copyright, 2014: air academy associates rick murrow ceo, air academy associates air academy...

Copyright, 2014:Air Academy Associates

Rick MurrowCEO, Air Academy Associates

Air Academy Associates

Enhancing Business Excellence


Business Strategy Drives Improvement Efforts

Sustaining the Improvement Gains

Strengthening Business Excellence

Customer Value

Sample Survey Results

Next Steps . . . Taking Action

Agenda

ENHANCING BUSINESS EXCELLENCE

� 2 �

Human Capital

Knowledge-Based Management

Enterprise Projects that Drive Shareholder Value


UCL

LCL

Avg

From Planning to Running the BusinessTHE BUSINESS STRATEGY

� 3 �

Pro

cess

Sco

reca

rd

Business Unit Scorecard

CEO / Business Scorecard

Tools &MethodologyLSS, PDCA,

etc.

UCL

LCL

Avg

Y'sX's

Voice of Customer &

Markets

StrategicPlan

Business Objectives

Business Measures

• Customer• Financial• Internal

Business Process

• Employee

Value Stream

Process Flow

Process Measures

“Plan the Business”

“Run the Business”

Business Excellence


Strategic• Grow Top-line • Grow Bottom-line • Increase Innovation …

products/services• Infrastructure

Linking Improvement Efforts and Projects To The Business Priorities

THE BUSINESS STRATEGY

� 4 �

PR

OC

ES

S

SC

OR

EC

AR

D

Voice of Customer & Markets

StrategicPlan

BusinessMeasures

Value Stream

ProjectSelection

“Run the Business”

“Plan the Business”

Tools &Methodology

BusinessObjectives

Project Results• Timeliness / Accuracy• Cost Reduction• Revenue Growth• Customer Impact

Tactical• Reduce Lead Time• Reduce Cycle Time• Reduce “Lost Sales”• Reduce Mistakes • Reduce Expenses • Delight Customer

Business Unit Scorecard

CEO / Business Scorecard • Customer

• Financial• Internal Business

Process• Employee


Achieving the “A” Curve Across Your BusinessesSUSTAINING THE IMPROVEMENT GROWTH

� 5 �

Viewed as “the way of doing business”, with both tactical & strategic projects. Involves

owners, customers, suppliers and entire workforce, for growth, technology leadership, value creation & culture change.

Robust plan for selecting, certifying and rotating full-time professionals. 1-3% of work-

force dedicated, with > 20% part-time.

Portfolio of projects to improve entire value streams, linked to

business goals, using appropriate level tools and

methodology.

Involved and accountable executives with fully aligned & committed leaders at all levels.

Enterprise-wide / All functions

“A” Curve

Implemented with other business improvement

initiatives to address a clear business need. Competing

priorities limit the involvement and benefits.

Mixture of full-time and part-time resources approaching 1% of workforce, with some linkage to succession plan.

Numerous cross-functional projects focusing on cost

reduction, reduced cycle time, improved quality and major

operational problems.

Led by a committed, involved and accountable set of

executives and managers.

1 or 2 major business unit

“C” Curve

Limited to proof-of-concept. fails to gain broader acceptance

because it is not aligned with mainstream business objectives

and related measures.

Part-time only resources for selecting and leading projects.

Limited numbers of projects focusing on manufacturing and related functions to establish

proof-of-concept.

Led by a single visionary member of management.

Localized Effort

“F” Curve

TransformationalImpetus

People

Projects

Leadership Alignmentand Ownership

Implementation

Attribute

1 2 3 4Year

Continuous Improvement

Business Benefits

$

Time

1 2 3 4

AC

FYear

Annual Net

$

Time

$ As many as 50% of deployments end up here!

Which curve is your company on?


