How Much of Your Company's Improvement Potential Are You Still Burning?

Picture: an AI-generated visualization of lost opportunities.

CEOs, COOs and CFOs need to measure and report the performance of their improvement system, not just the results of individual projects. Asking "Should we use AI?" should be rephrased to "Where is the measurable business value, and why are we not getting more out of it?" The Board of Directors should require that the Executive Team reports at least annually on how much of its improvement potential it is actually capturing.

If your company spent $X million on Lean, Six Sigma, automation, transformation and AI last year, is spending $Y million this year, and is budgeting $Z million to spend next year, what percentage of the available improvement potential did or will that investment actually capture?

I am sure that most executives, let alone board members, cannot answer this question. Does it matter? It surely does. Just think about it for a while. Companies can have tens or even hundreds of active improvement programs, improvement departments, expensive technology, trained Black Belts, AI initiatives and continuous improvement programs, and still leave most of the improvement potential untouched. From a shareholder or owner perspective, leaving the potential untouched is essentially the same as burning cash in a bonfire. This does not improve customer or employee satisfaction either. There is seldom only one bonfire, but many. The management does not have any dedicated means of spotting them, despite all the technology and measurements. The old rule "A lost dollar is lost forever!" still applies. The lack of a proper "radar" for detecting and prioritizing the bonfires cannot be compensated for by activity. Activity does not equal improvement performance, and improvement performance does not equal business value. To understand the underpinnings of the business problem, it is worthwhile to consider Return on Investment (ROI) from three distinct perspectives:

1. ROI of the individual improvement ("Did this project pay off?").

2. ROI of the improvement portfolio ("Did we spend resources on the right projects?").

3. ROI of the improvement system itself ("Is our way of improving producing the maximum possible return?").

Most companies concentrate on the first ROI. Some consider also the second ROI, but very few the third ROI. Any CEO, COO or CFO should ask: "How do I know whether the money we're spending on process improvement is actually producing enough economic value?" The dilemma is that most organizations measure the output of the improvement program, but not the performance of the improvement program itself. You may hear that:

• "We completed 200 improvement projects!"

• "We trained 500 employees in Lean!"

• "We launched 80 Kaizen events!"

• "We automated 40 workflows!"

• "We reduced cycle time by 12%!"

None of these answers the real executive question: "What percentage of the improvement potential available to the organization are we actually realizing?" This question can be answered by the Process Improvement Yield (PIY; 0-100%):

PIY (%) = Plan Quality (%) × Plan Coverage (%) × Implementation Quality (%) × Implementation Coverage (%)

PIY is the answer to that third ROI question, the one almost nobody in the room is asking. PIY is not primarily a process improvement metric, but a management metric judging whether the organization's improvement investments are economically worthwhile. Because the formula is multiplicative, weakness in any one factor drags down the whole score, and it compounds faster than most executives expect. A company scoring a respectable-sounding 70% on all four factors isn't realizing 70% of its potential. It's realizing about 24%. Push any single factor to 0%, and the total is 0%: a high-class improvement plan with no coverage is useless, and a zero-quality plan with full coverage is equally useless.

The first half of the formula, plan quality × plan coverage, measures your "bonfire radar": how well you find and prioritize the improvement potential that exists. That's improvement effectiveness. A 100% score here means you've disclosed the full potential, in performance terms (time, quality, cost) and financial terms (including the net present value of specific initiatives). The second half, implementation quality × implementation coverage, measures how well you convert that disclosed potential into results. That's improvement efficiency. A 100% score here means every resource is optimally aligned to harvesting what the first half found. Getting selection right, high-quality plans with full coverage, has to come before automation, not after.

To make a rough assessment of whether your company knows the ROI of its improvement system, you can answer the following five questions with a "yes" or "no":

1. Do we know our total improvement potential?

2. Do we know how much of it we actually realize?

3. Do we know whether we constantly select the highest-value improvement objects?

4. Do we know the quality of our improvement plans?

5. Do we know whether our improvement process itself is performing efficiently?

If the answer to most is "no", then your company does not really know the ROI of its improvement system. Why not introduce a yearly HPPI-expert-verified PIY score that is reported to the Board of Directors? This would provide a natural spark and motivation boost to start deploying resources where it really matters, for the benefit of all stakeholders. After all, the Board of Directors, and the executives are there for the company's stakeholders, not only for the owners. A high PIY score assures that the improvement needs of the customers, employees and owners are taken care of properly at the process level. Without more satisfied customers and employees, it is harder to make the owners happier. Getting there starts with knowing exactly where you stand today.

Recommended Next Steps

HPPI / VISTALIZER is modular, so you can build the setup that fits your organization. Four practical starting points (links to external sources):

• Get your annual board-level PIY score. The VISTALIZER Acid Test, run by a seasoned HPPI expert, is what turns "we think we're improving" into a number the Board can actually track year over year.

• Build the concept and understanding internally. Share the idea of focusing on measuring and improving PIY with the process owner who'll drive it, starting with the free VISTALIZER for Enterprises (VfE) app available in the App Store and Google Play, and its Executive's Handbook and Audio Blogs. For deeper grounding, read the Preface and Chapter 1 of High-Performance Process Improvement. The Preface is free to download at springer.com.

• Disclose the real potential of one key process. A VISTALIZER Report is a focused, few-week engagement that surfaces a single process's true improvement potential without a heavy time ask from your team.

• Build the skills to execute. Expert-led training using the VfE app scales from a single half-day session up to a 14-session program, depending on how much capability you need to build.

Happy to walk any of these through directly: pdca@vistalizer.com.