Monthly Archives: January 2010

Outsourcing

Advice for Outsourcers

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Bigger
Reading an article in the Wall Street Journal called “Advice for Outsourcers: Think Bigger.”  This is basically a call for companies to do more outsourcing of not just the easy stuff, but to off-shore the more complex things too.  This article pretends that we actually do offshoring well on simple things and I found that nothing could be further from the truth.

The category of simple things are outlined in the article as “easy to learn  – things like software support and call-center operations.”  Rarely are either of these things easy and more importantly finding a company that actually does them well is like finding the another Hope Diamond.  A survey of customers would confirm this as fact.

So before we graduate to “bigger” offshoring let’s review the fact that in most cases we are outsourcing organizational waste.  The emphasis on reducing transaction (or visible) costs are blinding them to the total cost increase from this mentality.  Business cost reduction comes from improving flow, not focusing on costs.

The functional design and technology approaches are increasing these end-to-end costs.  The functional separation of work led to the poor design of most service organizations and is perpetuated by entrapping technology.  Organizations are missing one of the biggest opportunities for improvement . . . the design of the work.

So before running off to bigger and better outsourcing, let’s take a step back at our organizations.  Look at the waste being created in our end-to-end systems and rethink our approach.  A good place to start is in understanding failure demand (demand caused by a failure to do something or do something right for a customer).

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Systems Thinking Concepts

The Wall Street Journal: Over 60% of Improvement Projects Fail!

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2010 Improvement
In the Wall Street Journal this morning in an article written by Dr. Satya S. Chakravorty titled “Where Process Improvement Projects Go Wrong,” the author states that 60% of all process-improvement projects fail.  I have found this to be true but with a larger percentage of failures.  In this article Dr. Chakravorty doesn’t cite a source for his statistics.  Too bad, I am sure there are plenty to support this claim (this will be a future mission for me).

Dr. Chakravorty outlines the problems in these failures by using a comparison of a stress-strain curve – stretching, yielding and failing (interesting comparison).  In the “stretching phase”  there is a willingness to tackle the new project and the tasks associated with it.  In the “yielding phase,” the expert moves on to another project and focus is lost.  Finally, in the “failing stage” with focus and expert gone, team members stop caring about the improvement project.

Dr. Chakravorty continues to outline what he learned from his observation of an aerospace company (paraphrased):

  1. A need for extended involvement of the expert.
  2. Performance appraisals need to be tied to the implementation of improvement projects.
  3. Improvement teams should have no more than 6-9 members and last no more than 6-8 weeks.
  4. Executives need to directly participate in improvement projects and not just support them.

Similarly, we have found that claimed gains in lean six sigma projects rarely materialize to the bottom line.  One company told us that with all the improvement projects they should have millions of dollars to the bottom line, but at final account none were seen.  This is a huge problem.

For the most part, I don’t care for the lessons learned by Dr. Chakravorty, I believe he misses the point.  The problem is NOT the expert, team size, length of project and certainly not performance appraisals and incentives.  He seems to have something with executive participation until the reason being for this involvement is to assess the viability of the project.  I believe he hasn’t learned anything.

No improvement effort stands a chance until we understand that the thinking is the problem.  More specifically, the thinking about the design and management of work.  A project is a coward’s approach to improvement,  this does nothing to change the thinking.

If we are to be successful, management thinking has to change too.  The same thinking that has led us down our current path will not suffice.  The new leadership strategy for improvement must be to change thinking.

So what needs to change?  Many of the things I have written in management articles and blog posts. The movement away from things like scientific management theory (functional separation of work), separation of decision-making from the work, targets, incentives, tools, and many other items found in my posts.

To continue down the path of wrong thinking is to spell disaster for any organization.

Leave me a comment. . . share your opinion!  Click on comments below.

Make the new decade a profitable and rewarding one, start a new path here.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Systems Thinking and Financial Industry

Carpe Diem US Small Banks!

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Not long ago, I listened to Mark Sievewright of Fiserv tell customer banks that they would be facing a wave of consolidation in the banking industry.  That this was inevitable for the US.  A few years ago, he may have been right.

Not today, in fact, the Obama administration will be hand-tying those “too big to fail” banks for the foreseeable future.  This presents opportunity for small and mid-size banks to seize the day or take the field! 

As with the Japanese after WWII that couldn’t compete with the US in scale, neither can the small banks.  But like the Japanese the opportunity lies not in economies of scale, but in economies of flow.  You will not achieve economies of flow with the prevailing thinking about the design and management of banks.

The current view of banking is such that spending on technology will make small banks more competitive.  Specifically, that automation is what is needed . . . and nothing could be further from the truth.  Most technology is filled with best practices and standardized processes to sell a “solution” to small banks.

This assumption that surrounds technology is not only wrong, but is wasteful.  Technology organizations are selling solutions without ever understanding the problem.  If small banks are to compete using the economies of flow philosophy, they will need to think differently.

