How to implement continuous improvement in your business

Continuous Improvement

This How-to guide has three sections:

  1. What is continuous improvement?
  2. The need for leadership
  3. Choosing a continuous improvement approach

①   What is continuous improvement?

1.1    What is it?

Simply defined, continuous improvement (CI for short) is an ongoing effort to improve products, services and processes. This effort can seek incremental improvement over time or breakthrough improvements, or a combination of these.

Some practitioners highlight the difference between continuous improvement (continuous without interruption) and continual improvement (continuing over a long period but with intervals of interruption). Some argue that continual improvement is broader in scope and preferable in application.

It’s important to highlight that although continuous improvement was first conceived to help with manufacturing processes, it can applied equally to products and services. The one big difference is that in the world of services, there is often no “standard product” – the particular service solution is customized to solve each customer’s specific requirement or problem. The implications of this are discussed further in Section 2.4.

1.2    Gurus of continuous improvement

Continuous improvement has its roots in the work of Walter Shewhart, the father of statistical quality control, who worked at the Bell Telephone Laboratories in New Jersey in the 1920s and 1930s. His primary business focus was finding ways to improve the quality and reliability of transmission systems which were very expensive to fix when they failed in the field.

History of CI

Listed here are some of the practitioners who have made the most significant contributions to the development of CI.

J Edward Deming – an American engineer and statistician, inspired by the work of Walther Shewhart. Best known for formulating the Plan-Do-Study-Act cycle and for his 14 Points of management, articulated in his 1986 book “Out of the Crisis”.

Joseph Juran – Romanian-born American engineer who wrote several books on quality management. Like Deming, he lectured extensively in Japan in the 1950s. The first to apply the Pareto principle to quality issues, and credited for adding the human dimension to quality management.

Ichiro Ishikawa – a Japanese engineer who became a professor at Tokyo University and introduced the concept of quality circles. Best known for the Ishikawa or Cause-and-Effect diagram (the fishbone diagram).

Taiichi Ohno – rose through the ranks of the Toyota motor company. Together with wtih Eiji Toyoda – who gave him strong backing – he is regarded as the father of the Toyota Production System. Devised the Seven Wastes (or Muda) as part of this system.

Masaaki Imai – Japanese organizational theorist. In 1986 he published his best-selling book on Japanese management “Kaizen – the key to Japan’s Competitive Success”.

Michael Hammer – former professor of computer science at MIT and one of the founders of the management theory of Business Process Reengineering (BPR). Author of the 1993 bestseller “Reengineering the Corporation”.

John Seddon – controversial British occupational psychologist and author, a proponent of the concept of systems thinking. Worked extensively in the services sector, where he developed the concepts of failure demand and economies of flow.

1.3    Principles of continuous improvement

Common to most continuous improvement approaches is a four-step quality model—the plan-do-check-act (PDCA) cycle, also known as Deming Cycle or Shewhart Cycle:

PDCA cycle

 

Plan: Identify an opportunity and plan for change.

Do: Implement the change on a small scale.

Check: Use data to analyze the results of the change and determine whether it made a difference.

Act: If the change was successful, implement it on a wider scale and continuously assess your results.

If the change did not work, begin the cycle again.

Other widely used methods of continuous improvement which we will discuss later — such as Six Sigma, Lean, and Total Quality Management — add additional core principles, mostly focussing on employee involvement and teamwork.

②   Choosing a CI approach

2.1   Continuous improvement methodologies

Evolving from the original Toyota Production System devised by Taiichi Ohno, four different methodologies for CI have emerged, each with its own distinct characteristics.

Kaizen – a distillation of the TPS and other company-specific systems, created and popularized by Masaaki Imai in his 1986 book.

Six Sigma – a set of techniques and tools introduced by Bill Smith in Motorola in 1986, then adopted by Jack Welch at General Electric. The meaning of Six Sigma refers to the number of standard deviations between the mean of a process and the customers specification limit, resulting in a defect rate below 3.4 parts per million.

Total Quality Management – this term was coined by the Naval Air System Command in 1985 and at about the same time by the British Standards Institute (BSI) to describe the holistic Japanese-style approach to quality improvement. It was incorporated into ISO standard 8402 in 1994 and subsequently into the ISO 9001 standard for quality management.

