The business case for adopting Predictive Improvement

01 October 2015 Consultancy.uk

We live in a world which is ever changing. Businesses are facing increasing challenges to meeting consumer demand. As well as having to respond to volatile commodity prices and currency fluctuations, increased information available to consumers is impacting traditional demand planning.  Businesses are having to respond to consumer choices quicker than ever before.

Factors like the ‘Delia Effect’ - named after legendary UK Chef Delia Smith - where food products sell out quicker than usual when featured on television programmes, now impact the whole supply chain, and manufacturers in particular. Forecasting and delivery channels need to be designed to respond accordingly.

For many companies, digital manufacturing, or Industry 4.0 and all of the new opportunities that come with Big Data analytics, cloud computing, artificial intelligence, the Internet of Things, robotics and so on are suddenly connecting business in new and transformative ways that will provide much more flexibility and agility.

Digital manufacturing

Moving Beyond Continuous Improvement
For years manufacturers have strived towards achieving operational excellence through continuous improvement, new ways of working, staff behaviour behaviours, and application of key learnings throughout the company’s operations. The aim is to become more efficient by reducing complexity, streamlining operations, managing performance and aligning the roles and responsibilities of staff accordingly.  This has been a key area for consulting businesses to work with clients on small interventions to large scale improvement.

We have seen that technology has been playing a key role in transformation over recent years and therefore, these developments are nothing new. In reality, however, most continuous improvement programmes are focused on specific plants, regions, business units or departments, and do not cover the entire value chain. The result is that while one silo may become very efficient, overall benefit to the business is eroded. Programmes often lack overarching KPIs which measure the ability to drive both efficiency and effectiveness. This leads to reduced clarity of roles and ownership, and ultimately impacts leadership. Efficiency improvement tools that employees have used to improve performance to-date are still useful, but are insufficient to make a difference across the chain. Employees need to interact with different departments within the business, as well as with partners and customers outside of their organisation, to operate the process to best performance. Innovation, for example, is no longer an internal process, and the ownership for ideas and their implementation frequently crosses organisational boundaries.

Continuous Improvement

This development has a major impact on business models, communication processes and ultimately performance management. Small, agile start-up businesses will challenge these models as a matter of course. Large businesses set up to drive efficiency may find themselves in a disadvantageous position unless they are able to adapt. All of this also has an impact on what continuous improvement means. It needs to be more predictive about the market and trends. So the consultants need to be able to predict the connections and apply the knowledge to support the client.

The need for Predictive Improvement
At Hitachi Consulting we believe the way forward is for companies to begin the journey from a culture of continuous improvement to a one of Predictive Improvement. It is a case of looking to move beyond continuous improvement methodology. This will take time, but is the only way companies will hit fast moving targets and be able to adapt to every changing consumer demands.

To reap the true benefits of digital you have to develop a dynamic operational strategy across the whole value chain that can deal with both everyday variability and future disruption. Predictive Improvement goes beyond classic continuous improvement and is about anticipating tomorrow; developing new capabilities in leadership, management and processes to be able to respond quickly and stay ahead of the curve and, building a culture of predictive improvement, which is about using innovation to do things differently and making significant changes with high impact. The difference between providing advice, implementation and technology consulting will become less clear. The ability to connect different disciplines, e.g. beyond IT into deep technical solutions expertise, will increase in importance.

Changing Behaviours
There is much more to driving improvement than just enabling technologies. Even the most advanced and innovative technologies cannot deliver results on their own. The need for increased rigour to improve capabilities, leadership and management, processes, communication and performance management only becomes greater along with technology.

Digital

Within the boundaries of an organisation, the promise of a career up the ladder has, in the past, gained loyalty from employees. This is no longer the case and each individual will increasingly own their skills and capabilities, USP and the ability to match these to a business’s needs. This shift in power impacts the ability of a business to secure and retain skills and, importantly, impacts variable and fixed cost structures and the way the business is able to price competitively.

From the employee perspective, the perception of a “factory” worker on a repetitive production line needs to change. In the same way as a car mechanic now uses a laptop rather than a spanner, the average level of education and skill across industry needs to increase. Digital replaces manual work but also increases the responsibility on the remaining workforce.

Management needs to ensure that decisions are made at the right time, using the right information. Digital will mean ensuring that anyone involved in operating a process must be able to interpret information at the right time and act upon it, regardless of where they are organisationally or geographically.

Already, today’s leaders are expected to be collaborative, engage with their people and not dictate. The leadership style in a business model which collaborates more and more beyond traditional boundaries requires engagement with people who have a lesser feeling of dependency on the organisation rather than an implicit dependence on authority or position power.

Cathy Johnson - Hitachi Consulting

The Challenge
The implications for consulting are being ahead of this development and mastering the connection between disciplines at the right time and place. Partnerships with product providers will be critical, either from within the client organisation or with consulting partners.

The challenge to businesses looking to adopt Predictive Improvement processes will be aligning the whole value chain to respond to what the information is saying and will change the way people see ownership of information. This will require different skill sets in leaders and employees, doers and thinkers who can act upon strategy immediately and cope with change and uncertainty. The measure of success which has driven continuous improvement so far will be complemented or superseded by customer-driven measures - even consumer driven measures - and the feedback process will be more immediate through social media.

An article from Cathy Johnson, Vice President EMEA Consumer at Hitachi Consulting.

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