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Shifting the Paradigm: Business System Analyses for Identifying Areas to Improve

January 3, 2012
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A previous blog, Applying 30,000-Foot-Level Predictive Metrics to Business Scorecards , described how to link predictive scorecards to organizational functions through the Integrated Enterprise Excellence (IEE) value chain. Through this business performance fundamental map, one could access information by clicking to functional procedures and their resulting performance measurements. However, the simple reporting of metrics does not improve anything.

To address this improvement desire, organizations will often set goals throughout the organization. However, the simple setting of goals does not make improvement happen. It has been said that if you can improve productivity, sales, quality or anything else, by, for example, 5% next year without a rational plan for improvement, then why were you not doing it last year? Within IEE, goals are set with an accompanying plan for making improvements, where the results from process enhancements are quantified when its operational 30,000-foot-level control chart transitions to a new, improved level of performance.

However, organizations cannot expect to improve every business function’s performance in any given time frame since they do not have enough bandwidth. In addition, improvement in all aspects of the business is not really necessary since organizations may have only a few a constraints that when identified and resolved could make a very significant impact on the big picture. What is needed is a methodology to determine where improvement efforts should focus so that the business as a whole benefits the most with the least effort. This objective is accomplished through implementing the nine-step IEE business management system, which is shown in Figure 1.



Figure 1: Integrated Enterprise Excellence (IEE) Business Management System



Within this IEE business management system roadmap, step two contains the value chain. What a business wishes to accomplish over time is to make positive changes so that the enterprise as a whole benefits. This is achieved when the process steps within the value chain are improved, which positively impacts the 30,000-foot-level operational metrics that in turn enhance the satellite-level financial metric performance.

To accomplish this objective, organizations need to focus on the big picture. They need to analyze the business as a whole to determine the focus areas that would provide the most benefits. This objective is addressed in step three of the nine-step roadmap, the analyze phase. Items that need to be assessed in this phase of the nine-step roadmap include:

  • Analyze satellite-level financial metrics and 30,000-foot-level operational scorecard/dashboard metrics reporting to identify improvement opportunity focus areas; e.g., reduction of defective rates.
  • Assess business fundamentals for providing the best customer value/price on a consistent basis.
  • Conduct a strategic analysis, which addresses industry, competitor analysis, customer/marketplace trends, environmental forecast, and internal strength/weakness/resources.
  • Conduct an environmental scan checking market conditions.
  • Conduct Failure Modes and Effects Analysis (FMEA) to identify enterprise risks.
  • Examine satellite-level metrics and establish SMART (Specific, Measurable, Actionable, Relevant, and Time-based goals for these metrics.
  • Assess effectiveness of prior strategic plans and the direct impact that these plans have upon the improvement of the enterprise’s satellite-level metrics.
  • Analyze the satellite-level, 30,000-foot-level metrics, financial equation components (e.g., ROI), and enterprise processes to identify constraints and improvement opportunities. For this data analysis, utilize financial, statistical and non-statistical assessments, Theory of Constraints (TOC), and Lean tools (e.g., value stream mapping, and time value diagramming).
  • Obtain inputs through one-on-one meetings with area managers for a description of process improvement opportunities.
  • Create organizational 30,000-foot-level scorecard/dashboard metric goals that are consistent with the delivery of established satellite-level metric goals.
  • Drill down to project opportunities using an enterprise improvement plan (EIP) template, showing 30,000-foot-level metric goal linkages, when appropriate.
  • Create business cases for new product/service development opportunities, considering portfolio management, design modularity, reuse of existing designs, axiomatic design, and TRIZ.

    This analyze-phase work will then eventually lead to targeted-strategies and 30,000-foot-level metric improvement goals, where process owners of these metrics are asking for improvement projects to be created in their area. I will discuss these aspects of the IEE business system roadmap more in future blogs.

    The content of this blog was taken from IEE Volume III .
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