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Author: Erich Kreidler

The Evolution of Six Sigma: Continuous Improvement Using Network Analysis

Traditional process improvement techniques like Six Sigma, Lean and Kaizen have enabled the successful transformation of innumerable companies over the last few decades.

Even though they are based on a scientific approach to improve processes and increase the quality of the output, their relevance has decreased considerably. In fact, as effective as they were in the past, they are critically flawed for delivering the same impactful change moving forward without additional, new solutions.

The Need for Faster and More Integrated

Our world has changed radically since the beginning of the century. All elements of the modern enterprise are highly dynamic, complex and require high speed. Companies nowadays rely on elaborate processes, driven by global networks that provide resources, skills, and inputs to satisfy the demand of audiences dispersed around the globe. Take for instance, bringing to market a smartphone. For a smartphone to meet minimum consumer standards, the solution must have a tight integration between its operating system, hardware, software, user communities, etc. Each of these components is created by distributed networks, who must find a way to integrate seamlessly in the eyes of the customer. It is no longer feasible to consider each area independently and expect a major improvement in overall performance if changed.

In contrast, conventional process improvement techniques typically work well when things are relatively stable and are localized (say a manufacturing plant), but react very slowly in more dynamic environments (say integrating Uber Eats’ supply chain). Each technique – control charts, process mappings, etc. – was designed to analyze a specific, localized area and maximize its efficiency. So, if you have a product that interfaces with the market, the implementation of concurrent, independent process improvements may not converge.

An Emerging Science: What is Network-Based Process Analytics?

Network analytics arose from the perspective that organizations work around issues, tasks, and activities – not processes or organizational charts. Thus, the basic building blocks of an organization’s effectiveness are individual, day-to-day interactions between people. These interactions happen within networks of decision and influence, large and small, operating within teams, between departments, and across the entire company, even across partner companies. These networks tend to take on a life of their own – and often they have little to do with the formal organizational structure and, in many cases even the documented processes.

kreidler 062117 1An easy way to understand network analysis is to realize that organizations work just like the human brain. If neurons do not connect effectively, then your brain will spend more effort to perform a given task. Similarly, if people (the organization’s neurons) are not integrated properly, the result is inefficient processes and lower than optimal organizational performance.

A solid Network Analysis methodology provides a structured approach for achieving performance uplift. It should give management visibility to understand fundamental elements in an organization to make meaningful changes:

  • Communication networks: Examines the flow of information across the organization in the processes under study
  • Influence networks: How individuals influence decisions and activities within the organization. It provides visibility of the influence level of each stakeholder in the process
  • Decision networks: Studies the networks that drive core decisions. This proves the misconception that it is the CEO or the Big Boss have the final word in day to day decisions

Rethinking Process Engineering

Process improvement methodologies identify waste (or non-value add) and value add activities. The idea is to stop activities that are a waste and redeploy those resources toward activities that produce value. Thus, to be effective, tools must quickly identify, diagnose, design and synthesize processes in situations with a high order of complexity.

The traditional way to look at a company is through the lens of the organizational chart, with its hierarchies, “dotted lines” and other forms of structure but is this the way people perform their work?

According to Dr. Michael Mann, “An organization that is thought to operate in accordance with its formal org chart – DOESN’T.” This is because enterprises are dynamic and organize around tasks, not charts. Also, when performing tasks people will gravitate toward the path of least resistance, not what is most efficient and productive for the company. Therefore, if we are going to make enterprise-wide improvements, we must recognize that processes, tasks, and people are highly dynamic.

Network Analytics are Organizational MRIs

Network analytics is the equivalent of taking an MRI inside the organization: you need accurate instruments and the ability to interpret their results. Let’s explore a few scenarios to understand how processes can be improved drastically through the aid of such tools. The processes below are examples captured using Argonaut™, a leading organizational network analytics tool. In these examples, the 3D diagrams, lines show actual interactions between people in an organization, their frequency (thickness) and the perceived importance associated with such interactions (color). You will also notice that in several instances, a line leaves a node with a specific thickness and a color, but connects to a different node in a different thickness or color. This is a documented disagreement between stakeholders and therefore a sign of process pathology.

All Interactionskreidler 062117 T1 Enterprise processes can be very complex.  Interactions between consequential stakeholders vary in frequency, importance and agreement levels. There is organizational noise; deeper analysis is required to understand the opportunities for improvement.
High-Frequency, High-Importance – Disagreedkreidler 062117 T2 High Frequency, High Importance disagreements display areas that require attention. High Frequency and Importance typically means that at least one party is spending significant effort to push a task forward. When this is not reciprocated, it yields waste.
High-Frequency, High-Importance – Agreedkreidler 062117 T3 High Frequency, High Importance agreements are the tasks that everybody agrees makes the organization move forward. In a restructuring, these are the key areas that must remain undisturbed.
High-Frequency Low-Importance – Agreedkreidler 062117 T4 Agreed Low Important interactions are in brief, misallocated efforts. Everybody agrees that such tasks do not add significant value, but are done following an empty process ritual. Stop doing them, especially the ones with High Frequency.
Emergence View™:  Identifying influencers and decisions makerskreidler 062117 T5 In a network Emergence View, what “emerges” at higher levels are the real decision makers and their degree of influence, regardless of organizational rank. These are the people who get the job done (or not!) as nominated by their peers.

