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					Analytical Problem Solving
Gemini Skills Workshop
August 1998
Learning objectives


• Understand the key steps in the problem solving process.


• Learn tools and techniques that are available
  for each step of the process.




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Analytical Problem Solving

             “The significant problems we face cannot
         be solved at the same level of thinking we were at
                       when we created them”
                           - Albert Einstein




       “The difficult is what takes a little time; the impossible
                     is what takes a little longer”
                            - Fridtjof Nansen

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As consultants we need to have a structured approach
to problem-solving

• We work in groups.
• We work with complex problems.
• Other consultants or clients may have to continue our work (e.g. in
  later phases of the project or when implementing the solution).
   – Need to know “where we are” and what has been done
   – Need to understand the process that leaded to the result/recommendation
• A structured approach helps the client follow “where we are”
• Our solution will be shared with people that did not take part in the
  problem solving process.
• It is easy to miss a step.
• Current steps often seem less important than future steps.




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       Key steps in the problem solving process

                                           Determine                                                                     Follow-up
           Clarify        Investigate       Decision          Identify                Evaluate       Implement
          Problem           Causes                            Solutions               Solutions       Solution              and
                                            Criteria                                                                      Measure


1. Determine      1. Identify        1. Determine   1. Determine            1. Compare with   1. Prepare action   1. Measure
   what we know      possible           criteria       solution                decision          plans               expected
   and what we       causes                            approach                criteria                              benefits
   don’t                             2. Determine                                             2. Prepare follow
                  2. Design tests       decision    2. Develop              2. Decide on         -up plan and     2. Collect
2. Gather                               process        solutions               solution(s)       measures            feedback
   information    3. Perform tests
                                                                            3. Validate       3. Implement        3. Incorporate
3. Identify       4. Determine                                                                                       feedback into
   constraints       causes or re-                                                                                   ongoing work
                     test
4. Determine if
   you should     5. Determine to
   proceed           proceed




                      There are many variations of this process, but these are the basic
                      steps you should follow.

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STEP 1: CLARIFY PROBLEM




  Clarify the problem

                                  Determine                                                 Follow-up
     Clarify        Investigate    Decision   Identify              Evaluate    Implement
    Problem           Causes                  Solutions             Solutions    Solution      and
                                   Criteria                                                  Measure




            Steps                             Tools (examples)
             1.Determine what we              • What we know/What we
               know and what we                 don’t
               don’t
                                              • 5 W`s and 1 H
             2.Gather information               (What, Where, When, Who,
                                                Why and How)
             3.Identify constraints
                                              • 5 Whys
             4.Determine if you
               should proceed                 • SWOT (strengths,
                                                weaknesses, opportunities,
                                                threats)



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STEP 1: CLARIFY PROBLEM

Clarifying the problem is the most important step in
this process

• A problem can be defined as a gap between where we are and where
  we want to be. This gap should be measurable.

• Be aware that “perception is reality”. Although some client problems
  we encounter are very logical and factual, such as machine
  breakdowns, most client issues are based on people’s perceptions of
  problems, such as poor customer service.

• Because of this, most problems will no require an optimal solution,
  but will have many adequate solutions.

• Ensure that the problem statement accurately depicts the client
  situation. It will determine your entire course of action.




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STEP 1: CLARIFY PROBLEM - EXAMPLE




 These are the steps involved in clarifying the problem

 1. Determine what we know and what we don’t. Using a table with What,
    Who, When, Where, How, and Why can help define what information
    needs to be gathered.

 Example: Urgent customer requests are not being addressed.
                   What We Know                                  What We Don’t Know
  What             Customers are complaining about               Are requests being lost, forgotten,
  or not           lack of responsiveness                        answered initially?
  Who              Only customers with urgent                    E-mail, voicemail,or telephone
                   requests or rush orders                       communications?


  Where            Headquarters                                  Customer place of origin
  When             Problem only in last two months
  Why              No documentation of requests or               System error? Not recorded by
  service          orders                                        agent? Message not received?
  How

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STEP 1: CLARIFY PROBLEM




Steps to clarify problem (continued)

2. Gather the information you need in order to define the problem
   statement. You may begin to identify possible causes, but that should
   really be done at a later step.

