The philosophy behind his writing and his books is to share his experiences and learning

Category: Uncategorized

How the Trends of 2000-2009 Will Shape Performance Improvement in This New Decade

Posted on by DS_admin

As 2010 ushers in, it’s time for us to look at the key trends that surrounded the ecosystem of all businesses. These trends provide a cue into the way the engine of performance improvement will be driven going forward. Organizations serious about customers and improvements will find it difficult to neglect these events. While leading business transformation initiatives, change agents will have to enmesh these trends with their knowledge of quality/improvement methods and techniques. These trends should not only be an integral part of the transformation process but also play a part in the final solutions. And they would touch a myriad of facets of business such as product development, customer engagement, acquisition, human resources, costs, profitability, distribution, processing, risk management, cost and so on. So what are these trends and the takeaways for performance improvement leaders?

1. Power of Social Networking Sites: Something That Companies Can No Longer Ignore

Did we ever think about social networking sites pre-2000? Maybe not, but in the last decade, we have seen how these sites have become an integral part of our lives. Social networking sites such as Twitter, Orkut and Facebook have grown in use and importance, and businesses can no longer afford to ignore them. Companies have began using these social media sites to carry out market research and even test possible product and marketing ideas; for instance, Citibank turned to Facebook to ascertain acceptance of its new Citibank Air Asia card launched in Malaysia.

In addition, companies have started looking at social networking sites as another channel to respond to customer concerns and queries. For example, Wells Fargo has a team that responds to queries on checking, savings and online accounts though Twitter. Social networking sites have also been used to deepen customer engagement; for instance, Walmart uses Twitter to create engagement by sharing what is happening within the company and exposing the community to its unique culture.

Take Away: While looking at performance improvement projects, leverage social networking sites to connect with customers to collect their feedback, test out products/solutions, etc. Social networking sites provide immense possibilities that have still yet to be fully leveraged.

2. Democratic Consumerism: Tacit Expectation of Today’s Customers

In October 2009, ASDA Chief Executive, Andy Bond talked about “Democratic Consumerism,” a way of doing business in which consumers dictate the way the companies do business and also dictate what products companies sell. Customers are considered as partners and are involved in all aspects of the business. This emanates from a belief that because customers have a diminishing trust in government and business, they have a growing demand for more openness and transparency. As a result, Bond launched a series of initiatives at ASDA in order to make the otherwise opaque company more transparent to customers. These initiatives are: 1) Your Asda: a blog, which introduced a number of webcams to provide a view of the company’s operations, including a dairy farm, carrot processing plant, and its head office, Asda House, in Leeds; 2) Chosen by you: Beginning Jan 2010, customers can get involved in product development, packaging etc. by logging on to www.asda.com/yourasda; 3) Bright Ideas: Customers who come up with brightest ideas that saves the business money will be financially compensated. If an idea saves ASDA £2 million, the customer will be awarded £100,000.

Take Away: Make your organizations transparent to customers and win their trust. Involve them in ideation and product development, and communicate with them not only what you are doing but also why you are doing what you are doing.

3. Complexity Reduction: Silent Threat Faced by Companies

Complexity is a problem that tacitly weakens organizational performance and is difficult to detect. While the concept is not new, leaders in the last decade had started realizing the importance of complexity reduction. As early as 2001, Larry Ellison, CEO of Oracle, talked about “War on Complexity” in computer software. One of the major reasons for complexity is proliferation. Complexity gets added to organizations because of multiple products, different channels, suppliers, locations, mergers and acquisitions, etc. As the pressure of growth builds, companies inadvertently do things that they should not do. In the Western world where growth is limited, organizations have been flooding the market with multiple products, more distribution channels, etc., all with the expectation to gain new customers. In emerging markets, companies are doing the same but with expectations to garner market share in the growing market. As businesses worked towards catering to varying consumer needs, they have adopted newer processes and complex technologies, which not only made businesses complex but also added to cost.

Just look at the financial services domain. Earlier we just had a branch for the customer to carry out transactions, while today we have multiple channels such as Internet, mobile-phone, television, phone, ATM, etc. A financial services company may have a large number of credit-cards/co-branded cards, but most of them may not really contribute to desired revenues. A closer look can show that only a few of them really make a positive contribution to profits. The impact of complexity results in higher customer lead times, depleting profits, slower decision making and irate customers and so on. Clearly as organizations grow, they will have to install metrics that can measure complexity and associated hidden coordination costs within the company.

Take Away: Identify the key drivers for value and proactively engineer simplicity for customers and employees. Focus on what’s important—the bulk of value creation happens in 20-30 percent of your offerings. Shun the mindset of market-share and instead focus on value-share. After getting rid of products that do not generate economic profit, work toward reducing the complexity within your company.

