Just like MRP and ERP transformed the manufacturing industry, Enterprise Services Planning or ESP will soon usher in new levels of productivity, efficiency and customer service to the global Professional Services Industry.
Here’s what you’ll learn in this fascinating interview with David Anderson, Chairman at LeanKanban and well known Business Leader, Author, Speaker and Originator of the Kanban Method:
- How Kanban laid the foundation for a sweeping new way to manage work in professional services businesses
- The grand vision for ESP, what it is, and the back story of how all the components came together now
- Inside information on leading companies who are now rolling out ESP in a grand fashion
Let’s get started with our first question.
Question 1: I’m starting to hear a lot more about Enterprise Services Planning. What is it and why do professional services businesses need to know about it now?
At one level Enterprise Services Planning (ESP) is simply bundling everything that you need to exploit a Kanban implementation to the maximum—everything that you may consider to be not specifically Kanban. Things like how you do planning, how you do prioritization, how you do risk management, even to the point how does that align and tie into strategy, marketing plans, and big picture stuff.
Kanban training and intellectual property are about how you would set up a Kanban system, design Kanban boards, and understand the mechanics of those things. The Kanban method body of knowledge takes that further and looks at how you do evolutionary change, what causes people to resist change, how can we avoid as much of that resistance as possible, and if we can’t avoid it, what do we do about it. ESP is all the other things that don’t fall under those categories of designing Kanban systems or boards or leading evolutionary change.
But there’s a much bigger, grand vision for Enterprise Services Planning (ESP). We believe ESP is the equivalent of Manufacturing Resource Planning (MRP) for professional services businesses. MRP dates to Joseph Orlicky in 1964 when he first proposed it. It took him 11 years until 1975 to publish a book on it and that coincided with affordable minicomputers and the arrival of the microprocessor and software industry built up around it because essentially MRP is a set of mathematical algorithms for scheduling work and managing inventory and supply chains and manufacturing operations and revolutionized the way that physical, tangible goods businesses were managed and operated. MRP helped manufacturers save a tremendous amount of working capital and it facilitated a lot of the JIT concepts at much larger scale.
It’s quite typical to see a manufacturing company using an MRP system for large-scale purchasing, ordering, replenishing, fetching things from warehouses and delivering them to what are often referred to as supermarket shelves inside the factory. MRP is used on this bigger scale determining what we need for a whole shift, what we need for a whole day of production, what we need for a week, for a month. How far in advance do we need to order these things? MRP was a very significant revolution in the effectiveness and efficiency of tangible goods industries.
However, Kanban systems are virtual systems in professional services industries, which are made up of intangible goods. What I see and what we’ve achieved so far is that we’ve laid the foundation to now ask the question, “How do you schedule work through a network of professional services?” How do you sequence it for optimal risk management? What signals an order? How do you replenish? How do you signal that you need new stuff coming down the pipe and effectively achieve the equivalent of just in time knowledge work in the same way that MRP facilitated just in time manufacturing and supply chain management?
I see ESP as this new set of technology—a new way of managing professional services businesses and a completely new generation of software tooling for managing such companies. If I get ESP right, it creates a new market equivalent to MRP but for professional services businesses rather than manufacturing and tangible goods supply chains.
We’re moving into a world where intangible goods, professional services, knowledge worker industries will be more than half the global economy—perhaps they already are? And by the end of the century, they’ll probably 80 or 90% of the value of the global economy. We’re talking about the next big thing.
First, there was MRP, then Enterprise Resource Planning (ERP). Arguably ERP is just MRP with a bundle of other applications sold in a suite such as finance and human resource applications. However, ERP didn’t bring the mathematical rigor to those activities in a way that MRP did for manufacturing. But ESP very much brings a mathematical rigor to sequencing and scheduling work. Also, it’s underpinned by a set of algorithms which can be coded in software. And frankly, without software, they’re quite difficult to use.
My observation is most of these big physical goods businesses will tell you they cannot live without their MRP system. That it’s a vital part of how they run their business. It encapsulates a set of mathematical algorithms which they wouldn’t want to have to teach the workforce. While there can be some bitching and moaning about ERP applications and whether they add value to a company, I haven’t met a significant business that complains about its MRP system. They believe MRP revolutionized how their industry works and they couldn’t do without it.
