Innovation beyond improvement

innovation
BEYOND THE STATUS QUO

The competitive environment never, ever gets easier. Just to stay as competitive as last year, we need to execute better this year.

In many cases, Continuous Improvement is necessary just to stay in the game! And to pull significantly ahead, an organization must make process innovations in addition to improvements.

Defining the Term
A process innovation is one that has the potential to change the competitive landscape. When an organization implements a process innovation, they produce, modify, and/or adopt a new value-added product, service, process, management system, or market.

More simply stated, a process innovation significantly changes at least one of the following aspects of a process or service:

  • Speed
  • Cost
  • Quality

For example, an insurance company overwhelmed the competition by shortening the time between claim filing and payment from weeks to hours. A small bank picked up market share through a process innovation reducing the number of days to approval by 80%.

The pandemic has been a catalyst for numerous process innovations as well; supermarkets instituted curb site pick-up, restaurants found ways to expand outdoor seating and delivery, businesses of all types quickly shifted into “remote” working modes, and the availability of fast or same day delivery of goods bought on-line has been significantly increased.

Operating Assumptions?
Every business operates under the constraints of operating assumptions, and each of the above-listed process innovations challenged and overcame powerful assumptions. People may not even think of them as assumptions, but rather as facts-of-life, because they are so ingrained in our organization’s paradigm.

But to achieve a significant breakthrough, we have to identify and overcome a significant operating assumption and rewrite the rules of the game.

Easier said than done, of course. We all want to achieve a process innovation that will remake the competitive landscape in our favor. And yet, it is hard enough to get our teams to accomplish continuous improvements when they are running hard just keeping up with the usual deliverables.

Consequently, game changing innovations are rare. If your organization is going to identify and execute process innovation, you have to have created both the right human conditions and the best methods to successfully identify, challenge, and reverse the constraining assumptions that are keeping you and your competition trapped in the status quo.

With experience comes wisdom, but…

confirmation bias

As the saying goes, “With experience comes wisdom, but also confirmation bias!”

As you are likely aware, confirmation bias is the tendency to pursue and embrace information that matches our existing beliefs. Human nature is part of the problem as the information (facts?) we uncover that align with what we already thought to be true “feel” right.

But this inclination to look for supportive data can easily lead us to serious mistakes and poor decisions.

Consider that if we become more likely to look for evidence that the idea we favor is correct rather than look for ways it may be wrong, we’re really not making a “data-driven decision” because we’re actually collecting “decision-driven data.”

Here are three ways in which we can protect our decision-making from the related distortion:

  1. Recognize the bias and remind ourselves to look for it in our decisions and analyses. Remember that the authors of everything we read are making a point that is supported by the data they present, but is not necessarily by data they do not present.
  2. Make a habit of asking ourselves, “What else could it be?” We must think creatively about alternative explanations and alternative solutions, and do our best to explore them.
  3. Encourage the expression of contrary views and ideas.

How to Process Information into Lasting Solutions

analysis_process

Our previous post shared best practices for gathering quality input when engaged in an improvement effort. Certainly, high quality information about the current reality is necessary, but it’s not sufficient to produce lasting solutions.

We also require systematic analysis, unencumbered by preconceptions and biases, to identify the best solution addressing the root cause(s).

Some useful methods of processing some of the inputs are:

  • Systematically ask and answer the following questions to analyze the quantitative data gathered: o What question is this data intended to answer? o What can we conclude regarding that question from this data? o What additional questions does this data prompt?
  • Develop a cause-and-effect fishbone diagram with the people closest to the work and with someone who brings a “fresh set of eyes” to theorize about root causes. And then they can identify what data would test the possible causes they identified.
  • Use the 5 Whys to drill down from a confirmed cause to root cause(s) to avoid applying a superficial solution or ’patch’ instead of a powerful and lasting solution.
  • Analyze the process flowchart to evaluate which work steps are inspection, rework, transportation, wait time, or a gold nugget adding value. Once the waste is identified and quantified, apply the 5 Whys thinking to drill down to root causes.
  • Imagine perfection. Take some quality time with your team to think wildly about possibilities. Use exercises, including Triz, to prompt creative thinking to broaden the set of possibilities. If the best solution isn’t in the set of options a team surfaces, it cannot be selected for implementation!

How to gather input

gathering data

To optimize the effectiveness of our Improvement efforts, it’s important that we begin with a thorough understanding of both the situations we’re trying to improve as well as our own thinking and decision-making processes.

But these tasks are not always easy.

The quality of the output of any process is determined by two things:

  • The quality of the input to the process
  • The quality and reliability of the process of converting the input to the desired output.

