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Featured Increase Lean Six Sigma’s Power with TOC and Systems Thinking

Increase Lean Six Sigma’s Power with TOC and Systems Thinking

Lean Six Sigma (LSS) has demonstrated the ability to produce outstanding results; over time, however, returns from LSS may begin to slow. One of the more common reasons cited for slowing returns is poorly targeted projects. This occurs because organizations fail to recognize that continuous improvement efforts need to be addressed on a systemic level rather than within a department or function in isolation. Although improvement projects carried out in isolation can yield short-term results, they also can translate into having minimal, or even a negative, impact on overall organizational performance.

In order to achieve maximum and consistent returns with LSS, efforts must be focused on improving overall system performance. Seeing and understanding the whole system can be accomplished by combining Lean Six Sigma with systems thinking and the theory of constraints (TOC). This article demonstrates the necessity and benefits of combining these methodologies into a single continuous improvement approach.

Systems Thinking: The Opposite Approach to Lean Six Sigma

Continuous improvement programs that use LSS generate improvements by disassembling the process into smaller pieces. This is known as an analytical approach. However, often an analytical approach will fail to provide an adequate understanding of the problem due to the dynamic complexity of the situation (see table, “Difference in Approaches to Problem Solving” and sidebar, “The Difference Between LSS and Systems Thinking – An Example”). It is within this realm that the tools of systems thinking become a valuable asset to a continuous improvement program.

Difference in Approaches to Problem Solving
Systems Thinking Synthesis: understanding the whole by looking at the relationships among its parts.
Lean Six Sigma Analytical: understanding the whole by taking it apart and looking at the pieces.
 

The Difference Between LSS and Systems Thinking – An Example

An aircraft can be viewed as a system that has the purpose to fly. With an analytical approach (Lean Six Sigma) to understanding the system, the aircraft (wings, avionics, etc.) is disassembled with the pieces spread out on the hangar floor. After each individual part is analyzed, the function of each of part is understood. But, still, how does the aircraft fly?

That is unknown, because in isolation the parts do not create a system capable of flight. To understand flight, a synthesis approach (systems thinking) must be used to understand how the parts work together to create the necessary conditions to achieve flight.

In this example, an analytical approach helps gain an understanding of what the parts do and how they work. Systems thinking, on the other hand, explains why flight is possible.

The term system is defined as a whole that consists of parts, each of which can affect the others behaviors or properties.1 In other words, performance of the system is determined by how parts interrelate. In business, the manner in which sales, procurement, manufacturing and distribution relate to each other is what drives business performance, not the isolated performance of each department.

An example of how the approaches differ can be found when an organization attempts to improve the efficiency of distribution and warehousing. In an analytical approach, improvements are made based solely on the processes within that department. In reality, the root causes of inefficiencies within that department can originate from any combination of procurement planning, production scheduling and capabilities, sales forecasting, people, the market conditions, and more. Despite the interrelationship between warehousing and other departments throughout the organization, continuous improvement programs launch projects and Kaizen events aimed at making localized improvements in the warehouse. This is not an uncommon occurrence in LSS deployments and can negatively impact a deployment’s ability to maintain momentum and generate returns.

To see the “whole,” systems thinking creates diagrams using reinforcing or balancing feedback loops, system delays and archetypes. A system archetype is a pattern of behavior within a given system, and in the example represents an organizational problem to be addressed.

The example shown in Figure 1 is based on work at a large public energy company that was deploying LSS as well as applying systems thinking. The company created a systems diagram of the customer service department because of an increasing number of customer complaints. The diagram revealed that the decisions made by the department when customer complaints were received was the leverage point in the system. (In systems thinking, a leverage point is where within the system a solution can be applied.)

Figure 1: Systems Diagram from a Public Utility

Figure 1: Systems Diagram from a Public Utility

The company concluded that over time actions taken by the customer service department in response to customer complaints had led to higher costs and more complaints. That conclusion was surprising to company leaders because the department’s key indicators rated customer service among the best-performing departments in the organization. They had expected the cause of increasing customer complaints to stem from issues related to the administration of energy service. The exercise of creating a systems diagram served as a powerful collaborative learning experience that aligned the organization around the need to deploy LSS resources to examine the policies, metrics and processes within the customer service department. Something was clearly amiss if the metrics used to monitor the customer service department suggested excellent performance, yet customer complaints and company costs were rising.

Although this example does not dismiss the need to address problems with equipment reliability or reducing network failures, it does emphasize the need to address the underlying systemic root causes of higher costs and complaints.

