Posts Tagged ‘Lean Six Sigma in Services’

Productivity – The Coming Golden Age of Continuous Improvement

February 10th, 2013 Comments off

A Drive for Productivity

Last week I wrote a post entitled Value Creation for Private Investors that went largely ignored as it was one of my lowest viewed posts of the new year for a Monday when most of you tune in.  The idea about which I wrote was a revelation to me but it was still nascent at the time and thus very undeveloped and weakly presented. But it gnawed at me and so it kept turning in my head.  And now it pops out again this week hopefully a bit more developed.  The idea is the transition we are making from creating the illusion of wealth with financial engineering to needing to truly drive wealth with productivity gains which will make for a golden age in Operations and Operational Excellence.

As a nation, we will flourish based upon our ability to drive productivity.  You see wealth, as measured by GDP, during the majority of our lifetimes has been driven by population growth.  But as our population growth slows, wealth will only be created by increased productivity.  This transition has been hidden from us for some time by the illusion of wealth creation brought about by high capital liquidity and inappropriately priced risk which eventually lead to the bursting of a financial bubble.  But with risk being more appropriately priced, the illusion is gone and we are now faced with long term slow growth and the only way to stoke it is with increased productivity.

To drive the growth in productivity, I wish to cite a recent blog post by GE’s Jeffrey Immelt a portion of which read as follows;

There are four new drivers of productivity, and success in each depends on the technology and talent we develop. The first is how the sheer volume and increased access to shale gas in regions around the globe is changing the energy debate and the balance of energy power. It would require real infrastructure and pipeline integration between Canada, Mexico and the U.S., but North America could achieve energy independence within 10 years. The second driver for dramatically increased productivity is applying the lessons of social media to the industrial world and building what we call the Industrial Internet. By owning and connecting the analytical layers around industrial products – and using real time data to extract real timeknowledge – we can improve asset performance and drive efficiency. The third driver is speed and simplification because the only way to serve our customers better and compete in a complex world is by working faster and smarter. The last productivity driver, and related to the other three, is the evolution of advanced manufacturing. Manufacturing excellence, forgotten for too long, is once again a competitive advantage.

Drive Value with OpEx

Now when you look at this argument about from where we will get the productivity growth, a problem jumps out.  Namely, we have to generate non-population related productivity gains with a population that isn’t geared to Immelt’s productivity drivers.  Our younger citizens certainly are better aligned and skilled but as population growth slows, they will be the minority.

So guess what — the knowledge of how to improve services, products and processes is really valuable.  Now I’m not talking about how to write a project charter or write up a SIPOC.  I’m talking about revolutionizing energy with process innovation in the extraction of natural gas, the development of the cloud so we can jettison underutilized servers from expensive IT budgets and citizen publishing of information so knowledge flows freely and into every nook and cranny of the population instantaneously.  Imagine – those have all happened in the last five years.  Those are the types of improvements that transform an economy.  But there is plenty of room between a project to save an AP process two days and reinventing the extraction of fossil fuels.  And every time a new industry is targeted, all the operating processes below the top level change will also be looking to improve.

Can you imagine where these big seismic changes will happen next?  How about redesigning education so everyone has access to knowledge inexpensively?  Or health care where we can all see an insanely low level of simple IT tools that if applied would eliminate gobs of waste.  Or all levels of government where we have constantly rising costs with little measureable gains in services.  These trends will continue.  They must continue or we, as a nation, will slowly lose our global relative wealth.  And I just don’t think Americans are ready for that.  But the changes will be disruptive.

In the race to drive wealth through productivity gains, we will see the greatest impact in processes and services simply because they are the largest percentages of the economy.  I’ve already named drilling services, the cloud, newspapers & magazine publishing, health care and education as service companies which either have gone through or are poised to go through significant redesign. What of the process side?

Systematically Driving Value with OpEx

Well I think we are going to see work get reinvented.  My former colleague at Qualtec, Mitch Lawrie, is working on software to focus management on results versus activities and my recent blog on the subject drew significant attention from many of you.  We have worked with several clients in financial services, telecom and transportation which are redesigning long accepted processes to drive greater than 50% reductions in key process cycle times by making them leaner, reducing complexity and capturing information better as well as analyzing it for knowledge.