Shortcomings in either of these will result in poor quality output. In this regard, the Continuous Improvement process is like any other process: the desired output, i.e., meaningful and lasting improvements, is produced when high quality information about the current reality is studied and analyzed by a systematic thinking process unencumbered by preconceptions, untested assumptions, and biases.

The Foundational Step
Gathering the right input about the current situation is the foundational step. If we overlook important information at this step, we are unlikely to achieve a meaningful and lasting solution.

We suggest the following four major types of input to produce high quality Continuous Improvement:

  1. Quantitative data about the current situation: How frequently does the process deliver high quality? When it fails to deliver high quality, where and how does it fail, what types of failures occur, what are the impacts of those types of failures, what factors seem highly correlated with the failures? Quantitative data about the process provides important information about how and where the process succeeds and fails.
  2. Observations and insights from people closest to the work: This includes the people actually doing the work and the customers and the suppliers of the work. Members of all these groups can bring unique and important perspectives about how the system is working and some ideas about how it might work better. Recipients of the output of the process (internal or external customers) can also provide a great deal of insight: what are their pain points and what do they value? Taken together, observations from people close to the work provide valuable input to the improvement process.
  3. Documentation of process flow charts or value stream maps: Gather a team of knowledgeable participants to compile a step-by-step understanding of how the process works, where the bottlenecks and opportunities for error take place, where the work sits waiting, where and how the work is inspected and reworked.
  4. Direct observation with new eyes: An outsider watching the process will often notice an aspect of the work or work environment that is so familiar to the people closest to the work, they no longer see or notice it. This information will not surface in interviews with people close to the work nor in process mapping. The only way to surface a full understanding of the factors influencing quality and productivity is to spend time directly observing the work.

The value of a written problem statement

problem

Few decisions have a greater impact on the likelihood of an improvement project’s success than the definition of the problem.

Stephen Covey says that, “The way we see the problem is the problem!”

In a past post, we shared four guidelines for accurately defining problems, which included:

  1. Defining the problem in writing
  2. Specifying and quantifying the waste the problem is causing
  3. Identify the metric that will be use to “size” the problem
  4. Omit judgments, opinions, and predispositions about the underlying causes

These aspects of framing a problem have a huge impact on how well a team can analyze and solve a problem. They also enable a team to create an accurate problem statement.

In fact, creating a written, specific and measurable problem statement that incorporates a baseline against which solutions can be tested helps people avoid biases about root cases or solutions. This practices also makes clear why and how much we should care about the problem, and might inspire a team leader and sponsor to more enthusiastically guide the team to efficiently achieving the results the organization desires.

The act of crafting a problem statement does require some careful thought, but a good problem statement is worth the effort because it helps you to ensure that:

  • Team participants, leaders and sponsors, have a shared understanding of the problem that will be solved
  • The organization will give the project the appropriate priority and urgency
  • The team has a good baseline against which they can test the results of their solutions
  • The team is open to surfacing and testing a range of possible root causes so as to increase the likelihood of finding an effective and lasting solution.

Decision-making pitfalls

decision making pitfalls

As organizational leaders or managers we may feel comfortable with the decisions we make. However, it can be helpful to recognize what constitutes “good” decision making, and also the fact that “how” we make decisions is just as important as the decisions themselves!

In a recent post we shared common traits among the best decision makers.

But looking at the decision-making process from a different perspective, there are pitfalls as well!

In a Wall Street Journal article, Robert I. Sutton, a professor in the Department of Management Science and Engineering at Stanford University and co-author of “Scaling Up Excellence,” shared some interesting and important insight into this aspect of decision-making.

He first explains that, as noted above, how leaders make decisions (the process) is just as important as what decisions they make.

Then he shares four specific pitfalls associated with the decision-making process that can compromise a leader’s effectiveness as well as the effectiveness and attitudes of people throughout the organization.

The first of these pitfalls involves telling people they have a voice in decision-making when, in reality, they don’t.

“Good decision-making entails consulting key stakeholders—and using their input to shape final choices,” Sutton said. “Doing so improves the quality of the decisions and makes employees more motivated to implement them.”

“Unfortunately, in too many cases the consultation of others is only make believe… it starts out looking like the real thing, but in the end leaders are just pretending that others’ input has some influence over the final decision.”

While the motivating force behind the make-believe-consultation can vary — some bosses do it to fool people into getting behind the decision’s implementation, and others because they think the mere opportunity to voice opinions somehow makes people feel better — it doesn’t matter. In the end, pretending to consult others for decision-making purposes and then ignoring their input turns out to be demoralizing. Further, the associated deception and disrespect often causes employees or stakeholders to lose faith in their leaders.

