{"id":37051,"date":"2024-05-28T09:39:05","date_gmt":"2024-05-28T13:39:05","guid":{"rendered":"https:\/\/www.lean.org\/?p=37051"},"modified":"2024-05-28T09:39:08","modified_gmt":"2024-05-28T13:39:08","slug":"how-an-established-company-disrupted-an-industry","status":"publish","type":"post","link":"https:\/\/www.lean.org\/the-lean-post\/articles\/how-an-established-company-disrupted-an-industry\/","title":{"rendered":"How an Established Company Disrupted an Industry"},"content":{"rendered":"\n

It\u2019s one thing to revolutionize an industry as a startup, a small, nimble group of big thinkers identifying and attacking a weak link in an industry blinded by decades of stable, seemingly durable growth. It\u2019s quite another to do so when you\u2019re a large, established market leader, comfortable in your success, and invested in the business model and internal systems that fueled it. In the business canon, the former tends to be the victor.<\/p>\n\n\n\n

Then too, adopting lean thinking and practice isn\u2019t the first solution to which business leaders turn to disrupt and capture the market. Unfortunately, many still view lean management as a slow, incremental method focused on small improvements in production rather than on achieving significant competitive advantages or transformational, disruptive changes.<\/p>\n\n\n\n

But one company in the offshore and subsea oil and gas services industry, TechnipFMC (formerly FMC Technologies), turned the tables on these tropes. Primed for change due to market instability, the company swung into action. This response was triggered by the 2014 OPEC gas war, which pushed the benchmark price per barrel of oil from over $100 to less than $60, making business as usual no longer an option.<\/p>\n\n\n\n

So, the company invested in lean thinking, specifically in Lean Product and Process Development (LPPD), embarking on a transformational journey. The effort would retool TechnipFMC\u2019s business strategy, reinvent its new product development process, and, ultimately, revolutionize the subsea oil and gas industry.<\/p>\n\n\n\n

The initial results, coming after about 16 months, featured a completely redesigned product platform, dubbed Subsea 2.0, made of six core products that deliver the same or better functionality as the previous system, with up to a 50% reduction in size, weight, and part count.<\/p>\n\n\n\n

More significantly, the redesign standardized the products at the component level to enable the company\u2019s shift from an engineer-to-order (ETO) to a configure-to-order (CTO) business model, the first of its kind in the subsea and offshore oil and gas industry. For TechnipFMC, the CTO approach reduced manual activities during the production process by 70% to 90% and, in turn, slashed hardware delivery time to clients.<\/p>\n\n\n\n

When the company presented the breakthrough product platform and the new business strategy analysts upgraded the company stock from \u201chold\u201d to \u201cbuy,\u201d and its stock price immediately jumped by 3%.<\/p>\n\n\n\n

This story reveals how TechnipFMC, a 20,000-employee, $10-billion-dollar company, applied and continues to leverage LPPD principles to forge a competitive advantage and reenergize the industry segment\u2019s future \u2014 and the lessons they\u2019ve learned along the way.<\/p>\n\n\n

\n
\"\"<\/a><\/figure><\/div>\n\n\n
<\/div>\n\n\n\n

The Challenge<\/strong><\/h4>\n\n\n\n

TechnipFMC\u2019s formal lean journey began as many do, catalyzed by \u201cthe burning platform.\u201d Instability in the oil industry had the company and its competitors scrambling to find ways to accelerate time to market, reduce variability and costs, and ensure quality. Most companies serving the subsea industry agreed that product standardization would be at least part of the solution \u2014 that shifting from a project-based model (engineer-to-order) to a product- based model (configure-to-order), was necessary. Indeed, many had tried and failed.<\/p>\n\n\n\n

Their path to transforming their product development process, thereby creating a new industry paradigm was paved in three phases:<\/p>\n\n\n\n

    \n
  • Create a pilot project to align the organization and see the results.<\/li>\n\n\n\n
  • Spread the learning by influencing parallel value streams.<\/li>\n\n\n\n
  • Transform the enterprise systematically.<\/li>\n<\/ul>\n\n\n\n
    <\/div>\n\n\n\n