4. Technology Solutions: Enabler for Business Process Improvement

While service businesses’ adoption of information technology happened in the late 1990s, the last decade saw the use of technology solutions for customer convenience, operational improvements, security enhancement and business expansion. One thing became very clear: technology adoption is going to be a part of many process improvements. Forward looking practitioners made sure that when they used process improvement methods such as Lean, Six Sigma, etc., technology was very much an option which was kept by successful streamlining of processes. Companies adopted key technologies such as mobile banking, RFID, smart cards, biometrics, and grid computing and so on. For example, Indian financial institutions such as ICICI Bank, Union Bank, Indian Bank and Corporation Bank began using biometric solutions for underprivileged masses both in the rural and semi-urban areas. ICICI Bank provided mobile and TV banking to provide better customer convenience. Walmart began using RFID for tracking cases and pallets of supplies. Organizations looked forward to technology for providing greater security to customer transactions. There are a plethora of examples from around the world.

Take Away: Remember that process improvement methods (such as: Lean, Six Sigma) and technology solutions are not oxymorons but can complement each other. While leading process transformation, do look at technology solutions if there is a need and business case. Of course, this does not mean that you should automate a waste-laden process/business system.

5. Lean for Service: Quality Improvement Approach of the Next Decade

While Lean has been around for more than two decades, the services business saw its adoption in the early 2000s. In 2003, the Harvard Business Review reported the first case study on Lean adoption by a service company, which was Jefferson Pilot Insurance (the company was acquired by Lincoln Financial in 2006). In Asia, ICICI Bank led its deployment of Lean in the early 2000s. Since then, a large number of service companies have adopted Lean (in isolation or with Six Sigma) as a method for performance improvement. Companies in financial services, healthcare, education and hospitality have reported successes. Bias for action, team work and quick results has helped this practice to get into the mindset of business leaders. While we still do not have a Toyota of service businesses, Lean is going to be an important engine for business process improvement going forward.

Take Away: The next decade will see this practice taking center-stage of services performance improvement. Hate it or love it, you cannot ignore it. I am confident that by the end of 2019, we shall for sure see the Toyota of service businesses in the horizon. This handful of companies will have institutionalized Lean thinking as a part of their culture.

6.Service Differentiation: Evergreen Strategic Weapon for All Businesses

Service as a concept is not new. However, the last decade has reinforced the fact that differentiating through service is the only way forward for many businesses. Companies have realized that as products get commoditized, differentiation becomes a big challenge. Even if companies launch new products sooner rather than later, their products get copied by others and their unique selling proposition is lost in the marketplace. In such a context, quality service can be a distinct differentiator that competitors will find difficult to compete with. This will be possible when companies provide a superior experience and cater to customers’ demands that are valued by customers.

Service companies across the spectrum realized this importance in the last decade. Take the example of the banking sector. The financial tsunami in 2008 has made life difficult for banks. Getting deposits has never been so difficult. These banks have realized that superior service is a way to gain a competitive advantage and increase the share of their wallets. There are already a few successes on the horizon. For example, at Amazon.com, CEO Jeff Bezos has stuck to his vision of creating a world-class retailer with a focus on creating a superior customer experience. His persistence has paid off. In October of 2001, Amazon.com traded at $5.51; in December of 2009, it traded at an all-time high of $145.91. By the end of December 2009, Amazon.com shares traded near $135, still a 2,400 percent leap off the low. Clearly, creating a superior customer experience does pay off in the long run, and it will continue to be a big part of the agenda for performance improvement professionals today.

Take Away: Embed superior customer experience as part of the agenda for business enhancement. Relentlessly get the basics of service performance correct and look for opportunities to exceed customer expectations. Creating exceptional experience does not have to cost a lot of money; it just requires an alert company staff that is willing to go out to better serve the customer.

References

http://www.cab.org.in/ICTPortal/Lists/News%20Room/DispForm.aspx?ID=29

http://www.rfidjournal.com/article/articleview/642/1/1/

http://your.asda.com/2009/10/1/andy-bond-heralds-a-new-era-of-democratic-consumerism-2

http://crmindustry.blogspot.com/2009/10/facebook-costs-companies-15-percent-of.html

http://finance.yahoo.com/news/Amazoncom-Whiz-Jeff-Bezos-ibd-2675246265.html?x=0&.v=1

http://www.qfinance.com/mergers-and-acquisitions-best-practice/the-missing-metrics-managing-the-cost-of-complexity?full

http://www.aislespyblog.com/

Swank, C.K. (2003). The Lean Service Machine. Harvard Business Review 81 (10), 123-129.

Standardizing Service Processes through Lean: Is It Unthinkable?

Posted on by DS_admin

This column of mine is triggered by the interesting debate that I saw in response to Tripp Babbitt’s article, Redux: Rethinking Lean (Six Sigma) Service, on Six Sigma IQ. The article inspired some interesting thoughts by some of the leading names in the world of Process Excellence/Lean today, such as John Seddon and Shingo prize recipient Mark Graban, over whether standardization of service processes is necessary.

Through this column I thought to share my own views on standardization while leaning service processes. This is based on what I have successfully been adopting over the years while facilitating Lean transformation. It has delivered results, and the gains have been sustained over a period of time.

Is Standardization in Services Required?

