Demystifying the business improvement toolkit

With the wide range of business improvement tools available, it’s natural to wonder which to use. For starters, are they all still relevant? Especially in an environment of rapid digitization and automation.

12 Minutes By Jörg Münzing Private Equity 12/12/2023

At a Glance

This article provides a blueprint for driving transformational change through organizations. It details the tools you can use to take you from strategy to realization. What’s clear in our experience is that you draw on six key tools, beginning with Lean and then drawing on:

  • Six Sigma to reduce variability.
  • Agile to accelerate delivery.
  • Digitalization to automate.
  • Industry 4.0 to connect and control.
  • Transformational Leadership to execute.

The Key Question: Is Lean Still Relevant in the 21st Century?

Let’s begin with the classic contender Lean. Its principles were discovered in the 1950s and widely implemented since the 1990s. Initially, it focused on Lean Manufacturing before expanding into other functional areas such as product development, engineering, human resources, and finance.

To break this down, let’s revisit the fundamentals. Achieving progress requires a customized strategy and set of tools. Within this arsenal, prominent methodologies such as the Toyota Production System (TPS), Total Quality Management (TQM), Six Sigma, Theory of Constraints (TOC), Agile Management, the Fourth Industrial Revolution (4IR), and Transformational Leadership all contend for supremacy. In reality, successful operational improvements often need a seamless integration of six essential methods:

  • Lean to reduce waste.
  • Six Sigma to reduce variability.
  • Agile to accelerate delivery.
  • Digitalization to automate.
  • Industry 4.0 to connect and control.
  • Transformational Leadership to execute.

Lean Always Comes First!

It serves as the foundational step, preceding the application of any other method. Lean focuses on waste reduction, maximizing value generation by streamlining processes, eliminating redundancy, reducing complexity, overload, overproduction, overprocessing, defects, and non-value-adding bureaucracy. Intellectually, this is broadly understood, but not always applied.

Starting with Lean is crucial because optimizing wasteful processes without its foundation leads to suboptimal results. For example, in the banking sector, traditional approaches focus on digitalization and Six Sigma application to speed up processes and reduce variability, while managing approvals in an Agile manner. While this improved the process, it didn’t create a real breakthrough – many approval interfaces remained, so it still takes days to approve a mortgage application. Modern banks born Lean [ED1] start with a clean slate, defining the ideal process without any waste and selectively adding waste only where necessary. The result: a Lean process from application to approval completed in minutes (or even seconds), meeting customer demand just in time (JIT), in-session approval.

Sigma Quality to Reduce Variability

Once Lean principles shape the process from the inside out, the next step involves tackling variability. Applying Six Sigma is vital to make processes capable, especially in repetitive scenarios requiring consistent outputs. For one-off projects, like constructing a unique bridge or an innovative satellite, the thinking applies, but the Sigma level differs. Mass-producing automotive parts may require a quality level of 3 Sigma, while one-off projects might suffice with a quality level of 2 Sigma, ensuring nearly 70% of the work is completed right the first time.

Agile to Accelerate Delivery

In fast-moving environments where change is constant and customer expectations evolve rapidly, Agile methodologies have emerged as a pivotal force in project management and product development. Agile focuses on iterative and incremental progress, breaking down complex projects into smaller, manageable tasks or features. This approach enables teams to respond swiftly to changing requirements, ensuring that the final deliverables align seamlessly with customer needs.

Emphasizing the minimal viable product (MVP) over the exhaustive full-scale version, Agile prioritizes making the core functionalities work first before incorporating additional features. Leveraging well-known management techniques like Scrum or Kanban, Agile fosters collaboration, adaptability, and valuable customer feedback. Through cultivating a culture of continuous improvement, Agile expedites delivery by focusing on high-value features and executing them in brief cycles, referred to as sprints. This iterative process not only heightens efficiency but also enables businesses to remain responsive to dynamic market conditions.

Imagine a software development team working on a new mobile app. Instead of waiting until all features are perfected, they apply Agile methodologies. They prioritize the development of the core functionalities that make up the minimal viable product (MVP). Through short sprints and continuous feedback loops, they quickly release functional components, ensuring a rapid response to user needs and a more adaptable development process.

Digitalization to Automate

Digitalization has become synonymous with the modernization of business processes through the integration of digital technologies. Automation, a key aspect of digital transformation, involves leveraging technology to streamline and mechanize repetitive tasks. By digitizing manual processes, organizations can significantly reduce the risk of errors, enhance speed, and improve overall operational efficiency.

Automation extends beyond simple task completion; it involves intelligent decision-making processes enabled by technologies like artificial intelligence (AI) and machine learning (ML). The integration of automation not only frees up human resources for more strategic and creative tasks but also ensures a higher level of accuracy and consistency in day-to-day operations.

Consider a manufacturing company implementing digitalization to automate its production line. By incorporating robotic process automation (RPA) and AI-driven systems, repetitive tasks such as quality control and packaging are automated. This not only reduces the risk of human error but also significantly increases the speed of production, leading to higher efficiency and resource optimization.

Industry 4.0 to Connect and Control

Industry 4.0 represents the fourth industrial revolution, characterized by the fusion of digital technologies with traditional industrial processes. This paradigm shift introduces a new era of interconnected, smart systems that leverage the Internet of Things (IoT), artificial intelligence, data analytics, and robotics. The integration of these technologies enables businesses to achieve unprecedented levels of control and monitoring across their operations.

Through real-time data analysis and predictive maintenance, Industry 4.0 allows organizations to optimize processes, minimize downtime, and enhance overall efficiency. Smart factories, equipped with advanced sensors and automation, enable a seamless flow of information, empowering decision-makers with insights to make data-driven choices.

Visualize a smart factory adopting Industry 4.0 principles. Sensors and IoT devices are integrated into the production machinery, providing real-time data on equipment performance. Predictive maintenance algorithms analyze this data to anticipate potential issues, minimizing downtime. The factory gains unprecedented control over its operations, optimizing processes and ensuring a seamless flow of information for informed decision-making.

Transformational Leadership to Execute Change

In business transformations, leadership plays a pivotal role in driving and sustaining change. Transformational leadership goes beyond traditional management, inspiring teams to embrace change and align with a shared vision. Transformational leaders foster innovation, encourage collaboration, and create a culture of continuous improvement.

Effective leadership during times of change involves transparent communication, active involvement in the transformation process, and a focus on developing the capabilities of the workforce. By championing a clear vision, cultivating a sense of ownership among team members, and fostering a culture that embraces change, transformational leaders create an environment conducive to successful execution of strategic initiatives.

Think of a company undergoing a significant cultural shift toward sustainability. A transformational leader communicates a compelling vision of a more eco-friendly business model, inspiring employees to embrace change. They actively involve team members in the transformation process, fostering a sense of ownership and commitment. Through transparent communication and continuous support, the leader guides the organization toward executing sustainable practices, driving both environmental impact and business success.

In conclusion, the integration of Agile, Digitalization, Industry 4.0, and Transformational Leadership alongside Lean and Six Sigma forms a holistic approach to optimizing business performance in the 21st century. This comprehensive strategy ensures adaptability, efficiency, technological advancement, and effective change execution in an ever-evolving business landscape.

About the author

Jörg Münzing, is an a-connect Independent Consultant, with over 30 years of experience across various industries and geographies in operations management and product development.

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