Why the average is always wrong. 5-Bullet Friday Newsletter

by @reagan No Comments
The Average is Always Wrong Webinar

Welcome to this week’s 5-Bullet Friday where we share insights, learnings, tools, and tips on making changes happen.

The majority of our certified learners all claim that earning a Lean Six Sigma certification gives them a lot of perks. They not only confirm particular expertise and capabilities but they also help to establish them as highly marketable professionals.

Investing in yourself is the best investment you will ever make!

Getting to grips with data

During the last couple of months, we have had more and more conversations with people who want to be more comfortable with data and understand the basic concepts behind statistics. Our education systems seem to make things worse, not better!

We have therefore decided to re-launch a series of webinars starting with 101: Why is the Average Always Wrong | An Introduction to Basic Statistics

This is a short 45 mins webinar that is open to all our members where we will break down, simplify and explore how understanding basic statistics can improve our decision making in what we do.

Discover the webinar >

Noise, Noise, Noise

In one of our previous newsletters, we talked about the challenges we all face to identify the difference between something which is important, and what is just noise. We jump continually between tasks and competing priorities, from one flavour of the month to another, and by doing so we often miss those opportunities where we can create real value!

Daniel Kahneman’s Thinking Fast and Slow has been on the top of our essential reading list for all Black Belt candidates but he has just launched a new book called “Noise”. Noise explores the idea that not only do we have variation in our processes, but we have variation in our decision processes as well. It is no way near as good as Thinking Fast and Slow – but it shows how all business decisions and decisions generally are influenced by a wide range of factors and from one day to the next we may not make the same decision each time.

One of the most shocking examples of how this impacts us all is that judges, after reviewing an identical case, gave prison sentences that varied between 3.5 years and 10.5 years for the exact same offence.

Finding Opportunities (Runners, Repeaters and Rarities)

The 3R is a simple tool to help identify and evaluate if we are working on the right projects. We have activities and processes that happen every day or even 1000’s of times per day. We also have activities that happen fairly regularly, perhaps once a day, once a week or once a month. And then we have things that happen rarely.

When we are looking for projects and improvement opportunities, we want to be focused on Runners – things that happen multiple times per day and are the core of what the team or department does. This could be answering customer calls in a service centre, fulfilling daily e-commerce orders, processing loan applications for example. These are the bread-and-butter of what we do. A small 30-second improvement in processing time is suddenly multiplied by the 1000’s of times we do this activity each day.

3Rs Runners, Repeaters and Rarities

Repeaters on the other hand are predictable tasks that are less frequent. They happen once a week or perhaps once a week. A small improvement with a repeater has a small impact as the process happens less frequently. So we generally need larger improvements in our repeaters to have the same improvement impact.

And now, we must learn to avoid rarities. These are processes or issues that happen rarely. We can not normally plan for them. They are single occasion processes. The challenge is that when they go wrong, they tend to make a lot of noise, cause a big impact and quickly get senior management attention. There is no point in trying to fix the process for a rarity. How long will you have to wait to see if the issues are fixed? It might never happen again.

So when identifying opportunities, avoid the rare events that make a huge impact and look for those smaller improvements that when multiplied by high volumes, make the real difference.

Do You Have Vanity Metrics In Your Business?

We love this one! A vanity metric is where the data is not actionable and not auditable. You can identify vanity metrics because they do not map to a clear, meaningful effect on your business.

The key here is that the data we collect must be actionable. Looking at how many Facebook likes a page has is worthless if no one is actually buying the products. Vanity metrics exist for bragging rights and for raising profiles, but they can be very destructive if used to manage the business.

Quotation

“They change the stars that cross the sea but not their souls” (unknown)

The Value Creation Economy

Businesses that continuously create the most value within a market win. And it is not just value creation for your customer, but also the value we create for our employees.

When we look at customer value and customer empowerment, we see the gap between those people that build products and those that experience them has almost disappeared.

We have to:

Be close to the customer
Discover new value
Create value in the moment

Lean Thinking is to continually strive to create more and more customer value and eeradicateeverything else that gets in the way.

Lean Academy

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