I’m hoping we can achieve the same thing with ESP. People will see it as incredibly helpful and something that does have a level of mathematical sophistication to it that they wouldn’t want to have to teach the workforce—nor would they trust the workforce to do that stuff manually. They want to teach employees to operate the software and trust the algorithms encoded in the software work appropriately.
The vision that we see as we watch companies gradually scaling out Kanban and applying it across different parts of their business is we see a lot of growth into media related parts of business—advertising agencies, web agencies, market research companies, or departments within larger corporations. VistaPrint for example, has an internal advertising agency, partly based in Boston and partly based in Barcelona. They implemented Kanban for their internal ad agency with dramatic results. They cut their time to prepare advertising campaigns from 6 to 13 weeks down to about 12 days—that gives them a tremendous amount of additional agility in their marketing. They’re achieving a lot more business agility by improving the lead times through their ad agencies on both sides of the Atlantic.
When we see companies doing stuff with Kanban and spreading it out, you quickly realize that modern businesses are an ecosystem of interdependent services. We’ve always had this very service oriented approach with Kanban that wherever you see a service, you can Kanban it. In our basic two-day training, and in my book Kanban – Successful Evolutionary Change for your Technology Business, they’re oriented around the idea that you identify a service. You design a Kanban system for that one service independently. We maintain this approach and scale Kanban by implementing it one service at a time across your organization. You scale it by doing more of it. That provides a network of services, which are running faster and more predictably. Then the challenge becomes how do we schedule the work that cascades through this network of services and provide some reasonable expectations to the originating customer or request.
For example, someone approaches an ad agency and says I’d like you to build a campaign for me. That request will cascade through their organization. They might need stock photography, graphic design, copywriting, and copy editing. They also might need a photographer, do casting for models, and a photo shoot. The photo shoot could be in a studio or it could be on-location. There could be logistics and travel to be booked for that. The simple request of “please make me an ad campaign” from a customer creates demand all over their organization and potentially on external vendors. Meanwhile, the customer would like to know when will my campaign be ready? Obviously, there’s a significant level of complexity to it, but it’s very much a solvable problem using non-deterministic mathematics and statistical methods.
Question 2: I’ve followed your work for some time and interviewed you several years ago in Kanban Systems: An Evolutionary Incremental Approach to Change. Can you bring up us to date on what’s happened since then?
We started bundling a lot of material external to Kanban. Thinks like risk assessment, advice on scheduling, sequencing, and prioritization. We started bundling that into classes we were calling “Advanced Kanban.” People weren’t buying them. They didn’t know what it was for, and they didn’t understand it.
At some point in early 2013 during a week when I was teaching advanced classes in Oslo and Copenhagen, I just had this epiphany. I realized that if organizations are indeed ecosystems of interdependent services, then what we’re talking about is planning the work. The name Enterprise Services Planning just came to me. Then I began to think about it a little and realized the vision for it fitted nicely with MRP and ERP. ESP is only one letter increment from ERP. This made it quite easy to explain conceptually. But it was very much an epiphany born out of the frustration of Advanced Kanban isn’t the right thing to be calling it—people don’t get it or understand it.
However, what they will tell you is that they need to prioritize, schedule and make promises to customers. They need to manage dependencies across their organization. They need to know if they have enough capacity. We needed a nice convenient handle for all that stuff—ESP.
I also wanted something which quite clearly had a wider scope than IT or software or high-tech product development. I wanted a name that we could communicate the scope was all knowledge worker activities—all professional services. I think we’ve achieved that.
I also think it helps us to have some distance from the agile software development body of knowledge and intellectual property and for that matter the community. I don’t want ESP being labeled as just another scaled agile method, which is good for the IT department. It’s self-evidently much more than that.
The past year we had attendees from advertising agencies attending our conferences in San Diego, Heeze in Netherlands, and Hamburg, Germany. We’ve also had presentations at our conferences from market research companies, advertising agencies, and web design companies. We’re seeing Kanban branch out beyond IT and software development. We’re crossing over into the wider professional services community and attracting those people to our events. If ESP is too closely associated with the agile software development community, it will be challenging to maintain this trend.
Question 3: How do Kanban and ESP work together?
You Kanban individual services in the organization. It could be anything from a person who provides a single service, such as an executive approval—that’s a service. It could also be a governance activity, or it could be value adding such as an enterprise architect, data architect or security expert. Or the services could be much more elaborate. They might involve long workflows of different teams of people collaborating to produce something. It could be at the Personal Kanban level or Team Kanban level—or an entire workflow of multiple teams collaborating. But you Kanban services.
