by Keith Cowan, President, Yorktown Technologies Inc.

The System of "Profound Knowledge" was espoused by Dr. Deming in his statistical process control methodologies. Basically, the premise is that management must really understand their business processes at the grass roots level in order to successfully manage the implementation of major improvements to their businesses.

Many techniques are used to discover the underlying contributors to business success. It is only when the fundamental causes and effects are known that effective processes can be designed to support the desired outcomes. Current thinking centres on "Systems Thinking" as documented by Peter Senge. In this approach, greater insights are gained by looking at the whole system in which events occur to truly understand the various impacts rather than taking a narrow cause and effect viewpoint. While this may seem obvious, let's consider some examples to stimulate and anchor this root cause thinking.

IBM's Personal Computer Success (and Failure)

When IBM introduced the PC1 in 1981, it became an immediate success. IBM had not anticipated such success. They had set up an Independent Business Unit to address HOME computing. They did not expect these little machines to have such a profound impact on the business world.

Their success was attributed to two major factors: the IBM name "legitimised" the microcomputer which had been around for over five years, and the open nature of the system allowed smaller solution providers to capitalise on the technology. Certainly these were significant factors. But one key factor was overlooked. The PC1 with DOS appealed to the microcomputer store sales staff. These people liked the machine, and the IBM name made it easy to sell. Unfortunately, IBM never learned about this profound factor during their PC1 success.

When IBM again tried to address the home market, they overlooked this key factor. The now famous "chiclet" keyboard of the PCjr was its Achilles' Heel. Although the machine was great for many home games, it made routine typing a chore for such common household uses as text preparation. Many people believed that IBM was cautious not to eat into their successful PC sales and so crippled the machine's capacity to be used in any office.

The PCjr death knell was dealt by those same microcomputer sales staff who had made the PC1 a success. They ridiculed the machine as a toy and discouraged many solution providers from investing in exploiting its other features. The result was significant adverse publicity and dismal sales. The profound knowledge or root cause that was missing was the correct answer to the question: "Who really influences the customer to buy and how does a computer maker appeal to those influencers?"

The Bankers' Selling Initiatives

A specific example in the banking arena will illustrate the need for determining root causes. (We are all customers of some financial institution and can relate to some of their recent approaches personally.) During the Eighties, many major financial institutions decided to move towards an increased sales culture in their branches. They were able to acquire much
help from the industry by way of incentive plans, branch layouts, personal computers, sales training, etc. While these institutions have made great strides in moving towards the appearance of a sales culture, those same initiatives have made their customers more conscious of the commodity (product) nature of the major banks' services. This phenomenon has increased both customer sales resistance and the bank customers' propensity to "shop around" and become expert buyers of financial services.

The results of such efforts did improve the sales results somewhat, but often fell short of the targets needed to justify the investments. What was overlooked in these instances was a proper assessment of their starting position. Each bank has developed a unique culture that stems from their history, their image, their hiring practices, pay rates, training approaches,
as well as their unique executive direction, style or vision. For example, the branch staff often resented these sales initiatives, feeling betrayed at being asked to SELL when they had joined the bank to provide SERVICE to the banks' customers. The banks' customers were also unique in what they desired from their banks, what they thought their banks were good at, etc. For example, many customers only looked to their banks to provide superior service in keeping their money secure while making it readily-accessible and offering reasonable rates.

By adopting standard approaches to sales training and implementation, the banks have not fully capitalised on their unique starting positions. What is needed is a better way to understand and qualify where they are at the beginning of their change process. For example,
a major eastern US bank ran a pilot to attempt to give a subset of the customers what they really wanted, superior banking service. The branch employees were trained to approach their customer to ask for all their financial services business and,in return they promised to provide superior advice and consistent service levels and flexibility. They proved that many of their customers would forfeit shopping around in exchange for convenience and professional service and would give the bank ALL their banking business. The approach has also been proven successful in several geographies in widely-different financial services institutions.

They also found significant new business through referrals from their newly delighted customers. Both customer satisfaction and employee satisfaction measurements were beyond the statistical bounds of the rest of their organization. The banks' employees loved being service-oriented again and that high satisfaction showed through to their clients. Automation tools to manage workflow and expert systems to help with advice and counsel improved the likelihood that the bank staff would deliver on their service promise. Client-focused tools and access to a common set of notes about the client ensured that any employee dealing with the client would do their part in delivering on that promise.