Yes, standardization is required in services. It is the foundation for meeting the requirements of customers and other stakeholders such as regulators, the community, etc. It not only brings about consistency in customer outcomes but also ensures better productivity. As a matter of fact, without standard processes, do you think businesses such as financial services, healthcare and food-services could survive and also meet regulatory requirements? A successful Lean adoption should see these standard work procedures being generated by the teams who run them and will later be involved in using them. Of course, sometimes (in businesses such as financial services) you would also need participation of members from other specialized functions such as legal, actuary, compliance, technology, etc. Getting an organizational bottom-up involvement in processes is not easy and takes time to get it right, especially when there has been a culture of pushing down processes from the top. But leaning an organization is about making it bereft of command-and-control, and the beginning has to be made.

For those who are new to Lean, Table 1 has been used to define a standard process.

What is standard work?
It is the best known method of doing work that has been designed by the process team, keeping in mind the needs of the customers and best practices around us. Standard work is also called work procedure, standard operating procedure, etc.
For an organization implementing Lean, standard work should have the following attributes:
1. Should be developed and created by the team that knows and runs the process—should be mandated from the bottom-up and not top-down, which would involve a team disconnected from the process,
2. Should be made easy for the associate to carry out his job—cannot be another chart for display on the soft-board,
3. Should be defined in detail without getting verbose—pictorial depictions yield the best results,
4. Should help to identify and track problems,
5. Should have gotten rid of non-value added activity and complexities,
6. Should help in educating new employees.

Does Standardization Generate Waste in Services?

It is not correct to say that standardization generates waste in service processes. Standardization is required but cannot be carried out in a mindless manner. Standardization in service businesses should be done based on the context and the complexion/type of processes that has been taken up for improvement. For example in a retail branch, the “DD” (demand-draft) or “cash” process can be standardized as this process is repetitive in nature. However, you cannot standardize a process that handles “queries.” This is because this process handles queries, a majority of which could be different. So wherever you have processes that handle exceptions instead of standard queries, the teams should come up with broad set-of guidelines which customer-services executives can use. Standardization does not mean here that the customer services executives will become robots. Each of these processes (whether standardized or not) will have to be backed up by highly competent and empowered customer-services executives who are able to manage the interaction experience of customers. Of course, standardization will result in waste when you try it on a process that does not require standardization.

As a general rule, it may be a good idea to remember that there are two things that drive standardization: “Visibility” and “Variability in Transaction Type.” Visible processes are those wherein the customer is involved and the process acts on them. In a “non-visible process” the information and material provided by the customer is worked on. In the former the quick response times and customer-interaction skills are critical, while in the latter there is a lag between customer request and delivery. Figure 1 summarizes this concept. I would recommend that before embarking on a Lean transformation, all processes should be placed on a scale like the one shown in Figure 1, and then you can make the decision to standardize or not standardize these processes. (Click on diagram to enlarge.)

Figure 1–Degree of Visibility and Process Standardization

A similar scale should be made for capturing “transaction variability” and its impact on standardization. This would help in taking decisions on branch processes such as “DD making” and “query” about which I discussed above.

Conclusion

Standardization as a concept is required in service processes. However, the degree of standardization has to be based on “transaction variability” and “visibility” of the processes. Yes, standardardized service processes must emerge from the bottom-up—from the team members who run, own and will be using these processes. I agree with Mark Graban that standardization in services is a spectrum.

360 Degree Metrics for Lean Transformation

Posted on by DS_admin

While embarking on a holistic Lean transformation, I have seen practitioners struggle to come up with metrics that can provide a 360 degree view of the quality of a deployment. What normally happens is that success is defined with metrics such as quality and lead time, which are right but not complete. The success of a Lean transformation should be measured with an all encompassing set of metrics, which covers the immediate and not-so-immediate performance issues as well as elements that ensure sustainability.

My experience tells me that the majority of times practitioners take up an incomplete set of metrics is because Lean change agents are not aware of what comprises an all encompassing list. Even if they are aware, they are not comfortable placing the entire set of metrics on the table as they are not sure how they would accomplish using them. Or, they would not like commit to using metrics that are very organic in nature and have results that take time (such “people engagement” metrics).

The type of metrics that practitioners will use will vary based on the context and the type of Lean project that has been chosen for implementation. However, as leaders responsible for Lean implementation, we need to keep in mind the most important metrics that should be looked at to gauge the health of a Lean transformation.

Important Metrics for a Successful Lean Deployment

There are broadly two types of metrics that need to be kept on the radar:

Primary MetricsSecondary Metrics
Metrics that measure the direct output metricsMetrics that measure the results or outcomes of the primary metrics

Primary Metrics

MetricsWhat do they mean?
TimeTime taken to complete an end-to-end execution of a process, also known as “customer-to-customer time.” The measurement starts from the time the order is placed with the customer until the time the customer gets served. Examples include lead time of a process and time to service.
QualityAbility of the process to create an error-free product /service, which is made per the customer requirements. Examples of quality metrics are error percentage, rejection percentage and first pass yield percentage.
ServiceManner in which service representatives interact with and serve the customer. It includes behavioral dimensions such as friendliness, warmth and product knowledge.
ResourceMeasures effectiveness of resource utilization in the process and includes areas such as people, infrastructure, capital and materials. Examples of resource metrics are manpower productivity percentage, capital productivity levels and infrastructure used/person.