Lean (Lean manufacturing, Lean production, or simply “Lean) – popularized by John Krafcik in his 1988 article “Triumph of the Lean Production System” and in the 1990 book “The Machine that Changed the World” by James Womack, Daniel Jones and Daniel Roos. Lean is often defined as the set of tools that assist in the identification and steady elimination of waste.

2.2   Selecting a methodology

Which of these should you choose to use in your company? To decide this, we must first ask “What is the problem we are looking to solve?”

Kaizen is more a continous improvement mindset rather than being a specific tool. A Kaizen event is a collection of resources (dedicated people, money, and time resources) that are pulled together using the Kaizen mindset, typically with a targeted problem project in mind.

Lean is focused on improving process speed and quality through reduction of process wastes. These wastes all consume unnecessary energy, money, and time – things that don’t provide value to the customer.

Six Sigma is heavily driven by statistics and measurements. Statistical control charts are a key tool in Six Sigma. An output from a process must meet or exceed specific customer requirements, and that in turn translates into specific characteristics in the product or service. Six Sigma is a methodology that optimizes the consistency of meeting these characteristics.

ISO 9001 is perhaps the best defined of all the CI frameworks. A global community has grown up to deliver ISO 9001 consulting, audit and accreditation services. At last count there were more than 1.1 businesses worldwide that have achieved ISO 9001 accreditation. Many more have been certified to related standards, for example ISO 16949 for automotive quality management.

2.3   Common elements

The concept of the elimination of waste (muda in Japanese) is common to all four methodologies. The original seven muda were:

  1. Transport (moving products that are not actually required to perform the processing)
  2. Inventory (all components, work in process, and finished product not being processed)
  3. Motion (people or equipment moving or walking more than is required to perform the processing)
  4. Waiting (waiting for the next production step, interruptions of production during shift change)
  5. Overproduction (production ahead of demand)
  6. Over Processing (resulting from poor tool or product design creating activity)
  7. Defects (the effort involved in inspecting for and fixing defects)

More recently 2 new wastes have been added: Waste of a human being (e.g. a machine watcher) and Waste of natural resources.

No matter which approach you choose, the 14 Deming principles together with the PDCA cycle are the core tools that are applicable to almost any scenario.

2.4   Continuous improvement in services

In services businesses it is common for the service to be lightly or heavily customized, depending on the needs of the customer. How can you define variation when every customer solution needs to be slightly different? This makes it quite difficult to apply the statistical analysis of variation that is common to some CI frameworks. Many of the lean tools developed for manufacturing don’t work well in services businesses.

A second key difference is that teamwork in service organisations doesn’t have to be physically co-located as much as it does in manufacturing, where actual physical work-in-process has to be moved between people and machines. Service processes are usually coordinated using computer networks and the internet, so it doesn’t matter so much where people sit and work. In manufacturing, coordiination can be achieved with simple tools such as quality circles and kanban charts. In services, these concepts need to be translated into collaborative software-based proceses.

John Seddon asserts that the key priority in a services organization is to move away from a command and control approach in the design and management of work, and move towards a systems approach. He originated the concept of “Failure demand” – additional demand placed on the system caused by prior failure to meet individual customers’ specific requirements.

An example is people ringing back because they did not get their problem solved the first time. This failure demand has been observed to run as high as 80% of total demand in call centers. Failure demand can be reduced by systems redesign. Removing the system conditions causing it will create capacity and massively improve the flow of value to the customer. Organisations should be designed around “economies of flow” and not “economies of scale”.

2.5   Limitations of continuous improvement

You might well read this article and wonder why, if continuous improvement sounds like a great idea, why isn’t everyone doing it?

The tools and techniques of CI have been evolved over the years to the point where they have become over-complicated. For example the number of requirements contained within the ISO 9001 standard grew from 205 in the 2008 edition to 309 in the 2015 edition. Many consultants and practitioners have a vested interest in perpetuating this complexity. Especially for small and mid-sized business, it’s time for a simpler approach.

