First Friday Book Synopsis

"…like CliffNotes on steroids…"

Uniting the Religions of Process Improvement

Brad Power

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog (March 7, 2011). To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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When they set out to turn around processes that have become woefully inefficient or ineffective, most companies choose one of four process improvement “religions”: Lean, Six Sigma, Business Reengineering or Business Process Management (BPM).

After hearing about its success at another organization, many companies choose just one. For example, several companies embarked on Six Sigma programs after their CEO heard about GE’s success with the approach, and many other companies have adopted Lean because of Toyota’s success.

It’s like adopting a diet or exercise program that a friend has used and lost 50 pounds.

But some companies realize they need to go beyond making episodic improvements. They try to institutionalize process improvement — that is, put in place the right mechanisms in their management systems so that their business processes don’t become grossly unproductive in the future. That is, they try to build continuous improvement into their DNA. It’s like the difference between going on crash diets every two years and fundamentally changing one’s eating and exercise habits.

But moving from episodic process improvements to having the wherewithal to improve processes continually is a tall order because of five key challenges I highlighted in a previous post: competing demands for attention, competing mindsets and behaviors, strategic irrelevance, traditional management processes, and the pain of disruption.

If an organization tries to institutionalize process improvement based on the tenets of just one process religion, it will run into trouble because no single religion has all the approaches for sustaining organizational attention to improvement. Lean has the most complete set of approaches for continuous improvement among the four religions. But a company that embeds Lean thinking into its DNA may occasionally need the hard financial results that Six Sigma can produce. In addition, Lean converts have a predisposition against adopting large, centralized IT solutions, which may cause them to ignore useful approaches from the BPM religion.

The result: Organizations need to consider every possible approach, not just those offered by one religion. To stay with the diet and exercise analogy, being aware of multiple diet programs will help you pull out common themes and arrive at a tailored program that works best for you.

Consider this example. Many companies adopted Six Sigma in the late 1990s. They trained experts in improvement projects (“Black Belts“) who then drove initiatives that achieved large financial results. In some of these companies, senior managers were dubious about the claims. They suspected there was some backsliding or double counting because the results were almost too good to be true. Many of those organizations then embraced Lean for different set of tools for improvement projects, tools that helped them connect project results to key strategic measures. They also stressed organizational learning (meaning, capturing the methods of Lean so that other parts of the organizations could adopt them). Adding another religion helped these companies embed continuous improvement into their DNA.

If organizations want to keep their processes up to date continually, they need to be able to use many approaches to embedding improvement in their management systems. Let’s review the distinguishing features of what each religion has to say about sustaining improvement.

1. Six Sigma zealots say “Belts,” lots of training, and performance measures are what matter.

Motorola pioneered the Six Sigma statistical tools, but it was GE that built the training programs and the hierarchy of accreditations or “Belts” (Green, Black, Master Black) with which it is so strongly associated. People who have earned these belts drive projects with clear financial targets set at the top organization, with progress monitored by the CFO. Six Sigma zealots argue that if you train enough people, you get a cultural transformation. You instill process improvement into the corporate DNA.

2. Business Reengineering’s high priest said core process owners, process maturity, and performance measures are what count.

Reengineering focuses on radical changes in core, end-to-end processes. In addition to laying out an approach for making one-time improvements, Reengineering’s high priest (the late Michael Hammer) had advice for organizations wanting to sustain improvement. He implored their leaders to create and track end-to-end process performance and establish an organization — including process owners and councils — to support the processes. He also advised them to continually assess their processes against a model of process maturity — PEMM for short — which he unveiled in an HBR article.

3. Lean “senseis” (teachers) say strategy deployment, executives as coaches, and front-line problem-solving sustain improvement.

Followers of Lean, which is based on the Toyota manufacturing approach that made it the leader in automobile quality (the Toyota Production System), believe top executives need to break down strategic objectives into implications for process improvements to get everyone moving in the same direction. For example, to improve customer satisfaction, an insurance company decided to focus on reducing the number of service requests over 30 days old from 40% to below 5%, which translated into activities in 30 departments. All organizational levels must identify and solve problems, but senior managers must tell front-line workers why efficiency is critical at all times, and then help them remove waste and improve service to customers.

