Friday, January 25, 2013

Value = Quality/Cost

Over Christmas break down in the Yucatan Peninsula, I read Dr. Toussaint's book "Potent Medicine." He reminded me of the old equation for value: Value = Quality/Cost. Increase quality and reduce cost and you increase value to the customer. Great concept.

My company, a large healthcare system, defines the 'Quality' part of the equation as Outcomes x Safety x Service. I think that's a great way to look at quality in healthcare.

Taken together, the two equations are: Value = (Outcomes x Safety x Service)/Cost. If you, like me, are in a position of leadership responsible for engraining a lean mindset in a healthcare organization, keep in mind that you will want to connect the dots between each of these components of value. If you don't, there's a distinct possibility that nobody will.

Also, you will want to focus on building the habits needed for increasing value via quality improvement and cost reduction. One keystone habit is the use of PDSA to test ideas when an opportunity for improvement is identified. If you can hardwire that habit, it will set the stage for other positive habits to flourish. Habits such as: going to the gemba to find OFIs, using 5-Why? to get at root causes of problems, and engaging teams of people in problem-solving. To help hardwire PDSA as a habit, another habit, the coaching of PDSA, is critical. Or, to simplify the whole thing a bit, just start talking about, teaching, modeling, and using PDSA all the time for everything.

Improve value. Connect the dots. Hardwire PDSA as a habit. Be a great lean leader.