Transforming an Enterprise Starts with Clearly Describing the Outcomes

Our company transformation is centered on the following specific intents:

Intent 1: Restructure into one company, LM Aero, with a single vision and with exactly the right capabilities for the business of the new organization.

Intent 2: Deploy the LM Aero Concept of Operations that is driven by the principles of customer focus and financial strength.

• Create focus by establishing a one-company strategy, 5-year imperatives, and yearly company objectives that align all the work in the company.
  
  
• Meet or exceed our customers' expectations
  
  
• Perform on our commitments, each and every time
  
  
• Demonstrate our operating values while achieving our objectives

Intent 3: Establish an organizational structure that aligns with the efficient and effective conduct of work, assures clear accountability, and has no unneeded redundancies.

"The Concept of Operations...How We Run LM Aero" (Ref 1) is proving to be a very important tool in communicating the intents of our transformation and providing a framework for the change process. For example:

• Communications — The concept of operations was first presented by Ralph Heath at the March 2000, transformation kick-off meeting to the leadership team. We then took members of the new leadership team to all of our sites to hold a series of "question and answer workshops" on the concept of operations. A "frequently asked questions" web site was established to provide the opportunity for employees to ask questions. The publication of Reference 1 came nearly a year after we began the transformation, and the document was based on input from a series of focus group meetings.
  
  
• Framework — The Concept of Operation is a "what and why" document and not a "how to" document. Taking this approach has provided an excellent way to keep leaders and managers focused on "what we are going to accomplish and why." For example, the document provides our 5-year imperatives related to customers, workforce, business, and processes. These imperatives, in turn, drive the "how to" plans and the measures of progress and effectiveness.

The Company Transformation Approach

There are many excellent references (e.g. see References 2-7) related to the topic of enterprise transformation, often called corporate reengineering. All of these have been reviewed and all have influenced, in some way, the LM Aero transformation approach.

Figure 1 provides a summary of the input to and outcome of the LM Aero transformation. The outcome of the transformation is to be a company that operates to the clear outcome intents (Indents 1-3 above) and a company that initially operates with a specified reduction in overhead and infrastructure. Key enablers included:

• Clear intents and requirements from the president ("complete the physical transformation to one company in one year; and achieve our customer, workforce, business, and process imperatives within 5 years")
  
  
• Commitment of the leadership team

Figure 1

Figure 2 illustrates the flexible transformation approach being used. The overall transformation approach spans the 5-year imperative period as detailed in our Concept of Operations. The actual transformation has two significant elements:

1. Architecture and Transformation Plan: This involves the overall transformation architecture and plan to achieve the 5-year imperatives and the concept of operations. The plan reflects our transformation approach and includes the yearly priorities for transformation objectives deployment.
   
   
2. Deployment and Execution Process: The focus of this element is achieving the changes required by the transformation plan. In general, these change actions are deployed via our yearly company objectives. Concrete changes and measures of effectiveness are deployed via this objectives process. Additionally, we deploy, when appropriate, "pilot projects" to gather information on the best procedures to use in deploying the next significant steps in the transformation plan.

Figure 2

For example, within our "architecture and transformation plan" element we have set the baseline process architecture and are designing our company-wide processes. The process architecture is a required enabler for LM Aero to become a process-centered company (Ref 7). Being process-centered will allow LM Aero to align operating capability with business requirements and to rapidly respond to intentional (and unexpected) changes. These two key characteristics — meeting our commitments and being responsive — are, in turn, central to achieving our LM Aero 5-year imperatives.

The corresponding "deployment and execution process" currently centers, for example, on "activating" the enterprise process owners (these enterprise processes all cross multiple organizational boundaries), designing the top-level enterprise processes, converging existing legacy processes from the three legacy companies, linking the enterprise and legacy processes, and managing by the resultant enterprise processes. Additionally, we have a "pilot project" underway related to supply chain integration. This "pilot" is defining the new roles and responsibilities of suppliers in LM Aero as well as "piloting" the approach for deploying all of our enterprise processes.

What about our near-term transformation intent: "complete the physical transformation to a single company in one year?"

