The Toyota Production System (TPS) is much studied and emulated for use in other companies around the world. Unfortunately, many study the Toyota Production Systems’ Tools and Tactics such as the Kanban pull systems, cords, production cells, etc rather than the underlying principles!

Ran across this very interesting article published in 2004 in the Harvard Business Review - Learning to Lead at Toyota.

The author Steven J.Spear argues that the underlying principles of TPS are more useful to study, and emulate, rather than the Tools and Tactics. Could not be more useful for Process Improvement in Services! Let’s see how Stevn Spear’s principles apply to services:

1. There Is No Substitute For Direct Observation : Improvement of business processes is impossible without direct observation of how business processes are executed now, today, no matter what the Visio diagrams of the business processes say how they should be executed! Invariably,studying how business processes are being executed today is the only way to unearth process improvement possibilities. Currently, most process improvement efforts seem to be focused on measurements and improvement of Key Performance Indicators. They may miss a whole boatload of improvement opportuities related to elimination of waste in the process.That can be best done only with direct observation and lots of it.

2. Proposed Changes Should Always be Structured As Experiments: If you want to improve a business process, you can spend money on employee training, buying a new software package and implement it, or address the way the process itself moves forward, eliminating steps that are non-value adding, or speed up value adding steps. Now which of these may be the most effective for the time and money spent? Not all improvement efforts yield the same magnitude of improvement. Design of Experiments in Six Sigma practices have long offerred a very useful technique to effect improvements as experiments. These can be rolled back if they have unintended consequences or they don’t yield the expected results!

3.Workers and Managers Should Experiment As Frequently As Possible: In many Six Sigma and Lean Six Sigma process improvement activities, the emphasis may be on a single consolidated effort in process improvement, as opposed to a committment to improve business processes constantly! TPS advocates standardization of a process and once it standardized, it emphasizes constant improvement! If that approach is used in business process improvement, you can get significantly better results. This underlying principle can make a lot of difference than specific tactics and tools that are used without experimentation first.

4. Managers Should Coach, Not Fix: This principle that has worked very well in Manufacturing and in the Toyota Production System is perhaps the least used one in business process improvement. Many process improvement activities are organized and conducted by management rarher than the people who do the work. Of course, manufacturing may be different somewhat from services where you may need to have an eye on the overall process flow and avoid any sub-optimization at a process step level. This principle is also a great way to ensure buy-in of the participants!

Good article and good principles to think about when thinking about continuous business process improvement!

Rules are not necessarily sacred, principles are. - Franklin D. Roosevelt.

When applying the notion of Value and Value-Adding steps in a Service, the idea is not as clear-cut as in a product. For example, if you were to buy a car, fastening the door on to the car when it is manufactured is clearly a Value-Adding step for the end consumer. They need a door for the car.On the other hand, the factory worker in the assembly line filling out a production form may not add direct value to the end consumer and may clearly be a Non-Value Adding step.

Many Value Stream Mapping articles paint with a broad brush that value stream mapping is easily applicable for "products or services". It may not be that simple when you actually try to apply the same!

Let’s assume that we are doing Value Stream Mapping of a busy doctor’s rounds in a Hospital. The doctor checking the patient’s bedside medical record and making sure that the right medications have been given at the right time, is clearly a Value Adding step. Now, how about the Doctor chatting for 10 minutes with the patient on how he or she is feeling at that time? Is that a value-adding activity? From the point of view of most patients, it may be a value adding activity, adding a sense of comfort that may even speed up recovery. Who knows? The doctor may find out something totally new about the patient or the side-effects some of the medications may be having. Alternatively, some patients may feel that this talking did not add any value to them directly.

This is where things that are cut-and-dried in the case of a product, may wander into some uncharted territory when it comes to services! In fact, many companies advertise on TV about the personal attention that they provide in addition to say an Insurance policy or some other service they provide.

For the purposes of Value Stream Mapping how do you treat these differences? Are they differences that matter? Is there any other way to look at these?

All interesting questions! Looking for some answers...

A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large. - Henry Ford

Value Stream Mapping, very simply put, tries to eliminate Non-Value Adding activities while speeding up Value-Adding Activities. For example, in Manufacturing a Toy, attaching two pieces of the toy together is Value Adding while filling out a Production Floor Log is Non-Value adding. This is from the point of view of the end consumer, a child. The production floor log is value adding to the company but not to the end consumer. The child could not care less whether the log was filled out or not.

