The New Beginning Part 1

As promised on my LinkedIn post, I am beginning a series of posts on Matt Hutcheson's and my new book, The New Beginning.  As I explained, this book is written as a business novel and it is a sequel to The Secret to Maximizing Profitability.  Matt and I hope you enjoy this series of posts.

As I said, the New Beginning is a sequel to my last book, The Secret to Maximizing Profitability.  In this book Matt Hutcheson and I demonstrate how the same principles and improvement tools apply to both Healthcare and Manufacturing environments.  Between Matt and I, we have both been fortunate to have worked in Manufacturing and, along the way, I added Heathcare to my resume.  While many people believe that the Theory of Constraints applies only to a manufacturing environment, we demonstrate through a business novel format just how wrong this thinking is.  No matter whether you are in a manufacturing setting or a healthcare setting, you will see that both settings can use an integrated Theory of Constraints, Lean, and Six Sigma methodology to drive profit margins to new levels.

 This book begins with Tom Mahanan, the former Finance Director for Tires for All, cherishing his huge royalty check for the improvement efforts he had completed for his Board of Directors. Tom had changed his career aspiration and was now an internal process improvement consultant. Tom was a huge fan of Kevin O’Leary from his favorite tv show, Shark Tank, and he had negotiated a royalty deal and it really paid off.   Tom had directed improvement efforts at six of the Board’s portfolio companies and the improvement results were astonishing!  On the six Portfolio Companies that Tom had worked with, the average % Profit Margins had increased from an average of 8.3 % to an astounding 27.6%!  And the improvement had occurred in a relatively short period of time, which very much excited the Board of Directors. The other key metrics that had improved were, the average % On-Time Delivery for the six portfolio companies, which improved from an average of 77.6% to 94.6%!

 Other performance metrics that demonstrated improvement under Tom’s leadership were, Average % Scrap for the six portfolio companies, which had improved from 5.9 % down to 2.1%. In addition, the average % Rework improved from 9.4 %, down to 2.9 %! Surprisingly, the average % Stock-Outs for the six portfolio companies had decreased from 10.1 % to 1.1 %. And finally, the metric that surprised the Board Members the most was what happened to the average Efficiency % which dropped from an average of 89.7 % to 68.3 %!

One metric that brought back happy memories for Tom was his discovery relative to percent efficiency. Before he had begun his improvement learning journey, percent efficiency was considered a key metric that should be driven higher, especially by the Board of Directors.  Tom remembered exactly what the Board Chairman said after seeing this graphic, where he said that he was totally confused by these results. While efficiencies nose-diving, at the same time the profits and delivery metrics were sky-rocketing upward.  Tom remembered that this was a true turning point for him, as he responded to Board Chairman’s question and his ensuing conversation. Tom had explained that believing that efficiency was a good performance metric was a false belief.   And he goes on to explain why this was true.

In my next post, we'll continue on with this series of posts.

Bob Sproull