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Improved to Death

Improved to Death

Could the whole notion of continuous improvement be out of date and dangerous?

If you want to boost the performance of your car you can obsessively tune and retune the engine as much as you like. Trouble is, after a while, any improvements you can still achieve become marginal at best. And if you only have a small engine, say 1600cc, you are most unlikely to attain higher performance at all, no matter how hard you "continuously improve".

To get a really high performance car, you are probably better off altering the car's entire body shape to make it more aerodynamic and dropping in a new engine, or even buying a brand new vehicle.

Jed Simms, executive chairman of Australian value and benefits specialist company Capability Management, thinks continuous improvement - once seen as the panacea to organizational efficiency problems - is a lot like that. Certainly continuous improvement has delivered some benefits, he says, but too many organizations are finding themselves achieving ever-diminishing levels of returns for the amount of effort they put in. Like the car enthusiast finally forced to recognize that no amount of further tweaking is going to win him or her a scintilla of extra performance, Simms says most organizations have reached the point where real gains will only be achieved through an entirely new approach.

"Most re-engineering work is done within assumed constraints: the components of the process, the existing policies, the existing outcomes. Improving current processes is like continuously retuning the 1600cc engine - you can get some [marginal] improvement, but you are often missing the main game," Simms says.

"A lot of organizations have got process groups of one sort or another that are being highly ineffective, but they believe that because they have a process group, they should be or they are getting something. Continuous improvement also misses the game because people are just trying to improve the efficiency of what they're doing today rather than really questioning that and moving to the next level of performance, and saying: 'What can we be doing, what should we be doing in this area?'"

Organizations are now turning to more radical improvement approaches to break out of their current ways of doing things.

Going to Extremes

To obtain dramatically improved performance requires just such an extreme approach, Simms says. Organizations need to go beyond just process improvement to look for breakthrough ideas and the ability to leverage the power of systems to deliver sustained improved performance. Business simplification programs can deliver such results, he says, consistently increasing performance by a factor of three to five over more conventional approaches.

The competitive challenge is not to strive continuously to take 2 or 3 percent out of an existing process here and an existing cost there, but to radically transform the way the organization does business, competes and makes money. That way, you can confidently look to 20 to 30 percent improvements, he claims.

Simms claims the results are startling. "At one manufacturing company, for example, they had one of the Big Five in there for nine months doing re-engineering, and we went in for six weeks and took out 45 percent of the process steps, reduced their implementation costs by 19 percent by eliminating all these things they didn't have to support, standardized a whole series of processes across the different organizations, and changed the whole way they thought about meeting customer orders. And it wasn't rocket science. We had two people on that project; the Big Five firm had 15."

How did the Big Five consultancy get it so wrong? Simms says it was because they failed to ask the right questions, concentrating only on how to improve current processes, rather than examining scope for process elimination. Why nine months were spent spinning their wheels, well, he says, he has no idea.

"I've used continuous improvement methodologies three times now in past corporate lives and I think there's a very high risk with continuous improvement," says Members Equity interim CIO Damien McAree. "It's a paradigm really, which is more suited to manufacturing environments or environments that lend themselves to the manufacturing paradigm. It goes well with that sort of 'continuous refinement, elimination of bugs, getting processes smooth' way of doing things. It assumes, though, that things remain the same in terms of environment, in terms of many other external variables that do change.

"I think what we got out of [business simplification] was an incredible awareness of just what the business needs to do right across the business at all levels of the business. And I think it developed a real head of steam - a real momentum and energy, which you don't often see in the corporate world these days, and an enthusiasm for the change to be effected.

"I am a bit of a fan," McAree says.

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