Posts Tagged ‘design’

Risks and innovation

January 19, 2014

In 1979, Daniel Kahneman and Amos Tversky won the Nobel Prize for Economics for their “Prospect Theory: An Analysis of Decision under Risk”.

This theory shows that we prefer certainty to taking a risk. We see this on auction sites where the “Buy It Now” price is often much higher than the price of similar items sold by auctions. The BIN price may influence the bidding but it is for those of us who are willing to pay more for certainty.

Stable, well-established organizations tend to be risk averse. They place great value on their stability and choose continual improvement instead of innovating. Indeed, most organizations with process-based management systems continually improve their goods, services and processes. Some also go beyond development to design something entirely new.

Sustainable organizations do both; they continually improve and they innovate to find new ways of fulfilling their missions.

Successfully managing risk implies formal largely predicable processes. Being innovative tells us that selected team members interact in an informal free-thinking “sandbox” of collaborative effort. How do process-based organizational management systems help their leaders to manage innovation and the risks inherent to innovation?

First, let us never forget that effective process-based management systems deliver a valuable resource: time. By preventing problems, the management system substantially reduces time wasted on firefighting. The organization has time to innovate. Secondly, remember the leaders who serve to lead. Such leaders remove causes of fear from their systems. Their words and actions earn trust by selflessly taking responsibility for helping employees to understand and fulfill stakeholder needs. In this supportive environment, noble causes can stimulate innovation to find new ways of creating successful stakeholders.

The leader challenges and authorizes the special innovation team that comprises accomplished problem solvers. Unlike capable processes, innovating requires the leader’s patience and to expect to “fail” many times. Of course, knowing what does not work is not really a failure. And so-called failures may be successful in completely unexpected ways. Think Post It Note®.

Innovative teams comprise a mixture of different types of people with a wide variety of talents. Instead of endlessly talking, the team creates prototypes as soon as possible. Prototyping a new service may require a focus group. The team allows for the fact that focus groups usually comprise people who favor certainty. The prototype must impart value by solving a costly problem.

A shared understanding of the costly problem is a vital input to innovating. In bringing the innovation to market (internally or externally), successful organizations decide which innovations yield the greatest benefit to stakeholders. They determine which innovations have the greatest chance of success. The latter stages of innovating show that innovating is a process that really is design rather than development. It is a process that includes such risk assessment techniques as SMEA (Success Modes and Effects Analysis) and FMEA (Failure Modes and Effects Analysis) before verifying and then validating the design.

Of course, risk has an upside. Nevertheless, risk managers tend to manage risk to avoid loss instead of managing risk to add value. Prospect Theory can help them to understand this. By fully appreciating risk, we recognize and manage both the downside and the upside of our decisions including our decisions to innovate.

In responding to a recognized adverse risk or threat, we use our management system to avoid, accept, transfer and mitigate aspects of the threat. Similarly, we respond to a recognized positive risk or opportunity by using our management system to share, enhance, accept and realize the opportunity.

Knowing Kahneman and Tversky’s Prospect Theory, we can dissolve the fear that would otherwise stop us from making difficult investment decisions. Organizations can enjoy the thrill and rewards of innovation by recognizing the value of taking positive risks that are essential for sustainable organizations to create even more successful stakeholders.

Is defect the same as nonconformity?

March 9, 2013

Defects adversely affect the functionality of the product; indeed the defective product may be dangerous. A product’s nonconformity is a failure of a characteristic to meet a requirement. Defective products are therefore more serious than other types of product nonconformity. The gap between the two (defect and nonconformity) is wasteful but a margin of safety is necessary because designers and customers seek assurance of safety, reliability and durability but both have limited information about the actual performance of materials, structures and subsystems in a wide variety of operating conditions.

Surely, because of these unknowns, we have to treat product nonconformity as if it were a defect? Therefore, defect and nonconformity may differ but we treat them the same way in that they must be corrected and that we should learn from them to improve our management systems.

In the continuum from an outcome being defective to perfect, we could usefully think along the following lines:

1. Defective – outcomes may injure or kill someone
2. Nonconforming – outcomes fail to meet a requirement
3. Quality – outcomes fulfill customer requirements
4. Excellent – outcomes exceed the needs of customers
5. Perfect – an ideal many choose to pursue

Meanwhile it is reasonable to expect designers to continue to improve their processes and product specifications based on their understanding of the actual performance of materials, structures and subsystems. This knowledge can be used to close the gap between defect and nonconformity.

