editor for the project book Build to Order; The Road to the 5-day Car which presented how EU automotive companies can produce and deliver a customer bespoke car only five days after receiving an order. As part of The Agile Construction Initiative he led UK construction firms and government clients in research into lean process, knowledge management and company strategy. Prior to joining BBS he worked at the School of Management, University of Bath, where he is a visiting fellow, WMG at the University of Warwick, and LEK Consulting LLP. Glenn Parry is the corresponding author and can be contacted: [email protected] John Mills spent 20 years with Shell International and
Philips Electronics prior to joining the University of Cambridge in 1992. He has wide industrial experience from the simulation of global oil distribution alternatives, reservoir engineering in the oil business to factory, development and business management in consumer electronics, white goods and mobile communications sectors. His research has concentrated on the development of practical processes for the formation and implementation of manufacturing and R&D strategies and the design of coherent performance
measurement systems. His research focuses on strategic competence analysis, development and exploitation. These techniques are currently being applied in the S4T programme on manufacturers who are increasingly providing services as well as manufactured goods to their customers. Current focus is on the complex, Defence support contracts struck between BAE Systems and UK MOD for the support of military aircraft, ships and land equipment. Celine Turner is an experienced Aerospace Engineer with a
PhD in Mechanical Engineering. Celine joined The University of Warwick in 2002, as a Senior Research Fellow, working on the UK Lean Aerospace Initiative, an Aerospace Strategy research programme involving leading UK aerospace companies. This four-year programme bore many successful projects including the release of a scaleable, international training game for teaching lean product development and guidelines for successful application of product development performance measurements. This work resulted in several of the member companies reassessing their current performance measurement system. She is currently researching the application of the lean principles to the Product Development Process as part of a European Seventh Framework Programme. Prior to joining WMG Celine was a Principal Engineer at TRW Aerospace.
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