“Doing the same thing over and over again and expecting different results” is Einstein’s definition of insanity. However, many U.S. and International Companies do just that! While working with business leaders around the world developing corporate strategies to improve their results, I was met with strong resistance and a bit of “insanity”. Finally, I realized that we must capture their desire for change by objectively analyzing their business results. Based on 31 years of experience working for a Fortune 100 company, I have discovered that there are great lessons to be learned from your business performance history, which are locked inside the vast array of business measures and data that you keep.
With the explosion of computer applications and systems, there is not a shortage of data. However, there is a great shortage of knowledge. If we cannot improve performance or solve problems with the data we have, the response is to “get more data”! This has been made worse by many organizations using the overly simplistic analysis technique of comparing a current result to the same result a year earlier, yielding an
“index versus year ago”. This has become the primary Wall Street assessment tool, and is a barrier to understanding the organization’s true progress and capability. It usually leads to “tampering” with the organization’s work, strategy, structure and measures, which is unproductive and lulls the business leaders into a false sense of security.
What if you could get more knowledge from the data that you have, or better yet, get more knowledge from one-half of the data you have. This is the new challenge of the 21st century.
We at Sustain the Gain SM use simple statistical tools to analyze business performance data, such as Revenue, Shipments, Costs, Share, Market Size, Advertising, Turnover, Surveys, Inventory, Productivity, and many more. After issuing the report along with the graphs, we can work with you to dig deeper into the causes of any statistically relevant changes in your business’s performance based on your Strategic Choices and Action Plans. These consultations are confidential and done at your site. Finally, we can arrange tailored training events for your organization to build the capability to perform these kinds of performance assessments in house.
We follow these 3 simple steps:
Construction – Simple formulae, calculations and construction can be found in most statistical handbooks for X, MR Charts. The standard deviation is determined from the Moving Ranges (absolute difference between consecutive results). These MR’s are graphed with their own average (MRbar) and upper limit. The Control Limits for the graph of actual data (X Chart) are then calculated plus / minus three standard deviations around the grand average (Xbar).
Interpretation – Three easy-to-remember control chart interpretation rules are: a result outside the limits, a “non-normal” pattern, or a run of 7 above/below the average. In addition, for the less patient business leaders, some “end of chart” interpretation rules are often used. The conclusions from these “end of chart” tests are less certain and serve only as early indications that the results could be changing.
Business Ledgers - This tool is the key link between historical performance, and successful future plans. By isolating periods of sustainable improved performance through the use of control charts, clear connections can be made to the business activities that created them. These are recorded as “Breakthrough Initiatives” on the ledger.
There will be some business actions that create improvement only for a single period, after which the results return to previous levels. These are defined as “Bump Initiatives”. Many corporate reward systems are built around having a good year, quarter, or month, but do not recognize that often, the future results simply return to the previous levels. Therefore, you should be careful with the idea of “net extra” business performance, and how strategies and activities are currently justified under these conditions.
Finally, most of the executed business strategies and plans do not have any measurable effect on the results. These are defined as “Sustenance Initiatives”. Many, but not all, of these sustenance activities can be successfully eliminated without a detrimental effect on future results. Higher profitability can also result from the cost efficiency gained from the knowledge of how to sustain your results. This will also free up resources to reapply to sustainable positive breakthroughs.
From the ledger, criteria are developed against which to judge all proposed business-building plans for inclusion in the forecast of future results as Breakthrough, Bump or Sustaining activities.
Many businesses have used these new, cutting edge techniques to change strategies and improve results. By applying simple data assessment techniques, you can unlock a treasure of understanding that will allow you, and your organization, to develop a new competitive advantage by the unique choices that you make.