As-Is, Should-Be, As-Of

The application of network analysis should not be a one-time shot. An “As-Is” study performed at the beginning and allows management to understand the current state and therefore gain an order of magnitude estimate for required changes. This should be complemented with a “Should-be” assessment by stakeholders based on their unique perspective in the organization. The target state is a negotiated agreement that takes the As-Is and the Should-Be.

“As-of” analyses provide an objective state of the processes under study as of a given date and allows you to objectively measure progress. As-of’s are performed throughout the life of change process to ensure that the organization is making progress as planned. In addition to being a very effective tool to monitor the pace of change, it allows management to correlate improvements in company processes with the desired outcomes.

Key Benefits of Using Network Analysis in Process Improvement

In a fast-changing business environment, we need to look for new tools to make process improvement effective. Network analysis is becoming a key component of organizational process management in the 21st century as it blends processes, people, and their interrelations. Understanding and addressing such complexities can improve speed to market, innovation and turn monolithic processes into major organizational weapons. As important, it helps to ensure that any network analysis goes beyond the superficial “social network” and connects the true interactions that result in actions taken by company personnel and other decisions regarding resource allocation.

Process improvements will result in the following three areas:

  1. Alignment to the Business. Are processes typically aligned to where the largest payoffs would be? The reality is that most process improvements methods do not even think about creating a repeatable link to creating business value. Network analysis can provide management with continuous visibility to identify where the largest payoffs will be – and monitor their progress. As shown above, management can perform an “MRI” of consequential organizational processes and visually identify the areas that need the most attention. As important, a broader study would also point out if the support systems are performing their function aligned to the key business drivers. 
  2. Recognize invisible connections with external processes. Enterprise processes are highly interactive and connected. They are dynamic and have interdependent interfaces. This is, if you make changes to a process, it will have a cascading effect on other processes, typically causing disruptions. Network analysis allows you to look at the system holistically: identify the process you are planning to improve, and it will tell you what the areas in the company that you need change at the same time are. You will get this information FAST without weeks of endless classic process mapping and stakeholder interviews.
  3. Anticipate outcome before all changes are implemented. Network analysis gives you a simple tool to monitor the process of change, and therefore you can make near-time interventions. By identifying the links that need to be created, changed or decommissioned, you can create a specific change plan and monitor how each change affects the outcome. This is a fundamental departure from classic process improvement initiatives. By employing techniques such as As-is, Should-be, and As-of, you monitor the process change, not the end state of change, thereby giving management ample opportunities to make tactical course corrections as needed.

About the Authors

mmannDr. Mann is the Chairman of Creso Global, an international consulting practice applying the latest insights from neuroscience, behavioral economics, and best-practice project management. He has served as an advisor to corporations and government agencies around the globe, including the United Nations; as the CEO of a diversified high technology company with industrial, commercial, service, and aerospace business units; as the founder of successful engineering, manufacturing, and service arms; as an outside director of both public and closely held high technology and health services companies; as a member of the Board of Examiners of the Malcolm Baldrige National Quality Award; and on the Army Science Board, where he chaired the Directed Energy and Ballistic Missile Defense panels. Email: [email protected]

ekreidlerErich Kreidler, Managing Partner of KRE Consulting, has more than two decades of organizational consulting, management, and leadership experience. Erich, who heads KRE’s Project Management and Operations practice, is recognized for his expertise and experience in integrating complex organizations to generate optimal results; helping organizations scale for rapid growth; and the development of responsible and responsive crisis management processes. Kreidler lectures at USC’s Viterbi School of Engineering at the graduate level and has also served as a panelist, moderator and keynote speaker for several industry conferences and summits. Erich is also a founding member
and president-emeritus of the Institute of Industrial Engineers, Orange County, California Chapter. Email: [email protected]

Business Acumen as an Integral Part of Project Management, Part I

Project management’s conventional wisdom leaves substantial opportunities to deliver business value.

The project management profession has gone through a tremendous evolution over the last three decades. Major trends, such as globalization, access to resources across the planet and the sheer complexity of projects, have pushed project managers to a level of sophistication never seen before. To adapt, project managers have developed new methodologies, standards, processes, and generally accepted best practices. While extremely important and required for success, these new norms are not sufficient to ensure projects remain relevant to the organization through their life cycle. In fact, recent studies performed by Gartner and other analysis firms are consistent in their reports that more than half of the projects do not meet expectations of the business. Why?

The answer is relatively simple. The missing ingredient in the standard project management practice is the systematic understanding and adjustment of actual value creation as the project is executed.

Why is managing the triple constraint not good enough?