3. Identify constraints - Who is the client for this problem and what is
   important to that client? Consider time frame (short-term vs long-term),
   costs, resources required, level of effort vs value-added, etc.

4. Define the problem statement. Validate the problem with the client. Do
   we agree that this is really the problem at hand?

5. Determine how to proceed. Seriously consider if the time and effort
   involved creates enough benefit or if this problem will disappear as the
   result of other activities.



                 Most importantly, this step frames the investigation before we begin
                 tackling the causes.

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STEP 2: INVESTIGATE CAUSES - EXAMPLE

 One very easy way to understand and define a problem
 is to ask “Why?” 5 times (5 Whys)

  Real Client Example:

  • Why are we shipping orders late?
    Because we can’t meet our production schedule.

  • Why can’t we meet our production schedule?
    Because we are constantly changing it.

  • Why do we change it?
    To accommodate late orders from our customers.

  • Why do we have late orders?
    Because many of our customers don’t know what their orders are by
    the order cut-off date.

  • Why do we have a cut-off date?
    So we can create a production schedule and meet our shipping dates.


                        Client problems may require several iterations of the 5 Whys.

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 Strengths, Weaknesses, Opportunities, and Threats
 (S.W.O.T.) can clarify complex issues and define
 direction

   – S.W.O.T. analysis is a general tool that can be used across key areas:
      • Product mix
      • Profit/pricing
      • Promotions
      • Space management
      • Supply chain
   – Definitions:



                     Strengths                                                   Weaknesses
Exploited strategic capabilities and/or market                Exploited strategic capabilities and/or market
positioning providing a competitive advantage in the          positioning possessed by competitors creating a
market place.                                                 competitive disadvantage in the market place.

                    Opportunities                                                   Threats
Unexploited strategic capabilities and/or market              Unexploited strategic capabilities and/or market
positioning which could provide a competitive                 positioning which could provide a competitor a
advantage in the market place.                                competitive advantage in the market place.


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STEP 2: INVESTIGATE CAUSES




  Investigate causes ( or perform analysis)

                                   Determine                                                 Follow-up
      Clarify        Investigate    Decision    Identify             Evaluate    Implement
     Problem           Causes                   Solutions            Solutions    Solution      and
                                    Criteria                                                  Measure




                   Steps                            Tools (examples)
                    1. Identify possible         • Hypothesis
                      causes                     • Surveys and interviews
                    2. Design test               • Fishbone (cause and effect)
                    3. Perform test              • Pareto
                    4.Determine causes or        • Root cause analysis tools
                      retest                     • DuPont tree
                    5. Determine to proceed      • Financial, statistical, database
                                                   analyses
                  We use two general methods to approach problems - using analogies
                  to previous experience and breaking the problem down into smaller
                  pieces.

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STEP 2: INVESTIGATE CAUSES




 Step 2 is to investigate causes of the problem

 1. Identify possible causes. We need to do this in order to carve out a
    manageable piece of work by narrowing the scope of the problem to the
    most probably causes.

 There are many tools we can use to investigate causes. The two basic ways
   to analyse problems for causes are:
        – Use analogies. We naturally relate the current problem to our previous experiences. As experts,
          we should be able to develop plausible hypotheses to explain the problem.
        – Break the problem into smaller subsets of problems (chunking). In conjunction with our
          hypotheses we can also dissect the problem into its variable components and determine which of
          these components is most likely to be causing the problem.




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STEP 2: INVESTIGATE CAUSES




 Now we are ready to test our possible causes

 2. Design tests or analytics. Tests can include surveys, interviews,
    process flows, pareto analyses, control charts, etc. it is unlikely that
    you will have to create an entirely new analytic because so many
    already exist, in Gemini and externally. Well-designed tests should
    directly prove or disprove hypotheses and should consider one
    problem variable at a time.

 3. Perform tests. Ensure that the test will not be a burden for the client
    and that they want to do it. Otherwise, the results may not be
    accurate.

 4. Determine causes based on test results. (Or re-test, if necessary)

 5. Determine how to proceed. Is the cause within our sphere of
    influence? How does it compare with our constraints?

                  It seems logical that the next stop would be to develop solutions. but
                  to make our time more effective, we should plan ahead to determine
                  what a “good” solution looks like.

