Manufacturers, more than any other sector, know they must continually improve their operations. Most embrace continuous improvement.
Lean and Six Sigma provide the most recognizable frameworks for continuous improvement. Both have been around for a long time. When these programs are well-run, they produce great results.
But for some manufacturers, there’s a challenge. Lean and Six Sigma need a major commitment. And top management must be fully committed. But not every manufacturer can commit the resources required or get top-level buy-in.
For manufacturers who prefer a simpler model, an outcomes approach offers an alternative.
Why Change to an Outcomes Approach?
Continuous improvement usually focuses on processes. It’s felt that if manufacturers get the processes right, then everything else can follow. But processes have three problems as the foundation for continuous improvement.
First, too much detail. Manufacturers may have hundreds or even thousands of processes. It’s easy to get lost in the details. The adage of ‘can’t see the forest for the trees’ proves apt.
Second, less innovation. Processes emphasize the way a manufacturer does things today. And it’s hard to break out of current-process thinking. As a result, process-focused teams tend to enhance existing processes rather than looking for innovative new approaches.
Third, processes aren’t results-focused. They prescribe what to do, not what to achieve. But continuous improvement should deliver improvements in what manufacturers achieve.
Outcomes offer a way of simplifying and improving how teams analyze manufacturing operations. Here are the six steps to achieve Outcome-based Continuous Improvement:
Step One – Define Your Execution Outcomes
When a manufacturer executes a group of processes or activities, it should produce a business outcome. We call the outcome from a group of processes an execution outcome. Achievement of a series of execution outcomes produces the manufacturer’s overall business outcome.
Most manufacturers have only 8 to 12 execution outcomes – a manageable number to focus on. Here is an example of the Execution Outcomes for a Make-to-Stock manufacturer:
Step Two – Develop Your Ideal Execution Cycle
You’ve mapped your 8 to 12 execution outcomes. You can now consider the ideal approach for achieving each execution outcome. Ignore your current processes. Focusing on execution outcomes can lead to new insights on how to execute. And that may lead to changes in processes. Or to different approaches such as outsourcing entire sets of processes. The execution cycle contains a high-level description of how to achieve each execution outcome.
Step Three – Define Execution Capability
The purpose of continuous improvement is to improve execution capability. We define execution capability as the ability to execute current strategies.
Execution capability has four elements – processes, systems, people skills and partners.
In Step Two, you developed your ideal execution cycle. Now, map the processes, systems, people skills and partners needed for the ideal execution of each step.
Step Four – Identify the Gaps in Execution Capability
It’s unlikely you can execute the ideal execution cycle right away. There will be gaps (ie differences) between the ideal way you’d like to operate and your current capabilities.
For each major process, system, people skill and partner activity, rate your current ability to execute. You can use a simple color code to identify the size of the gap. The result is a one-page view of the execution outcomes, ideal execution cycle and your current ability to execute that ideal cycle.
With this analysis done, you have two possible paths. You can move forward to Step Five. Or, if there are too many orange and red squares on your one-page summary, you might reassess your ideal execution cycle. There will be more than one way to achieve each execution outcome. You might choose an interim approach that requires less change.
Step Five – Choose the Areas to Improve First
Each gap in execution capability represents an opportunity for improvement. You won’t be able to tackle them all at once. So, you need a simple test to prioritize your focus. You want to fix gaps that will produce the biggest returns. But fixing them has to be practical, so you also need to consider ease of implementation. Score each gap from 1-5 on the following:
- Size of the potential return if you fix the gap – 1 means a low return, 5 a high return
- Ease of Implementation – 1 means it’s hard, 5 means it’s easier to implement
Gaps that score 5 on both will get your highest priority. Gaps that score 1 on both will get the lowest priority.
List the gaps in order of their scores. Then decide where you will draw a line in the list. You’ll tackle those above the line now and those below the line in the future. Keep it practical. Don’t take on too many at first.
Step Six – Develop a Practical Plan
You’ve scored each gap in execution capability and chosen the ones you will work on. Now you need a plan for each chosen gap.
You can start by generating ideas for how to bridge each gap. You’ll come up with far too many ideas to implement. You should rank the ideas, this time using criteria that makes sense for your organisation. The criteria might include Return on Investment, Impact on the Environment, Health and Safety, etc. Different manufacturers might choose different criteria. Score each idea from 1 to 5 using the criteria you’ve chosen.
Once you’ve scored the ideas, choose the ideas you’ll work on. Again, keep it practical. Don’t take on too many ideas. You can always add more later. Assign each chosen idea to a person and set a date for when that person will have a plan for implementing the idea.
You now have a working plan to drive improvement for the foreseeable future. And you can cycle through that planning process on a regular basis to keep your continuous improvement plan fresh.
Execution outcomes provide a simple way of framing continuous improvement programs. With a single sheet of paper, a manufacturer can visualize their ideal execution model and their execution capability.
That one-page summary becomes the foundation for driving a simple, practical plan for improvement. And you can run the planning process on a regular basis, maintaining an outcomes approach and keeping your continuous improvement program fresh and up-to-date.