George always enjoyed his bi-monthly CEO Group meetings. Hearing the problems and issues his peers were having made him feel less exposed at the top of his own organisation.
Today Simone, the CEO of a textiles manufacturer, was bemoaning the lack of success of her continuous improvement project.
“I budgeted for a 5% productivity increase from our continuous improvement project, but I’m being told we’ll be lucky to get 1% this year.” Simone complained.
“It’s been a struggle to get 5% over the past few years, but they claimed they did achieve it. But this year, apparently, it’s beyond them. Do any of you have similar problems?” she asked looking around the table.
Raj, a silver-haired Indian running a string of retail shops responded, “While I still have a continuous improvement process going but I no longer budget any productivity increases. I take anything I get as a bonus.”
A general muttering in agreement was heard around the table. Except from Anthony, the CEO of a distribution company. He joined the conversation with a radical assertion.
“I think the whole notion of continuous improvement is out-of-date and dangerous!” He immediately had the attention of his peers.
“Think about it. Continuous improvement aims to improve a ‘nip’ here and a ‘tuck’ there. Because these ‘improvements’ are usually done in isolation to each other they tend to allow each organisational function to improve a process to increase their own efficiency often at the expense of the end-to-end process. These ‘improvements’ actually make the end-to-end process less effective so we are pushing people – even rewarding them for it – to come up with ideas that make our businesses less effective. That does not seem to me to be a very good idea. I told my management team some time ago that I was no-longer interested in continuous improvement.” Anthony continued. “As you can imagine they were somewhat shocked. Stories of the Japanese improvements through Kaizen had convinced us that this is a good way to go. But look at what happened to the Japanese economy – they continuously improved themselves to death.”
The group maintained a stunned silence.
Anthony continued to hold the floor. “Continuous improvement, while it can deliver some immediate benefits, will only deliver the ‘low hanging’ fruit. What we all need is quantum leaps in performance. We need to move from our current ways of doing things to new, much better ways – new levels of performance. Improving at the edges is no longer good enough! We need more radical change – to redesign how we do business, compete and make money.”
George liked the idea but had a problem, “I agree with your idea, but no one seems to be able to come up with the ideas or processes that take us to this new level of performance. I mean,” continued George, “I seem to have a bunch of people doing process mapping, but nothing seems to come of it. I see no significant improvement to my operations, just some marginal cost savings that, as Anthony points out, probably make the end-to-end process worse. My question is, how do we break out of this situation?”.
Suddenly everyone wanted to be in on the conversation.
“If I see another process map I’ll scream!” interjected Judy, the CEO of a car parts manufacturer. Most group members agreed.
“I thought process reengineering was supposed to achieve this ‘move to a new level of performance’.” stated Barry, the CEO of a charity.
“I’m not sure most executives understand yet what a ‘process’ is and so don’t have a clear idea what process reengineering is.” added Brian, the convenor of the CEO group.
“Ouch!” exclaimed Raj, “That hurt, but I think you’re right. If I think of my executive team I’ll bet they talk ‘processes’, but actually only think within their functional areas. We’ll have to break them out of this mould to move forward.”
“But how can you tell when people are not process-oriented?” asked Brian, the convenor of the CEO group.
Anthony rejoined the discussion. “I wondered about that for some time until I put my management team through a one-day workshop on processes and process redesign. It was interesting to hear how they thought differently. Some just got it and could see how to tackle processes end-to-end to get to a solution. The others were of a different mindset. They were constantly asking for ‘the deliverable’ and the ‘required measures’ but not about ‘how they were going to get there’.”
“I have come to the conclusion, therefore,” continued Anthony, “that managers who think solely in terms of outputs and deliverables, the ‘whats’, are not process-oriented. Those that think in term of ‘how’ things are going to be achieved are thinking in terms of processes. What I have not worked out is how to move the ‘whats’ to become ‘hows’.
“Where does Six Sigma fit in to all this?” asked Peter, the CEO of a legal firm who had been quiet so far. “My firm in the US has just decided to adopt Six Sigma and I’m not sure what it is going to do for my firm.”
Anthony looked around to see if anyone was going to respond to this. Everyone knew of Six Sigma, but no one was game enough to respond to Peter’s question. So Anthony launched forth.
“Six Sigma is a 1980s approach to continuous improvement. It is a two-level process improvement tool that can be used by process and functionally oriented people alike. It improves efficiencies and tackles problems. However, it is not so good at increasing end-to-end process effectiveness or results. You’ve got to remember that it came from a manufacturing improvement background. It was designed to eliminate production errors and variances. It can be applied to clerical processes and will often improve them. But it is a limited tool and very costly to implement.”
“How so?” asked Peter with obvious anxiety.
