Lean Enterprise

Fundamentals

The early studies of lean organizations were carried out in manufacturing settings, typified by Toyota, where metrics such as inventory, work in process, and cost could be measured easily. Lean organizations were characterized as having (a) a pull-based system that signals the need for each production step rather than pushing an inventory of work-in-process, (b) standard work flow that promotes efficiency and rapid detection of deviations, (c) a learning system that supports continuous improvement, (d) a human resources system that empowers employees, and (e) a management system that offers support for the process. Over time, lean principles were extended to other aspects of the organization, such as product development, engineering, sales, and billing, and to service industries such as airlines and hospitals. However, the overwhelming majority of lean interventions have focused on the adoption of selected practices rather than as a complete system of change.

In contrast, a lean enterprise can be defined as an integrated entity that efficiently and effectively creates value for its multiple stakeholders by employing lean principles and practices. This definition offers a holistic and broad view that extends beyond an individual department, production line, or company. As a complex, integrated, and interdependent system of people, processes, and technology that creates value as defined by its stakeholders, a lean enterprise develops a value proposition that satisfies multiple stakeholders from various units of the company but also shareholders, suppliers, partners, and customers. For example, a hospital may apply traditional lean practices to deal with an overcrowded emergency room but end up creating more problems for other units in the hospital. An enterprise approach would examine the interdependencies between the emergency department, operating [Page 439]room, pharmacy, suppliers, human resource practices, insurance companies, primary care organizations, and other units within and outside the hospital (including patient expectations and behaviors) that are part of the way value is created for all stakeholders. Even Toyota can be considered part of the Japanese societal ecosystem: The lack of natural resources and the ability to exploit the unique Japanese conception of work were critical catalysts in development of the Toyota production system.

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