CEO’s have an overriding imperative to seek continual performance improvements. How they accomplish this is the dilemma to solve. In today’s complex, hyper-competitive business climate, they’ve tried many strategies to achieve their ever more challenging goals; acquisition, reorganization, right sizing, down sizing, increased scale, partnerships, investments in product/service development, the latest IT systems and a continual march of initiatives from bench-marking, TQM, Lean, TOC and Six Sigma. The results early this year of a troubled, high profile corporate acquisition showed, for example, that “…speed and flexibility now trump scale.”1 Indeed, it is our belief that the best corporate strategy is to always be responsive to the needs of your customer as they face the competitive realities of their market space. Thus, our focus is on time as the key metric and its use to align and integrate the disparate corporate objectives and organization functions to produce the results their business requires.
Although the hope of finding a “silver bullet” for competitive advantage springs eternal, corporate leadership teams are slowly realizing that picking the right mix of strategies enabled with reliable management tools is required to boost performance. Unfortunately, many management teams become enamored with a faddism philosophy that continually seeks out the latest and greatest management tool du jour—it is so easy to try what is new again and again without ever commit-ting to the use of those few management tools (See Figure 1) that have won the test of time.2 Cycle time reduction is one of those few tools that survive over time. Our version of cycle time reduction has grown into a methodology we call Process Value Management (PVM). A later section of this paper will deal in more detail with why time is the independent variable in the business equation.
Leadership teams always want step function performance improvements and are willing to try anything to get them, but they usually have to accept incremental year-over-year results because they selected the wrong strategies, methodologies and tools or did not properly implement either. So, the often-stated “continuous improvement” goal frequently becomes only an annual slogan for lack of an enduring, time-driven strategy, coupled with a rock-solid implementation methodology, which consistently delivers significant results.
A frustrating fact about many “performance improvement” strategies is that they usually fail to attack the organization’s underlying business processes which offer the only practical means to achieve the desired performance improvements. Managements frequently start far more initiatives than they ever finish. It is easy to “throw resources” at problems rather than approach their solution systematically through use of a true root cause problem-solving methodology, based on time, that will attack the key barriers that constrain the organization’s business processes. (See Figure 2)
It is Thomas Group’s experience that TIME is the strategic weapon of choice for business leaders. Thomas Group has found that when leadership treats time as the independent variable in its business equation, optimum quality and costs are the predictable results (Figure 3). The corporate strategy of choice ought to be to use time to drive all aspects of the business, and our experience has taught that, to be successful, any change initiative must be driven by a key metric. Thomas Group will demonstrate that time is the best metric to use because, in summary, it is the independent variable and because time, as a metric, is both very easy for management teams to understand and is very difficult to manipulate.
For example, in the public sector, we’ve made some very impressive improvements in the “human supply chain management”3 process for producing military aviators by using the “time to train” as the overarching metric to focus on the barriers that had constrained that complex process for many years.4
In the mid-1980’s, academia and industry began studies of the impact of time as a corporate metric.
The University of Indiana surveyed 553 manufacturing plants in the US, Europe and Asia in 1998, Covering over 200 topics, including; products, processes, changing environments, the work force and trends in productivity measures and programs.5 The most significant factor they found was the reduction of “throughput time,” which directly led to better quality, lower inventories, process balance/rationalization, more effective plant layouts, attention to bottlenecks and diminished chaos/confusion. Additional benefits were quicker market response, overhead reductions, improved capital spending and reduced cash needs.
Also in 1988, a paper entitled “The Merit of Making Things Fast,” was published in the Sloan Management Review in which the author concluded; “Time …is the single most useful and powerful metric any firm (organization) can employ to measure its operations.”6 Properly managing time was found to ensure that cost and quality metrics fall into line and that the “manufacturing system” is only part of an integrated whole, the management of which requires a metric that ties various systems together operationally. The author found that time is a more useful and universal metric than cost and quality because time can be used to drive improvements in both. This is because cost is always a lagging metric and quality frequently does not have a consistent or common definition on the factory floor (except for First Pass Yield). The author concluded: “Reducing time is always a benefit.”
