Tuesday, August 3, 2010

Focus and Leverage Part 2

Last time I said that over the next few months I was going to demonstrate exactly how TOC can work for you and how to turn all of those training $’s you spent into profits that will be sustainable. Before we get into the solution, let’s take a look at the problem of why the bottom line isn’t improving fast enough to suit you or your leadership. If you’re like many companies, there seems to be a rush to run out and start improvement projects without really considering the bottom line impact of the projects selected. Many companies even develop a performance metric that measures the number of on-going projects and attempt to drive the number higher and higher. Instead of developing a strategically focused and manageable plan, many companies try to “solve world hunger” instead of focusing on the areas of greatest payback. Many Lean initiatives attempt to drive waste out of the entire value chain while Six Sigma initiatives attempt to do the same thing with variation. There’s nothing wrong with either of these strategies if they are focused on the right area.

The real problem with failed Lean and Six Sigma initiatives is really two-fold, too many projects and focusing on cost reduction. Many companies simply have too many on-going projects that drain valuable resources needed for the day-to-day issues facing them. Knowing what to do next can really be confusing to managers who have reached their saturation point and are not able to distinguish which projects are vital or important and which ones are not. The economic reality that supersedes and overrides everything else is that companies have always wanted the most improvement for the least amount of investment. Attacking all processes and problems simultaneously, as part of an enterprise-wide Lean-Six Sigma initiative, quite simply overloads the organization and does not deliver an acceptable ROI. In fact, according to the Lean Enterprise Institute annual surveys, the failure rates of LSS initiatives are hovering around fifty percent. With failure rates this high is it any wonder why companies abandon the initiatives and back-slide to their old ways?

Earlier I said that focusing projects on cost reduction was one of the reasons that many Lean-Six Sigma initiatives are failing. Across-the board cost cutting initiatives are pretty much standard for many businesses. Companies spend inordinate amounts of money on external consultants and in-house training programs and then focus on ways to reduce costs. Focusing soley on cost reduction is a mistake. So if this misguided focus isn’t right, then what is the right approach? In my next blog, I’ll demonstrate why this focus is misguided, but more importantly where the right focus should be.

Based upon my experiences in a variety of organizations and industries, the disappointing results coming from Lean and Six Sigma are directly linked to failing to adequately answer three questions: What to change? What to change to? and How to cause the change to happen? Take a look at your own company. Are your projects focused on cost reduction? Do you have an army of green belts and black belts? Do you have so many projects that they are bogging down your company? Are your Six Sigma projects typically taking 3-6 months to complete? Are they providing you with real bottom line impact or are they a mirage? In the next blog we’ll begin to address how we can take advantage of the LSS training that’s already been provided to accelerate your company’s profits and where to focus your efforts..

Bob Sproull


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