So, what is the discipline, the methodology and, ultimately, the structure that brings it all together? We call it a “conduit,” consisting of “three Cs”: customer, capability and culture. Much like a T-1 line, this conduit focuses and aligns the critical components of an organization toward a single purpose and facilitates the flow of business strategy throughout the organization. The process is not radical, but it creates revolutionary change in your organization.
The Customer Question
First and foremost, creating a conduit starts with the customer. It is important to focus on the external customers, as they are the real reason you exist. Your business strategy has addressed how you wish to be positioned—customer segmentation and differentiation, product mix and distribution channels. Now you need to focus on a single key question: How does your customer define value for the products and services you provide? It is this value proposition, the relentless focus on value creation, that ultimately drives execution.
Customers define value based on your outputs and the processes they experience in dealing with you to ultimately receive that output. How well do your leadership and, ultimately, your organization understand this principle? How will you communicate this understanding so it is actionable within your organization? When you initially focus on value definition, consider and define the aspects of your products and services that are truly important to your customers. In many organizations, this analysis is too internally focused and results in a clear definition of what aspects you are good at delivering, but the voice of the customer is not heard. Carried to the extreme, you may be functionally excellent while disappointing customers.
Remember, customers evaluate your company based on output and process. How easy or difficult is it for customers to do business with you? How aligned are your internal processes to support value-creating activities? You may be delighting your customers in terms of output, product or service, but if your customers are dissatisfied with your process, they are at risk. Can you afford to lose a key customer because you are slow to answer the phone, because you pass customers around looking for someone to answer their question, because you ship incomplete orders or because you bill them incorrectly? Do you know your current level of capability in these areas?
The Customer Solution
Intentionally differentiating between external and internal customers, the discipline of creating a meaningful conduit begins with a focus on the external customer. With that in place, the next critical step is to develop an understanding and awareness of how internal customers must work together. Where there is disagreement, the external customer serves as the referee.
From your business strategy and the rich, two-way conversation with your customers, begin to define key business processes and value streams—the series of activities that you currently complete in order to deliver your outputs to your customers. Then define gaps in this process and close them. In most organizations, this creates two high-level needs: the ability to define and measure current processes and the ability to analyze and improve them. While multiple tool sets are available for this effort, the tools of “Lean Thinking” and “Six Sigma” are very effective. The blending of these thought processes has resulted in a principle-driven methodology—lean6sigma.
There are five principles of lean6sigma:
- Specify value through the eyes of the customer.
- Identify the value stream; eliminate waste and variation.
- Make value flow at the pull of the customer.
- Involve, align and empower employees.
- Continuously improve knowledge in pursuit of perfection.
These guiding principles are absolutes that shape direction, and leadership must be in alignment with no dispute. You should debate in earnest over the process that best embodies these principles, but always come back to the principles as the foundation of strategy execution. Leadership is beginning a journey for the entire organization, and these principles serve as the core for how they will run their business. This is how they will execute their strategy.
While the first principle relies on the customer to define value, the second principle creates a new organizational thought pattern. The focus becomes identifying and defining the value stream. What are the key outputs–individual products or services, or families that share common creation steps–for which there is a paying customer? What are the activities that you currently perform within this value stream to successfully deliver this output to your customer? Where is there waste and variation, and how can you eliminate it from the value stream?
The organization changes as work begins to be viewed relative to its impact on the value stream and, ultimately, the ability to respond to the customer value proposition faster, better and at lower cost. The organization begins to think differently about what it does, and the key question asked throughout all levels of the organization becomes, “How does that activity create value for our customers?”
The Capability Question
The discipline continues with developing capability. Creating capability is a tool-driven process focused on enabling the organization to execute the business strategy. Lean6sigma utilizes the tools of Lean Thinking, rooted in Henry Ford, Deming, Ohno and the Toyota Production System, to drive waste from the value stream; and the tools of Six Sigma, rooted in Taguchi, Motorola and GE, to remove variation. The synergy resulting from the combination of these methodologies creates a whole significantly greater than the sum of its parts. As you eliminate waste from the value stream, you simplify processes and reduce steps. As you eliminate variation, you reduce process defects and create a repeatable process. The value stream begins to flow; capability and capacity are discovered and unleashed.
Think of this flow of value as a raging river to help you mentally visualize perfection. When you start the journey, there will be many obstacles to the flow of value. You likely see these obstacles every day and do not realize the impact they are having on your value stream and the ability to create value. As defined in Figure 1, obstacles or undesirable effects will appear in the form of waste and variation—overproduction, waiting, defects and unnecessary transportation or conveyance, processing, inventory and motion. Additionally, you may be encouraging overproduction and unnecessary inventory by focusing on a push system, every station working as effectively and efficiently as possible, pushing output to the next stage of the value stream whether it’s needed or not. Another thought-process shift occurs here as you begin to focus on moving to a customer-focused pull of value creation. Now value flows at the pull of the customer, which is the third lean6sigma principle.