Figure 3 shows the organization transformation approach that was announced at the March 2000, kick-off workshop. The challenge was to move quickly to get the organizations in place to conduct the day-to-day business of the company. Speed was required, but the restructure needed to be done in a way that was consistent with the concept of operations and did not add significant barriers for the 5-year transformation process.

Figure 3

We used an approach and terminology that was familiar to our employees: system requirements review (SRR), preliminary design review (PDR), and critical design review (CDR). The basic intent at each of these review milestones was as follows:

• SRR: Understand the LM Aero concept of operations and use it to establish each organization's individual concept of operations; document any boundary condition or issue that affects the organization's ability to achieve its operating concept.
  
  
• PDR: Resolve major issues; illustrate the top-level organization design; define the roles and responsibilities of the organization leadership and management team; and provide specific response to company-level requirements for management layers, numbers of managers per layer, and three-company infrastructure reduction.
  
  
• CDR: Provide plan (no more than 6 months) to began full-operation within the new organization design; identify any remaining open issues and plan for resolution.

This rapid organization physical transformation provided the foundation for the full LM Aero transformation process. The following items were found to be important to enabling this physical transformation:

• Use of a structured organizational design process (SRR, PDR, CDR) that allowed interaction of the leadership team and which rapidly converged to organizational designs consistent with the company concept of operations.
  
  
• Use of common templates so the same type of information was obtained from each "organizational designer."
  
  
• Participation by the entire leadership team to ensure human-centered issues and organizational interface boundary conditions could be quickly resolved with all points of view considered in the "organizational design meetings."
  
  
• A supporting organizational integration design team that maintained a design room and focused on the overall integrated company design. This assured that the result was an integrated design and not just a collection of individually designed parts.

Transformation Status, Results and Highlights

Efforts involving enterprise transformation can lose focus if the process is allowed to extend for too long a period without providing visible results. Ralph Heath, the LM Aero COO, led the company transformation process for the president. Mr. Heath established concrete and measurable milestones for the critical early phase of the transformation. The following represent typical objectives measures:

• In three months, have the LM Aero top leadership in place and reduce executive positions by more than 50 percent
  
  
• By the end of the year (8 months), have the next three levels of management in place and realize a 30 percent reduction in company-wide overhead staff by end of year (8 months).
  
  
• By end of year, have new organizational designs in place and key positions filled.
  
  
• By one-year point, have critical organization design issues all resolved and declare the completion of the physical transformation. At this juncture, turn full attention to performance in the new LM Aero.
  
  
• The first year had, and each succeeding year has, specific objectives for reduction of inventory, facilities, property, and equipment.

Did we make any mistakes by pushing hard on organization designs before the process architecture was fully defined? Yes, but there are no detected organizational design flaws that are not being "cleaned up" as the organizational designs continue evolving in concert with the process architecture, 5-year imperatives, and specific yearly objectives. On the other hand, waiting until the process architecture was fully designed and vetted would have put the entire transformation initiative at risk. Most importantly, we must view transformation as being flexible and continually adjusting to new information...while keeping focused on the required outcomes (in our case, the concept of operations and our 5-year imperatives).

Were we finished at the one-year point? The physical transformation was complete. However, the "social transformation" was just getting started and the critical elements of the process architecture (consistent with the 5-year imperatives and concept of operations) were coming into a sharper focus.

Figure 4 and 5 illustrate, with specific and real examples, some highlights from the transformation approach. Our architecture design work and transformation plan are continuous and will span the 5-year transformation process. However, the transformation plan is converted to specific and measurable one-year company objectives as illustrated by Figure 4.

Figure 4

Figure 5 further illustrates highlights from the transformation approach. The approach is very specific for the current year's transformation objectives while all the while designing the next steps (the next year's company transformation objectives) in concrete terms.

Figure 5

The highlights provided by Figure 5 reflect this incremental approach:

• Focus on today's transformation objectives (left panel of figure) is accomplished by tracking specific yearly transformation objective metrics. Overhead staff reduction; inventory reduction; and reduction in plant, property, and equipment (PP&E;) are examples of the objectives and measures for 2001.
  
  
• Designing and deploying the next steps in the transformation plan are focused on the movement to a process-centered company in this example (right hand panel) from 2001.

The objectives for 2001 (left panel) were achieved in 2001 and the next step plans (right panel) were converted into concrete, measurable objectives for 2002.

