Two Tiers of Continuous Improvement (Nov 5, 2009)

Two Tiers of Continuous Improvement (Nov 5, 2009)

Part I in a Series of Observations from Biology for Business

Running a business is akin to maintaining health and well-being. In our book “Profit Mapping” we devoted a lot of attention to lean thinking, systems theory, business goals, and integrated financials. Profit Mapping is a set of methods and tools for business analysis and optimization. Fundamentally, Profit Mapping is inspired by cell biology — the basic unit of life. As the book did not talk as much about biology, we are writing a series of blogs to illustrate parallels between business improvement and what we were taught in high school biology.

Continuous Improvement “Tiers”

Over many years and across varied organizations we have observed that many successful companies use a two-tiered approach to continuous improvement.

The first tier is akin to emergency response fire fighting. Here, managers and workers battle daily operational “fires.” Problems are immediate, often mission critical, and must be resolved quickly or the risks may threaten operations and/or the business. Effective managers are good at this, calling upon their wealth of real-world experiences. In addition, low hanging fruit for change is often targeted in this tier.

Actions taken in Tier I are tactical in nature. The objective is to quickly get operations back on track. Living to fight another day is an ongoing struggle.

The second tier tackles harder and more complex opportunities to maximize process and financial performance simultaneously. A big challenge for managers is to figure out how to optimally configure multiple product, process, resources, supply chain and financial parameters all at once to achieve the best possible performance.

Managers frequently confide in us how difficult this is to do well. On the one hand, we are trained to reduce problems into narrower definitions and improve upon a few variables at a time. Reduce waste in any particular part of the system, we are taught, for instance, and the impact will percolate up to show real business value.

Yet, the reality is that everything is interconnected. Even the smallest operational or policy changes have ripple effects, which are dependent on both the specific and collective changes within the environment. In other words, a business is not the sum of its individual parts, but the collection of its interdependent operational systems.

Thus, managers must both constantly fight fires on demand (Tier I) as well as systematically drive complex change for the purpose of meeting multiple business objectives, including financial performance (Tier II). You can’t do just one or the other! You have to do both effectively or the organization will get sick and may perish.

The Biology of Continuous Improvement

A little background on us helps explain our thinking. I am a gerontologist by training — one who studies adult development and aging. Anil Menawat, who is the creator of Profit Mapping, comes from a cellular metabolism and systems theory background. How we ended up in business together is a story for another day. One might say our interests span from individual cells to entire human beings, with emphasis on facilitating growth and maintaining health and well-being.

You can begin to see the connection to business. Swap the above terms with those such as products, operations, factories, business units, supply chains, people, etc., and the “living” system comparison comes to life in a business context.

The first tier of continuous improvement is analogous to disease and the immune system. For instance, we are all exposed to viruses and bacteria on a daily basis. This is our risk exposure. Sometimes we develop infections. Some are life threatening. Some people may obsess over prevention. We take different actions depending on the severity and our pre-existing conditions and current situation when disease strikes. These symptoms are the “fires” that we all fight sooner or later.

The second tier of continuous improvement is analogous to growth and cell division. Growth relies on the production of new cells through cell division. This biological process is one of the most complex systems in the world, particularly when you extend this to an entire human being. Its parallel in the business world is also complex and dynamic. We’ve all heard the slogans concerning the “DNA” of business. The analogy seems to be that strategy is the genetic code guiding growth. This raises several business questions. Does the organization have the right strategy and roadmap? Is the cell division carried out properly? What are the risks?

The objectives for growth in both biology and business seem to be to “get it right” and sustain. Yet, the risks are great with plenty of opportunity for “error” in both systems, whether in cell division or implementing the right operational changes.

In the Tier I example of a virus or bacterial threat, our actions are tactical, such as taking a couple of Tylenols or getting a prescription for antibiotics. However, that does not change the larger context of cell growth and life (or death).

In Tier II, disturbances in cell division can also cause problems. Sometimes the implications are benign, but they can also have dire consequences. In addition, uncontrolled cell growth is cancer. In business this might be viewed as irresponsible management. Both of these biological and business situations are unsustainable without swift and appropriate action.

As we know from biology, there are more than two “tiers” to human existence and functioning. Likewise, organizations have many interconnected functions and tiers. We have simply focused on a couple to illustrate the dual approach to business improvement.

Adam Garfein