Great Business Performance
The Road to Excellence Requires Vision, Time, and Fortitude
“Generally the fire, ready aim methodology does not work well however, there are some areas that don’t require much decision making” – FitzGerald
Michael Treacy and Fred Wiersema & Great Business Performance
The incredibly insightful researchers Michael Treacy and Fred Wiersema determined how to create great business performance. They performed an analysis of business and subsequently were able to group business strategies into three primary areas. These business strategies lift a business above the competitors. They found that the three strategies were:
They determined that very good companies focus on one of those three areas and become excellent in that area. Truly great companies do the same thing except that they also become exceptional performers in the remaining two areas. Implement Lean Six Sigma and therefore march ahead in desire to create Operational Excellence, a competitive advantage.
This requires a maniacal focus on decreasing operational costs and thereby increasing the profit margin.
Example: Toyota can deliver a custom configured car to a customer within three weeks, consequently, their nearest competitor takes three months. As you drive around and look at dealerships, look at all the cars on the lot that are inventory. This inventory ages, is fried in the sun, and takes up real estate. Inventory has a quantifiable cost to business. If you can deliver a car in three weeks, where most of the cars in that three-week inventory are already sold, your inventory costs plummet and therefore you are operationally efficient.
Lean Six Sigma and Operational Excellence
Lean Six Sigma:
- Increases process flow by removing activities a customer would not pay for,
- Decreases cost by having operators perform less activities, and
- Increase quality by performing less activities on a product or service.
Every process contains activities. The activities are either value-added or non-value-added. A simple definition for value-added means that a customer will be willing to pay for it. For example this could include an okay for an order or a processing of a tax return. A non-value-added activity could be walking over to getting a stapler or excess signatures. Removing non-value-added activities creates great business performance. Toyota is constantly removing those activities. Usually non-value-added activities take up much more time than value-added activities subsequently, it makes sense to focus their first.
A Value Stream determines which process to focus on. The performance of the Value Stream is much more important to know than the performance of an individual process. This is because the Value Stream contains all the processes needed to satisfy a customer demand.
This Presentation Defines the Components of a Business System:
This strategic focus is about creating sticky customers and customers appreciate that you deliver exceptional value. Lean Six Sigma uses the Voice of the Customer to guide execution, hence, make customers feel special.
Example: This is an example of a moderate sized town that cares for its citizens. Ft. Wayne, Indiana repairs a pothole within 24 hours of notification and has an online building permit request system. Both of these things strengthen the connection between the citizen and the city provided services.
Innovation or Product Leadership
Focus on Innovation and subsequently garner customer loyalty by making sure their customers have the newest, coolest products.
Example: Apple’s leading innovation, Siri, allows you to query phone applications for information. Consequently, competitors have not caught up to this capability yet.
The business strategic plan will dictate where to start. As a result of resource availability, work could be performed in multiple areas at once.
In Conclusion, This is Great Business Performance
Great Business Performance firstly means Profound Knowledge of your system, building a competitive advantage through Operational Excellence, and constantly removing fat or non-value-adding activities from your system. The goal is to run a Lean Business System and beat the competition.