    Go Deep: Unlocking Success with Hands-on LPPD on a Key Project<\/strong><\/h3>\n\n\n\n
    <\/div>\n\n\n\n

    Setting the Vision<\/h4>\n\n\n\n

    One of the critical early moves leadership made was naming a chief product developer (CPD) for the Subsea 2.0 program, vesting him with responsibility for defining and overseeing all aspects of development. Subsequently, the appointed CPD took a further step by selecting individual Chief Product Developers for each specific product within the Subsea 2.0 suite, ensuring focused and expert oversight for each component of the project.<\/p>\n\n\n\n

    The CPD\u2019s first responsibility was to write a concept paper. This essential document captures the voice of the customer and aligns it with business objectives. In turn, it unifies the organization around what it must deliver and serves as a contract committing the development team to deliver the performance precisely as described. With project goals enumerated in writing for all stakeholders, the document also protects against scope creep, requirement shortfalls, or corporate redirection \u2014 all issues that traditional development teams face.<\/p>\n\n\n\n

    In the concept paper, the Subsea 2.0 CPD, working with the team leaders, set out a vision for the new platform, communicating the broad principles and specific goals that the new system should achieve, with a detailed explanation of why achieving the goals was vital to the company\u2019s future.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Synchronizing the Work<\/strong><\/h4>\n\n\n\n

    Early on the teams set up an obeya. The term \u201cobeya,\u201d translated from Japanese, means \u201cbig room.\u201d It is how teams make a project\u2019s work visible and enable the collaboration needed to resolve issues as they arise.<\/p>\n\n\n\n

    Within the obeya, the teams created and posted the master schedule, which visually depicts the timeline and deadlines for all the subcomponents. Reviewing the schedule helped the team determine the work they needed to do and the order in which they needed to do it.<\/p>\n\n\n\n

    To set up its obeya, the TechnipFMC team adopted an idea from a gemba visit to an LPPD Learning Group Member MillerKnoll. During the visit, team members saw an obeya where everyone worked full-time rather than in a conference room, the more traditional obeya setup. Having the teams co-located, they reasoned, would allow more efficient collaboration among the component teams \u2014 that information flow would be faster and problems identified more quickly with everyone co-located in the obeya.<\/p>\n\n\n\n

    Previously, the various departments worked in separate office areas \u2014 manifold group, connector group, the drafters, etc<\/em>. The shift is like that which traditional manufacturers must make to create flow in production, moving production departments from separate areas and co-locating them in one location. Notably, it also illustrated the relationships between various design elements on which teams must collaborate more closely.<\/p>\n\n\n\n

    At first, the TechnipFMC team struggled to set up their obeya, debating what and how much information to track and the meeting cadence. However, they worked through the issues and eventually realized that learning how to set up an obeya is mastered the way every lean practice is: by doing.<\/p>\n\n\n\n

    The team also learned that obeya is more about establishing new behaviors and a culture focused on collaborating and solving problems, according to LEI LPPD Chief Engineer and Senior Coach John Drogosz. \u201cTo truly get the value, the obeya needs to become the andon system for the project team where they can make issues (technical and business) visible to everyone and get help from the right team members (and management if needed) to resolve them quickly so the project can keep moving forward,\u201d he says. \u201cWhen people meet frequently in the obeya, it helps them all stay on the same page and see the bigger picture of how their work fits in and how they can help each other.\u201d<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Applying other LPPD Practices<\/strong><\/h4>\n\n\n\n

    Among the LPPD practices the team adopted early on, during their study (concept) phase, were set-based concurrent engineering, trade-off curves, and rapid prototyping. These practices call for developing multiple design options for product components simultaneously, closing knowledge gaps, and de-selecting weaker alternatives to converge on the best system solution based on test results. The TechnipFMC team chose to adopt these practices first because they could easily see how they would help the team make better design decisions that reduce the risk of rework in the later development stages.<\/p>\n\n\n\n

