Are Your Improvement Methods Old Scrap?

Original Title (in Finnish): “Ovatko kehittämismenetelmäsi vanhaa romua?”

Original Publisher: The Finnish Pharmacists’ Society

Publication: Proviisori Journal 4/2011 (pages 24-26)

The article is the second in a series of three articles providing a general introduction to high-performance process improvement.

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The value chain of process improvement consists of two interconnected processes: the diagnosis and implementation. The objective of the first is to assure the improvement effectiveness, whereas the objective of the second is to assure the improvement efficiency. Many improvement methods have in today’s dynamic circumstances only a nostalgic value – just like old scrap cars.

The diagnosis comprises the required analyses and syntheses, the objective of which are to assure the improvement of the right issues in the given improvement setting. The implementation embraces the improvement education and training, the practical realization of the identified improvement potential, and the follow-up. The objective of the implementation is to assure that the improvement objects are improved in the right way. It contains also analysis and synthesis phases that fine-tune the planning and execution. The total management and improvement of improvement activities, in today’s ever-changing circumstances, with scarce time and money resources, set new performance requirements to both the applied improvement methods and the improvement method development.

 

Neither Should a Ship Rely on One Small Anchor, Nor Should Life Rest on a Single Hope

There are numerous participants or actors taking part in the process improvement value chain. This is especially true in large or a bit more ambitious endeavors. The actual performance that relates to the participants’ knowledge and skills, learning and the concentration abilities, shows many times a great variation. This is an issue that is not often identified or taken into account well enough in the different improvement phases. An ominous illusion that obscures management is thus easily created from the outset between the presumed and actual improvement performance. This illusion loosens unnoticed the improvement efforts from the real world. If the illusion grows enough, it will pop with bad consequences, just as it did in the fairytale “the Emperor’s New Clothes” by H. C. Andersen.

To avoid such an outcome it is crucial to define, even on a rough level, the expected process or even project specific improvement yield level. This level determines in practice the success of the improvement effort. It provides in a fast way, if required even in advance, a strong indication of a potential illusion and the nature of it. The effort should not be executed as such if the improvement effectiveness in (pre)planning phase is not on a sufficient level (> 85 percent). Should for example the route plan of a ship cruising in the archipelago be only of an 85 per cent level, it is clear that sailing to the right quay, safely and economically, would require extraordinary efforts and good luck. The improvement effectiveness seldom exceeds 20 per cent in companies. The saying by Epictetus, “neither should a ship rely on one small anchor, nor should life rest on a single hope”, is striking.

 

The Know-How Level is the Problem

A company should allocate annually about 4 per cent of the working time to process improvement, i.e. about 10 working days for each employee per year. Not more, but neither less. Of this time, 10 per cent should be allocated to the diagnosis, the rest on the implementation.

The improvement effectiveness is directly related to the output of the diagnosis, i.e. the quality level (0-100 percent) and scope (0-100 percent) of the synthesis (the process improvement plan). Large-scale gains can be realized not until 40 percent of the personnel understand in practice the process improvement philosophy, the approaches and practical tools. Few companies have a score better than a few percent. The level is rather a few tenths of a percent. Even in comparably large companies there is in practice not even a single person with adequate process improvement know-how. A process improvement related title does not guarantee an adequate understanding level. Studying and implementing improvement tools will not do because these do not provide any means to take the operations to the next ambition level where more strenuous challenges and demands wait for their solution.

How could one then manage this knowledge and skill related, most dynamic improvement issue, bearing in mind also time based prerequisites?

The level of difficulty of this challenge is Mt. K2 of process improvement, because traditional approaches to process improvement education and training provide at best only a solution that comes half the way. Coming all the way requires the identification and management of the substance that should be mastered, combined with a sufficiently performing method that enables personal learning, and the measurement and assurance of the transferred know-how. The real quality level of the know-how is eventually measured by how well the organization realizes the improvement potential in practice.

 

Basic Mantra 3.0

Customer orientation and minimizing quality defects, variation and waste are only one part of modern process improvement. Producing defect free what customers want is the basic mantra (version 1.0) that puts the ambition level on a too low a level from the beginning. A perhaps more sophisticated version of this basic foundation related to total quality management (TQM) is to “do the right things right”, which can be considered the basic mantra 2.0. It means that the processes should both be effective and efficient. Besides customers, the company should also satisfy other stakeholders, such as the personnel and owners, as well.

