3.4 PER MILLION
Digging the Holistic Approach
Rethink business improvement to boost your bottom line
by Ronald D. Snee
Few will argue we live in a dynamic world in which change is accelerating. What often goes unnoticed is that along with this rapid change, there is the opportunity and the need to improve. Improvement methods come and go, but the need to improve business performance and the bottom line never goes out of style.
The financial meltdown has created a great opportunity for quality professionals.1, 2 This is certainly a time when we all wish we had a cash cow—a source of continuing cash flow to help us through these lean times. Indeed, every organization has a cash cow in the form of continuous improvement.3
Sizeable bottom-line results with minimal capital investment are possible. Companies focused on improvement regularly complete projects returning $50,000 to upwards of $500,000 or $1 million per project per year. Annual returns of 2 to 4% of annual revenue—every year—are realistic. There are a lot of resources wasted (funds left on the table) by many organizations in which a rigorous focus on continuous improvement could have moved them to the bottom line.
The continuous improvement cash cow need never dry up, even though competitors change strategies, new products are introduced, and economic downturns occur. Innovation and growth are not perfect—they can create waste and inefficiencies that reduce returns. If left alone, processes and products deteriorate. They do not get better by themselves. Improvement opportunities continually appear and must be addressed for the long-term effectiveness of the organization.
Getting better all the time
Lean Six Sigma (LSS) has been effectively used for the last 15 to 20 years, and much has been learned during this period. Now is the time to focus energies on helping your organization use continuous improvement to meet the challenge of the financial meltdown by creating the cash cow. At the same time, you can use what you have learned to create and develop a more effective approach to improvement.
We see companies that are mature in their use of LSS and other methods move their focus from the method to improvement. Some have followed Toyota and use the term "production system" to refer to their approach to process management and improvement. Some use other business process improvement terminology.
"Holistic improvement" captures the essence of what is needed.4, 5 Holistic improvement is defined as: "An improvement system that can successfully create and sustain significant improvements of any type, in any culture for any business."
Discussion of the key words in this definition helps explain the breadth and depth of the approach.
- To "create and sustain" improvement, some things are needed, including infrastructure: management systems and resources, a continuous improvement culture and leadership development.6
- "Significant improvements" refers to enhancing all measures of organizational performance—quality, cost, delivery, customer satisfaction and the bottom line.
- "Any type" refers to the type of improvement needed, such as any of the process performance measures noted earlier; speeding process flow; reducing variation; and the design, improvement, control and optimization of processes. A holistic improvement method is needed to address this broad array of issues.
- Improvement is needed in many places (in "any culture"), including any function in the business (functions can create cultures often described as silos) and any region or culture around the world.
- Organizations run many different types of businesses and processes. "Any business" refers to manufacturing, nonmanufacturing processes and service. Holistic improvement also works in nonprofit, healthcare and government organizations.
The characteristics of holistic improvement are illustrated in the sidebar, "Characteristics of Holistic Improvement" and summarized in the sidebar, "An Example of Holistic Improvement." These characteristics show a holistic approach is more than just a method for conducting improvement projects.
An Example of Holistic Improvement
The need to improve an organization that manufactures a biopharmaceutical product provides a good example of holistic improvement at work.1
The organization had developed a new blockbuster drug and was creating a manufacturing process to produce it. Soon, it became clear the manufacturing process was not going to meet market demand. An assessment of the entire organization was done, and it was determined that organization-development process improvement was needed. A holistic approach would address this broad range of issues.
Using lean techniques, batch release cycle times were reduced by 35 to 55%, depending on how the product sped up product release and reduced inventory and manufacturing costs.2 Six Sigma techniques increased process understanding and increased yield by 20%.
Because the organization contained a large number of people who had developed the product in R&D, the manufacturing organization had an R&D mind-set, which needed to be evolved to a manufacturing mind-set. This was accomplished through leadership development workshops. Process operator training helped improve process reliability. In addition to improvement mentioned earlier, the holistic approach produced a 50% increase in capacity, enabling the process to meet market demand. —R.S.
- T.L. McGurk, "Ramping Up and Ensuring Supply Capability for Biopharmaceuticals," BioPharm International, January 2004, pp. 1-4.
- Ronald D. Snee and Roger W. Hoerl, Six Sigma Beyond the Factory Floor: Deployment Strategies for Financial Services, Healthcare and the Rest of the Real Economy, Pearson Prentice Hall, 2005.
Characteristics of Holistic Improvement
- Works in all areas of the business—all functions and all processes.
- Works in all cultures, providing a common language and tool set.
- Can address all measures of performance (quality, cost, delivery and customer satisfaction).
- Addresses all aspects of process management (process design/redesign, improvement and control).
- Addresses all types of improvement (streamlining, waste and cycle time reduction, quality improvement and process robustness).
- Includes management systems for improvement (plans, goals, budgets and management reviews).
- Focuses on developing an improvement culture (uses improvement as a leadership development tool). —R.S.
