Speed
Recently I was reminded of a very important idea about quality improvement - the
need for speed. Improving is
always good, but getting better faster is much better. A number of years ago I read an
article by Ray Stata who was Chairman of Analog
Devices at the time. The article was
entitled, Organizational Learning -The Key to
Management Innovation. And thanks to
the world wide web, I was able to find the essence of
the article at: http://www.schneiderman.com/Concepts/The_First_Balanced_Scorecard/Excerps/Ray%20SMR/Ray's%20SMR%20article/Ray's%20SMR%20article.htm
Stata contends that there is a rational
basis on which to set standards for rates of improvement. He cites several cases that suggest that
once a serious quality improvement effort is started, the rate of improvement
is remarkably consistent over an extended time period. The graph below is an example from his
paper.
You will notice that
defects go down at a very steady rate over time. You can also see that
the time required to cut the
number of defects in half stays the same over a long period.
Another way of saying that is, if it takes 8 months to cut the number of errors
from 100 to 50 each week, it will take 8 more months to cut the error rate from 50 to 25 each week and 8 more
months to cut the error number to 12.5/week.
Stata states, “The
slope of the learning curve is determined by how long it takes to identify and
prioritize the causes of the problem and to eliminate those causes. The skills
of the people and the level of resources do have an impact, but surprisingly
the time required for each cycle of
improvement is largely a function of the complexity and bureaucracy of the
organization (italics mine). Or, to put quality improvement in the larger
context of this paper, the slope of the characteristic half-life curve is
determined by the rate of organizational learning.”
You say, "So
what?" Well, think about
it. What if two companies both start with 100 errors
per week. Assume the first company has an
"error half life"
of 8 months. It will take 24 months (3 x 8 or 2 years) to get to 12.5 errors/week. Now assume the second company learns faster - its "error
half life" is 4 months.
It will get to 12.5 errors/week in 1 year. Or in two years it will be at only
1.5 errors/week - almost ten times better than the first company. If,
as is commonly accepted, it
costs ten times as much to repair
or correct a mistake or defect than it does to do it right the first time, then the
company that learned faster how to cut its defects will have only 100th
(10 x10) the cost associated with defects.
Or put another way, the faster learning company will be much more
profitable since the cost of rework or errors subtracts directly from the
bottom line.
The lesson for me is
you will be rewarded if you:
§
Clean up the complexity and bureaucracy of your organization
(no small undertaking),
§
Get started on improving your processes now, and
§
Go around the improvement cycle fast.