    In contrast, traditional design processes, such as iterative and waterfall (and sometimes agile), drive teams to decide on a single design solution early before moving to the next stage with limited knowledge, increasing the risk of failure later in the process \u2014 and rework.<\/p>\n\n\n\n

    With set-based engineering, developers work on several concepts that meet specified targets instead of choosing only the one that initially seems to be the best, so they continue to learn and optimize the design throughout the development process.<\/p>\n\n\n\n

    For example, the compact connector team applied these approaches to address a complex multi-dimensional problem. First, using set-based engineering, it developed several concepts. Then, to help gain knowledge quickly, they created simple mock-ups of their design options to discuss with the cross-functional team. These early mock- ups helped enroll and align the team to understand more completely the complexity and functionality of each option and eliminate weaker alternatives sooner without having to do detailed design work on every concept.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Go Broad: Spreading the Learning by Influencing Parallel Value Streams<\/strong><\/h3>\n\n\n\n

    Once the teams working on the configure-to-order project had learned several LPPD methods, they worked to share their learning with others who would be completing the engineering on the other Subsea 2.0 products. Also, they worked to fully involve all functions in the product\u2019s value stream, including manufacturing, supply chain, logistics, delivery, administration, and the like.<\/p>\n\n\n\n

    LEI\u2019s LPPD coaches call this idea of including all the functions early in a products design \u201cdesigning the value stream,\u201d a fundamental principle of LPPD thinking. LEI Senior Advisor on LPPD, Jim Morgan explains: \u201cIn LPPD, we focus on creating a value stream, which means intentionally designing each value-creating step required to deliver value to your customer steps like manufacturing, logistics, and serviceability, which are all critical considerations when you think about the total value proposition.\u201d<\/p>\n\n\n\n

    While the designers focused on developing the product, TechnipFMC\u2019s global manufacturing director and her team concentrated on designing the future value stream to deliver the product. Their focus was on the business operating model and the organizational changes needed to support the CTO model.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Applying LPPD Practices to the Value Stream<\/strong><\/h4>\n\n\n\n

    The value-stream design team used many LPPD practices to redesign the Subsea 2.0 platform value stream to enable the CTO model. First, the team created a product- development value-stream map, a variation of value-stream mapping that helps cross-functional teams see how their work fits together. Creating the map helps each function align its understanding of the current state and identify the knowledge gaps it would need to close to move from the current state (ETO model) to achieve the future state (the CTO model). With the gaps identified, the team started to use the A3 problem-solving methodology to help solve the gaps and put in place some countermeasures to help achieve the goals.<\/p>\n\n\n\n

    <\/div>\n\n\n
    \n
    \"\"
    Obeya Room at TechnipFMC<\/em><\/figcaption><\/figure><\/div>\n\n\n
    <\/div>\n\n\n\n

    Throughout the process, the team asked themselves: \u201cHow can we ensure that people from across the entire value stream are fully embedded and involved early on in development?\u201d<\/p>\n\n\n\n

    As a countermeasure to potentially answer those questions, the value-stream design team adopted readiness levels, a concept they\u2019d learned about through LEI to create the collaborative links between functions necessary to achieve flow from customer order to delivery.<\/p>\n\n\n\n

    Readiness levels addressed the technical questions around verifying that every function is ready to meet the development targets. An LEI LPPD Learning Group event led to the idea of creating readiness levels for each critical function. By tailoring the idea to suit their needs, TechnipFMC created a standard way of measuring the progress and ensuring that the development progression not only focused on the product itself, but also on the readiness of the rest of the organization.<\/p>\n\n\n\n

    Before adopting LPPD, the development teams did not have clear deliverables or event criteria to determine whether things were going well within the development process. Instead, the team\u2019s measure of success was limited to designing a more technologically advanced product.<\/p>\n\n\n\n

    <\/div>\n\n\n
    \n
    \"\"
    A product-development value-stream map (PDVSM) details the work of each function along the value stream, so everyone can see how their work fits together.<\/em><\/figcaption><\/figure><\/div>\n\n\n
    <\/div>\n\n\n\n

