In a related article (Continuous Improvement vs. Systemic Failure) we saw how Continuous Improvement is essential in driving change and perfecting processes. Let’s just remind ourselves of the three basic stages (the related article goes into greater detail on these – also see the image that has been reproduced on the right). Continuous Improvement starts with some kind of assessment, a measure is taken of the current situation and where improvements need be made, secondly a plan is made to address these issues and deliver the improvements and thirdly the plan, often remedial in nature is implemented. The cycle is then ready to begin again and each full turn brings about positive change. It is possible the reader has seen other, often more complex models, but they all will contain these three essential components.
Continuous Improvement operates on two basic levels in an organisation, namely its production environment and its processes. Continuous Improvement can always push processes to become more effective as it largely affects services. It is a simple concept that whatever we do it can always be made better. However, in the production environment there are other considerations and the most important of these is optimisation.
Optimisation is a core efficiency indicator as by definition it’s the driving down costs (both in terms of time and money) while maintaining quality which is acceptable to the end user.
Before continuing it is important to establish that this makes the definition of improvement more subjective than it first appears. Paradoxically according to this refined definition Continuous Improvement doesn’t necessarily mean made better. This may seem odd and the concept screams against my own values. Personally I always do the best I can and while cost effectiveness and efficiency are important drivers they always plays a secondary role to quality.
Let me illustrate.
Consider a company like Ryanair who have a reputation for cutting costs as much as possible so that savings can be passed on to the passenger. They utilise three basic techniques.
- They aggressively drive down the basic ticket prices and then charging a premium for ‘additional services, such as on board catering, baggage allowances and seat selection. At one time suggestions were even made that fat people should pay for two seats and there should be a fee for using the toilet.
- They impose hugely disproportionate penalties for any failure to comply to their rules. This includes high fees for oversized / overweight baggage and huge costs for checking passengers in and printing their boarding passes after they opted for online check-in.
- They cut administration costs ruthlessly if media stories are to be believed. These stories include a ban on staff charging their electrical devices at work and being encouraged to take pens from other places where stationery is often freely available such as post offices and banks. They further reduce costs by using regional airports rather than large hubs.
In many ways this doesn’t sound better, but the cost savings are passed on to the passenger and if (s)he is prepared to put up with it, Ryanair offer the cheapest flights on the market if you are prepared to sit in a cramped seat of their choosing while carrying minimal baggage and travel to and from an out of the way airport.
I can vouch for this because I recently flew with them and due to date availability I flew back with another budget carrier. I did pay for some additional services on both flights and the fact is that Ryanair cost 55% of the cost of the other carrier.
Ryanair’s aim is to drive ticket prices down as far as they can so they remain competitive and they have managed to do this in challenging economic times. So as a mark of Continuous Improvement it needs to be acknowledged that they have achieved this.
This doesn’t mean I am particularly a fan nor advocate of them. I too have my own horror stories in terms of the service I have received from them in the past. However they have consistently delivered the best prices available.
So now we have explored how Improvement may have differing definitions we will turn our attention to the production environment. The fact is that a product can always be made better, but this has to be matched with cost effectiveness.
The car industry is a perfect way to illustrate this. It is now at least theoretically possible to manufacture a car that never wears out. It may need some attention from time to time on relatively minor things such as tyres, spark plugs and exhausts but on the whole it could go for ever. However, it would be counterproductive for a company to produce such vehicles as they will effectively do themselves out of business. Companies exist primarily to generate profits and if there is no profit it becomes unsustainable.
On the other hand consumers do not want a cheap car that will break down constantly and fall apart after three years. Such poor quality is unacceptable and such a manufacturer will lose customers at a cataclysmic rate.
In terms of supreme engineering there is probably few cars in the world that are better than the Bugatti Veryon. It is a showcase of superlatives in the automotive industry. It was produced mainly to show what can be produced and less to become a production model. Production costs are too high and they would have to be passed on to the buyer. This makes it far too expensive to go into popular production and become available on the open market.
Optimisation is about finding a point somewhere in the middle and it halts Continuous Improvement. A product can be improved as far as possible but must ultimately be limited by efficiency and cost effectiveness so that it still remains competitive on the market.
I have it on good authority from a senior figure in the insurance industry that new cars generate little or no profit when they leave the showroom and profit is generated through servicing and official spare parts. As an illustration the same figure told me that if a Volkswagen Golf were to be manufactured by using only official spare parts it would cost 500% of the cost of the factory finished product. Once more this optimisation as car manufacturers want to get cars on the market as price effectively as possible, but then generate profits through additional services, to do otherwise would be to make new cars prohibitively expensive.
However Continuous Improvement in driving processes forward do not suffer from such constraints because optimisation is more inclusive of the whole than in manufacturing. Continuous Improvement can also be used to make a process more cost effective (and while this is possible in manufacturing it is much harder to achieve).
Processes need to be stripped down as much as possible. This means making them simpler, less bureaucratic and easier to implement. This means staff require less training to be able to work effectively and by implication this may mean less staff to carry out functions. When Continuous Improvement drives processes it often drives down costs too.
So to summarise Improvement is often defined more subjectively than we would think and doesn’t always mean made better, depending on the core aims of an organisation. Optimisation and profit must always come before Continuous Improvement in the production environment, but in driving processes, while cost limitations can be a slight issue, Continuous Improvement can be a never ending cycle because optimisation often means tweaking a system and process. IN this context it is all encompassing and factors in efficiency and cost saving too.
© Richard Horton Omega Support Services 2019