In a “Chaotic” Organization

TIME SPENT ON BUSINESS EXCELLENCE IS CRITICAL

� 6 � Source: George Hanson - Empire State Advantage


In a “Conventional ” Organization




In a “World Class” Organization




PDCADemming, Juran,

Feigenbaun, Crosby

Interchangeable Parts

Eli Whitney

Time & MotionDivision of Labor

F. Taylor

Mass ProductionHenry Ford

Assembly Line

Employee Partnership

Drucker

Six SigmaMotorola

Toyota Production SystemT. Ohno

Just–In–TimeK. Toyoda

DOETaguchi et al

Early Quality Efforts

Lean Six SigmaLean Six Sigma

SystematicInnovation

Design For Six Sigma

A NATURAL PROGRESSION

� 9 � Time

SystematicInnovation

Bus

ines

s Im

pact

Design For Six Sigma

Appropriate Level of Tools and Methodology

Continually grow and evolve to

deliver g

reater

custo

mer and busin

ess value

Early Quality Efforts

QFD and KANO

Advanced DOE

Robust Design

Techniques

Tolerance Allocation

Combinatorial Testing

Methods

Monte Carlo Simulation

Ideal Final Result (IFR)

Psychological Methods

Emotional Methods

TILMAGBattelle Institute

TRIZAltshuller


Understanding the Relationship

STRENGTHENING BUSINESS EXCELLENCE

� 10 �

Customer Value


Human Capital

BUSINESS EXCELLENCE


Customer Value


� 11 �

Customer Value


Human Capital

BUSINESS EXCELLENCE

• Critical to Customer (VOC) • Quality / Accuracy• Timeliness• Cost

• Critical to Process (VOP)• Consistent and capable• Process/products monitored in real time• Change and improve when appropriate…don’t “Tinker”• Is the business improving fast enough?

Customer ValueVOC VOP


Critical to Maintaining and Growing RevenueCUSTOMER RETENTION GRID*

� 12 �

Dazzled

HighValue(Delighted)

Satisfied

SatisfiedNot Satisfied

NotSatisfied

Process for Delivering Product or Service(experience with processes)

Prod

uct o

r Ser

vice

(val

ue-a

dd)

Gone

SearchingGoing

Loyal

Advocate

Typically, 65% of a company’s business comes from existing customers.

It costs between 4 and 7 times more to acquire a new customer than to keep an existing one satisfied!

65% Quote: Return on Behavior Magazine4 to 7 times: Chartered Institute of Marketing

68% of “Satisfied Customers” would Switch!

* Retention Grid: Dr. Tom Connellan

"Get closer than ever to your customers. So close , that you tell them what they need well before they realize it themselves." - Steve Jobs, Apple


Human Capital


� 13 �

Customer Value


Human Capital

BUSINESS EXCELLENCE

• Build Relationships• Customers• Suppliers . . . seek “ Win – Win ”• Community• Employees

• Develop Human Capital• Train• Mentor• Reward, recognize, compensate

• Employees Provide• Value to customer• Work processes and continually improve

Human CapitalVOP VOC


Enterprise-wide Opportunities

HUMAN CAPITAL

� 14 �

• An enterprise-wide business strategy develops human capital across all functions which then creates real customer and business value

Sales, Marketing, and Advertising

Administration, Leadership, Legal, etc.

Information Technologies

Facilities Management

Customer Communications

Development and Production

Financial Management

Planning & Design

Operations

Human Resources Management

Company




� 15 �

Customer Value


Human Capital

BUSINESS EXCELLENCE

• Manage the business as a system using value streams• Be process focused …VOP VOC• Use data and facts to make decisions… assess, sustain, improve• Understand variation … the process feels it, the customer feels it• Benchmark externally … share and adopt best practices internally• Use tools and rigorous process-excellence approach

• Improve value streams . . . don’t sub-optimize• PF/CE/SOP (Process Flow/Cause & Effect/Standard Operating Procedures)• IPO (Input-Process-Output)• Monitor performance real-time … run charts, control charts

Knowledge-BasedManagement

Manage Customer

Service

Deliver Products and

Services

Market and Sell Products &

Services

Manage Information Technology

Manage Financial Resources

Acquire, Construct, and Manage Property

Manage Environmental Health and Safety (EHS)

Manage External Relationships

Develop and Manage Human Capital

Management and Enabling Processes

Develop & Manage

Products & Services

Develop Vision & Strategy

Manage Knowledge, Improvement, and Change

� 16 � * Adapted from APQC - American Productivity & Quality Center - www.APQC.org

KNOWLEDGE-BASED MANAGEMENTBegins with the Value Stream*

http://www.apqc.org/

PROCESS FLOW (PF) OR PROCESS MAP

MeasureDefine Analyze ControlImprove

KNOWLEDGE-BASED MANAGEMENT – PF/CE/SOP

� 17 � Copyright, 2014:Air Academy Associates

SOP1) Soak ingredient A

in xx.x degree water for xx minutes.

