In the Wall Street Journal (WSJ) article "Where process improvement projects go wrong,"1 the author made very good points about issues with Six Sigma and lean process improvement programs. However, his points relate not only to Lean Six Sigma efforts but to other improvement efforts as well – e.g., Total Quality Management (TQM) and Deming’s Plan-Do-Check-Act (PDCA) cycle structured efforts.

I have seen similar issues like those described by the author and agree that his deployment-improvement efforts can help reduce the magnitude of the issue; however, I think that there are additional points that should be highlighted, and an additional focus should be made to resolve the issue.

The methodology that I will later describe involves a business system resolution, which integrates process improvement efforts with a blending of an enhanced predictive scorecard system that includes analytically/innovatively determined strategies so that process improvement changes positively impact the business as a whole. This approach is in contrast to the commonplace brainstorming for projects that results in the creation of silo projects that in isolation appear beneficial but do not in reality positively impact the business as a whole (e.g., we saved $100 million but nobody can find the money).  

The issue
The author of the WSJ article points out how improvement efforts can start well with generated excitement and progress but often fail to have long-lasting impact. The author builds an analogy between process improvement programs and a spring’s stress-strain curve – stretching, yielding and failing.

Stretching phase: In a sited example, top executives were paying close attention to the project managers and made it clear to employees that the improvement initiative was their top priority. When teams reached their goal, the improvement project was declared a success. The spearheading director shared the benefits of the company’s Six Sigma initiatives with others in the company. Team members were given public rewards and recognition.

Yielding phase: If one were to pull continually on a metal spring, the metal’s yield point would be exceeded, which would result in permanent deformation. Similarly, when the process improvement expert moves on to another project, and top management turns its focus elsewhere, implementation difficulties start occurring, and he finds it difficult to maintain previous achieved gains. Amid confusion and facing day-to-day pressures, some team members started reverting to old ways.

Failing stage: If one were to continually pull, the spring would become smaller and smaller in one area until it cannot sustain any additional pressure and breaks. This is not unlike the final stage of a process improvement project where team members find that they are unable or unwilling to tackle improvement tasks, which leads to collapse.

With these project failures, teams often report achievements incorrectly; i.e., the sense of success is false. In addition, the director often communicates about successful projects that show benefits; hence, it can take some period of time before the division vice president becomes aware of widespread failures and then reluctantly informs company top executives.

The article then describes four things that can be done to improve the likelihood of success from improvement projects. I don’t disagree with the four points that the author makes; however, I think that there are additional issues that need to be addressed.

A business system resolution
Again, I agree with process improvement issues that were described in the article. However, I think that there are additional issues such as project selection, getting the right people to become the Lean Six Sigma expert, etc.

In addition, I suggest for success that process improvement efforts need to be part of an overall enhanced business management system. This structured business system needs to integrate predictive scorecards with targeted strategy creation that integrates analytics with innovation, and which leads to the creation of functional goals that pull for the creation of improvement projects that benefit the enterprise as a whole.

The financials of an enterprise are a result of the integration and interaction of its processes, not of individual procedures in isolation. Using a whole-system perspective, one realizes that the output of a system is a function of its weakest link or constraint. If care is not exercised, one can be focusing on a subsystem that, even though improved, does not impact the overall system big-picture output.

In Lean Six Sigma and lean kaizen event programs, improvement projects are often selected from a list of potential opportunities that were determined from a brainstorming session. This effort might provide some initial gains when starting a deployment; however, this effort typically stalls out, and the process improvement teams are laid off when times get tough. The reason for this downsizing is that often process improvement efforts are not expended in areas where the overall enterprise benefits the most; e.g., sales and marketing when excess production capacity is available.

Process improvement efforts need to focus on the orchestration of efforts so that this work concentrates on overall system optimization, not on individual procedure component improvement. Unfortunately, organizational-chart-functional thinking can result in competing forces for process improvement labors, where much of this work does not benefit the enterprise as a whole.