Next on the list is the poor habit some leaders have of “treating final decisions as anything but!”

“Many insecure bosses have a habit that is especially damaging: After a decision has been made and communicated and implementation has begun, their insecurity compels them to revisit the choice too soon and too often. A few complaints, a small early setback, or simply anxiety about the decision can provoke such unnecessary reconsideration.”

Sutton goes on to explain that the insecurity and waffling “infects their teams.” In addition, many of the people involved lose faith in their leaders’ ability to make good decisions, and also lose interest in implementing new directives that could soon become subject to change.

Moving too fast is the third pitfall. While some leaders suffer from indecision and procrastination, some decisions require more careful thought— “especially risky, important and complicated ones that are costly (or even impossible) to reverse,” Sutton says.

Despite the fact that employees most often like working with managers who are confident and don’t waste time, they are also leery of snap decisions, which are likely to turn out wrong. These decisions are also more likely to undermine employees’ faith in their leader and the decision, and can make employees less motivated to implement the decision. It’s the difference between a smart, confident decision and a rash one, possibly made without proper research or without sufficient facts and data.

Finally, using decision-making as a substitute for action is a waste of time.

“A decision by itself changes nothing” says Sutton. Simply “deciding” to change a protocol or process doesn’t help unless someone actually does it!

The gap between “knowing” and “doing” is real, yet too many leaders act as if, once they make a decision, and perhaps spread the word, their work is done.

managers’ critical impact on productivity, engagement, and retention

managers drive engagement

In a recent presentation, Gallup shared some powerful data on why an organization’s managers are so important.

“Managers are the heart of your organization,” they said. “Managers communicate and uphold the standards of your culture and your brand. They can make or break any change initiative. Nearly every problem and achievement in your organization can be tied back to the quality of your managers.”

During the presentation, Workplace Expert Patrick Mieritz referenced Gallup survey results indicating managers account for 70% of the variance in team engagement!

If you’re wondering why this statistic is so significant, consider their findings on how highly engaged business units and teams impact typical “negative” outcomes:

  • 81% decrease in absenteeism
  • 43% decrease in turnover within low turnover organizations
  • 18% decrease in turnover within high turnover organizations
  • 28% decrease in shrinkage (theft)
  • 64% decrease in safety incidents (accidents)
  • 41% decrease in quality defects

Their research also shows that highly engaged teams have a significant impact on “positive” outcomes as well:

  • 10% increase in customer loyalty
  • 18% increase in sales productivity
  • 14% increase in overall productivity
  • 23% increase in profitability
  • 66% increase in well-being (thriving)
  • 13% increase in organizational citizenship (participation)

Managerial Best Practices
If you’d like to increase the effectiveness of your organization’s managers or your personal managerial effort, a good first step is to identify or confirm the things that are important to your workforce; and beware, employee expectations have shifted since the onset of the pandemic.

As motivation expert Daniel Pink explained, “People really want three things: autonomy, mastery, and purpose.”

Or as famed statistician W. Edwards Deming often said, and a fact that still rings true today, “People are entitled to joy in work.”

So, what’s to be done?

We all know that, at the organizational or senior management level, offering more flexible work arrangements (when possible), reviewing pay scales, and improving on-boarding/team development programs are steps in the right direction.

But, if you’re wondering about actionable ways in which mid- or front-line managers can increase engagement, productivity, and retention levels, you might also consider the following best practices:

  • Set clear expectations. Approximately half of all US employees say they know what is expected from them at work. To improve on this, SHRM suggests managers should emphasize objectives, set expectations early, make goals measurable, and give meaningful feedback (only 26% of US workers say the feedback they receive is helpful). Gallup adds a note to this by suggesting managers give meaningful and frequent feedback, indicating that workers who receive weekly meaningful feedback from their managers are 2.7 times more likely to be engaged in their work.
  • Create a culture of clear accountability. This does not mean taking a “do it or else” stance, but rather a motivational approach that includes open communication, recognition, and awareness.
  • Motivate each employee individually. There is no one-size-fits-all approach that works.
  • Coach and develop people based on their strengths. Gallup says that 66% of employees who strongly agree that their manager focuses on their strengths or positive characteristics are engaged. Focusing on strengths has also proved an effective way to ensure people are placed in the right roles; and providing ongoing development to team members has proved to have a significant impact on increasing engagement levels while reducing turnover.
  • Overcommunicate! Leaders who maintain open and frequent communication, who show an interest in their teams, who share stories of success and vision, and who remind people of the mission tend to foster higher levels of engagement.

