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.

Habit-Building

I'm really liking The Power of Habit:  Why We Do What We Do in Life and Business by Charles Duhigg.  Taken along with the Mike Rother's Toyota Kata, you have the basics of what it takes to create a continuous improvement culture.

For clarity's sake, I define a continuous improvement culture as an environment in which we strive to improve every process, every day, with everybody involved.  No improvement is too small, we don't batch all our improvements into big projects, and anybody in the organization can be an improvement leader.  For more information on this concept applied to healthcare, see Graban & Swartz' book Healthcare Kaizen.

Anyway, in Duhigg's book, the habit-building loop is presented.  It has three components:

1. Trigger:  this is the cue to perform a routine
2. Routine:  this is the standard steps performed to arrive at the desired result
3. Reward:  this is the payoff for performing the routine on-cue

When these three elements are in-place and clearly related, a craving eventually forms.  This craving causes the habituated person to anticipate the reward at the trigger point, even before performing the routine.  This phenomenon is the indicator of a well-formed habit (for better or for worse!).

While Duhigg's book is about the science behind habit-forming, Rother's book is about the habits needed to drive continuous improvement.  Specifically, he emphasizes two habits (he uses the term 'kata'):

• Improvement Kata:  this is a 4-step routine that helps us 1) see the ideal condition to which we strive, 2) study the current condition to see our gaps, 3) set a short-term target condition to pursue that is on the path to the ideal condition, and 4) pursue the target condition using PDSA (another 4-step routine).
• Coaching Kata:  this is a routine, drawing upon the Socratic Method of teaching (asking questions instead of giving answers), that is designed to reinforce the proper execution of the aforementioned Improvement Kata.

So, how do we put in place the three elements of the habit-building loop for the two kata?  How do we create a craving for the kata?  The routines (element #2 of the habit-building loop) are established by Rother's book.  The other two elements, triggers and rewards, are TBD for me personally.  Some thoughts:

• Triggers:  eventually, the ideal would be that the trigger is the detection of a problem/gap/opportunity for improvement, but in the short-term, more artificial triggers may be needed (i.e. require each manager to perform one PDSA cycle per month...not a long-term solution, but can get the ball rolling in the short-term).
• Rewards:  eventually, the ideal would be that the reward would be the intrinsic motivators of mastery, autonomy, and purpose (see Daniel Pink's Drive), but in the short-term, more artificial rewards may be needed (i.e. gamification:  badges, achievements, recognition, compliance tracking, small gifts, etc.)

This type of habit-building is tricky business.  Culture change is hard.  It takes a wide range of knowledge, organizational finesse, and a lot of trust and patience on the part of senior leadership.  But the payoff is huge.  A culture of continuous improvement is the best, most sustainable competitive advantage available.