With theory of constraints (TOC), systems are viewed as a whole, and work activities are directed so that whole-system-performance measures are improved. To illustrate this, consider the system that is shown in Figure 1. Similar to water flow through a garden hose, the squeezing of one portion of the hose reduces water flow volume (i.e., Step 5 in the figure).

Figure 1. Identifying the overall system constraing.

From Figure 10.1 Intergrated Enterprise Excellence, Volume II - Business Deployment: A Leader's Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, 2008.

Without considering the whole system, we might be spending a great deal of time and effort working on Process Step 2 because this step is not meeting its localized-created target objectives relative to operating efficiencies, equipment utilization, etc. If we consider the figure to represent a series of departments through which a transaction is processed, where each step has a separate manager who is trying to support a strategy to improve the capacity of the business, without the theory of constraints concept, each department would apply resources to improve its step only. This would create a situation in which only one-sixth of the improvement resources are being applied to the single location that is limiting the system capacity. From this figure, we note that improvements to Process Step 2 will not significantly impact the overall system and may actually degrade the overall metrics if additional work in process (WIP) is created from the improvements.

The TOC system chain extends from market demand through the organization chain to suppliers. Let’s consider an example when this high-level view of the overall system is not addressed. An organization works at improving internal process efficiencies. Capacity then increases. Excess inventory is then created because there is not sufficient demand. It is then discovered that the constraint is really the sales and marketing process.

Within an organization, there are often constraints that we may or may not consider. Types of constraints include market, resource, material, supplier, financial and knowledge/competency. We need to look at the rules (i.e., policies) that drive the constraints.

Example: Theory of constraints
In this example, I will use terms typically associated with manufacturing; however, the concepts apply equally to transactional processes.

Figure 2. System constraint identification and resolution.

From Figure 10.1 Intergrated Enterprise Excellence, Volume II - Business Deployment: A Leader's Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, 2008.

A simple system is shown in Figure 2. Raw materials are processed through four component steps to produce a finished product. Each process step is an overall value stream link. The capacity of each step is described in the figure along with the market demand of 105 units per day. The goal is to make as much money as possible from the process.

From the examination of Situation 1 in the figure, it is noted that the capacity of Step C is 75, which is less than the market demand of 105. Even though other steps in our value stream process may not be performing up to their equipment utilization and efficiency goals, focus should be given first to increasing the capacity of Step C. From this enterprise-system analysis, Step C would be an opportunity for a Lean Six Sigma improvement project.

Upon completion of this project for Step C, the process then exhibited the characteristics of Situation 2 shown in the figure. An analysis of this situation indicates that the constraint is now at Step A. From this enterprise system analysis, it would now be appropriate for a Lean Six Sigma project to focus on Step A.

Upon completion of a Lean Six Sigma project of Step A, the process then started exhibiting the characteristics of Situation 3. An analysis of this situation indicates that all four steps of the process have enough capacity to meet the market demand. The internal system constraints relative to satisfying a market demand of 115 units per day have been removed. The constraint has moved outside the system to the marketplace. The next Lean Six Sigma project should focus on determining what can be done to increase product demand through improvements in the marketing and sales processes.

This example illustrated the importance of starting by analyzing the big picture to determine where efforts should focus when creating projects. Losing sight of the big picture can lead to the ineffective utilization of resources and the sub-optimization of processes.

Shortcomings of traditional process improvement efforts
The implementation of traditional Total Quality Management (TQM) and Lean Six Sigma has often been accomplished by dividing the system into processes and then optimizing the quality of each process. This approach is preferable to chasing symptoms; however, new problems can be created if the individual process is not considered in concert with other processes that it affects.

The theory of constraints approach focuses on reducing system bottlenecks as a means to improve the performance of the entire system continually. Rather than viewing the system in terms of discrete processes, TOC addresses the larger systematic picture as a chain or grid of interlinked chains. The performance of the weakest link determines the performance of the whole chain.

Figure 3. The Integrated Enterprise Excellence System.

From Figure 4.7 Intergrated Enterprise Excellence, Volume II - Business Deployment: A Leader's Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, 2008.

