It’s not what we don’t know that hurts, it’s what we know that ain’t so.  –Will Rogers

In statistics it is called “naive one” . . . the act of drawing conclusions from one data point.  This is how too many service businesses manage data.  What was last months (days, weeks, years) result and what action are we to take based on it.

The reality is without understanding both variation and context we are learning to make the system worse through tampering.  In terms of what W. Edwards Deming taught us we have information, but not knowledge.  This is why we need to understand the “what and why” of current performance.

But the problems with knowledge play out in other areas.  For instance:

  • Shared Services – Sounds logical, but almost always makes things worse because the motivation is to cut costs.  Without an understanding of customer demand we are increasing costs.
  • Outsourcing – Again, a plausible idea if the aim is to cut costs by focusing on transactions.  The problem is that costs are in the flow and not the transactions.  Service organizations and government wind up outsourcing their waste in the form of failure demand (demand caused by a failure to do something or do something right for a customer).
  • Lean manufacturing tools –  Service is different from manufacturing in variety of demand and other ways.  So for instance, standardization doesn’t allow for absorption of variety in demand and forced compliance follows . . . raising costs and worsening service.
  • Focus on costs – It is a management paradox that the focus to reduce costs increases them.  Yet this is one of the most violated principles.  People are reduced to cut costs ( a visible “improvement”), but the systemic issues that cause costs are not addressed leading to more reductions . . . a death spiral.
  • Economies of scale – Economies of scale is old thinking and still taught in most economic classes, but real improvement comes from economies of flow.  They are end-to-end from a customer perspective.

There are many logical and counter-intuitive thinking associated with systems thinking.  The world is full of unknowns and the truth is we are better off treating them that way or we wind up with knowledge “that ain’t so.”

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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.