To return to my original post, my “aha” moment was that I was at a private equity conference where investors of all sizes where lamenting they could no longer make easy money.  That easy money was driven by a combination of capital liquidity, high tolerance for risk and poor quantification of that risk.  It was a recipe for a bubble.  If you bought an asset, held it and sold it before the bubble burst, you made money.  If it was levered, you made a lot of it. The funny thing is that private corporate investors weren’t the only players at the casino. We were all there with real estate and stock portfolios.

But that is gone now.  And as we look into a new environment, we realize we are facing the longer term challenge of slowing population growth and an aging population that isn’t skilled at what is needed to drive the sort of productivity gains needed to maintain historic wealth creation.  To create wealth as a country, we now have to earn it the hard way.  And since there are only so many hours available in the work force, it means we have to work smarter.

And a clearer definition of that “aha” moment brings me to the message in this post.  We figure out ways to work smarter – whether it is a fifth level sub-process or an entire industry.  The result is that we are entering a golden age for people focused and skilled at how to work smarter.   We have the opportunity to make great contributions to our economy.  I urge you all to THINK BIG.  If you’d like to discuss, feel free to contact me.

Lean Paves the Road for Six Sigma…especially in Service Organizations

November 27th, 2012 1 comment

It was more than 15 years ago that our firm was first engaged to help a client implement Six Sigma. Along the way, Lean was integrated and the term of art became Lean Six Sigma.  Yet even today, we still begin many conversations with prospective clients who say “we want to do Six Sigma?”   We try to determine what Six Sigma means to them and why they want to do Six Sigma.  Definitions and motivations vary.  None are wrong.  They are individual to the person, the company and the situation.

But to determine the appropriateness of their conclusion, we ask about the nature of their business challenges and the state of their management system.  And at the end of that portion of the conversation we invariably begin to wonder whether the prospective client can benefit greatly by first paving the way with Lean.  And that is really most apparent in Service Organizations where so much of the waste is invisible and Lean’s visual tools brings the waste to light before introducing Six Sigma.

Lean Six Sigma for Services

our latest whitepaper, which discusses how Lean Six Sigma is different in a services environment, as compared to a traditional manufacturing environment.

Lean can be of great benefit before introducing Six Sigma for the following reasons:

  1. Lean makes the implementation of Six Sigma easier by eliminating non-value added activities.  Six Sigma, while robust, like any program that aims to drive change can be a challenge to implement.  You can make Six Sigma’s implementation simpler and more cost effective by first applying Lean.  This is for two reasons. First, you will enhance the effectiveness of the Six sigma tools by enhancing the rate at which information is fed into the Six Sigma problem solving exercises.  Secondly, you may discover after applying Lean, there is insufficient improvement available to merit a Six Sigma project.
  2. Lean develops a culture of improvement which makes implementing Six Sigma easier.  Lean can be implemented more quickly and easily than Six Sigma.  We facilitate workshops that by the end of a week introduce improvements.  People come out energized and feeling they made an impact.  Managers see an ROI on the improvement investment.  The result is a willingness by all levels of the organization to increase their commitment.
  3. Sometimes the problem isn’t going to be solved with Six Sigma tools…or at least not quickly.  When you prioritize problems, you try to separate them into buckets by their fundamental nature so as to gain some economies and structure to any allocation of resources.  Part of the reason is that Six Sigma efforts require more time and effort.  Failing optimize the problem to the applied tools, you may end up trying to apply Six Sigma to problems that can be easily addressed with a Lean exercise.  Even worse, you can work at reducing variation when all you need is to reduce your cycle time to capture the available gain.

We have written a great deal about both Lean and Six Sigma.  We don’t favor one methodology over the other nor do we see them as an “either or” decision.  In the long run, we encourage all our clients to gain proficiency and apply both Lean and Six Sigma.  However, to help our clients succeed in driving ROI and organizational change, we believe that there are advantages to Lean paving the way for Six Sigma, especially in companies just starting out as well as Service Organizations.

