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Don't be fooled by...
SINGLE DATA POINT ANALYSIS
January, 2013

As continuous improvement professionals, we should always be advocates for making better decisions. And better decisions come with experience, and more data. As humans, we gain more experience every day, this is a mathematical fact. But that doesn't stop us from making 'knee-jerk' decisions, based on limited data that just happens to be right in front of us.

We all do it. It's called 'reacting'. We try to convince ourselves (and others) that we know what we're doing. Our experience tells us the right way to go, despite having little or zero data to support our conclusion. And quite often, we get away with it. In fact, there is an argument that successful leaders DON'T waste too much time on the data; they're

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Bill Kluck
The Northwest Lean Networks
successful BECAUSE they 'go with their gut', and have the track record to prove it. But for every success story of this nature, there are dozens of cases of failure which don't get publicized, because we tend to tout our successes, and vigorously hide our failures.

HERE ARE SOME EXAMPLES WE CAN ALL RELATE TO
We all know that to make money in the stock market, we have to buy low, and sell high (while that's only part of the story, let's go with that for now!). Yet how many of us rush to sell on a really bad day, because we think that doom and gloom is upon us? Warren Buffet (highly respected for his stock picking abilities, among others) is fond of saying, "Be fearful when others are greedy. Be greedy when others are fearful.". This philosophy tells him to go in exactly the opposite direction, so while you're panicing and selling, he's cherry picking those companies with great track records, at bargain basement prices.

Cell phones are ubiquitous nowadays, and so is the breakage/loss of them. When you go to buy a replacement phone, you know you are going to be barraged with up-selling, and you steel yourself against the upcoming onslaught. But it's hard to fend off the insurance package, at its attractive price, especially since you just broke or lost your phone! But few of us realize the terms of these agreements, or how cost inefficient they are for consumers (experts advise consumers to NEVER purchase these agreements, for any electronic device/appliance, as they add as much as 500% profit to the retailer!).

Crisis mode at work! We just (fill in your most recent scenario here:_____). The boss is angry, and something needs to be done NOW! When something needs to be done NOW, something will be done. But does it address the root cause of the problem, or does it merely address the most current symptom, the one causing all the current ruckus? We never seem to have time to do it right, but we always have time to do it again.

WHY DO WE DO IT?
Rather than just jump to the solution, it is often useful to understand the 'why' of any problem. Why do many of us act on a single data point, instead of being thoughtful about the decision making process? I submit there are several reasons:

  • The cost of data is high - Good data takes time to gather, develop, and analyze. Too often we don't have time for a thoughtful data process, so we have to go with what we have, even if the data we have isn't the data we need to actually solve the problem.
  • The level of risk is low - If we don't make a decision, we can lose in many ways, not the least of which is the risk of being thought of as indecisive. As it happens, this risk can trump the actual monetary risk to a poor decision.
  • The reward for being right (or first) is high - Being first to market with any (good) product comes with it much potential. How many times has a decision been made, and you think to yourself, "Hey, I thought of that!". You've just been bested in the marketplace, and there are few rewards for second place.
  • If we're wrong, we can always fix it later - Statistically, you're going to have a batting average. If you have a great batting average, you're going to get more 'at-bats'. Also, you're going to get more 'atta-boys' (smirk).

There are other reasons, of course. But 'being right' isn't the objective in business. And it shouldn't be the objective in your career, either. That is just short-term thinking. To be successful in business, we have to be successful in the long-term. This means putting system and processes in place, which improve our abilities to provide products and services to our customers. In our careers, it means establishing and improving a pattern of success, along a wide spectrum of activities. When in 'reactionary-mode', it isn't natural to go to the measurement system, evaluate its effectiveness, develop a better measurement system, gather the data, analyze the data, develop solution sets, implement a pilot, validate the results, implement the full-scale solution. There just isn't enough time! So we often just shoot from the hip, and sometimes, that works out just fine. And in many cases, the risk of being wrong IS less than the cost of the structured solution pathway. But sometimes, it's NOT. And that's when you have to at least know that there is a structured way to go. And you have to practice that method, so reactionary problem solving doesn't become the only arrow in your quiver.

So here is one way to look at a more structured problem solving model:

  1. Go to the measurement system
  2. Evaluate its effectiveness
  3. Develop a better measurement system (if necessary)
  4. Gather the data
  5. Analyze the data
  6. Develop solution sets
  7. Implement a pilot
  8. Validate the results
  9. Implement the full-scale solution

9 steps? Wow! That seems like a lot of work! Well, this isn't the only problem solving model. Pick one. Pick two. Use them as often as you can. Understand where they work, and where they don't work. Over time, you'll get better at crafting your own, thoughtful problem solving processes, tailored to specific types of challenges.

And remember, just because you aren't using the proverbial 'single-point' of data, it doesn't mean you're not in reactionary-mode. An incorrect or invalid dataset is just as bad, or worse, than using a single point of data. That's why the evaluation of the data measurement system is a critical part of any decision making process. Bad decisions are the product of a process, and the inputs to that process are critical. I'm reminded of the lyrics of one William Martin "Billy" Joel, who said, "You may be wrong for all I know, But you may be right.". Our job is to be right, more often than not. Excercise your problem solving and decision making skills, and you'll be right, more often, and have a greater impact over time!

Keywords: Cost, Data, Data analysis, Decisions, Measurement systems, Reactionary-mode, Results, Reward, Risk, Validate results


ABOUT THE AUTHOR

no_photo.gifBill Kluck is the Founder and Director of Operations for The Northwest Lean Networks, a professional society which connects the community of lean professionals worldwide. Bill has over 20 years of experience implementing lean in a wide variety of industries, both public and private. He has trained thousands of team members in various lean strategies and techniques, and has overseen financial impact in the hundreds of millions of dollars.

Bill is currently the Director of Operational Excellence with The Coca-Cola Company, in Atlanta, Georgia. His main focus is building transformational change and evolving business culture.

Bill earned his Bachelor of Science in Industrial Engineering from the University of Washington, an MBA from Seattle University, and holds several continuous improvement certifications (including a Six Sigma Master Black Belt, and a Masterís Certification in Lean Methods).

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