Trends in Business Process Improvement
In the very same year that America first declared its independence, a Scottish academic named Adam Smith was predicting the future of business process improvement. A single protracted sentence from his book tells of a visit to a pin factory, and predicts the entire structure of work and workplace consulting for the next two and half centuries:
One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business, to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands…
That passage comes from The Wealth of Nations (1776) and those mere 93 words highlight a fundamental principle of the industrial revolution. Today, we call this division of labor, and although most of us don’t work on a production line making straight pins, we are all tremendously specialized. Our skills and aptitudes cover such a narrow field that we are extremely valuable in one function yet utterly useless in the next. In the words of Adam Smith, we are all “distinct hands.”
In the intervening generations, the notion of division of labor has been repeatedly lost and rediscovered. The rise of the power grid is division of labor: centralizing the creation of energy instead of relying on local sources. The 20th-century assembly line is a linear form of division of labor, as is the current obsession with cloud computing. What are online banking and Web-based services but a delegation of specific responsibilities? In every case, we make a complex task appear simple by consciously separating the work into constituent parts. This endeavor may be difficult, but it is no longer revolutionary. Yet, we continue to be surprised when division of labor strikes again.
The Business of Business Improvement
Implementing programs that redesign business operations is one of the younger branches of consulting. Since Fredrick Winslow Taylor effectively created this field in the 1880s, countless experts have offered similar services for a fee. In fact, the conscientious manager can easily cite a dozen or more trends in business improvement. Many are attached to handy acronyms: TQM, KPI, TCO, 5S, JIT, or BPM. Others boast flashy names such as Six Sigma or Lean. Do these methodologies represent completely different ways of thinking or are they all shades of the same color? And most important, are any of them truly revolutionary or are they just trademarked versions of common sense?
For example, consider the accounting jargon TCO. This stands for total cost of ownership, and it is intended as a methodology for computing the complete direct and indirect cost of a particular system or product. A new software application has the initial price tag, plus the support contract, as well as any training needed for the user. A TCO calculation might also include the downtime during the transition as well as the diminished capacity of the employee while they are learning the new system.
By most accounts, TCO became popular in the late 1980s as a tool advanced by the Gartner Group. However, an article in Processor magazine (Goodall, 2008) traces the phrase all the way back to 1929 and speculates the concept dates to the previous century. This brings us to the essential question: are any of the ideas in business process improvement truly new, or are we still working to put into practice what we should already know?
The Latest Fashion Trends
Six Sigma may be the most well-known of current methods in process improvement. Developed by Motorola in 1996, the approach is now used in more than two thirds of Fortune 500 companies. The name “Six Sigma” comes from a considerable emphasis on statistical process control. A Six Sigma process is one where there are no defects within six standard deviations from the average, or at most, 3.4 defects per million.
Much of Six Sigma is derivative. The basic project methodology, DMAIC, stands for “Define the problem, Measure key aspects, Analyze the data, Improve the process, and Control and monitor.” That sequence should sound like a strategy for any technical endeavor. However, Six Sigma does have some unique elements. Individuals trained in the methodology are awarded a series of colored belts in the same manner as in a karate school. Furthermore, Six Sigma is almost always a top-down, outside-in model, where executives are recruited as passionate advocates and outside consultants do most of the analysis and improvement.
Lean is a modern version of the Toyota Production System and is centered on the elimination of waste. In many respects, Lean is a set of principles and best practices that are sometimes in competition, and that stress creates a space for discussion and opportunity.
For example, the two pillars of Lean management are Continuous Improvement and Respect for People. In practical terms, however, a supervisor may feel trapped when considering a change that would reduce the need for specialized labor. An article in the New York Times about Lean in hospitals quotes a healthcare provider who characterizes the changes as inappropriate (Weed, 2010). Patient care, she explains, requires bedside manner–which cannot be standardized. Similarly, several nurses’ unions have rallied against Lean, claiming the practice is used to justify decreases in staffing despite increased profits.