LeanSigma in the Data Center
Source: Business Excellence – May 1, 2007
By: Business Excellence
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Tools that have proven themselves in manufacturing can be harnessed to improve the operation of IT departments. Mike Bawn and Jeff Watzka explain how LeanSigma can create excellence through a new approach to IT management.
Information technology organizations are stretched thin these days. Whether they are stand-alone outsource providers or organizationally embedded departments, all IT organizations are being tasked to do more with less, improve quality and increase operating margins.
Traditionally, the approach to solving these issues has been adding resources—new and more powerful technology, more staff or additional controls. While this was never desirable, it was inevitable as IT leaders typically fought to keep pace with the rate of change in technology and customer expectations. Today, however, managing network operations is a mature business and is quickly becoming a commodity service offering. With price as the leading value proposition causing shrinking margins, the pressure for a new approach is stronger than ever. Many CIOs have also realized that the capital spending approach in the past has not delivered the levels of ROI and sustainable performance demanded by today’s business environment.
When it comes to finding ways to increase productivity, lower costs and improve reliability in a data center environment, there are a litany of approaches to choose from and many more that are still evolving. Most organizations, however, are discovering that these approaches are not delivering the type of long-term sustainability while also providing agility to meet the changing demands of IT operations. Many are finding the same circumstances that existed for manufacturing companies in the 1970s. Then and now, one dimensional, silver-bullet solutions are a myth; competition remains fierce and off-shoring continues to accelerate.
Just as a few manufacturers did in the 1980s, a few enlightened IT leaders are beginning to realize the potential of adopting tools and methodologies from outside to create a sustainable competitive advantage. LeanSigma, the combination of lean manufacturing and six sigma, is just in the early stages of being adopted to improve IT center operations. By leveraging the combination of today’s most powerful improvement tools to ultimately reduce the cost of doing business, this new approach to IT leadership is delivering typically unheard of gains in productivity, quality, reliability and responsiveness as well as setting the stage for the future.
In the past few years, LeanSigma has begun rapidly making a migration into the service world. Financial services companies, health care, government and other organizations have initiated programs to leverage the lessons from manufacturing to deliver rapid and sustainable improvement. Unfortunately this same migration has been slow to take hold in the IT world.
Service operations leaders often view IT as a “black box” so that, as the operations improvement team is full steam ahead in redesigning their processes with LeanSigma, they seldom bring IT resources into the efforts until a solution has been designed. This is unfortunate because it does not incorporate the creativity of the entire organization. While functional improvement has value, the real improvement potential lies in the ability to view the delivery of value from the client perspective, which ultimately includes IT systems and processes.
Typically, the most challenging step for an organization to improve is the “how”. Most leaders understand the need for improvement, but struggle with choosing an approach, where to start, when to start, etc. The following example traces the journey of a single data center in a Fortune 500 outsourcing firm as they begin to leverage LeanSigma to improve their performance.
The first step in every LeanSigma improvement effort is to understand the current state and measure it from a client’s perspective through a hands-on assessment. The goal of the assessment is to understand the business from end-to-end, request to payment. An assessment typically includes mapping the end-to-end process (or value stream) as well as walking the floor and capturing the current state at the point of service delivery. In many cases simply having a steady-state operation is the “service offering.” The “boxes”, representing how they communicate with each other, are the various business processes that take place around them to get to steady-state, stay at steady-state and recover from incidents that take them away from steady-state. These are the elements of a typical data center value stream. It is not uncommon to see data centers with many value streams all operating at the same time and, in some cases, sharing resources.
In this case the team identified over a dozen value streams in a single business unit. And within one of those value streams the team identified several million dollars in potential savings and improvement opportunities through the application of LeanSigma.
Once the current state is clearly understood the next step is to identify the appropriate sequence of actions, tools to be used and metrics to track for transformation of the value stream to an improved state. Typically this plan includes a series of lean and six sigma problem solving activities focused on a pilot area or value stream. The pilot should be visible to the organization and clearly important to the business unit. Choosing a “safe” area for the pilot with limited risk and overall impact simply provides an opportunity for the organization to question the commitment for change. The goal is to get everyone in the organization to “buy in” to the idea that rapid and sustainable change is realistic and achievable.
