Many tools, strategies, and methodologies have been developed for improving business processes. Most of these aim to achieve continuous, incremental improvement of existing processes. They are suitable for companies in stable businesses or business units that perform relatively stable processes (like accounts payable) that need continuous improvement. However, excessive focus on process excellence can hold back innovation and is not suitable for companies or divisions exploring a new market.
Using these approaches, companies can benefit from other businesses’ experiences and leverage what has been proven to work. The latest developments in technology, especially in AI and machine learning, can boost process improvement efforts.
Why is process improvement important?
There have been different process improvement approaches since the 1940s, as this field has emerged from the automotive industry to use resources in the scarce economic environment efficiently. Since then, businesses have been looking for ways to increase their quality and reduce their costs. Compared to the past, process improvement is more important today due to the following reasons:
- Today’s customers have higher expectations on the quality
- Higher competition in the market
- Unpredictable economic environment
However, importance of process improvement depends on the company’s strategy. A new division aiming to build an innovative product needs to focus on innovation and can delay improving processes to a future date. Since their processes are likely to change fast, it would not be efficient to spend significant effort to change and improve them.
On the other hand, a business in a stable market can focus on process improvement to delight customers and increase its margins.
What are the different process improvement approaches?
Process improvement (also called continuous process improvement and abbreviated as CIP or CI) refers to the process of defining, analyzing, and improving business processes to increase overall quality. Companies can make changes to processes to increase their profit margins, improve employee satisfaction, and accelerate their operational timelines. Many methodologies and techniques can identify problematic parts of processes. You can find the main process improvement approaches below.
Note that most of these approaches share similarities, and a single company can combine more than one method for the same process simultaneously. While all these techniques can help your company achieve your goals, the decision of which one to use ultimately depends on your process scope.
Lean methodology reduces wasted resources that don’t add any customer value while improving processes. The main goal of this approach is to create more customer value with fewer resources. To implement this strategy, businesses need to identify customer value first and then eliminate waste until they reach “perfect” processes. As a result, companies reduce their cost while improving customer satisfaction. For more details about this approach, you can read our in-depth guide.
Six Sigma is a statistical method that reduces the variations for process improvement. To do that, this approach aims to keep the acceptable lower-upper limits in the six-sigma level so that the probability of having errors in a process will be 3.4 per million opportunities. Six Sigma has been used by successful businesses like General Electric since the mid-1980s. Though it is less popular today thanks to the popularity of new emerging approaches as well as companies’ focus on innovation, it is still a powerful method for process standardization today. To learn more, feel free to read our in-depth Six Sigma guide.
Lean Six Sigma
Businesses used to adopt the lean approach to remove wastes in processes to use their resources efficiently. Then, Six Sigma was created to reduce process variation. Considering today’s dynamic business environment, these two methods work together successfully.
Lean Six Sigma is the combination of the Lean approach and Six Sigma methodology for businesses. This technique aims to eliminate defects as in the Lean and reduce deviations as in Six Sigma for process improvement. It allows establishing efficient systems with high quality and efficiency while it increases bottom-line earnings and helps to achieve company goals.
Total Quality Management
Total Quality Management (TQM) is a process improvement approach that continuously detects and eliminates production errors by facilitating supply chain processes, improving customer experience, and ensuring that employees are trained well enough. Total in TQM means that all departments, in addition to production (like sales, marketing, finance), are accountable for improving processes. Management in TQM emphasizes that executives are obligated to actively manage quality through funding, training, staffing, and goal setting.
TQM was a popular approach between the late 1980s and early 1990s while approaches like Lean and Six Sigma are more popular today. As TQM is a similar method with the Six Sigma, TQM focuses on improving internal guidelines and process standards to reduce errors, while Six Sigma concentrates on reducing defects.
Kaizen is a philosophy meaning “change for the better” or “continuous improvement” in Japanese. It refers to continuously improving business processes by including all workers from the CEO to the assembly line workers. By applying this philosophy, businesses can focus on achieving a more efficient work environment and creating a team atmosphere. As a result, employee satisfaction improves, as jobs become more fulfilling and less tiring.
Kaizen aims to make incremental changes regularly to improve processes efficiently within businesses. These changes don’t mean that improvements are made slowly; the goal is to acknowledge that minor changes may have significant impacts on the future.
Theory of Constraints
The Theory of Constraints states that there is always at least one constraint, and these constraints always prevent businesses from achieving more of their goals. Thus, this approach focuses on identifying and reducing the obstacles to improve processes.
The Theory of Constraints is another approach that aims to improve process efficiency. However, while the Theory of Constraints provides increased manufacturing capacity by focusing on detecting and eliminating bottlenecks, the Lean approach mostly reduces costs by targeting to eliminate defects in processes. In the below table, you can also see the main differences between these two approaches.
Agile is a software development methodology and is quite suitable for processes that require collaboration. It is an iterative and incremental approach that requires employees in the different teams to work collaboratively. The method includes consecutive incremental steps called “sprint” and “scrum” meetings that enable teammates to give feedback. These sprints ensure flexibility and aim for improving the process with small steps.
