Note: This is a guest post by Kevin Duggan, renowned speaker, executive mentor, author of several books, and educator in applying advanced lean techniques to achieve Operational Excellence. More of his information is at the bottom of the page. We’re honored to have him on the blog:
Since the lean movement began, organizations have steadily been making improvements to their operations using tools (mostly from Japanese manufacturing techniques) to eliminate waste, increase productivity and become more efficient.
Over time, these efforts make progress by solving quality problems, reducing inventory, and perhaps even creating flow.
And while these changes are “improvements,” at some point, senior management will ask, “With all of our continuous improvement efforts, why isn’t our business growing?”
Related Content: Podcast interview with Kevin Duggan about his newest book
It’s simple: companies spend years driving continuous improvement and applying lean techniques with the goal of eliminating waste and reducing cost in hopes of growing their business. In reality, however, there’s not a direct link. We could have the leanest, lowest cost, best quality, and on-time operation only to have the customer say, “We just don’t need your product anymore.”
That’s where Operational Excellence differs from traditional continuous improvement approaches. Rather than a “get a little better each day” or “never-ending journey” approach, Operational Excellence is a destination. That destination is defined as:
“When each and every employee can see the flow of value to the customer, and fix that flow before it breaks down.”
There’s even an acid test to let you know if you’ve achieved it: a visitor should be able to tell if you’re on aligned with your customer needs just by walking through the operation, without asking any questions.
So how do organizations shift their improvement efforts from waste elimination to achieving Operational Excellence? The answer is actually 9 answers.
Companies that make the leap to Operational Excellence are able to answer nine tough questions before they even get started. Why are these questions –- and their answers -– so important? In order to do things differently, we first have to see things differently. That’s what these questions allow us to do.
1. Why do we do ‘continuous improvement?’
If we answer the question, “Why do we do continuous improvement?” by stating that we do it to eliminate waste, reduce cost, improve quality, and make our operation perform better each day, we are bound to a slow journey of improvement year after year. Rather, the right answer that enables us to jump to Operational Excellence is, “We do continuous improvement to grow the business.”
We want each employee to understand that continuous improvement is not about making the operation a little better each day, but about growing the business each day.
2. What is the best way to improve?
Instead of responding with one of the many tools, methods, and approaches to continuous improvement, the correct answer to this question is to communicate to each employee exactly where the operation is going from a business perspective, thereby providing a destination for our continuous improvement efforts. Then, we provide all employees with a road map that will guide them to this destination in their area.
3. How do we know where to improve?
Typically, employees answer that we decide where to improve based on where performance is lacking and the resources available. But that approach only fixes the biggest problem in the operation at that time.
Instead, we need to set a destination, or how the new operation should be designed and perform, and a road map to get us there. So the correct answer to this question is, “By following the road map.”
4. Why do we strive to create flow?
The Lean Concept teaches us that we create flow (the flow of product to customers) to eliminate waste. But a company that achieves Operational Excellence creates it for a different reason: so it can see when flow stops. No matter how good the flow is, eventually flow will stop. By exposing the disruptions that stop flow so that we can see them, we can then educate and enable the people in the flow — not management -– to correct the problem before it becomes catastrophic.
5. What causes the death of flow?
Value streams that have constant interruptions in flow are not as healthy as they could be. Management has to step in and expedite, prioritize, and override the flow, and eventually, flow dies.
A common answer is lack of long-term commitment from the top. But the true answer is because we don’t truly understand why we created flow in the first place. If we knew that we created flow just to see when it stops, the concept of flow would never die because its purpose doesn’t. We would also realize that the next step is to teach the people who work in the flow what to do to prevent it from stopping again.
6. What would the shop floor look like if we did everything right?
Many employees answer this question by describing the results of years of continuous improvement. But this doesn’t give us an overall picture that describes what we would see if we were standing on our shop floor after achieving Operational Excellence.
At that point, you should be able to tell if the flow of product to the customer is normal or abnormal and see standard work, not only at each station, but between the stations as well.
7. What would the office look like if we did everything right?
Typical answers to this question, like making sure employees show up on time and providing timely responses, aren’t very practical since you can’t see or teach them. Instead, you should have an exact destination for the office processes or preset flow paths that provide the formal route along which information flows. It needs to be set up so everyone knows what to work on next based on flow, not based on management-reshuffling priorities or meetings to decide priorities.
8. What would the supply chain look like if we did everything right?
Typical answers would be: accuracy, on time, and requiring fewer resources. But again, the real answer is that you can stand on the receiving deck and know if your supplier is on time, if you have enough inventory for the next scheduling period just by walking through the warehouse, and if a supplier is going to fail long before it impacts production.
9. Where will our continuous improvement journey take us?
Most companies answer this question in terms of performance and results. Their answers may sound good, but there’s no road map to ensure that we’re improving the right things in the operation to leverage business growth.
Instead, we need a more practical answer that can be applied at each level of the organization so that all employees know what they can do to contribute to reaching the destination. The answer?
Our lean journey will take us to Operational Excellence, where every employee will understand exactly how to flow product to the customer, what to do when that flow is normal, and what to do when that flow starts to become abnormal.
Flow will “self heal” without management, who will then work on product development, meet with customers, become solution providers to customers, and leverage their operations towards business growth.
One final Question
In addition, there’s probably one more question you should answer: is Operational Excellence something you’d like to achieve with your operation?
About the Author
Kevin J. Duggan is a renowned speaker, executive mentor, and educator in applying advanced lean techniques to achieve Operational Excellence, and the author of three books on the subject: Design for Operational Excellence: A Breakthrough Strategy for Business Growth, Creating Mixed Model Value Streams, and The Office That Grows Your Business – Achieving Operational Excellence in Your Business Processes.
As the Founder of the Institute for Operational Excellence, the leading educational center on Operational Excellence, and Duggan Associates, an international training and advisory firm, Kevin has assisted many major corporations worldwide, including United Technologies Corporation, Caterpillar, Pratt & Whitney, Singapore Airlines, IDEX Corporation, GKN and Parker Hannifin. A recognized expert on Operational Excellence, Kevin is a frequent keynote speaker, master of ceremonies, and panelist at international conferences, and has appeared on CNN and the Fox Business Network.