Ideas that create the future
Point of View
Rediscovering continuous improvement
By Jon Bumstead and Andy Bruce
Whatever happened to continuous improvement? A couple of
decades ago, it was seen—along with total quality and Kaizen
techniques—as providing a universal panacea for all of
industry's ills. Today, many people believe it is largely
irrelevant. Even quality, the watchword of the '80s and '90s, is
now wrongly seen by many as secondary to other criteria,
such as time to market.
But the fact is that continuous improvement and its corollary,
operational excellence, are even more important now than
they have ever been. The need to revisit continuous
improvement seems clear in light of such e-world business
problems as:
● how an e-business can prevent its supply chain from being
overwhelmed by rapidly rising demand, or
● how a commodity-based multinational can continue to
generate shareholder value when commodity prices are
falling and it is being threatened by fast-growing Internet
competition.
Implementation, functional focus hinder success
When one does revisit continuous improvement, it is clear
that although many results were disappointing, the problem
is not with the concept of continuous improvement but with
how it is implemented. Real continuous improvement success
stories were—and continue to be—spectacular, such as those
western companies that applied the principles of Kaizen
imaginatively rather than slavishly, adopting the philosophy
because they really believed and understood it rather than
because it looked cheap.
Today, of the many multinationals still pursuing continuous
improvement, a sizeable proportion are implementing it
poorly. Typically, these companies have hundreds of
functional-level Kaizen-type continuous improvement
projects going on at any one time. However, experience
suggests that for many of them, as few as half their projects
have clearly stated target benefits, while up to 20 percent are
woefully under resourced with, on average, less than one
individual allocated to each. The result is that while
significant numbers of people and equally significant
resources are deployed, they are spread so thin that average
project yields are, at best, only a few hundred thousand
dollars.
Such modest gains are hardly likely to impress organizations
faced with the need to reduce their cost base by five percent
per year simply to stay in business. But that is not a failure of
continuous improvement as a concept, but a failure to
implement the concept in a way that enables the
organization to extract the available value and extend the
process throughout the supply chain, beyond the four walls
of the company.
Today's continuous improvement: Proactive,
not reactive
Traditionally, continuous improvement purists have argued
that the process could and should be left to manage itself, in
line with the mantra: "Let the people go forth and manage
the business." In contrast, today's leading-edge continuous
innovation practitioners aim to harness and optimize around
individuals' natural talents. They do this by managing the
innovation process within a clearly defined framework that,
in time, will lead to the continuous improvement project
cycle becoming the heartbeat of the entire organization.
Arguably the most important role for that framework is to
ensure that the organization maintains a balanced portfolio
of projects as individual projects are initiated, developed,
monitored and completed or, if failing to deliver, prematurely
terminated. This implies a major departure from previous
practice. Where conventional continuous improvement was
reactive—initiating projects to correct perceived deficiencies—
today's continuous innovation is proactive—seeking out
opportunities to improve or replace existing processes before
something goes wrong. This kind of continuous innovation
has two critical functions:
1. To promote a steady stream of innovative ideas, establish a
mechanism to screen those ideas and provide rapid
feedback of results. Organizations typically have no trouble
Outlook Point of View aims to provide a forum
for ongoing discussion between Accenture
professionals and their clients.
“Deliberate” closed loop continuous improvement framework
Seven interrelated crucial components
Right shared
Right insights direction for Right
& imperatives + continuous + execution
improvement
Success factors
• Getting the seven components right
• Allowing for significant scope for innovation and stretch by moving average performance higher
• Creating a “closed loop” system
• Choosing the right metrics and incentive to drive the right behavior
• Building a deliberate and systematic planning process into performance contracts
identifying opportunities, the trouble starts in the process
or lack of process that follows. Feedback should ensure
that idea providers become, in effect, "self screening" as
they recognize which types of ideas will add value and
thus have the best chance of acceptance. The non-selected
ideas remain on file for another day.
2. To balance ideas within the project portfolio. In many
organizations today, innovation at the strategic level and
continuous improvement at the operational level are seen
as being in conflict, with the one pulling rank over the
other. Certainly, rapid changes in the external competitive
environment mean multinationals must develop the ability
to "re-invent themselves" at the strategic level. However, if
that strategic innovation is not complemented by an
efficient and largely self-managing continuous innovation
and improvement process at the operational and
functional level, senior management will become sucked
into the management of day-to-day issues. As a result, the
organization will become less able to innovate, to renew
itself and, ultimately, to survive. A balanced continuous
innovation portfolio will therefore contain carefully
selected projects, with the aim of dramatically improving
the benefit yield per project and per person involved.
Closed-loop solution
Although it would be comparatively easy to impose such a
portfolio as a one-off exercise, the essence of continuous
innovation and improvement is that it really is continuous. That
means that the portfolio must undergo a repeated rollover—for
example, an annual or quarterly basis—as new projects at each
level replace their successfully completed predecessors.
Figure 1
Right
Right
Right people & performance Right results
+ skills + measures & + communi- = (x+2%)
cations
incentives
Knowledge sharing
That in turn implies that continuous improvement or
innovation becomes in effect a closed-loop process, or rather
a series of interlinked closed loops that optimize themselves
as the results of their outputs are fed back from processes
further down the chain (Figure 1). By identifying and
optimizing each link in this chain—from the insights and
imperatives that drive idea generation through execution,
people and skill selection, and performance measurement and
incentive structures—the organization develops its own self-
optimizing continuous innovation framework. It also ensures
that the knowledge and "learnings" acquired over time
become embedded within the framework and are not lost as
individuals return from projects to line assignments or, worse
still, leave the company.
In the rush to meet the challenges and exploit the
opportunities of e-business, continuous improvement is in
danger of being overlooked or dismissed as inappropriate to
the new business paradigm. However, in its more systemic
form of continuous innovation, it is in fact fundamental to
success in the e-enabled world. Indeed, while it may well
provide early users with a key source of differentiation, it will
soon be seen as the minimum price for staying in business.
Surviving is the new paradigm and the rate at which we can
learn may be our only sustainable competitive advantage.
Jon Bumstead, associate partner – Supply Chain, is based in
London, U.K. (jon.bumstead@accenture.com).
Andy Bruce is the founder of SofTools and a business author
in the fields of strategy and project management
(ab1@softools.net)
Please contact us at pointofview@accenture.com or visit us at
www.accenture.com.
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