Similar agile approaches including iterative changes and collaboration are also becoming more popular in other areas such as manufacturing and construction. Rather than taking fundamental steps for updating processes, this methodology responds to the changes that occur while taking the incremental steps.
What are the most popular process improvement approaches now?
Most process improvement techniques have a decreasing trend since the 2000s. We observe that Six Sigma has been a much more popular approach than other process improvement techniques until the 2010s. Although it is a common method today, we see a significant fall in its trend.
On the other hand, agile development is an exception to the decreasing trend of other process improvement approaches. This methodology has increasing popularity since the 2000s, and its popularity will seemingly continue to rise for the next few years.
Today, agile methodology stands out as the most popular process improvement approach, and Six Sigma comes second, although its decreasing trend. We observe that other methods have a slightly decreasing trend with similar popularity levels. We haven’t included the lean approach in this figure, as there are different popular meanings of lean that affect its trendline.
Disclaimer on these trends: Process improvement is more art than science and they could be likened to diet fads that rise in popularity for a few years to be forgotten later. As management teams and market conditions change over time, new management teams tend to prioritize newer approaches.
Can too much process improvement hinder innovation?
As indicated in this article, focusing on process improvement too much can prevent businesses from innovation. This situation may cause process improvement efforts to not deliver the desired outcomes, or companies can miss more significant benefits. Thus, it is also essential to keep an eye on innovation opportunities and evaluate your options for better performance.
Process improvement refers to looking for ways to improve processes that exist. These ways can include the elimination of bottlenecks, upgrading systems, or other actions that enhance process efficiency. On the other hand, innovation focuses on solving the problem in the most effective way. It consists of more radical and disruptive changes.
Companies and individuals tend to focus on improvement rather than dramatic change. This is why Henry Ford famously said “If I had asked people what they wanted, they would have said faster horses”.
In the end, companies should focus on their customer demands and how they can satisfy those with the latest technology. This can involve both process improvement (i.e. improving what’s already in place) and innovation (i.e. using the latest technology to solve problems via dramatic change and new products).
How does the latest technology impact process improvement?
With AI becoming a more significant part of our lives and business processes, different fields contribute process improvement. From data collection and extraction technologies that enable more accurate insights to machine learning algorithms that create cause-and-effect relationships that help businesses to see the “full picture” of their position, companies today have a wide range of tools to enhance process improvement.
Improved process understanding
These tools help companies understand their business processes including variation in the process, cycle times, personnel involved etc.
Process mining is the latest solution in this area. It shows “as-is” processes thanks to a layer of software integrated into the company’s IT systems. This feature enables businesses to identify discrepancies from the desired processes and understand the actual performance of their position. Using event logs and data-driven performance metrics, process mining tools connect process steps in a cause-and-effect relationship. These metrics also allow companies to identify bottlenecks and help them to find their root causes for eliminating them.
By introducing process mining, companies can eliminate unnecessary costs, create value-adding steps, and reduce deviations from their desired processes. It is a critical solution that supports many process improvement techniques listed above.
As an example, Metsä Board identified the constraints in supply chain processes and mined their processes to improve their performance. According to QPR, they have identified differences between their real process and target process flow. These insights enabled them to improve the process, leading to an improved customer experience. You can see more examples of process mining case studies in our related article.
To learn about how process mining tools work, you can read our detailed process mining guide.
Improved process automation
Data extraction technologies play 2 roles in process improvement.
Machine learning is enabling companies to improve data extraction capabilities and automate their processes that involve data extraction. For example, data from documents can be captured automatically with high accuracy using deep learning, a sub field of machine learning. Automated data extraction creates more visibility into how individual processes function and enables companies to audit and continuously improve results.
Data extraction software can also be used to collect data from a wide range of sources such as customer reviews and convert unstructured data to structured data. This allows companies to evaluate their position with higher-quality data and ensures more accurate insights for better process improvement.
You can read more about data extraction in our related article.
Business Process Management (BPM) and Business Process Automation (BPA)
Business Process Management (BPM) tools include some aspects of process mining and process modelling tools allowing businesses to identify, model, automate, and report on their processes. As a result, companies can optimize their processes to achieve their goals. BPM software is used for process analysis and tracking performance of any changes made in processes.
BPM tools also include modules for process automation. These tools, also called Business process automation (BPA) software when they are used as separate modules, can be used for process improvement to execute repetitive activities where human force can be replaced. This solution allows companies to reduce their costs and increase process performance by benefiting from automation. It consists of integrating applications, restructuring labor resources, and using software applications throughout the organization. Under this technology, robotic process automation (RPA) is a popular solution that relies on bots that use UI intended for human use to automate repetitive activities.
You can read more about BPA and find an extended list of BPA vendors on our website.
Robotic Process Automation (RPA)
Robotic Process Automation (RPA) is a popular technology that involves bots that mimic human actions to complete repetitive tasks. RPA enables bots to handle repetitive and tiring tasks instead of humans and allows them to focus on higher-value activities. As a result, they reduce wasted resources and focus more on customer value. This solution ensures businesses to accelerate their processes while reducing their costs.
To learn more about this emerging technology, you can read our ultimate RPA guide.
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