At the National Academy of Engineering Symposium on Foundations of World Class Manufacturing Systems in 1991, a paper entitled “Time is a Primary System Metric” was presented.7 The author reported: “Properly managing time will drive improvements in both quality and cost; Time is the metric that allows you to “manage” an organization’s systems as an integral whole; time can be used to guide activities to improve performance; and reducing throughput times drives reductions in system variability.”
The long-term use of time as a strategic weapon was reported in FORBES Magazine in 1992 as a study of corporate operations. Corporations that implemented time-based strategies grew three times faster and enjoyed five times the profitability of their competition.8 Their success all but closed the business to their competitors.
The American Quality Foundation issued a Best Practices Report in 1994 which analyzed 900 management practices in 500 companies in both the manufacturing and service sectors in the USA, Canada, Europe and Japan.9 The question asked respondents was “Are there any universal truths, any practices which have consistent impacts on performance across all the organizations, regardless of industry, country or the organization’s stating position?” The answer was: “Only a few: cycle time analysis, process value analysis and process simplification.” All three of these form the basis for our firm’s Process Value Management methodology.
A survey of Management Tools and Techniques is conducted every two years by sending several thousand questionnaires to a broad range of executives in multiple countries in North America, Europe and Asia across a full range of industries, company sizes and financial returns.10 Personal interviews are conducted with the respondents. While the overall list of “Most Popular Management Tools” contained in each survey varies from survey period to survey period, classic management tools like Strategic Planning, Mission and Value Statements and Cycle Time Reduction are among those that consistently receive strong reviews, indicating an enduring, widespread and successful use. It is important to keep in mind that the purpose of using any set of management tools is to increase corporate performance.11 To increase performance, corporations and organizations must use these tools to seek and satisfy customer requirements while building distinct competitiveness capabilities. In doing so, leadership teams need to find and use the best few proven management tools.
Our long experience in delivering time-driven process and enterprise improvements aligns well with the academic and other studies of the use of time as both a key metric for process improvement and as the basis for a management methodology for implementing change.
In implementing change, we’ve found that any process, if left unmanaged or improperly measured, deteriorates over time -- there are no exceptions. Entropy is alive and well! There are both process and cultural barriers to change that are “invisible.” The cultural barriers are the most significant with which to deal because an organization’s culture generally is not capable of dealing with itself. “Culture will defeat strategy every time.”12 Thus, in selecting an improvement initiative, it is important that it deals with the high impact cultural barriers and that the performance measurements are based upon cycle time.
It takes a cross-functional approach, effectively focused on true customer needs, rigorously delivered with a robust methodology built upon use of driver metrics that enable organizational buy-in to achieve improved operating and financial results. Reorganization is not required because an organization’s horizontal or output processes can be dramatically improved by linking organizational silos together in seamless processes measured by a few, key process metrics, driven by the time each process takes to deliver its product or service.
We have found that process change is more about people than technology—it is much more important to capture the energy and competence of the people in their processes than it is to invest in automating the process. In fact, the irony is that if a company will get its processes in “tip-top shape,” they may find that process improvement was the strategy they needed all along.13 Finally, change management must deliver consistent short-term results that aggregate to long-term systematic change.
To achieve this requires following what we call the four absolutes of our time-driven PVM: 1) The processes must be well defined. 2) Transparency must exist (people must understand how their process works beyond their part and they must know what transactions are in their process and the status of these transactions). 3) Good process data must be must be made available to enable process management (data integrity is always a barrier!). 4) Discipline must be exercised to follow process boundaries.
Figure 4 illustrates the magnitude of improvements we have achieved over an enduring period of time—25 years! Typically, we find the cycle time (process time) in key processes can be reduced by an average of 50%. The min/max reductions are also indicated by the ends of the “bars.” Using Time to drive process change, a private sector “for profit” organization can expect to see revenues increase 8-10%—when you get fast, you become much more responsive to your customers’ needs and you will win more business, thus growing the “top line.”
