Measuring Performance : the use of Lean in IT services

University essay from KTH/Industriell Management

Abstract: Lean has become a widespread concept within various industries. It originates from the production system at Toyota and focuses on maximizing customer value and eliminating waste. It has been adopted throughout industries as a consequence of stiffening competition and higher customer demands. From Toyota, the concept spread to other car manufacturers and then further to other manufacturing industries. In recent years, the Lean concept has spread to more intangible settings, initially to service functions within the manufacturing companies and later to pure service oriented industries such as healthcare, banking, and insurance. Most recently, the concept has been adopted in IT businesses as a mean to gain competitive advantage. A lot of research on the Lean concept has been concerned with issues such as implementation and the operational application of the concept. Even though the purpose of the concept is to increase the operational performance and to deliver high customer value, little emphasis has been put on research related to performance measurement in a Lean service setting. While some research regarding modern performance measurement frameworks exists, a weak link is identified between the two research areas (Lean and Performance measurement). This study has focused on the specific IT service setting at Company X and their Lean initiative. The purpose of this study is to complement Company X’s Lean initiative with recommendations related to an area currently not emphasized by Company X, measuring performance improvements due to their Lean efforts. Company X is especially interested in the linkage between operational improvements and the financial outcomes. This study employs a holistic view in order to gain a wide understanding of the organizational context and the business in general. It has been paramount for this study to understand the organizational setting, the theoretical concepts, and the interplay between them. As a mean of fulfilling the purpose, the case study methodology has been employed throughout this study. The research was initially defined by its objectives and delimitations. Interviews, observations, and a content analysis contributed to the overall organizational knowledge which was deemed crucial for the end result. The organizational knowledge together with the understanding of the theoretical concepts and the exploratory benchmark study has been the basis for the analysis and recommendations. The study has rendered in recommendations regarding how measurement activities should be designed and employed in Company X’s Lean setting. This study suggests that a limited focus should be put on general measuring activities in Tieto. More specifically, little focus should be put on attempting to determine a correlation or linkage between the operational improvements and financial outcomes. The study further suggests a separation of the organizational KPIs into steering (operational) KPIs and monitoring (financial) KPIs. This is suggested in order to have operations steer the organizational performance as well as cement the Lean concept within the organization. Overall, a focus should be put on measuring processes rather than financial data. 

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