The basic mantra 2.0 requires already a considerably better process improvement method performance than is possible to achieve with traditional improvement methods. Many organizations have sunk into this improvement swamp, and many are yet to sink, because the applied improvement methods have not changed despite changed circumstances and challenges.

It is not sufficient that the processes are competitive today. The essence of modern process improvement is how well the performance can be maintained and improved in spite of dynamic conditions and needs.

How is, for example, the improvement effectiveness assured, and by this also the effectiveness of the operations, if there is no verified and well-performing logic in use that ensures that the organization is focusing on the right issues? One very popular guarantor of the decision quality is the widely applied gut feeling. As the decision makers do not know of any better approach, it is applied year after year, despite having the best people dealing with the improvement efforts. Organizational changes, process models, score cards, surveys and studies, outsourcing activities and IT system projects consume time and money, and many times also nerves, often without a considerable payback and impact on stakeholder satisfaction.

In continuously changing conditions it is crucial to do ”right things rightly, in a fast and cost-effective way”. This is true for all processes, including the improvement activities. More and more organizations have moved, or are moving, into a business environment that is formed by this basic mantra 3.0. In such a setting, many improvement methods have only a nostalgic value, just like old scrap cars.

 

Managing a Contradictory Equation

A high measurable improvement performance keeps the organization continuously competitive. In the company world the practical implementation of this strategy means a concrete solving of a contradictory improvement equation: how to lower the costs, increase the price of the outputs, boost sales, without the dissatisfaction of any stakeholder. The process improvement yield provides the understanding regarding the current solvability level of this equation (0-100 percent) for any given company. This understanding provides also a perspective of the magnitude of lost opportunities that go down the drain currently.

A similar equation providing the direction and meaning to the improvement efforts can also be defined in the public sector. Based on this it is possible to select such improvement methods that solve the total equation as well as possible.

Should appropriate improvement methods not be readily available, these can be created using reverse engineering concepts and a constructive research approach. None of the traditional improvement methods have been designed using such approaches. This explains their poor total performance and unsatisfactory fitness for solving contemporary challenges. A good way to assure the improvement method performance is to study how it has been developed, including the method’s prerequisites.

 

The Improvement Culture Cannot be Copied

The greatest quality weakness of the improvements methods used by car manufacturer Toyota is that the methods do not assure the improvement effectiveness, i.e. that the right issues are really improved from a total perspective (see also the first article in the series).

The greatest quality strength of Toyota’s set of methods is that the PDCA logic (plan, do, check, act) assures the efficiency of the improvement work, i.e. that the issues are improved in the right way. By applying an indicator that shows how well the PDCA logic has been used in the practical improvement work it is easy to define the quality level of the implementation. It should be at least on an 85 percent level for the organization to improve its operations in a sustainable way. The core of the PDCA logic is the setting and testing of a hypothesis, which is also the spine of scientific work

Process improvement based on lean thinking focuses per se on waste and quality defect (variation) reduction, especially in the production. Such a narrow perspective is today insufficient. Paradoxically, many organizations have in their lean thinking application gone unwittingly in for the end-results of the PDCA logic used by Toyota. The improvement object has not been the understanding and thorough application of the PDCA logic, which would create on the practical level the right improvement culture. This deficit is not lessened by analyzing the end-result in a systematic and result-oriented way using benchmarking.

It is not possible to improve commitment, understanding and operations in general by applying or even copying the end-results of other organizations’ improvement methods. Applying end-results omits many crucial issues such as the identification of the right improvement objects and the setting and testing of hypotheses. The organizational and cross-functional learning is also desisted in such an approach. Best practices should be utilized with caution when improving processes, because this may lead to a situation where the organization never learns the true dynamics and character of process improvement.

