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Using creativity to boost profits in recessionary times.

Imagine a consumer goods business with 5 to 7 percent annual market growth, a high-quality product with near mystique status, growing market share and world class profit margins -- what could go wrong with a business with attributes such as these? Unfortunately, a multi-year recession could come along and flatten that market growth; a deep-pocketed competitor could decide to invest heavily in a successful new product launch; a difficult crop year could sharply raise the cost of a key raw material; and profit growth, so important to growing shareholder value, could begin to look anything but world class.

One such manufacturing company, faced with exactly this dilemma, responded not with the typical external consultant approach to reduce costs with employee cutbacks, but instead turned to its employees for help in reducing internal waste. The process employed is relatively simple:

* Find the waste;

* Eliminate or reduce it; and

* Keep it out.

The same approach can be applied to any business process. Analytical tools are used to gather data about the waste, then a creative process called Simplex is used by one or more inter-functional teams to add to the data and discover new insights into the nature of the waste. As the creative process unfolds, new challenges are discovered, opening up opportunities to use additional analytical tools to provide solutions. Figure 1 outlines this approach.

The first step, finding the waste, employs an analytical tool used in the chemical engineering field -- a material balance. Quite simply, a material balance seeks to equate ingredient inputs with finished product outputs. Any difference is waste.

The process starts with detailed preparation. Prior to the manufacturing run to be measured, the ability to measure inputs is confirmed. For example, how are major ingredients accounted for? Minor ingredients? When have scales been calibrated? Where liquid ingredients may vary in temperature, are calibration tables for tanks available to ensure that outage data used to calculate usage are accurate? What laboratory support is needed? For example, when processes involve the vaporization of moisture content, a laboratory analysis determines the solid content of the ingredient that winds up in the finished product.

Similarly, the ability to measure outputs is confirmed. How is the precise quantity accounted for? Normally, bulk products will be weighed out in tank cars or trucks, whereas consumer packaged products are normally accounted for by cases at a target count and fill weight.

In the final phase of preparation, potential waste points are identified by observing the actual manufacturing process. Where can waste be seen on equipment or on the floor? Where can it seep down a drain? Where is it collected in bins, boxes, containers, drums, etc? Where can it disappear up a stack? Plans must be made to identify each waste point to capture and weigh its outputs. In this particular consumer goods process, 27 waste points were identified. Once identified, employees must be trained to track down, weigh and record every ounce of waste during the run. It is also necessary to design forms to facilitate the collection of data at each of these waste points.

Communication with all employees is another important preparation step. Many employees are trained to quickly cleanup the work area -- inadvertently disposing of the waste that should be recorded. By clearly communicating waste reduction goals, employee cooperation and participation in the process can be maximized.

The material balance

A material balance can be run over as short a time as an eight-hour shift or as long as a week. The key element is assuring clearly defined breaks in the starting and stopping points. The easiest way to achieve this is to begin the balance with as many empty waste points as possible and end it the same way, i.e., empty hoppers, tanks, mix chambers, belts, packaging machines, waste collecting receptacles, etc. Where this is not possible, try to finish a run with the same volume remaining in the waste point as when the run began.

It is helpful to have one person per shift designated as the leader. This individual coordinates the process, answers any questions and verifies the integrity of the process. Extra employees, both managerial and hourly, are necessary since extra work must be done to measure the waste. Extra laboratory staff are also usually required since additional analyses must be run, and speed as well as accuracy are paramount.

While not essential, it is helpful to construct a spreadsheet for the run (Lotus 1-2-3 is a good option). This reduces manual calculations, accelerates preparation of results and provides an overall view of the process, helping to assure that nothing is overlooked. It has been found useful to record ingredient costs and annual volumes so that the value of waste for the run alone, as well as on an annual basis, can be calculated. A waste point of $10 per hour is worth $60,000 per year for a three-shift operation!

Now that we have collected the analytical data, what do we do with them? The ingenuity of employees is a vast untapped resource available to consider this question. While every person has a unique way of thinking creatively, we have found a simple but powerful methodology to harness these diverse elements into the previously mentioned creative process called Simplex.

Implementing Simplex permits the analytical data from the internal balance to begin the problem solving process to eliminate or reduce the waste.

Simplex

Simplex is a process of Creative Problem Solving (CPS) that teaches and employs the following three principles:

* Problem-finding skills, in which appropriate problems are identified and framed for solution, is an underdeveloped yet critical area of the entire problem-solving process.

