Continuous Improvement Is Not A Strategy

“Continuous improvement.” The term has been around for a while, a go-to for many executives and staff when explaining what they do and where they spend their time. I recently spoke with a leader in a software business, and again heard the familiar line - “our strategy is about continuous improvement and always getting better.” 

On the surface, this sounds great, who can argue with always getting better? I certainly cannot. My point is that a business will not adapt, innovate and grow to its' potential by continuous improvements alone.

To be clear, continuously improving is an excellent thing. The problem is relying on it for all positives changes, innovations and disruptions. I see process and quality improvements as a three-legged stool if executed correctly, with all three legs critical for success – and to avoid a fall. Let’s quickly review them –

1. Continuous improvement - This is a mindset or culture, the aim and passion of everyone in the business to always make things better. The concept and acceptance of continuous improvements seem simple enough, but a business can’t just mandate it “to be.” Much like any cultural belief, it must become part of the environment through rigorous intentionality every day and at all levels.

2. Strategic Process Improvement – These are calculated bets that leapfrog a business beyond just the typical incremental gains. Strategic improvements are more substantial efforts that tightly target load bearing areas. Because they are larger and more concentrated initiatives, they will eat up more resources while also delaying other priorities. Thus there is more downside to a poor bet made here, but there is also more upside if you get it right. 

3. Strategic Process Redesign - This is very similar to strategic process improvement, i.e., targeting the few key areas that will produce the most significant returns. However, the risks and rewards are even higher as it requires a fundamental change in the system's design. Typically, redesigns happen due to significant shifts in customer needs and requirements, competition, or the current process has been optimized to its’ fullest. Think of an airplane. The propeller engine was optimized about as much as possible (process improvement), then the jet engine introduced a step function increase in performance (process redesign).     

Let me use a metaphorical story to help illustrate how these fit together.

Imagine your washer and dryer as a business! For the sake of simplicity, let’s say there are two goals of this business. 1) To wash and dry clothes faster than the competition. 2) To get the clothes looking cleaner and smelling better than the competition.

Let’s further imagine there is a Vice President and a team of people over the “washer function,” and a separate Vice President and a team of people over the “dryer function.” Also, assume both departments have and continue to do equally good jobs continuously improving their areas. The washer presently takes 30 minutes to run with the dryer taking 45 minutes. The dryer currently takes more time due to the type of work and the system design, not due to team performance. This business handles ten loads of laundry per day.

Based on this simple business and assumptions, what happens if there are only continuous improvements? What about continuous and very targeted strategic improvements? Here are some scenarios on how it all played out:

Scenario #1 (Baseline) – 30-minute wash cycle and 45-minutes to dry. Also, the washer waits for dryer to finish before starting the next load

• RESULTS: It takes 8 hours to complete all ten loads, with no wet clothes waiting to be dried.

Scenario #2 (Improve the washer speed) – Now a 25-minute wash cycle after a 5-minute improvement, but still a 45-minute dry cycle despite enhancements. Why is the dryer still taking 45 minutes if enhancements were made there? It turns out the washer is increasing speed by cutting out “spin time,” so the clothes going to the dryer are wetter and require more effort to dry. Also, the washer does not wait for the dryer to finish before starting the next load, improving the washer team’s “equipment utilization.”

• RESULTS: It still takes almost 8 hours to complete all ten loads (5 mins faster on the first load is the only gain), but now there are ~15 total bottleneck hours of wet clothes waiting to be dried. Loads #9 and #10 are each waiting 3 hours or more for a dryer! Customers complain loudly and ask for refunds as the speed is the same, but the clothes now smell bad from waiting wet for so long.

Scenario #3 (Improve the dryer speed) – Now a 35-minute wash cycle, adding 5 minutes from the baseline after inserting more “spin time” for additional drying in the washer. This, however, leads a 10-minute improvement in dry time, which is now down to 35 minutes. The washer also waits for the dryer to complete before starting the next load if needed, hurting the washer team’s “equipment utilization” metric.

• RESULTS: The ten loads now take 6.4 hours to complete, almost a 20% improvement after speeding up the bottleneck (the dryer)! Also, with the washer and dryer optimized together, there are no longer any real bottlenecks and wet clothes waiting to be dried. Customers saw quality return to previous standards but with a dramatic decrease in turnaround time!

The punchline: Targeting strategic improvements and redesigns toward crucial load-bearing areas can deliver step-function gains. Yes, continuous improvements are needed and should be part of the culture. However, as you can see in scenario #3, a well-targeted strategic enhancement can give more than an incremental “bump.” It can move mountains (or in this case, mountains of laundry).

