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Source: Business-improvement.eu
WorldClass: Value adding, smooth & perfect organization
Recipe for continuous improvementPlus three tastemakers
Six ingredients for continuous improvement
By Dr Jaap van Ede, editor-in-chief Business-improvement.eu, 05-04-2022
Available in Dutch on Procesverbeteren.nl

When you start with continuous improvement, which components are then indispensable? Based on hundreds of interviews I had as a journalist specialized in process improvement, I developed a basic recipe with six essential ingredients. Without these, you improve without direction and structure, and you will experience a relapse after a short period of time.

The basic recipe is not sufficient. Flavorings are needed, which prevent the menu to become less satisfying in time. Without tastemakers you will get diminishing job satisfaction. Or, after a while, you will deliver products that nobody wants anymore.

Continuous improvement should be preceded by something else: as a company you need to know what your mission is, and which products match with that!

Being able to be proud of your work, and doing it better and better, is a great source of enthousiasm. The Japanese use the term monozukuri for this: the art (mastery) of making things.

An importrant question is: what do you do more inspired, faster, differently and/or more effectively than your competition? Your mission should include a vision of the future. This vision should be playable like a movie.

Percieved value
The mission is fulfilled with products. Or services. To this end, for each product/market segment the customer value must be defined.

Actually, it is better to speak of percieved customer value. This is equal to the earnings for a customer (including e.g. sustainability, service, image and customization), minus sacrifices regarding the time, energy and money to obtain a product, to learn to use it, to maintain it, and eventually to get rid of it. The weight of the aforementioned things depends on the market and the context.

Process improvement aims, per product-market combination, to increase the following fraction: experienced customer value / costs. Costs here refers to things that must be done by a company to make a product, or to provide a service.

Once it is clear in what way and with what products you want to distinguish yourself, continuous improvement of the flow of value towards your customers can start.

You can learn a lot from companies in which everyone enthusiastically contributes to continuous improvement. However, realize that these are industry - and even company - specific solutions. Each production system was developed over time as a tailored suit. If you put such a suit on without modification, it will pinch.  

So, there is no template or blueprint to start with - or take the next step towards - Operational Excellence (OpEx). However, it is a legitimate question which ingredients you need, or might be missing in your current approach.

Therefore, based on hundreds of improvement cases I have studied in the last twenty years, I will try to develop a basic recipe. As we will see later, this recipe contains six crucial ingredients.

To get - and keep - continuous Improvement going, six crucial ingredients are necessary
To get - and keep - continuous Improvement going, six ingredients are necessary

On this site the most common improvement methods are defined, based on how these are practiced. Nobody can avoid applying Lean. In developing a basic recipe for OpEx, I will therefore start with some elements from the definition of Lean:

‘Lean is...a logistic improvement method that continuously strives for more flow and shorter lead times, thereby adding maximum value for the (end) customer (...) Disruptions in the flow are made visible (...) Typically, everyone in the organization contributes to continuous improvement.’

From this, the first three essential ingredients for continuous improvement can be distilled!

1. Value streams towards customers are made visible
In companies with are operationally excellent, it is immediately visible how value flows towards the customers. To achieve a 'flowing' process, and to make deviations visible, standardization is necessary. Then, for each processing step, there is a generally accepted best practice, and everybody is trained in it.

Standardization is not a brake on process innovation, as is sometimes thought. Everybody can suggest better best practices. However, you don't keep these to yourself, but you present them to your production team, with the aim to improve the work standard. 

Making value streams visual is a crucial part of all OpEx approaches. This is also possible if processes are digital
Making value streams visual is a crucial part of all OpEx approaches. This is also possible if most processes are digital

Only products that reach customers have value. Therefore, performance indicators must be formulated in such a way, that they measure the end result of value chains: the percieved value of your product by a customer. A (production) department should never be stimulated by a local performance indicator to produce more, than the next production step can handle.

