Putting Lean in context
[NOTE: This post was originally titled Deconstructing Lean. I renamed Putting Lean in context on 3/26/09, because the post got so long I never got around to the deconstruction of the Lean concepts. That’s coming in a future post, so stay tuned! Natalie]
When I first conducted ethnographic research at SAP as part of my job, I was working in the U.S. Sales Operations. That organization’s priority was to establish systems and services to drive sales productivity. Simply measured, sales productivity is the amount of software license revenue per Account Executive (AE, or sales representative). For new hires, time-to-revenue (that is, time to close the first software deal) is also a critical measure. Because I had been working in Sales Operations since it’s inception, I understood these priorities well, and I was able to position the value of the research in a way that would resonate with my management team. That is, I was able to tell a compelling story about how understanding ‘a day in the life’ of an Account Executive would help the Operations management team become more informed about factors affecting sales productivity. I also proposed to look at new hires versus experienced reps to show where new hires struggled with internal processes.
Similarly, as Lean Management has started to emerge at SAP, I’ve been able to show how my vision for User Experience is aligned with it. On the off chance that there are a few social scientists reading my blog, I thought it would be important to make clear that I recognize Lean as an emergent management discourse. What I hope to do in this post is deconstruct the first glimmerings of that discourse emerging at SAP.
Marx and Durkheim laid the theoretical foundation for early 20th century anthropology, though they looked at the increasing industrialization of society in very different ways. At the most basic level, Marx believed that at the fundamental problem was an economic one, and having to do with class relations. Marx and his contemporary Engels believed that increased stratification, unequal distribution of wealth, and the resulting unrest of society (which Durkheim called anomie), came about with the formation of state societies. As the means of production became privately owned, those that controlled those means were distinguished from those that had to work as wage laborers to survive. Those laborers were divorced from means of subsistence and forced to rely on cash to provide themselves and their families with what they needed to survive. Engels believed that as capitalism progressed, these classes would become more polarized. In contrast, Durkheim believed that the root of the problem was a cultural one, and that over time anomie would disappear. He believed that primitive societies were at their root tied together by a collective conscience, linked by mechanical solidarity. As society became increasingly stratified and individuals specialized, organic solidarity (an imposed organization and control by the state) would be required to keep people from deteriorating into a Hobbesian, individualistic attack on one another. Durhkeim also believed that increased specialization would ultimately force people to cooperate in order to get what they needed to survive.
As both anthropology and management studies are social sciences, the theory underlying both often has common elements. In my dissertation I traced these early theoretical trends into contemporary management literature:
There are two social science paradigms that inform our analysis of organizational change. One is rooted in a socio-psychological understanding that can be traced from Durkheim through the Human Relations school of thought and into the Total Quality Management (TQM) practices of the 1980s. The other is rooted primarily in rational, economic understanding, traceable from Marx through scientific management and into the Business Process Re-engineering (BPR) practices of the 1990s.
Barley and Kunda (1992) have argued that the dominance of these paradigms has alternated consistently from one to the other, and that the transition is triggered by the advent of new productive technologies and related changes in the economy. While it is beyond the scope of this research to assess the validity of these claims, it is nonetheless apparent that in the past twenty or so years, these paradigms have become increasingly interwoven, in the search for a higher order of corporate predictability and employee control. Proponents of the latest management fads have sought to distinguish one fad from the other, but the reality is that formalized accounting practices, computing technologies, and management consultant methodologies like TQM and BPR share the common objectives of streamlining work to increase productivity and reduce costs. (Hanson 2004, p.204)
If you’ve been reading this blog, you may know that SAP is a software company which helps to automate all aspects of a company’s business operations. SAP was founded by five German businessmen who left IBM in the 1970s. While IBM was still deeply focused on hardware, SAP’s founders believed that the packaged software business was a new growth area for the industry. Members of that startup team wrote the first SAP module – Financials – and they were quickly on their way, later developing applications for everything from Manufacturing to Supply Chain Management, and later to the softer side of corporations, including Human Resources. While SAP was the first, it’s not surprising that competitors eventually followed, and the software came to be known in the industry as Enterprise Resource Planning, or ERP. ERP is deeply rooted in rationalist thinking. Not unlike the spirit that drove Taylor and Ford, ERP software seeks to standardize and automate work tasks to find efficiencies and reduce costs. This has been a ripe area for study by social scientists, who have shown over and over again that work practice is much more complex than what can be accounted for in a system.
Nonetheless, what’s critical for this post is that I work at the company that started this industry. It is therefore not at all surprising that the engineering, it-can-be-automated, technology-can-do-that mentality pervades life at SAP, especially as it regards our own internal operations.
My dissertation research focused on the emergence of market discourse at SAP, and specifically looked at how internal corporate practices have evolved to increase employee focus on both SAP customers and the market. Since Oracle’s acquisition of JD Edwards and PeopleSoft several years ago, there has been increased comparison between and scrutiny of revenues and profitability margins of SAP, Oracle, and Microsoft. SAP continues to become more sophisticated in how it responds (both externally and internally) to the market, and one of the means for doing this has been the growth of Operations as a new form of expertise inside of SAP. In the past few years, I’ve moved from Sales Operations to Business Operations, where the priorities are broader than sales enablement. Business Operations still focuses on both top line (sales enablement), but it also focuses heavily on the bottom line through finding or creating operational efficiencies.
In the past few months, the executive team has been more and more communicative not just about license revenue and profits, but also about operating margin. We’ve learned about or current margin, that of Business Objects (SAP’s most recent acquisition), and we know both Oracle’s and Microsoft’s margins and how we compare. Combined with the global economic situation today and SAP’s growing focus on talent management these statements form a backdrop for the introduction of Lean Management at SAP.
A deeply rational, engineering culture is at the heart of ERP solutions and of SAP, but Lean also has many of the elements that SAP very much wants to see as part of the corporate culture in the future – for example a focus on employee empowerment and innovation at all levels of the company. SAP has a unique set of challenges, not only being in a services industry, but also in software, where the introduction of Lean has never really been attempted. A truly lean enterprise (like Porsche and Toyota, for example) don’t let people go – any efficiencies derived from innovations are reinvested. While the recent planned layoffs don’t have to do with efficiencies uncovered through Lean Management, SAP does not necessarily espouse the philosophy of re-investing all the savings that are realized, either, so it remains to be seen whether we can truly embrace this new way of thinking and working to help SAP continue to mature and evolve as a corporation.