/change

Adapting process improvement improvement tools to services organisations

SERVICE VERSUS MANUFACTURING

Techniques such as lean and Six Sigma have made lots of noise in manufacturing firms and it's not surprising that process improvement gurus have switched their attention to service induss tries. After all, a process is a process is a process. If these established, well proven and well documented approaches can so dramatically improve things on the factory floor then they must also be relevant to the white collar factory. But service businesses aren't just different because they shift information rather than parts. And the information flows that exist in manufacturing organisations simply aren't of the same species as the information generated by services. Transferring lean or Six Sigma to the service environn ment isn't a straight swap. Hope that either approach will prove an instant fix is a delusion.

Why is it so hard to get tried and tested improvement disciplines such as lean and Six Sigma to work effectively in service industries? Most service organisations that tried importing these manufacturing strategies are still looking for breakthroughs in vain – and some are counting the cost of failure. It's our opinion that before clambering aboard the continuous improvement bandwagon service organisations must check whether their business architecture is fit for purpose. Otherwise, they're throwing money down the drain.

The philosophies underlying both lean and Six Sigma apply for any area of activity. No one wants to run a business that indulges in waste, needless variation or inflexibility. The relentless attention to these issues embodied in lean and Six Sigma is highly valuable and a key enabler of change leadership in organisations.

But enthusiasm for sound philosophy shouldn't blind us to the practicalities of application. In a nutshell, service businesses are characterised by unpredictable events that partly occur outside the organisation's direct control, and which are largely invisible. A service organisation may have explicit, defined processes – but any enactment of a process will be highly variable.

Take, for example, a mortgage application. The product vehicle is, of course, standardised as much as possible. The processes for assessment, approval and enactment are also specified with a high degree of accuracy. But for any single mortgage application in the system, we cannot predict the exact journey it will take. The application may need to collect several items of information from parties beyond the organisation, such as surveyors and insurers. It may need to be modified in the light of new information, or adjusted to changing customer requirements. Each mortgage application is a unique entity, born of individual customer need, that evolves as the business attempts to satisfy the goals of all the stakeholders attached to it.

We're not just concerned with completing the application: we're trying to allocate the organisation's funds, cover its risks, ensure the customer can make his payments, and add as much value to the opportunity as we can. Services, then, are demand-driven. And “demand-driven” doesn't just mean that a service experience is triggered by a customer action: demand is a continuous, evolving factor. The processes of a service organisation are like a protracted, complex conversation. Our systems help us negotiate amongst competing aims. This is completely different from the manufacturing arena, where “demand-driven” is a means of controlling the production tap, and where customer choice devolves to selection amongst configurable attributes.

MAKING IT VISIBLE

A large part of the success of lean and Six Sigma lies in their ability to add a communication layer to industrial processes. Visual information systems populate the working environment with clear signals for parts delivery or tool changeover. Service environments have a different kind of information visibility challenge. Such organisations are rarely lacking in systems that provide access to the recorded detail of the cases they are currently handling. But they typically do not have any real appreciation of the business status of those cases. For the most part, they know that cases are “pending” – literally, hanging around.

Taking lean and Six Sigma principles straight into the service environment often yields absurd results. There's one famous example where an elegant technique for optimising operator movements was transferred to PC users. These lucky folks found their desktops marked out with black sticky tape, showing them the ideal region within which to manipulate their mice. The service person's tool isn't her mouse, but the information system the mouse drives. Black tape is no more help to her than red tape. There is an open, mature and reliable discipline that exists to help people make sense of invisible process environments. It's called systems analysis. It doesn't get much attention these days, because people assume it's all about specifying computer systems. In fact, systems analysis precedes the advent of the digital computer. The discipline owes more to biology than electronics, and it can be applied to any system – from a telecoms switch to a human society. Systems analysis is about modelling the boundaries and com ponents of systems, figuring out how their elements work with each other, and describb ing the ways in which they behave. It's the natural way of articulating the busy-ness of a business – of describing what the business knows, and what the business does.