Starting with the design of the work, small banks need a redesign.  This redesign must be based on getting knowledge about customer demand, outside-in and offering end-to-end flows that serve the customer.  This means the front, middle and back office designs enabled (or entrapped) by technology have got to be reviewed.

This doesn’t mean more automation via the latest fad like BPM or CRM.  In fact, most likely this will mean less automation as small banks build the design of the systems around customer demand and not technology solutions. 

Like most service organizations, banks have a variety of customer demand that can not be absorbed by technology.  Technology firms do not understand that the promotion of best practices and standardized processes inhibits this absorption.  I might add that it is in their best interest not to understand, as the “solution” becomes more expensive.

Further, small banks are in need of making the work flow better not only from a customer perspective, but also to help enable the front-line worker that has to absorb the variety of demand.  This can be achieved through not only customer purpose, but customer measures derived from this purpose.  Front-line employees that are armed with knowledge of purpose and customer measures can help small banks achieve innovation leadership.  Humans are able to absorb variety, technology is not.

There are many other concepts that can help small banks, but the first step is a different leadership strategy that requires different thinking about the design and management of work.  Carpe diem small banks!

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public).  His organization helps executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Systems Thinking Concepts

Killing Assumptions – The Executive Series – Introduction

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The US has become a nation of assumptions.  Try counting the number of assumptions you will hear on any given day.  For a systems thinker there can be no moment when we can let our guard down and this isn’t easy.

The barrage of assumptions that accompany business and government is overwhelming.  Many organizations build and perpetuate their business based on assumptions.  This thinking is no more than a form of copying.

The companies that seem to display the most innovation leadership are those that blaze new trails.  Yet, they are so few.  And innovation doesn’t have to be new products or services, but just doing things differently in routine actions can be innovative.

Command and control management focused on costs misses innovation opportunities as they search for short-cuts.  Copying they believe speeds things up at less cost.  I have rarely found this to be the case.  The management paradox is copying increases costs.

So, what are the biggest assumptions that are killing business and government?  Let’s look at a list of assumptions that are most copied.

  1. Focus on costs and budgets.
  2. Measures
  3. Targets and Incentives.
  4. Technology and automation.
  5. Front Office/Back Office work design.
  6. Improvement tools (lean, TQM, etc.)
  7. Best practices, benchmarking, scripts, and standardization.

I have written about the problems with these in the past, but felt it important to put these in a series.  I will delve in to some of the history (when appropriate) and ideas for better thinking in organizations interested in a better way.

As I write to each of the assumptions, I will come back to this introductory post and link to the appropriate assumption post.

Are there any assumptions that I have missed?

Leave me a comment. . . share your opinion!  Click on comments below.

Tripp Babbitt is a speaker, blogger and consultant to government and service industry.  His organization helps service executives find a better way to make the work work.  Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected].  Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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Systems Thinking Concepts

Lean: Someone has Poisoned the Waterhole!

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Perusing emails, websites and conversations on Twitter the purported “lean thinking” crowd seems to be a contradiction of terms. I have been in emotional conversations with some of these folks that claim foul when I categorize them as “lean hornets.” Claims of “we really are about the thinking” is the feedback.

So, what is the big deal? Here is the rub. I like to view folks I encounter by what they do or claim to do. Most of these folks are posting to their blog . . . or when I visit their websites . . . or when I visit prospective customers that have worked with lean consultants about how they use tools (value stream maps, takt time, etc.) Someone has poisoned the water hole!

The classic came via email that I received from the Lean Enterprise Institute (LEI). Here is what was written:

“Lean tools are important, but they can’t deliver sustainable results — and often can’t achieve any results — unless we use them with a lean state of mind in an environment that supports problem solving through experimentation by means of Plan-Do-Check-Act.”

Wow! A revelation has taken place, maybe this whole 2012 thing is for real. But wait a minute . . . scroll down further and you see mistake-proofing and value stream mapping workshops for healthcare!!!!?

I appreciate the affirmation that tools don’t deliver. But we need deeds, not words.

I’m sorry my friends, but it was W. Edwards Deming that told us that we have one shot to train people the right way. We have been wrongly led down the tool path by LEI. They may regret the path, but the familiar quack of this duck still rings.

Dr. Deming and Taiichi Ohno taught us a way of thinking and both warned against tools. I find it to be a form of copying. Three questions stand stalwart:

  1. Who invented the tool?
  2. What problem were they trying to solve?
  3. Do I have that problem?

I can taste the poison at this drinking hole . . . can you?

Leave me a comment. . . share your opinion! Click on comments below.

Systems thinking . . . Join us in 2010!

Tripp Babbitt is a speaker, blogger and consultant to service industry (private and public). His organization helps executives find a better way to make the work work. Download free from www.newsystemsthinking.com “Understanding Your Organization as a System” and gain knowledge of systems thinking or contact us about our intervention services at [email protected] Reach him on Twitter at www.twitter.com/TriBabbitt or LinkedIn at www.linkedin.com/in/trippbabbitt.

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