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STEP 2: INVESTIGATE CAUSES - EXAMPLE

 The Fishbone or Cause and Effect Diagram is simple
 tool for investigating causes
                              CAUSES FOR A CAR NOT TO START:
                            Man                   Machine
                                                                  Dead battery
                    No gas                                                   • Left lights on
                    Lost keys              Bad choke                         • Bad Switch
                                                                             • Electrical
                     Wrong fuel              Worn out
                                                 Lemon
                            No oil
                                                Vapor Lock


                                                                                                                     Car will
                                                                                                                     not start

                                         Out of tune                             Don't know                Too cold
                                                                                  how to start
                                                                                      • Rental
                                                                                                      Parts Stolen
                                  No antifreeze               Repo'd
                                                                                                 Gets wet in the rain


            Material                   Methods                                 Milieu (Environment)



                          “5“ M fishbone - Man, Machine, Materials, Methods and Milieu
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STEP 2: INVESTIGATE CAUSES - EXAMPLE

 Supply Chain fishbone is an ‘mental model’ for looking
 at a business
      Purchasing & Vendor
                                                                                                        Production Control,
               Mtg.
                    Supplier                                                                                Inventory
     Partnership    selection
                       Performance                                                                          Capacity       Reliability
               EDI         measures
                                                                                                            Safety stock      Maintenance
     Sourcing terms         Vendor alliances                       Information Mgt.
                                                                                                               Lead time       Reliability
             Supplier base Auditing
            Certification                             Common databases             Networking
                                                                                                               Change over        Cycle time
                  Contractor Lead time
                  reduction   New product                          Accessibility     Transparenting
                                                                                                                           BOM      Quality
               management           development                        Real time      Bar coding
                                                                                                                    Forecasting           Complexity
               Quality material       MRO                  Aligned with operations        User training
                                                                                                                 Monitoring turns          Labour training
                              TQM        JIT                  Timing of processing          Cycle time
                                                                                                                           Scheduling         Stock accuracy
                       All-in-one cost     Forming consortiums           Data accuracy         Trust in the system
                                                                                                                              Real time        Data accuracy
                        Transportation         Procurement                Measurements           Reliability
                                                                                                        Standardised coding                       Labour climate
                               Cycle time       Raw material packaging         Data capture Management reports
                                                                                                            Consumption rate                                             Supply Chain
                                Order size         Order                Modes & lead times           Driver training              Cycle time       Corporate scorecard
                                                                                                                                                                         Effectiveness
                             Frequency         EDI                        Transportation         Return logistics                          MTBF/MTTF
                                                                                                                                    CSF’s Planning & objective
                           Bar coding      Cost order              Vehicle maintenance         Warehousing                          OEE   setting
                   Segmentation          Pricing                     Network/routing        Driver tracking                      KPI’s       Break-even time
                     Verification     Know your customer DRP optimisation Modes of freight &
                                                                            Labour climate                                   SOP’s         Sales & op. planning
        Lead time on orders         Perfect orders         Cost of fuel   packing                                           ABM          Customer loyalty
         Order processing        Transportation costs              Regulations       LTL vs. FTL               Cost of quality      End-to-end measures
        Payment terms         ECR                              Outsourcing    Intermodel networks Compensatio         Quality & availability of
                                                                                                       n rewards      measures
  Distribution/logistics     Promotions                      Scheduling      Electronic tracking
                                                                                              Budget variances    Tracking & reporting
    Order error rate       Accounts receivables        Goods in transit   Insurance
                                                                                                 Continuous     Total consumption
        Discounts       Inventories                        Sourcing     Inventory management
                                                                                               improvement      systems
   Vendor mgt.       Credit control                      HVOV’s       Cross-docking                          Connectivity to other
   Customer        Order status record             Service point      Damaged goods                                    core processes
        Order                                               Distribution                                       Performance
      Fulfilment                                             Logistics                                          Measures

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STEP 2: INVESTIGATE CAUSES - EXAMPLE




 A “DuPont” tree is a structured way to look at causes
                                   Price
                                                   Revenue
                                  Volume