Now there is always an exception to a rule such as when prioritized projects clearly require Six Sigma tools.  The business should always “pull” the improvement efforts as outlined in “Let Your Business Define Your Improvement Program”.  But in the case of launching or re-launching a general program, allowing Lean to pave the way for Six Sigma increases the ROI of the continuous improvement effort by using the simplest and most applicable tools first while increasing the effectiveness of subsequent Six Sigma activities.

If you wish to discuss these points, contact me.

Process and Change in Service Industries – The Survivor Challenge

February 1st, 2011 Comments off

Outwit…Outplay…Outlast.  Wow, that says it all doesn’t it?  Reality TV is a kick. Throw a bunch of strangers onto an island and watch them dwindle down based on how well they can play to the desires of a group in a winner-take-all battle. Lots to learn from watching. How well and quickly can a player understand the group’s requirements? How well can they meet those requirements in a highly competitive situation? Each elimination changes the group’s dymanics so the requirements, competition and strategy all have to be adapted continuously and quickly. One slip up and you could be out. How does this relate to Service Industries?

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our critical to customer requirements VOC module

In previous articles, I’ve discussed how business and consumer patterns have gone through massive changes and how understanding the Voice of the Customer is the key to adapting to the new environment. The nascent recovery is providing an opportunity to survive and, for some businesses, to flourish. But the competition is still in the elimination phase and I believe that is very much the case for service businesses of nearly every nature.

It’s important to understand why things are different in services so as not to be lulled by more macroeconomic headlines. Before the crises, manufacturing went through years of driving productivity while services accelerated right up to the edge. The Federal Reserve’s strategy of depreciating the dollar and growing demand in emerging markets has helped the global competitive position and demand for manufacturing products while services are more tied to the domestic economy. Finally, we have a political environment that ramped regulation or restructured entire service industries such as banking and health care. And if that weren’t enough, services are going to be the start-ups of all the unemployed as they require less capital and can use the internet to gather and distribute information, the very essence of a services business, at a very low cost.

Change is not over in service businesses. Like Survivor, listening and adapting quickly to an ever changing customer is still the only protection from elimination. Several key points we consider imperative to driving alignment are:

  1. However you capture VOC, keep improving it. We propose a five level maturity model that goes from what you need to simply stay alive to what you need to be innovative.
  2. Balance how you respond to VOC with how you respond to other stakeholder demands. We have a checklist of behaviors that will give you the ammunition to point to an imbalance.
  3. Segment your VOC. Meeting every item your customer sets out for you will not yield a purchase while some will yield tremendous results. We offer a framework for segmentation.
  4. Convert what you hear to something you can measure. To make science out of art we use industry case studies and benchmarking as the best guide.
  5. Align process metrics to the chosen customer measures in #4 above. Again, use industry benchmarking and cases to apply knowledge and experience and avoid the alchemy.

Now you are ready to drive change. But there is one more thing. Let’s return to the scenario painted at the start of this article…it’s not enough to just do this. You must do it fast. We are rebounding but demand for services isn’t returning to 2006 levels…at least not until around 2016…and competition is increasing. During that time, businesses will fail, be acquired or be rationalized. But there will also be winners and, like Survivor, they will win big. We urge you to recognize what is coming and act.  Outwit…Outplay…Outlast.

If any of the pieces above would help you, let me know our thoughts.

Who ya' gonna call? LSS for Services Tip #2 – Lean Busts Halloween Ghosts

October 19th, 2010 Comments off

Lean Tools Bust Waste in ServicesAs we all know, the birth of Lean (usually with the word “Manufacturing”)  is often considered to be the Toyota Production System. Lean for Service Operations is so new it is defined on Wikipedia as the application of lean manufacturing principles to service operations. Yet when you search using Google the term Lean Manufacturing yields just over 1.5 million results while Lean Services yields a surprising 16.3 million results! The derivative outpaces the original because of its natural application. It’s as if it were always meant to be.
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This natural fit lies in the very nature of manufacturing, service operations and the strengths of lean. Lean was first easily discovered in manufacturing because waste and WIP are easily found. Like in the California gold rush, you could bend down and pick up the nuggets. Manufacturing’s physical nature provides an easy route by which to follow the flow of work. As you move along, you can see raw materials, intermediate stages of inventory and final finished goods. And also along the way, you can see bins of rework and scrap as well as WIP between stations. You physically see the work, the WIP and the waste. Certainly it took brilliance to design what to do with it but the problem was evident.