2. Value streams are controlled
Unnecessary variation, such as peaks and troughs in demand, or product variants that customers do not (or no longer) desire, must be reduced as far as possible. Modularization of products, by constructing these from standardized 'lego stones', simplifies your logistical challenge. Also allocating products (or components thereof) to specific customers as late as possible (postponement) ,reduces the amount of variation.

After this simplification of the logistics (that's what it is!), a control system for the value streams is needed. The goal is, that steadily as much 'water' or value flows to the customers as possible. As a rule, several steps in a row are required to deliver a product or service. These steps must then be coordinated. A Lean production line is like a straight 'channel'. This channel should be balanced so that each production step handles the same amount of 'water' per unit of time. This way, am ennobled conveyer belt is created.

When you make customized products, or when you make a lot of product types, you have a so called job shop environment. In that case there is a network of possible routes to possible end products. This situation is harder to control. What you need, is a way to prevent peak loads on each route. You don't want a long period of 'high water' anywhere, resulting in a queue for a particular processing step.

There are lots of regulation systems to prevent this, including Kanban and POLCA. In addition, you need buffers. For people like me. living in the Netherlands, this makes sense. In our country the rivers have overflow areas, which ensure that a river can cope with a 'peak level' of water.

Truck manufacturer Scania is a good role model of Lean
Truck manufacturer Scania is a good role model of Lean. The value stream is the factory clearly visible, and sll materials arrive just-in-time. However, there are also material buffers, further upstream in their supply chain

Even an advanced Lean company such as Scania cannot function without buffers, be it that these are kept as small as possible. Large buffers mask improvement options, because they make it difficult to see deviations and diturbances in the value stream. Large buffers also cause long lead and delivery times. The word Lean literally refers to production with buffers as small as possible.

3. Deviations in a value stream are improvement options
Employees should stop production immediately if they see or suspect a problem. This so-called Jidoka principle may seem illogical, because it leads to many short stops, which block the flow. However, Jidoka prevents errors to be passed on to the next production step, thus preventing defective end products.

Every deviation and disruption of a value stream is an opportunity for further improvement. Therefore the source, or root cause, should be detected of each disruption of the flow. Next, this source of disturbance is preferably permanently eliminated. In addition, everything that does not directly create value for customers (unnecessary work, errors, etc.) is increasingly reduced.

When there Is a problem or conflict, managers should not try to solve this from behind their desk. Instead they should apply Go to the Gemba (workplace). This means: visit the place where the problem is. A virtual Go to Gemba is also possible, for example with video software.

Employees are experts in their own field and know better than anyone else what goes wrong and how that could be improved. Besides this, talking to employees creates a better connection with them. This motivates, because they feel that what they think matters.

The three ingredients of the recipe for OpEx developed thus far create (1) visible and (2) controlled value streams, of which (3) the flow is continuously increased.

Goldratt, the founder of the Theory of Constraints (TOC) was the first to point out that these three ingredients are present in all three logistics improvement methods: Lean, the TOC and Quick Response Manufacturing (QRM).

In any organization in which multiple and consecutive steps are needed to get results, improving the flow should be the primary goal.

This is also true when you make customer-specific products, even when the work in your company is project-based. This explains, why for example a Lean hospital is well possible. Logistically seen, a hospital is certainly not a production canal. On the contrary, it is like a complicated river delta, through which patients move along unpredictable routes. However, even then, you should make bottlenecks in the flow visible and try to prevent local peak loads. In addition, you should try to remove "clutter" such as bureaucracy and rework from your "waterways" as much as possible.

Also railroads are good metaphors to explain the primary goal of Operational Excellence: flow
Besides waterways, railroads are also good metaphors to explain the primary goal of Operational Excellence: flow!  The aim is to get as many 'trains' (products) as possible, without waiting times, to their final destinations (the customers).

Central to OpEx is system thinking, with the aim of increase the flow throughout production and supply chains. Specific tools such as improvement boards or 5S only play a supporting role.

If visualization, control, standardization and continuous improvement of your value streams is present, successfull process improvement is possible in a short time.

That said, an important factor is still missing: it is the people in an organization who realize process improvement. This is why I will add three more ingredients to the recipe for improvement!