2) Boil the mix, add ingredient B & filter.

3) Add xx.x yeast to ferment in tank.

4) Bottle the mixture.

STANDARD OPERATING PROCEDURES (SOP)

CUSTOMER DRIVEN CAUSE AND EFFECT (CE)

!

Improvement Tools that Reduce Variation, Optimize Process and Decrease Cycle Time

Control . . . Sustain Gain

Control Chart … the “Voice of the Process”

KNOWLEDGE-BASED MANAGEMENT – CONTROL CHART

� 18 � Copyright, 2014:Air Academy Associates

TIME

UALITY

MEASURES

Control limitsestablished

UCL

LCL

Special cause

identifiedProcess has shifted

Process trend

Control Regioncaptures variationnatural to theoriginal process

Control limits extended

Centerline

+3σ

-3σ

)y(

Q


InputProcess Input Variable

Process Indicator

Independent Variable

OutputProcess Output Variable

Response

Process Performance Measure

Critical-to-Customer (CTC)

Critical-to-Quality (CTQ)

Dependent Variable

x2y

y = f(x)

“Transfer Function”

Process

BUSINESS PROCESSES

Process Understanding Begins with IPO and Relationship of x’s and y’s

� 19 �

x3

x1


� 20 �

Input OutputProcess

Sales

Process

Customer Demographics

Sales Force

Knowledge

Follow-Up Policy

Standard Sales Proc. (SOP)

Pricing Strategy

Budget

Suppliers (hardware, software, etc.)

Sales Volume

% Defects (failure to convert)

Lost Sales

Sales Oriented Customer Complaints

Cycle Time (lead to closure on agreement)

Sales ($) / Employee

Training

Experience

Effectiveness

Incentive

System

Competition

Product

Line

Customer Requirements

Marketing Strategy

Products

KNOWLEDGE-BASED MANAGEMENT – IPO


What are the Desired Outputs? What are the Critical Inputs?

PROCESS EXCELLENCE – AS A PROCESS!

� 21 �

Faster

Better

Lower Cost

ContinuousImprovement

Implementation

ImprovedIntellectual Capital

Top-Line Growth

ImprovedQuality ofWorking

Relationships

ContinuousImprovement

Realization

Bottom-Line Growth

Cultural Change

Improved Value forCustomers, Share-holders and Society

ProcessExcellence

Research was accomplished and the book written!


IPO (Input-Process-Output)

WHAT IS REQUIRED TO DELIVER GREAT RESULTS?

� 22 �

Faster

Better

Lower Cost

Executive Ownership and Leadership Alignment

ImprovedIntellectual CapitalProcess

ExcellenceImplementation

Top-Line Growth

Bottom-Line Growth

Cultural Change


Relationships

ProcessExcellenceRealization


Effective Support Infrastructure in-placeIntegration w/Existing Bus. Improvement Initiatives

Selecting the Right People and Projects

Integrated Training, Materials & Software

Financial & Implementation Accountability

Enterprise-Wide Knowledge Sharing

Customer and Supply Chain Involvement

Change Management and Leveraging Culture

Reward & Recognition


Understanding Relationships and Priorities Helps Identify Improvements

WHICH INPUTS HAVE THE BIGGEST IMPACT?

� 23 �

Outputs (y)

Inputs (x)Customer Value

Intellectual

CapitalTop-Line Growth

Bottom-Line

GrowthCulture Change

Executive Ownership X XSupport Infrastructure X Integration with exist Init. XRight People & Projects X X X Integrated Trg Mat & SW Financial Accountability X X X XReward & Recognition Knowledge Sharing X Customer & Supply Chain Int. X X Change Mgmt & Cultural Strength X X X X X

y = f(x)

Understanding Input-Output Relationships Helps You to get the Biggest Impact for your Improvement Investments!