In developing capability, training should not attempt to make key leadership into “tools experts.” Rather, that training should be invested in Black Belts or subject-matter experts. However, you do want to change leadership behavior and give them capabilities at a basic level to use the tools to improve process. Examples of basic lean6sigma tools for leadership include Input-Process-Output Diagram, Process Observation, Process or Logical Flow, Physical Flow, Time Value Map and Controlling Variables with Mistake Proofing. With lean6sigma tools and lean6sigma executive education, leadership will have a clear understanding of how organizational capability is going to be enhanced. They will also be empowered to initiate the strategy execution by engaging the organization in improvement opportunities.
The Capability Solution
Organizational capability must be enhanced at all levels. Leadership must identify the key individuals who will become Black Belts or subject-matter experts to garner new skills and to challenge the organization to accelerate the changes necessary for successful strategy execution. Black Belts learn a disciplined methodology of mapping a value stream to baseline current state. This data-driven process facilitates a holistic, systemic view of a value stream. In the best execution models, these individuals are dedicated full-time to this work and are aggressively supported by functional leadership and sponsorship. Additionally, teams of employees throughout the organization need to be involved with these individuals to gain new skills and to facilitate rapid process improvement.
To begin this process, leadership selects the value stream based on strategic fit and overall impact to the business. Black Belts and employee teams then define and measure current-state activity within the value stream. The learning from this value-stream review can then be applied across other value streams to further facilitate strategy execution and drive business results. Following two weeks of initial Black Belt training and three to four weeks of data collection, the Black Belts, employee teams and leadership shift to the analysis and improvement stage of the process. A disciplined five-day Baseline process occurs with the selected value stream being analyzed in terms of undesirable effects, cause-and-effect analysis, root-cause identification, problem and financial impact identification, alternative solution generation and project selection. Leadership needs to be actively engaged in each day of the analysis process, offering support and seeking additional clarity as necessary to facilitate closure at the end of the week with a contract for change.
With projects and project resources identified, Black Belts continue their education, and organizational capability is further enhanced with additional tool training and mentoring as project execution is launched and monitored. Generally three additional weeks of training occur, with each week of training being followed by three weeks back on task to execute projects and drive business success. The analyze-and-improve phase of each project is led by a Black Belt and sponsored by a key member of leadership who continues to challenge for greater and faster results, while also working to remove any barriers the Black Belt and project team may encounter.
The Culture Question
To effectively use the conduit to facilitate the flow of strategy throughout the organization, it is important to focus on culture. As you change the way you do things, you will change the organization’s culture. Additionally, from a leadership perspective, it is important to understand organizational culture from the perspective of systems and structures. With an understanding of what in your organization is causing you to do things the way you do, you can accelerate the change process associated with successful strategy execution by changing personal behavior, and systems and structures that support or encourage the organizational behavior you want to change.
The Culture Solution
To accelerate the conduit, focus your organization on the discipline of culture. To do this, the Competing Values Framework (CVF) model (first created at the University of Michigan) can be effective in assessing current and desired states of organizational culture. (See Figure 2.) CVF provides the process and tools that help you conceptualize, plan and manage the change necessary to implement your strategy. To explain the process, it is first necessary to define the dimensions of culture and the four dominant cultures that exist in business. CVF distinguishes two important dimensions in organizations. One dimension reflects the extent to which an organization operates and behaves under the degree of control that is exercised—stability versus flexibility. The second dimension reflects the degree of organizational focus—internal versus external. Together these two dimensions form four quadrants, each representing a distinct organizational culture: the Clan, the Adhocracy, the Enterprise and the Hierarchy.
Each organization has a dominant culture, with characteristics of each of the other three cultures. To shift culture to any quadrant, you must give up elements of the opposing quadrant. You cannot simultaneously become more of the Hierarchy and the Adhocracy. To be more of one culture, you must be less of another. None of the four culture types are good or bad, but any of them taken to the extreme can negatively impact the way work is done. By assessing a few key statements as to how important certain attributes are to your organization, you can quickly define and map your individual view of the current culture. Then you can discuss your views with other stakeholders in the organization to define a consensus of the current state. Next, shift your focus to the desired state and follow a similar process resulting in two graphical representations of organizational culture—current and desired.
With consensus, you can define how the culture change can be accelerated and review the systems and structures that are in place and may need to change in order to facilitate movement to the desired state. Define specific actions and accountability to facilitate immediate change that will demonstrate urgency and significance to the organization and longer-term sustainability of the broader strategic change.
Throughout the methodology, you can see the creation and linkage of the conduit through customer, capability and culture. The conduit aligns the critical components of the organization, driving change in support of lean6sigma principles four and five; involving, aligning and empowering employees; and continuously improving knowledge in pursuit of perfection. This proven approach forces the organization to think and behave differently and drives alignment and convergence on successful business results and strategy execution.
Robert Blaha and Charlie Johnson are both partners in Human Capital Associates (HCA LLC). HCA (www.hca-leadership.com) specializes in leadership development and the deployment of major change initiatives and is headquartered in Colorado Springs, Colo. E-mail Robert and Charlie at firstname.lastname@example.org.