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By Root 2596 0

starts with the definition of key concepts and a brief historical perspective on this subject. It then provides an overview of the current gap, extent, and consequences (vicious cycle) related to traditional continuous improvement and auditing methods and mistakes (why change). We then examine, the underlying conflicts and assumptions that need to be challenged, (what to change), the solution criteria and direction and details of a solution to break these conflicts and prevent new undesirable effects (to what to change), and finally how to overcome the typical implementation obstacles (how to cause the change) to implementing such a TOC-based continuous improvement and auditing solution.

Key Concepts and Definitions

Continuous improvement (CI) is defined simply as the continual improvement (in organizational or system goal units) over time. CI can also refer to the continual improvement of subsystems, processes, or products or services provided by an organization, but with the warning that unless these “local improvements” can or will contribute to improving the organization as a whole, they cannot be called improvements but rather “local optima.” In fact, the Japanese word Kaizen, made famous by Masaaki Imai’s book (1986), Kaizen: The Key to Japan’s Competitive Success, is frequently used today as a synonym for CI because the translation of “kai” (change) and “zen” (good) literally means “good change” (improvement for the system as a whole). In the context of this chapter, “continuous” is used to refer to all types of ongoing improvement rather than as a way to differentiate small marginal (low-leverage) improvements from large step-change (sometimes defined as discontinuous or high-leverage) improvements.

Continuous improvement process (CIP) is by definition a closed-loop cycle of sequential steps designed to bring about continual improvement through a process of discovery, application, review, and corrective action. The Shewhart cycle (Plan-Do-Review-Act), Six Sigma’s DMAIC (Define-Measure-Analyze-Improve-Control), and TOC’s Five Focusing Steps (5FS) are among the best known.

Change impact is classified into three types, with Type 1 referring to a change that results in a measurable improvement, Type 2 referring to a change that did not result in a measurable improvement or decay (within the “noise”), and Type 3 referring to a change that resulted in a measurable decay in performance of an organization as a whole or a specific process output.

Auditing is defined as an ongoing process of review of an organization, its process, projects, products, services, or subsystem’s performance and compliance against standards or expectations. In the words of Winston Churchill, “However beautiful the strategy, you should occasionally look at the results.” Auditing is an important part of CI in any organization as it provides a practical feedback mechanism for stakeholders with the objective to reduce the time to detect and time to correct performance gaps, variations, or noncompliance. It is in this more general context that the terms “audit” and “auditing” would be used in this chapter rather than the more common use where “audit” refers only to internal or external financial auditing. As part of a CIP, there are typically three types of audits that are done. Compliance auditing is the organization doing what it should be doing (and not doing what it should not be doing). Performance auditing is the organization performing as well as it is expected to perform. Potential auditing is the expectation that the organization do (much) better.

A Historical Perspective—Standing on the Shoulders of Giants

The desire and capability to continuously improve our lives and understandings of the systems with which we interact have played a critical part in the evolution of our species. But it was not until the development of the “scientific method”—initially formulated by Aristotle around 350 BC and improved upon through significant contributions by the likes of Ibn al-Haytham (965–1040), Roger Bacon (1214–1294), Francis Bacon