Improve Sales by focusing on customer/supplier relationships

sales

Continuing with the theme of improving our sales process, it’s important to remind ourselves that satisfied and delighted customers are the lifeblood of any organization.

Providing customers with the highest quality products and services at the best possible price starts with clearly understanding the customers’ needs and requirements and then designing and implementing processes that consistently deliver value.

But there are two types of customers:

  • external customers
  • internal customers

It’s important to recognize that both types of customers are important and have needs that must be met. External customers are the people who pay for our products and services. As Dr. Deming said: “No customers, no orders, no jobs!”

Paying attention to the external customers’ requirements is essential and helps us keep the entire organization focused on doing value added work (i.e., “work the external customer would pay for if they know what we were doing”).

However, to effectively meet the external customers’ needs, we must also work with our internal customers. Understanding and meeting our internal customers’ needs and requirements helps the process of producing our product or service to flow smoothly, be problem-free and deliver the highest quality at the lowest total cost. When we work with our internal customers we are, in fact, “internal suppliers.”

Of course, this customer-supplier relationship extends to our external suppliers as well. From our external customer’s point of view, we are responsible for what they buy from us; and our suppliers are part of the system.

It is increasingly important to build strong customer/supplier partnerships that ensure that we get exactly what we need, in the right quantity, at the right price to be able to meet our external customers’ needs.

Studying Our Work to Improve…

If we’d like to increase sales by improving our “sales” process, we should begin by studying our work. As a first step, identify our top customers’ 3-5 “must-have” requirements. As requirements are identified, it helps to understand their relative importance. What requirements does the customer consider “musts” versus “wants?”

Keep in mind that customer requirements are constantly changing as well, and yesterday’s “wants” may become tomorrow’s “musts.”

Sales Process Improvement: 5 best practices & 20 questions!

sales

While many businesses make efforts to improve production, distribution, and various administrative work processes, it is less common to find organizations that focus on applying the fundamentals of Continuous Improvement to the sales process.

However, our research and experience indicate the selling process is more complex than many people realize. In addition, we have consistently found that the largest waste in most commercial and industrial organizations is lost gross margin that results from sales not made, sub-optimal pricing, and excessive costs in sales-related processes.

So, leaving aside the “selling skills” or “charisma” that is often associated with those perceived as the most successful sellers, when you consider the day-to-day activities required of field-based sales professionals, there are some proven best practices that can help boost field-day efficiency, which include the following five:

  1. Pre-call planning: by planning each sales call in advance, in writing, sales people can position themselves to accomplish more in less time, thus increasing personal productivity as well as accelerating overall cycle-time. Not only will conducting more comprehensive sales calls increase efficiency, but the habit will also make a stronger, more positive impact on customers. Many who have embraced this best-practice report that their customers recognize the difference and, over time, become more willing to schedule meetings, thus enabling them to more easily make more calls each day.
  2. Set a daily call volume goal. This may sound like an unnecessary step, but a surprising number of sales people are unable to quantify the actual average number of sales calls they make each day. As author Jack Falvey has said, “Want more sales? Make more calls.” By setting an average personal goal, (or company requirement) which will vary depending on the nature of each territory, sellers are often able to self-motivate more effectively and make more calls per day.
  3. Geo-plan: by creating a strategic geographic or travel plan each day, outside sales people can minimize drive time and optimize “face” time (Or, in our current situation, “virtual face time.”). The best plans will begin by creating territory quadrants and then mapping the locations of customers and key prospects. The rule-of-thumb is to avoid traveling beyond two quadrants in any given day, so when an appointment is set in one area, try to schedule meetings or plan to visit others in the same general region to enable a maximum number of interactions in a minimum amount of time.
  4. Bookend each day by scheduling an appointment early in the morning and another late in the afternoon. This will promote “staying the course” as opposed to deciding to drive back to the office early to do administrative work. This best-practice might also help to achieve item #2 above.
  5. Try to schedule next steps (i.e., follow-up meetings, conference calls, etc.) “on the spot” before the conclusion of each sales call. This simple best practice can significantly boost efficiency for two reasons. First, it helps sales people more easily populate their calendars for future selling days in the field; and second, it can help shorten selling cycles by securing time with buyers sooner than could be done otherwise.

But the sales process extends well-beyond a day in the field, as it encompasses everything from identifying a lead to delivering a solution. Considering this broad spectrum, it is really not surprising that the largest waste within most businesses can be found in the sales area.