* Divergent thinking, in which judgment, criticism and evaluation are suspended, is used in each of the eight steps of the process to expand alternatives. Convergent thinking, in which the best alternatives are selected, is also used in each step but separately and following the divergent thinking process.

* Each individual is unique with special skills and knowledge. The Simplex process encourages diversity and participation, yet is structured and orderly in producing a plan of action. In practical terms, after the material balance has been completed and the waste points evaluated and arranged in descending order of magnitude (pareto), a group of employees can normally be trained in Simplex and develop an action plan for waste elimination in just one day.

An overview of the CPS Process is shown in Figure 2. The focus is on a three stage process of problem finding, problem solving and solution implementation activity based on two central concepts. First, there are distinctly different stages; problem finding is separate from problem solving and from solution implementation.

The second important feature of the process is that within each of the three critical stages, there is a process called "ideation-evaluation". Ideation is defined as idea generation without evaluation or judgment and represents the diverging aspect of the two-step process. Evaluation, however, is defined as the application of judgment to the generated ideas to select the best one(s) and is the converging aspect. Both aspects are essential to creativity.

Evaluation is an important aspect of the creative process since there are additional stages beyond simply finding solutions to already identified problems. Einstein said that the mere formulation of a problem is often far more essential than its solution, which is usually merely a matter of mathematical or experimental skill. Problem finding involves both discovering problems to solve and formulating them for subsequent solution. Solution implementation is an equally important stage of the creative process. It is not sufficient to merely solve a problem creatively. Creativity must also be initially applied to the discovery and formulation of the problem and ultimately to the implementation of a solution.

In day-to-day practice, problem-finding activity means continually looking for opportunities for improvement. This may involve finding new product or service opportunities by anticipating new customer needs. It may include discovering important opportunities for improving existing products, services, procedures and processes or for improving the satisfaction and well-being of the organizational members. On the other hand, problem-solving activity means finding new and useful solutions to the identified problems. Solution implementing activity, however, means making such new solutions work successfully for the benefit of the organization and its members. Of course, such implementation leads to further problem-finding activity as the environment reacts to the impact of such implementation. Thus, creativity in organizations can be conceptualized as continuous, circular, identification and resolution of new and old problems.

In actual practice, it is useful to break the circular process into smaller steps. One important aspect of this model is the skillful separation and also synchronization of divergent, ideational thinking and convergent, evaluational thinking in each of eight steps. The first three of these steps are called problem finding/fuzzy situation, fact finding, and problem defining. In sequence, they constitute "Problem Finding" (Stage I). The two subsequent steps, solution finding and solution evaluation, constitute "Problem Solving" ("Stage II). The final steps, action planning, acceptance gaining and action taking, constitute "Solution Implementation" (Stage II).

Application of the two-step thinking skill (ideation-evaluation) is required not only within each of the eight steps in Figure 2, but also between steps. For example, it is critical for problem defining to be deferred until after fact finding has occurred, and for idea finding to be deferred until after problem defining has been achieved. It is also critical that creative thought be applied skillfully in the "Solution Implementation" stage just as in the other two stages.

Applying the Simplex CPS Process for reducing and eliminating waste using a material balance is outlined below.

The information gathered from the material balance is used to start the creative process. The waste points are subjected to a pareto analysis and each of the vital waste points selected represents a fuzzy situation and is put through the circular process.

A large team of employees can be broken down into smaller teams, each working on individual situations simultaneously. The assignment of one key waste point as the fuzzy situation for each team completes step 1 of the Simplex Process. The next step, fact finding, reveals that while there are important quantitative facts determined analytically by the material balance work for each key waste point, there are other facts yet to be uncovered. The team's understanding of the assigned waste point is expanded by invoking the ideation-evaluation process for creative fact finding. Initially, the team diverges, attempting to list as many facts that may be potentially relevant to the situation as quickly as possible. Judgment and logical thinking are suspended and prompter questions to stimulate fact generation are used. Prompter questions include:

* What do we know or think we know about this waste point?

* What don't we know but wish we knew about this waste point?

* What makes this waste point a problem for us? Why can't we resolve it? What are the obstacles?

* What have we already thought of or tried?

* If this situation was resolved, what would we have that we don't have now?

* What assumptions or biases might be brought to the situation?

Certain critical fact-finding behaviors and attitudes are taught to the participants to improve their skills. These include the value of respecting the viewpoints of others; avoiding hidden assumptions and agendas; viewing challenges optimistically; expressing themselves openly; and sharing information freely.

In the creative process, we recognize that there are likely important facts hidden behind the currently visible facts. Finding these hidden facts is difficult, because we are accustomed to believing that if the few available facts or assumed facts will give us an acceptable answer to a question, why look for alternatives?