                                   Sales
                                                                         Earnings

                                 Materials


                                Production           Costs

                                Overheads
                                                                                         EVA
                                 Marketing
     Risk-free rate
                                               Capital employed
          Beta                Cost of equity

                                                                       Cost of capital
     Risk premium               Total equity
                                                 Ave cost of
                                                   capital
                               Cost of debt


                                 Total debt
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  We rely heavily on surveys and interviews to
  gain information quickly - Example Culture
  Survey
Please complete the following questions by circling the appropriate number on a scale from 1 to 6, where 1=strongly disagree and
6=strongly agree. Answer the statements according to the ‘way it is’ in your organisation at the moment on the left column. Then move to
the right-hand column and respond according to ‘the way it should be’ in your opinion. There are no right or wrong answers. Please
answer all questions from your own perspective.
  Strongly disagree               Disagree                    Agree                     Strongly Agree

  1                       2         3                           4                   5         6

          Please circle                                                                                          Please circle
          The way it is                                                                                       The way it should be
                                        1.   People here act when they see things that need to
      1   2   3   4   5       6              be done                                                          1   2   3   4   5   6

                                        2.   People in this organisation try to resolve their
      1   2   3   4   5       6              differences constructively                                       1   2   3   4   5   6

                                        3.   People here readily accept responsibility for their
                                             actions and decisions
      1   2   3   4   5       6         4.   Cost is one of the most important factors taken                  1   2   3   4   5   6
                                             into account before decisions are made here
                                        5.   Inconsistencies exist between what is said and
      1   2   3   4   5       6              done. Managers don’t ‘walk the talk’                             1   2   3   4   5   6

                                        6.   People here constantly explore new and better
                                             ways of doing things
      1   2   3   4   5       6         7.   People here listen to customers and respond to                   1   2   3   4   5   6
                                             their needs
      1   2   3   4   5       6         8.   There is a concerted effort to perform better than               1   2   3   4   5   6
                                             the competition


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  We use focus interviews on every Analysis and
  Design project
                                        Focus Interview Guide
General Information

 1)   Years with Company::            _______________________________

      Years in current position:      _______________________________

      Number of reports:              _______________________________


 2)   a) What is your understanding of your company’s top three business objectives?




      b) What is your company’s vision?




 3)   a) What are your group’s top three business objectives?




      b) How are they (or will they be) measured?                                Your Group
                         Overall
 efer back to the scope graphic on page 1 if the concept of GTS is not clear.)

 4)   What do you consider to be your group’s three greatest strengths?
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Pareto’s Law states that 20% of the sources cause 80%
of the problem

                     $35M
                                       Customer Service Complaints Pareto Analysis

                       30



                       25
 Occurrences/month
     Number of




                       20



                       15



                       10



                        5
                                                            2       2
                                                                              1                1        1
                        0
                             No one   Routed to Don’t    Unhelpful Don’t Hard to          Gum       Discourteous
                            Answers   wrong     know the           return underst         chewing
                             Phone    person    answer             calls and


                                         Customer Complaints about our Customer Service

                                We can use this principle to determine where to focus our
                               improvement efforts

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STEP 3: DETERMINE DECISION CRITERIA




   Determine Decision Criteria

                                      Determine                                                 Follow-up
       Clarify         Investigate     Decision      Identify           Evaluate    Implement
      Problem            Causes                      Solutions          Solutions    Solution      and
                                       Criteria                                                  Measure




              Steps                                        Tools (examples)
              1.Determine criteria                           • Decision modelling
              2.Determine decision                           • RACI charting
                process
                                                             • Criteria weighing
                                                             • Quadrant analysis




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STEP 3: DETERMINE DECISION CRITERIA




  The third step is to determine our decision criteria


  • Determine the decision criteria. Refer back to the constraints.
    Consider:
        – Needs vs. wants
        – Long-term vs. short-term
        – Interim steps
        – Risks
        – Costs
        – Timing
        – Desired benefits
        – Ranking or prioritizing the decision criteria (most important to least important)

  • Determine decision process. Who needs to be involved in the
    decision? Who has final say? What method will we use - voting,
    client chooses, numerical rankings, a dart board?

