Chapter 16 Operations Improvement
Why is improvement so important in operations management?
Mainly because improving operations performance has such an impact on what any organization is
there to do. It is not surprising then that the whole emphasis of operations management has shifted
towards emphasizing improvement. Operations managers are judged not only on how they meet
their ongoing responsibilities of producing products and services to acceptable levels of quality,
speed, dependability, flexibility and cost, but also on how they improve the performance of the
operations function overall.
Why the focus on improvement?
Various reasons have been suggested to explain the shift towards a focus on improvement in
professional operational managers’ activities:
- There is a perceived increase in the intensity of competitive pressures.
- The nature of world trade is changing. Emerging economies are becoming important as both
producers and consumers.
- New technology has both introduced opportunities to improve operations practice and
disrupted existing markets.
- The interest in operations improvement has resulted in the development in many new ideas
and approaches to improving operations.
- The scope of operations management has widened from a subject associated largely with
manufacturing to one that embraces all types of enterprise and processes in all functions of
the enterprise. Because of this extended scope, operations managers have seen how they
can learn from each other.
The Red Queen effect
Improvements and innovations may be imitated or countered by competitors. Those firms that have
improved their competitive position have improved their operation performance more than
competitors. Where improvement has simply matched competitors, survival has been the main
benefit. An important distinction in the approach taken by individual operations is that between
radical or ‘breakthrough’ improvement, on one hand, and continuous or ‘incremental’ improvement,
on the other.
Radical or breakthrough change
Radical, breakthrough improvement is a philosophy that assumes that the main vehicle of
improvement is major and dramatic change in the way the operation works. The impact of these
improvements is relatively sudden, abrupt and represents a step change in practice. Such
improvements are rarely inexpensive, usually calling for high investment of capital, often disrupting
the ongoing workings of the operation, and frequently involving changes in the product/service or
process technology. Breakthrough improvement places a high value on creative solutions.
1
,Continuous or incremental improvement
Continuous improvement, as the name implies, adopts an approach to improving performance
which assumes many small incremental improvement steps. Although there is no guarantee that
such small steps towards better performance will be followed by other steps, the whole philosophy
of continuous improvement attempts to ensure that they will be. Continuous improvement is also
known as kaizen. In continuous improvement, it is not the rate of improvement which is important;
it is the momentum of improvement.
Exploitation or exploration
A closely related distinction to that between continuous and breakthrough improvement is the one
that management theorists draw between what they call ‘exploitation’ and ‘exploration’.
Exploitation: the activity of enhancing processes that already exist within a firm. The focus is
on tight control of the improvement process, standardizing processes, clear organizational
structures, and organizational stability. The benefits tend to be relatively immediate,
incremental and predictable.
Exploration: is concerned with the exploration of new possibilities. It is associated with
searching for and recognizing new mindsets and ways of doing things. The benefits are
principally long term but can be relatively difficult to predict. Moreover, any benefits or
discoveries that might come, may be so different from what the firm is familiar with that it
may not find it easy to take advantage of them.
Organizational ‘ambidexterity’
It is clear that the organizational skills and capabilities to be successful at exploitation are likely to be
very different from those that are needed for the radical exploration of new ideas. Although both
exploitation and exploration can be beneficial, they may compete both for resources and for
management attention.
2
, Organizational ambidexterity: the ability of a firm to both exploit and explore as it seeks to
improve; to be able to compete in mature markets where efficiency is important, by
improving existing resources and processes, while also competing in new technologies
and/or markets where novelty, innovation and experimentation are required.
The structure of improvement ideas
It is important to distinguish between four aspects of improvement:
1. The elements contained within improvement approaches – these are the fundamental ideas
of what improves operations. They are the ‘building blocks’ of improvement.
2. The broad approaches to improvement – these are the underlying sets of beliefs that form a
coherent philosophy and shape how improvement should be accomplished. There are many
elements that are common to several approaches.
3. The improvement techniques – there are many ‘step-by-step’ techniques, methods and tools
that can be used to help find improved ways of doing things; some of these use quantitative
modeling and others are more qualitative.
4. The management of improvement – how the process of improvement is managed is as
important as, if not more important than, understanding the elements and approaches to
improvement.
What are the key elements of operations improvement?
The elements of improvement are the individual basic fundamental ideas of improvement.
Improvement cycles
An important element within some improvement approaches is the use of a literally never-ending
process of repeatedly questioning and re-questioning the detailed working of a process or activity.
This repeated and cyclical questioning is usually summarized by the idea of the improvement cycle,
of which there are many, but two are widely used models – the PDCA/PDSA cycle and the DMAIC
cycle.
The PDCA (or PDSA) cycle
The PDCA cycle model includes:
3
Why is improvement so important in operations management?