Complex, Large Scale Transformations Require Better Tools and Methods

LM Aero has long been designing and building complex aircraft and, as a result, we have a premier systems engineering capability. Due to this history, it should not be a surprise that we took an approach to "designing and building" a new company that parallels what we knew about designing and building of new aircraft (Figure 6). This is what we know best and the terms (like SRR, PDR, and CDR) are already familiar within the company. In fact, our yearly deployment of transformation objectives is very similar to an aircraft "block upgrade" approach or what is now being called "spiral development."

Figure 6

We started by defining the transformation outcomes for the new company. Next we focused on selecting and collecting the tools and methods needed for designing the needed organizational architecture and transformation plan. However, we came up empty when we looked in the "tool-box" for a version of systems engineering to use for "designing and building" an enterprise or an organization.

We found business "case studies," lists of "best practices," and many "special methods and tools" (balanced score cards, re-engineering, lean and Six Sigma, quality standards, maturity models, etc.)

We did not find any systematic methods for "designing and building" an enterprise to meet mission and design intents. One major barrier in establishing such a methodology is the inclusion of the qualitative aspects of all the people that comprise the enterprise. A second barrier is that business research seems to center on specific problems in an industrial sector, a company, or a part of a company. When applying these case studies and findings to a different company or enterprise, the result is often sub-optimized or not applicable.

Did we wait for new methods to be developed? No, of course not. We used our experience, our process architecture, and current literature (Ref 2-7) to guide the transformation approach and priorities. However, having a proven and systematic methodology would, most likely, have saved time and would have improved both our efficiency and effectiveness in the transformation.

Summary

The LM Aero physical transformation from three companies to one company was completed in one year. The transformation plan to achieve the company 5-year imperatives and to fully operate to the LM Aero concept of operations (Ref 1) is in place and is well underway.

The body of transformation literature and our own personal experiences indicate that two specific enablers are required for successful large-scale transformations:

1. An occurrence of a "significant emotional event" that makes the commitment to transformation clear.
   
   
2. The absolute, unwavering, and sustained commitment of the enterprise leader and the leadership team to communicating, leading, and supporting the transformation.

What has been accomplished in two years of the LM Aero transformation would have been impossible without having these enablers in place. One lesson we learned (again): conducting a transformation is hard work and must be tempered by realistic expectations and led by committed, experienced leaders. It is very easy to "draw up the transformation plan on paper" but it is extremely difficult to realize the plan's intent in actual practice. Why? Well, because human behaviors are involved in the process and the day-to-day business realities will challenge even the most "proactive" leadership as these realities compete for available time and other scarce resources.

• Such large-scale transformations are difficult to achieve and costly. Initiation and investment should only be undertaken when the outcomes provide truly substantial benefit, e.g.
  
  
• Sharpened strategic focus
  
  
• Altering solution completeness required by the customer
  
  
• Extending operating reach to suppliers, partners, and customers
  
  
• Enhancing process capability for reliability and responsiveness

Keeping the company engaged during a multi-year transformation process is very difficult. Our current experienced-based methodologies eventually get us through the lengthy process if the leadership is diligent and totally committed. But the time span required via our current process and methodologies can place the transformation initiative at risk.

Systematic methodologies for efficiently "designing, transforming and building" enterprises would be a most welcome addition to companies and enterprises where continuous organizational change and adaptation to external influences is now the "new normal" in business.

References

Concept of Operations: How We Will Run LM Aero, Copyright 2020, Lockheed Martin Corporation

Womack, J.P. and Jones D.T. (1996) Lean Thinking: Banishing Waste and Creating Wealth in Your Corporation, New York: Simon & Schuster.

Hammer, M. (1997) Beyond Reengineering: How Processes-Centered Organization is Changing Our Work and Our Lives, HarperCollins.

Murman, E., et al (2002) Lean Enterprise Value: Insights from MIT's Lean Aerospace Initiative, New York: Palgrave.

Rouse, W.B. (2001) Essential Challenges of Strategic Management, John Wiley & Sons.

Hammer, M. (2001) The Superefficient Company, Harvard Business Review, 77(6); 108-118.

Pall, G.A. (1999) The Process-Centered Enterprise; The Power of Commitments, New York: St. Lucie Press.



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