Ben Taylor, of Red Quadrant, a consultancy operating in the public sector, explains the company’s model to save and improve, which starts with demand analysis and the creation of flow.
Our clients are mostly public sector bodies, all facing reduced budgets and massive savings targets. Cuts, rebranded as savings, have more recently been rebranded as transformation, and the more thoughtful authorities understand that lean can offer a way to achieve savings while protecting (or improving) service quality.
However, the tendency is usually to have a quick look at the big book of lean, chapter 1 (‘Create flow’), and skip forward until they find the familiar-looking chapter 2, ‘Reduce waste’.
“Aha! This is something we understand,” they think. “We’ve been making cuts for years.” Lean is pigeonholed as a process improvement approach, focused on finding and removing waste.
We’ve developed a model called ‘Seven ways to save and improve’, to try to: provide a checklist to make sure all bases are covered when looking for opportunities to save and improve; make the point that transformational change starts with demand analysis and creation of flow, not waste reduction or improved procurement; and conceptualise a model which is based on sensing, responding to, and shaping customer demand.
For us, shaping and analysing demand and creating economies of flow are the most appropriate starting points. Operational reviews might undertake basic analysis of value and failure demand, but not understand real customer needs, as their data is already corrupted by being forced into transactional categories. We seek to bridge the gap between ‘customer world’, ‘service world’ and ‘manager world’ with some simple analysis which looks not only at demand and failure, but also at restorative and innovation demand.
There are two useful principles concealed within these two points:
- If you build a system responsive to demand, you had better be sure that you can respond when that demand changes. We’ve seen many ‘lean processes’ that operate brilliantly for a time, but, when demand changes, the capacity no longer matches and chaos ensues.
- Customer demand in the public sector will come at you whether you like it or not, through the channels and in the ways and for the things that the public actually wants. Once you are capable of understanding what demand is, you can ignore it (but know the consequences), shape it to better meet your needs or put the capacity to deal with it at the actual point of customer contact.
We then come to familiar territory – waste within the project or process, and optimisation of resources. These can be effectively addressed with a set of tools. Most of this is to the good, especially if done well – do you really need levels of sign-off? Can a single hefty form adequately cater for all procurement, from the purchase of postage notes to a new IT suite?
Let’s look at resource optimisation: buildings, people, IT and ‘sweating’ organisational assets in general. In many ways, this is an even easier target, but without prior demand analysis, work economies of flow, and reduction of process waste, resources are optimised to service systems full of waste. The effects are two-fold: first, they lock in the waste at the transformational levels above by building structures that are not fit for economies of flow. Second, they can generate additional cost by forcing optimisation at the cost of inefficiency elsewhere.
Nevertheless, because you are freeing up real concrete resources, if done right, this step generates significant cashable savings. For example, mobile and flexible working allows organisations to identify their staff’s working patterns and tailor provision around them, implementing desk-sharing and working from home to free up the need for leased buildings.
Next, we come to economies of scale, addressing the fact that unit costs reduce as the size of an organisation and the usage level of inputs increase. This is particularly useful to local authorities considering shared services such as HR or Revenues and Benefits as part of their savings strategy, but, as our model demonstrates, this stage should only come after the previous areas have been thoroughly developed, as economies of scale often run directly counter to economies of flow. These savings and improvements should only be sought very cautiously.
Sixth on our model is the optimisation of procurement, which involves creative and flexible thinking. This can include any or all of the following: procure volume, shape the market, reduce or standardise specification, share services, outsource, use the third sector, or multiplying effects. The London Library Consortium, for example, provides a shared Library Management IT system for twelve boroughs, with customer benefits including online access and access to stock, and significant financial savings.
Last on our list is the changing of policy, which wraps around the previous six recommendations as an enabler to future improvements. The policy might change a system by stopping, rationing, reducing eligibility, delaying, or charging for a service, all of which could deliver significant improvements to the organisation. The councils with whom we work are political organisations and may change policy to determine which demand they respond to, thus ensuring a streamlining of the service they offer.
So, approaches which start with economies of scale, resource optimisation or waste reduction (often process improvement) can be delivered through more ‘technical’ change and, while these approaches realise real savings, they risk building ‘waste’ demand and activity into the system. Our ‘Seven ways to save and improve’ model links these as secondary to the more emergent, transformational, and sustainable systems thinking approaches of demand shaping and economies of flow, to create a coherent yet pragmatic framework that focuses on delivering value to meet demand.