Another example of the benefits of combining systems thinking and continuous improvement comes from Dantar Oosterwal, former head of the new product development department at Harley Davidson Motor Company. Oosterwal and his team leveraged systems thinking and Lean to challenge the traditional phase-gate approach to product development. The result was a knowledge-based product development approach that accelerated the average number of new models released to the market per year from 0.74 in 1996 to 4.6 models in 2007 – a dramatic performance increase.2 At the end of his book, Oosterwal emphasized the necessity of systems thinking in continuous improvement programs by stating that “with a focus on tools and techniques there may be a monetary improvement, but the change they usher in will not become embedded as part of the system; the change will just become another fine program.”3 If LSS becomes just another program, then leadership will quickly find ways to better use the resources and a great program will eventually die.

Theory of Constraints: A Structured Approach

The challenge of combining systems thinking with LSS stems from the perception that systems thinking is often too nebulous or academic to implement. TOC provides a structured approach to identifying leverage points, referred to as constraints in TOC language. The TOC is based on the idea that the overall performance of an organization, or system, can be improved by focusing on the increase in throughput at the constraints of the system. Simply stated, a system constraint inhibits throughput of products or services through the organization, therefore reducing the ability to make money, both now and in the future.

According to TOC, constraints typically take three forms: physical, market or policy. Viewing the public utility example through the lens of TOC, the system constraint is the policies within the customer service department. These policies created the metrics, the processes and the culture. The culture drove behaviors that led to actions, which eventually resulted in increased costs and more complaints. TOC encourages the same principles outlined in systems thinking by considering the whole, as well as cause and effect. The TOC uses an intuitive five-step methodology to provide a continuous improvement program for the organization.

Figure 2: Five-step Theory of Constraints

Figure 2: Five-step Theory of Constraints

As Figure 2 illustrates, TOC provides an effective, step-by-step continuous improvement approach that 1) gives simple and clear guidance on where to improve, 2) communicates how to manage the organization to achieve maximum throughput, and 3) gives guidance on what to do before making additional investments (such as a new technology). When TOC is combined with LSS, the organization significantly increases the effectiveness of targeting projects because resources will be targeted on the system constraints. One study found that combining TOC, Lean and Six Sigma in a logical sequence yielded up to four times better (financial) results than using Lean or Six Sigma alone.4

An excellent example of combining Lean and TOC comes from the U.S. Marine Corps Logistics Center in Albany, Georgia. The MK-48 maintenance team had challenges with capacity and returning repaired vehicles on time to their customers. The team identified a policy that was constraining the throughput of the maintenance process (TOC), then implemented a pull-system (Lean) to schedule maintenance activities. These activities resulted in on-time performance of 99 percent of the production lines.5

Advantages of Looking at the Whole System

To avoid the loss of momentum or slowing results that can come over time, continuous improvement programs must enable the organization to see the whole system while discouraging efforts that are aimed at localized improvements. The examples cited in this article demonstrate the advantages of combining LSS, systems thinking and TOC into a single continuous improvement program, including:

  • Significant improvement in targeting of LSS projects
  • Improved alignment with leadership goals because continuous improvement efforts will be focused on system performance rather than local optimization
  • Intuitive five-step approach of TOC to helps organizations determine where to focus, what to improve and when to consider future investments
  • Compatibility and complementary nature of LSS, systems thinking and TOC
  • Potential for up to four times better (financial) results than using Lean or Six Sigma alone6

Although the best way to integrate these approaches is beyond the scope of this article, it is safe to say that any integration should include open-mindedness within the LSS program. True continuous improvements professionals understand that in order to continuously improve one must continuously learn.

References

  1. Ackoff, Russell, “Enabling a Systems Thinking World,” http://www.systemswiki.org/index.php?title=Systems_Thinking_with_Russell_Ackoff, retrieved May 4, 2011.
  2. Goldratt, Eliyahu M., The Goal: A Process of Ongoing Improvement, The North River Press, 1984.
  3. Oosterwal, Dantar P., The Lean Machine: How Harley-Davidson Drove Top-line Growth and Profitability with Revolutionary Lean Product Development, American Management Association, 2010.
  4. Pirasteh, R. M., & Calia, C. G., “Integration of Lean, Six Sigma & TOC Improves Performance,” http://www.industryweek.com/articles/integration_of_lean_six_sigma__toc_improves_performance_21537.aspx?ShowAll=1, retrieved May 3, 2011.
  5. Srinivasan, M. M., Jones, D., & Miller, A., “Applying Theory of Constraints Principles and Lean Thinking at the Marine Corps Maintenace Center,” Defense Acquisition Review Journal, 135-145, 2008.