Sample Survey Distributed to a Cross-Section of Employees LET’S LOOK AT COMPANY A’s DATA

� 24 �

Survey Structure• Output:

• Achievement• Importance

• Input:• Achievement

• General Questions

• Demographics

• Comments


Q-2 Output Importance Estimate your perception of level of importance that your

company places on the success of each outputs.

Y1 Y2 Y3 Y4 Y5 Y1 Y2 Y3 Y4 Y5

Survey Results (n=66)


� 25 �

Q-1 Output AchievementEstimate the level of achievement your Process Excellence

system is currently experiencing for each output.

Mean = 7.01 7.22 6.39 6.77 7.63 8.57 7.63 9.11 9.21 8.22


Survey Results


� 26 �

X1 X2 X3 X4 X5 X6 X7 X8 X9 X10

Mean = 8.01 6.35 6.62 7.25 6.55 7.43 6.66 5.90 6.42 7.50

Executive Ownership and

Leadership Alignment

Effective Support

Infrastruc-ture in-place

xxxIntegration w/Existing

Bus. Improve-

ment Initiatives

Selecting Right

People and

Projects

Integrated Training, Materials

and Software

Financial and

Implemen-tation

Account-ability

Reward & Recogni-

tion

Enterprise-Wide

Knowledge Sharing

Customer & Supply Chain

Involve-ment

Change Management

and Leveraging

Culture

Q-3 Input AchievementEstimate the level of achievement you feel the company is currently experiencing for

each of the following 10 inputs.


Survey Results – Importance / Achievement of Outputs*

IPO OUTPUTS

� 27 �

Higher Importance /Lower Achievement

Lower Importance /Higher Achievement

Assessed Achievement at Company A

Impo

rtance to

Com

pany A

Improved Intellectual Capital ( 7.63/ 7.22)

Top-LineGrowth (9.11/6.39)

Bottom-LineGrowth (9.21/6.77)

Cultural Change ( 8.22/ 7.63)

Improved Value for Customers, Share-holders and Society (8.57 /7.01)

* Output Importance and Achievement is based on sample survey


Understanding Relationships and Priorities Helps Identify Improvements

WHICH INPUTS HAVE THE BIGGEST IMPACT?

� 28 �

Outputs (y)

Inputs (x)Customer Value

Intellectual

CapitalTop-Line Growth

Bottom-Line

GrowthCulture Change

Executive Ownership X XSupport Infrastructure X Integration with exist Init. XRight People & Projects X X X Integrated Trg Mat & SW Financial Accountability X X X XReward & Recognition Knowledge Sharing X Customer & Supply Chain Int. X X Change Mgmt & Cultural Strength X X X X X

y = f(x)

X

XX

XX X

X

X

X

XX

Focusing on these Five Inputs can make a Significant Impact on Outputs

High Performance /High Impact

High Performance / Low Impact

Low Performance /Low Impact

Low Performance /High Impact

9. Customer & Supply Chain Involvement

2. Support Infrastructure

1. Exec. Ownership

4. Right Projects and People

3. Integration with Business Initiatives

5. IntegratedTraining/Software

6. Financial & Implementation Accountability

7. Reward & Recognition

8. Knowledge Sharing

10. Change Mgmt. & Culture

Impact on Re

sults

Current Company “A” Category Performance

Inputs x1 – x10 Based on Company “A” Assessment Dataand Air Academy Associates Research*

* Impact position based on Air Academy Associates Research. Current performance is based on sample survey

8.0 9.0

6.4 8.2

7.3 8.6

7.4 8.7

7.5 8.7

� 29 �


IPO (Input-Process-Output) Based On Gap Closure*WHAT IMPACT WOULD THE IMPROVEMENTS MAKE?