Mainly because improving operations performance has such an impact on what any organization is
there to do. It is not surprising then that the whole emphasis of operations management has shifted
towards emphasizing improvement. Operations managers are judged not only on how they meet
their ongoing responsibilities of producing products and services to acceptable levels of quality,
speed, dependability, flexibility and cost, but also on how they improve the performance of the
operations function overall.
Why the focus on improvement?
Various reasons have been suggested to explain the shift towards a focus on improvement in
professional operational managers’ activities:
- There is a perceived increase in the intensity of competitive pressures.
- The nature of world trade is changing. Emerging economies are becoming important as both
producers and consumers.
- New technology has both introduced opportunities to improve operations practice and
disrupted existing markets.
- The interest in operations improvement has resulted in the development in many new ideas
and approaches to improving operations.
- The scope of operations management has widened from a subject associated largely with
manufacturing to one that embraces all types of enterprise and processes in all functions of
the enterprise. Because of this extended scope, operations managers have seen how they
can learn from each other.
The Red Queen effect
Improvements and innovations may be imitated or countered by competitors. Those firms that have
improved their competitive position have improved their operation performance more than
competitors. Where improvement has simply matched competitors, survival has been the main
benefit. An important distinction in the approach taken by individual operations is that between
radical or ‘breakthrough’ improvement, on one hand, and continuous or ‘incremental’ improvement,
on the other.
Radical or breakthrough change
Radical, breakthrough improvement is a philosophy that assumes that the main vehicle of
improvement is major and dramatic change in the way the operation works. The impact of these
improvements is relatively sudden, abrupt and represents a step change in practice. Such
improvements are rarely inexpensive, usually calling for high investment of capital, often disrupting
the ongoing workings of the operation, and frequently involving changes in the product/service or
process technology. Breakthrough improvement places a high value on creative solutions.
1
,Continuous or incremental improvement
Continuous improvement, as the name implies, adopts an approach to improving performance
which assumes many small incremental improvement steps. Although there is no guarantee that
such small steps towards better performance will be followed by other steps, the whole philosophy
of continuous improvement attempts to ensure that they will be. Continuous improvement is also
known as kaizen. In continuous improvement, it is not the rate of improvement which is important;
it is the momentum of improvement.
Exploitation or exploration
A closely related distinction to that between continuous and breakthrough improvement is the one
that management theorists draw between what they call ‘exploitation’ and ‘exploration’.
Exploitation: the activity of enhancing processes that already exist within a firm. The focus is
on tight control of the improvement process, standardizing processes, clear organizational
structures, and organizational stability. The benefits tend to be relatively immediate,
incremental and predictable.
Exploration: is concerned with the exploration of new possibilities. It is associated with
searching for and recognizing new mindsets and ways of doing things. The benefits are
principally long term but can be relatively difficult to predict. Moreover, any benefits or
discoveries that might come, may be so different from what the firm is familiar with that it
may not find it easy to take advantage of them.
Organizational ‘ambidexterity’
It is clear that the organizational skills and capabilities to be successful at exploitation are likely to be
very different from those that are needed for the radical exploration of new ideas. Although both
exploitation and exploration can be beneficial, they may compete both for resources and for
management attention.
2
, Organizational ambidexterity: the ability of a firm to both exploit and explore as it seeks to
improve; to be able to compete in mature markets where efficiency is important, by
improving existing resources and processes, while also competing in new technologies
and/or markets where novelty, innovation and experimentation are required.
The structure of improvement ideas
It is important to distinguish between four aspects of improvement:
1. The elements contained within improvement approaches – these are the fundamental ideas
of what improves operations. They are the ‘building blocks’ of improvement.
2. The broad approaches to improvement – these are the underlying sets of beliefs that form a
coherent philosophy and shape how improvement should be accomplished. There are many
elements that are common to several approaches.
3. The improvement techniques – there are many ‘step-by-step’ techniques, methods and tools
that can be used to help find improved ways of doing things; some of these use quantitative
modeling and others are more qualitative.
4. The management of improvement – how the process of improvement is managed is as
important as, if not more important than, understanding the elements and approaches to
improvement.
What are the key elements of operations improvement?
The elements of improvement are the individual basic fundamental ideas of improvement.
Improvement cycles
An important element within some improvement approaches is the use of a literally never-ending
process of repeatedly questioning and re-questioning the detailed working of a process or activity.
This repeated and cyclical questioning is usually summarized by the idea of the improvement cycle,
of which there are many, but two are widely used models – the PDCA/PDSA cycle and the DMAIC
cycle.
The PDCA (or PDSA) cycle
The PDCA cycle model includes:
3