Most of the tools that project managers (PMs) employ in their daily activities are designed to balance the project’s classic triple constraint: cost, scope and time. Typical project management metrics include comparing estimates created during the planning phase against the actuals incurred during execution. None of these metrics provide an accurate representation of the actual value the company is gaining in the execution of the project. They are a mere compilation of tactical numbers that, while very important, they do not paint the whole picture of value creation.

Metric Answers the following question(s)

Schedule variation (estimated duration – actual duration)

  • What is the duration of a particular activity?
  • Are we executing faster, slower or at the same pace as we had planned?

Percent completion (planned completion – actual completion)

  • What percentage of the work has already been completed?
  • Are tasks taking more, less or the same effort to complete as we had planned?

Cost variation (estimated cost – actual cost)

  • Is the project on budget?
  • If not, which areas contribute to the highest variation of in costs? 

For instance, consider the following two scenarios:

  • A project is “on budget” and “on schedule”, but the product it intends to build has been rendered obsolete by a competitor. Are the efforts and investments of this project of real value?
  • A project is 20% over budget. This project included additional functionality that is expected to increase the project’s ROI by 50%. Should the project be flagged as mismanaged?

Does the triple constraint ensure that the day-to-day decisions are made following the true spirit of what the project is intended to deliver?

Bridging the Gap

Project managers are responsible for initiatives that are critical to the business. Therefore, project managers should have a solid foundation built on business acumen. Business acumen can be simplified as one’s ability to deliver tangible business value (i.e. make money). This is not the same thing as just managing costs – any mediocre project manager can do that. Making money requires additional fundamental skills. In his bestseller book “What the CEO Wants You to Know”, Ram Charan provides a simple, yet powerful framework for creating the building blocks of business acumen.

Here are some of the fundamental business acumen questions every project manager should be able to answer:

  1. Cash
    1. Does the execution of the project increase or decrease the company’s cash position? Is there a difference in time between the receipt of additional cash created by the project and the payment of its costs?
    2. If the project is burning cash (decreasing the cash position), what is the criticality of this cash to the organization and how can it be optimized? Is there a possibility to negotiate contracts that are aligned?
    3. What is the difference between the project costs and their net result to the company’s cash flow on a monthly basis? Is this causing a problem or an opportunity for the CFO?
  2. Margins
    1. What is the direct impact of the project toward the margins of the company’s products or services?
    2. My project can reduce the cost of producing a widget, but can it increase the revenue (price) it brings to the company?
  3. Velocity.
    1. How will the project enable the organization to increase its speed to market and therefore increase the company’s return on assets?
    2. By how much? (Yes, a PM should be able to calculate this number).
  4. Growth
    1. Is your project going to increase the quantity of products or services that the company offers?
    2. How are the project’s contributions aligned to enable such growth?
  5. Customer
    1. Everything around customer service: What are the major sources of client dissatisfaction? Is the project addressing them by reducing opportunities for failure, automating lengthy manual processes?
    2. Now the hard question: Is your project aligned to increase the customer base for your company? For instance, can I take an existing product or service that works well in an industry and use it in a similar industry?

      As important, are you willing to be accountable for moving the needle in any or all of these five areas?

The job of the organization?

Projects are typically preceded by a business case, project charter, project concepts and similar artifacts, where executives document the business decisions that affect the 5 business levers described above. These artifacts generally do a good job to baseline the spirit for initiating the project and are expected to serve as the compass to move forward. However, this approach has a fundamental flaw: a business case is already outdated the date after its release. We live in a world that is moving too fast for static business plans. A business case may be irrelevant 6 months into a 2-year project, but the triple constraint must not be disturbed to ensure good project management. Nonsense!

Therefore, whether formally charged with this task or not, project managers have to make daily, tactical decisions that will have a direct impact on the company’s bottom line. Why not equip them with the right knowledge and skills to make the right decisions as the projects get executed?

Business acumen skills can be learned.

In my many years executing projects and training project managers, I have found that business acumen skills can be learned in a systematic manner, just like you would learn the mechanics of building a Gantt chart. It starts with the awareness that business acumen is an integral part of project management and the open mind to learn about the exciting world of business. As a first step in this journey, I recommend you to read Ram Charan’s book (please see above), but there is no substitute for practicing. If you are currently managing a project, actively find ways to improve the business levers by tweaking the triple constraint. If you are working for a public company, read the annual report (10-K) in detail and find opportunities to improve its business fundamentals – maybe even by sponsoring and leading new projects. Practice will make your very comfortable linking business to project management and will increase your relevance to the organization exponentially.


  • Managing time, cost and scope is just the basic. To excel, project managers must go beyond the current project management practices and ensure that their projects bring full business alignment.
  • Project managers must have a solid understanding of the fundamentals of the money making machine. They must be able to make relevant business decisions as the project gets executed.
  • Business acumen is a skill that can be learned and subsequently applied systematically across projects.
  • Project managers must be comfortable with accountability beyond ‘the triple constraint’ that reflects the actual business value delivered