Redefining Quality –

accelerating change

reducing cost

protecting reputation

Professor John Oakland

Sellafield 2nd November 2011

Oakland in 30 seconds…

Updating & sharing knowledge through

research and education

Redefining quality

Oakland’s Business Model

The “Voice of Experience”

informs new research

The “Voice of Research” ensures we

employ cutting-edge practices

Oakland Consulting plc

European Centre for Business Excellence

Oakland Consulting

Carbon Ready Ltd

CONSULTANCY DIVISION RESEARCH & EDUCATION DIVISION

Some of our Private Sector Clients

Some of our Public Sector Clients

Why ‘Re-define Quality?’

The 21st Century world of business never rests – the speed of flow of information has created global markets in which we all trade. Consumer needs vary widely across time and space creating constant need for alertness and change. If we as managers are not keeping up with the pace, others will – it’s very competitive out there!

In the past Quality has become synonymous with control, compliance & cost. Excessive focus on internal capability generated overly bureaucratic approaches that attracted negative perception, particularly in boardrooms

The requirements are around building a ‘learning organisation’ that is quick to change, avoids excessive costs and reputational impacts of getting it wrong!

Quality must play a wider role in business to meet the challenges of 21st century

Key concept – the journey & maturity

1

2

3

4

5

Time

Products, services, processes and organisations progress on a change journey, from idea to implementation, where quality maturity

increases over timeQua

lity

& O

pera

tions

Mat

urity

Lev

el

Key concept – the journey & cost

Time

1

2

3

4

5

As the journey progresses costs accumulate. The rate

increases early in the journey and slows as maturity is

increased

Qua

lity

& O

pera

tions

Mat

urity

Lev

el

Qua

lity

Mat

urity

Lev

el

1

2

3

4

5

Time

Maturity level

Reputation

Net cost of qualityVariablecontrol

Gainingcontrol

Incontrol

Improving – “Industrialized”

Worldclass

Scaling the maturity curve

The journey and the key stages

1

2

3

4

5

Time

Journey Progress

Stop “holding back”

As good as competitors

Clearly the best in the industry

Redefine the industry

expectations

Correct Problems

Adopt best practice

Link strategy to operations

Bust assumptions

Addressing the sustainability agenda

Environmental Sustainability Journey

Financial & reputational cost of Carbon Emissions

Addressing increasing energy costs through, low-cost, quick wins

Understanding the need for change, developing strategy and realistic objectives

Successfully deploying new technologies, management systems and behaviours for operational excellence

Developing the right end-to-end value chain for the low-carbon economy

What are the risks relating to speed of change, cost and reputation?

Speed related risks

• Projects fail to meet their objectives through a loss of momentum, which leads to stalled progress

• Benefits realisation delayed while change is taking too long

• Going slow puts more pressure on critical resources because key personnel are tied up in projects

• Slipping back down the curve due to loss of capability

Accelerate Change

Cost related risks

• Costs get out of control due to poor quality through inadequate specification, excessive rework, or too much waste

• Hidden costs don’t get addressed because they don’t feature in financial reports, because they are hard to identify

• Carbon emissions cost money – under the Carbon Reduction Commitment many companies will start being penalised for carbon emissions

Reduce Cost

– failure to manage and avoid risks throughout the change journey

Protect Reputation

Reputation related risks

• Reputation takes years to recover from failure making it harder to do business

• Perception of poor CSR will damage your reputation – consumers expect modern companies to have strong demonstrable Corporate Social Responsibility

• Reputational damage is deeper and quicker now than ever before because information, opinion, and ultimately consumer choice is affected at scale due to communication technologies

Accelerating change

Time

Journey progress

By accelerating transformation, significant

costs can be reduced or avoided, and the benefits

of transformation will start to accrue more quickly

“We were impressed at how well the techniques applied during the workshops helped us to quickly reach conclusion ”

Highways Agency

How do you accelerate change?

Successful change is possible when all 7 key elements are addressed and readiness is achieved before you start changing processes and implementing other changes

PlanningPlanning

Leadership& DirectionLeadership& Direction

ProcessesProcesses

Organisation& ResourcesOrganisation& Resources

BehavioursBehaviours

Systems& Controls

Systems& Controls

Need forChange

Need forChange

Effort wasted on non-core

Driving blind

Paralysis and frustration

Resistance endangers success

No urgency and no action

Never leave the start

False starts and wrong directions

Missing focus Result

ImplementingChange

Readinessfor

ChangePlanningPlanning

Leadership& DirectionLeadership& Direction

ProcessesProcesses

Organisation& ResourcesOrganisation& Resources BehavioursBehaviours

Systems& Controls

Systems& Controls

Need forChange

Need forChange

External or internal

drivers of change

Oakland figure 8 model of effective change

Reducing costs

Time

The cost of delivery

The cost to deliver products and services is

reduced by addressing the causes of poor quality

(mainly waste & variation) and busting assumptions about how services are

delivered

“The application of the ‘DRIVER’ model to our claims process yielded an audited savings of €1.6m. This is evidence of the what the DRIVER model can deliver”

