As the global recession continues to bite, every organisation is searching for ways to improve efficiencies and increase agility. Businesses are forced to make radical choices to survive, and often the term "lean" is used as a euphemism for "slashing the budget".

However, lean is perhaps one of the most misunderstood of all business concepts. As originally envisaged by its creators, Toyota, the philosophy is all about minimising waste and creating a culture of continuous improvement - not simply squeezing expenditure till it hurts.

"Every business talks about doing more with less, so there is a real need for organisations to be lean, but very few CIOs have implemented lean IT principles," says Dr Alexander Peters of Forrester Research in Frankfurt.

"Although there are elements of lean thinking in IT transformation programmes, including process streamlining, infrastructure and service consolidation, business-driven governance and service-oriented organizations and processes, we see only a small number of CIOs who have used lean thinking as an explicit strategic framework."

Is lean a fixture on CIOs' agendas?

Greg Kinsey, European MD of Amsterdam-based consulting group BMGI, believes that, thanks to lean-related methods such as ITIL and Six Sigma, IT has made great strides with quality and service. But he questions whether lean itself is a major fixture on CIOs' agendas.

"IT today is where auto manufacturing was in the 1990s," he says. "It's pretty good at processes and operational efficiency, but it has failed to make the breakthrough to continuous production flows and process simplification. It is still driven by the mindset of 'make-it-and-ship-it' batch processes."

Manufacturing was able to break through and make that shift, he explains, and the trigger was Toyota's dominance of the car industry. "It was won out of an absolute fixation on quality, customer service and continuous improvement."

Bengt Engstrm, CEO, Nordic Region at Fujitsu, picks up on this point, stressing that it is vital to comprehend lean's underlying philosophy: "One of the original mindsets is to understand your customer and ensure that your business is entirely geared to providing the best possible service. The focus has never been primarily on cutting costs, but rather on two far more fundamental tenets of the lean philosophy: Respect the people who are working at the company, and aim for continuous improvement."

How VW and P&G apply lean thinking

Dr Peters, however, does contend that things are changing fast as many CIOs reposition themselves as business partners and focus their teams on business process optimisation. He cites good examples of companies such as P&G and VW, who have applied the basic principles of lean thinking without being explicit about them.

"Volkswagen pioneered the concept of process information centres, which they have used to accelerate the adoption of innovative best practices and drive process optimisation," he says.

He adds that others have discovered lean's potential and are repositioning IT through service-orientation, managing corporate business processes and eliminating waste through consolidation, use of software templates and shared services.

"P&G has gradually transformed traditionally fragmented IT support functions, consolidating them into global entities and changing their culture from locally intimate to industrial."

Firms such as these continuously improve overall efficiency and flexibility through capability relocation, standardisation, and process automation. "Once they accomplish their consolidation goals, they typically move to a delivery model based on shared services," Peters explains. (For more on P&G, see our interview with the company's CIO, Filippo Passerini.)

Agile development at Severn Trent

Streamlining IT processes is another way in which lean can be applied to IT. Myron Hrycyk, CIO at UK water utility Severn Trent, agrees. "Toyota say there is up to 70 per cent waste in any process," he says. "So I knew any IT department could be made more productive."

Since Hrycyk arrived at Severn Trent, lean thinking has been applied to the development of new applications and business systems. Traditionally, IT defines the requirements, specifies the development, writes the code, tests the programmes, and then goes back to the business user to test, make amendments, re-test and then implement the change.

Now, Hrycyk's software engineers work with business end-users, using "agile" development techniques, which tap into the lean principle of making decisions carefully and by consensus, then implementing them quickly.

Requirements are worked on in close collaboration with end-users, before the IT department decides on the priorities and develops the system. Then it immediately tests the code with users. Changes are rapidly turned around, resulting in a better quality system.

"For customer-facing systems, this new method of IT development produces a solution that meets business requirements much more closely," says Hrycyk.

20 per cent efficiency gains

Proponents of lean believe in incremental changes. The way to achieve a 20 per cent efficiency gain is not with a big-bang process change, but with continuous improvements that enhance the process by 1 per cent each time - and by doing it 20 times over.

Lean principles such as these have been successfully adopted by companies such as Legal & General and Allianz. One of the latter's tactic is to operate "clear to zero" schemes that help smooth operations and build in process efficiency.

Helpline service-desk performance has improved as a result, so that all emails are responded to within 24 hours, 95 per cent of calls answered within two rings, and dedicated teams charged to see through each query until its resolution.

Savings of 440 million

Another example is the UK's HMRC (the government's revenues and customs agency), where the adoption of lean business principles is expected to drive savings of 440 million. By applying lean techniques known as "The Unipart Way", developed by the eponymous distribution giant, lean has already led to huge gains.

The government's spending watchdog, the National Audit Office, reported that HMRC has achieved a 45 per cent improvement in productivity for processing tax returns, and a reduction from 36 to six days average lead time for processing information received. By 2011, lean is expected to have helped deliver full-time equivalent staff savings of around 6,870.

Practitioners caution that while the setting of incremental targets is necessary to drive up productivity, increase quality or reduce lead times, it can also create concern among staff that targets may be used to monitor individual performance.

Others feel that working as a cog in a well engineered process can ultimately lead to de-skilling and inflexibility. But such HR issues are neither new nor insurmountable. Indeed, for Severn Trent's Hrycyk, using lean has had an additional benefit.

"When an IT department starts to use lean thinking," he says, "they suddenly find they talk the same language as other business functions, which allows for true inter-departmental communication."

For more on the subject, log in to our Members' Area for downloadable figures on how lean IT has saved money for a wide variety of businesses; see also our lean Case Study from Kenneth Egelund Schmidt, CIO of Carlsberg, and a viewpoint from Dr Jeffrey Liker, author of The Toyota Way, on how the creator of lean applies IT in a very specific way.