In reality, however, the number of facts pertaining to our challenge is virtually limitless. By expanding our efforts through divergent thinking, we are likely to identify new facts that were formerly invisible. Research has shown that some of our best thoughts emerge later in a given time frame, when judgment is suspended and the divergent thinking process is employed. When our problem solving is limited purely to analytical thinking and techniques, we assume that there is one correct answer and only one set of facts to get that answer. For example, we know that if we identify all the sources of waste, and quantify the amount of waste in each source, they will equal 100 percent of all the raw materials inputted. However, analytical techniques identify only the more visible sources of waste, and the more easily perceived facts. We must also examine the hidden sources of waste, as shown in the following.

In this particular company, a manufacturer of potato chips, the fact that all the workers who trim and pare potatoes prior to slicing are working diligently and quickly is a visible fact. However, the invisible fact that the station is overstaffed to help keep people employed may lead to good potatoes being trimmed and pared over-zealously by employees simply attempting to stay busy. Other people then haul this newly created waste just to keep busy also. The same is true for the "pickout" station, which is positioned after the potatoes have been sliced and baked. Employees may discard potato chips with no discolorations or irregularities just to appear busy.

One reason such facts are hard to identify is that people fear that they may lead to layoffs. Another reason is the assumption that if something is not broken, why fix it? Consequently, important facts and sources of waste are kept invisible by such negative fears and assumptions. Analytical tools alone cannot identify such invisible facts, but the creative process can. The creative process, however, depends on trust. People are willing to divergently search for and express invisible facts if they are encouraged to participate in a process of improving profitability that will continue indefinitely. Once this kind of invisible fact has been explored, it can lead to productive new challenges in step 3, problem definition. Such a challenge might be to explore ways to re-employ the excess employees to implement methods of waste prevention in other parts of the plant to increase profitability. Instead of laying off experienced, committed workers, the plant can immediately use their talents to eliminate waste and improve profits.

Identifying new facts also offers the chance to state new challenges requiring the expanded use of analytical tools. For example, how to optimize the amount of trimming and paring needed for each potato ready for the slicer. This could involve the installation of efficient analytical devices measuring discoloration and other irregularities in potatoes to reduce the amount of unnecessary trimming or paring.

In this large potato chip manufacturing plant, divergent fact finding uncovered many additional facts beyond the analytically identified and quantified sources of waste. These key facts needed to be expressed in clear language, free of jargon and ambiguity and in simple terms that an outsider could understand. Examples of actual facts uncovered by employees expressed in their own terms were:

* We have setup such an extremely efficient system of waste disposal that it was hard to even detect the presence of waste during the material balance;

* Our plant looks very tidy and clean and our employees are proud of this;

* We have both easily visible and almost invisible kinds of waste. We have few instances of chips lying on the floor because they are immediately swept up and disposed of. This is a form of easily visible waste. However, our automatic potato overflow equipment discharges overflow potatoes directly to the sewer without anyone seeing them. This is a form of waste that is not easily visible;

* Many people in our plant have no idea of the value of the various items of waste; and

* We regularly overpack our finished product. Marked bag weight is 22 grams, but we average 23.5 grams.

It is human nature for people to try to hide important facts simply because they do not know what to do with the information. It is their way of coping with information overload. As a result, we must try to uncover the less visible facts. For example, further fact finding stemming from the issue of overpacking above led to the point that if we pack only target weight, our bags do not look full, which creates a poor impression to customers. It appears that a decision was made in the past to overpack and keep the bags looking full.

This provides a good example of a relatively invisible fact that cannot be identified by traditional information systems, but can be uncovered by the use of creative behaviors, attitudes and thinking skills. The way to transform such new facts into creative challenges that broaden the playing field follows.

Problem definition

Whenever we examine a particular issue, our focus ultimately expands within this narrow perspective. For example, when we focus on waste handling, the amount of waste handled expands. If we shift our focus to waste elimination, the amount of elimination expands. This shift in focus is where the expanded facts emerge.

Now, how to convince a plant to make such a shift in focus? This requires skills in creative thought. Such shifts in focus are called "paradigm shifts." One way that a paradigm shift occurs is when a challenge is broadened to a higher level, permitting an expanded range of alternatives and a higher, more profitable, target to be set. For example, Edison could have focused on the more narrow challenge, "How might I improve home kerosene lamp efficiency?" but chose instead to broaden the challenge to "How might I improve the way light is provided in homes?" Such a paradigm shift in effect raises the standard quality and productivity target level limited by the current process. The Simplex CPS process provides the tools to raise the standard, by similarly identifying new processes.