Secondary Metrics

MetricsWhat do they mean?
FlexibilityAbility of the process to manage varying customer demands, new product introduction, customer requirements, risks, regulation, etc. Examples of flexibility metrics are number of exceptions handled, number of new products introduced and number of customized solutions to customers.
Engagement (People Engagement)Level of engagement of members who are directly or indirectly impacted by the Lean transformation. Examples of engagement metrics are people engagement percentage and penetration percentage across hierarchies.
Cost / RevenueImpact of the transformation on the top-line or bottom-line of the company. It also includes impact on cost of the product or service offered by the company. Cost efficiency could manifest as reduction in price, service charge, premium, fees, etc. Revenue enhancement could manifest as an increase in market-share, increased share-of-wallet, etc.
Customer SatisfactionFeedback from customers on the quality of the product/service provided by your company. This could be measured by customer satisfaction/engagement/loyalty index, etc.

Avoid a Half-Baked Lean Transformation

If a Lean transformation does not positively impact all the above metrics, it is a half-baked transformation. We all know what happens to half baked products.

Just imagine that a Lean transformation of mortgage processes delivers great metrics in the areas for lead time and quality but there is no visible change in employee engagement. Do you think the change will sustain?

Or just imagine a project done on a sales process that showed radical reduction in acquisition costs but the quality of interaction with customer continued to be less than acceptable. Do you think the improvement met all the business expectations?

Or let’s imagine a Lean process improvement that has excellent lead time and quality ratings but is not able to take care of the variability of customer demand.

I have seen companies declaring victory by looking at commonly used metrics such as “lead time,” “quality,” etc. This is “good” but if you are looking for “great” results focus on all above that I have listed. Some may take time to show results but I can guarantee long term success.

To Value Stream Map or Not to Value Stream Map a Service Process?

Posted on by DS_admin

Value stream mapping and Lean implementation in the service business have somehow become synonymous. I have observed service organizations embarking on Lean implementation to invariably use value stream mapping. It is paradoxical that organizations using “value stream maps” often see these maps as a sign of their organizations’ Lean implementation and not necessarily as the tool to show the results that the Lean intervention should deliver. During my visits to service organizations that have implemented Lean, the first thing these organizations show me are their value stream maps. What surprises me is that the tool is used even when it is not necessary. Corporate walls are mindlessly getting pasted with value stream maps, which are often static documents for visitors to see and compliment service organizations’ Lean endeavors.

Value stream mapping and Lean implementation in the service business have somehow become synonymous. I have observed service organizations embarking on Lean implementation to invariably use value stream mapping. It is paradoxical that organizations using “value stream maps” often see these maps as a sign of their organizations’ Lean implementation and not necessarily as the tool to show the results that the Lean intervention should deliver. During my visits to service organizations that have implemented Lean, the first thing these organizations show me are their value stream maps. What surprises me is that the tool is used even when it is not necessary. Corporate walls are mindlessly getting pasted with value stream maps, which are often static documents for visitors to see and compliment service organizations’ Lean endeavors.

I do not blame organizations for this faux-pas. Lean as a concept is new to many service companies. They hire individuals, who in their enthusiasm to show progress, make teams do value stream mapping even if it is not required. Somehow, value stream maps are being used for obvious wastes, which can get identified by a value-contribution analysis (as discussed in my earlier column).

Be Careful with Value Stream Mapping

For God’s sake, my observations above should not be taken as my being anti-value stream mapping! Value stream mapping is a great tool and probably the best one that I have come across to unfurl hidden wastes in processes. However, we need to be careful because of the following reasons:

  • Value stream mapping is a cumbersome exercise and requires investment of much time and resources.
  • Wastes in service processes can often be identified by doing a detailed value added/non-value added analysis.
  • Understanding the nuances of value stream mapping is critical before they start getting used by teams. It has many things to offer and just not waste identification. Ask a service Lean expert and he will tell you.

Remember, using the value stream mapping in the right context is critical. The worst thing that could happen if value stream mapping is used in the wrong context is an unproductive and wasteful approach while Leaning a process. Unfortunately this is often not seen by organizations that are dependent on consultants/individuals who have yet honed in the whys and hows of Lean tools.

Defining Value Stream, Value Stream Mapping, and Value Stream Map

Before I delve on the use of value stream mapping in a service business, for the un-initiated let me explain the terms value stream, value stream mapping and value stream map.

I am mentioning the definitions as mentioned in Lean Lexicon (edited by Chet Marcwinski et al, Jan 2003) and their service interpretation:

Value Stream

Definition as per Lean Lexicon (Jan 2003, LEI)A Services Perspective
All of the actions, both value creating and non-value creating, required to bring a product from concept to launch and from order to delivery.All activities (both value adding and non- value adding) that are required for carrying out a service business (of a product family). Within the value stream there are core processes which work in tandem to achieve the strategic business objectives.

Value Stream Mapping/Map

Definition as per Lean Lexicon (Jan 2003, LEI)A Services Perspective
A simple diagram of every step involved in the material and information flows needed to bring a product from order to delivery.Value Stream Mapping is a visual tool used to identify wastes in processes. It includes movement of materials and information flow and also how resources, such as people, within the system get used in the process. The final diagram is called a Value Stream Map.

