Continuous improvement: Build a culture that drives efficiency and results
17-minute read
Continuous improvement is an organized way to constantly get better as a business. It can make your company more profitable, efficient and innovative.
“Entrepreneurs should develop a culture of continuous improvement to make their business stronger and more competitive,” says Lalit Bhushan, a Senior Business Advisor and industrial engineer with BDC’s Advisory Services, who coaches entrepreneurs on operational efficiency.
“If you don’t change, you’ll become a dinosaur that disappears because it can’t adapt to the evolving environment.”
We always want to change for the better. We want to ask ourselves: What is the process and how can we improve it so it becomes perfect or closer to perfect?
Lalit Bhushan
Senior Business Advisor, BDC Advisory Services
What is continuous improvement?
Continuous improvement is a structured way to constantly improve a company’s operations and products with incremental steps.
“We always want to change for the better,” Bhushan says. “All work follows a process. We want to ask ourselves: What is the process and how can we improve it so it becomes perfect or closer to perfect?”
Continuous improvement is rooted in operational efficiency methods, especially the famed Kaizen methodology.
Kaizen, which means “change for the better” in Japanese, was developed by Toyota as part of its legendary system of striving for greater efficiency.
Continuous improvement can be implemented with a variety of methods. They’re all typically used to achieve one or more of these four goals:
1. Reduce/eliminate waste in business processes
Not the stuff that goes in the trash can, but rather wasted effort, time and resources. Waste is anything which doesn’t add value and which a customer won’t pay for. The lean methodology focuses especially on addressing waste.
2. Reduce/eliminate variation
Key to quality control is consistently producing high-quality products. The Six Sigma methodology is particularly concerned with reducing variation.
3. Reduce/eliminate inflexibility
Processes should be flexible. This means they can be flexibly applied by any worker and on any shift. The Theory of constraints methodology is often used to improve business flexibility.
4. Increase digitization
Digitization can accelerate the three other process improvements. “We always try to digitize the process,” Bhushan says. “That’s how we can link together all the improvements and help them become sustainable.”
What are the benefits of continuous improvement?
Continuous improvement can benefit your company in numerous ways, such as:
- increased profitability, sales and competitiveness
- reduced costs and greater productivity
- enhanced product/service quality, delivery, customer satisfaction and brand reputation
- fewer errors and accidents
- greater employee engagement, happiness and retention
- facilitated compliance with regulations, standards and certifications
- a culture of innovation
- better resilience and adaptability to changing conditions
4 continuous improvement methodologies
Businesses can choose from several different continuous improvement methodologies depending on their challenges. “The kind of problem defines what kind of tool you need to use,” Bhushan says. “A handyman has different toolboxes; which one they use depends on what they need to do.”
Here are four of the most commonly used methodologies.
Lean
Lean is a methodology focused especially on reducing waste—i.e. non-value-added activity in a business. It’s often associated with manufacturing, but it can be used for any kind of company. Lean uses three steps to eliminate waste.
1. Go and see
First take a physical tour of your facility to see how work is done. The goal is to identify the 8 types of waste in the business:
- Overproduction—Producing sooner or more than needed.
- Waiting—Idle employees or equipment.
- Transportation—Excessive movement of materials or products.
- Inefficient operations—Unnecessary or non-optimal operations.
- Inventory—Excess inventory.
- Motion—Unnecessary employee movement or activities.
- Poor design—Poorly designed products (or services) that take more time to produce (or deliver) than planned.
- Poor quality—Rework due to inefficiencies, suboptimal processes or poor information.
One tool for doing the walk-through is the Gemba walk. This is a structured way to observe and record what’s happening in the workplace.
Waste vs. value-added work
2. Ask why
Next, ask why a process or task is done in a certain way. Break down processes into individual tasks and understand why they’re done that way. Is this the optimal way, or just how it’s always been done?
3. Analyze with your team
Analyze processes to see if they contribute to the top line. Think about how to reduce or eliminate any that don’t.
It’s vital to include your team. They’re the ones executing the processes every day and likely know best what works, what doesn’t and why. Their participation is also key for finding and implementing the best solutions.
Six Sigma
Six Sigma is a methodology primarily focused on improving quality control and reducing production variability. It can also reduce errors and costs and boost customer satisfaction. The name comes from the goal of reducing variability so that errors are limited to six standard deviations, or no more than 3.4 errors per million units.
