Enterprise Design for Dynamic Complexity: Enterprise Product Strategy

Transcription

1 Enterprise Design for Dynamic Complexity: Enterprise Product Strategy Ted Piepenbrock October 2003

2 Research Partnership Structure Industry Sponsor Intermediary Research Vehicles Academic Partners Massachusetts Institute of Technology 2

3 MIT s Research on Lean 3-Dimensional Concurrent Engineering Enterprise Product Production System Supply Chain Massachusetts Institute of Technology 3

4 World Class Lean Enterprises Manufacturing Example: Service Example: Toyota Chrysler Ford GM American Delta All Others Southwest Market Capitalization Market Capitalization 2002 Massachusetts Institute of Technology 4

5 Corporate Eating Disorders (data from The Machine That Changed the World) 20 Toyota Auto Production (millions) US Production Japanese Production Chrysler Ford GM Market Capitalization Lean Anorexic Lean Bulimic Lean Year Massachusetts Institute of Technology 5

6 The World s Worst Industry There is no worse business of size that I can think of than the airline business. Since it began in 1903, the industry has had an overall net loss If there was a capitalist on Kitty Hawk, he would have shot the plane down. Warren Buffet World s Most Successful Investor Massachusetts Institute of Technology 6

7 The World s Worst Industry Total Airline Profits ( ) $20 b $15 b $10 b Higher, Faster, Farther Network Carriers Hub & Spoke Networks Wide Body Planes American Delta All Others Southwest Market Capitalization 2002 $5 b $0 b -$5 b -$10 b -$15 b Better, Faster, Cheaper Low-Fare Carriers Point-to-Point Networks Narrow Body Planes -$20 b Massachusetts Institute of Technology 7

8 Commercial Aircraft % Market Share in Commercial Airplane Deliveries 100% US B.F.C. Enterprise 50% EU H.F.F. Corporation Time Massachusetts Institute of Technology 8

9 Agenda Product Development & the Lean Heavyweights Enterprise Design for Dynamic Complexity Technology & Industry Roadmapping Lean Revisited Massachusetts Institute of Technology 9

10 Product Development & the Lean Heavyweights Massachusetts Institute of Technology 10

11 Aerospace Industrial Evolution Higher, Faster, Farther (Integral Product & Supply Chain Architecture) Dominant Design Better, Faster, Cheaper (Modular Product & Supply Chain Architecture) Product Innovation Process Innovation Boeing Airbus Number of Firms Time Fluid Phase ( ) Transitional Phase ( ) Specific Phase ( ) Massachusetts Institute of Technology 11

12 Organizational Re-Architecture Marketing Define (Engineering) Produce (Manufacturing & Supplier Mgmt.) Programs Higher, Faster, Farther Vertical Functional Focus Product Innovation Fluid Phase ( ) Dominant Design Number of Firms Better, Faster, Cheaper Products Horizontal Customer Focus Process Innovation Transitional Phase ( ) Specific Phase ( ) Time Customers Massachusetts Institute of Technology 12

13 The Lean Heavyweight Higher, Faster, Farther Marketing Product Development Manufacturing Lightweight Project Manager Better, Faster,Cheaper Customer Demands Marketing Product Development Manufacturing Customer Deliveries External Integration (Strong Concept Champion) Internal Integration (Strong Project Coordinator) Heavyweight Project Manager ( Shusa ) Massachusetts Institute of Technology 13

14 Enterprise Development is Large-Scale Product Development Massachusetts Institute of Technology 14

15 Mastery of Dynamic Complexity Low Human Complexity High Low Dynamic Complexity Product Design Tame Problems Platform Design Messy Problems Corporation Design Negotiated Problems Wicked Problems High Enterprise Design Massachusetts Institute of Technology 15

16 Enterprise Dynamics Massachusetts Institute of Technology 16

17 Airline Profitability Dynamics Deregulation Airline Profitability $25b $20b $15b $10b $5b $0b -$5b -$10b -$15b -$20b Year Massachusetts Institute of Technology 17

18 Airline Profitability Dynamics Total Airline Profits ( ) $20 b 10-year Period of Oscillation (like Juglar waves of machine-investment cycles) $15 b $10 b $5 b $0 b Deregulation A380 Delivery Begin Placing New Orders 7E7 Delivery Stop Placing New Orders -$5 b -$10 b -$15 b -$20 b Massachusetts Institute of Technology 18