The first step toward improvement or to moving from “where we are now to where we’d like to be if everything were right,” is to identify specific areas of sales process waste, and a good way to begin might be to answer the following 20 questions:

  1. What is our current market share?
  2. What are our customers’ requirements?
  3. How well are we meeting these requirements?
  4. What would it take to truly delight our customers?
  5. How long does the sales process take from lead to sale?
  6. What is our lead conversion ratio?
  7. What were the top 3 reasons for lost sales over the past quarter?
  8. How many calls do our sales people make, on average, each day?
  9. How much time do we spend talking with uninterested or unqualified leads?
  10. How do we continually improve our sales team’s skills and habits?
  11. What percentage of prospects contact us first?
  12. How does this percentage (#11) compare with industry data?
  13. Does the sales process take less time to complete for inbound leads? If so, how much less?
  14. What is our response time to customer or prospect inquiries?
  15. How many customer complaints do we receive?
  16. How much time do our sales people spend interceding or responding to complaints?
  17. What is done with the information associated with customer complaints?
  18. How do customer complaints or how does customer dissatisfaction impact our ability to make sales?
  19. How often are discounts extended, and what is the average discount?
  20. Are discounts offered due to competition or in response to dissatisfaction?

Clearly there are many ways to analyze and improve the productivity of an organization’s sales process, but these five best practices and twenty questions are good starting points.

Motivating people to improve performance

inspiration

We have consistently observed that most high-achieving organizations are able to develop and sustain high performance cultures in which team members are inspired, engaged and highly motivated.

During a discussion with Human Resource, Quality, and Continuous Improvement leaders, various approaches to the motivational component of performance management were shared.

Individual v. Group
Some organizations focused on personal quantitative measurements to motivate individuals and to encourage and inspire them to achieve important goals. Tying these individual goals to the organization’s KPIs was cited as an effective way to align behaviors with goals and make sure everyone is aware of exactly what they are expected to do.

However, others said that group rewards and recognition were more effective than focusing on individual metrics. For example, one participant described how teamwork deteriorated to the detriment of the organization as a whole after his organization switched to individual metrics and rewards instead of rewarding everyone based on achievement of the company’s key strategic metrics.

Show me the money?
We also discussed experience with financial rewards as opposed to intrinsic rewards, such as recognition, and financial rewards did not necessarily produce the best results.

One participant explicitly pays people for participating on improvement teams in some of their facilities, while one of their Midwestern plants is prohibited from paying for participation. The Midwestern plant relies on intangible rewards such as recognition and “thank you notes.” Surprising to many, the Midwestern plant had a much higher rate of participation than the others, seeming to demonstrate that intangible or ‘intrinsic’ rewards can be more effective than monetary rewards.

Another organization found recognition, sometimes coupled with small gift cards, was an effective method for their organization.

Two Critical Factors
Everyone agreed that two keys to effective use of recognition as a motivational method are timeliness and making the recognition public.

Several examples involved peer-recognition programs, in which people were empowered to recognize one another by giving-out stars or some similar token when observing a co-worker exhibiting certain behaviors. When someone receives a certain number of stars, they get a gift card and the ‘star of the month’ gets a party, recognition, and a preferred parking space. It was noted that guidelines for the awarding of stars or tokens were set in advance.

Another perspective relative to timeliness involved making motivational and performance management activities an “everyday job,” and basing strategies on more than just past data. Over-reliance on past data when crafting improvement or motivational plans was referenced as working through the “rear-view-mirror.” A better approach not only enables managers to identify opportunities for team improvement based on analyzing past activities and results, but to also identify preemptive action steps and strategies that can impact outcomes and future results.

Conclusions & Best Practices

  1. Performance Management and motivation must be about much more than individual performance measurement. As Deming said, over 90% of problems are caused by the system not the person. To manage performance, we must manage the system by which people, plant, process interact to produce results.
  2. Frequent observation and feedback is more helpful to people than formal annual reviews. Motivation and engagement levels were consistently rated as “much higher” when team members received frequent, consistent feedback on their work, and also when they felt they had input to improvement plans.
  3. Frequent communication about what an organization needs and wants greatly increases the odds that the organization will get what they need and want.
  4. Group rewards encourage teamwork, while individual rewards encourage an individual to optimize his or her own goals even if it may sub-optimize the organization as a whole.
  5. Tying money directly to performance appraisal can be a two-edged sword – raising stress and reducing the intrinsic rewards and personal satisfaction from doing a good job for the team.
  6. Intrinsic rewards tend to increase motivation over time as opposed to financial rewards. Recognition is among the most effective. The keys to effective use of recognition as a motivational method are timeliness and making the recognition public.
  7. Avoid performance management in the “rear-view mirror.”

Challenges and best practices associated with continuous improvement