W. Edwards Deming in the 1950’s proposed that business processes should be analyzed and measured to identify sources of variations that cause products to deviate from customer requirements. He recommended that business processes be placed in a continuous feedback loop so that managers can identify and change the parts of the process that need improvements. As a teacher, Deming created a (rather oversimplified) diagram to illustrate this continuous process, commonly known as the PDCA cycle for Plan, Do, Check, Act*:
- PLAN: Design or revise business process components to improve results
- DO: Implement the plan and measure its performance
- CHECK: Assess the measurements and report the results to decision makers
- ACT: Decide on changes needed to improve the process
Deming’s PDCA cycle can be illustrated as follows:
Deming’s focus was on industrial production processes, and the level of improvements he sought were on the level of production.
In the modern post-industrial company, these kinds of improvements are still needed but the real performance drivers often occur on the level of business strategy. Strategic deployment is another process, but it has relatively longer-term variations because large companies cannot change as rapidly as small business units. Still, strategic initiatives can and should be placed in a feedback loop, complete with measurements and planning linked in a PDCA cycle. To illustrate the relationship of business unit processes to strategic processes, we may construct two nested PDCA cycles:
This ‘wheel within a wheel’ describes the relationship between strategic management and business unit management in a large company. There are actually several separate business units, of course, each with its own set of metrics, goals, targets and initiatives. But this figure illustrates the idea that the business activities constitute the DO part of the overall strategic effort.
* Note: The PDCA cycle was in fact originally developed by Walter A, Shewhart, a Bell Laboratories scientist who was Deming’s friend and mentor, and the developer of Statistical Process Control (SPC) in the late 1920s. So sometimes this is referred to as the "Shewhart Cycle". There are also several recent variations on this concept. See The Man Who Discovered Quality by A. Gabor, Penguin Books, 1990.