In this case, the team chose a pilot area and conducted a half-day “vision event” where they created a future state map or vision for the future of the pilot value stream. They identified, from the current state map, where opportunities for improvement lay and their potential benefit to their clients. They prioritized their actions by impact versus effort and then created a six-month calendar of events to execute the activities. The final element was to create a “back of the envelope” cost-benefit analysis to communicate the opportunity to the organization.
As would be expected some of the greatest opportunities came from business processes which support the steady state operations. In this particular value stream these included asset receiving, server stand-up, change management, and server decommissioning. Each opportunity was scheduled as a cross-functional kaizen event along with some pre-event data collection and post event sustainment activities. The events were designed to leverage the analytical elements and capabilities of six sigma and the “applied common sense” of lean to accelerate the improvement efforts and improve sustainment. Some of the results from these efforts include:
- Change management. In just two days the team delivered a 57 percent reduction in non-value added activities and a 55 percent reduction in handoffs which led to a significant overall reduction in the cycle time for the change management process.
- Asset receiving. The kaizen team achieved a 55 percent reduction in total in-house receiving transportation time and a 59 percent reduction in total travel distance for items moved during asset receiving. Between August 2005 and August 2006 the site collected over $512,000 of excess inventory which was eliminated by the end of the five-day kaizen event.
- Server standup kaizen (BQ-RFU). The team reduced cycle time by 15 percent on average for all projects leading to a conservative benefit of $400,000 annually. The reduction was achieved by eliminating 29 percent of the processing delays and over 50 percent of the process handoffs.
- Server Decommissioning. Another kaizen team identified $1.6 million in incurred and unbilled costs due to timing of billing stoppage combined with long decommission lead times. They also achieved a 30 percent reduction in end-to-end cycle time resulting in additional labor savings, a 66 percent reduction in lead time, an 81 percent reduction in failure points and a 71 percent reduction in handoffs.
- Business Qualification. This kaizen team eliminated 6,000 person work hours from the downstream process.
While these types of results have been typical in manufacturing organizations leveraging lean and six sigma, it was not until the team saw the results themselves that they believed the application of these tools could deliver this type of results for an IT organization.
This data center continues to leverage this approach for improvement and has begun to work in another value stream while continuing the improvement efforts in the pilot value stream. At present the team believes there is ample opportunity to improve operating costs by five percent to ten percent annually.
Certainly the organization described above is realizing tremendous results by leveraging tools from industry. But this has not been without challenges for the site culture and leadership. Like most IT organizations, they are not inherently “process thinkers” but system and technology thinkers. They tend to see things from a project and functional perspective and not from end-to-end as the client.
To truly capture the benefits of LeanSigma, an organization’s leadership must themselves begin to view the opportunities for improvement from the vantage point of the client and then drive the population to do the same. This not only requires a shift in thinking but may also require a new organizational structure or even redesigned performance management and incentive compensation systems to align the actions of the organizations to the client’s perspective.
In addition to organizational changes leadership often needs to support and highlight the early successes of radical restructuring. Every body in motion continues along the same path unless acted upon by an outside force. That outside force must be leadership providing “air cover” for the early adopters willing to step outside the status quo and try new approaches. Leadership must communicate the need for change, become fully engaged and supportive of the new efforts and align accountability. Simply providing lip service to the new way will lead to certain failure.
There is ample opportunity to improve IT and data center performance and create a competitive advantage. One senior IT executive described their data center performance as “the best of a sorry lot” when giving the reason for adopting a different approach to creating operational excellence. The challenge lies in breaking free the embedded culture from viewing their business from a technology, project and functional perspective. Creating an end-to-end, customer value perspective creates its own unique challenges, but also offers exciting potential for the future of data center operations.
LeanSigma provides the tools and methodologies to capture the end-to-end perspective. While engaging the workforce and increasing the speed; ultimately, the data center acquires the benefits of transformation. Early evidence suggests that organizations which adopt these tools from industry are able to realize the same magnitude of improvement that has been achieved for decades in manufacturing. Those organizations who embrace the approach early will undoubtedly create sustainable competitive advantages just as Toyota, GE, Honeywell and other organizations have in manufacturing.
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Mike Bawn and Jeff Watzka are management consultants with Guidon Performance Solutions
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