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Business Improvement seen as a System

I’m assuming you have some area of responsibility, whether that’s a company or a department. You also help somebody achieve something by providing some product or service.

Do you see what I’m trying to prove here? You have a customer, whether that’s an internal customer who is the next link in your company’s chain, or the external customer who actually exchanges your output for money. In order to compete and not simply fall into a price war nobody can win, there are three things you must work on. And before I go on, this applies to you even if you don’t have a company to care for. You are still exposed to competition based on price, even if it’s just younger people entering the workforce who have more recent exposure to industry best practices and new technology (at least the academic versions). It’s definitely in your best interests to learn how to compete by better serving your customer, whoever that may be.

The three areas that are the real areas of competitive advantage:

1 – Getting to know your customers’ real undisclosed needs and meeting them;
2 – Constant, deliberate innovation in your product or service;
3 – Excellence in Operations

I deal mostly with number three, Excellence in Operations. How you do your work is something you can improve. In other words, how well you serve your customer, even if that customer is just the next step in the order fulfillment chain where you work.

The goal, then, is to create a system that will make it easy for you to make and keep improvements. In time, the other two pillars of business will be facilitated by you, because they too are operational – that is, they are carried out day-by-day and how they work can be made more effective.

What do we mean by a “System”?

Improvement needs to to be a basic part of business, it’s own department, whether formally or not. There are avant-garde companies that have a much less departmental structure than others, but in general, each function or specialty has its own domain. Factory workers don’t usually do your telemarketing or social media outreach; your sales team typically focuses on sales and not shipping. So it is with improvement. Even if your company isn’t big enough to have an improvement specialist on staff, and everyone is wearing multiple hats, improvement must at least be its own hat. You need to consider it to be an activity in its own right, and any business activity worth doing, of course, must have its own process and structure.

A system by definition has multiple interdependent parts. As a pilot (well, a former student pilot…) I like to use the analogy of a light aircraft. You open the throttle and add power; airspeed, attitude and altitude all respond. You then channel the power. Pull back on the yoke and you directly affect only attitude, and your craft’s nose rises; but the rest of the system is connected and your airspeed slows and your altitude increases. An improvement system is similar, with all different parts that work together. The trouble is, you can lose sight of the main concepts and get buried in data very quickly. You need to start out keeping a very simple system and set of components in mind.

At it’s essence improvement has a few core pieces. Take a look at this diagram. It’s over-simplified but does a good job of illustrating what we need. We’re looking at a basic ratcheting mechanism. To get water from the well we turn the handle. Maybe you can’t get the bucket to the top in one movement, and let’s say the bucket is too big to pull up directly with just the rope. You apply what effort you can to the handle, and its leverage allows you to move the wheel by one notch. The big arm, called a Pawl, lifts up as you turn and drops into the next tooth on the wheel, allowing you to catch your breath for the next effort by holding the wheel in place.

An improvement system has to be exactly like this in concept. You can take your company, department or even just your own function to the next level of competitiveness if you have a system that has the right parts, no matter how simple. Let’s take another look at our ratchet and see if we can apply the same ideas to our work:

  • In our picture of a well, “WATER” is being raised up. Let’s call “WATER” the work you are doing every day as a company. Or more specifically, how well (pun intended) you’re doing your work. This could be productivity, profitability, revenue, customer satisfaction; this could be the percentage of widgets produced defect-free in an hour; in short, this is a KPI you already have, whether it’s spelled out or just generally accepted.

  • How deep is the well? The distance we need to raise the water is the magnitude of improvement we need. This is not what we’re shooting for right away, it’s the big-picture ideal situation, the vision we believe is possible.

  • How far can we reasonably raise the water without stopping for breath? If the teeth on our ratchet mechanism are too far apart, we’ll tire out before reaching the next stopping point. This is like our improvement efforts. We need to bite off a small target we can reasonably expect to attain in a short period, otherwise we’ll lose focus or relevence before we get anywhere.

  • The Pawl is the most important part. In our well, we’re assuming the water is in a bucket too heavy to raise in one shot. We have to have something to hold it while we stop and rest. Improvement efforts are the same in business. You have to have a system in place or an action taken that will sustain the work you have done.

  • Finally, the handle and the effort. This is a choice you have to make, and it can’t be over-stressed: only focused effort makes a difference. Think of cutting with a blunt knife: at the edge, the pressure you apply is spread over too wide an area, so it isn’t enough to cleave the material. Improvement efforts need careful planning, so that you apply the right amount of effort to the right place.

    So here we are again with a summary of our well. In order to improve, we are combining the following parts:

  • The Water: A measurement we are trying to improve
  • The Depth of the Well: knowledge of where we’re starting and where we’re going
  • The Ratchet Teeth: we’re planning incremental progress
  • The Pawl: we will actively put something in place to sustain results
  • The Handle: we will carefully determine the location, direction and amount of effort we will apply for each incremental improvement.

    If you haven’t started developing a system for your improvement, sticking to this model will allow you to change any size of department or company for the better.