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Integrative Improvement System

Integrative performance improvement is the new approach to sustainable operations excellence. Without an integrative improvement approach, performance improvement using methodologies such as Lean and Six Sigma is simply not sustainable.

Introduction

Organisations such as Apple, Proctor & Gamble, Dell, and Toyota are the benchmarks for the desired end state of operations excellence, but despite many books, articles, and white papers on the advantages of Lean, Six Sigma, and similar approaches, most organisations have not had sustainable success as a result of adopting these methodologies. The few organisations that did, typically needed to undergo long-lasting and significant organisational transformation to achieve this. To execute successful operations excellence, an organisation needs a robust integrative improvement system (IIS). This allows an organisation to embed operations excellence in the fibre of the business, rather than treating it as a project, philosophy or intervention driven by a small handful of experts — “the few and the proud”. The integrative improvement system requires three key structural components to effectively drive the transformation process:

1. Maturity-based and process-based transformation
2. Functional integration
3. Sustainability through a three-tier system.

Component 1: Maturity-based Transformation

There is no “quick-fix” approach to changing an organisation’s culture. Engaging employees, developing their skills and competencies to effect process improvements and fundamental shifts in leadership style from “cop” to “coach” (servant leadership) take time and effort.

Transferring process improvement ownership from technical experts to front-line employees requires structural reorganisation around lateral processes. Employee skills and knowledge need to be developed and employees need to be motivated to remove all obstacles (including traditional management’s tendency to solve problems on their behalf). Employees can only be held accountable for delivery of results once the above has been completed. A maturity-based management system needs a 3 to 5 year execution road map and must be capable of measuring the stage of maturity for all process areas. Appropriate implementation actions can then be planned according to the maturity levels of the process areas and their process-based teams; this ensures consistency and a logical flow of actions in the long-term execution plan, as well as a resultant culture-based change.

Component 2: Functional Integration

One of the key principles of the new integrative approach is that the organisation should be designed around processes, products, and customers. Multifunctional teams optimise processes and value streams to deliver superior products to customers.

The process-based and integrative approach must also prevent the sub-optimisation that often arises from more traditional approaches to functional improvement. This means that functional improvement requirements (quality, maintenance, planning, HR, etc.) and the continuous improvement methodologies used (Lean, Six Sigma, TPM, TQM, WCM, etc.) are on the same platform and are executed simultaneously and in concert with each other.

Component 3: Sustainability through a Three-tier System

Sustainable improvement does not result from the mere application of continuous improvement tools. The introduction of autonomous maintenance, one-point lessons, 5 Why problem-solving, visual management, and so on are not sustainable without supporting systems and underpinning management principles. Sustainable change requires a three-tier system. These three tiers are: management principles, operating systems, and tools. An example in the quality function serves to illustrate the three tiers:

1. A fundamental principle of the modern quality management approach is: “Ensuring good quality by controlling it at the source: in the process, by the operator, and at the supplier”.
2. The quality system will document the training plans, audit procedures, SOPs, quality plans, critical control points, etc., to help ensure that the quality assurance system is in place: controls, measures, and procedures.
3. The operators will use tools such as run charts and SPC charts to ensure processes remain under control.

An effective quality management system requires that the principles, systems, and tools be in place. This requirement is true for all functional systems.

A complete integrative improvement system requires that the management principles, systems, and tools are ready in all functions to ensure that improvements are sustainable, that the transformation process is managed effectively through a maturity-based system, and that the functional improvement approaches and improvement methodologies are integrated. Figure1 illustrates the structural components of an effective improvement system.

An organisation’s initial approach to operational improvement is typically project-based and often takes place only in selected functions. Organisations identify their critical systems — for example, the quality system in the food industry, or the maintenance system in the aircraft or chemical industries. Due to the importance of such systems to an organisation’s survival, the corporate organisation will typically set up a policy document and then audit the operational areas to ensure policy conformance. These are examples of functional improvement approaches. Organisations also typically adopt one or more of the standard CI methodologies. A separate function is usually created to drive the implementation of these methodologies, and the approach adopted often varies across different areas of the organisation.

As an organisation’s understanding of operational improvement matures, the organisation normally identifies the need to standardise approaches and move from project-based improvement to a more inclusive, process-based approach. This evolution results from the recognition that there is a limit to the number of systemic opportunities that can be addressed using a project-based approach to operational improvement.