 

Four Crucial Variabels

In many organizations, process improvement equals the creation of a process model accompanied by a quality handbook. In a best case scenario, these issues support the organization’s quality assurance efforts. In a worst case scenario, they create a comfort zone where the executives and other personnel enjoy themselves until the organization is demolished. A process is by definition the interaction of people, technology, information and material (stuff) to produce the desired output. It is clear that without active improvement efforts, the interaction between these four variables will not remain, but declines continuously. Even good quality assurance efforts cannot stop this trend as these only affect the absolute quality level, not the relative quality level that also takes into account changed conditions.

 

About Average Thinking

Every process has a unique set of prerequisites, interfaces and priorities. Therefore average thinking should be applied with deliberation, even if it could provide from a certain perspective a tempting advantage. A soccer team cannot procure sneakers based on the players’ average feet size, even if such an approach would provide a better discount and an easier procurement bureaucracy. Each phase in the improvement value chain has to be customized, verified, prioritized and implemented in a total and optimal way, despite limited time resources.

Moving from average thinking towards precision improvement requires from a management point of view the adoption of new perspectives and the sharpening of attitudes to maintain attention on crucial improvement details as the improvement work advances.

The continuous improvement principle means that the organization’s process improvement yield is constantly on a high level. The ability to maintain a high level in the long run using resources scarcely shows that the organization has come a very long way in providing its stakeholders with a higher level of satisfaction.

Nothing delights more than real improvements achieved year after year. A good performance can always be improved, and even the best can be better!

Outperform Toyota by Improving the Processes

Original Title (in Finnish): “Prosesseja kehittämällä paremmaksi kuin Toyota”

Original Publisher: The Finnish Pharmacists’ Society

Publication: Proviisori Journal 3/2011 (pages 28-30)

The article is the first in a series of three articles providing a general introduction to high-performance process improvement.

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Definitions

  • A network is the interaction of organizations (units), technology, information and material (substance) to produce a product or service.
  • A process is the interaction of people, technology, information and material (substance) to produce a product or service.
  • A core process is a process that affects directly the cash flow (produces directly added value).
  • A support process is a process that affects indirectly the cash flow (produces indirectly added value).
  • A key process is an important process.
  • A value chain is a network of core processes of different organizations.
  • Process improvement is a systematic approach to satisfy the stakeholders of the organization by improving the performance of the activities in terms of time, quality and costs.
  • High-performance (process) improvement is a high-class (process) improvement using scarce time and money resources.

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Toyota is known for its improvement methods. However, any organization can improve its operations better than Toyota.

What’s the quality of the improvement methods your organization uses? How well are the methods applied? If the quality of the improvement method is low, then the implementation quality becomes irrelevant.

The improvement challenges boil down to two totally different issues: the quality of the improvement methods and the quality of implementing the methods. Anyone responsible for improvement issues in the organization should at least on a general level grasp the improvement performance of the company, and how to achieve and maintain a high-performance improvement performance in dynamic circumstances.

Improving processes is an every-day task in every industry. How good, systematic, and result-oriented the efforts are, is completely another issue. Paradoxically, the improvement performance itself has not improved much during the years in terms of time, quality and costs, despite that the competitive state and operations of both whole industries and single organizations face continuously more demands and challenges.

In process improvement, as in all activities, the crucial issue is to achieve as good an interaction as possible between people, technology, information and material (substance) to produce the desired output. How well this interaction functions in real-life is easily judged by the output quality, and by measuring the process performance (time, quality and costs). The output produced by the improvement work is the achievement of a better interaction in the focus network, organization or process.

 

The Improvement Work Needs Improvement

Operations or process improvement has as a substance field developed much in recent years, as the focus of method research and development has been put on the improvement work and the related improvement performance. It is clear that improvement methods and concepts developed decades ago have not been able to deliver even a satisfactory improvement output for a long time.

Traditional improvement methods and concepts, such as lean, six sigma, quality awards, maturity levels, process modeling and different hand books, are from a method point of view scattered, static and stiff. Even a combined use of such methods offers at best only a low momentum to increase the improvement performance, resulting nevertheless in a bad input/output ratio. Defining the quality of the traditional improvement methods and concepts, and evaluating their time related performance (effective and calendar time) show that the shortages of such methods and concepts are severe.

 

The Improvement Yield Concept

The improvement yield of an organization, process or unit can be easily defined by measuring the quality and scope of the improvement plan(s) and the related implementation of the plan(s). The end-result is a percentage number (0-100%), i.e. the improvement yield. It tells in a practical way how effective, efficient and striking the conducted improvement work actually is.