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Comments

NR

Great article! I was considering going to get my Six Sigma Certification in the fall. However, after reading this article, I’m considering taking courses on TOC in lieu of Six Sigma.

Reply
Michael Higgins

NR – The point of this document is not to choose between TOC, Lean or Six Sigma but to reinforce the fact that all performance improvement methodologies can play a key role in achieving results. However, if you are considering which methodology to learn first – I recommend Lean. Lean tools and methodologies are very intuitive and can easily be applied in any industry. After Lean, consider branching out to TOC or Six Sigma. Thanks for your comment.

Reply
ChrisHarry

Absolutely agree. Start with Lean and Lean Thinking approach. This will automatically guide you.

Reply
Mike Fisher

Nice Job- really well articulated article and very relevant in forcing end to end thinking.

Reply
Bob Sproull

I just finished reading Michael’s article and I have to say it was well written and very nicely explains why so many Lean-Six Sigma initiatives fail to achieve great bottom line improvement. I especially like the way Michael has carefully laid out the case for integrating Lean-Six Sigma with system’s thinking and TOC with reference to results achieved. I’ve been using this same integration for the past 10-12 years in a variety of industries and each and every time the bottom line impact was very significant. Job well done Michael!

Bob Sproull

Reply
Bart Gensch

Lean Six Sigma can easily be used to look at systems before the disassembly! If we are not looking at what the customer wants from a product or service before jumping to piece thought to cause the problem, then shame on us!
TOC & Systems Thinking can even be mis-used if not done correctly.
Problems do not come to us wrapped in packages with “TOC”, “Systems Thinking”, “Lean”, or “Six Sigma” imprinted. They come in a generic wrapper imprinted “Problem”. The trick is to unwrap the problem and discover the solution through a methodology, not tool usage.

I commend you for the article as you provided great thinking/learning points for me to apply before I receive my next package!

Reply
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Mike Carnell

Bart,

Excellent point and exactly what I was thinking when I started reading this. When I read “breaking the problem into smaller pieces” that is Analysis in Blooms Taxonomy – step 4 out of the six steps. It always amazes me how people who have supposedly accomplished the level of understanding of Six Sigma don’t seem to be able to move it around – take it up to the top level, apply it to a non-manufacturing environment, etc. Maybe that is why MBB’s really need to operate at the Evaluate and Synthesis Phase rather than stop at the Analysis Phase.

I am also not sure where the data is to support the original position that returns slow over time. I have been gone from Motorola 20 years this year. When I was there we targeted a 10 fold improvement every 2 years. My understanding is that the current target is 10 fold in 1 year. I could be wrong but that would appear to be faster. The author also cites poor project selection as the cause. Again no data. Assuming it is a true assertion that would mean the projects are there therefore the money is as well so why wouldn’t you just fix the project selection process.

Maybe one of the issues I have is with the concept that people have to have work categories i.e silos. Why do they need to declare that they are now using TOC, to fix that problem over there I will use LSS, and to fix that I will use XYZ. I alway have visions of this little pulpit sitting in the company cafeteria where people have to climb up and declare to the world that they are now doing this project and they will be using these tools. Management is like that Honey Badger video “Management don’t give a ____. Management just wants it fixed.”

Reply
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Dushyant Thatte

First of all a very excellent article.

Bart, Mike,

I don’t think that this article is underestimating Lean Six Sigma anyway. What this article is proposing is to improve Lean Six Sigma framework by utilizing Theory of Constraints.

And Theory of Constraints can be and should be used to improve the Project Selection. It provides powerful Tools in the form of:

1. Intermediate Objectives Map:- ensures that everyone has a common understanding of business objectives
2. Current Reality Tree:- ensures that the RIGHT root causes are identified and thus solution is always focused on solving the RIGHT root causes rather than some undesirable effect.
3. Future Reality Tree:- ensures that the solution is complete, comprehensive and bulletproof

And consistent System Level Metrics (throughput, Inventory & Operational Expenses) can be used to prioritize the Process Improvement Projects.

What TOC does to entire LSS is really a magic. It can ensure achievement of effective system level benefits efficiently.

Thank you Michael for sharing such an excellent piece of work.

