3 objectives for process improvement
If your organization is confronted by a critical need to improve your operations, how do you focus your process improvement activities? Do you launch a program soliciting many local improvements, or do you focus resources in one area for more dramatic benefits and expand? Run everyone through training in how to improve work (e.g., Six Sigma, Lean)? Set up an organization for process or embed it in the existing organization? Invest in new systems?
The focus of your process improvement activities should depend on the needs for change in the business, and I see three possible objectives: (1) fine-tuning the "performance engine", (2) process innovation, and (3) making your organization "anti-fragile".
#1: Fine-tuning the Performance Engine
The "performance engine" is the ongoing operation of the business day-to-day. It delivers services to customers according to a formula that for large, successful organizations has been refined and streamlined for years. As long as there are no major threats or disruptions in the environment, the organization is looking for "better sameness": do the same work we’ve always done faster, cheaper, and better. Improvement can be achieved within the existing organizational structure, and changes are incremental. The territory is familiar and results can be predicted with fairly high confidence.
What's the focus of your process improvement program?
If fine-tuning a success model is what you need, then "Belts" can work with operating leaders to define projects within their responsibilities. Typical Six Sigma and Lean tools can be applied within the organizational structure to reduce costs, eliminate waste, and improve quality. GE historically provides the best example of this approach in action, with their Six Sigma belts fanning out and looking for cost reductions. ROI models work for predicting costs and benefits.
The biggest challenge to focusing process improvement on fine-tuning the performance engine is the competition for people and money with line managers. Given possible short-term thinking, many line managers often would rather "work harder, not smarter", for example, hiring a few more people to work around a broken process or system, rather than fixing it.
#2: Process Innovation
Process innovation is the radical redesign of cross-functional, end-to-end processes. It is called for when performance for customers is not meeting competitive standards, and when functional optimization (fine-tuning the performance engine) is inadequate. "Better sameness" and incremental changes are insufficient; big change is needed. Moving into new territory, outcomes are unpredictable.
Process innovation can’t be achieved within the existing organizational structure of the performance engine or with typical projects. This is a transformation program, with the need for dedicated transformational leaders and governance systems. Business reengineering offers useful tools and approaches, such as "process owners" and an evolutionary experimental approach to redesign, labs, pilots, and rollouts. An example of process innovation is the move by companies to implement global standard enterprise systems and processes.
The biggest challenge to focusing process improvement activities on process innovation is making peace with the performance engine. People are comfortable in the success model of the organization, and imposing major changes will naturally meet with resistance. There is competition for resources, and the financial review systems will favor the predictable and short-term over the risky and long-term. Senior leaders need to approve funding and be actively involved over a number of years. The result is often episodic bursts of process innovation.
#3: Making Your Organization Anti-Fragile
As I wrote in a post for the Harvard Business Review, some systems, such as biological ones, gain from disorder. These "anti-fragile" systems love randomness and uncertainty; going beyond resilience or robustness, they get stronger with stress and volatility. Start-ups tend to be anti-fragile; large, successful organizations tend to be fragile. Focusing your process improvement activities on making your organization anti-fragile is called for if your organization’s major concerns are increasing disruption from threats and opportunities in the environment.
How can you make your organization anti-fragile? In my post I describe how developing capabilities in problem solving, as Toyota has done, provides one approach. Crises and major disruptions are not an abrupt departure from what anti-fragile organizations do continuously — solve problems. Rather than being controlled through rigid command structures, employees at all levels are trained every day to be quick problem-solvers. A disruption or crisis that might be crippling for some organizations is a challenge they already know how to handle. Another approach is to develop and invest in processes for sensing and responding to changes in the environment, particularly by listening to customers.
The challenge in making your organization anti-fragile is that a focus on building problem solving capabilities competes with the performance engine’s short-term focus on immediate results. Command-and-control management will almost always get results faster with less effort devoted to developing people. And in the competition for resources, the momentum of the performance engine will again be to "work harder, not smarter".
In summary, process improvement activities can drive very different kinds of results, so where you focus your efforts requires clarity on purpose. What does your organization need: fine-tuning, innovation, or anti-fragility?