Simplex thinking skills pave the way for paradigm shifts to occur for two reasons. First, in fact finding the existence of the process to be improved is not viewed as an unchangeable given, only as a fact. Second, the problem definition step following fact finding isolates the true purpose of the current process, thereby expanding the opportunities to achieve this goal.

Analytical tools alone are able only to optimize the current process, not to create new processes. In fact, sometimes the current process being optimized is the wrong process altogether. For example, focusing on the handling of waste to develop a better process, when eliminating the waste is the real goal. Even if the correct process is being considered, analytical techniques are confined to overcoming deviations from the present target and are not able to redefine the target or establish a new process.

Identifying challenges

The Simplex creative process opens up and expands the ability to use proven analytical tools to reduce waste by identifying new challenges previously invisible to the plant. A fundamental principle of the Simplex process is the skill of stating challenges in the form of "How might we?" (HMW) questions. These statements allow people to express themselves free of evaluation or judgment. They also reflect the positive aspects of the situation and focus on the solution rather than the impediments to it. Here is how it works. The process of divergent thinking in problem definition, takes the fact, "If we pack target weight, our bags do not look full," and turns it into multiple optional challenges such as:

* HMW (how might we) make the potato chip slices larger in area?

* HMW make our slices thinner?

* HMW make our bags smaller in volume yet appear larger?

* HMW fill our bags without overpacking?

Divergent thinking in problem definition allows the team to consider alternatives to the challenge "How might we keep our bags looking full to customers?" such as, "How might we keep our bags looking full at existing target weight?" or "How might we fill our bags at existing target weight?"

Following this initial divergence in problem definition, a special creative problem definition process called the "Why/What's stopping us?" analysis is invoked to discover the interrelationship between the existing challenges, identify new challenges, and reveal the relative strategic and tactical positions of each. First, one of the challenges is selected. The questions "Why?" and "What's stopping us?" are asked in respect of the selected challenge. Next, the answers to these questions are elicited from the team in simple, clear sentences. These represent facts. Finally, each answer is transformed by divergent thinking into one or more new "How might we?" challenges.

By repeated use of the "Why?" and "What's stopping us?" questions and lateral expansion to "Why else?" and "What else is stopping us?" questions, a problem definition map is created, Asking "Why?" of a particular challenge identifies a broader challenge while asking "What's stopping us" narrows the scope. These two concepts combined provide the tools to develop a hierarchical overview of the problem. The hierarchy becomes a two-dimensional "map" when the two questions are augmented with the word "else" (i.e., why else ...? and what else is stopping ...?). The process of mapping often leads the participants to a "eureka" experience. If, for instance, the participants originally defined a symptom as the problem, upon asking "What's stopping us ?" the real problem will emerge. In addition, some participants initially narrow the problem (they can't see the forest for the trees), so that by broadening it, they gain a better perspective. Conversely, participants may approach the problem in its entirety instead of breaking it down into more manageable parts. The map is built gradually and displayed visually, and the most productive challenges are selected for solution by the team.

For example, if the challenge "How might we fill our bags without overpacking?" is selected, sequentially broader challenges emerge such as, "How might we keep our bags looking full to our customers without overpacking?"and "How might we keep our customers satisfied without overpacking?" to ultimately "How might we keep our customers satisfied?" By asking "What's stopping us from filling our bags without over packing?" we conclude, "We have not taken the time and effort to optimize the relationship between potato density, slice thickness and bag volume." This fact leads to the breakthrough challenge, "How might we optimize the relationship between potato density, slice thickness and bag volume?" Analytical tools can be used to optimize the relationships among potato density, slice thickness and bag volume. By focusing on such new challenges, several new challenges surface, permitting a broader range of analytical tools that can be employed. For example, the challenge "How might we keep our bags appearing to be full at our existing target weight?" even permits using gaseous pressure to inflate bags without altering their size or shape. The use of creative problem definition thus broadens our scope in the sense that different challenges call for different sets of analytical tools. For example, process control technologies are appropriate for more tactical challenges whereas financial information systems are appropriate for more strategic challenges.

The problem definition map of Figure 5 shows how the focus can be changed to eliminate waste altogether rather than handling it efficiently -- a fundamental challenge that leads to increased profitability and a plant that increases employee morale.

Negative facts to productive challenges

Another important use of the problem definition step is to use the "How might we?" question as a tool to turn negative facts into productive challenges. For example, two key facts might be:

* If we could sell our waste starch, we wouldn't need our starch handling crew. (Positive Fact.)