19 Closing the Business Case NPV > 15 years $ million 12,000 10,000 8,000 6,000 4,000 2, ,000-4,000-6,000-8, Year Base Case Best Case Scenario Worst Case Scenario $11.6 billion Massachusetts Institute of Technology 19

20 Lean Segmentation of Market (Notional) Total Airline Profits ( ) $20 b $15 b $10 b Higher, Faster, Farther Network Carriers Hub & Spoke Networks Wide Body Planes Network Strategy: 10 year, $10 b batched launches $5 b $0 b -$5 b -$10 b Better, Faster, Cheaper Low-Fare Carriers Point-to-Point Networks Narrow Body Planes Low Fare Strategy: 3 year, $3 b continuous flow launches -$15 b -$20 b Massachusetts Institute of Technology 20

21 Enterprise Complexity Massachusetts Institute of Technology 21

22 Commercial Airplane Enterprise Transportation Network $200 billion in Sales (spread over 20 years) Reliable Transport Network (Strategic Economic Engine) Airplanes Airlines (e.g. JAL & ANA) $ Tax Breaks, Bailouts Government (e.g. Japanese) Sales Revenues $! NPV $ Taxes, Votes Boeing Offset Agreements $ Suppliers (e.g. Mitsubishi, Kawasaki, Fuji) PP&E + R&D$ $10 billion in N.R. Costs (investment risk) Risk-Sharing Skilled Work-Placement Components & Sub-Assemblies Massachusetts Institute of Technology 22

23 Enterprise Boundaries Gov t Unions BCA Suppliers Gov t Airbus Unions Suppliers World-Class Aerospace Company World-Class Aerospace Enterprise Massachusetts Institute of Technology 23

24 Strategic Architecture The Realm of Public Goods and Protected Commodities Government / Regulatory Policy Dynamics Airbus Business Cycle Dynamics Industry Structure Dynamics Boeing Corporate Strategy Dynamics The Realm of Private Goods and Differentiated Products Product/ Technology Dynamics Massachusetts Institute of Technology 24

25 Technology & Industry Roadmapping Massachusetts Institute of Technology 25

26 Industrial Dynamics Government / Regulatory Policy Dynamics Business Cycle Dynamics Industry Structure Dynamics Corporate Strategy Dynamics Product / Technology Dynamics Massachusetts Institute of Technology 26

27 Disruptive & Sustaining Technologies Performance Time Massachusetts Institute of Technology 27 Performance Trajectory that Customers Demand or can Absorb Performance Trajectory that Customers Demand or can Absorb Performance Trajectory that Customers Demand or can Absorb Upper End of the Market (Demanding, Profitable Customers) Middle of the Market (Today s Customers) Lower End of the Market (Undemanding, Unprofitable Customers) Performance Trajectory of Sustaining Technologies Performance Trajectory of Disruptive Technologies Under-served Middle of the Market Companies with Integral architectures beat competitors with Functionality Companies with Modular architectures beat competitors with Speed & Customization Over-served Middle of the Market

28 Products for Unprofitable Customers Targeting Profitable Customers Targeting Unprofitable Customers Massachusetts Institute of Technology 28

29 The Disruptor and the Disrupted Massachusetts Institute of Technology 29

30 The Evolution of Disruption 500 seat Wide Body Commercial Jet 100 seat Narrow Body Commercial Jet 50 seat Regional Jet 5 seat Eclipse Air Taxi 1 seat Aeromobile Massachusetts Institute of Technology 30

31 The Evolution of Disruption Growth 40 Fractional 37 Aircraft Ownership Both are normalized to 1.0 Air Travel Growth Time Massachusetts Institute of Technology 31

32 Lean Revisited Massachusetts Institute of Technology 32

33 Capturing Value Integrated Lean Enterprise: In mature/saturated markets, with reduced/variable customer in-flows Construct a right-sized, integrated, flexible enterprise to capture value so that Waste is eliminated and flexibility is maximized. Is there something you don t know about your enterprise? Traditional Mass Enterprise: In a rapidly growing homogenous market, with large customer in-flows Construct a large, expensive, inflexible monument to capture value, but Poor integration creates holes through which value leaks out (waste!) Massachusetts Institute of Technology 33

34 Architecture of a Lean Enterprise 3. Control Variability of Input (Mura) 1 3 Is there something you don t know about your enterprise? 1. Remove Waste (Muda) 2 2. Make Enterprise Flexible (Muri) Massachusetts Institute of Technology 34