The Secret That Reduces Business Complexity

The Secret That Reduces Business Complexity

Every organization dreams of achieving cost and risks reduction, simplify the operations and processes, and even be able to make better decisions, and more. It all sums up to reducing complexity in the organization. How can this be achieved? Find out the answer in this article.

By Ishayau Perelman, Partner at Tefen Israel

Complexity in business - chainwheels and people next to it

“Trust the people in the organization – the people in the best position to improve a business are the people in the job every day.” (GE CEO Jack Welch)

 Business decisions involve stakeholders who need correct and up to date information to enable them to make the right choices. Now that we are on the brink of a new industry revolution – “Industry 4.0”, the need to increase interconnectivity and reduce complexity has become more critical. In order to be effective in reducing complexity, management and decision makers must rethink services, products, and processes from a customer point of view.

This article will present the problems of complexity in business, and then explain and describe one of industry best practice solutions.

Business Complexity

Globalization, technology, regulatory requirements, new technical skills and interconnectivity all add to complexity. Today, everyone in a modern organization must constantly learn new technologies, processes, procedures and regulations. These are some of the reasons businesses are becoming more and more complex.

Business complexity sound glamorous, but it can come with a hefty price tag: the negative effect on companies. Simple processes that used to work became complex and unclear, and this may drive inefficiencies, higher costs, lower quality and eventually customer dissatisfaction. In most cases, executives and employees accept this situation as something they just have to live with, and find ways to work around it. Companies that want to stay competitive and thrive in the modern complex market will have to learn to work smarter – not harder. 
Complexity reduction requires the company’s leadership to:

  • Understand the sources of complexity and their interdependences
  • Identify opportunities to simplify: operations, business processes, services, products, organizational structures, working procedures and information technology systems
  • Strengthen focus on the customer, while maintaining the correct balance between customer satisfaction and the business needs
  • Confront the negative effects of complexity on growth, organization structures, business opportunities, and customer relationship
  • Simplify the decision making process

So what can be practically done in an organization to simplify operations, is there and effective and efficient solution to reduce business complexity?
The answer is a definitive Yes.

Simplifying Business Complexity– The Solution

The solution to the problem of complexity was given back in 1989 by the then CEO of General Electrics (GE), Jack Welch. Welch sought to transform the company from a bureaucratic, top down, inefficient and slow organization, into a fast, flexible, interconnected and cooperative one. Welch understood, that much of the complexity was caused by the way the organization was structured, the way processes were setup, how products and services were designed, and the way leaders managed their subordinates.

According to Welch, the critical drivers in the transformation of the organization are “Simplicity, Speed and Empowerment” of the workforce. A company's transformation is not only about streamlining the processes and the business, but more fundamentally, it is about changing the mind-set of the workforce, the culture of the organization and the way executives and managers lead the company. In order to realize the transformation, GE developed a structured and systematic methodology that empowered the workforce across the organization to develop and deploy lasting improvements in their workplace. 

The methodology is known as “GE Workouts”.

What is a “GE Workout”?

The GE Workout is a structured, systematic methodology, whose purpose is to develop and deploy rapid, lasting improvements of process/business enhancements, by the people that perform the job. The Workout methodology focuses on engaging the people who are closest to the processes, those who do the day to-day job and “live the process”. These are the people in the best positions to know what is wrong and what needs to improved.

an iceberg with descriptions of the organization

Fig. 2: The iceberg of organization

The full Workout cycle is facilitated by a Certified Lead Facilitator, who is an expert in the Workout methodology, but has no stake in the process or the business. The Lead facilitator is a fair broker who has no other agenda than to support the team navigation through the Workout process, while using the correct tools. This approach significantly helps to reduce resistance to change and adopt change faster during the implementation phase.

The implementation time of the improvement depends on the scope of the workout and the complexity of the improvement initiative. Typical implementation time is between 90-120 working days.

Why Workouts?

As nicely put in iSixSigma: Workouts are the most powerful process improvement tool, that an organization can use: “If an organization could choose only one method for unlocking value quickly, what approach should rise to the top of the list? If a company could adopt only one method for shaping its culture toward continuous improvement, what tool should it use? The answer to both questions is GE Workouts”. Don D. Harris

So, why should you choose to use Workouts?

a man training on Horizontal bar

Workouts have an impact at the operational level as well as the cultural level. They are a proven industry best practice, and are used in diverse sectors such as Manufacturing, Financial/Insurance Services, Government, IT, Military, Energy and Retail. Workouts is probably the most effective approach for unlocking value in the organization with minimal investment, and with a typical ROI ratio of 5-10. 

 The reasons for using Workouts:

  • Proven Method
  • Facts Based
  • Fast & Effective
  • Value Led
  • Team Oriented
  • Results Centered
  • Anchors the Change
  • Measurable benefits

How Does It Work?

The full life cycle of a Workout process is based on the DMAIC Roadmap and is comprised of 3 phases:
1. Define and Measure – A series of scoping and data/facts collection sessions over a period of 2-4 weeks. During this period the team is selected (5-15 people) and approved by the sponsor, who is responsible for the process/business and has the authority to approve the Workout. During this phase the baseline performance is calculated/established.

2. Analyze and Improve – This intense 1-3 days' event is conducted in order to identify the key root causes that constraint the process/business, develop applicable solutions to remove the constraints and present the recommendations to a panel of executives that have a stake in the process/business for approval.

3. Implement and Control – During this phase, the solutions' implementation plan is developed, approved and implemented. Typically, this is accomplished within 4-6 months. Once the implementation is completed, the benefits realization (financial and non-financial) of the change will be tracked, measured and reported.

GE workouts are supported by best in class process/business improvement methods and tools and include: Lean, Six Sigma, Theory of constraints (TOC), Team building, Change Management and Project/Program Management.

 

The concept of the three days' event

Fig. 3: Roadmap: The concept of the three days' event

What Are the Expected Results?

The results of successful Workouts are: operations & processes simplification, cost reduction, risks reduction, increased clarity of the business & growth, better decisions making & control and higher customer satisfaction. 

Workouts are scalable and can be used to drive local improvement, as well as large and complex cross-functional organization strategic programs, making the organization more flexible and faster.

The greatest benefit to the organization is, that while reducing complexity and increasing effectiveness and efficiency, the organization unleashes its full power and is more prepared to the Industry 4.0 revolution.

Moreover, Workouts release the full potential of the organization's employees, resulting in an empowered workforce that takes ownership and pride of the working area, their business and most important – themselves. This is the greatest benefit to business that exists. 

Some of the Organizations where our experts used GE Workouts to improve their business: British Petroleum, DHL, Unite Nations (UNFCCC & UNOG), Plexus, Motorola, Pfizer (Wyeth), Dounreay Site Restoration (Nuclear).

 

Ishayau Perelman

Partner at Tefen Israel

OpEx and Business Transformation Expert

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