Thursday, January 19, 2012

Focus and Leverage Part 75

For-profit organizations exist presumably for two primary purposes: to make money now and to make money in the future. Most people believe that in order to make money now and in the future requires organizations to relentlessly remove needless sources of waste and variation across the enterprise.  But is the best way? That is, if we be attack each and every process across the enterprise and remove waste and variation from every step of every process, will this guarantee profitability?  And will this approach sustain our profits in the future? If you’re using this approach, how’s it working for you?
In my view, in order to sustain profits (that is, to make money in the future), organizations must continually reinvent themselves. What worked yesterday and today most likely will not work tomorrow or next year, so change becomes necessary. The good news is, it is much easier to manage change than it is to react to it. Because products or services have such short half-lives these days, change must not only be expected, but also be passionately pursued and embraced. But what is it that you should be changing? This is one of the most important questions to answer…..what to change? Knowing what to change, what to change to, and how to implement change are the determining factors for how successful an organization will be in the future.
In an effort to reinvent themselves, many organizations have attempted across-the-board improvement initiatives like Lean or Six Sigma or an integrated version of the two, only to realize that they have failed to achieve the positive results they expected or at least hoped for.  Because of poor results, many times these same companies become disillusioned and either abandon the initiative altogether (backsliding to their old, more comfortable way of doing business) or use bits and pieces of the improvement strategy.
In the fairly recent past, the Lean Enterprise Institute (LEI) has conducted annual surveys on the subject of how well Lean implementations are going. The results of three fairly recent surveys (2004, 2005, and 2006) do not paint a very rosy picture. In fact, the LEI reported in 2004 that 36 percent of companies attempting to implement Lean were backsliding to their old ways of working. In 2005, the percentage of companies reporting backsliding had risen to almost 48 percent, while in 2006, the percentage was at 47 percent. With nearly 50 percent of companies reporting backsliding, we are not looking at a very healthy trend, especially when you consider the amount of money these companies invested in their initiatives. Add to this what Jason Premo of the Institute of Industrial Engineers reported: “A recent survey provided some shocking results, stating that over 40 percent of Lean Manufacturing initiatives have hit a plateau and are even backsliding, while only 5 percent of manufacturers have truly achieved the results expected.”

In the case of Six Sigma initiatives, the results have been somewhat more impressive, but not as impressive as they could or should be.  Celerant Consulting carried out a Six Sigma survey in 2004, generating responses from managers across all business sectors, and although the results of the survey were more positive than negative, there were several problems that did surface.
·        The survey suggests that most businesses new to Six Sigma often find that running effective projects has been a significant challenge, with Six Sigma projects often quoted as taking four to six months or even longer to complete.  I don’t know about your company’s leadership, but in many companies this is too long to wait for improvement results to hit the bottom line, especially after investing so much money in the training.
·       Poor project selection is a key area where many businesses still continue to struggle. Industry experience suggests that about 60 percent of businesses were not identifying the projects that would most benefit their business.
·       There was a shortage of good Master Black Belts. Across the survey, the ratio of Master Black Belts to Black Belts was 1 to 18. This creates pressure on the leadership of the most challenging projects and the capacity to train and develop others.

Based on 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 the question “What to change?” or worse yet, failing to ask that question at all. Deciding what to change cannot be done in a happenstance manner. It must be addressed logically at the strategic, tactical, and operational levels after careful deliberation and analysis. The roots of this disillusionment are manifested in ill-advised efforts wasted on local improvements that fail to achieve global (or system-wide) improvement.  But even if an organization successfully considers and visualizes what to change, many times that same organization will fail to rightfully answer the question of what to change to. It is one thing to change your way of doing business, but you had better make sure that what you are changing to makes sense strategically. So how do you know what to change to? In today’s world there seems to be so many choices regarding improvement initiatives, so surely one of these will work, right? Not so fast.
Even if an organization is successful in determining what to change and what to change to, there is still the question of how to make the change happen. No matter how well conceived an improvement initiative is, how the change is executed plays a significant role in the success or failure of the change. Establishing and implementing a sustainable improvement initiative requires selecting the right area to focus on, what the content of the improvement initiative should look like, carefully planning and developing a step-by-step execution plan, total support and buy-in from the leadership, and sincere collaboration with and true involvement of the employees that make the product or deliver the service.
The question of why these stand-alone or integrated improvement initiatives (i.e. Lean-Six Sigma) have not lived up to their advanced billing is not always simple to answer. It could be that the projects or processes selected to focus on were ill-conceived, or it could be that their vision of the future was flawed. It could be that implementation plans were not well planned and executed or, worse yet, never developed. But let me be clear: The reason for failure is not the initiative itself. The failure is not because Lean, Six Sigma, or Lean–Six Sigma, are not good improvement initiatives. It is really a question of planning, execution, focus, and leverage. In fact, after having witnessed the remnants of failed initiatives, it is pretty clear to me that many of these initiatives fail for two primary reasons. First, the scope or size of the initiative is well beyond the capacity of the available resources and secondly, companies generally fail to recognize their leverage point.
Part of the problem with failed Lean and Six Sigma initiatives is that many companies simply have too many ongoing projects that drain valuable resources needed for the day-to-day issues facing many companies. Knowing what to do next can be confusing to managers who have reached their saturation point and are not able to distinguish between projects that 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 the 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 return on investment in many cases.  In addition, some companies cherry-pick which Lean and Six Sigma tools to use instead of thinking of them as part of the overall improvement strategy.
Although the implementation problems I have discussed thus far certainly impede progress, in my opinion, there are other reasons initiatives have failed in many companies. So again, I ask, why are many Lean and Six Sigma initiatives failing to deliver their promise of significant profit increases to many companies?
In my next posting, we’ll take a deeper look into why so many improvement initiatives fail and what companies can do to change their course.
Bob Sproull

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