International Process and Performance Institute

A business associate and good friend who ran a small telecomm company was in the habit of calling me on occasion and the conversation always started with, “Don… Mark here…  What have you done for me today?”   It was his refreshingly frank way of telling me he wanted something from me.  On one particular occasion, I reminded him of the large contract he had closed only the day before, of which I had graciously sent his way.  My response was something to the effect of “What about that account I sent you yesterday? What about that?” I’ll never forget his response, “That was yesterday!  I fed my kids yesterday, but they woke up hungry again this morning.”  Of course, after saying that, he laughed long and hard at his own joke.   We can chuckle about it too, but the uncomfortable truth is we don’t get to coast very long on past achievements.  Life is like that and so is business.   

Business excellence, like life, is a journey and not a destination.  We never quite arrive.  It is a series of paths strung together; some more successful than others and all educating us along the way.  So it’s no surprise that recently the topic of “sustainability” in terms of process improvement and business excellence has become a hot issue.  Why are steady gains and improvements so elusive for most organizations?  Why do we experience the huge gains from early process improvement projects and less from subsequent ones?  There is no singular answer to this question of sustainability.  Indeed, to get sustainability we have to look in a number of places.  It’s my turn to chime in on a few ideas I think are relevant.

One observation I have from a few glimpses inside some companies (manufacturing in particular) is the primarily singular focus on processes within manufacturing or operations.  Customer support, order entry and fulfillment, warranty and other non- manufacturing or operations processes are rarely brought under the microscope of process improvement.  Many of these other processes represent much more of the organization’s contribution to the P&L than is perceived.  Particularly those processes which touch the customer have a huge effect on revenue, which is the first part of the profit equation (revenue – expenses = profit).  To overlook these processes is to limit sustainability. 

One recent example of this was a manufacturing concern who had asked me to come tour their facility and offer some ideas for improvement.  What I saw and heard on the tour, which was entirely of the manufacturing facility, was a wonderful story of many Lean projects and the fantastic results they had achieved.  It was truly remarkable what efficiencies they had gained on the manufacturing floor in almost every area.  However, as I asked about other processes such as sales, warranty, dealer acquisition, etc., the answers I received left me with the impression those processes had never come under scrutiny. 

At the end of the tour we discussed what we saw and what I thought they could do, applauding them for what they had done on the manufacturing floor.  I explained I thought their future opportunities would primarily be found in analyzing processes which faced the customer, and using the CEM (Customer Expectation Management) approach instead of Lean for analyzing those processes.  I told them there were probably more gains to be made on the manufacturing floor, but they seemed to have that well in control. 

This is where I misread the situation at first.  It finally occurred to me they had “hit the wall” as is common with Six Sigma, Lean, TOC and similar methodologies that come from manufacturing. The biggest process improvement gains from these methodologies come in the first projects; each subsequent project yields less and less.  They had already harvested the big yields from manufacturing and were frustrated with the meager gains they were getting with recent projects.  Yep, these folks had hit the wall and unfortunately, they could not see anything beyond their manufacturing processes for more gains.  What is sad about this company’s story is they really do have some great products, but their customer is so far removed from their sights, they are doomed to stay in the ruts they’ve created which run long and deep.  Unfortunately, this company is chronically inside-out.  In their defense, most companies are.

One of the reasons I attribute for this inability to see process improvement in a more holistic way is the feedback and incentives which are common in manufacturing and other organizations where costs are a large focus.  Frankly, most of the rewards and incentives are geared for reduction of costs, manufacturing costs, operations costs, etc.  Most of the recognition organizations offer is in terms of reducing costs as opposed to increases in customer satisfaction, customer retention and lifetime value, and increases in revenue per customer; all of which are more difficult to measure.  So it’s no surprise many organizations fail to realize these opportunities in their process improvement programs and thus sustainability is restricted. 

Sustainability in business excellence is only possible when we take a holistic approach to process improvement and we incent all sides of the business equation.  Cost reductions are only part of the equation.  Revenue related processes (all customer related activities that bring in revenue) deserve our consideration as well.  We need to scrutinize all aspects of our organizations.  We also need to develop incentives and recognition for delivering on successful customer outcomes (SCOs) in addition to cost reductions.  Once we determine what the SCOs are, we can set the appropriate key performance indicators (KPIs) to measure our gains and reward them.

These are only two observations I have in regard to increasing sustainability.  I have others I would like to share and they will come along in the next few weeks.  I’m interested in your thoughts too, so please comment or email me (don.smith@ipapi.org).