If You Focus on Productivity,

You Will Get Quality for Free.

 

            Problems cannot be solved at the same level of awareness that created them.
                                                                                                                                                                    —    Albert Einstein

 Productivity is defined as:

Doing the right thing (effectiveness)

in the right way (efficiency)

all the time (occupancy).

The only way poor quality can happen is if you do the wrong thing, or the right thing in the wrong way, or if you don’t do the right thing in the right way all the time.

It just seems such a waste if you don’t do the right thing in the right way all the time.  Doesn’t it?  Why in the world would you even consider it?

If you do the right thing in the right way all the time, you get quality for free.

It is not the other way around.

A focus on quality is mainly a focus on removing variation in products and processes.

It does not necessarily question whether you are doing the right thing or not.

But that is the most important question anyone could ask.

We are producing endless amounts of the wrong things.  Who cares if you are 100% efficient in producing the wrong thing, especially if you do it all the time?

Productivity improvement starts by eliminating the burden of doing the wrong things so that you can turn your resources fully towards doing the right things.

How do we remove this burden on our resources?

1.      By getting rid of all that should be done, but should be done by someone other than you. 

2.      By getting rid of what nobody should do.

Once you have done that, you are left with what you should do.  Now you have freed 35% your resources for other and better use.

Take it a step further.  Better planning saves another 18% of your resources.

Then focus on efficiency and you free another 16%, if you’re average in this area.  Finally, do the right thing in the right way all the time—no down time, no waiting time.  That saves another 23%.

This is what “extreme lean” truly means and, if you do it right, you will do all that you did before but with only about 8% of your own resources.

Now you must get ready for the most incredible experience in your life:  An increase in productivity that could be at least 1,150%!  That would be 11.5 times more productive than you were before.  This increase assumes that you use all the 92% of the resources that you saved (35%+18%+16%+23%) to expand the production of the 8% that is perfect.  Eight percent goes into 92% 11.5 times.  If you know people who achieve 11.5 times what the average person achieves, now you know at least five reasons why.

What if we expand our focus beyond the core 8%?  What if we spend only half of the 92% of our resources that have been freed on improving the production of the right things so that they are done faster, better and more cheaply than before?  Could we not then spend the other half on inventing what no one on Earth is doing?  This is what Deming, Juran, Crosby and many others suggested during the Quality Revolution.  Since productivity declined over that period (from 1973 to 1995 productivity improvement fell to an average of 0.9% per year — less than it was before the Industrial Revolution), it seems that the focus on productivity was lost in the United States.

Doing something better, cheaper and faster is achieving cost-effectiveness; doing something no one else is doing is achieving temporary monopoly advantages.

Because no one else can compete with us we will have achieved temporary monopoly status.  If we earn a monopoly advantage, we are able to set our own price.  The higher we set that price, up to a certain point, the more money we’ll make.  But sooner or later, a free and competitive economy will come up with substitutes for what we do.  That’s why any earned monopoly advantage is likely to be temporary.  If we continue to focus on cost-effectiveness, however, we can make it difficult for a new competitor to gain entry in our market place.  The route to market entry is quicker through the invention of a better substitute for our product.  That is why the search for monopoly advantage is never-ending. 

This indicates to us that productivity improvement brings about two powerful strategies for survival:  Cost-effectiveness and earned monopoly advantage.  Companies that focus on productivity leap ahead of companies that focus on something else — like quality, market share, quarterly profits, or stock price.

Silicon Valley focuses on productivity.  Their goal is to increase the speed or storage capacity of chips by 100% every 18 months or so.  They have accomplished this for the last 30 years.  That’s a productivity improvement of 67% per year, compared to 2% per year for the American economy.  Note that the way this is done is by “unfreezing” their production process every 18 months. The reason for this is the simple fact that the production process that doubled the speed and capacity of chips by 100% previously cannot double it again for the next cycle—a new and more powerful production process has to be invented for this to happen.  Only then is it time to “freeze” this new process in the same way as quality experts did before.  But not until then!  Silicon Valley’s “unfreezing and freezing” approach has brought about a level of productivity almost 7 times greater than that which China has achieved annually since 1989 (China has the highest yearly productivity growth of any country in the world).

