Gap analysis through data analysis turns data into information.
As part of the model we explore information and gap analysis and how that links all of the other pieces together. See statistical data analysis graphic and how it completes the model. There are multiple reasons for doing data analysis. Most are to do gap analysis between expected, a standard or the competition..
Any organization that wants to be successful must have a structured way of gathering data, analyzing data and doing gap analysis. All important areas should have data collected and then turn that data though statistical data analysis into information. Data in of itself is really not worth very much. It is only when the data is tortured by statistical data analysis to reveal information that it becomes valuable. This gap analysis can vary in complexity and sophistication from some very simple averages and histograms to complex regression analysis.
Data collection for gap analysis can be done for a number of reasons. In every area we have discussed thus far there should be data that is analyzed to produce information. Based on information better decisions should result at all levels in the organization. A few of the uses of information resulting from statistical data analysis follow:
Monitoring. Any number of things can be monitored from market conditions, performance of various parts of the organization, competitor actions/performance, etc. The gap analysis is to assure that on going performance does not vary too much from target. When done correctly, gap analysis prompts action in the the area being monitored. All of the statistical process control rules for special cause variation are examples of action criteria from monitoring. These rules make it easy to do gap analysis and know when action is required. Deming always warned against tampering –that is making special cause corrections for a system that is in statistical control. When a process is in statistical control common cause variation is present and a system improvement is required and entirely different solution is needed.
A business strategy will have a number of key performance areas each with a number of metrics that are the leadership wants to improve. It is always an interesting exercise in gap analysis to find out what is improvement, or which direction is good. Is there a targeted goal for each metric and are we on target for achieving that target. Multi-period efforts that do not meet the target and come as a surprise to management are a clue that an adequate monitoring system is not in place and on going gap analysis is not in place. Measurements and performance indication should show if progress is being made or not. Seldom do efforts go for 11months with no change and then in the 12th month all of the benefits are realized. On going gap analysis from the the plan can prevent some very ugly surprises.
With proper reporting and tracking the Six Sigma projects should deliver in the areas important to achievement of the Strategic Plan.
Benchmarking. A favorite tool gap analysis. One of the early steps in any effort is to understand the current performance. We recommend understanding the cycle time for every one of your processes as well as those best in class. This can then be used as a Benchmark against other organizations that have a similar process that difference is simple gap analysis. A Benchmarked point is also valuable in determining if activities and efforts associated with a Six Sigma project have had any impact. A caution against using a single point value for doing the gap analysis. Frequently there are cyclic patterns, seasonal effects and other influences that should be considered. At a minimum we believe you should look at the average over some period and then compare that average with an average over a similar period of time after implementing a project. Of course the variation should also be considered while doing gap analysis. Several months of poor performance followed by one exception month can easily yield the same average as the entire time period at moderate performance levels, yet the information from the gap analysis is much different. Some Benchmarking has very structure statistical gap analysis and other use a more qualitative gap analysis of the data collected.
In most organizations there are several areas that are important. A common flaw in Benchmarking is to target a single performance metric. Most organizations do not have a clear understanding of the interrelationships and can improve one area to the detriment of another. An example of this is in the area of waste. It is relatively easy in many processes to change the waste from solid waste to air emission or liquid waste. Concentration on only one of these as a metric can often result in no net change is the total pounds to the environment. If the gap analysis is just for one type of emission misunderstanding can occur. The waste just changes form from a solid to air emissions or to liquid and moves from one to the other with no net change in actual waste. The correct gap analysis is for each type of emission and also gap analysis for total emissions.
When benchmarking for a Six Sigma project collect data from multiple time periods and for several different metrics a gap analysis can be done on each of the metrics. At a minimum, know the historical average performance and variation before attempting to do any sort of gap analysis.
Data Analysis. Other flaws are the reorganization efforts that eliminate staffing especially in support functions with large claims of savings. The remaining people in a different cost center are still doing the work often in a less efficient fashion. Activity Based Accounting can burst the bubble on many of these pseudo savings efforts. When the Purchasing Department is rationalized and line people pick up the slack it is not uncommon to find that productivity has decreased and the actual cost to do the Purchasing activity has increased rather than decreased as claimed. Without a system to accurately collect and analyze data mistakes of this type are common.
As a suggested gap analysis activity to find out if this is a problem in your organization, go back five years ago and find out the total cost structure for a business. Then document all of the improvement ideas and projects during that five-year period and the claimed savings (both single points in time and those that were to carry forward). Use a simple time value of money and do a gap analysis on your are actually realizing vs.the benefits claimed from all of those projects. In one case a VP of Manufacturing claimed that if all the benefits from projects over a five year period were real he would need no raw materials, no energy, no payroll and would be able to double the production.
Six Sigma projects can make major improvements in service and staff functions, just be sure that the measurements to do the gap analysis capture what is really happening. It is easy to transfer costs from one function or location to another. Make sure your projects return the benefit to the organization as a whole.
Prediction. Another very valuable use of data is make predictions. One of the favorite tools is regression analysis. In fact one of the main reason for using statistics of any kind to gain some capability to make predictions. Many organizations have very sophisticated regression models for many facets of the business. The computer folks have added to our lexicon GIGO—Garbage In Garbage Out. Any prediction model is only as good as the inputs. Sensitivity analysis of any model is high recommended. In fact some people have conducted Designed Experiments on purchased proprietary models to gain a better understanding of the factors and interactions.
As you make decisions we encourage you to take to heart the mantra
In God, We Trust…All others bring data. Once the data is in hand however it must be tortured with analysis to disclose information. Time, resources and capability all influence the amount of torture you will inflict upon your data to get it to reveal its information. Only with information do you have a true competitive advantage.
For small business having adequate resources to collect and manage the data is frequently an issue. In today's environment a fully functional computer system is essential. For those who do not have an internal IT department or need help we recommend you use a organization that provides small business resources consultants.
Quotes that Inspire
It is not the ship so much as the skillful sailing that assures the prosperous voyage. George William Curtis
The most important thing about a man is what he believes in the depth of his being. This is the thing that makes him what he is, the thing that organizes him and feeds him; the thing that keeps him going in the face of untoward circumstances; the thing that gives him resistance and drive. Hugh Stevenson Tigner
Forgive yourself for your faults and your mistakes, and move on. Les Brown
If you don't invest very much, then defeat doesn't hurt very much and winning is not very exciting. Dick Vermeil
First say to yourself what you would be; and then do what you have to do. Epictetus
"Effort only fully releases its reward after a person refuses to
We grow because we struggle, we learn and overcome. R. C. Allen
Failure is never fatal and success is never final. LaShawn Evans
It is better to be prepared for an opportunity and not have one than to have an opportunity and not be prepared. Whitney Young, Jr.
You are today where your thoughts have brought you; you will be tomorrow
where your thoughts take you.
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