The type of culture, function, leadership, management systems and other key elements of the business must be considered. This leads us to see the two principal aspects of holistic improvement:
- A focus on applying the approach to all aspects of the business in every part of the organization.
- A method (such as LSS) to deploy, execute and sustain process and organizational improvement.
These aspects of improvement must be addressed by the improvement system for it to adequately address all types of improvement needs of an organization and to be a truly holistic approach.
Learn from the past
George Santayana admonished us many years ago that, "Those who remain ignorant of the past are doomed to repeat it."7 Despite what has been learned in the past three decades regarding business improvement, these common mistakes continue to be made:
- Failing to design improvement approaches that require the active involvement of top management.
- Focusing on training rather than improvement.
- Failing to use top talent to conduct improvement initiatives.
- Failing to build the supporting infrastructure, including personnel skilled in improvement and management systems to guide improvement.
- Failing to work on the right projects—those that deliver significant bottom-line results.
- Failing to plan for sustaining the improvements at the beginning of the initiative.
The holistic approach described in this article can help eliminate these mistakes. Just as importantly, statisticians and quality professionals can play active roles in the process.
Things to watch for
As I attend conferences, read literature and work with clients, I hear a number of issues that continue to hinder improvement initiatives.
Project selection: This is perhaps the biggest issue, even for organizations with mature improvement processes.
One of the most significant root causes is there is too much focus on tactical improvements at the expense of strategic improvements. Both types of projects are needed. Strategic projects have greater value to the organization and are of more interest to senior management. Using value stream mapping and projects needed to address strategic business goals are good ways to help ensure the right mix of projects.8
Some organizations need to broaden their views regarding sources of improvement projects. The list of high-impact projects gets shorter if you keep looking in the same area.
Project reviews: Organizations continue to have problems sustaining improvements of individual projects and of improvement initiatives. The periodic management review of projects (weekly to monthly, depending on the level of management involved) and quarterly management reviews of the health of the improvement process are essential. A critical component of the quarterly strategic review is the assessment of the project hopper (the portfolio of projects the organization has on its to-do list).
If you want improvement to be effective on a regular and sustained basis, you must have management systems in place to guide and support improvement efforts. Successful improvement systems have management systems to support improvement. Critical elements include communication, reward and recognition, annual review and goal setting, project execution (identification to closure) and budgeting.
Management involvement: There are many demands on management’s time. Managers are always looking for duties that can be delegated to others. The monthly and quarterly reviews are effective ways to keep management involved, particularly when these reviews are part of their normal management work.
Data quality: Getting quality data in the right amount with minimal effort continues to be a challenge. Effective and sustainable improvement requires the collection, analysis and use of data. There is no way around this. The availability of statistical software has enabled more companies to use data analytics as a competitive weapon,9 a trend that will no doubt continue.
We must recognize that data cost money, and it is important to make cost-effective use of data. When the importance of the problem is clear, the role of data in the problem solution is well defined and the method of analysis is well thought-out, the cost benefit of the data will be much clearer. Support will become easier to obtain.
Never out of style
Improvement is a global imperative. To survive in today’s marketplace, you must improve quality, cost and delivery, leading to customer satisfaction.
There are many types of opportunities for improvement. A holistic approach is needed because a single method does not work for all problems. We need to match the improvement method and tools to the project and use an approach that works in all aspects of the business, solving all types of improvement needs.
Process variation affects process flow, product quality and the ability to sustain process performance. Reducing variation must be part of the approach. The bottom line is that improvement can be a very profitable business, with enhanced process performance and customer satisfaction resulting in improved financial results. An improved bottom line never goes out of style.
© Ronald D. Snee, 2009.
- Ronald D. Snee, "Grab the Brass Ring," Quality Progress, May 2009, pp. 58-61.
- Ronald D. Snee, "Get Moo-ving," Six Sigma Forum Magazine, May 2009, pp. 30-31.
- Ronald D. Snee, "Business Improvement Methodology—What’s on the Horizon?" ASQ Statistics Division Special Publication, Spring 2007, pp. 10-19.
- Ronald D. Snee, "W. Edwards Deming’s Making a New World: A Holistic Approach to Performance Improvement and the Role of Statistics," The American Statistician, Vol. 62, No. 3, pp. 251-255.
- Ronald D. Snee and Roger W. Hoerl, Leading Six Sigma—A Step by Step Guide Based on the Experience With General Electric and Other Six Sigma Companies, FT Prentice Hall, 2003.
- Ronald D. Snee and Roger W. Hoerl, "Integrating Lean and Six Sigma—A Holistic Approach," Six Sigma Forum Magazine, May 2007, pp. 15-21.
- Thomas H. Davenport and Jeanne G. Harris, Competing on Analytics—The New Science of Winning, Harvard Business School Press, 2007.
Ronald D. Snee is founder and president of Snee Associates LLC in Newark, DE. He earned a doctorate in applied and mathematical statistics from Rutgers University in New Brunswick, NJ. Snee has received the ASQ Shewhart and Grant medals. He is an ASQ fellow and an academician in the International Academy for Quality.