If the U.S. and China continue on their chosen productivity paths, China will pass the U.S. in GDP in this decade.

Can everyone become as productive as Silicon Valley?

We think so.

Investments in productivity improvements exceed 100:1 ROI.  And since productivity improvement methods improve all the time, we expect that this return will improve to 1000:1 in the next decade.

But doesn’t this mean we’ll all be working harder?

No.

This isn’t about working hard.

Two-thirds of people’s stress and dissatisfaction at work occur when they are unproductive.

To prevent burnout, employers usually hire consultants who teach their people stress management.

That makes employees happy with nonproductive behavior.

Why not get rid of all nonproductive behaviors instead?

Silicon Valley shares the fruits of their productivity every year:  They pay high wages, they lower their prices by 7.54% per year, and they have produced more billionaires than any other economic sector.

The work of Silicon Valley truly is not about money. It is about improving the lot of their customers.  It is about the excitement of lifting the productive contributions of everyone on Earth.  It is about knowledge, and learning, and growth, and it is about working for something larger than oneself.  It is about managing people in a totally different way. And all this makes use of the hard-earned insights about what truly motivates people at work.

In the US economy, productivity — the only way to create new wealth — languishes.  It constitutes a drag on the potential of our country.  Two of the largest and most important sectors of our economy, health and education, show negative productivity “improvement” year in and year out.  When productivity improvement methods are used in education, performance leaps ahead.  When they are applied in the health sector, productivity improvement becomes 1% per month — while the rest of the health sector shows a -2.6% “improvement” annually.

On a gloriously sunny day in California in 1974, I had the good fortune of spending some time with Peter F. Drucker.  I asked him what he thought would be the biggest challenge for the U.S. in the years ahead.

He did not hesitate for a second:  “It will be to increase the productivity of knowledge workers.”

Economists estimate that eighty percent of all capital is human capital.  Those employers who view workers only as cost items miss out on the contributions of human capital and work experience that go out the door with layoffs and firings. Also — and notably — they lose out on the potential cooperation of employees if those employees associate productivity improvement with loss of jobs.  Productive companies grow.  They don’t lay off workers.  Productive companies invest in their human capital the training and education which will be needed for the challenge represented by new growth.  This is what made it possible for Google to go from zero to more than $150 billion in market value in only six years.  Some eighty percent of the U.S. economy belongs to the knowledge sector.

It does not require rocket science to improve the performance of an economy.  It is a field that has its own laws, principles and, now, tradition.  We ignore productivity improvement at our peril.

A while ago, we looked at the differences between U.S. companies that focused on quality and those that focused on productivity.[i]  The difference was stunning.  Companies that focused on productivity produced higher profits, created more jobs and caused greater growth to occur than did those that practiced “lean six sigma” — the Toyota-inspired process that was embraced by Motorola, General Electric, General Motors, Chrysler and many other American companies.

The latter practice was a costly experiment and it provided a very expensive lesson. Productivity improvement requires variation—something must change for the better for productivity to increase over what it was before. When variation is removed, productivity improvement moves towards zero.

It is time to return to the eternal verities:

Let us focus on doing the right thing,

in the right way,

all the time.

And do it now.

It will require a new awareness of how wealth is created in the knowledge economy. We must let go of what no longer works.  We must focus on what is necessary to lift the productive contribution of every man, woman and child in America.

That, my friends, is the only way to raise the embarrassingly low growth rate that has become the biggest obstacle to the prosperity of this country.  It is the only way to address and resolve our deficits; our debt burden and the problems with Medicare, Medicaid and Social Security.  It is, for sure, the only way to put every American into a high-paying job.

Is it not time for banking and Big Oil, for the health and education sectors, and for all the other drag anchors in our economy to step up and do what they should have done in the first place?  If they had, even with a growth rate half that of China’s, our economy would have been three times the size it is today, and most of our current economic problems would have been solved, if not averted.

The acoustic valve that was needed when the oil leak in the Mexican Gulf erupted would have been in place and secured the operation. There might well have been no leakage.

Doing the right thing, in the right way, all the time is an idea whose time has finally come.

Ant it is not a moment too soon.