Tuesday, April 9, 2013

Reducing Fallibility in Business: The Case for Managerial Poka-yoke

Decision making is considered a major attribute and of managers and leaders. There is, however, a significant difference between technical decision making and business decision making. Technical decision making, almost always, has access to established principles of science and technology and a track record of field performance under a set of varied and variable conditions. Even products of new technologies are backed by several theoretical principles, experimental data and virtual simulations to judge the relative performance prior to commitment on commercializing a product. Business decision making, on the other hand, is not governed by any laws of science or engineering. Business, unlike science or engineering, has no predetermined formats to strictly conform to. It is, therefore, a challenge to error-proof business decisions.

Despite the technical and scientific principles being well set, technical processes need error-proofing. Poka-yoke is the term that represents fool-proofing or error-proofing technical and operational processes. The concept which emerged as an integral part of the famous Toyota Production System has contributed to flawless and productive operations. The concept has applications beyond technical and operational matters as well. Decisions are implemented through processes. Technical poka-yoke or managerial poka-yoke requires that the processes of taking decisions and executing them are error-proofed. There is, however, a world of difference as to how this is achieved in both the areas.

Technical versus managerial poka-yoke

Technical poka-yoke has become a standard feature of industrial and process design, and in product assembly. In manufacturing, go-no gauges have been the earliest check points to determine if a component has been produced right. For assembly, color coding of matching parts has been the simplest method to achieve the right assembly. Machining centers which manufacture different sizes of components are equipped with transportation chutes that automatically segregate components of different sizes, and reject wrong pieces. As processes became more complex, sophisticated poka-yoke accessories such as automated weight checking, electronic profile checking and digital visual inspection have become the order of the day. Components are themselves designed in such a manner that they can be assembled only in one right manner. All this is made possible by the binary nature of technical matters, right or wrong, with respect to specification.

In terms of managerial processes and decisions, however, poka-yoke has had very little application. In fact, fallibility of processes, unpredictability of outcomes, and inevitability of failures are often seen to be the characteristics of managerial processes. Swami Vivekananda is reported to have said "Take risks in your life. If you win, you can lead! If you lose, you can guide!".  A more contemporary quote, in fact a tweet, says "A 90% chance of failure sounds pretty bad. But a 10% chance of changing the world seems like a pretty good deal." Management and leadership rewards risk-taking and failures as long as these lead to learning and failures. Clearly, there is a huge, and unfortunately well-accepted, perception difference between technical matters and managerial matters that accepts certain loss and inefficiency in managerial processes. This, in turn, leads to creeping ineptitude in management and leadership processes.

Uncertain certainty, certain uncertainty

All processes are a mix of certainty and uncertainty. Technical processes are characterized by initial uncertainty and eventual certainty which then becomes the standard specification that is repeatable. Managerial processes are, however, characterized throughout by certain uncertainty which refuses to be a repeatable phenomenon. The reason why technical processes are more robust eventually is because of the continuous cycle of experimentation and validation that goes on till the desired or an optimal feasible result, defined by a set of operating conditions, is achieved. The reason why managerial processes of a firm are more uncertain is that they are, by themselves, parts of a larger set of industry level competitive processes which operate in a linear, sequential fashion with little or no scope and time for iteration of experimentation and validation.

Clearly, if managerial processes are to be fool-proofed, rather error proofed, some characteristics of managerial processes need to be jettisoned and some other characteristics of technical processes need to be integrated. Technical processes are based mostly on material and machine specifications. Managerial processes, in contrast, are based on a much wider spectrum of human factors such as competencies and positive attributes on one hand and knowledge gaps and negative attributes on the other. The only bridge between technical and managerial processes is the man-machine interface. More and more human capabilities are being transferred to the machines both in terms of hardware and software to reduce the negatives of human management and intervention and leverage the perfection and repeatability of machines. However, the larger challenge of making managerial processes, which are of only human faculty and are attributed based, reasonably error-proof remains.