                                      Doing this now avoids looking foolish later.

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Quadrant Analysis provides a framework for making
decisions

 – Quadrant analysis is a general tool that can be used across different levels of analysis:
    • Corporate portfolios
    • Customers
    • Products

 – You can compare any two axes relevant to your problem:
    • Quality vs. cost
    • Market share vs. market potential
    • Volume vs. margin
                                      Market
                                        Share


                          Sleepers                          Winners    Market
                                                                       Growth



                       Questionables               Opportunity Gaps




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  And then helps determine possible actions based on
  your findings - Example Quadrant Decision Matrix
                                Possible
        Quadrant             Category Roles                                           Possible Actions

Opportunity gaps             Profit contributor    • Review planograms - are category and fastest movers underspaced?
(Higher growth/low share)    Variety image         • Review pricing mix - is pricing of key items too high versus market?
                                                   • Review promotions - are category and key items under-promoted versus market?
                                                   • Review product mix - is mix wrong for target customer segments? Any new, faster-
                                                     moving items not being carried?
                                                   • Tie-in promotions with higher margin consumption items

Winners                      Traffic draw          •   Continue current programs
(High share/higher growth)   Cash generator        •   Increase promotional support
                             Price image           •   Review space management to ensure minimal out-of-stock potential
                                                   •   Add good performing items not carried but available in market
                                                   •   Be first with new items
                                                   •   Review pricing and gross margins to see if selected price reductions can enhance
                                                       image and increase growth and share

Sleepers                     Profit contributor    • Review product mix versus
(Good share/lower growth)    Transaction builder




Questionables                Profit contributor    •   Review product mix versus market (variety index)
(Low share/lower growth)     Variety image         •   Delete poorest performance items (brands, flavors, sizes)
                                                   •   Raise prices if appropriate
                                                   •   Promote category to meet market
                                                   •   Minimize space allocated



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                                                           Anal Prob ol v5.ppt
Key steps in the problem solving process

                          Determine                                                 Follow-up
  Clarify   Investigate    Decision       Identify          Evaluate    Implement
 Problem      Causes                      Solutions         Solutions    Solution      and
                           Criteria                                                  Measure




                     Steps                                      Tools (examples)
                     1.Determine solution                        • Various Gemini
                       approach                                    methodologies
                     2.Determine solutions




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                                      Anal Prob ol v5.ppt
STEP 4: IDENTIFY SOLUTIONS




 Finally, we can develop solutions


 1. Determine solution approach. This can be almost anything, like:
        – Brainstorming
        – Benchmarking
        – Best practices
        – Modelling techniques, e.g., decision modelling, business modelling, process modelling
        – Vision engineering
        – Organisation design
        – Any number of Gemini methodologies

 2. Develop solutions. It is good practice to develop alternative
    scenarios, if applicable.




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                                                Anal Prob ol v5.ppt
  Benchmarking can provide a gauge of “what good
  looks like” - Purchasing KPI Benchmarks
                                                                       Average     Benchmark
                  Key Performance Indicator                           Benchmark      Range

         •     Purchasing function expense as a                         0.3 %     0.06% -> 3.0%
               percentage of sales
         •     Purchasing function expense as a                         1.2 %     0.7% -> 7.0%
               percentage of purchase value
         •     Purchasing headcount as a percentage                     1.1%      0.3% -> 4.5%
               of total company headcount
         •     Active suppliers per purchasing                            50        6 -> 182   1
               employee
         •     Percentage of all active suppliers that                   20%       5% -> 75% 2
               account for 90% of total purchase value
         •     Average actual time to                                   9 wks      2 -> 26 wks
               develop/negotiate a contract
         •     Percent of deliverables received on-time                  88%       63% -> 98%
               within the most recent 12 month period

1: Median = 39
2: Median = 91
Source: Center for Advanced Purchasing Status
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                                                Anal Prob ol v5.ppt
We can also benchmark best practices - Purchasing
Best Practices

       Company                                       Best Practice/Strength

• Outboard Marine    • Partnering: establishes 3-5 year contracts with suppliers
  Corporation