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4. Direction for improvement
In the context of OpEx, everyone should strive to increase the percieved product value by the customers, bij improving their own work, every day.

Operational Excellence requires a True North as a compass, and a link between this mission and local goals Operational Excellence (OpEx) requires a True North as a compass, and a link between this mission and local goals (Hoshin Kanri).

One example: the mission of a hospital is to add health value for their patients, which in turn requires all kinds of products and treatments. In the context of healthcare, percieved customer value may sound strange. However, a patient will also value if healthcare professionals are friendly, and if the waiting time is short.

Knowing to which percieved customer value you contribute as an employee, is not enough. In addition, you need to know what kind of improvement has priority at a given time, and how you can personally contribute to help to achieve this goal.

To this end, the hospital needs a compass that translates the mission and the corresponding customer value(s), to local targets at all levels in an understandable way, see also ingredient 6. In Lean jargon this is called Hoshin Kanri, or 'compass for change'.

5. Problem-solving capability
After knowing what to improve (ingredient 4), you need to understand how to do this. Therefore, in a Lean company, everybody coaches each other to become an increasingly better problem solver. Examples of good practices are searching for the root causes of problems, and finding smart ways to increase the flow.

The Improvement Kata for problem-solving behavior
The Improvement Kata for problem-solving behavior, described in the book Toyota Kata. Via short improvement cycles - of hypothesizing, testing and adjusting - you move further and further towards a vision for the distant future.

Scientific thinking plays a central role. This means hypothesizing, testing, checking the outcome and then formulating a new and better hypothesis for improvement.

Managers are not only coaches, for example of an improvement team, but in turn have an 'upper' manager who coaches them. This way, everyone grows continuously in terms of problem solving skills! So, a Lean company is a learning organization in two ways: people learn, and processes improve.

At the top of the improvement pyramid is a sensei. This is someone who is very experienced in process improvement. This person can temporarily be an experienced consultant.

6. Structure
When everybody solves their own problems and improves their own work, this is still not enough. Even if problems are solved by multidisciplinary teams, there are always issues that go beyond the sphere of their influence. In that case they must be able to call in help, or 'escalate' a problem to a higher level in the organization.

Calling in help may start small. At Scania, for example, there is one 'Andon' per production team. This is someone in the role of libero and team leader. This person jumps in when necessary, and records observed problems for later analysis.

In addition, Lean companies have daily startup meetings at multiple levels. That way, a cross-departmental problem can easily be passed on to the appropriate level. Managers who frequently visit 'their' shop floor contribute to this, because they see what is going on there. Leader standard work, this is called.

The structure of the Oobeya-system at Rockwool
The structure of the Oobeya-system at Rockwool

As indicated at ingredient 4 (direction), a system that links local target values to each other, and to the mission, is needed. Some companies, such as Rockwool, use Oobeya rooms. These function as nerve centers at departments, and contain boards with targets, deviations and current improvement actions. Targets of an Oobeya can be sub-targets of the Oobeya above it.

A Lean organization is a calm environment, without overload (muri) of machines or people. Neither physical nor mental. Stress only leads to absenteeism and reduces job satisfaction.

A certain overcapacity is needed anyhow, to prevent that small peaks in demand will immediately disturb the flow. People need also time to think about process improvement and, for example, to participate in Kaizen improvement teams.

The Lean improvement building of Philips Lighting (now Signify)This 'Lean building' of Philips Lighting  (now Signify) shows that the ingredients of their improvement approach reinforce each other

The ingredients of the recipe for improvement reinforce each other. This explains why many companies depicture operational excellence as a building with multiple pillars.

If the above-mentioned cocktail of six ingredients is present, chances of success are high.

However, knowing this recipe does not make you a good cook. A company learns how to 'cook' by doing, thereby giving a personal twist to the recipe for process improvement. Patience is a virtue. At Auping, for example, it took ten years to develop Lean production to a chain-wide level!

Now, the basic recipe for process improvement is complete. It is a good foundation, but there are many extra ingredients that, in my opinion, explain why one company improves much more successfully than the other.