4. BPM missionaries say processes and process knowledge embedded in software, an enterprise architecture, and a central process management organization sustain improvement.

Most missionaries of the BPM religion come from a heritage in information technology. They believe companies can sustain process improvements if their people use a company-wide software system (such as an ERP application), which has standard processes embedded in the software. They also advise companies to use business process management software to map and document process flows and how work should be executed and to monitor performance. They also believe in building a BPM “Book of Knowledge” (a codification of process improvement “best practices”) and a BPM “Center of Excellence” (a central organization where process experts reside and develop guidelines and procedures for documenting and analyzing business processes).

A few companies that lead in sustained process improvement have drawn from the best of each religion to embed continuous improvement in their organization.

Shell Oil’s downstream (refining and retail) businesses have rolled out a global implementation of enterprise software SAP with standard global processes (as the missionaries of BPM would preach). The company has trained its people to be Shell Sigma Belts (following the precepts of Six Sigma), and appointed process owners and established an elaborate process governance structure (as Hammer would have recommended). What’s more, the company helped develop Hammer’s PEMM concept and is now training Lean managers.

Chemical company Air Products has adopted nearly every approach for sustaining improvement from all four religions. Sloan Valve appointed core process owners several years ago following the Reengineering playbook. The manufacturer has since introduced quality techniques (“kaizen” events), as well as Lean strategy deployment methods and tools.

There is no reason that organizations wishing to sustain process improvement should not draw on all these ideas, becoming “Unitarian Universalists” and bringing together the best of each religion.

Request: What approaches have you seen companies adopt that have kept their attention on process improvement? Have any of these companies combined the approaches of different process religions?

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Brad Power is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute.

 

Thursday, March 24, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , | Leave a comment

Most Valuable Business Insights: 6-10

After having read and reviewed so many business books, I now share brief comments about what I consider to be the 25 most valuable  business insights and the books in which they are either introduced or (one man’s opinion) best explained. Here are second five:

6. Customer Evangelism: Satisfaction is determined per transaction; loyalty is determined by sustainable satisfaction; zealotry occurs only when customers say “Yes!” to this question posed by Fred Reicheld: “Would you strongly recommend us to a friend, neighbor, or colleague?”

Best Sources: Fred Reichheld’s The Ultimate Question: Driving Good Profits and True Growth and Creating Customer Evangelists: How Loyal Customers Become a Volunteer Sales Force co-authored by Ben McConnell and Jackie Huba.

7. EDNA: This is an acronym I devised long ago when I began to teach English at Kent School in Connecticut.

Exposition (i.e. expose, reveal, open up, reveal) explains with information.
Description makes vivid with compelling images.
Narration explains a sequence and/or tells a story
Argumentation convinces with logic and/or evidence

Effective communication relies on mastery of one or more of these four.

Best Sources: Robert B. Cialdini’s Influence: Science and Practice (5th Edition) and Crucial Conversations: Tools for Talking When Stakes Are High co-authored by Kerry Patterson, Joseph Grenny, Ron McMillan, and Al Switzler

8. Employee Engagement: Recent research indicates that, on average, less than 30% of a workforce in the U.S. is actively and positively engaged. The others are either passively engaged (i.e. mailing it in) or actively disengaged (subversive and toxic). Increase active and positive engagement by (a) convincing workers that they and what they do are appreciated, (b) making crystal clear what expectations of them are and how their performance will be measured, (c) earning and sustaining their trust and respect by setting an with what you say (both verbally and non-verbally) and with what you do.

Best Sources: Freedom, Inc.: Free Your Employees and Let Them Lead Your Business to Higher Productivity, Profits, and Growth co-authored by Brian M. Carney and Isaac Getz, Simon Sinek’s Start with Why: How Great Leaders Inspire Everyone to Take Action, Edward M. Hallowell’s Shine: Using Brain Science to Get the Best from Your People, and The Why of Work: How Great Leaders Build Abundant Organizations That Win co-authored by Dave Ulrich and Wendy Ulrich.

9. Innovation: In essence, innovation achieves improvement of what already exists and that could include almost anything (e.g. an idea, assumption, theory and strategy as well as a product, process, or behavior). Almost anything can be improved and almost anyone can do that by embracing that challenge and pursuing that opportunity.