Lean Six Sigma for Services

our whitepaper that discusses how Lean and/or Six Sigma in a services environment differs from a traditional manufacturing environment

Service operations, however, by their very nature aren’t so easily observed. Work flows are unseen. Information representing WIP are sent over networks. Customers waiting on phones can’t be seen. Time lost is erased with the stroke of a delete key. Service operations, like spirits on a Halloween night, can pass before our eyes without a trace. Enter Lean. Lean with its highly visual tools like value stream maps performs the supernatural. It gives earthly form to the phantom.

As the invisible becomes visible, we make a great discovery – so many service operations occur between functional areas such that they aren’t owned by anyone. We learn that not only is there waste, but there isn’t anyone even worried about it. Thus Lean, with its visual tools, not only provides visibility to work flow, waste and WIP but raises the question of process ownership.

With processes made visible and ownership addressed, the race for improvement forces the question of where to attack first. Very simply put, once non-value added activities are made obvious by the accumulation of waste & WIP, you look for the actions and processes that drive up said waste & WIP. Therefore, when looking for projects, look within or between the processes to which waste and WIP demonstrate the greatest sensitivity. Then heavily rank that projects that improve those processes. They will have the greatest impact on eliminating non-value added activities.

People talk about the amount of low hanging fruit in service operations. It’s important to understand why it is there. People in service operations aren’t fools willing to let waste and WIP drag them down. But they haven’t been able to see the problem and where it resides. With the visibility lean brings, that has changed. And consider us your Ghostbusters! If you would like to discuss the visual tools embodied in lean and how they can help your service operations, please feel free to contact me.

Lean Six Sigma In a Services Environment – Tip #1 What Versus How to Measure.

October 6th, 2010 Comments off

When attempting performance improvement in a services organization, it is very important to distinguish between measuring the “correct thing” vs. “measuring the thing correctly”. Since people drive the decisions in service organizations more than in manufacturing organizations where machines and software limit human variance, processes are less defined in service organizations.

With less defined processes, the service world’s KEY measurement issue is finding the correct things to measure that gives true feedback on past or future performance. This “what to measure” issue is quite different than the predominant issue in manufacturing, which is “how to measure more accurately.” In manufacturing, for example, gage studies are critical; the data usage is straightforward. In service processes, however, the greater issue by far is determining a useful measure.

Lean Six Sigma for Services

our latest whitepaper that discusses key differences for Lean Six Sigma in a Services environment

A general lack of consistent, cookie-cutter measurements for service businesses demands greater time and attention is focused on developing and understanding appropriate measurement systems in specific environments. Managing a process becomes a matter of reading and interpreting a series of interrelated measurements rather than relying on a mystical “key measurement”. No one measure will identify and eliminate all problems forever. For the most part, businesses measure variables such as close rates, cycle time and on-time compliance, with little understanding of “value added” contributions to the final “product.”

Each service-related

environment has its own unique set of problems, and each requires a carefully crafted, custom analysis that fit its top level customer and business data, its core and sub processes and its definition of critical to customer. As such, the skills needed to do this well, such as process mapping and process design techniques rise in importance.

So often when we talk to clients and prospective clients in service industries, they describe their requirements along the lines of “our folks don’t handle statistics well”, “we’d like more service examples” or “we need someone who understands our culture”. To them, that is what Lean Six Sigma in Service environments mean. All these things are true. But just as importantly, you need to understand your unique nature and adopt a different set of tools and techniques. This discussion of the importance of process is just one. In coming posts, we’ll discuss others. If you want to talk about these Service Industry points, please feel free to contact me.