* We already tried to sell our waste starch locally five years ago but no one wanted it. (Negative Fact.)

Some of the positive challenges raised by the team could be:

* How might we find a buyer for our starch outside the local area?

* How might we make it more attractive for local industry to buy our starch?

* How might we redeploy our starch handling crew in more productive ways?

* How might we start solving some of the most lucrative challenges we have raised in the plant by freeing the people currently employed to handle waste starch?

* How might we find new uses for starch?

Solutions and action plans

Once the most productive challenges have been selected from step 3, the team moves on to develop solutions, then to make action plans that specify the steps the members themselves will take to implement the solutions. Senior plant management becomes directly involved in the process immediately following action planning, thus accomplishing the objective of gaining acceptance. In the final step, if the team and senior management act as partners, action will be taken successfully and the waste will be eliminated or greatly reduced. Then it will be possible to institutionalize the process and keep the waste out.

Keeping the waste out

The most important step in this process is the final step -- keeping the waste out. This is an anchoring step, which solidifies the learnings, action plans, new procedures, new behaviors, new specifications, etc., of the process. The following list outlines ways in which this has been successfully achieved:

New specifications -- The range for raw material specifications is tightened with suppliers on key ingredients or components; incoming analysis/inspection is sharpened and/or statistical control techniques are introduced in supplier operations.

Process design procedures -- Quality techniques shift from inspection, assurance and control to improvement and prevention. How can the process be redesigned, stabilized or restructured so that defects and waste are prevented?

Employee participation -- Waste point control is designated to employees with each waste point in the process managed by an employee each shift. Waste results are visibly recorded on bulletin boards and in employees' communications, and are reported in department meetings. Employee teams meet periodically to not only review results but also to solve problems.

Feedback -- Waste is calculated frequently. Some companies use highly sophisticated computer systems to measure waste. Less sophisticated, but equally effective, control systems can be used and managed by using groups on a per shift basis.

Results

In our example, the material balance process was executed as follows:

Day 1 -- Conduct material balance training and confirm preparation;

Day 2 -- Conduct two shift material balance; and

Day 3 (a.m.) -- Conduct creative problem solving training P.M. - Develop waste reduction action plan.

Yield for the run on Day 2 was calculated at 66 percent. Twenty-seven waste points accounted for an additional 32 percent of input ingredients and only 2 percent was unaccounted for -- an extremely positive outcome. Analyzing the pareto of waste points, three of the 27 waste points accounted for nearly half the waste opportunity, or 16 percent. The total dollar waste opportunity, a conservative figure since only ingredient and not value-added manufacturing cost was considered, totaled over $12 million annually. (The parent company, the international leader in its field, has a total waste opportunity in excess of $100 million, valued at more than three margin points on its balance sheet.)

Creative problem solving training and action planning on Day 3 were highly productive. Outcomes included:

* A detailed plan of action for the largest waste point;

* Endorsement of both the material balance and the Simplex process for other parts of the operation. In fact, an action plan for the training of internal Simplex trainers is now under consideration; and

* Selection of a waste reduction goal and endorsement by the accountable senior manager that waste reduction is now his primary productivity initiative.

This desire and ability to reduce and eliminate waste by continually improving all our processes is the key to survival in world markets. While waste reduction is frequently associated with ingredients, it also affects capital (surplus or underutilized equipment, buildings or inventory), time (at all levels of employees) and service (lost sales due to inappropriate marketing, product quality, order quantity, delivery time or location). This process of continuous improvement begins with recognition and focus, continues with a commitment of resources and the application of proven tools, and relies for its ultimate success on relentless tracking and follow-up to ensure that improvements are maintained. We trust that this article will serve those who have recognized the need for continuous improvement as they strive for profitable growth despite economic climate or capable competition.

Min Basadur, Ph.D., is a professor of organizational behavior in the Michael G. Degroote school of business at McMaster University and founder of the Center for Research in Applied Creativity. Bruce Paton, Ph.D., a senior member of lIE, has been an associate of the Center for Research in Applied Creativity since 1984. He continues to promote the implementation of creative problem-solving technology as vice president of internal consulting at PepsiCo Foods International with responsibilities in both the domestic and international food business.
COPYRIGHT 1993 Institute of Industrial Engineers, Inc. (IIE)
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Business Strategies
Author:Basadur, Min; Paton, Bruce
Publication:Industrial Management
Date:Jan 1, 1993
Words:4761
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