Best Sources: Tom Kelley’s The Idea of Innovation and The Ten Faces of Innovation (both co-authored with Jonathan Littman) as well as Steve Johnson’s Where Good Ideas Come From: The Natural History of Innovation and Henry Chesbrough’s Open Innovation: The New Imperative for Creating and Profiting from Technology

10. Lean: The concept of “less is more” can be dated back at least to ancient Greece. In a business context, its core concept is elimination of whatever is wasteful such as a production process that consumes too much time and effort as well as raw materials, one that results in omissions, duplications, redundancies, and flaws. Albert Einstein probably said it best: “Make everything as simple as possible…but no simpler.”

Best Sources: James Womack’s Lean Thinking: Banish Waste and Create Wealth in Your Corporation, Revised and Updated and Lean Solutions: How Companies and Customers Can Create Value and Wealth Together, both co-authored with Daniel T. Jones

Note: You may also wish to check out Most Valuable Business Insights: 1-5.

Wednesday, February 23, 2011 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Brad Power suggests, “Keep Your Eye on Process Improvement”

Here is an excerpt from an article written by Brad Power for the Harvard Business Review blog. To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

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In my consulting and research I’ve seen many companies launch process improvement programs such as Total Quality Management, Business Reengineering, Lean, and Six Sigma. Many got significant benefits, including lower costs, faster time-to-market, and better customer experiences. But after one round of improvement, they gave up and let their organization get flabby again. Organizations, like people, need to stay fit and make improvement a habit to be competitive. So why don’t they? Why is sustained process improvement so rare?

Consider the story of Allied Signal. Under Larry Bossidy, Allied Signal was a “poster child” of process improvement success following the “Six Sigma” approach — enjoying consistent growth in earnings and cash flow from 1991 to 1999, highlighted by 31 consecutive quarters of earnings-per-share growth of 13% or more, and tripled operating margins to almost 15 percent. Bossidy wrote a best-selling book, called Execution, about his approach. Yet when Allied Signal merged with Honeywell in 1999 and Bossidy departed in 2000 and was replaced by Mike Bonsignore, they dropped their Six Sigma attention while focusing on a GE-Honeywell deal. According to market analyst Cliff Ransom, “It took about 18 months for a Six Sigma culture to essentially disappear when the wrong successor to Larry Bossidy took the reins.”

Or consider the story of Wiremold, a famous example of a “lean transformation,” profiled in the book Lean Thinking [click here].  From 1990 when new management and Japanese consultants arrived to 1999, Wiremold’s stock rose 32% per year, the first shipment fill rate rose from 60% to 92%, sales per full time employee rose from $92,000 to $241,000, inventory turnover rose from 3.4 to 15.8, and new product development cycle time declined from 2-3 years to 3-12 months. Then in 2000, Wiremold was acquired by Legrand, a French manufacturer of electrical equipment. Legrand was firmly committed to batch production and standard cost accounting, and the lean transformation unwound [click here] in a few years.

As the Allied Signal and Wiremold stories demonstrate, there are significant potential business benefits from adopting a process improvement program, yet despite these apparent benefits, they weren’t enough to build process improvement into Allied Signal’s or Wiremold’s DNA. What are the factors that get in the way of continuous improvement?

In my research, including analysis of more than twenty companies which have launched major process programs, I’ve identified five factors that have gotten in the way of sustained attention to process improvement:

• Competing demands for attention (as with Honeywell’s potential deal with GE)

• Competing mindsets and behaviors (such as work harder vs. work smarter)

• Strategic irrelevance (other more important levers for competitive success)

• Traditional management processes (Legrand’s cost accounting)

• The pain of disruption

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To read the complete article, check out other articles and resources, and/or sign up for a free subscription to Harvard Business Review’s Daily Alerts, please click here.

Brad Power (bradfordpower@gmail.com) is a consultant and researcher in process innovation. His current research is on sustaining attention to process management — making improvement and adaptation a habit (even fun?). He is currently conducting research with the Lean Enterprise Institute [click here].

Wednesday, August 25, 2010 Posted by | Bob's blog entries | , , , , , , , , , , , , , , , , , , , , | Leave a comment

   

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