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At Thomas Group, we take an enterprise perspective to continuous process improvement and the competitive advantages it creates in companies, which leads directly to enhanced bottom-line results. By enterprise perspective, we mean that every department, division, unit, or company must operate and align its operations throughout every fulfillment stage, from suppliers through its internal production lines to shipping and final customer fulfillment, keeping the service provided and the value delivered to the end customer foremost in mind.
As alignment takes place, a cross-functional value chain, which includes all the stakeholders of every process both within and outside the organization, is created. As this occurs, the power of the enterprise emerges. At Thomas Group we call this our Enterprise Approach.
Our view of widely known process improvement methods such as Lean, Six Sigma, and Theory of Constraints (TOC) is positive. While we affirm the improvements these excellent tools can bring, it is important to remember that they are only tools. In and of themselves they cannot begin to address the overarching strategic needs of an enterprise.
We take as a foundational truth that any enterprise is comprised of a set of linked processes whose interdependency is critical to lasting performance improvement and that they must be strategically aligned. That is why Thomas Group’s enterprise model provides an overarching governance structure for driving implementation of process improvements or new process developments. While the effort must start with high-level strategy, a coordinated implementation across the entire value chain is also necessary. Most large-scale process improvement efforts ignore this truth; that is why many fail. Lack of an overarching perspective may enable improvements in certain areas at the cost of other areas, with reduced effectiveness enterprise wide.
Thomas Group’s enterprise approach supersedes the horizontal alignment of processes. It represents a cultural change—migrating from simply doing discrete process improvements to instituting a culture of continuous process improvement.
Process Value Management™ (PVM™) is derived from the concepts of Total Cycle Time® (TCT) developed by Philip R. Thomas, founder of the Thomas Group. PVM is our key methodology for implementing continuous process improvement. It is based on an inclusive, end-to-end, integrated view of the enterprise, considering all process stakeholders, including suppliers and customers. Interestingly, our methodology grew from the same roots as Lean, Six Sigma, and TOC, but takes the holistic view of the organization applying those and other tools to achieve rapid results.
Over the last decade, PVM has enabled the US Navy to implement improved maintenance processes for aircraft, aircraft carriers, and other surface ships resulting in savings from improved efficiency and cost avoidance in excess of $3.7 billion. PVM has also been implemented in General Motors, Gulfstream Aviation, Hillenbrand Industries, and many other enterprises.
As the need for enhanced enterprise productivity has grown, senior executives have nearly unanimously called for the institution of continuous process improvement and cultural change. Lean, Six Sigma and TOC, the best known tools for driving process improvement, have migrated to the arena of continuous process improvement. These tools are process focused and point specific. They do not drive rapid culture change. All three focus on improvements at the lower levels of an organization. Positive results from them may bubble up and drive culture change over a protracted period of time, but that is not their purpose or their intended role.
The purpose of this paper is to present a way forward that makes use of the process improvement tools already readily available and accelerates cultural change in that it brings a new way of acting and thinking. This approach leverages the investments you have already made in process improvement tools, creating a value chain and gaining greater efficiency with a top-down driven, bottom-up implemented approach. It presents an assured way of achieving strategic alignment and deployment across large and complex organizations for continuous process improvement.
Understanding the history of the evolution of Lean, Six Sigma, and Theory of Constraints is essential to today’s application of them.
In the 1920s, Bell Laboratories’ Dr. Walter Shewart began using control charts for production quality and repeatability akin to today’s Six Sigma methodology. The Training Within Industry (TWI) service was established in 1940 and incorporated into industry in order to increase wartime production output. TWI was based on Charles Allen's 4-point method—Preparation, Presentation, Application, and Testing; it focused on the interface between supervisors and employees and proved invaluable to industrial support of the war effort.
Post-war industrial leadership recognized the need for support in rebuilding its industrial infrastructure for peacetime. A former TWI trainer and his group were contracted and began the training process.
This group used the multiplier effect (training trainers who would be the core to train more trainers) to get the program started. Several Japanese agencies emulated the training and promoted it throughout Japan. The massive use of the TWI programs in all facets of Japanese industry is an integral part of Lean, Six Sigma, and TOC, yet it derives from TWI and Charles Allen. In Japan, TWI formed the basis of the Kaizen culture in industry. Kaizen was successfully used at Toyota as part of what is known as Lean today. TWI was the forerunner of what is today regarded as a Japanese creation.1
Theory of Constraints (TOC) was first discussed in Eliyahu Goldratt’s book, The Goal. The title comes from the contention that any manageable system is limited in achieving more of its goal by a very small number of constraints and that at least one constraint is always present. The TOC process seeks to identify the constraint and restructure the rest of the organization around it, through the use of Five Focusing Steps: Identify, Exploit, Subordinate, Elevate, Repeat step 1.2
TOC focuses on the most limiting constraint with the aim of exploiting it as much as possible. Once the organization removes that constraint, TOC asks whether the most limiting constraint has moved elsewhere. TOC is an example of Socratic thinking. TOC continually asks “what is the next constraint?” TOC pursues constraints until the customer becomes the constraint. This occurs when the system is fully optimized but high output is not consumed.
Six Sigma, developed by Motorola, focuses on improving the quality of process outputs by identifying and removing the causes of defects (errors) and variation in processes. A key element of any Six Sigma project is that it follows a defined sequence of steps and has quantified financial targets (cost reduction or profit increase) established before the project is initiated.3
All three process improvement tools are excellent when properly applied. They drive process improvement and gain greater efficiency in specific areas; however, they are process tools, not culture change tools. Their emphasis on fomenting change from the bottom up lacks an overarching process improvement implementation strategy across an entire organization. Those implementing them often fail to consider that improvements in one area may sub-optimize results in another or that the tool may not be the best choice for a given situation. In short, the tools do not focus on strategy or culture change.
