Improve - Business Argument A business argument for this work describes a company whose goal is to generate more profit dollars, more extra money at the end of the year. Let's imagine they're a $50 million revenue company earning 5% profit, or $2.5 million per year. They want to double their profit dollars.
One strategy would be to increase capital and headcount to increase the size and capacity of the organization to reach this goal. If the current system capability generates x and they want 2x, they need twice the revenue, i.e. $100 million in revenues. But they would have to subtract the cost to double the organization’s capability, so in fact they would need even more revenues, an even larger organization.
Another strategy would be to target the 10-30% of an organization's revenue being spent on generating waste. This waste is often hiding in their company processes. Here they would maintain the size of the organization but deliberately improve its capability. To earn an additional $2.5 million dollars, they would have to improve their processes only 5.3% ($2.5M new profit/$47.5M operating costs). Improving their processes only 10% would earn $4.7M extra profit dollars, without extra headcount or additional capital in many cases; equipment is improved and not necessarily purchased.
This improvement can only occur when leaders and employees learn to think and act differently about waste:
- what does it look like?
- where is it hiding?
- how can we reduce it?
- how can we maintain the new processes?
" Brilliant process management is our strategy. We get brilliant results from average people managing brilliant processes. We observe that our competitors often get average (or worse) results from brilliant people managing broken processes."
Mr. Cho - Chairman of Toyota
Improve– Business Imperative We live in a competitive world. Commerce is now global and for us to succeed we must be able to compete with, better exceed, our competition in providing products and services to our global markets efficiently, effectively, and profitably. To compete we must improve. To improve we must change. To change we must start doing something new, and stop what we have been doing that doesn’t help anymore.
To compete we must innovate. To innovate we must be able to regularly develop new products, new services, and new attractions to customers to build market share and profitability.
Deciding to improve and innovate are decisions to learn, on an ongoing basis, throughout your organization, faster than your competitors.
I will present a one day Process Improvement seminar in Holland on April 23, and in Grand Rapids on April 24, 2014
To learn more about Process Improvement, see Process Improvement
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