When You Should Use Value Stream Mapping


My intention in this column is not to tell you how to do value stream mapping but to share with you when it should be used. I will talk about the how’s of value stream mapping at a later date.

So when should you use value stream mapping? While the list can be large, the following is a list of major reasons when value stream mapping should be used in a services business:

  • When the process is large and simple value contribution analysis will not throw up the opportunities for improvement
  • When you are keen on improving the productivity of a large number of people scattered across locations and are keen on knowing their utilization/load distribution
  • When you want improve an end-to-end process
  • When you want to know the various inventories that get piled up in a process
  • When you are keen on identifying the opportunities for optimization in a process
  • When the process is complex and cuts across geographies involving multiple stakeholders
  • When you want to know the inherent complexities of a process
  • When you want to know the various IT systems that are used in the process
  • When you are keen on knowing the effectiveness of various channels that are used for serving the customer
  • When embarking on a Lean journey and there is a need to find out the Lean opportunities in all your core processes
  • When you want to show visually the health of your processes to the CEO and other top management
  • When you want to do a strategic—review of all your processes

In all other cases, I would recommend that you ascertain the value-contribution of the processes. Use value stream mapping as a strategic tool and do not squander its power on tactical work. For all tactical work I can guarantee a good value contribution analysis will get you good results.

Value Stream Mapping Requires Mastery Over Time

Let me caution you that value stream mapping is not an easy tool, and one masters it over a period of time. In service contexts, sometimes it can be quite arduous and requires a good understanding of business processes and their complexities.

Reference:

Lean Lexicon—A Graphical Glossary for Lean Thinkers, Chet Marchwinski and John Shook, The Lean Enterprise Institute, USA, 2003.

5S for a Service Business

Posted on by DS_admin

5S as a tool has been leveraged by manufacturing companies for decades. Leaders driving operational excellence on the manufacturing floor would provide a list of benefits on how 5S delivers superb benefits on the production shop-floor. They would narrate how 5S adds to visual order, cleanliness, safety and standardization on the manufacturing floor.

But are you aware that 5S can also provide great benefits to service companies? This simple yet powerful tool has the ability to transform service organizations. I am telling this from my experience, having pioneered one of the world’s largest 5S adoptions in services.

So, What is 5S in a Services Context?

5S is an approach for workplace organizations; it drives workplace efficiency and productivity improvement. Based on a simple set of principles, it not only helps to identify wastes in the workplace but also creates an environment wherein teams get involved in improvements. It is a movement to make sure that all the elements of a “workplace system” function in harmony in order to allow teams to deliver an optimum level of performance.

Practitioners often mistake the words “workplace organization” as a synonym for housekeeping. This is quite myopic and misleading as it leads one to believe that 5S is a tool for driving workplace cleanliness. Actually, the words “workplace organization” mean much more. They refer to the way the various components of a workplace system are managed and organized. This organization is with respect to components such as workplace procedures, rules, inventory management, policies, asset-ownership, infrastructure maintenance and so on.

Implementing 5S within a service business delivers the following benefits:

  • Reduces process lead times
  • Facilitates workplace organization
  • Standardizes operating procedures
  • Improves customer response times
  • Installs policies / guidelines that drive workplace
  • Contributes to cost efficiency
  • Helps to identify wastes
  • Builds a culture of continual improvement
  • Removes workplace clutter
  • Reduces waste in the workplace
  • Improves look-and-feel

The brilliance of 5S is that it can be adopted by all throughout an organization. There are no burdens of complicated tools or difficult data analysis. 5S is a set of practices that needs to be practiced everyday until it becomes a habit. Whether it is a CEO or a janitor, everyone should practice 5S. As a matter of fact, when you embark on a 5S deployment, your organization should first have the CEO adopt this tool and apply it to his or her office.

Proceed with Caution: 5S Can be Difficult to Implement within a Service Business

Let me caution you that implementing 5S in service businesses can be quite challenging as there are not too many success stories. People always look at 5S with suspicion and doubt its potency to deliver benefits to a non-manufacturing environment. Its simplicity often dissuades individuals who look for glamorous and complicated tools for driving improvements. Also, organizations find it difficult to engage white-collared workers who are made to believe that 5S is a merely a house-keeping tool so it should be done by the house-keeping staff.

This is where you need a strong Lean change agent who understands the concept of “5S for services” well and has the ability to not only engage the CEO with its use but has his or her backing to have the entire organization adopt the tool. The Lean change agent communicates to all the power of 5S and how it can deliver benefits to the business.

Some think that 5S cannot be applied in a paperless office. This is not true. The 5S principles can also be used in the virtual space. The IT space is a great candidate for 5S deployment. Whether it’s investment banking, healthcare, hospitality, government, retail banking, information technology or education, 5S is applicable everywhere.

The Various Times of Lean

Posted on by DS_admin

Before embarking on a Lean project, we should be clear with the various times that are used in Lean improvements. While Lean practitioners have various ways to define these times, I detail these as I use them successfully in my transformations. While the types of time used in Lean are large, the following is a partial listing of the ones that all Lean change agents (both leaders and project facilitators) beginning a Lean journey should know.

