Three Sigma Systems

On this blog I have devoted a great deal of time to the abstraction of theory. In my “Methods of Enterprise” posts, I will be departing from this indulgence and in order to offer some specific methodologies for improving an enterprise.

There are many specific methods that an enterprising organization can use to improve the efficacy of their efforts. Fans of Dr. W. E. Deming often have favorites. Some people focus on the use of statistical methods and control charts. Others want to displace performance evaluations and incentives. And still others look to employ Lean methods to improve the efficiency of processes.

The problem that is typically encountered comes from the fact that none of these methods can stand alone. Instead, they must be employed as part and parcel of and overall strategy that is based in comprehensive theory of enterprise.¹

Nevertheless, in a discussion of methods, we have to start somewhere and I can think of no better place to begin than with the methodology of “aiming”. I will try to keep this discussion of aiming in the context of an overall theory of enterprise.

Deming and Aiming

The importance of aiming has been consistently misunderstood, and is often skipped by enterprise leadership because it is seen as being too fluffy, too imprecise, and not directly related to the “bottom line”. But Dr. W. E. Deming regarded aiming as a method of the utmost importance, placing it in the prominent position of Point 1 in his famous “14 Points“.

Deming also said, “A system has an aim” and it is by way of aiming the system that an enterprise can realize what he called a “constancy of purpose” that is the essential component of “continuous improvement”

In other words, if you are going to create and drive a system of enterprise, you must assert the aims of that system or you will not be able to create the constancy of purpose necessary to improve continuously.

So let’s be clear. In Dr. W. E. Deming’s view, aiming was neither trivial nor optional.

Below I explain the concept of aiming in the context of a theory by which enterprising organizations innovate and improve by creating new knowledge. Then I give an example of how U.S. automakers failed because they did not understand the process of aiming.

Aiming is the Process of Harnessing Intentionality

As I have often discussed on this blog, INTENTION is the crucial component of a theory of knowledge by which we shape the emergence of the new knowledge that lies at the heart of continuous improvement. This process was described by Deming’s PDSA (Plan-Do-Study-Act) model.

Plan-Do-Study-Act

As good as Deming’s adaptation of Walter Shewhart’s PDCA is, it fails to convey the forward motion of knowledge creation and continuous improvement that is created by our intentions. If we picture PDSA as a process that occurs over time, it looks like this.

PDSA in Motion

As this revised version of PDSA shows, our aims direct us along a general methodological course of stepwise action. Although our aims have constancy to them, they are not fixed forever because as we create new knowledge, our aiming improves along with everything else. Also, it is important to note that aims cannot “determine” what new knowledge will emerge as the outcomes of activity, but they do provide us with the constancy necessary to shape our inquiries and actions in ways that are consistently relevant to our enterprise.

So we can infer some things about aiming from this diagram of the process of knowledge creation.

• Aims are not specifications of outcomes because new knowledge outcomes cannot be known in advance.

• Although aiming is part of methodology for creating knowledge, an aim cannot be specified in terms of a process that we believe will serve that aim. That is a part of a Plan.

• Aims must reflect what the members of the enterprise value and what they believe will “work” in a manner that is consistent with those values in the world “out there”.

• Aims must be clearly defined and continuously redefined in a manner that is understood by, and subscribed to, by all members of an enterprise.

• Aims must actually work to guide all of the actions of enterprise members.

• Without aims, people’s actions at all organizational levels will drift off to “issues of the moment” which will result in actions that steer the enterprise off course, and in the long run irredeemably so.

In other words, because we cannot plan and do all things and ask all questions, we must use our aims and intentions to guide all enterprise participants in what they will plan to do, what questions they will ask when they study the effects of their doing, and the actions they will take to begin our next cycle of planning, doing, studying, and acting.

Our aims and intentions drive the whole thing, and once we understand this, the idea of not devoting considerable energy to aiming will come to be regarded as simply insane! They form the foundational baseline by which we determine what to do next.

What is and is not an Aim?

If we think about aims and intentions, it quickly becomes clear that we all have aims. Most of us do not aim to harm others or ourselves. Most of us aim to live well, do good work, earn the respect of significant others, and contribute to the wellbeing of our family and friends. Our personal aims provide meaning to all of our intentional actions, but when we come together to collaborate in some enterprise, the aims that have shaped our actions as individuals and as members of other groups, are not sufficient to guide the actions of everyone in the new enterprise. The new enterprise must be built around its own set of aims.

As important as aiming is, few organizations really understand what the process demands. Confusion reigns at strategic planning meetings in which statements of vision, mission, targets, goals, and objectives are tossed into fuzzy pot and cooked into some watered-down version of wishful thinking about goodness and hopes of profitable outcomes.

Just to be clear, the following are not aims although they are frequently confused for aims.

• Mission Statements: A mission statement is quite simply a statement of “What business we are in”. The mission statement tells everyone what value our system creates.