The benefit of engaging all organisational levels to attack situational and systemic problems eventually becomes apparent. A recent industry trend is to develop and implement operational or performance systems (e.g., TPS). Several such systems have been introduced into organisations, but, to date, there has been no shared framework that enables the understanding or benchmarking of such systems. The attached assessment will enable an organisation to accurately determine the maturity and gaps in its operational improvement system. The framework described below sets the parameters against which the assessment is made.

Benchmarking Your Improvement System

Figure 1 depicts 5 stages of evolution in operational improvement systems. Typically, world-class organisations have evolved through these stages as they have experimented with CI. If we recognise that organisations that have achieved the holy grail of culture-based operational excellence have done so through their improvement systems, we need to understand the critical features of these systems.

The key features required within all improvement systems are:

Strategy

Is your end-state vision clear? What will the new work organisation, determined by the management principles adopted, look like? Is this vision described through the improvement system? Does the leadership group responsible for the improvement system design understand the critical components and features of a successful system? Have these been built into the design?

Standardisation

Successful organisational change across the supply chain requires a standardised approach, a shared end vision as well as a standardised and logical execution plan. This is the detailed “how to”, the step-by-step methodology that drives sustainable transformation over multiple years, where actions depend on the maturity of the process area.

Integration

Functional system methodologies relating to quality, maintenance, planning, HR, etc., need to be on the same platform as the other improvement methodologies that are in place. The “how” and “when” of the planned improvement actions should depend on the type of process and operational maturity, and should be integrated across the organisation to enable seamless front-line execution. There must be a shared dashboard to enable visibility of the performance progress and practice improvement made by all operational areas in the supply chain.

Transformation

Implementation phases for each function and the operational improvement methodologies must be documented and detailed to enable an explicit understanding of the skills and competencies that employees will need. These should include organisational design changes that allow employees to be engaged within multifunctional process-based and customer-focused teams.

Systematisation

Systems need to be integrated with the front-line tools because these are introduced to ensure sustainable use and application. These include elements such as SOPs, audits, schedules, and competency acquisition.

Training and Development

Implementation is ultimately the responsibility of operational management. Initial deployment may involve using facilitators to help build operational manager skills and ensure consistency across the organisation. The skills development required for sustainable transformation requires that training be built into the overall execution road map and delivered just-in-time for the deployment of the new front-line tools, processes, and structures. Organisations standardising their management system across multiple geographical locations will require content and training to be available in all relevant languages.

Roles and Responsibilities

Rapid deployment across multiple sites and locations can be enabled through the use of centralised and regional continuous improvement resources. Hand-over to operational personnel and the responsibility for building capability within every process area needs to be clearly documented and built into the performance management system.

Knowledge Management

Managing and sharing implementation learning across the organisation will ratchet up progress. Learning occurs at two levels: learning about implementation, and operational learning as process teams eliminate non-conformances (i.e., tacit knowledge needs to be made explicit). Sharing this learning should be made possible through the technology used by the improvement system.

Results and Tracking

The organisation’s ability to track the implementation of practice, process, and performance improvement benefits both employees and management.

A structured, codified and integrative improvement system enables exponential returns

An organisation’s improvement system can be benchmarked on a maturity scale based on the stages shown in Figure 2 against the above-mentioned components and features.

Stages of Maturity

Stage 1: No Continuous Improvement

Organisations in this stage manage their operations as a cost-adding function only. No formal improvement initiatives are in place.

Stage 2: Expert-based

The focus of organisations at this stage is to minimise the potential negative impact of operations on the business. Internal financial control systems are the primary means for monitoring operational performance. External experts (corporate employees or consultants) are used for decisions on strategic operational issues and to lead operational improvement efforts in the process areas. These experts have a vision of where they want to go from previous implementation experience and a plan for how to get there. They’re often focused on the function (maintenance, quality system, etc.) or the methodology (Lean, Six Sigma, etc.). Different experts often have diverse end state visions as well as different road maps for how to reach the end state. At this stage, operational improvement is often project-based and takes place predominantly in the manufacturing sites. There is often no standard improvement approach across the process areas. The transformation process and competency development requirements for the organisation are neither documented nor understood.