Lead Time—This is the time from when the customer gets in touch with the organization until he or she is served with the required product or service. This is also called customer-to-customer time.

Throughput Time—This is the time required to process a product or service within an organization. The time starts from the moment the organization begins working on a request until the product or service is shipped to the customer.

The difference between lead time and throughput time is explained in Figure 1. This is a figure of a liabilities account opening (savings account) process in a bank. The application form is received by the branch wherein there is initial scrutiny or acceptance, after which it is sent to the back office for full processing, and then the deliverables (such as an ATM card, check book, etc.) are sent to the customer through the mail. Here the lead time is from the time the customer enters the branch until he receives the deliverables, while the throughput time is the processing time within the branch and the back-office after the application form is received.

Just improving throughput time might be quite myopic. To make an impact on the customer, it is imperative that we make sure that the lead time of the process improves. (Click on diagram to enlarge.)

Cycle Time—This is the time taken to do the smallest unit of work (task) of a process before it is repeated again. This is explained in Figure 2 wherein a part of a process, which has activities such as data-entry, maker and checker, is shown. The time taken to complete one unit of each of these activities is the cycle time. The cycle time should be captured using a stop-watch. (Click on diagram to enlarge.)

Value-Added Time—The time spent in doing the value-added activities in a process or the activities that the customer is willing to pay for.

Non-Value Added Time—This is the time taken to do the activities in a process that the customer is not willing to pay for.

Business Value-Added Time—This is the time taken to do the activities in a process that the customer is not willing to pay for but is required for doing business (includes activities done for control, assurance, regulation).

Just remember, lead time is the summation of value added, non-value added and business value-added time.

Lead Time = Value Added Time + Non-Value Added Time + Business Value Added Time

Value Contribution of Processes

Posted on by DS_admin

In my last column we discussed the eight wastes of Lean. We also looked at the various examples from the service sector. The eight wastes of Lean that we looked at are also called non-value-added activities. In this article we zoom out a bit to demystify the concept of not only non-value-added activities but also other types of activities in the process.

Looking Over the Process of a Lean Improvement

During a Lean improvement of a process we dissect a process in detail. While doing so we list the following types of activities:

Value-Added Activities: These are those activities for which the customer is willing to pay for.

Non-Value-Added Activities: These are those activities for which the customer is not willing to pay for. They only add to cost and time. Non-value-added activities are also called “wastes,” as delved in the last article. The focus should be to eliminate these non-value-added activities. Examples of non-value-added activities include all the eight wastes of Lean.

Business Value-Added Activities: These are those activities for which the customer is not willing to pay for but needs there for running of processes and the business. These business value-added activities could include work done on audits, control, reduce risk, for regulation or to support value added work.

Remember, both non-value-added and business value-added activities are wastes. However, we need to segregate them to give them a different treatment.

Taichi Ohno called all these non-value-added activities muda (“waste” in Japanese). Business value-added activities are called Type-1 muda while non-value-added activities are called Type-2 muda.

How to Separate Value-Added Activities from Non-Value-Added or Business Value-Added Activities

So, the question before us is how does one go about identifying value-added activities. Dissect a process and ask the following questions:

  • Does the activity transform the form, feature, feeling and function that the customer is willing to pay for?
  • Is it being done right the first time?
  • Is this something the customer expects to pay for?

A positive answer or a “yes” to all of them indicates that it is a value-added activitiy. Even a single “No” indicates that it is either a non-value-added activity or a business value-added activity.

Remember, when you stop doing the value-added activity, the customers are going to complain, while eliminating a business value-added activity would lead to internal customers or regulators complaining.

What Action to Take Based on Each Activity Type During a Lean Transformation

Having identified and segregated the activities into three types, Table 1 summarizes the action that should have taken place during a Lean transformation:

Activity TypeAction During Lean
Value-AddedOptimized and Standardized
Business Value-AddedQuestion and Reduce
Non-Value-AddedEliminate

A very effective metrics for measuring the non-value-added content in a process is Process Efficiency.

Process Efficiency (PE) = (Value Added Time X 100) / (Value Added Time + Non Value Added Time + Business Value Added Time)

Value-added time is the time spent on doing the value-added work in the process. While the denominator has lead time, which is the combination of value-added, non-value-added and business value-added time of the process.

This is an excellent metric to unfurl the waste optimization opportunity in a process. After carrying out a Lean improvement, it also tells the quantum of Lean improvement achieved. I have seen service processes have Process Efficiency that has been as low as .5 percent, while best-in-class service processes can be as high as 25 to 30 percent.

8 Wastes of Lean Manufacturing in a Services Context

Posted on by DS_admin

Defining “Waste” As it Applies to Service Organizations

Anything that does not add value to the customer is a waste. Waste only adds to time and cost. And the definition of “waste” in a service organization is quite similar to its Lean manufacturing definition.

When you look at a process, this customer could be an external customer/end user (consumer) for a process that has an impact on customers. For an internal process of an organization, this refers to an internal customer. Examples of the process of the former types include: sales, marketing, production, etc. The examples of the process in the later bucket include training, recruitment, administration, etc.