Reply
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Bob Sproull

I consider this paper to be top notch and clearly demonstrates why integrating Lean and Six Sigma with System’s Thinking and the Theory of Constraints is the true pathway to profitability. Having written two books on this subject, I can honestly say that Michael has hit the nail on the head! I see so many LSS improvement initiatives faltering and Michael has hit on the key reason why this is so. Improving isolated parts of the system instead of focusing on the key leverage point (the system constraint) will typically result in suboptimal return on your improvement investment. Job well done Michael!
Bob Sproull

Reply
Michael

Nice article!
Following currently a consultant path this gave me excellent food for thought on the project in a transactional environment of the BPO center. Pinpointing the right spot to target a project is always a challenge and TOC would be a good step-by-step to look into it.

It’s however important to mention that a significant ‘buy-in’ role for the LSS methodology as such is played by the maturity of the management of the company so to say and them being prepared to go for it. On the other side of the scales there is still a wide offering of conventional instruments like systems integration, implementing sophisticated IT tools, etc.

Thanks again Michael for sharing your vision of TOC with us!

Michael Pyzhyanov

Reply
Mitch Johnson

Excellent article Michael, and your key points are well made! The coordination of improvement methods and integration of efforts targeting the right issues that are of prime importance to leaders, enterprise or systems-oriented in nature, and span an organziation from end-to-end are likely to be the most meaningful and enduring. Your key point is spot on that if/when addressing individual parts without proper consideration for the system as a whole one may drive maximizing performance in an isolated area while driving suboptimizing performance across the system.

I do have to ask this question though Michael. Could you have been equally successful authoring an article that reinforces the importance of deploying a High Impact Core Value Stream (HICVS) or Prime Value Chain (PVC) approach for scoping and targeting improvement projects that drive end-to-end oriented outcomes? I can understand why some reviewers of your article might conclude that you’re much making as much a case that LSS isn’t an effective methodology as your are that Systems Thinking and TOC are effective. In fact, I think you may be unwittingly subordinating LSS to TOC, which I believe is a slippery slope my friend.

All in all, you present a very compelling and well written thought piece. Cheers! VR, Mitch

Reply
Michael Higgins

Mitch –

When I discussed TOC it was not an attempt to subordinate one methodology or another. My point is that each provide valuable approaches to solving business issues. However, I think we should always look for ways to get the best outcomes and not hold one tool or another.

Regarding your point about HICVS or PVC’s, projects that come from these assessments do not always focus on systemic constraints. Often projects are sprinkled all across the entire PVC which may lead to strengthening non-constraint links. And from a system perspective strengthening non constrained link does not serve to improve overall performance. All in all, I believe we all agree that systematic improvement is essential for creating value whether using Lean, Six Sigma or any other methodology.

Reply
Anando Chowdhury

I am a very disappointed by this article and at all the accolades it has received so far. Systems thinking, lean manufacturing and six sigma were actually born together. I really would advise against such elementary attempts at taxonomy between various modes of thinking. The attempts to seperate these methods and pigeonhole them, create artificial barriers to thinking. They destroy the plasticity that these methods need to maintain in order to be effective and engage the mind. I argue that the management thinking required to make lean and six sigma work across an enterprise (and in designing new products/services) are exactly those that are congruent with systems thinking.

I also recommend reading W. Edwards Deming’s 14 points for management to get a true example of how systems thinking is applied to management to drive a lean transformation. These things are not separate and never were.

Reply
Michael Higgins

Anando,

I agree with you that each of these methodologies are of common origin and Demings wisdom is timeless. However, my point is that often times when lean and six sigma are deployed, projects are focused solving symptoms rather than systematic problems. Using the article (Figure 1) as an example, many organizations may choose to focus a reducing network failures. This project sounds desirable, meaningful and impactful, however, our analysis viewed this as an symptom (i.e. cause and effect) of the customer service departments policy of reacting and prioritizing to customer complaints. I agree that all CPI activities should focus on systematic problems, however, my experience and observations indicate that many organizations focus on solving symptoms rather then the true root causes. Thank you for your comment and feedback.

Reply
Maria

Michael,
Thank you for this article.
Commonly people stick to one approach due to difficulties in combining one with another. Your article does not only set the idea of combining LSS with TOC and Systems thinking it also shows benefits of such actions and what is even more useful shows how to do it in several steps (ex. 5-step theory of constraints).
Article is well structured, plain language makes it easy to be understood by non-native speakers and/or beginners in LSS area. I belive I could make use of this article during my projects.

Maria Druzhinina

Reply
Rajeev Seth

Very basic article, I am failed to understand how we can get maximum benifit out of LEAN or SixSigma or any initiative without system thinking. Now organizaitions are talking about End to End responsibility where you have to work across the boundaries.

Reply


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