    That\u2019s not surprising, according to Morgan. Most traditional product development works this way \u2014 without considering the design\u2019s implications on downstream functions \u2014 which causes the problem that most organizations accept as inevitable: rework. Delaying other functional teams\u2019 involvement in design usually causes rework because their testing and validation processes often identify issues with the product. For example, manufacturing cannot cost-effectively build it, or a supplier cannot reliably deliver a crucial component, so they request design changes.<\/p>\n\n\n\n

    Avoiding this rework, Morgan says, requires that designers achieve \u201ccompatibility before completion,\u201d which means that your product design is compatible with all downstream steps. Achieving this requires the team to understand design interdependencies and synchronize the development of each value-creating step.<\/p>\n\n\n\n

    Working through issues with the cross-functional teams within the obeya, step by step, the value-stream design team transitioned the Subsea 2.0 platform to a CTO business model within six months even though the Covid-19 pandemic forced everyone to work from home.<\/p>\n\n\n\n

    Ultimately, the value-stream design team credits the ability to execute the CTO business model to the LPPD practices they applied. <\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Transform the Enterprise Systematically: Setting the Business\u2019 Future<\/strong><\/h3>\n\n\n\n

    Many companies \u2014 especially those who view LPPD as a project, not an ever-evolving development system \u2014 would have celebrated the successful product launch and moved on to the next trendy approach. However, TechnipFMC is one of a select group of leading LPPD practitioners that continued to use LPPD principles and practices to innovate how they run their business in years to come.<\/p>\n\n\n\n

    And it continues to do so.<\/p>\n\n\n\n

    <\/div>\n\n\n\n

    Continuing the Never-Ending Journey<\/strong><\/h4>\n\n\n\n

    Building on its successes, the TechnipFMC development team continues to leverage and advance LPPD to design new products and the value streams to make, deliver and service them. Through experimentation and overcoming obstacles using the process, the team learned the purpose \u2014 and value \u2014 of using those LPPD practices and tools they\u2019d scoffed at when they first heard of them.<\/p>\n\n\n\n

    This systematic approach of learning and applying LPPD methods to address problems as they arise \u2014 and as they develop new products and their processes \u2014 step by step created the innovation system that continues to evolve to this day.<\/p>\n\n\n\n

    And ultimately, they used those efforts to create a development system that not only steered a company through a crisis but also transitioned a prosperous, large, global company to a new industry-changing business model.<\/p>\n\n\n\n

    Perhaps more significantly, the company is adopting LPPD across the enterprise. \u201cWe keep saying that it [adopting LPPD] is a journey that has a start, but no end,\u201d Senior Vice President of Global Engineering and Development Paulo Couto says.<\/p>\n\n\n\n

    TechnipFMC has an ambitious goal: to use LPPD in a different dimension. Couto says the company is now exploring how \u201cthe product of LPPD can be an enterprise transformation.\u201d<\/p>\n\n\n\n

    \n

    We keep saying that [adopting LPPD] is a journey that has a start, but no end.<\/p>\nPaulo Couto, Senior Vice President of Global Engineering and Development<\/cite><\/blockquote>\n\n\n\n

    This new focus highlights the most critical understanding of lean thinking and practice: adopting it is not a project. Instead, it is how an organization executes its work, creates a competitive advantage, and ultimately moves toward accomplishing its mission and vision.<\/p>\n","protected":false},"excerpt":{"rendered":"

    TechnipFMC confronted a crisis and redesigned its business model using Lean Product and Process Development.<\/p>\n","protected":false},"author":23,"featured_media":37189,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"8786,3744,9256,7714,12010,4172","_relevanssi_noindex_reason":"","footnotes":""},"categories":[23],"tags":[27],"acf":[],"yoast_head":"\nHow an Established Company Disrupted an Industry - Lean Enterprise Institute<\/title>\n<meta name=\"description\" content=\"TechnipFMC confronted a crisis and redesigned its business model using Lean Product and Process Development.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lean.org\/the-lean-post\/articles\/how-an-established-company-disrupted-an-industry\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How an Established Company Disrupted an Industry - 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