The 8 Wastes of Lean Manufacturing

Kudos to Taichi Ohno, the father of Toyota Production System. His 8 wastes of Lean manufacturing have a universal application. Despite what some practitioners may say or write, the 8 wastes of Lean are applicable not just in a Lean manufacturing system but also in services. Take any context and you’ll see for yourself the applicability of the wastes as expressed by Ohno.

Table 1 summarizes the 8 wastes of Lean with examples from services. I have kept a column empty for you to fill with the ones that are visible in your own company.

Type of wasteWhat is it?Examples
Waste of Over-productionProcessing too soon or too much than required• Information sent automatically even when not required
• Printing documents before they are required
• Processing items before they are required by the next person in the process
Waste of DefectsErrors, mistakes
and rework		• Rejections in sourcing applications
• Incorrect data entry
• Incorrect name printed on a credit card
• Surgical errors
Waste of InventoryHolding inventory (material and information) more than required• Files and documents awaiting to be processed
• Excess promotional material sent to the market
• Overstocked medicines in a hospital
• More servers than required
Waste of Over-ProcessingProcessing more than required wherein a simple approach would have done• Too much paperwork for a mortgage loan
• Same data required in number of places in an application form
• Follow-ups and costs associated with coordination
• Too many approvals
• Multiple MIS reports
Waste of TransportationMovement of items more than required resulting in wasted efforts and energy and adding to cost• Movement of files and documents from one location to another
• Excessive e-mail attachments
• Multiple hand-offs
Waste of WaitingEmployees and customers waiting• Customers waiting to be served by a contact center
• Queue in a grocery store
• Patients waiting for a doctor at a clinic
• System downtime
Waste of MotionMovement of people that does not add value• Looking for data and information
• Looking for surgical instruments
• Movement of people to and fro from filing, fax and Xerox machines
Waste of Un-utilized PeopleEmployees not leveraged to their own potential• Limited authority and responsibility
• Managers common
• Person put on a wrong job
Waste of Over-productionProcessing too soon or too much than required• Information sent automatically even when not required
• Printing documents before they are required
• Processing items before they are required by the next person in the process
Waste of DefectsErrors, mistakes
and rework		• Rejections in sourcing applications
• Incorrect data entry
• Incorrect name printed on a credit card
• Surgical errors

Table 1 — 8 Wastes of Lean Manufacturing with Examples From Service Organizations

In Conclusion of the 8 Wastes of Lean Manufacturing

The above definition of the 8 wastes of Lean should be looked at as something that is directional and should always be kept in mind while taking up a Lean optimization project. These are also called Non-Value Added activities, and I have seen processes in service business wherein up to 95 percent of the time is spent on these Non-Value Added activities. I shall talk about the concept of Value Added/Non-Value Added/Business-Value Added activities in my next column. Understanding this concept is a must for dissecting a process for Lean transformation.

Appreciating waste in a service business can be quite challenging as many of the activities do not happen before one’s eyes. What is needed is the usage of value stream mapping, which helps bring out the tacit wastes in a process. This has to be supported with sharp judgment of the change agents that are catalyzing the process improvements.

15 Ways to Tell if You’re a Process Centric Company

Posted on by DS_admin

Does your company leadership treat processes as strategic assets? If not, maybe it’s time they did. Here Debashis Sarkar, Asia’s Service Lean Pioneer, Author and Thought Leader, shares 15 ways to tell whether you’re a process centric company.

What is a process centric organization?

The simplest definition of a process centric organization is one where processes are consciously used to get business results. Two words in that definition have been underlined to convey the fact that leadership leverages processes as a strategy to derive business outcomes. A process-centric organization manages process as a system (process management system) which implies that you just don’t confine your attention to processes but associated elements – such as people, partners, and leadership – that impact process outcomes.

Why would you want to be a process centric organization?

The benefits of creating a process-centric organization are immense and comprise both hard and soft results. Beyond improving the performance of the company on strategic parameters; a process centric company fundamentally enhances the DNA of a company and makes it “change ready” while equipping it to face the pressures of competition better. It also creates a more engaged and involved workforce who understand that problem-solving and meeting customer requirements is a key part of their role.

15 Attributes of a Process Centric Company

The following are the 15 key facets of a process-focused company:

  1. There is clarity on the key processes that provide competitive advantage to the firm
  2. Leadership is visibly committed to leveraging process for business results
  3. Employees are aware of the value creating, value enabling, support and management processes that operate in the company
  4. Processes have well defined ownership
  5. The company invests in improving the processes that make a difference to the company
  6. The organization is structured around processes or value streams (or some sort of hybrid model to achieve this)
  7. Strategy gets deployed through the business processes that coalesce upwards through the functions (unlike strategy getting deployed vertically down through functions)
  8. Focus on meeting the process goals (or customer outcomes), which at times could be at the cost of functional goals
  9. Leadership doesn’t just focus on the outcomes of business but the how processes were used to achieve those results
  10. Process performance gets measured through metrics around efficiency, effectiveness and adaptability – not just one of them to the detriment of others
  11. Process management & improvement capabilities (such as Lean, Six Sigma, BPM, TOC, TRIZ etc) are embedded across business units and functions not confined to one central process team
  12. Focus is not just on tactical improvements of key processes but the company endeavours to move them up a maturity continuum
  13. Leaders mobilize the larger organization to engage in process improvement endeavours
  14. Organizational culture (includes values, assumptions, etc.) supports process thinking
  15. Employees across hierarchies willingly adopt tools for solving day to day problems and decision making

Although there are probably many more attributes of process centricity, I believe the list above are the most important characteristics and an easy way for you to measure how “process-centric” your own company is.

