Continuous Improvement: The Four Critical Dimensions

(a version of this post, published in February 2009 and titled “The Antidote to Averageness”, was the second-ever post on EFA®;  this updated version of the original was recently published as “Four Live-or-Die Dimensions:  A Manifesto” in Builder online)

Almost twenty years ago, when SAI began its work helping home building companies understand and improve their business processes, I felt compelled to offer that work in the context of an overall improvement methodology.  So – I wrote a client narrative with the worst-ever title, 1998 Supplement to SHOULD-BE Reports, in which I characterized the effort to achieve and sustain improvements in business performance as involving “a certain chemistry – a complexity and a comprehensiveness”, noting that “improving performance tends to be hard, involved work.”

I went on to explain:  “It’s hard work because performance can’t be improved without doing things differently, and change is threatening;  it’s involved work because improving performance requires more than a simple, one-dimensional approach – it requires a continuous effort on more than one front.”

In retrospect, I think that improving business performance is hard, involved work, but it is not complex.  Even as I was noting complexity, I was also saying that “business performance improvement really boils down to getting the job done – viewing the issue, sustaining the effort, and getting the results – in three critical dimensions.”

Today, I describe the effort required as focused and comprehensive.  However, I would suggest that the three critical dimensions that I identified are as true and relevant today as they were almost 20 years ago.

Today, I would make it four dimensions.

Over the years, I have learned to reduce everything to its essence.  I would suggest that the essence of improving operating performance and business outcomes comes down to getting the job done in these four critical areas:  (1) developing a strategic and marketing discipline;  (2) having a clear perspective towards how value is created;  (3) creating a business context in which everything makes sense and generates the right sense of urgency;  and (4) developing a focus on managing operations and solving problems as a system.

Discipline:  A building company needs to build its operating model (operating processes, management systems, organizational structure, business culture) and design its entire product to deliver exceptional levels of the specific, distinctive value demanded by a narrow, demographically-specific, market-defined segment of home buyers.

It cannot be broad, uncontained, and good enough;  it needs to be narrow, limited, and exceptional.  We don’t see most builders having thought through this dimension with sufficient discipline.

Perspective:  A building company needs to organize its efforts around the manner in which it performs work, thereby finding better ways to provide the exceptional level of specific and distinctive value it was disciplined enough to create.

It is the most basic, most fundamental proposition in business:  the reason a business enterprise exists is to make money;  the way a business enterprise makes money is by creating value for its customers and other stakeholders;  that value is only delivered through the work that the business enterprise performs;  and, that work has to be performed in some manner of workflow.

In homebuilding, workflow is a blend of process management and project management:  project portfolio management with embedded and supporting processes;  regardless, it requires a horizontal perspective aligned with that workflow and the value that flows from it, as opposed to a vertical perspective aligned with functions, departments, and areas.

We can attest that most builders have not acquired the perspective required by this dimension.

Context:  A building company needs to become a company of business-people – a savvy, accountable, and motivated homebuilding team, comprised of savvy, accountable, and motivated teammates.  It must instruct its teammates on the real, actual numbers of the business, and do it in a way that makes sense to them;  it must give them the authority – and the responsibility – to act on that business knowledge;  and, it must give them a financial stake in the business outcome, one in which the financial payout is equitably-shared, frequently distributed, progressively-weighted, based on a single business outcome, and completely self-funding (resulting solely from targets achieved above a baseline).

It must create an underlying business logic that builds a sense of urgency towards a specific economic result.

We see little evidence of the context required by this dimension.

Focus:  A building company needs to infuse ”systems-thinking” into everything it does – everything it manages, everything it strives to improve.  A focused process of continuous improvement is deeply-rooted in an understanding of how systems work, and how they are improved;  it is root cause analysis directed at identifying the core problem and identifying limitation and constraint to the business outcome being sought.

It draws conclusions about order and priority, based on dependencies and cause-and-effect relationships.  It improves the performance of the system, not the pieces or parts of that system – not any of the parts, some of the parts, all of the parts independent of one another.  It identifies and resolves the problems, identifies and manages the constraints, that determine the performance of the entire system.

It does not look at the fact of current reality, and conclude that what it sees is a set of equally-important-yet-independent, related-yet-isolated measures.  It does not attempt to improve everything, everywhere, all at once;  it does not treat the symptoms of problems;  it does not treat everything as the cause of the problem.

A building company does not operate in an environment that provides unlimited capacity, resources, capital, or opportunities.  Its effort to improve business performance has to be prioritized and focused.  Some problems and opportunities need to wait on the resolution and exploitation of problems and opportunities that are more important.

Too often, we see just the opposite of the focus required by this dimension.

Four critical dimensions.

. . . a Strategic Discipline.

. . . a Horizontal Perspective.

. . . a Business Context.

. . . a Systems Focus.