� 30 �

Faster

Better

Lower Cost

Executive Ownership and Leadership Alignment

ImprovedIntellectual CapitalProcess

ExcellenceImplementation Top-Line

Growth

Bottom-LineGrowth

Cultural Change


Relationships

ProcessExcellenceRealization


Effective Support Infrastructure in-placeIntegration w/Existing Bus. Improvement Initiatives

Selecting the Right People and Projects

Integrated Training, Materials & Software

Financial & Implementation Accountability

Enterprise-Wide Knowledge Sharing

Customer and Supply Chain Involvement

Change Management and Leveraging Culture

Reward & Recognition

9.0

8.6

8.7

8.2

8.7

12%

8%

13%

11%

12%

* Assumes Gap Closure of 50%. Predictions based on Air Academy Associates transfer function.


Enterprise Value Map can be Useful to Help Select Right Projects

WHAT DRIVES SHAREHOLDER VALUE?

� 31 �


Project Selection Key to Growing Revenue

TOP-LINE GROWTH DRIVES SHAREHOLDER VALUE

� 32 �

Where can you target projects to enhance Profitable Revenue Growth?


Projects Can Grow Top-Line, as well as Plug Holes

PROJECTS TO HELP SUSTAIN REVENUE

CancellationsLosses due to poor

quality

CustomersNot satisfied

Needed Customer Upgrades and Trade ins

Needed ProcessUpdates

Customer losses due to Economy

Product Sales Mix not competitive

Moves to Competition

Customer Annuity & Services Renewals

RevenueRevenue

Lean Six Sigma projects help stop the revenue leaks

� 33 �


How Many Projects are Aligned Here?

FOCUSING ON REVENUE GROWTH

� 34 �

Many Revenue Growth Opportunities

Opportunities



FOCUSING ON REVENUE GROWTH

� 35 �

Many Revenue Growth Opportunities


Projects Can Grow Top-Line, as well as Plug Holes

REVENUE PROJECTS

RevenueRevenue

New Products & Services

New Customers

DFSS and LSS Revenue Projects can Drive Incremental Benefits in New Revenue

Added

Business

With Current

Customers

LSS Projects Help Plug the Leaks to Sustain Current Revenues

� 36 �


Project Selection Key to Growing Profit

OPERATING MARGINS DRIVE SHAREHOLDER VALUE

� 37 �

Where can you target projects to Reduce Cost and Increase Margins?



DIVING DEEPER INTO COST REDUCTION & MARGINS

� 38 �

Opportunities



DIVING DEEPER INTO COST REDUCTION & MARGINS

� 39 �


Identify Opportunities to Strengthen Operational ExcellenceEXPECTATIONS ALSO DRIVE SHAREHOLDER VALUE

� 40 �

World-class “Operational Excellence” capability Increases shareholder confidence which strengthens expectations and Increases value


Focus on Operational Excellence Culture, Process Improvement, Innovation, Cross-Business Collaboration, Quality and Benchmarking

EXPECTATIONS DRIVE SHAREHOLDER VALUE

� 41 � Opportunities

Etc.


Potential Next Steps

ENHANCING BUSINESS EXCELLENCE

� 42 �

• Continue to strengthen capability of Business Excellence to improve results across the business

• Further investigate Business Excellence gaps and identify appropriate action plans to address highest impact opportunities

• Grow business-excellence capability by adopting higher-level tools and methodologies to enable the next level of maturity

• Systematically select processes to improve to grow revenue, improve margins, delight customers and enhance shareholder value

• Consider implementing your own structured Business Excellence survey to better understand gaps and opportunities• Air Academy Associates can support you, as we have supported various

other companies

• Survey at either 1 – 10 Input Level or at 50 Best-Practice Level

• Receive anonymous predictions and recommendations


Thank You – For More Information, Please Contact:

Air Academy Associates, LLC1650 Telstar Drive, Suite 110Colorado Springs, CO 80920 USA

Call: (800) 748-1277 or (719) 531-0777Facsimile: (719) 531-0778Email: [email protected]: www.airacad.com

� 43 �

http://www.airacad.com/

http://www.airacad.com/

http://www.facebook.com/#!/pages/Air-Academy-Associates/117849668317219

http://twitter.com/#!/AirAcademyAssoc

http://www.linkedin.com/company/2236351?trk=tyah

http://www.youtube.com/watch?v=mc53SAMUITY&feature=g-upl&context=G208c37fAUAAAAAAAAAA

copyright, 2014: air academy associates rick murrow ceo, air academy associates air academy...

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