Tuesday, January 25, 2011

Continuous Improvement Vs. Big Bang

So your in the business of making money and you're doing OK but your shareholders expect more. 
Sure, projects usually start with an ROI calculation but we all know that these projections are often optimistic or misleading to benefit your system integrators and do your shareholders really want to wait 2 to 5 years to see a return on their money?

While big bang projects can be great to get your organization into a new market (think iPod) they are far less effective at making you money at your core business and more and more these days, by the time you've waited 5 years to see your return on the project, the technology is obsolete.

So what's the alternative? 

Strategically you will be much better off with a continuous improvement methodology rather than starting a project to do everything differently.

I learned a lot about continuous improvement or kaizen during my time at Toyota.  Continuous improvement allows you to add quality or value to your product or service and reduce the cost of providing that product or service.  Effectively you can give your customers more for less which increases your margin.  And it doesn't just increase your margin once.  Every time you provide that service you are getting an immediate return and the more times you're doing it, the more you're adding to your bottom line.
So how do you introduce a continuous improvement culture? 
Unless you know how a service is performing now, it's impossible to know if any improvements you make have actually had the desired results so step one is measure the service.  At a bare minimum you should know how often it is performed, the cost of performing it, the benefit from performing it and the affect not performing it would have on your business.  You can also measure more intangible thing like, for example, the affect on reputation.
Once you know how your services are performing you must take some time to look over the data.  Try to identify areas for improvement.  Where can you improve quality, lower costs, reduce waste, remove customer frustration, improve reputation, whatever is important to your business.
Don't necessarily try to fix all of these things at once.  Look for improvements that are easy to implement first, implement them, continue to measure the service as it's provided and then review the data to see if it had the desired affect.  If service improved, leave the change in place.  If not, remove the change and go back to how it was done before.
Now do the whole thing again!  Look at your data, make an improvement, measure it's effectiveness, keep it or go back.  If you can introduce this cycle into your day-to-day operations you will be well on your way to continuous improvement.  Also have larger cycles to look for larger improvement opportunities.
Try to encourage everyone, at every level to suggest improvements.  Make it part of their process.
What about the risk of all that change?
Look at it this way... If you on a boat going from point A to point B would you rather have a big bang project that spends a year planning the route and sets off only to find out later that the projections of wind strength were not accurate or that someone didn't take into account that you competitors are firing cannon balls at your boat?
Continuous improvement allows you to declare where you want to go, set out and then repeatedly make adjustments in your route as conditions in the marketplace change.  It is far more adaptable to the change going on all around us.  As long as you manage your change process you can control the risk.
Do you sometimes need a big bang project to bring something to market?  Of course but once it's implemented keep ahead of the market using continuous improvement.
For more information on getting more from your services, contact tony@tonydenford.com.

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