MBOE recap: How confident are you?

One of the greatest challenges organizations face is choosing among multiple alternatives for improving a product or service. Our Master of Business Operational Excellence students last week got a crash course in a great decision-making tool.

Holly Stein, director of operational excellence at Cardinal Health, introduced our students to the “design of experiments” concept, which helps organizations facing options where each alternative by itself or in combination with others could have a positive or negative impact on the business goal. Students in this exercise were tasked with creating paper helicopters with different characteristics: Some short, some long, some with wide wings and some with narrow wings. Their goal was to create a helicopter that, if dropped from a height of 6 feet, would fall exactly or very close to a target on the floor. Using design of experiments, teams created models that met the business criteria.

Design of experiments is very commonly used in product development and in clinical trials, but the health-care and service industries don’t use it on a day-to-day basis. The goal of the helicopter exercise was to help students see the applicability of the concept and trigger any ideas for how they can use it in their organizations.

But how did students make the final decision on which model worked best? Stein also introduced the concept of statistical analysis, which businesses use to help them make meaningful decisions. An option at a 95 percent confidence level, for example, means you are willing to take the risk of 5 percent that the decision could be wrong.

“How nice it would be if you knew that 95 percent of the time you’re right about the decisions you make every day!” Stein told the students.

Analyzing data is key in driving decision-making, but continuous improvement is all about designing small experiments and observing the impact on the business problem.