It can be shown that Toyota, the world’s improvement icon, has evidently an process improvement yield in the range of 15%. A lot has been written about Toyota’s underlying improvement methods, and perhaps even more about the related end-results that include the lean philosophy and the Toyota Production System. In theory, the application of Toyota’s set of improvement methods, known as hoshin kanri and nichijo kanri, could result in a 60% process improvement yield level. It is remarkable that it took Toyota approximately 20 years to reach the 15% level, which means that the time performance of the applied methods is not especially good. The level has not improved in 40 years, rather declined, due to a lower implementation quality and a decreased scope, the applied methods remaining intact.

 

The Best that did not Pass the Class

The average company has a process improvement yield slightly below 3 percent. Compared with the average company, Toyota’s improvement performance is more than five times better. Despite this, Toyota’s improvement performance can be described as ”the best that did not pass the class”, because a 15 percent process improvement yield level is, after all, modest.

Passing the class with only a 15 percent knowledge level is rare, let alone with a level of only a few percent. If a drug would have such a low efficacy level, then the improvement efforts of most companies could be compared with placebos or homeopathic substances, because of the almost non-existing effective components of the methods applied. In the event of having a hint of effective components, the time factor dilutes mercilessly the impact towards zero.

When things are considered at a sufficiently low ambition level, the improvement work becomes inevitably busy work, regardless of other beliefs. The quantity of improvement methods never replaces the quality of the improvement methods, nor is it possible to solve today’s problems using yesterday’s improvement methods.

 

Process Improvement Provides Welfare

How could our organization gain a sufficient process improvement momentum? The key persons need first to identify and acknowledge the improvement performance deficit. This is not a very easy task as the consideration of the process improvement performance, including the terms and concepts, is for most people new. To get familiar with the basics takes time, besides the issue of getting rid of old perceptions and behavior that per se requires great efforts.

Getting a sufficient and correct general view what modern process improvement is, and on what level the improvement work should be in today’s world, should be on every executive’s and improvement manager’s agenda.

Every organization can in practice achieve at least a 75 percent process improvement yield in a few years, i.e. a five times higher level than Toyota’s. Such a level offers both on the micro and macro level interesting possibilities to increase the satisfaction of stakeholders, and to generate welfare. The understanding how the actual potential of the organization, or even the whole value chain, can be realized each year is in everybody’s interest, also in the individual consumer’s or tax payer’s.

 

Away from Quasi-Improvement

Implementing ineffective improvement methods has in practice led to a situation where the improvement work is conducted within the organization’s and individual persons’ comfort zones. Such issues that people are used to gain momentum, not such issues that are actually needed. A trivialization of the improvement work in combination with a strong faith in common sense feeds such quasi-improvement further.

Offering simple and user-friendly solutions to customers, in a cost effective and timely manner, requires often a deep understanding, management and improvement of very complex, contradictory and large wholes. At the same time, the company has to satisfy its employees and owners better than before.

Metaphorically speaking, organizations step on the gas with the wheels firmly in the air, without the car moving in real-life anywhere. Without speed, it is fundamentally clear that the car cannot move in the right direction even if the front wheels would be pointed in the right direction.

In practice, organizations select the improvement objects without a high-class identification and evaluation of their importance. This results in a low improvement effectiveness level from the outset. The implementation of the improvement efforts is also quite inefficient, and the follow-up of both results and the quality of the improvement work is often neglected. This is a real nuisance in almost all industries.

 

The Methods are not All the Same

Any set of improvement methods offer, even correctly and widely used, a certain improvement performance that provide the theoretical upper limit how well and fast the improvement work can advance in an organization. This limit is very low for many improvement methods, implicating that that the performance level in practice is (much) below the theoretical maximum performance level.

The selection of an improvement method locks the forthcoming improvement performance in a certain category. It is not advisable to conduct any improvement work without a thorough understanding about what can actually be achieved with the applicable methods. After this the organization should evaluate how well this improvement performance serves the current and future ambition level of the network, organizations, unit or process.

Right improvement methods, implemented correctly and promptly, produce results that make improvement work interesting, and even joyful!