Managerial poka-yoke, strategic

Poka-yoke can be applied to managerial and business processes at both strategic and operational levels, although approaches could be different. At strategic level, two success factors of technical poka-yoke need to be transferred to strategic business processes for achieving managerial poka-yoke. The first is the learning experience of simulation and sensitivity. The second is the replacement of "first and fast to market" by "right, as much as first, to market". These are considered below. At tactical or operational level, two critical approaches would include skill coding of roles and tasks, dovetail of people and positions, choice of processes for outcomes and correlation of efforts and rewards.

Unlike in scientific and technical processes, strategic managerial, leadership and business processes do not provide opportunity to experiment and validate. Even if a firm chooses to experiment its business decisions on a pilot scale, other competitive firms could move straightaway to execution stage, and a couple of them could end up being the successful first movers even as the firm goes through its pilot scale experiments. The answer to this paradox lies in undertaking a lot of simulation and sensitivity testing options as part of the planning process itself. Apart from providing a good preview of risks and rewards, it identifies potential pitfalls and helps the firm develop poka-yoke gates to separate strategies that could lead to successes to ones which could lead to failures. Simulation and sensitivity analysis would be as successful as the depth of knowledge management has on the industry environment and competitive factors.

The second aspect is one of being Right to the Market rather than being just First to the Market or Fast to the Market. Of course, it would be nice to be first and right as well as fast too. If, however, a choice has to be made amongst the three, being Right to Market is of overriding importance. Today, if a user is asked who has been the first to bring a tablet computer to the market, the user would unhesitatingly mention Apple as the pioneer. On the other hand, the right answer is that Microsoft brought out the tablet first in 2000. The reason why Apple is thought of as the pioneer of tablet computers is simple: Apple got the product right (as a complete and seamless hardware and software integration) rather than first or fast (Apple took its own time to launch iPad after iPhone or iPod). Similarly, no one today thinks that Dell pioneered the 5" phablet type of large format smartphone or Palm pioneered the handwriting on palm top devices. Everyone thinks of Samsung with its Note as the phablet pioneer, again a point of making a product right rather than first or fast.

Managerial poka-yoke, tactical

At the tactical level, it is necessary to recognize that there are two sets of factors that need to be matched. On the right side, we have four factors: tasks, positions, outcomes and rewards. On the left side, there exist four factors: roles, people, processes and resources. The better these are matched to each other, the better will be the move from tasks to rewards. The way to poka-yoke the tactical and operational activities is by matching roles to tasks (by job and task definitions), people to positions (by talent positioning), processes to outcomes (by process mapping) and resources to rewards (by investment analysis). By doing these matches (which are very much akin to matching equipment to operating conditions and material results to material inputs in a technical process) one can achieve better certainty with lower errors in day to day managerial processes.

Signal recognition is a key aspect of tactical and operational poka-yoke. Experimental results invariably come out as digital or analogue readouts. Managerial results come as a mix of signals, often with lot of noise, making recognition and readout difficult. Compounding the problem is the unwillingness or diffidence of managers and leaders to recognize contrarian or unexpected signals. Signals are of different types. Some signals warn us of economic or business cycles; these are often sharp and can be recognized more easily, more so they tend to impact firms collectively. Certain other signals reflect a technological or business discontinuity; these can be muted initially but can be reflective of an impending structural transformation. These tend to be weak signals mostly. The ability to recognize weak signals and analyze objectively helps managers and leaders poka-yoke their processes.

Each day, a judgment day

In technical processes, each experiment is an opportunity to vary conditions and inputs that can provide new results which, in turn, can form the basis for new experiments until the feasible and optimal results are achieved. In managerial processes the reverse is probably true. Each day's results provide an opportunity to verify if the parameters chosen are the right ones for obtaining the right outcomes.

Posted by Dr CB Rao on April 9, 2013


1 comment:

Unknown said...

I found this post informative and interesting. Looking forward for more updates, thanks for sharing. . .
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