Stage 3: Functional Excellence

Organisations at this stage follow industry practice and seek parity or better with competitors. The planning horizon for investment decisions is generally within one single business cycle. Capital investment is often regarded as the primary means for catching up to competition or achieving competitive advantage. By now, organisations have identified their critical systems; these are generally industry-dependent. (For example, the airline and chemical industries require fail-proof maintenance systems, considering that the failure of these critical systems can result in the loss of life.) At this stage, organisations will have pushed the evolution of their critical systems, codifying and standardising the required components and ensuring that all process areas comply with the requirements of the system. A standard operational improvement approach might also have been adopted. Functional initiatives and standardised operational improvement methodologies will be integrated, but not necessarily on the same platform. Competency development requirements within functions are understood, but there is no cross-functional visibility. Improvements remain predominantly functional rather than process-based. The standard approaches adopted will have been translated to allow process areas in all locations to comply. At this stage, most of the formal improvement processes are still in manufacturing.

Stage 4: Integrative Improvement System

Organisations at this stage are managing their internal operations as a means to obtain competitive advantage. Operational investments are screened for consistency with the business strategy, and business strategy changes are translated into operational implications. The demand-driven supply network is seen as key to major marketing, customer, and product decisions. Long-term initiatives (e.g., culture-based change programs) are pursued to acquire sustainable capabilities in advance of needs. These organisations have evolved to a complete and integrative improvement system and have documented best practice requirements across all their functional and process systems, with accompanying road maps for the process areas to close gaps and measure the current status with diagnostic tools. They have fully integrated all functional and operations improvement methodologies onto a shared platform. At Stage 4, operational improvement is predominantly process-based and the entire organisation is engaged in improvement across all areas of the demand-driven supply network. The approach to organisational transformation is by now fully documented, including the process for multifunctional process-based and customer-focussed teams to acquire the necessary competencies. The improvement system, including implementation detail and training programs, is available in all the languages that are necessary for employees to be engaged across the locations in which the organisation operates. Technology is embedded in the improvement system to allow rapid sharing of implementation techniques and operational knowledge between functions and process areas across the whole demand-driven supply network. Process-based performance indices are continually tracked, as are the improvements arising from all projects. Operational improvement status can be measured across all process areas within the demand-driven supply network, and progress is visible to all.

Stage 5: Learning Network

This is the holy grail of operational improvement. Efforts are continually made to anticipate the potential of new demand-driven value network practices and technologies. All aspects of the internal and external demand-driven value network are evaluated for their potential to provide competitive advantage. These organisations are learning at multiple levels, not only about improving processes, systems, and practices, but also about improving the learning process. Systems are in place to encourage and facilitate learning and collaboration across the whole value network, both internal and external. The 5 stages are depicted in Figure 3. Attaining each stage allows a progressively increased return on investment (ROI).

