copyright, 2014: air academy associates rick murrow ceo, air academy associates air academy...
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Copyright, 2014:Air Academy Associates
Rick MurrowCEO, Air Academy Associates
Air Academy Associates
Enhancing Business Excellence
Copyright, 2014:Air Academy Associates
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
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Human Capital
Knowledge-Based Management
Enterprise Projects that Drive Shareholder Value
Copyright, 2014:Air Academy Associates
UCL
LCL
Avg
From Planning to Running the BusinessTHE BUSINESS STRATEGY
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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
Copyright, 2014:Air Academy Associates
Strategic• Grow Top-line • Grow Bottom-line • Increase Innovation …
products/services• Infrastructure
Linking Improvement Efforts and Projects To The Business Priorities
THE BUSINESS STRATEGY
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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
Copyright, 2014:Air Academy Associates
Achieving the “A” Curve Across Your BusinessesSUSTAINING THE IMPROVEMENT GROWTH
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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?
Copyright, 2014:Air Academy Associates
In a “Chaotic” Organization
TIME SPENT ON BUSINESS EXCELLENCE IS CRITICAL
� 6 � Source: George Hanson - Empire State Advantage
Copyright, 2014:Air Academy Associates
In a “Conventional ” Organization
TIME SPENT ON BUSINESS EXCELLENCE IS CRITICAL
� 7 � Source: George Hanson - Empire State Advantage
Copyright, 2014:Air Academy Associates
In a “World Class” Organization
TIME SPENT ON BUSINESS EXCELLENCE IS CRITICAL
� 8 � Source: George Hanson - Empire State Advantage
Copyright, 2014:Air Academy Associates
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
Copyright, 2014:Air Academy Associates
Understanding the Relationship
STRENGTHENING BUSINESS EXCELLENCE
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Customer Value
Knowledge-Based Management
Human Capital
BUSINESS EXCELLENCE
Copyright, 2014:Air Academy Associates
Customer Value
STRENGTHENING BUSINESS EXCELLENCE
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Customer Value
Knowledge-Based Management
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
Copyright, 2014:Air Academy Associates
Critical to Maintaining and Growing RevenueCUSTOMER RETENTION GRID*
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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
Copyright, 2014:Air Academy Associates
Human Capital
STRENGTHENING BUSINESS EXCELLENCE
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Customer Value
Knowledge-Based Management
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
Copyright, 2014:Air Academy Associates
Enterprise-wide Opportunities
HUMAN CAPITAL
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• 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
Copyright, 2014:Air Academy Associates
Knowledge-Based Management
STRENGTHENING BUSINESS EXCELLENCE
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Customer Value
Knowledge-Based Management
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*
PROCESS FLOW (PF) OR PROCESS MAP
MeasureDefine Analyze ControlImprove
KNOWLEDGE-BASED MANAGEMENT – PF/CE/SOP
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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
Copyright, 2014:Air Academy Associates
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
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x3
x1
Copyright, 2014:Air Academy Associates
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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
Copyright, 2014:Air Academy Associates
What are the Desired Outputs? What are the Critical Inputs?
PROCESS EXCELLENCE – AS A PROCESS!
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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!
Copyright, 2014:Air Academy Associates
IPO (Input-Process-Output)
WHAT IS REQUIRED TO DELIVER GREAT RESULTS?
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Faster
Better
Lower Cost
Executive Ownership and Leadership Alignment
ImprovedIntellectual CapitalProcess
ExcellenceImplementation
Top-Line Growth
Bottom-Line Growth
Cultural Change
ImprovedQuality ofWorking
Relationships
ProcessExcellenceRealization
Improved Value forCustomers, Share-holders and Society
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
Copyright, 2014:Air Academy Associates
Understanding Relationships and Priorities Helps Identify Improvements
WHICH INPUTS HAVE THE BIGGEST IMPACT?
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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!
Copyright, 2014:Air Academy Associates
Sample Survey Distributed to a Cross-Section of Employees LET’S LOOK AT COMPANY A’s DATA
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Survey Structure• Output:
• Achievement• Importance
• Input:• Achievement
• General Questions
• Demographics
• Comments
Copyright, 2014:Air Academy Associates
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)
STRENGTHENING BUSINESS EXCELLENCE
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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
Copyright, 2014:Air Academy Associates
Survey Results
STRENGTHENING BUSINESS EXCELLENCE
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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.
Copyright, 2014:Air Academy Associates
Survey Results – Importance / Achievement of Outputs*
IPO OUTPUTS
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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
Copyright, 2014:Air Academy Associates
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 �
Copyright, 2014:Air Academy Associates
IPO (Input-Process-Output) Based On Gap Closure*WHAT IMPACT WOULD THE IMPROVEMENTS MAKE?
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Faster
Better
Lower Cost
Executive Ownership and Leadership Alignment
ImprovedIntellectual CapitalProcess
ExcellenceImplementation Top-Line
Growth
Bottom-LineGrowth
Cultural Change
ImprovedQuality ofWorking
Relationships
ProcessExcellenceRealization
Improved Value forCustomers, Share-holders and Society
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.
Copyright, 2014:Air Academy Associates
Enterprise Value Map can be Useful to Help Select Right Projects
WHAT DRIVES SHAREHOLDER VALUE?
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Copyright, 2014:Air Academy Associates
Project Selection Key to Growing Revenue
TOP-LINE GROWTH DRIVES SHAREHOLDER VALUE
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Where can you target projects to enhance Profitable Revenue Growth?
Copyright, 2014:Air Academy Associates
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 �
Copyright, 2014:Air Academy Associates
How Many Projects are Aligned Here?
FOCUSING ON REVENUE GROWTH
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Many Revenue Growth Opportunities
Opportunities
Copyright, 2014:Air Academy Associates
How Many Projects are Aligned Here?
FOCUSING ON REVENUE GROWTH
� 35 �
Many Revenue Growth Opportunities
Copyright, 2014:Air Academy Associates
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 �
Copyright, 2014:Air Academy Associates
Project Selection Key to Growing Profit
OPERATING MARGINS DRIVE SHAREHOLDER VALUE
� 37 �
Where can you target projects to Reduce Cost and Increase Margins?
Copyright, 2014:Air Academy Associates
How Many Projects are Aligned Here?
DIVING DEEPER INTO COST REDUCTION & MARGINS
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Opportunities
Copyright, 2014:Air Academy Associates
How Many Projects are Aligned Here?
DIVING DEEPER INTO COST REDUCTION & MARGINS
� 39 �
Copyright, 2014:Air Academy Associates
Identify Opportunities to Strengthen Operational ExcellenceEXPECTATIONS ALSO DRIVE SHAREHOLDER VALUE
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World-class “Operational Excellence” capability Increases shareholder confidence which strengthens expectations and Increases value
Copyright, 2014:Air Academy Associates
Focus on Operational Excellence Culture, Process Improvement, Innovation, Cross-Business Collaboration, Quality and Benchmarking
EXPECTATIONS DRIVE SHAREHOLDER VALUE
� 41 � Opportunities
Etc.
Copyright, 2014:Air Academy Associates
Potential Next Steps
ENHANCING BUSINESS EXCELLENCE
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• 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
Copyright, 2014:Air Academy Associates
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
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