TOC considers three dimensions of system performance in the following order: throughput (total sales revenues minus the total variable costs for producing a product or service), inventory (all the money which a company invests in items it sells), and operating expense (money a company spends transforming inventory into throughput). Focus on these dimensions can lead a company to abandon traditional management cost accounting while at the same time causing an improvement in competitive price advantage.

Application of TOC in an overall business system
Other articles describe the following aspects of the nine-step Integrated Enterprise Excellence (IEE) business-management-governance system, as illustrated in Figure 3:

TOC would be part of the Integrated Enterprise Excellence “analyze enterprise” (Step 3), which would provide input to the following sequence:

  1. Determination of realistic business financial goals (Step 4).
  2. Creation of analytically/innovatively determined targeted strategies (Step 5).
  3. Identification of potential improvement focused areas (Step 6).
  4. Recognition of targeted projects so that the business as a whole benefits (Step 7).

The integration of TOC within the Integrated Enterprise Excellence system provides an overall business-management system so that Lean Six Sigma and lean kaizen events improve the overall enterprise financials.  

An article that describes this system in more detail is: “C-Suite: The Need to Re-think our Business System’s Strategic Planning, Scorecard Creation, and Process Improvement Efforts.”6 The following books provide execution details for the article-described system at the business-implementation and project-execution levels:

References

  1. Chakravorty, S. “Where Process-Improvement Projects Go Wrong,” Wall Street Journal, January 25, 2010. (http://www.smartersolutions.com/blog/forrestbreyfogle/?p=2726)
  2. Breyfogle, F. W., “Predictive Performance Measurements: Going Beyond Red-Yellow-Green Scorecards,” Quality Digest, September 23, 2009. (http://www.smartersolutions.com/pdfs/online_database/article132.htm)
  3. Breyfogle, F.W., “Are Your Business Metrics Measuring the Right Thing? Don’t base your metrics on your organizational chart,” Quality Digest, October 6, 2009. (http://www.smartersolutions.com/pdfs/online_database/article133.htm)
  4. Breyfogle, F. W., “The Balanced Scorecard: Issues and Resolution,” Forrest W. Breyfogle III, Quality Digest, October 15, 2009. (http://www.smartersolutions.com/pdfs/online_database/article162.htm)
  5. Breyfogle, F. W., “Integrating Lean and Six Sigma Process Improvement Tools: A road map integration of Lean and Six Sigma tools helps choose the appropriate tool for the job,” Quality Digest, October 29, 2009. (http://www.smartersolutions.com/pdfs/online_database/article136.htm)
  6. Breyfogle, F. W., “C-Suite: The Need to Re-think our Business System’s Strategic Planning, Scorecard Creation, and Process Improvement Efforts,” (http://www.smartersolutions.com/pdfs/online_database/article128.htm)
  7. Breyfogle, F. W., Integrated Enterprise Excellence Volume II - Business Deployment: A Leaders’ Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, Austin, TX, 2008. (http://www.smartersolutions.com/blog/forrestbreyfogle/?p=572)
  8. Breyfogle, F. W., Integrated Enterprise Excellence Volume III – Improvement Project Execution: A Management and Black Belt Guide for Going Beyond Lean Six Sigma and the Balanced Scorecard, Forrest W. Breyfogle III, Bridgeway Books, Austin, TX, 2008. (http://www.smartersolutions.com/blog/forrestbreyfogle/?p=584)
  9. Breyfogle, F. W., Lean Six Sigma Project Execution Guide: The Integrated Enterprise Excellence (IEE) Process Improvement Project Roadmap, Forrest W. Breyfogle III, Citius Publishing, Austin, TX, 2010. http://www.smartersolutions.com/store/product.php?productid=20&cat=2&page=1

About the author
Forrest W. Breyfogle III, CEO and president of Smarter Solutions Inc., is the creator of the integrated enterprise excellence (IEE) management system, which takes Lean Six Sigma and the balanced scorecard to the next level. A professional engineer, he is an ASQ fellow who serves on the board of advisors for the University of Texas Center for Performing Excellence. He received the 2004 Crosby Medal for his book, Implementing Six Sigma. E-mail him at forrest@smartersolutions.com.