THEMES	STAGE 1: NO CONTINUOUS IMPROVEMENT	STAGE 2: EXPERT-BASED	STAGE 3: FUNCTIONAL EXCELLENCE	STAGE 4: INTEGRATIVE IMPROVEMENT SYSTEM	STAGE 5: LEARNING NETWORK
1. Strategy	No formal operational improvement plans are in place. A strategy to codify critical functional systems has been formulated.	A strategy is in place to codify a standard improvement approach for critical functional systems. There are many operations improvement projects, but they are disconnected.	Codified best practices for critical functional systems are in place. There is a strategy to put in place an IIS. Plans exist to codify the best practice for all functional systems. There is a standard approach to operational improvement, but it is not integrated with functional improvement initiatives.	A strategy has been formulated to develop a learning network through effective knowledge sharing. An IIS is in place to integrate all functional and systemic improvements, and this is process-based to enable an effective demand-driven supply network.	Rapid sharing of know-how and collaboration to enable a demand-driven value network.
2. Standardisation (Codification)	No standardisation of operational improvement methodologies exists.	There are non-standard approaches to improving critical functional systems. These approaches are determined by individual experts. There is no standard operational improvement methodology.	Codified and standardised best practice is in place for key functional systems. A standardised operational improvement methodology has been instituted. The standard incorporates a best practice diagnostic to audit execution and details all processes for implementation.	A standardised and codified approach is in place to integrate functional and process-based operational improvement methodologies.	Standard processes for collaboration and rapid sharing of know-how enable a demand-driven value network.
3. Integration	No shared improvement methodologies are in place.	Various operational improvement methodologies are in place, but not integrated with the functional improvement initiatives in all critical functions.	Codified and standardised best practices are in place for key functional systems. A standard operational improvement methodology has been instituted.	Standardised and codified best practices are in place for all functional systems. There is a standardised and codified operational improvement methodology. The functional-based and process-based operational improvement methodologies are integrated and visible in one framework, and activities	Integration allows for collaboration across the demand-driven value network and continually improves best practices based on customer expectations, rather than on functional demands.
4.Transformation (functional to process–based)	There has been no consideration of the required individual and organisational transformation necessary for operational excellence.	Experts drive ad-hoc transformation within silos across selected areas of the supply chain.	There is a documented, maturity-based approach to building competencies within critical functions. Change management and training requirements to develop skills, motivate, and empower all employees within the functions are available and utilised.	The integrative improvement system provides a system for managing the transformation incrementally based on the organisation’s current state of maturity. The organisation has moved from being functionally based to process-based and is focussed on creating value for the customer.	Transformational processes across the demand-driven value network are clear and incorporate all constituents.
5. Systematisation	There is limited application of improvement tools, and these are not effectively linked to systems.	Some leadership principles are in place based on operational improvement methodologies. Random application of operational improvement tools and systemic improvement initiatives.	Leadership principles are in place to support functional excellence. Systemic requirements and tools are integrated within each function, but not yet fully integrated across the organisation.	An integrated set of guiding leadership principles is in place. An IIS manages the use of tools and systems to support process-based optimisation.	The IIS drives an outside-in business focus by sensing market opportunities and ensuring agile use of tools to capture and interpret data.
6. Training and development	No formal process is in place to build internal improvement capability.	Improvement activities are led by capable internal or external experts.	There is strong support from leadership for competency development. Formal processes are in place to build competencies at all levels in selected critical functions. Training content is available in	Operational leadership is capable of driving the building of competence building for all employees so as to optimise the performance of their process areas. All competence building, including advanced operational improvement methodology and change management skills, is integrated into	The whole network is fully capable of optimising its customer value delivery processes.
7. Roles, goals, and responsibilities	No formal operations improvement roles, goals, or responsibilities exist.	Experts with formal operational improvement roles, goals, and responsibilities are in place within selected areas of the supply chain.	Prioritised functional operational improvement goals and requirements are built into functional job descriptions and performance management processes.	Responsibility for operational improvement is in everyone’s job description. Line employees are fully responsible for process-based improvement, and functional experts are responsible for functional integrity. Front-line workers are responsible for situational problem elimination, and line	The culture of the organisation enables proactive efforts for enhancing customer value and ongoing improvement of results for all stakeholders.
8. Knowledge management (shared learning network)	There is limited sharing of learning	There is no standard approach to share learning and operational knowledge. Experts meet occasionally, but most sharing is ad hoc	Structured sharing of learning exists within functions. The operational improvement organisation shares process-orientated learning in a structured way. Some tools are in place to facilitate sharing of operational knowledge, but no formal system exists.	Structured cross-functional and process-based sharing of implementation knowledge and learning takes place across the demand-driven supply network. A systematic methodology exists to capture, manage, share, and collaborate around operational knowledge across the demand driven supply network.	The culture and systems allow for sharing and collaboration across the demand driven value network. There is continual sharing of learning between all network entities and across industry boundaries.
9. Results and tracking	Ad hoc improvements happen, but are often not sustained, and results are not measured/tracked.	Selected improvement projects are in place and based on a structured loss and waste analysis. Experts report results formally and projects yield net benefits to the organisation.	Systems exist to track project and functional improvements, but these cannot always be linked to improvements in KPIs. Functional KPIs are in place and there is year-on-year improvement in functional performance.	Results are tracked within internal functions and across internal processes; these results are focused on customer-based and consumer-based KPIs. The process-based organisation is held accountable for results through a formal performance management system.	The organisation measures and shows progress on KPIs such as overall value creation, collaboration, learning, and end-to-end cost to serve.