Below, I will add three key flavorings to the basic recipe. One of these flavorings, innovation, is indispensable in the long run! If you do not innovate, your OpEx salt will lose its power, because you will end up making perfect products that no one wants anymore. You can also formulate this differently: you will then produce very Lean, but nevertheless do not add value for customers.

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7. Giving meaning
When the basic ingredients 1 to 6 are present, everyone knows what - and how - they can personally improve, regarding the "value streams" towards the customers.

However, thinking about improvement, and the continuous change that comes with it, requires energy.

The question how enthusiastic everyone will be, to pursue your True North, is therefore legitimate. To create enthousiasm, the goal of the organization should be inspiring and meaningful. In addition, there should be no unnecessary obstacles that prevent people to serve the customers, see also ingredient 8: self-management.

8. Self-management
Continuous improvement is something you should do with all the people in the company. Otherwise you don't use the knowledge of those who add value for the customer. Also, by contributing themselves to improvement, everybody becomes an increasingly better problem solver.

New work standards imposed from above are not easily accepted. Sometimes this is even justified, because things have been overlooked. Therefore, 'the shop floor' must have a certain amount of freedom, to improve their own work. In Lean, the goal is often set, but each production team may fill in the how themselves. Within safe boundaries, of course. This way, each team becomes the owner of their own process.

You can go even further, and let employees decide themselves which tasks they take up in which teams. Or even give them a say in which goals to pursue. This makes it possible that everyone develops and exerts entrepreneurial qualities.

This has disadvantages, but also brings risks. Chaos and unrest may result. Advocates of self-organization often have an idealized world view, in which everyone works perfectly together, and is equally motivated. A world in which everyone thrives, even if it is not clear what is expected of them!

A company is not a family or a tribe, or a group of friends. Also, the size of a company is often such, that a high level of coordination is necessary. You often hear that a company wants to be as agile as a startup. However, a startup is small and, to a certain extent, is a sort of family.

It seems to depend on the type of organization, how much freedom is appropriate. If it is possible to form self-managing teams that are in fact mini-companies, then you can go the furthest. The alignment problem then disappears. Home care organization Buurtzorg is a good example.

Trainingsplatform Springest adopted the Holacracy model, to get freedom with structureTrainingsplatform Springest adopted the Holacracy model, to get freedom with structure

It is also possible to structure a company, in the way democracies are organized. Self-organizing teams are then called 'circles'. These operate more or less independently, but are linked to each other in a way that resembles the connection between local and central governments. Organizations such as Springest and Voys embraced this so-called holacracy model.

9. Innovation
Most OpEx-improvement methods, with exception of the Theory of Constraints, hardly pay attention to innovation. Read: is a product, and the process with which I create and support it, still what the customer wants!

You can improve step by step for a very long time. This will makes you a perfect producer of e.g. photo films, petrol cars or mobile phones. However, you will then miss the step to digital photography, electric cars and smart phones.

Therefore, while striving for Operational Excellence, you must also continuously improve your products and services. Companies must be agile to make this possible. Both in terms of what your people do (see ingredient 8, freedom and self-management), and in terms of your "value proposition": what products and services do you provide.

Fortunately, companies in which everybody continuously improves are a good breeding ground for continuous innovation. Because everyone is already focused on customer value, new customer questions surface sooner.

In addition, processes, organizations and products can be improved and innovated in the same 'scientific' way. This is because Lean and Agile use the same improvement cycle: hypothesis formation, testing and adjustment!

Scrum develops a (software)product in short sprints
Scrum develops a (software)product in short sprints. These are in fact experiments, with feedback of a test group of customers. (source: Wikipedia)

In innovation, quick customer feedback indicates whether you are moving in the right direction. Methods such as Scrum and Lean Startup are examples of this approach.

Lean-tools can make innovation processes visible and manageable. Think of an Oobeya space in which the development of, for example, a new type of car is monitored, as well as the bottlenecks during this process.

> Zie also: What is "customer value" within Lean?

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