In an era of stagnant economies, financial turmoil and the consolidation of supply chains, it is now more important than ever that organizations segment and build capability to effectively shape demand at the lowest cost possible within these segments. Furthermore, organizations need to be able to measure how well they are building this capability. Codifying the end state and mapping the sequence of work to get there is a significant challenge in itself, but deploying this across a wide global network in the correct sequence to ensure business results is a seemingly impossible task. Additionally, as organizations merge with others, acquire others and move sites to other continents, how can they be sure that all these disparate parts align with the organization’s vision and promises to its shareholders and markets? While the concept of business improvement systems is not new, advanced technology has emerged to help companies define, prioritize and manage this complex work in order to achieve superior results. Glenn Leask, President of CCI Inc., discusses how organizations must transform themselves from functionally managed organizations to create integrated processes that are aligned across continents, language and culture.
Organizations such as Toyota have long been recognized as leaders in operational excellence, but despite many books, articles and white papers on the topic of organizational transformation and Lean implementation, few organizations have had success in replicating the outcomes of the Toyota Production System (TPS). While the ideal end state, and even the techniques to be adopted, is well documented, few of these books detail the organizational design (the skills, structures, rewards and process changes needed to deliver on the selected strategy), the required implementation road map and actions, and the change management that needs to be in place to ensure that transformation is sustainable.
Consequently, organizations’ attempts to achieve the documented end state have been plagued by the application of misunderstood tools and techniques through a myriad of disjointed and isolated projects. These disjointed projects are also typically implemented within functions, or in selected micro processes, without effectively having been joined in order to substantially improve the end-to-end value chain. While these projects may well deliver quick wins internally, thus creating “pockets of excellence”, they are not having an impact on the customer and achieving sustainable transformation across the organization.
The transformation from a functionally managed organization to one that is process-based and designed with the ability to always meet (and even shape) demand is a complex task made up of organizational development, frontline execution and systems improvement work, which all need to happen simultaneously. Increasingly, companies are realizing that a comprehensive management system is required to define the work to be done clearly, and to manage the competencies, procedures, processes and people that ultimately influence a performance-driven culture.
Over many years, CCI has done substantial work to research and define what systems need to be in place to enable effective implementation. It has subsequently defined and formulated the term Integrative Improvement, which encapsulates the broad range of components and features a system requires to effectively manage this simultaneous, integrated, organization-wide transformation. A diagnostic tool (TRACC iiS Diagnostic) was also designed to enable an organization to assess and benchmark its current systems against those that have made the Toyotas of the world successful.
Components and features of an integrative improvement system
An Integrative Improvement System requires three key structural components to effectively drive the transformation process:
- Maturity-based transformation
- Functional integration
- Sustainability through a three-tiered system
A complete management system requires that these three structural components are in place to ensure implementation sustainability, effective transformation and an integrated approach to improvement.
The framework described in the graph sets the parameters against which the diagnostic assessment is made.
The survey indicated that organizations below a Phase 4 level are unlikely to successfully replicate the long-term performance culture exhibited by leading corporations such as Toyota.
Benchmarking integrative improvement
This graph illustrates five phases of evolution in Continuous Improvement (CI) systems through which successful world class organizations would typically have evolved in their respective improvement journeys. Acknowledging that organizations that have succeeded in finding the “holy grail” of culture-based CI have done so through their management systems, necessitates understanding the critical features of these management systems.
Organizations in Phase 1 manage their operations as a cost-adding function only. No formal improvement initiatives are in place.
The focus at Phase 2 is to minimize operations’ potential negative impact on the organization. External experts (corporate employees or consultants) are used for the implementation of mostly situational tools focused on the shop floor, and CI is done at sites without a standard approach. Transformation processes and competency development requirements are neither documented nor understood.
Organizations at Phase 3 follow industry practice and seek competitor parity. Systemic improvement work is done only on critical systems, driven by industry regulation and compliance. The planning horizon for investment decisions is generally within one single business cycle only. Capital investment is often regarded as the primary means for catching up to competition or for gaining a competitive edge.
A diagnostic tool (TRACC iiS Diagnostic) was also designed to enable an organization to assess and benchmark its current systems against those that have made the Toyotas of the world successful.
Integrative improvement solution
Organizations at Phase 4 have now migrated toward a complete management system, rather than merely managing a set of disconnected point solutions or projects. They have defined best practice (and the maturity-based execution process to get there) across all their functional systems and have developed a diagnostic tool that measures current status. All CI methodologies have been incorporated into a shared platform with the functional improvement methodologies, and the entire organization is engaged in improvements across the supply chain. The management system, with implementation detail and training programs, is available in multiple languages to enable engagement across multiple geographies.
Phase 5 organizations have a demand-sensing, end-to-end value network in place, driven by engaged employees that are skilled at detecting problems, and then “swarming and solving” the problems to build new knowledge. All aspects of the internal and external supply chain are used for competitive advantage. These organizations are learning at multiple levels — not only about improving processes, systems and practices, but also about improving the learning process.
Objective of the TRACC iiS diagnostic
The TRACC iiS Diagnostic has been designed to evaluate a company’s ability to implement and sustain a CI culture. It measures an organization’s systemic ability to effectively manage all aspects of change across multiple themes such as strategy, standardization, integration, results and tracking, etc. The diagnostic tool has more than 140 questions across these themes.
It can be regarded as a measure of the improvement potential available in an organization, of how well it has defined its operational strategy, its capability to deploy this strategy effectively, and how balanced current initiatives are against the critical assessment themes.
The TRACC iiS Diagnostic also acts as a benchmark against what other organizations are doing, and serves as an indication of the gap between current systems and what is required to attain end-to-end business improvement. It should be noted, however, that it is not a tool to measure business performance. Some industry leaders may have low scores because their industry as a whole is in the early phases of improvement initiatives.
Analysis of results
Our current survey across 75 companies reveals that 63% of organizations scored between 1.1 and 2.5 mapped against the five phases of maturity, which indicates that most organizations still operate at an expert-based level and are functionally managed. To validate this initial survey, a more detailed database is being built.
The current detailed database extends across 17 Fortune 500 companies, all advanced in their respective industries.
The survey indicated that organizations below a Phase 4 level are unlikely to successfully replicate the long-term performance culture exhibited by leading corporations such as Toyota. The industry results are shown in the bar chart.
So far, the TRACC iiS Diagnostic has revealed that existing systems in many Fortune 500 companies that operate globally do not have the capability to drive the required transformation that will deliver superior performance over the long term. What has thus become evidently clear is that to ensure the building of sustainable advantage across the end-to-end supply chain, organizations will have to seriously consider an integrative improvement system to deliver on their vision and promises.
This resource has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained herein without obtaining specific professional advice. Competitive Capabilities International (CCi) does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this resource or for any decision based on it.