There are no black belts in systems analysis, no ultra-proprietary techniques, no ruinously expensive tools. Yet the discipline is the ligua franca that underlies every serious attempt to take a managed approach to business. Tech niques such as lean and Six Sigma are tooll based interventions: they seek to reinforce rigour into environments where rigour has evaporated – to correct processes that have slid away from sense. But service environ ments are not production machines that need maintaining and upgrading. They are sensi tive systems designed to listen to customer requirements, and to manipulate resources to meet those requirements. When we're looking to improve such environments, we need to look for organic aids: strategies that fit the business.

TRANSFORMATION STRATEGIES

Just as the wholesale importation of standard techniques distorts a service business, so undifferentiated use of techniques in a vanilla change programme leads to confusion and missed opportunities. Transformation comes in many guises, depending on what you're trying to achieve for the business. Change agents therefore need to understand the range of transformation strategies available to the business, and their different characteris tics: the scales of their benefits, their timee lines, costs and risk profiles.

For example, if you're looking for significant cost reductions, based on tactical intervenn tions at the project level, and no real developp ment of a continuous improvement culture, then apply Six Sigma. But if you are considerr ing cost reductions over a longer timeframe, and targeting end-to-end process change within a sustainable CI culture, then lean will be more appropriate. If you just need quick wins, then you may be better off using Business Process Reengineering (BPR) techniques.

True sustainable operational improvements take time and money to achieve. There are no short cuts to the cultural changes that continuous improvement entails. But not everyone needs to make such investments. Companies readying themselves for a trade sale shouldn't choose methods such as lean or Six Sigma: they need to focus on cutting costs and preparing for change. On the other hand, if a company's business is really hurting and it needs to change its underlying business architecture, then pragmatic use of systems analysis techniques will be much more valuable.

THINK AGAIN – AND THINK FIRST

Where service organisations fail with lean or Six Sigma, it's not the techniques that are at fault. It's the context in which they're deployed, and the management intentions to which they're hitched. The great achievements of such methods in manufacturing industry don't invalidate the use of traditional management controls, including critical success factors and change management.

Above all, decision makers must be wary of the celebrity allure of fashionable techniques. There's an unfortunate perception that a qualified Black Belt Six Sigma guru will also be an expert statistician, tactician, project manager and change management practitioner. But, in reality, only the people who run your business are qualified in your business. (I say this as a Black Belt myself.)

Few transformation strategies will fail to benefit from an initial phase of holistic systems thinking. Methods such as IDEF0 (SADT), Soft System Method, iThink, Departmental Purpose Analysis, Context Diagramming, and Causal Loop Diagrams provide a more comprehensive view of the important elements within a service environment. The flow-charts, VSM and SIPOCR diagrams associated with lean and Six Sigma often omit the important performance drivers associated with service process, such as controls, constraints, external influences and data structures.

This isn't a matter of preferring one doctrine over another. It's simply a fact that techniques which interrogate and illuminate your business goals yield more, and more valuable, options for positive business change. And, to be brutal, despite the claims sometimes made about them, neither lean nor Six Sigma make much impact on revenue. Companies may be able to claim some spurious revenue uplift from applying these techniques, but the accounting is often suspect. We all know that the only way to increase revenue is to sell more, or raise prices. There's only so far you can take profit enhancement solely by reducing operational costs.

Proper analysis of the business can reveal flaws in the product portfolio or market strategies. It can suggest synergies in the business that will remain undetected by manufacturing-based techniques.

Sometimes lean or Six Sigma make perfect sense in a service organisation – when applied to product development processes..

CONCLUSION

The companies that made lean and Six Sigma grew those techniques in their own soil. The methods are the organic result of systems thinking in their parental environment. And they transfer well to environments which closely imitate the original models. In radii cally different business – including every service organisation we have ever seen – decision makers need to adopt and adapt techniques to fit their own circumstances and goals.

Parts of service businesses can be treated as factory processes, and parts can be reconfig ured to behave that way. But the most valuable and distinctive elements of such organisations will always resist raw manufac turing solutions. The very variability of a service organisation's behaviour is its strength. Ignore this distinctiveness, and you destroy value. Respect and embrace the difference of service, and with the right tools you can raise performance – repeatedly.

by Chris Stokes & Russell Stokes