Ultimately, though, you will know that you are a process-centric organization when the improvement in process performance improves the overall performance of the company. If despite, the improvement in processes performance, the organizational performance remains status quo or even plummets, it’s time for you to re-visit your strategy around processes and how it be leveraged for business results. Leaders should treat the value-creating (core) processes as strategic assets and always keep their eye on them. Efforts in process design, management and improvement should have a direct or indirect impact on the strategic priorities of the firm.

Challenges of Service Lean Implementation

Posted on by DS_admin

Lean implementation can be quite challenging in a service organization. While the principles and learnings from Lean manufacturing are also conceptually applicable to the service business, Lean implementation needs to be done quite differently in the service industry because of the context under which service processes operate. The relevant list of Lean principles is quite long, but I will encapsulate the key challenges that make Lean implementation a difficult proposition.

Service Lean Implementation Challenge—Processes Are Not Visible 

In a manufacturing context, waste identification is relatively easy because it is visible. All that one needs to do is to master the art of observation. Abnormality identification gets enhanced by tools such as value stream maps. Unlike manufacturing, in which one can see the processes getting executed before one’s eyes, in the case of service organizations, processes are often not visible. In a service business, many times processes that are not visible result in wastes that are not visible. As a result it requires a high degree of skill, wherein one needs to look for things such as work-arounds, complexity-manifestation, voice-of-customer, etc. These are enhanced by tools such as the Lean Opportunity Questionnaire and Value Stream Maps.

Service Lean Implementation Challenge—Processes Are Large and Complex

Meaningful impact from processes can only be felt when end-to-end processes are taken up for improvement. Given the size and complexity of processes, this is often not easy in a service organization. For example, there could be processes in service companies that not only cut across functional silos but also geographies. Managing such a large process for improvements is not easy because it not only requires integrating a large number of improvements across all the sub-processes but also engaging teams in various functional silos.

Service Lean Implementation Challenge—Processes Are People Intensive

Service processes are people intensive. This brings in the task of aligning all individuals directly or indirectly associated with the process on the improvement goals. Lean implementation for service process would have improvement goals that could have both tangible and intangible components. The intangible elements of Lean implementation in service processes are dependent on moods of people and how they are feeling it at different points of time. Getting consistency on this dimension puts additional pressure beyond getting buy-in from all stakeholders impacted by the improvements.

Service Lean Implementation Challenge—Processes Are Technology Dependent

A large number of service processes are technology enabled. Many times there are IT systems that do not communicate with each other. There could be issues pertaining to slow-moving business intelligence, flexible infrastructure, data integrity, modular processes and so on. As a part of Lean implementation, it is imperative that these IT issues are addressed simultaneously to ensure Lean implementation has the greatest impact on the business outcomes.

Service Lean Implementation Challenge—Very Little Books of Knowledge for Service Lean

Unlike our friends in manufacturing, practitioners of service Lean do not have ready success stories that they could refer to. We still have yet to come across the Toyota of services that we could emulate. There are very few books of knowledge available that people could buy. I am probably the first person to have provided a holistic approach to Lean implementation in my book Lean for Service Organizations and Offices—A Holistic Approach for Operational Excellence;however, I am confident that going forward we shall see many more books on service Lean that will address the various nuances of Lean application to service processes.

Service Lean Implementation Challenge—Concept of Pull and Flow

Applying the concept of pull and flow as a principle of Lean is quite difficult to service processes. Many times people have to look for intelligent hybrid solutions that mimic the concept of pull as seen in manufacturing companies. Creating supermarkets and cellular layout require out-of-the-box ideas, which sometimes need to be supported with technology. While looking at customer facing processes, we may have to also take generous help from concepts such as Little’s Law (Queuing Theory) to arrive at solutions.

Service Lean Implementation Challenge—Processes Cut Through Vendors

In a service organization, vendors broadly play two roles. On one hand they can be suppliers of materials that are used in the process (such as plastic being supplied for credit cards). Or there could be processes that are given to vendors for execution. In this case, part or whole of an end-to-end process passes through a vendor for execution. This is also called “outsourcing.” Holistic Lean implementation would require both types of vendors to be taken onboard the organization’s operational excellence journey. Aligning employees of an external partner on the organization’s operational excellence goal is not easy; it requires a high level of commitment from both the organization and the partner (vendor) organization to make this happen. Before we mindlessly outsource processes to partners, we should see if the same can be avoided by achieving cost efficiency through Lean implementation.

These are just a few of the challenges that one faces while embarking on a journey of service Lean implementation. Service Lean is filled with trials and tribulations that require an open mind that is ready to experiment.

Let's
Connect

#

Mobile No.

+91 8939723810
#

E-mail ID

query@proliferator.net