Money_Doesnt_Grow_On_Trees_GoLeanSixSigma.com

When we envision a project, we often have a pretty good idea of whether or not it could produce a favorable result, but we may not be able to put a value to that result. Sometimes the result we envision is just only the tip of the iceberg, and there are many other impacts, some good, some bad, that might result as well.

In 2001, I was coaching a number of Six Sigma projects and I found that many of them had only vague benefits identified. I had been using the Future Reality Tree as part of my Theory of Constraints work, and soon found it helped clarify the expected results for nearly any project.

The Future Reality Tree (FRT)

The Future Reality Tree starts by assuming that an intended change occurs, and asks “then what?” over and over again, until we:Low_cost_to_scrap

  • Confirm that the change accomplishes the intended result (or not)
  • Find any additional benefits
  • Identify potential adverse consequences

How Does The Future Reality Tree Work?

Let’s start with a really simple example: reducing scrap. If we reduce scrap we will save the cost of scrap, and therefore reduce overall cost. This is so obvious that it might seem silly to dwell much on it, but we will see that there may be much more.

If we reduce scrap we will save the cost of scrap, and therefore reduce overall cost.

The Future Reality Tree starts at the bottom, where we list what is to be accomplished by our project – in this case, “Reduce Scrap.”  Next we ask, “then what?” and list “Lower Scrap Cost” in a round-cornered box.  The square cornered boxes are things that we “do,” while the round cornered boxes are the “effects” of our actions.   We put a green dollar sign next to the box to identify a source of savings or profit.  Asking “then what?” again leads us to “Lower Cost” (overall), which is a good place to stop.

Lower_costIf that was it, I wouldn’t advocate a tool that belabors the obvious. But there’s often more to the story. If we ask “what else happens?” we begin to discover more. The answer depends on the conditions in the workplace. For example, suppose that because of the scrap, we work a lot of overtime to produce additional product. In that case the tree might look like the one here. 

Why The Future Reality Tree (FRT) Maximizes Results

With a little additional effort we can determine the savings resulting from lowering the overtime and then we can then claim a greater gain.  Now suppose we are not working overtime, but simply can’t keep up with customer demand. In this case we’re losing sales because of the scrap. Since producing scrap wastes manufacturing capacity, reducing scrap means we could use that capacity to produce more saleable product, and produce more revenue.

Reducing scrap means we could use that capacity to produce more saleable product, and produce more revenue.Maximize_Results

Note, the additional square-cornered box “More Product Demand” which is critical to selling more product.  If we simply produce more product and don’t sell it, we just increase inventory and internal costs.  The loop which circles the arrows going into “Sell More Product” signifies that both of the contributing conditions (“Make More Product” and “More Product Demand”) must occur in order to achieve the benefit of selling more product.   Of course, if we can sell more product and work less overtime to replace the scrap, we should show that on the tree as well. 

A Flexible Tool That Grows With You

The tree can be as complex as your situation warrants. It’s a good idea to share it with others familiar with the problem to see if they have anything to add. Flexible_tool

Don’t be alarmed if others challenge your tree

As long as the cause-effect thinking you use is sound, the tree should be accurate, but don’t be alarmed if others challenge your tree; their challenge may only encourage you to improve your tree.  If you create the tree, you will naturally be somewhat biased – sharing it with others will challenge and improve your thinking, so welcome critique.

Identifying Unintended Consequences With Negative Branches

Not every branch on the tree is positive, which is another strength of the tree: it can help identify unintended consequences. These unintended consequences are called negative branches.  Let’s look at another problem – speeding up the quoting process. Identify_branches

Suppose our company receives requests for quotations from customers and our process responds too slowly, causing us to lose business.   We decide to launch a project to speed up the quoting process and create the Future Reality Tree on the right.

It seems pretty clear: if we can produce faster quotes we won’t lose as many bids and consequently will do more business.  We may need to research some recent history in order to quantify the savings, but the outcome is obviously positive. Now, let’s look at each box and see if there is a negative side.

Negative_branchesIt seems that only good can come of making the customer happier, and an increased win rate seems to have no downside.  More business means more profit, but then we realize that for some products, we are currently close to production capacity.  If we win bids on those products we may not be able to deliver, so there is a potential negative branch, as shown to the right.

If this is a real risk, it’s good to know as soon as possible, so we can decide what to do about it.   Those who oppose the project and may cite the negative branch as a reason not to proceed.   Occasionally a negative branch is so dire that we should scrap a project, but usually we proceed, and let the negative branch become a guide.

Classes Of Negative Branches

There are three broad classes of negative branches:

  1. Real issues that should be addressed
  2. Minor consequences that are better than the original problem
  3. Honest wrong beliefs

The existence of a negative branch merits enough research to determine its type and resulting action step. In this case, we can determine how close we are to reaching capacity on our various product lines.  If we are nowhere near capacity, then the branch is  Type #3 and can be ignored (at least for now).  If the risk is real, we can decide what to do about it – perhaps decline to quote on work we can’t handle, or determine how to add the needed capacity.

The existence of a negative branch merits enough research to determine its type and resulting action step.

Let’s consider the the second type of negative branch in the scrap reduction tree. Suppose we sell scrap to a salvage dealer. If we reduce the amount of scrap, it reduces our revenue from scrap sales, but this is small sacrifice compared to the savings from scrap reduction, so we would simply ignore it.

If, on the other hand, we actually pay to have to scrap hauled away, then the reduction in scrap would produce a savings, and become another positive branch.

My purpose here is simply to introduce you to the Future Reality Tree. If you Google it, you will find articles providing step-by-step instructions, but here is the rough approach:

  1. Identify the aspect(s) of your business that will be directly improved through the project (using a square-cornered box).
  2. Working in a small group if possible, ask “what then?” repeatedly and build the branches (using round cornered boxes).
  3. Put a green dollar sign next to each box that produces a financial gain.
  4. Review the tree and ask “what could go wrong?” and note negative branches
  5. Shop the tree around your organization to get input from others.
  6. Quantify the savings associated with each green dollar sign.

This may seem like a lot of work, but with practice it can be done quickly – I can usually sketch out a first draft on paper in 5-10 minutes, and, with some practice, you will too.  I use it on nearly every project.

It’s well worth the effort. It won’t create the savings, but can definitely help you find it!

Have you found money on trees before? Of course we’re talking Future Reality Trees here! If you have, we’d love to hear your story. Please also feel free to ask any questions on the Future Reality Tree as well. We’d love to help.

Bill Eureka

Bill Eureka runs EurekaResults.com, working with clients to solve difficult problems. Bill welcomes your questions and comments, and can be contacted at [email protected] or www.EurekaResults.com.