United Technologies Corporation Achieving Competitive Excellence (ACE) Operating System Case Study George Roth Leean Advancement Initiative & MIT Sloan School of Management 292 Main Street – Bldg E38 Room 624 Cambrridge, MA 02142 [email protected] Revised November 30, 2010 http://lean.mit.edu Massachusetts Institute of Technology Cambridge, MA 02139 Lean Enterprise Change Research Case Study Series This case study provides an example of managerial and organizational changes that have accumulated into significant performance improvements. It is one of a series of case studies undertaken by researchers at the Lean Advancement Initiative (LAI) at the Massachusetts Institute of Technology. LAI focuses on developing, testing and studying the application of lean and other management principles in the aerrospace induustry. LAI’s sponsors, and their improvement initiatives, have created a natural laboratory for studying lean enterprise efforts. The case studies in this series report on effective, interesting and novel applications of lean methodologies at enterprise levels in LAI-sponsoring and other organizations. The author acknowledges financial support for this research made available by the Lean Advancement Initiative (LAI) at MIT, sponsored jointly by a group of aerospace companies, the U.S. Air Force, and other federal government agencies. This material is based on research sponsoredd by the Air Force Research Laboratory (under agreement number FA8650-05-2-5706) and a consortium of other government and aerospace industry members. The U.S. Government is authorized to reproduce and distribute reprints for Governmental purposes notwithstanding any copyright notation thereon. © Massachusetts Institute of Technology, 2010 UTC ACE Operating System Case Study Table of Contents INTRODUCTION ....................................................................................................................................................... 1 UNITED TECHNOLOGIES CORPORATION .................................................................................................................... 2 Corporate history ................................................................................................................................................. 3 CASE STUDY ORGANIZATION AND METHODS ............................................................................................................ 6 1) LEADERSHIP AND FOLLOWERSHIP FOR CONTINUOUS IMPROVEMENT ........................................ 7 FROM RESPONSIVE SUBSIDIARY PRESIDENT TO PROACTIVE CORPORATE CEO ........................................................... 8 LEADERSHIP FOR IMPROVEMENT ............................................................................................................................... 9 LISTENING TO OTHER LEADERS ............................................................................................................................... 10 LEADING FROM EXPERIENCE ................................................................................................................................... 11 ACE over time .................................................................................................................................................... 15 2) EMERGENCE OF ACE OPERATING SYSTEM ............................................................................................ 17 Nippon Otis – finding new direction from past failure ....................................................................................... 17 Ito’s influence – a welcomed prophet in a new land .......................................................................................... 18 Lean Production – learning Toyota’s methods from Shingijutsu Consulting .................................................... 20 North Berwick – “flexible manufacturing” staves off closure ........................................................................... 21 Designing ACE – Pratt & Whitney recreates flexible manufacturing ................................................................ 23 ACE across UTC – making efforts to institutionalize quality ............................................................................ 25 Ito University – establishing management commitment for ACE ....................................................................... 26 ACE Council – broadening decision-making and feedback ............................................................................... 28 Restructuring – using ACE in its own redesign ................................................................................................. 29 Operations Transformation – emanating from the business case ...................................................................... 32 Operations Transformation – a strategy that required ACE ............................................................................................ 34 Second Generation ACE .................................................................................................................................... 35 UTC Commitments ......................................................................................................................................................... 36 Ongoing ACE – staying on course ..................................................................................................................... 37 Collecting data and assessing progress ........................................................................................................................... 38 Developing assessor standard work ................................................................................................................................ 39 Overcoming barriers to progress ..................................................................................................................................... 40 70% ACE Silver and Gold sites by 2009 ............................................................................................................ 41 Accelerating ACE ........................................................................................................................................................... 42 Supplier Gold – extending improvements beyond UTC’s boundaries ................................................................ 43 70% Supplier Gold and Performing by 2011 ..................................................................................................... 45 3) FUTURE CHALLENGES FOR UTC AND ACE .............................................................................................. 46 Achieving results ............................................................................................................................................................ 47 Supporting Learning ....................................................................................................................................................... 47 Importance of Growth ..................................................................................................................................................... 48 Final Evidence ................................................................................................................................................................ 49 APPENDIX A: ACE OPERATING SYSTEM ........................................................................................................ 51 ACE OPERATING SYSTEM ....................................................................................................................................... 52 Benchmarking ................................................................................................................................................................. 54 Infrastructure ..................................................................................................................................................... 55 ACE Council ................................................................................................................................................................... 56 Reporting and Monitoring Progress ................................................................................................................................ 56 Employees ....................................................................................................................................................................... 58 Alignment ........................................................................................................................................................... 59 Roadmaps ....................................................................................................................................................................... 59 Metric Scorecards ........................................................................................................................................................... 61 ACE Boards .................................................................................................................................................................... 62 Councils .......................................................................................................................................................................... 63 Managerial Orientation ..................................................................................................................................................