There is a direct relationship between the process time reduction (independent variable) and the “care about- metrics,” which are dependent variables, such as revenues, working capital, inventories, productivity, return on assets, etc. But, because organizations are “living, breathing entities comprised of human beings,” we’ve not found an exact, pre-engagement, “3-decimal” relationship between time and the dependent variables. Due to the human element involved (culture), and the different levels of improvement within each organization, we have found approximate pre-engagement relationships between cycle time reduction and the various dependent variables shown, with excellent post-engagement correlation. Thus, a 1% reduction is cycle time generally equates to an 8-10% revenue increase; a 1% cycle time reduction generally equates to a 1% inventory reduction, etc. This is a more than accurate enough relationship to create a vision and for driving process change initiatives.
Once a management team agrees to use time to drive their improvement initiative, an important “next step” is to create and communicate the vision that includes both the “As Is” and “To Be” states of the key processes upon which the improvement initiative will focus. Figure 5 shows the relationship between these states. Knowing the starting point for process improvement is a vital element in any change management initiative. Seneca, in the 2nd Century BC, said it all when he said: “If you don’t know what port you sail for, no wind is the right wind.” Next, the management team must have a target for improvement and that is the “To Be” state, the achievement of which will be directly linked to the reduction of the cycle times and the improvement in other process metrics. The PVM-driven change initiative will, over time, drive the organization toward the “To Be” performance state. In our experience, step function performance improvements always occur.
There are three types of barriers that constrain organizations: Subject Matter, Process and Culture, shown in Figure 6. Many subject matter barriers exist in an organization, the elimination of which, in our experience, rarely results in significant performance improvement. These include the “nice to do, fun to do, easy to do” barriers that are usually not linked to solving the hard corporate problems that will produce the desired significant performance improvements. It is our experience that the reason why “As Is” performance improvements tend to be only incremental year-over-year (as shown in Figure 5) is because the difficult process and cultural barriers have not been attacked and re-moved in favor of improving what the organization is most comfortable with—its subject matter. We find that if the removal of a single subject matter barrier has a relative value of one (1), then removing a process barrier will have the relative value of ten (10) and removing a cultural barrier will have the relative value of one hundred (100). Plainly, management’s attention should be focused on attacking the process and particularly the cultural barriers in order to achieve dramatic corporate performance gains. We have consistently found only 18 business process and 21 cultural barriers in our global process improvement work. Figure 6 illustrates 10 typical Culture and Business Process barriers that are frequently encountered.
Having first selected the key processes to attack through use of time and then developed a Vision of Improvement and finally agreed to focus on process and cultural barrier removal, management’s next priority is to deal with what metrics to use to both drive and measure the process changes as barrier removals occur. The linkage between the desired performance objectives and the actionable tasks that are impacted with time is an important one to make. (See Figure 7) Once processes have been defined, they can be measured, analyzed and improved. Good process metrics are time, quality First Pass Yield (FPY)) and sometimes, On-Time Delivery (OTD). Use of time as the driver metric will increase quality and decrease cost as process times are reduced through systematic barrier removal. It is important to align the improvement goals with the process drivers (Vision of Improvement). Management must not use the measurements to “beat up the troops.” Measurements should only point to improvement opportunities that can then be pursued via barrier removal. Thus, improvement requires installing business process measurements and using aggressive, “step function” goals as targets for the initiative.
The attributes of a good measurement are: improve as the underlying process improves, worsen as the underlying process worsens, be viscerally meaningful, consistent application for similar situations, drive correct behavior, deliver a justifiable benefits-to-expense ratio, and benefit the customer while reducing overall process times.
