Keeping up with the shift from products to services: the Lean Effectiveness Model for servicing existing systems

ISO and DOD lifecyclesThis diagram shows three aerospace examples where the system lifecycle stages before sustainment cumulatively represented less than 10% of the system's lifetime.The red dotted line in this diagram shows that depot groups are fragmented and scattered across the organization.Tina P. Srivastava By Tina P. Srivastava SDM Fellow ’11

Editor’s Note: Tina Srivastava is Deputy Technical Director of Electronic Warfare at Raytheon. As an undergraduate studying aeronautics and astronautics engineering at MIT, Srivastava served as program manager of a forty-person team that designed, built and flight-tested a low-Earth-orbit satellite. She received the Lockheed Martin Prize for Excellence in Systems Engineering for that project. Srivastava recently completed a master’s degree in the SDM Program. In her thesis, Srivastava outlined a services extension of the MIT Lean Advancement Initiative’s (LAI) Enterprise Self-Assessment Tool. Srivastava was selected to present the work at the 2012 International Council on Systems Engineering (INCOSE) conference in Rome, Italy.

The shift from products to services is being seen across industries and nations. Enterprises are adding services to their product suites, and new business models have emerged to sell software as a service (SaaS). In addition, new services are offered on existing product systems.

Web applications like Gmail as well as smartphone operating systems and apps are constantly evolving as updates role out. Companies like Walmart and Amazon rely on information technology (IT) systems to interact with their customers and supply chains. Updating these systems is critical to maintaining a competitive advantage. Key parts of the airline business also depend on servicing existing systems: aircraft maintenance and the airline reservation system.

The trend is not exclusive to software. Due to the 2007 downturn and the economic climate since then, more resources have been put toward life extension of expensive physical systems. During this time, the US Defense budget reduced the number of new procurement contracts granted and increased the number of sustainment and upgrade contracts. Servicing existing systems accounts for 70% of the US Department of Defense weapon systems total life-cycle cost. In 2011, aircraft engine manufacturer Pratt & Whitney derived over 50% of its revenue from servicing existing engine systems.

Existing Systems

Servicing existing systems is an important component of my thesis research because it directly affects the competitiveness of US companies. Organizations need tools to provide holistic solutions to customers. Providing services helps companies better understand their customers and avoid commoditization. Corporate leadership needs to discern the costs of servicing existing systems in order to be proactive rather than reactive, and to turn servicing existing systems into a competitive advantage.

One of my colleagues in the International Council on Systems Engineering (INCOSE)– a non-profit global organization that advances best systems engineering practices—polled systems engineers at a conference and found that over 50% work on existing rather than new systems. However, many systems engineering tools focus on new product development rather than system services development.

Repairing, upgrading, and servicing existing systems poses unique challenges compared to developing new systems. These challenges include:

  • lack of system configuration documentation
  • parts obsolescence
  • compatibility with legacy technology
  • lack of knowledge transfer between the workforce who designed the system and the workforce repairing it.

One of the core products of my MIT research group, the Lean Advancement Initiative (LAI), is the LAI Enterprise Self Assessment Tool (LESAT). This tool is used by many enterprises to assess strengths, areas of improvement, and readiness to change. LESAT has been designed for enterprises that offer products. However, many of the LESAT principles and methodologies apply to servicing existing systems.

My thesis extends LESAT and outlines a Lean Effectiveness Model for enterprises, which encompasses operations, maintenance, upgrades, repairs, and overhauls. The LESAT SES extension is intended to help organizations get the most out of in-service systems.

As a first step, organizations need to understand how much of their current business involves servicing existing systems. The proportion of the system life cycle allocated to sustainment in commonly used systems engineering tools, such as INCOSE’s Systems Engineering Handbook, can be misleading in terms of the actual duration and engineering effort of sustainment as compared to the other stages.

This diagram from the INCOSE Systems Engineering Handbook includes ISO and DOD lifecycles.

As part of my research, I conducted workshops with the INCOSE In-Service Systems Working Group (ISSWG), Raytheon, Pratt & Whitney, and Boeing to quantify the percentage of system lifetime when a system is "in-service". During these workshops, systems engineers outlined the lifecycles of their systems with durations to understand the magnitude of the sustainment portion. As system lifetimes grow, more and more engineers work in the sustainment stage of the system lifecycle.