“To be fully trained and experienced in Six Sigma takes months and expensive training, mostly in statistical analysis. You need to maintain a group of ‘black belts’ so that you can execute Six Sigma in your business and they are expensive to have on the payroll and very marketable at the moment. So you can go to the expense of training them up and then lose them to another company. But, more worryingly, I know of very few companies that have successfully implemented Six Sigma the first time. The companies that have stuck with Six Sigma have often had two or more goes at it. Most have given up after their first attempt failed. Six Sigma may be the ‘in thing’ but it is not cost effective or particularly business effective.”
“Going back to George’s question a while ago, ‘How do you break out of the endless process mapping?’"
"Six Sigma is one answer but is limited as it tends to look only at the process you are looking at. I know that sounds strange, but to generate the breakthroughs you often have to look at other processes that have two or three degrees of separation to the process you are looking at and change them so that the process you are focusing on can break through. To give you an analogy,” Anthony continued to a sea of bemused faces, “you know those games where you have a jumbled picture and one blank slot and you then have to move pieces around within a frame to un-jumble them and recreate a picture?”
The heads around the table nodded.
“What I have always found is that you have to make big moves well away from where the blank slot is in order to get the picture right. If you fiddle around near the blank spot you will not get very far. Similarly with processes, why continuous improvement does not work well is that processes are interconnected, often by information and, unless you recognise this, the improvement for any one process will only be fiddling at the edges overall.”
Barry looked perplexed. “Can you give us an example please.”
“Certainly,” continued Anthony, “We recently looked at our Bid and Tender response process. It was costly and not very successful. Initially the team made some improvements that would reduce the time and cost of the process, its efficiency and cost. Nice, but not very useful because, when you think about it, a Bid and Tender process is about winning, not process efficiency.”
“What we then did was look at what we needed to do to win more tenders. Then we found we needed to change how our sales force worked, what information they captured about customers and prospects in their sales process. We needed to capture our customers’ buying values and to track the leading indicators of when they were likely to go to tender so that we were in on the ground floor pre-empting it where possible. Making changes to these other processes has increased our success with tenders but are not directly changes to the tender response process. Does that make sense? What I have found is that you have to look at all of your processes and how they impact or feed information to each other in order to break through.”
George was fascinated, “This information tracking idea is new to me. So you get the IT people involved?”
“No,” answered Anthony, “we get the staff involved in the process to map them and then, once we have redesigned the process and made the obvious, and sometimes revolutionary, improvements, we answer a very simple question, “For each step in the process, What information does this person need to do an excellent job?” The staff then nominate what information they need. This ‘information needs specification’ then links the processes with the systems as the systems can then be designed to provide the staff with the information they need to perform excellently. We can then look to where this information needs to be captured. In the tender response process case it was in the sales and customer relationship processes, and we changed those processes to ensure the information we needed was captured.”
“Does this achieve the breakthroughs we were talking about earlier?” asked Judy.
“To obtain dramatically improved performance requires a different approach. You need to go beyond just process improvement to look for breakthrough ideas and the ability to leverage the power of systems to deliver sustained improved performance. Our sales force was previously busy but not very effective.” continued Anthony. “They each did their own thing and reported through our common sales system. We applied what we call our ‘Simplification approach’ to the sales processes, a challenge at any time!”
“Isn’t the concept of ‘sales processes’ an oxymoron?” joked George.
“Well, our results,” continued Anthony, “were that they came up with a new, structured way of approaching clients that enabled us to focus our sales efforts on the areas where we are most likely to succeed. Our sales are already up by more that 20%. Simultaneously, my sales force now collect the information we need for the tender response process without even realizing it.”
“We’ve moved from an energetic sales force to a focused sales force. Every sales dollar is now allocated on a considered basis in terms of how it will deliver results. That’s not incremental continuous improvement, that is a step change with consequential results.”
“So,” asked Judy, “are you still using process maps?”
“Oh yes,” answered Anthony, “but two different types. The first, simple ones just get us going and document the current state in detail. This is where most process mapping seems to fail – they only map a general idea of the current state and, therefore, do not fully understand it.”
“We then go on and define the new state and document that in the form of ‘value maps’ that force us to discover the value of each and every step of the process. This approach causes us to radically question the value of what we do now and to come up with the new ways of doing business. Then, once we have defined each value-adding process, we look at the information needs that I talked about earlier. Providing the right information at the right time to the right person can, at times, simplify processes by a further 20% in terms of the number of process steps.”
“Continuous improvement does not generate this level of process scrutiny. As soon as continuous improvement or Six Sigma has found an improvement it has ‘won’."
"But I don’t want improvements, I want step-change because that is the only way we are going to win in the long term,” stated Anthony emphatically.
The group nodded agreement and made mental notes to find out more.