Lean manufacturing

A software company takes a page from Toyota's playbook

October 6, 2011: 12:15 PM ET

Using a combination of Toyota-inspired lean manufacturing principles and an open office atmosphere, Menlo Innovations' work environment is attracting attention.

By Katherine Reynolds Lewis, contributor

Menlo Innovations in Ann Arbor, Mich.

FORTUNE – At most white-collar job offices around the country, workers scurry from cubicle to cubicle, speaking in hushed tones. Take a step into software firm Menlo Innovation's offices in Ann Arbor, Mich., and it's clear that this firm is more cotton mill factory floor than monastery.

Instead of rows of cubicles, visitors enter an open space that calls to mind an artist's loft or an industrial warehouse that is filled with the sound of a dozen overlapping conversations.

"A lot of people don't believe software development can be done in anything but library quiet," says CEO Rich Sheridan, during a tour of his company's space. "I have 12 years of experience that says differently."

Sheridan and his co-founders built Menlo's work culture with a great deal of intention, and with the modest aim "to end human suffering in the world as it relates to technology." The free-form floor plan was inspired by Thomas Edison's Menlo Park, N.J., laboratory, which had an open and collaborative workspace that in turn drew inspiration from the machine shops of the day.

"There are no rules around here about how the space is formed," Sheridan says. Network and electrical cables are pulled down from the ceiling, rather than from a wall or pillar, so lightweight tables can be pushed together in the center of the room, or moved around as needed. The staff put the CEO's desk wherever in the room is convenient -- rather than in a glass-walled corner office.

But arguably the most novel element at Menlo is one that put southern Michigan's auto industry on the map decades ago. Just as Kichiro Toyoda standardized the manufacturing and quality control processes for car production, Menlo has created its own standardized process for making software. Thousands of companies have attempted to duplicate Toyota Motor Corp.'s (TM) success when it comes to quality and culture, but Menlo is one of the few that captures the core principles, says Jeffrey Liker, an engineering professor at the University of Michigan and author of The Toyota Way.

"The concept of lean production was introduced in the 1980s and that was considered as big a revolution as moving from craft production to mass production," says Liker, who has studied Menlo's operations. "Any piece you see in Menlo you'll see somewhere else. What you won't find [elsewhere] is all the pieces working together…." More

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