The table below summarizes the methodology and dimensions of Lean, Six Sigma, and Theory of Constraints.
Increased efficiency and cost savings (or cost avoidance) are key elements in business today. Improving efficiency drives costs out of the process and causes more profit to fall to the bottom line, given the same output or more output at the same cost.
While aggregating the accomplishments of various improvements gained by Lean, Six Sigma, or TOC produces pockets of improvement, it does not make large and rapid improvements that a top-down driven, value-chain managed approach can.
At Thomas Group, the essence of our vision is our enterprise approach. Enterprise is a business model linking customers and suppliers in a value chain that creates, enhances, and achieves efficiencies in all portions of that value chain. It eliminates the silos and stovepipes of self-interest and applies best-for-the-enterprise thinking enterprise wide.
Enterprise thinking is linked efficiency that squeezes the most value out of the resources available; everyone gains. The graphic below depicts the impact of this approach to process improvement. The green section is the maneuver area where improvements result.
The first step in instituting continuous process improvements is to focus strategically and establish a realistic and executable plan. Remember that while it may be easy to write such a plan, implementation may be difficult and lead to failure.
One result of a recent study by the Economist Intelligence Unit (EIU) of The Economist and Celerant Consulting stated:
“Forty-two percent of business leaders in the US and Europe admit their change management programs over the past five years have more or less failed.”
Change management that drives new cultures and gains efficiencies requires a strategic view for implementation and must include the right players. The key element is cross functionality. There must be clearly-defined benefits for all the participants. Everyone must focus on what is best for the team in the decision-making process. In addition, there must be a clear charter and defined scope so that its limits and intentions are clear. This enterprise is the implementation vehicle for the strategic goals of the organization.
In their book Execution, Larry Bossidy and Ram Charan note the difficulties of implementing change. Changing behavior in any context is difficult work. As the authors write, “You do not think yourself into a new way of acting. You act yourself into a new way of thinking.” 4
This is the leadership challenge. How do you act your organization into a new way of thinking? Additional results from the same EIU study:
The leadership team that runs the enterprise is comprised of representatives of stakeholders. The team makes decisions about initiatives, resources, and goals. They manage the actions with a set of hierarchically-linked metrics that when rolled up or peeled back provide insight into results and the drivers that link results from top to bottom. The team drives the actions that create new thoughts.
The challenges inherent in leveraging and accelerating process improvements and driving rapid culture change make Thomas Group’s Process Value Management the best avenue for gaining required efficiencies and effectiveness. PVM also had its roots in the TWI effort of World War II and evolved in American culture. Philip Thomas, founder of Thomas Group, developed Total Cycle Time (TCT) and applied that concept in the semiconductor and other production arenas with great success. The key element of TCT was, and remains, to look at the process end-to-end at a high level and drill down from there. Thomas’ overarching approach considered all the elements of a process and addressed them holistically using Cycle Time and FPY (a Thomas Group-developed metric—the percentage of time things are done right the first time) to drive rapid process improvement.5 PVM was a natural outgrowth of TCT's holistic approach to considering the impacts of action across the entire process leading to an enterprise-wide construct that builds a value chain and links operations horizontally.
PVM takes a holistic approach to assure that improvements in one area, function, or part of the organization do not have unintended consequences in another.
Thomas Group employs Lean, Six Sigma, Theory of Constraints, Total Cycle Time, and other tools matching the right tools to the job. Our holistic approach creates excellence across the organization, not just in pockets. PVM provides the overarching umbrella for change management as shown. PVM aligns the organization and creates a value chain from supplier to the customer.
The result is a change in alignment and thinking from conventional stovepipes and silos. The enterprise creates a horizontally-linked value chain.
As depicted, the leadership team must be involved, reflecting the cross-functional nature of the enterprise, and act as the champions of change. The CPI mentors and advisors are the experts on enterprise and provide the linkage between levels and the business expertise that accelerates and leverages the pockets of change produced by process improvements. This is top-down driven and led change implemented bottom up.
Enterprise drives planning, leadership, communication, and buy-in at all levels of the organization and at all points along the value chain. As Thomas Group has demonstrated, it gets results. Over a decade the US Navy’s box score: Aircraft ready for tasking (RFT) , up 35%, carrier maintenance and operating costs decreased 20% ($220M in real savings and $377M in cost avoidance in three years), Surface Ship Maintenance cost savings of $1.1M. The bottom line of the Navy engagement is $3.7 billion in revenue improvement using the enterprise construct under the PVM umbrella.
The Navy achieved these results and the culture changed because the processes changed and the paradigms shifted. Cross-functional alignment with mentoring and a focus on best for all became the new paradigm. They acted into a new way of thinking.
The table below highlights the original methodology-dimension table and adds PVM for comparison sake. Note the differences.
1Womack, James P., Jones, Daniel T, and Roos, Daniel. 1991. The Machine That Changed the World, New York: Rawson Associates.
2Cox, Jeff; and Goldratt, Eliyahu M. 1986. The Goal: A Process of Ongoing Improvement. New York: North River Press.
3Anthony, Jiju (January 7, 2008). “Pros and Cons of Six Sigma: An academic perspective.” www.improvementandinnovation.com.
4Bossidy, Larry and Charan, Ram. 2002. Execution: The Discipline of Getting Things Done. New York; Crown Business.
5Thomas, Philip R. and Martin, Kenneth R. 1992. Time Warrior: Using the Total Cycle Time System to Boost Personal Competiveness. New York: McGraw Hill.