Management must regularly review its metrics package, at least monthly, and take action as required by the metrics. A more than adequate metrics review can be accomplished through use of a chart, as shown in Figure 8, where the “driver metrics” (usually a cycle time and a FPY or OTD) are shown across the bottom of a “cockpit chart” and the results or “care about” metrics are shown at the top of the chart. The single most important management metric is usually shown as the center panel of the cockpit chart to focus management’s attention to what they consider the most important performance improvement outcome—Figure 8, for example, shows “On-Time Delivery” as the most significant metric this client wanted to improve. Continued improvement of the “driver metrics” indicates that proper barrier removal actions are taking place in the processes, and followed by a brief lag, the “results metrics” will also progress in the desired direction.
Several examples of applying cycle time reduction to complex business processes are next presented to illustrate both the typical large improvements achieved and the broad application of a cycle time reduction methodology to different industries.
Profile: Manages over 400,000 maintenance contracts, with over 12,000 new installations per year. Cycle time reduction program focused on maintenance, repair and “callback” processes.
Each 1% cycle time reduction directly created a 0.8% decrease in the PMH/U/year and a 3.4% increase in the MTBCB. These were definitely NOT incremental results!
Profile: A Corporation known for excellent execution and technological innovation had achieved a 50% FPY (first pass yield) in automated “Dock-To-Stock” process. They benchmarked themselves against the best FPY’s in the defense industry (56%) and then achieved that industry benchmark in 12 months (see Figure 9). Victory was declared, believing the industry benchmark was the best they could do. Their improvement initiative plateaued due to some unaddressed cultural barriers.
Thus, each 1% reduction in cycle time improved FPY (first pass yield a.k.a. quality) and produced a 0.97% inventory reduction. Satisfaction with the “industry benchmark” did not allow this corporation to become as good as it could be -- it took outside help that focused on cultural barrier removal to produce “the company” against which others would benchmark themselves.
Profile: Division designs and manufactures large aircraft structures (empennage, wings, tails). The Assembly Department was not producing final units on time and was being blamed for “the bottleneck.”
Results: Process mapping, followed by comprehensive barrier identification, disclosed the root cause barriers to be in the preventative maintenance (PM) process for the CNC machines. By removing the various PM process barriers (scheduling, parts wait time (due to various purchasing barriers) and technician training), CNC downtime was reduced by 52% and the Machining Department’s On-Time Delivery (OTD) increased from 18% to 86% (a 286% improvement). Dramatic, non-incremental improvements were seen in productivity, capacity and scrap labor costs, all as a result of working on the root cause CNC PM Barriers rather than the assumed Assembly barriers.
A major benefit from cycle time reduction is the decrease in process variability as the cycle time is reduced 14. Figure 10 shows this expected result, where over a two-year period, the standard deviation of the total process cycle time decreased 80% as the cycle time decreased 71%. For the overall process, each 1% of cycle time reduction produced a 1.2% productivity gain, a 5.5% OTD improvement and a 0.75% output improvement.
A software development firm was suffering from a long “time-to-market” cycle time in a very competitive and fast-moving market. Major barriers were poor process definition, no use of metrics and large lot sizes for programming tasks. As shown in Figure 11, the company’s output distribution was extremely variable and their large market share was threatened by their slow responsiveness to the changing market demands.
Driven by the correct output metric, Development Days per Megabyte of Finished Software, the company achieved a 50% output improvement in 12 months by cutting the cycle time (development days) 53% while using the same number of software programmers. This combined 4:1 productivity increase is typical of the gains that occur in design/development tasks driven by cycle time reduction. And most importantly, their products gained an additional 9 ½ months of winning time in the marketplace.
The use of TIME to drive change has been demonstrated, both in academic and practical terms. The long-term nature of resource allocation means cultural change requires an investment mindset where the long-term improvements are optimized at the expense of short-term ones. It takes top-down support to achieve corporate cultural change; the active participation and commitment of leadership is the necessary and sufficient condition for success. Since highly impacting change is dependent upon cultural change, it will take time and resources. The management tool “fad of the day” won’t do; leadership must choose its change implementation approach carefully and stay the course until the desired results are achieved. Finally, change of this magnitude has its risks, but, if leadership chooses wisely and commits strategically, the results are very much worth the risk.
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