Six Sigma uses six steps:
- Define—Know the problem and set a clear goal.
- Measure—Collect data on the problem.
- Analyze—Propose possible solutions.
- Approve—Involve the team.
- Implement—Put into action the solution.
- Control—Measure the results.
Theory of constraints
Theory of constraints (TOC) is a methodology geared mainly to identifying and addressing constraints or bottlenecks in a business. It follows these five steps:
1. Identify constraints—Use process mapping to visualize your system and identify places where there’s a delay. Then determine the causes of the delay. You can use tools like the “five whys” approach—asking “why” something is happening several times—or a fishbone diagram.
Example of “five whys” approach
Example of fishbone (Ishikawa) diagram
2. Improve output—Find ways to improve output or performance at the constraint. For example, if the constraint is a machine that’s often offline for repairs, possible solutions could be using the machine more efficiently, maintaining it better or operator training.
3. Subordinate other processes—Adjust other activities to produce no more than the constraint can handle. This reduces the pile-up of work ahead of the constraint.
4. Elevate constraints—If the problem remains, you may need to invest more in eliminating the constraint. This could include upgrading the machine, hiring staff or changing processes.
5. Monitor and repeat—Use data to gauge the results. Repeat the steps on other constraints and bottlenecks.
Agile
The “agile” approach has its roots in software development, though it’s increasingly used in other industries and has been adapted as an operational efficiency methodology. Agile typically revolves around these principles:
- Incremental improvement—Focus on small, frequent improvements rather than major radical change.
- Cross-functional teams—Assemble cross-functional teams from different departments or functions to bring diverse perspectives to problem-solving.
- Customer-centric—Improve processes that directly impact customer satisfaction.
- Continuous feedback—Regularly get feedback from customers and your team to refine processes.
- Visual tools—Use Kanban or other visual tools to manage and track changes and make them more transparent.
- Sprints—Work in short work sprints on specific goals as a way to maintain a sense of urgency and momentum.
- Ownership—Empower teams to have a sense of ownership over their work. Hold regular meetings to reflect on progress and discuss improvement.
Digitization supports the whole journey. It helps to sustain the changes.
Lalit Bhushan
Senior Business Advisor, BDC Advisory Services
How to implement continuous improvement
Making changes in a business can be hard. It can cause disruption and require investment of time and money. Employees may need training and convincing that the change will make things better for them.
“Change management is critical,” Bhushan says. “Some companies make a lot of effort and devote a lot of time and energy, but don’t get expected results. It’s often because they didn’t manage the change well to make sure they had acceptance from the team.”
To implement continuous improvement, Bhushan recommends following four steps known as the Plan-Do-Check-Act (or PDCA) Cycle.
1. Plan
Ensure company leadership is fully committed to continuous improvement. Create a dedicated team or person to lead the process. Hire an outside efficiency expert if you don’t have someone in-house familiar with improvement methods and how to guide them.
“You need to have a good person who can lead, mentor and coach,” Bhushan says. In the Kaizen approach, this person is called the “sensei”—which means “teacher” in Japanese.
Also, define what you want to achieve with continuous improvement. This should be aligned with your business strategy. Along with your team, identify:
- problem areas
- bottlenecks in your business
- key processes that would benefit most from improvement
Then, brainstorm solutions and identify ones that will have the greatest impact.
“There has to be a proper leadership and vision so everybody has a common goal,” Bhushan says. “Vision is always key. It could be: ‘I don’t want to see any paper on the shop floor.’ Or ‘I don’t want to see any oil leaking from the machine.’ Then people start thinking: ‘How can I create this inspection sheet with digitization?’ Or ‘How can I fix the machine and clean up the workspace?’ It starts from the vision.”
To identify priority challenges and solutions, you can use the following tools:
- Pareto analysis (sometimes called the 80-20 rule)—Pareto analysis is based on the idea that 80% of effects are due to 20% of causes.
- Fishbone (Ishikawa) diagrams—Fishbone is a five-step tool to find, visualize and analyze underlying causes of issues and develop solutions.
- Structured problem solving—This seven-step process uses root-cause analysis to fix challenges.
2. Do
Create an action plan for implementing the most impactful solutions. Identify who is responsible for each initiative, a timeline, and milestones or key performance indicators to gauge progress.