• Ford Motor         • Partnering: 70% of North American Automotive Operations’ contracts
  Company              are long term (3-5 years)
                     • New product development: with preferred suppliers, Ford uses “black
                       box” design responsibility. Ford specifies a parts function and lets
                       suppliers figure out the best way to manufacture it

• Motorola           • Partnering: suppliers participate in developing design guidelines for
                       new products
                     • Supplier management: communications sector trimmed its supplier
                       base from 4,200 in 1985 to 1,155 in 1989
                     • Technology: supports a common global database for critical material
                       purchases
                     • Supplier management: has created “Motorola University”, an
                       education and training center in Schaumburg, Illinois where suppliers
                       and its own employees brush up on basic quality concepts as well as
                       learn the more advanced techniques in quality control


Source: Purchasing
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                                        Anal Prob ol v5.ppt
STEP 5: EVALUATE SOLUTIONS




  Key steps in the problem solving process

                                   Determine                                                 Follow-up
       Clarify       Investigate    Decision       Identify          Evaluate    Implement
      Problem          Causes                      Solutions         Solutions    Solution      and
                                    Criteria                                                  Measure




                                     Steps                                       Tools (examples)
                                     1.Compare with                              • Impact/Effort matrix
                                       decision criteria
                                     2.Decide on solution(s)
                                     3. Validate




                                                                                                    - ‹#› -
                                               Anal Prob ol v5.ppt
STEP 5: EVALUATE SOLUTIONS

 Evaluating solutions becomes easy because we have
 already laid the groundwork

 1. Follow the decision process and compare with decision criteria

 2. Decide on solution(s)

 3. Validate solutions with initial constraints and your sphere of
    influence




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                                   Anal Prob ol v5.ppt
                   An Impact/Effort Matrix is a useful tool for prioritizing
                   work and identifying “early wins”
High




                                                                                         Actio
Level of impact (results)




                                                                                          n4
                                                   Actio
                                                    n3




                                  Actio                                          Actio
                                   n1                                             n5
                                           Actio
                                            n6

                                   Actio
                                    n2


                            Low                                                                  High
                                                   Level of effort required

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                                                           Anal Prob ol v5.ppt
Key steps in the problem solving process

                           Determine                                                   Follow-up
   Clarify   Investigate    Decision         Identify        Evaluate     Implement
  Problem      Causes                        Solutions       Solutions     Solution       and
                            Criteria                                                    Measure




                            Steps                                        Tools (examples)
                            1.Prepare actionj plans                      • Workplans
                            2.Prepare followup plan                      • RACI charting
                              and measures)
                            3. Implement




                                                                                            - ‹#› -
                                       Anal Prob ol v5.ppt
STEP 6: IMPLEMENT SOLUTIONS




  Step 6 is to implement the solution(s)


  1. Prepare action/implementation plans. Include responsibilities and
     time frames

  2. Prepare follow-up plan and measures

  3. Do it!




                                                                         - ‹#› -
                                   Anal Prob ol v5.ppt
Key steps in the problem solving process

                           Determine                                                  Follow-up
   Clarify   Investigate    Decision         Identify        Evaluate     Implement
  Problem      Causes                        Solutions       Solutions     Solution      and
                            Criteria                                                   Measure




                            Steps                                        Tools (examples)
                            1.Measure expected                           • Key performance
                              benefits                                     indicators
                            2.Collect feedback                           • Balanced Scorecard
                            3. Incorporate feedback                      • Benefits dashboard
                              into ongoing work




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                                       Anal Prob ol v5.ppt
STEP 7: MEASURE AND FOLLOW UP




 Don’t forget to measure and follow-up!


 1. Measure improvements and compare with expected benefits

 2. Collect feedback

 3. Incorporate feedback into on-going work




                  You will learn more about performance measurement in later sessions

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                                              Anal Prob ol v5.ppt
 In everything we do, Plan (think) - Do - Review

                            Determine                                                    Follow-up
   Clarify   Investigate     Decision       Identify             Evaluate    Implement
  Problem      Causes                       Solutions            Solutions    Solution      and
                             Criteria                                                     Measure


THINK        DO            THINK        DO                    THINK          DO      REVIEW




                                                                                             - ‹#› -
                                        Anal Prob ol v5.ppt

				
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