This works very well in Manufacturing. However while applying Value Stream Mapping to Services, two other aspects may come into play -1. Internal Financial or Security Controls and 2. Mandatory Legal Steps required. In a services setting - let’s say it’s an Accounts Payable process and the person is approving invoices to be paid. Invariably, companies have limits for who can approve what Invoices. If it is a $100 invoice, it may need only one level of approval, while if it is for $100,000, it may need five levels of approvals. Similarly, only system administrators in a company are allowed to create new user accounts. Security needs may dictate levels of approvals for this activity also. The Fair Credit Act in the U.S may dictate distinct steps to be followed before an overdue account can be turned over to a collection agency. If the person says on the phone that they need to consult an attorney then the company may need to follow up with a legal notice of some kind. If they don’t say that they may need to follow another set of steps legally.

In Manufacturing, many of these mandated non-value adding steps may not be that much of an intrusion into Value Stream Mapping and improvement of those processes. In Services, these activities may not be eliminated completely because the law requires you to do them diligently. You may deploy technology to speed these activities up, even if you cannot eliminate them. Deploying methods such as sending a notice by Email may be legally acceptable, instead of paper snail mail.

Services are somewhat different from Manufacturing, but appropriate adaptation of Value Stream Mapping methods may produce similarly excellent resulsts!

The wise adapt themselves to circumstances, as water moulds itself to the pitcher - Chinese Proverb

Paul Harmon of Business Process Trends writes a very interesting column - BPM in Europe - about the differences he sees between Europe and the US, when it comes to adoption and use of Business Process Management approaches, tools, and techniques.

Paul observes that Europe is probably more advanced in its use of workflow automation software and hence Business Process Management as a disciplined technical approach seems to be more mature there, than in the U.S.

He also observes that among technology consulting firms, use of BPMS tools is more pronounced in Europe than the U.S. He observes that in the U.S, a lot more companies are engaged in Organizational Information Architecture than in Europe.

However, interest in Business Process Management as a priority within companies is equal in the U.S and Europe.

My guess is that use of information technology may have a longer history in the U.S than Europe. Consequently, there are many more islands of systems that do their own thing. Tying them all into a cohesive Business Process Flow Orchestration may involve retrofitting the older IT systems with technologies like Service Oriented Architectures (SOA) before BPMS solutions can be applied to tie them all together in the context of end-to-end business processes. This is where they may be doing a lot of Enterprise Architectural work on the existing Information Systems.

One of the more interesting observations Paul has about U.S companies is that they are more experimental in nature, switching over to new, untried approachees, while Europe may be more deliberative before adoption of new technologies. This is a double edged sword. Unless somebody tries these new approaches out, they may not be able to see the problems with them and fix them! Seems like sometimes US companies may be the guinea pigs for new approaches and technologies.

Interesting set of observations that could help both parties on both sides of the pond!

Our greatest strength as a human race is our ability to acknowledge our differences, our greatest weakness is our failure to embrace them. - Judith Henderson

The Number 1 enemy of most Business Process Improvement efforts within organizations is current organizational reality! Ironically, those companies in the developed countries that have been the most avid technology adopters are the most cursed!. We have run into many such organizations that have a long history of adoption of latest technologies for their work, have been very successful at what they do and have slowly grown into large bureaucracies now with clearly defined fiefdoms within their world with competing agendas. Many in the BFSI (Banking, Financial Service and Insurance) sector are classic examples of these kinds of companies. Unfortunately, they are the ones that need to change the most because of new models of business execution, especially online, web based versions of what they have done for the past 25+ years.

Many of them have come to be invested in large IT backbones that support their business and these are applications that have been in use for a while, work O.K. and do what they are supposed to do properly. However what they may lack is the nimbleness and the technical characteristics needed for morphing themselves into nimble, online, web based versions of themselves so that they can compete effectively. For example, old line companies like State Farm Insurance and Farmers Insurance have all had to rethink how and where their local agents could add value in the face of increasingly online, web-based, self-service based companies like GEICO, Progressive Insurance, etc.

There are some very useful BPM solutions that can Orchestrate the Business Processes with workflows that can be built with Glue like integration that can link into multiple backend software systems that form part of the end to end workflow. These can make things flow with Service Oriented Architectures (SOA) and Business Rule Systems.

In reality, many of these BFSI companies are also huge users of Business Process Outsourcing (BPO) services, many of them offshore. This puts in an extra wrinkle over any Process Improvement efforts you may have. Parts of an end-to-end business process is now in the hands of some offshore provider. For example, let us assume that it is an Order to Cash process and part of the Cash process is a Collections Process. This may have been outsourced and the offshore service provider may use their own local hardware, software and applications infrastructure to execute this part of the overall process.

Now visibility into detailed data may be limited because the process is now broken up in to pieces and handled by different people around the globe!

Just getting a good AS-IS picture of the whole process becomes much more difficult, much less do any process improvement. However organizations will continue doing this if they are saving money!

Organizational Reality always intrudes just when you see organizations place higher priority on end to end business processes, either in the form of an IT History or current outsourcing efforts!

Reality is merely an illusion, albeit a very persistent one. ~Albert Einstein