Some examples of key performance metrics for a company competing on cost or value include:
- labour efficiency
- defect rate
- on time delivery
- product reliability
Having the right metrics ensures that your continuous improvement efforts are directly focused on creating value for the customer, making you more competitive.
Also think about how to help your team adapt to the changes. Do they need training? How will you communicate about the change with employees, customers and suppliers? What are potential impacts on order fulfillment, operations and cash flow?
Put changes into motion. Consider first testing them on a smaller scale, then make any needed adjustments and implement more broadly.
3. Check
Measure your success. Meet regularly with your team to discuss progress on initiatives and whether you’re on-target. Make needed tweaks and celebrate achievements.
Some experts call this step “Study,” but the same actions are performed. The PDCA Cycle in this case is known as the PDSA Cycle.
4. Act
As the term implies, continuous improvement isn’t a one-off activity. It should be part of your company’s culture and routine. As you achieve elements of your action plan, add new initiatives to improve even more. Welcome employee and customer feedback, review what went right and wrong, and learn as you go.
Use data to understand the impacts and optimize your efforts. Standardize successful changes. Update your standard operating procedures and communicate successes.
The plan-do-check-act cycle (PDCA)
How can I use technology for continuous improvement?
Technology and continuous improvement go hand-in-hand. Using digital tools allows you to streamline processes more easily, use data to become more efficient and automate tasks.
“Digitization supports the whole journey,” Bhushan says. “In my experience, wherever a business works on continuous improvement, it’s more successful if it adopts digitization. This helps to sustain the changes. Without digitization, companies have a harder time sustaining progress and sometimes go back to the old way of doing things. If they digitize, they have much higher chances of success.
“Digital tools give you a clearer window into your business. Your processes are more transparent. If a task isn’t done, you know automatically. You get an alert: done or not done. Now all businesses have to be digitized. If they’re not, they will not be successful. Who will you order the pizza from? The one with no website and no menu online?”
Digital adoption can also help businesses perform better. Companies that extensively use digital technology have much higher growth and are more likely to export and be resilient, according to a BDC study in 2022.
Examples of continuous improvement
Continuous improvement projects can vary from small projects (cleaning up or organizing workspaces) to large-scale investments, such as buying a more productive machine.
Efficiency experts often advise starting with small quick wins to get the ball rolling. Examples:
1. Create a neater, cleaner and more efficient workspace
This can decrease time searching for tools or information, make workers more productive and reduce accidents and errors. The 5S methodology is a good tool for this.
2. Improve supervisors’ management skills
Better management can help improve the productivity of your workforce. Management training and improved communication can be useful.
3. Implement performance dashboards
Data is crucial for gauging progress on your continuous improvement journey. Dashboards allow you and your team to see the data you need to make better decisions and sustain changes.
Once you’ve taken care of lower-hanging fruit, you may be ready to tackle a bigger project. These could include:
Rearranging your workspace
A badly laid-out workspace could be adding costs to your business and contributing to wasted transportation and motion. Rearranging your facility can lead to significant efficiency improvements.
Kaizen blitz
If you’re ready for more radical changes, consider a Kaizen blitz. Kaizen brings together cross-department teams to break paradigms and completely rethink how you work, all in a compressed timeframe. The goal is launching a small controlled revolution to reach a higher level of performance or dramatically transform complex processes.
How to promote a culture of continuous improvement in the workplace
At the heart of continuous improvement is a sustained, long-term effort to make your business perform better. The idea is to make change part of daily activities and the company culture.
Swedish entrepreneur and innovation guru Lisa Lindström offers these five tips to sustain a workplace culture focused on continuous improvement and innovation:
- Increase employee participation—Make your team feel involved, heard and trusted.
- Encourage learning—Create opportunities for training, mentorship and celebrating your team’s curiosity.
- Build trust and transparency
- Foster engagement
- Start small—Start with a few quick wins that build inclusion, trust and a momentum of success.
Bhushan agrees: “Continuous improvement should be part of the regular process. People sometimes think it’s an addition to their routine tasks. It should be part of your routine. That’s how change for the better becomes integral to your business culture and mindset.”
Next step
Download our free guide for entrepreneurs, Create a Leaner Business, to learn more about the basics of operational efficiency. You can also start talking with one of our experts to launch your continuous improvement journey.