 

③   The need for leadership

3.1   Top management must buy in

After the 2nd World War, J Edwards Deming became very frustated at the slow adoption of statistical process control in US industry, after its great successes during the war. He identified a lack of commitment from top management as the main reason for this. In the US, management was more often more focussed on financial and sales goals rather than quality. Ever since, Deming and others have emphasised the key role that top management must play in re-ordering the priorities of the business. Without top management buy-in and evangelisation, very little meaningful progress will be made in any CI initiative.

3.2. Continuous improvement as a strategy

The concept of CI should be woven into the strategy of the business. Consider the success of Aldi, the German-based global discount supermarket chain. For Aldi, the goal of CI and lean thinking is not just about reducing costs. It is also about passing these savings on the customer. This allows Aldi to simplify their business and undercut bigger competitors who possess more resources and greater negotiating power with suppliers – like Tesco. The principles of CI and lean thinking are planned into everything that Aldi does. Aldi sells many fewer variations of products. Products are displayed on shelves in the same packing trays that are used in transit. Customers pack their bags away from the till after paying, boosting the efficiency of checkout staff. Aldi trains staff to be more multi-skilled and flexible in the roles they carry out vs the competition. All of this translates into lower prices and better value for the customer.

3.3 Hoshin Kanri

Japanese companies blended Deming and Juran’s teachings and began their first attempts at strategic quality planning. Each individual company created their own planning processes. Through the Deming Prize program set up in Japan in 1951, companies shared best planning practices and common themes started to emerge, which became known as Hoshin Kanri (which translates loosely as “management by policy” in Japanese).

Hoshin Kanri defnes a seven-step planning process:

  1. Establish organizational vision
  2. Develop breakthrough objectives
  3. Develop annual objectives
  4. Deploy annual objectives (via Hoshin Planning Matrix or X matrix)
  5. Implement annual objectives
  6. Monthly review
  7. Annual review

A Hoshin plan contains a series of hierarchical objectives that are derived from a series of ends and means analyses. Each tier’s sub-objective has an accountable person, an outcome statement, metrics and a timetable.

Hierarchical tiers

 

 

 3.3   Challenges of continuous improvement

All of the work that takes place in a business can be placed in one of two categories: (1) activities required to operate the business or (2) activities to improve the way to operate the business. The second is rarely viewed with the same sense of urgency as the first, and gets postponed by the “tyranny of the now.” For this reason a systematic approach to embed improvement activities into the workflow of the organization is essential. There are two ways to help make this possible. First, keep things simple. Don’t over-complicate the tools and techniques that you use. Second, use a tried-and-tested strategy setting process, like Hoshin Kanri.

In a follow-on article I will review the detailed implementation steps, tools and techniques that will help you set up and sustain a succcessful continuous improvement program.

 

Key points

Here are Deming’s 14 key points of management which as relevant today as when they were formulated:

  1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive, to stay in business and to provide jobs.
  2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
  3. Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.
  4. End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust.
  5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
  6. Institute training on the job.
  7. Institute leadership. The aim of supervision should be to help people and machines and gadgets do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
  8. Drive out fear, so that everyone may work effectively for the company.
  9. Break down barriers between departments. People in research, design, sales, and production must work as a team, in order to foresee problems of production and usage that may be encountered with the product or service.
  10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force. Eliminate work standards (quotas) on the factory floor. Substitute with leadership. Eliminate management by objectives. Eliminate management by numbers and numerical goals. Instead substitute with leadership.
  11. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality.
  12. Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objectives.
  13. Institute a vigorous program of education and self-improvement.
  14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody’s job.

Acknowledgements

Systematizing Continuous Improvement: It’s not about the methodology or tools – Roger Price

Deming’s Challenge to Us – Tripp Babbitt

Redux: Rethinking Lean Service – Tripp Babbitt

If Six Sigma is so easy why isn’t everyone doing it – Jay Arthur

W Edwards Deming – The Man and The Legend – Yonatan Reshef

An interview with Masaaki Imai – Quality Digest

Hoshin Planning: Making the Strategic Plan Work – Bob Page, iSixSigma

What is Lean vs Six Sigma vs Kaizen? – Chad Walters – Leanblitz

A History of Lean and Continuous Improvement – Terence Burton

Aldi case study – businesscasestudies.co.uk

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