This diagram shows three aerospace examples where the system lifecycle stages before sustainment cumulatively represented less than 10% of the system’s lifetime.

Applying enterprise architecting principles to my research, I studied the "as-is" behavior of Raytheon, Pratt & Whitney, and Boeing with respect to servicing existing systems. The obstacles to success in the services area overlapped among the three. Through this research, I began to understand the complexity of repair groups within an enterprise and the relationships between repair groups and product development, finance, contracts and business development.

For example, analyzing the interaction among products, strategy, and organization revealed that the breadth in products at Raytheon served to fragment sustainment, or depot groups.

The red dotted line in this diagram shows that depot groups are fragmented and scattered across the organization.

One of the indicators of an emerging field is the lack of agreement on terminology. During interviews with stakeholders and meetings with research collaborators, a number of terms were used to mean "servicing existing systems". These include:

  • Depot
  • MRO (Maintenance, Repair, and Overhaul)
  • PBL (Performance-Based Logistics)
  • Not new product development
  • Sustainment
  • Whole Life Engineering
  • Services
  • After-market
  • Mission Support
  • Upgrades
  • Customer support
  • In-Service Systems Group
  • Operations

The lack of agreement on terminology results in confusion and misalignment within enterprises.

Swivel Chair

I came across unique terms used in the industry, such as "swivel chair," which refers to manually entering the same data into multiple systems, and the "80/20 Rule," which refers to employees spending 80% of their time gathering and managing data and only 20% of their time acting on it.

Culture also plays a large role. Employees have a perception that the career path in new product development is better than in existing systems, so emerging leaders chose to work on "exciting new programs."

All three enterprises felt the need to overcome a "misconception that service activities are unproductive and ought to be minimized." Enterprise transformation advocates within the enterprises recommended developing a framework for calculating the value of services, incorporating service innovation into depot processes, and making sure leadership recognizes "service activities" as a primary company focus and potential revenue driver.

For example, after conducting an exercise with stakeholders to establish quality attributes, I helped build this series of questions to evaluate potential shortcomings of a future service architecture at one enterprise:

1) Efficiency

  • Does it minimize redundancy and managerial overhead?
  • Does it eliminate multiple entries?
  • Is more time spent analyzing then gathering?

2) Manageability

  • Does the candidate architecture allow for clear accountability in terms of compliance with guidance and timeliness?
  • Does it facilitate the implementation, use and control of performance metrics?
  • Are data sources integrated?

3) Agility

  • Does it reduce product development cycle time?
  • Does it reduce communication constraints among departments?
  • Is it scaleable for the large variety of mission support programs?

The answers helped guide the enterprise to select a target or "future-state" architecture and build a transformation plan.

The Lean Effectiveness Model for servicing existing systems captures best practices in the form of diagnostic questions, indicators, and the description of mature and capable enterprises. This enables products and services enterprises to assess strengths, areas of improvement, and readiness to change.

It is clear that organizations need to pay greater attention to servicing existing systems upfront in the product development phase. Operations and support can’t be an afterthought. The ecosystem doesn’t allow short-term cost reductions to be prioritized without significant thought about long-term impact on sustainability.

There are significant costs involved with servicing existing systems. If best practices are followed throughout the system lifecycle, it’s possible for servicing existing systems to be a differentiator in profitability and customer retention.

My research was carried out in collaboration with the INCOSE In-Service Systems Working Group (ISSWG), Boeing, Pratt & Whitney, and Raytheon. The best practices captured are being incorporated into a future version of the INCOSE Systems Engineering Handbook. The lean effectiveness model for servicing existing systems will be made publicly available on the MIT LAI website.

Many of the complex technical problems I saw as an engineer in the field couldn’t be solved with engineering alone—they required an understanding of stakeholders, economic factors and management. MBA programs, however, don’t address the level of technical detail necessary for solving these problems. I came to SDM because it offers both the technical and management perspectives that are needed to solve real-world complex technical problems.

Tina P. Srivastava