ESP is how you schedule, sequence, and manage dependencies of the work that flow through those Kanban services. If you think of Kanban systems as nodes in the network, how do you manage the work that’s flowing through that network from Kanban system to Kanban system? ESP is for that. Flowing the work across the network of professional services is the challenge. Planning the flow of work across the services is the challenge for ESP and improving the speed and predictability of the individual nodes in the network is what we use Kanban for.
Question 4: Where is ESP being used right now? Can you share any customer experiences?
Our best-known implementation is at the world’s second largest online travel agency. The holding company is known as Odigeo, and they’re based in Barcelona, Spain. It’s a roll-up of several European online travel brands such as GoVoyages, eDreams, and Opodo. Odigeo as a complete entity is the second largest online company after Expedia. Expedia is the market leader globally, and Odigeo is second for online sales of travel, flights, hotels, vacations, rental cars, all that kind of thing. They dominate the European market through their collection of brand names, but they are not particularly well known in the US or terribly much outside of Europe.
They are implementing ESP in an Enterprise wide fashion. Of their approximately 1,800 workers, nearly 1200 of them have being introduced to Kanban and ESP over the last 18 months. The initiative is being sponsored by the Chief Executive and led by Peter Kerschbaumer, who’s a Kanban Coaching Professional. He reports directly to the chief executive. They have strong executive support for what they’re doing.
It’s fair to say that given the boutique size of my company, we tend to work with smaller clients. Large companies tend to want to work with big consulting firms—big names like Deloitte, McKinsey, Bain and so on. The type of client that comes to us is often a medium size company and privately held. In some cases, it’s owner managed and still managed by the founder even if it has 25 or 30 years of trading history. We tend to engage with the Chief Executive or just one level below.
There is also a Canadian company based in Montreal that produces video surveillance equipment—about 700 or 800 people. They’re another client implementing on a large corporate scale. We have one or two other ones of a similar size and nature.
Odigeo is the biggest client who has gone public about their implementation. However, potentially the largest implementation is with Huawei, the Chinese electronics, and telecom equipment manufacturer. They are in the process or rolling out Kanban across 90,000 plus products developers. When I visited them very recently, they’re already beyond 5,000 people in more than ten business units. They’ve embedded Kanban pilots in almost every business unit in the company. The 2017 aspiration is to scale that out to almost 100,000 people. Then there’s a second wave coming behind that where they’re currently cherry picking some of the better Kanban implementation business units and piloting ESP in those business units.
They’re also developing some of their own internal software. They’ve been working with Swift Kanban. Huawei is likely to become the largest Swift Kanban implementation in the world in 2017 with potentially 98,000 users. They will be following that with a combination of the Swift Kanban ESP software and augmenting it with the software that they’re building internally.
I don’t visit Huawei very often, but our Chinese partners based in Shenzhen are quite active. And we also have some experienced Kanban practitioners/coaches inside the company. Minglan Wang who is a Kanban Coaching Professional and best known for an implementation at Nokia in Beijing is working at Huaweiwai now. The implementation was at part of Nokia in Beijing, which was acquired by Microsoft and was subsequently closed as they were making software for mobile phones, which are no longer on the market. There’s some good talent involved at Huawei, so I’m very excited to see what we can do there. The CTO of the company has tremendous ambition. He would like Huawei to be seen in the same light at Toyota. He would very much like Huawei to become an equivalent reference for 21st Century professional services work. There’s a tremendous amount of ambition and intent there. They hope to realize that ambition using Kanban and Enterprise Services Planning.
Question 5: How would you sum it all up David, can you explain ESP in 50 words or less?
Enterprise Services Planning is for all professional services businesses. It is a management method and a series of algorithms to enable professional services knowledge worker industries to plan capacity, schedule work, and sequence work in a risk-appropriate fashion. It’s about doing the right thing in the right way at the right time with appropriate risk exposure.
Question 6: Where can people get more information and tune into the latest developments?
At the moment, there isn’t a tremendous amount of literature on ESP. There are some articles and blog posts. The best overview is an article that I wrote What Is Enterprise Services Planning?
Prepared & published by:
Bill Fox, Co-Founder at CONTAINER13 & CEO/Editor at Exploring Forward-Thinking Workplaces™