Government Initiatives

When we look at some long term macro trends, there appears to be an ever increasing gap between cause and effect in government actions. There is growing concern that the political process that is the source of democracy cannot deal with any issues at the systems thinking level.

As an example, an illegal immigrant killed one of our citizens, and the government responded by passing legislation to tighten up the rules for entry into the country. The government
spokesperson was lauded by the press for taking quick action. Many citizens were interviewed and they all appeared in agreement that this fast action was needed. Yet the existing legislation was adequate because this person was in the country illegally!. What was needed was better enforcement of the current legislation that would have prevented their entry, not new legislation! None of the commentators even mentioned this.

Time after time, government initiatives are aimed at fixing the symptoms because the legislators have neither the time, money or training that would enable them to uncover and deal with the root causes.

Statistical Process Control (SPC)

All the focus on the Japanese school of management patterned after Deming's teachings makes many organisations believe that the implementation of SPC will be their saviour. They also tend to want to embrace other "silver bullet solutions" such as MRP, ABC and other techniques that some set of companies has benefitted from. The reality is that such approaches will only deliver breakthrough results when the project focus is aligned with the major objectives of the organization. For example, is the project aimed at reducing product costs or improving customer service? The bonuses generated by automation
savings need to be redirected to the areas that are appropriate to the executives' vision and priorities at the time. many hidden agendas can hinder the achievement of significant business results.

Only be clearly keeping in mind the specific objective of the SPC project will the desired results be achieved. We are aware of a company that implemented a statistical process control system without this focus on the priorities of their organization. They were not pleased with the results they achieved with this significant new tool.

They had to seek out another vendor of the same software system and pay them extra in consulting fees to get help in directing the tool to the appropriate root causes in their organization. Without the appropriately skilled external help in determining the real root causes that needed their attention, they were unable to get proper returns on their automation investment. Yet with the right direction, they got the desired results using the same tools.

Deming's System of Profound Knowledge (SPK) is an interdependent "supradisciplinary approach" to inquiry that integrates Systems Thinking (Expansionist, Shared Vision), Reduction of Variation (Quest for Certainty), Psychology and Theory of Knowledge (Mental Models, Team Learning, Personal Mastery). Systems Thinking and The Fifth Discipline have a built in "outside view" that might keep it from becoming a dogmatic, cult-like group like some of the other approaches.

Company Strategy Development

I had the opportunity to consult to the Director of Strategy Development for a major computer manufacturer on how his function could get better executive buy-in to the process of strategy development and gain more executive commitment to the resulting strategies. I asked how he was approaching the process. He replied that his people would assemble some of the best minds from various areas of the business and they would form a task force to devise the desired directions that the company should be taking. These would be boiled down, vetted, and packaged for the executives to review and approve.

I suggested that this was a process disconnected from the executives and that he had to get their interest in his process before taking them down the road. I suggested he get those same best minds to fully-articulate what the company's current (undocumented) strategy was by inferring it from the various programs and executive actions currently underway. I said that when he held up the mirror showing what they were really doing, their defacto strategy, the resulting analysis and questioning would generate the buy-in he was seeking.

The Director followed this advice, got the buy-in after many sessions in which the executives probed all aspects of his current assessment, and then used that as the basis for moving forward with his recommended changes. The resulting strategy was grounded in the executives' beliefs, experience and knowledge of their business. It was also consistent with where they had been and where they wanted to go. It had the benefit of their perspectives on the business. It was their strategy! And it was substantially better than the original strategy.
Once they were connected with the process, they easily took ownership of it.

Summary

This focus on discovering and testing root causes and their effects is a key to the successful approach of Yorktown Technologies to business improvement. We will broaden our view of your business processes to include customers and other outside influences before proceeding with improvement techniques. Only when the baseline is firmly understood, can our customer executives plot a course that will get them to their desired end points in record time. Our complementary focus on the employees and the organizational culture is also crucial to sustained success of the resulting change initiative.

Copyright the authors and/or Keith Cowan