Eurocopter

How do you reduce cost?Reduce process time•Apply approaches such as “Lean” to remove the non-value adding waste from a process, pathway or service

Reduce variation•Use techniques such as “Six-Sigma” to reduce undesirable variation in patient facing and back-office processes

Bust assumptions•Assumption busting leads to paradigm shifts – this can drastically reduce costs and create step changes in quality

Waste Removal

Variation Reduction

TIME

COST£££

Improving customer satisfaction andincreasing value for money

QUALITY

VALUEoutputs

Lean Six sigma

Protecting reputation

Time

Desired outcome reputation lags by customer response

time

The development of reputation

Journey progress

“You have taken us light years ahead – great value” Shell

How do you protect reputation?Protecting reputation starts with understanding performance and risk

Use an assessment tool developed across the dimensions of quality management including:

Leadership

Policy

Organisation

Manufacturing

Supply

People management

Performance improvement

Bringing together your performance measurement across the supply chain will

highlight areas of priority, risk and specific improvement actions

Reducing Carbon

Whether its a recession, competition from the far-east or climate change, your organisation’s success depends on its fit with the external environment

As with other complex business problems, we use a structured approach based on many years research and practice coupled with the specific expertise required to address climate change.

1. Evaluate external events2. Develop a strategy for

success in a low-carbon economy

3. Establish 21st Century business processes which will enable performance

4. Support the operational delivery

Developing Strategy

Planning

Leadership &

DirectionNeed for Change

‡

‡

‡

‡

‡‡

‡

‡

Operational Delivery

Behaviours

Systems&

Controls

Organisation &

Resources

PROCESSES

External Events

Energy Costs

Customers and Consumers

Legislation

Reputation

Physical Environment

How do you address carbon reduction?

Delivering value in CarbonLinking CO2 with Service Delivery

Working with a large local authority we used Carbon Stream Mapping on each service line to identify CO2 hotspots.

This enabled the organisation to reduce emissions whilst maintaining service quality, improving delivery time and reducing cost.

Reducing Energy Intensity in Heavy Manufacturing

We developed and ran a change programme to mitigate energy price rises with minimal capital investment. Reduced site operating costs by £50K per annum and developed internal capability to sell goods in low-carbon markets.

1: Understanding the need for change, developing strategy and

realistic objectives 4: Bringing 1, 2 & 3 together to address specific non-discretionary needs – the CRC (Carbon Reduction Commitment)

2: Successfully deploying new technologies, management systems

and behaviours for operational excellence

3: Developing the right end-

to-end business processes for

the low-carbon economy

Carbon reduction strategy

Developing Strategy

Planning

Leadership &

Direction

Need for Change

‡

‡

‡

‡

‡

‡

‡

‡

Operational Delivery

Behaviours

Systems&

Controls

Organisation &

Resources

PROCESSES

Success depends on fit

with external environment

Carbon management

factors:

External Events

Energy Costs

Customers and

Consumers

Legislation

Reputation

Physical Environment

There are four key areas that our carbon services address

• Redefining Quality with understanding and applying what quality means in the 21st century

• How are you going to accelerate change, reduce costs and protect reputation?

• You need to:• Understand your customers• Set your strategic direction• Diagnose the problems in your business• Improve your efficiency and

effectiveness• Transform the way you do business• Help change happen in your organisation

so that it is sustained • Collaborate with your partners much

more effectively

Redefining Quality

UnderstandCustomers

Set Direction

DiagnoseProblems

ImprovePerformance

TransformBusiness

www.oaklandconsulting.com

“No great improvements in the lot of mankind are possible, until a great change takes place in the fundamental constituting of their modes of thought” – John Stuart Mill

Oakland Consulting plc33 Park Square WestLeeds LS1 2PFTel 0113 234 1944

Professor John Oakland; Executive Chairman, Oakland Consulting plc

Emeritus Professor, Leeds University Business School

Professor Oakland and his team have completed numerous advisory assignments and management development programmes in their field, the aim of which has been to bring the practical application of best practice within the reach of top management in all types of organisations. He is author of several best selling books, including: Total Organisational Excellence; Total Quality Management, Oakland on Quality Management, Statistical Process Control and Production and Operations Management. He has written hundreds of papers, articles and reports on various topics in these and related fields.

Oakland Consulting, in its original form, was created by Professor Oakland over twenty five years ago (1985) and now operates throughout the world, helping organisations in all areas of business improvement.

Professor Oakland is a Fellow of the Institute of Directors, Chartered Quality Institute and Royal Statistical Society. He is also a Member of the American Society for Quality.

John is Chairman of Oakland Consulting plc and Head of its Research and Education Division, the European Centre for Business Excellence. He is also Emeritus Professor of Business Excellence at Leeds University Business School. Over 30 years he has researched and consulted in all aspects of quality management, strategic process management and business improvement in literally thousands of organisations. He has directed several large business research projects in Europe which have brought him into contact with a diverse range of organisations.