Jim Clifton, Gallup’s chairman and CEO, says businesses have, in most cases, maximized every possible benefit from practices based on neoclassical economics, such as Six Sigma, reengineering, and total quality management (TQM). The significant competitive advantages from these practices have hit a point of diminishing returns, he adds. Most well-run companies have wrung almost every efficiency they can from their operations—and their competitors have, too. So have we reached the end? Are there no worlds left to conquer?
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Hardly, Clifton says. There are vast new business frontiers left unexplored. Clifton points to revelations that behavioral economists are uncovering—starting with the discovery that human decision making is more emotional than rational. This upends a core assumption of neoclassical economic theory: That consumers can be counted on to always make rational decisions about the products and services they buy. It also opens up a vast new area for business to explore and exploit—and Clifton has staked his company on the fast-developing leadership science within behavioral economics.
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Comments
The next generation of leadership
Mr. Clifton provides some interesting history and comments. My primary reaction to the article, though, was it identified the problem of expectations created by academic and theoretical teachings from "neoclassic" business "experts". There is often room for improvement. And, if that has reached a practical limit, then look for a new paradigm or breakthrough. Furthermore, I would suggest the recent history of economic performance indicates a paucity of business leadership in applying known, good practices rather than the exhaustion of benefit from these practices.
We've barely scratched the surface on Lean Six Sigma
Coming, myself from the Marketing Research world, I disagree with Jim Clifton's comments regarding Lean Six Sigma having reached its limit. While this might be true when it comes to manufacturing, it is just beginning to be recognized, much less embraced, in service industries, like Healthcare.
I believe that rather than disparging Lean Six Sigma, attitudinal understanding and operational methods need to be integrated toward a more holistic approach to business success. In other words, we need to go beyond one dimensional approaches to problem solving and business implementation. We need to take an interdisciplinary approach to business success, understanding the role of different disciplines in the continum (The Wheel of Marketing and all supporting elements) and knowing how and when to use them appropriately. It is better that we take a Win/Win approach, embracing all disciplines toward building High Performance Enterprises, rather than one discipline saying "My way or the Highway" or "My way is all that is needed for success."
Charles Shillingburg
We are not even close
Most businesses failed at TQM and very few ever come close to implementing Lean. The reason is leveraging every brain in the workforce. Leadership is either scared of that level of communication or possibly feel the average worked has nothing to offer. And Six Sigma seems to languish in many organizations as well - it is really challenging to get leadership convinced to solve real problems rather than add more duct tape to temporarily 'fix' a problem.
I am not saying other frontiers don't exist - they do. But we haven't even learned how to tend the one were are in very well. Yes, we need to really understand our customers (emotionally or rationally) and align every employee to helping achieve that goal. That to me is the true premise of Lean - the customer and using the entire workforce to achieve that goal. These employess probably more intuitively understand the customer's needs than leadership - even with scores of data - yet this voice goes largely ignored.
Having statistics and data about how people think/act is very useful - but why just have leaders see that data. Again the employees working with customers need that understanding so they can better serve them.
And the productivity gains we have made are still a fraction of what we can achieve if we really apply improvement activities completely.
Jim Schwarz
Catching up with Deming and Behavioral Science
Prior to returning to school and pursuing a PhD, I worked in mental health and social services for 35 years, both as a clinician and manager. The quality of the service transaction is helped by quality tools, and still is most dependent on the people giving and receiving, internal as well as external customers. No doubt more can be done with certain aspects of process improvement given the rapid growth of technology and those disciplines applying innovative thinking to design, productivity, marketing, and ethical consumer satisfaction. A broad stroke view (always with exceptions) might be that an important and perhaps critical reason six sigma, lean, etc. tops out in some contexts can be laid at the feet of an important root cause: not really taking advantage of the human factors. However, once again I am stunned (bemusedly so) that behavioral economists are uncovering human factors (emotions) as a new frontier. Folks, I studied this area in graduate school in 1967. Deming wrote all this down before that. In and amongst all quality methodologies, human factors remain as the most important, as Deming noted. Human beings are the greatest asset and only real long-lasting competitive advantage. Those who truly understand this and are in positions of leadership to embrace, develop, and implement will reap the riches that floats all boats. Meaning, purpose, and maybe even saving a bit of our planet might also be possible.
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