Bootstrap #Root #Cause #Analysis into Your Strategic Thinking

Article written by Jon Miller

 

I have had some interesting differences of opinion lately about if and how root cause analysis fits into an organization’s strategic planning. Both hoshin planning, the strategy deployment method practiced by Toyota and many other lean companies, and the practical problem solving method have common roots in TQM, Deming and the scientific method. The mainstream lean position goes that strategic planning is just another form of PDCA problem solving wherein the gap to be closed is not between the standard and the current performance which fails to meet it, but rather the gap between the current best performance and a vision of what it could be. Those who don’t see a role for root cause analysis in strategic planning say that it is fundamentally different, the gaps between the current and the vision are widespread and complex, and therefore root cause analysis is not useful.

Let’s take a moment to put both problem solving and strategy development in a common frame of logical thinking. For ease of recall, I have worded this into 7 sentences, starting with letters A through G. With tongue in cheek, let’s name it “A-G Thinking”.

• Apprehend what the problem really is in terms of gap of current versus the ideal.
• Bring to light the addressable reasons for the gap or gaps.
• Choose the experiments to address the reasons for the gap.
• Do the experiments.
• Evaluate the process and results of the experiments performed.
• Feed new standards and knowledge gained from the successes and failures into the new reality.
• Go back to A.

In problem solving, root cause analysis is not the Holy Grail. A testable countermeasure that addresses the root cause of the gap between current situation and target situation is the Holy Grail. The same is true for strategic planning. The process of arriving at the testable countermeasures is only measured by how reliably it performs. Both the countermeasures we arrive at and how we arrive at them matters.

Strategic thinking is commonly focused on revenue improvement in the form of entry into new markets, either by region, consumer segment, price point, product / service variety or focus, innovation / category creation, etc. The common mistake people make when using root cause analysis as part of the strategy development process is that leaders have a set of usual suspects of strategic options. In the unfettered exchange of ideas for improvement, some may indeed come before root causes analysis has been fully performed. While de-selection and narrowing the focus are critically important, failing to understand cause and effect, failing to make the logical chain of causation of gap-cause-countermeasure, and failing to get out of the conference room and go to the gemba to confirm the existence of these root causes, is what causes many expensive strategy documents to succeed only by luck.

Why is it so important to have a logical chain of causation?

It’s only important if we wish to test our ideas and learn form mistakes. We can do that through guesswork and storytelling or based on data from experimenting with cause-and-effect relationships between gaps and reasons for them. Whether in problem solving or developing strategy, I wouldn’t bet against the persistent application of the scientific method.

Root Cause Analysis is about asking, “Why are we in this current situation?” and “How did it happen?” as well as “What are our assumptions about the current situation and the likely course of things should no actions be taken?”

In Strategy Development we often can ask, “What can close the gap?” but the only way to test our ideas in practice and learn more about reality is to have at least hypothesize a cause-and-effect relationship. We know the effects – the gaps between current and desired situations. In order to select the right strategic initiatives, a.k.a. countermeasures, we must look for the causes for the gaps.

Examples of growth-related strategy questions that get at the root causes:

“Why are customers buying from the competitor, and not from us?”

“How can we grow our revenue by 20% sustainably?”

Or simply

“Why does the gap exist?”

Root cause analysis is especially important for thinking about strategy development is that it requires us to approach reality with humility. When strategic planning is simply idea generation followed by a narrowing of the strategic initiatives down to the few that the leadership team will commit to, this is just another form of solution-jumping. It is what one of my sensei used to call “making happy plans” because we choosing among the ideas to which we are partial to achieve our strategy, often regardless of hard facts or cause-and-effect hypotheses. Even for the unhappy strategic plans that force us to choose difficult, unpleasant actions when an organization is in duress, we jump to solutions. In this case, companies in duress are more likely to employ the traditional practical problem solving which includes the root cause analysis. Perhaps there is something in root cause analysis that takes the cheer out of strategic planning? In fact, cognitive scientists have identified “optimism bias” as a false believe that people hold in terms of underestimating the chances of bad things not happening to them overestimating the chances for good things happening. Combined with executive egos, yes men and a fear culture that buries bad news data, strategic plans lacking root cause analysis are often built on little fluffy clouds.

In the words of Robert F. Kennedy, “There are those who look at things the way they are, and ask, ‘Why?’ I dream of things that never were and ask, ‘Why not?’” Both are great questions. When strategies are failing, we need to address root causes. When strategic planning is failing, we need to address root causes. When root cause analysis is not delivering good strategic options, we need to ask, “Why not?”