WHY STRATEGIC BETS ARE SOMETIMES NOT MADE

Most leaders will agree that all three legs of this improvement stool are critical to innovating and stretching a business. Why then are these strategic actions sometimes not pursued? Three reasons stand out to me –

1. Fear the “Critic” – Theodore Roosevelt famously said, “It is not the critic who counts.” While they may not count in the grand scheme, they can influence the short term. Leaders who commit significant time and resources toward a specific opportunity also by definition say “no” to other priorities. Enter the critics, who rarely comprehend strategic bets or understand the need for new paths. Most leaders hate being criticized, but some stop taking calculated risks to avoid that pain. Strategic changes have a tough timing happening with poor cultures and weak leaders.

2. It's all Good! – Many businesses don’t know why, how or when to initiate strategic improvements and redesigns. They think they are already doing it via continuous improvements and hard work, especially if they are getting good results. However, keep in mind what Jim Collins wisely warned us about, “Good is the enemy of great.” 

3. Activity is psychological comfort food…but does not always equal progress – Bill Gates once said, “People overestimate what they can get done in one year, and underestimate what they can get done in ten years.” Most leaders don’t want to say they’re only going to get 3-4 key initiatives done in one year. That’s being lazy! So, they plan on getting ten smaller items done, and in the process may only get one across the goal line. If they picked the best 3-4 initiatives and committed to completing them, in ten years (or three, or four, or five years…), they would shock themselves with how far they’ve traveled. 

HOW TO FIND THE KEY LEVERAGE POINTS TO TARGET

We’ve talked about why strategic improvements and redesigns are needed along with continuous efforts to materially move the needle. But how is this accomplished? Here are three methods to help quickly and effectively spot the places where to place a bet –

1. Process Mapping – Instead of measuring and analyzing your business performance as a set of vertical functions, re-look at them horizontally. This is how your customers see the business, and how you can better spot what is critical and not working. Get people in a room and start mapping out how things are today. Use a SIPOC model to help you document the high-level processes and the sub-processes below them: Suppliers – Inputs – Process Steps – Outputs – Customers. Once done, identify what the processes should look like and which ones are most important to overall performance. The gaps and impacts between "how things are" and "how they should be" will help inform what strategic bets to make.

2. Identifying the Bottlenecks – It’s critical to know the bottlenecks in a process, as they determine the speed of the system. One the best operational books I’ve ever read, “The Goal” by Eliyahu Goldratt, talked about this brilliantly. In this book, there was a story about a group of boy scouts who were on a hike and struggling to stay on pace and stay together. The leader then made a change, putting the slowest boy scout (named “Herbie”) in front, then the second slowest, etc., and at the end were the fastest hikers. Now all they had to do was to get Herbie faster to speed up the entire troop. They improved his speed through a series of actions (i.e., spreading out some of his backpack weight to other campers), thus increasing the pace of the troop while keeping them together. The lesson…know and target your bottlenecks (or "Herbies") to improve the speed of the whole system. You don’t need to make everything faster, just the right things.

3. Pareto Principle – This principle was made into a popular improvement tool by quality guru Joe Juran. It states that roughly 80% of the effects come from 20% of the causes. By using this tool, a problem can be narrowed down to the “vital few” areas where improvements will have the most substantial returns. Much like with bottlenecks, target these vital few causes to more rapidly improve the entire system. 

A LEADERSHIP RESPONSIBILITY

It is everyone’s responsibility to drive continuous improvements. This work should not be delegated to the "quality team" or some separate group. It must be part of the organizational fabric. Every leader and key individual contributor should also know the most basic improvement tools and how to use them. Pareto Charts, Histograms, and Scatter Plots when analyzing data. Control charts when looking at trends and variation. Affinity, "Five Why," and Fishbone tools when brainstorming. Process mapping when trying to find efficiencies or break down functional walls. By arming people with these fundamental tools and skills, an organization is being intentional about a culture of continuous improvement and positive change.

However, it is also the responsibility of leadership to give clear guidance on when and where to place strategic bets. This is a load-bearing requirement for generating step-function gains, and realizing the full potential of the business.

Choosing not to decide on making an informed bet is still a choice, and never the choice of someone trying to bring about positive transformation. Leaders must always be defining the path and embracing change, and no amount of continuous improvement can overcome this need. Remember, it takes all “three legs” to produce big results and drive real innovation, and everyone has a specific role in making that happen.

Image from Pexels.com