What IT Can Learn From Manufacturing

 Background

A long time ago, or at least what seems like a long time ago, in the U.S., Manufacturing was King. For companies whose primary product was manufactured, manufacturing, along with finance, dominated discussions.  There was little concern for quality, cost, or customer service.  The customers would get what they got (and like it), and any additional costs incurred would simply be passed along in the price of the product.  Life was good!

Slowly, however, things started to change.  As other countries began to emerge from the post-WW II economies, they began to develop their own infrastructure, and were actively seeking techniques to improve quality and productivity.

Meanwhile, back in the U.S., it was business as usual, and many felt these pesky little countries were no match for the mighty U.S. industrial base.  Quality experts like Deming and Juran, seeing the error in this line of thinking, pleaded their ideas to senior management before it was too late.  They were cast aside.

So they went to Japan, whose leaders were hungry for ways to improve quality and increase productivity.  They were able to implement these techniques through diligent work with much success.  Eventually, they began to take a foothold in the U.S. and their products became very successful.

Savvy U.S. manufacturers looked at what was going on and began to change their thinking and their organizations.  The traditional organization’s operations, with its command and control structure, siloed departments, mass-production mentality with its associated lack of flexibility, had to change.  Some organizations made the transformation while others did not, and are no longer in business.

Because of the “sudden” insurgence of foreign competition (not really, but few were paying attention to notice), managers took drastic steps to remain competitive – like outsourcing either entire manufacturing operations, or parts of operations.  Sometimes this worked, sometimes due to supply chain and other issues, it was less than successful. 

Next, and for those whose products and structure precluded them from outsourcing, came implementation of Lean manufacturing / Toyota Production System (TPS) concepts, along with several reorganizing by product or service.  This transformation continues to this day.

IT Comparison

So, what does this have to do with IT?  Well, when you look at IT in enterprise organizations, a lot.

One of many ways to look at it is to ask, “In an enterprise, what is the purpose of IT?  What does IT really do?”  In its simplest form, IT processes data to become usable information so it can be utilized in decisions to help the business.  In this way, IT is much like a factory that processes data and turns it into information.

Of course, the way it processes data varies greatly.  Sometimes it functions simply as a conduit, as in email.  A supplier (user) types a note on an application and presses SEND.  At that point, IT takes the email and processes it to a customer (also a user) who opens the email and makes a business decision based on the information it contained (act on it, do nothing, delete, etc.).  Sometimes IT is a storage facility that stores and inventories products (files) for later use by customers.  A supplier (user) sends a product (file) to IT for storage (server).  When a customer (user) needs the file, they order it from IT (click to open), and IT delivers the product to the customer.  Other times, IT functions as a true manufacturer and creates product.  A supplier has a need to solve a business problem and there is an IT product (application) that can help.  The supplier presents the build specs and IT produces the application either by building it with its own resources (development) or by outsourcing production to a specialist (purchase software).  IT then delivers it to the customer for use, and provides customer service (help desk) as well.

Now, there are a lot of things going on behind the scenes in the IT Factory to deliver these products and services, and the way IT Factories go about delivering these vary by organization.  As was the case in manufacturing during the mass-production hey-days, where factories were aligned by departments (Stamping, Machining, Finishing, Assembly, Shipping, etc.), many IT Factories are aligned by function (Hardware, Software, Network, Storage, Server, Support, etc.).  In the traditional IT Factory, every application has its own server, storage, and support group all within and aligned by each of the functional areas.  Changes and new requests must pass through each of the functional areas before moving to the next, with the occasional concurrent processes.  Since the organization was probably already structured in a hierarchical way, it only made sense for IT to follow this structure.

But things are changing, and changing quickly.  If the rate of change in manufacturing was linear, in IT it is exponential (see figure 1).

Mfg IT Change Rate

However, in a slight difference from manufacturing, the change IT enterprises are experiencing is not necessarily driven by outside competition, but by the technology itself.

Applications have gone from being developed in-house (highly specialized ones still will need this), to being purchased off the shelf and installed on the companies servers, to being available as a service (SaaS).  Storage and Networks (along with Applications) that used to require separate physical machines have gone from 1:1 to 1:many with the implementation of virtualization technologies and the advent of the cloud.  Mini-factories (desktops) that are supported by maintenance personnel (desktop support) who had to be dispatched remotely to solve customer (user) problems or make changes can now be fixed remotely with desktop virtualization technologies.

In essence, IT as we have known it in the enterprise is slowly becoming obsolete unless it develops new approaches and skills to support the business.  It’s not a question of whether the current work that is being performed will still be needed, it’s a matter of scope and scale.  There will still be a need for networking, hardware, storage, etc. personnel, just not as many (in the enterprise).

This leaves two choices for IT leaders.  They can either support these new technologies, figuring out how to best utilize them in their organization, or resist them and continue to maintain the status quo.  The problem with resisting them is they will eventually catch you and your organization.

IT Reaction

IT needs to use these transformative technologies to fundamentally change the way it does business, much in the same way that manufacturing embraces Lean and cellular manufacturing concepts and techniques.  IT needs to transform from a provider of technology to a provider of service that utilizes technology.  It needs to become the de facto expert at applying technology to improve the business and business processes, ensuring all the while its actions are aligned with the overall corporate strategy.

Time is of the essence.  Organizations need to review the technology available and determine not only how that technology will enable them to improve operating costs, but also how it will help them improve the service they provide to the business.  The opportunity is ripe for IT to take a true leadership role in helping change and improve the business.  History has shown us where the consequences for inaction lead.

 Mfg IT Then and Now

 

Let me know your thoughts!

Glenn Whitfield

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4 Responses to What IT Can Learn From Manufacturing

  1. Good article! I agree that IT is changing and advancing very rapidly. It is also becoming more and more crucial to all businesses. It will be interesting to see how these IT services further evolve over the next few years.

  2. […] more here: What IT Can Learn From Manufacturing « IT Business Alignment (IT2B) Share and […]

  3. Andrew Meyer says:

    Great analogy to US Mfg and IT. What’s interesting is that if you look at the automotive sector, there were alternatives to American Autos that had been available for years, but no one bought them. Then there was a change in the environment, the Oil Embargo in ’74, and suddenly fuel efficient, long lasting cars got a beachhead in the US markets that they leveraged to open the market.

    For many large firms and for many people, they can continue doing what they’ve always done until something in the environment changes.

    Are you putting out a call for organizations to understand this or for people to understand it?

    Andy

  4. Andy,

    The call is for organizations, and the people leading those organizations to understand what is going on around them and the potential consequences. Too often people inside large organizations get so caught up in the day-to-day they lose sight of the big picture, and how the changes that are taking place will impact them. When they eventually do see the change, often times it is too late.

    Thanks for the comments!!

    Glenn

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