3 Steps for Turning Failure Around Through Continuous Innovation

Instead, the root causes of inefficiencies in the VHA system have yet to be identified, or better yet, eliminated.

While costs are clearly measured in the American executive’s psyche, the causes behind those costs rarely are. Now these causes of failure in their system have resulted in 23 American deaths, customers (i.e. veterans) continuing to wait for service, and a system failing everyone it was intended to serve.

For all CEOs, there is a very important lesson here: failure can lead to great success if you and your employees know how to harness it properly. Consider the Virginia Mason Medical Center (VMMC), founded in 1927, which reached a crisis of its own in 2002. Unlike the VHA, which had American taxpayers to fall on to backstop their financial loss, many in the healthcare industry were suffering major pecuniary losses and had no one to turn to. Stakeholders at VMMC recognized if they did not contest and change the way they had always done things, they would have to close their doors. With nurses only able to spend 30% of their time with customers, long wait times for patients to see doctors and a widely held internal belief that defects were to be expected in overall healthcare, for patients, employees, and the local community, the business, and the medical center’s culture were failing.

To overhaul the organization, stakeholders at VMMC turned to implementing lean manufacturing, and the cultural benefits derived from Dr. Deming’s “14 Points of Management.” In a radical rethink of how to best convince individuals that this new way of doing things was needed, teams of workers and executives were flown to Japan to work in various production facilities. Working side by side with Japanese-speaking production workers, nurses, doctors, and executives were able to work in conditions that allowed them to observe and experience first-hand why continuous process improvement knows no specific industry, or geographical boundaries. Whether it’s building air conditioning units in Japan or improving American healthcare, great culture means employees get to spend a higher percentage of time doing things the customer pays for, and less time on wasteful practices that prohibit it from occurring.

Since these ideas are in radical opposition to what American executives typically are taught and believe about employee commitment and engagement, the new CEO at VMMC knew it would be a challenge to change the culture. He really wanted his teams to see and experience things differently in a process the Japanese call Genchi Genbutsu—which means go see and experience things for yourself where the actual work for the customer is accomplished. The team’s experiences in Japan proved that spending more time doing things customers want leads to increased quality, productivity and profitability. Employees’ contributions to these management principles are what make improvements possible. As employees begin to feel their contributions matter, they have, as Deming once said, more purpose in life, and higher levels of dignity and self esteem.

Unlike the VHA, the results at VMMC have been stunning. Productivity increased by 93 percent in targeted areas. For example, walking distance for nurses in the hospital has been reduced by nearly 750 miles per day. This has freed up more than 250 hours which can now be used for direct patient care. Inventory costs have been reduced by $2 million through supply chain reduction and standardization efforts. A new wing with an $11 million price tag did not have to be built since VMMC learned how to use existing space more efficiently. In just one year, overtime and temporary labor costs were reduced by $500,000, and nurse-to-patient time increased from 35% to more than 90%.

What steps can you take to begin improving your culture today?

1. Familiarize yourself with the tools of “Lean Leadership.” Many books have been written that help introduce the basic concepts of lean, including waste reduction and improving efficiency. Behind lean is the principle that all people are great assets in life, and great possibilities abound when minds are turned onto learning and improvement.
2. Regularly visit the place where work is being done and participate as an employee or customer. Or, become a regular on the shop floor, and schedule regular working days for yourself and your staff. Also, if you can buy your products off the shelf, do so. Ask yourself as the Japanese do, what’s the experience like? Japanese execs don’t look at reports, they live at the place where things happen.
3. Don’t wait for a crisis to begin improvements. A 1980 video by NBC News titled “If Japan Can Why Can’t We?” documented the inefficiencies in our plants at that time. Little has changed for American managers, and they continue to fail to nurture workers’ self-esteem, dignity and curiosity by empowering them to improve the conditions and system in which they work.

Our reluctance to learn that which we do not know continues to lead to large corporate failures and layoffs. It is management’s responsibility to wake up to their failures as the stakeholders at VMMC did and those at the VHA did not. The root causes of waste can be identified and eliminated, but waiting until you have your own VHA crisis could very well be too late.