Yes, designers must also address service quality or the customer’s feelings. Customer feelings are among the needs translated by designers into product requirements. Consequently, they appear in the product specification not as customer feelings but as product characteristics. We may prefer our tea served with love. The designer knows this but the service specification remains silent on this point so as not to sully the love characteristic of the service by specifying “serve with love”. This is why training is the key to excellent customer service. Designing the service part of the product remains an intriguing area of research. Of course, we continually learn more about product design and delivery by listening to the customer’s perceptions about how well their needs were fulfilled.

Differentiating clearly between an acceptance criterion (a requirement) and a blemish or deviation from perfection remains a difficult quest but we are on the other side of that continuum when we are talking about the difference between a defect and a nonconformity. From an engineering or design point of view, specifying the requirements that enable everyone to uniformly differentiate between 1, 2 and 3 are seen as the most important. Between 3 and 4 we have a point where customer needs become their new requirements. Some companies, such as Apple, anticipate or stimulate this transition point from hidden needs to requirements that drive customers to buy their products better than most. This may be due to the designers being very close to, if not the same as, the more futuristic customers.

Why do companies exist?

February 16, 2012

Some people claim that companies should provide jobs. Not necessarily work that adds value but jobs followed by generous company-paid pensions.

Companies exist to create more successful customers. They recruit well-educated employees who can anticipate the needs of future customers to collaborate in designing goods and services that will fulfill those needs. They hire well-educated employees to work together in designing processes that result in goods and services that create more successful customers. They also employ people to work in teams to fulfill the design specifications.

Customers reward companies by paying them what they agreed the goods and services would be worth to them. Companies invest part of these rewards to optimize the system while improving supply chains and neighborhoods. Companies share other parts of these rewards with owners and employees (may be the same) so they can look after their families, their communities and themselves now and in their futures.

The more a company has to invest in its ability to create even more successful customers the better it is for the economy especially when those customers live in other countries.

The greater the value they add through their work the more the employees can receive. Creative designers earn more and may be paid more than the implementers who fulfill the designs.

Employees are not alone in this. The leaders create and continually improve systems that help create more successful employees as well. These systems are organizations known as companies.

Companies that fail to do this consistently exist only on borrowed time.

Companies, why not design one as a system now?

Prevention of Nonconformity by Design

May 11, 2011

Even competent people make mistakes. Consumers misuse poorly designed products perhaps injuring themselves or others. Competent employees may not operate confusing, boring or complex processes as intended. Human factors should be considered when planning and designing systems, processes, goods and services.

The development, use and improvement of the management system should prevent problems instead of relying on their detection. Relying on warning labels to warn customers is less effective than planning and designing products so they cannot be used or operated wrongly. Verifying services and goods is less effective than designing delivery or manufacture to avoid nonconformity.

Unsustainable wastes arise from poor design failing to protect stakeholders from incurring more and more of these losses. Additional resources used to make good the poor quality further damage the environment and adversely impact sustainability.

The prevention of nonconformity in goods, services and processes is a paradigm change from the control of nonconformity. Sorting bad product from good product is less efficient than prevention to stop the design of nonconformity or situations that cause nonconformity.

Prevention focuses first on reducing complexity in design. The most expensive mistakes can then economically be prevented in delivery or manufacture by mistake-proofing. Remaining causes of variation that result in any defective products may then be eliminated. This progression applies to the design of all products and the processes and tooling necessary to deliver conforming products.

Prevention offers a more robust approach to quality assurance than appraisal. It may require major changes in management philosophy, such as shifting the responsibilities for quality assurance into the operating organizations to remove complexity from designs, mistake-proofing service delivery, mistake-proofing manufacturing, statistical process control and verification. Conventional quality assurance organizations may change or decrease in size and importance in organizations applying the prevention principle.

Hence, design is the only way to prevent nonconformity when creating and delivering goods and services.

An organization preventing nonconformity by design will:

1. Establish the metrics for prevention of nonconformity by design (starting with design simplification criteria);

2. Identify the stakeholders affected by the system, product, its processes and the related outcomes;

3. Determine the needs of the customers and the concerns of other stakeholders;

4. Specify measureable and achievable characteristics of the product;

5. Specify the critical methods, resources and controls (including mistake-proofing as required) for correctly making, delivering and safely using conforming products;

6. Fulfill the system, product and process designs with capable processes.

7. Monitor and measure the design process per the established metrics; and

8. Review the design process against stakeholder satisfaction information.