• Vision Statements: The vision thing is a general idea — a prediction — of what the future will be like.

• Targets and Goals: Most often, targets and goals are motivational gimmicks designed to make people try harder. They are not really predictions of outcomes, so much as wishes for outcomes. Since they are typically not set in terms of systematic processes that “do what they do”, more often than not, they produce “anything it takes” actions that break the system of enterprise.

• Objectives: These are formally specified predictions of process outcomes that are used to test process design and implementation. The degree to which actual process outcomes vary from stated process objectives is a measure of process efficacy that can be used to improve the process.

Aims are first and foremost value-based statements, but this does not mean that they are only about what is good, and true, and beautiful. Aims imply a theory about what constitutes value in the eyes of enterprise members, customers, and wider audiences.

Deming stated a set of general aims that he believed were basic to any business enterprise.

“Create constancy of purpose toward improvement of product and service, with the aim to become competitive and to stay in business, and to provide jobs.”

Deming’s statement of basic aims makes great business sense, but in today’s world, I can imagine many other aims. I cannot say what the aims of your system of enterprise should be but I can say that the essential criteria for aiming your system of enterprise is that your statements of aim must serve to guide everyone’s actions with a constancy of purpose, so that all participants in the enterprise are able contribute in meaningful ways that keep the enterprise on course.

U.S. Automakers’ Failure to Understanding Aiming

Let’s consider Deming’s list of basic aims: become competitive, stay in business, and provide jobs, in relation to the U.S. automotive industry.

Auto Sales Trends 1975 to 2005

The chart above compares U.S. market share trends for domestic and non-domestic automakers between 1975 and 2005. At the beginning of this period U.S. automakers held the high ground with what would seem to have been, an unconquerable dominance. Yet in the following 30 years their advantage was consistently and systematically eroded by foreign competitors.

It is easy to complexify the reasons for this disastrous course — labor cost differentials, unions, healthcare, animal spirits of consumers and investors, the rising price of gasoline — but of course, all of that would be nonsense. The cause for the decline was nothing more nor less than management’s results orientation and basic failure to understand the nature and importance of aiming.

Aim 1: Become competitive

U.S. management ignored the aim to become competitive. Instead, they focused on results — maximum profits. Their profit motive assured that over time, they would continue to produce products to which no substantive value was added relative to those products produced by their international competitors. While U.S. managers focused on exploiting what they already had, their competitors focused on what could be. U.S. management’s focus on profits assured that their shareholders benefited and that their customers lost. While competitors continuously invested in the improvement of the reliability, performance, and economy of their products, U. S. management stived to reduce costs in order to enhance profits. In the 90’s, U. S. automakers, already in the depths of competitive decline, actually achieved record profits, but without the aim to be competitive, they had already signed and sealed the death warrants for their enterprises.

Aim 2: Stay in Business

The aim to stay in business is open ended. It isn’t an aim to increase profits in the coming quarter or the coming year, or even five years. It requires a commitment to optimizing the enterprise so that it can survive indefinitely. When management aims to stay in business, they never exploit their customers unfairly because those customers and their children need to be there in the future. When management aims to stay in business, trends in pollution, energy scarcity, and customer safety loom large. For example, fuel efficiency is not a matter of political correctness or customer desires, it is a matter of long term survival of the enterprise. If you produce cars that consume energy at an unsustainable rate, the cost to users of your vehicles and to the society in which your vehicles operate, will become unsustainable. The management of U.S. automakers failed to aim to stay in business and as a consequence, betrayed their shareholders, their employees, their customers, and their nation.

Aim 3: Provide jobs

The aim to provide jobs is not some form of feel-good altruism. It is the responsibility of management to see to it that everyone who participates in the enterprise has a long-term vested interest in the enterprise’s system for creating constantly improving products and services. American management aimed to increase profits largely by reducing the cost of labor, and this placed them in an adversarial relationship with their employees. How could an organization hope to become competitive and stay in business, when most of its members are viewed as the enemy? What happens is exactly what you might expect. In many subtle ways, workers sabotage the enterprise by “just doing their jobs”  in order to maintain their tenuous hold on their earnings and their jobs.  Why would people with an axe suspended over their heads risk doing anything more? Without the aim to provide jobs, U.S. management reduced the ability of their organizations to create new knowledge and continuously innovate and improve, to ZERO.

Deming’s three basic aims are no more than a hint of what can be achieved through the power of aiming. Human intention is the engine by which great things — even things once thought impossible — are accomplished. Without aiming, it is impossible to discover what is possible.

So you see, aims and intentions are the whole thing. Once everyone is on board, answers and methods follow and will be improved as new knowledge is continuously created by the enterprise, as a whole. Without well thought out and clearly stated aims, anything goes, everyone goes, and so goes the enterprise.

When was the last time your organization sat down and did the hard work of aiming?

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