Deming and the System of Profound Knowledge

Knowledge work, such as software development, is becoming a critical element of the success of every business. It follows that getting better at knowledge work is important to improving the performance of those businesses. There is a powerful model that has been broadly applied to achieve success in knowledge work. I believe it gets overlooked because of its association with manufacturing and TQM.

A Little History

In 1960, the Prime Minister of Japan awarded Dr. Deming Japan’s Order of the Sacred Treasure, Second Class citing Deming’s contributions to Japan’s industrial rebirth and its worldwide success. Deming is widely credited with improving production in the United States during the Cold War, although he is best known for his work in Japan.

Deming did not teach statistical process control. Upon arriving in Japan to present to the Japanese Union of Scientists and Engineers (JUSE) (His first talk was July 10, 1950) Deming introduced an eight day course with these words “The Control Chart is No Substitute for the Brain”. He had assistants teach the statistical control of quality portion of the course. Deming taught the theory of the system and cooperation (The World of W. Edwards Deming by Cecelia Kilian).

He taught 29 seminars between 1950 and 1951, reaching essentially every essentially every single top manager in Japan. He taught his four-day course to over 200,000 American executives between 1980 and 1991. Again, he didn’t teach statistics – he taught how to derive knowledge about the system from data and how management should act on the organization as a system. He didn’t teach manufacturing at all – his goal was to transform the management of organizations. He believed mis-management was solely responsible for the dysfunction in organizations.

TQM is not The System of Profound Knowledge

Deming is often associated with TQM. And while TQM claims Deming, Deming did not claim TQM. From Deming’s biography:

It is very common, and sadly, very wrong, to hear comments on Deming’s work that sound like “It’s SPC,” or “It’s about the 14 points.” Others think about it as team and teamwork. Some think of it as some sort of humanitarian stuff. The one that upset Deming the most was “It’s about TQM,” referring to Total Quality Management. He did not want his name to be associated with TQM, as aware as he was of the risk of “guilt by association.”

The Japanese applied his teaching to manufacturing. He taught the same information in the 80’s in the US. A critique of US adoption of these techniques was that our objective was to replicate the Japanese manufacturing success and all we heard was statistics and process control – we missed the points about how understanding creates knowledge and how to manage human nature – therefore we missed the transformative nature of his message. TQM embodies these shortcomings. TQM fails because it is time consuming, generates a level of detail that is not stable or valid, is not organizationally sustainable, and is very expensive to implement. The focus of TQM is data – Deming’s focus was on effective management.

Deming’s System of Profound Knowledge

Deming believed that generating a shared understanding of the system, taking actions that optimize economic outcomes, and aligning the beliefs of the people within the system were keys to a sustainable ongoing improvement effort. Deming taught this as the System of Profound Knowledge (SPK). There are four points to SPK:

1. Appreciation of the system: For Deming, the organization is a system – a network of interdependent components that work together to try to accomplish the aim of the system. The system includes management, staff, suppliers, and customers. Without an aim there is no system. Understanding the system and the aim of the system helps us rise above complexity.

2. Understand how variation impacts the system: Understand the intrinsic capacity to supply the output required in the face of variation. Deming understood that variation was a phenomenon common to all human activities – particularly in knowledge work. Understanding variation equips us with the conceptual basis for correct management of performance and the improvement of capacity.

3. Theory of Knowledge: A theory of knowledge explains how a combination of methods, people, and environment produces a foreseeable change. Knowledge isn’t data. Knowledge is the ability to interpret and act on the system – by management, by the staff within the system, by suppliers, and by the customers. Knowledge of the system arises from within the system itself. Deming taught management how extract knowledge – not how to perform statistical process control.

4. Psychology: Psychology helps to understand people and their behavior and to appreciate their natural inclination toward success, learning and innovation. People respond based on the norms and rewards in their environment. When we make organizations hierarchical people act to defend their space in the hierarchy. When we create a system wide understanding people act to improve the system’s performance.

Impacts of SPK Thinking

Deming felt that managing to cut costs almost always decreases performance and increases costs – while managing the system to allow quality to emerge will reduce costs and increase performance. This is because a focus on cutting costs locally creates a toxic and competitive environment. Deming believed that workers have nearly unlimited potential if placed in an environment that adequately supports, educates, and nurtures their sense of pride and responsibility. He stated that the majority of a worker’s effectiveness is determined by his environment and that the malfunctioning of an organization is almost entirely due to the misunderstanding of the system by management. The System of Profound Knowledge dramatically shapes the way we think about work and workers.

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5 Responses to “Deming and the System of Profound Knowledge”

  1. Daryl Kulak says on :

    Hi Dennis,

    Another great post! In my view, TQM, Six Sigma and Lean all make the same mistake, they reduce the lessons of Deming down to a set of practices, while completely missing the systems aspect that holds them together.

  2. Paul Boos says on :

    Outstanding insight Dennis! Thanks ofr bringing this up… I even taught some TQM related stuff back in the early 90s and all the material that trained me be the trainer was wrong! This makes far more sense (i.e. is aligned more) when you read Mr. Demings works.

  3. Bill Bennett says on :

    This is a good summary of where Deming’s ideas and where they differ from the, sometimes clumsy, attempts to reduced them to a to-do list.

  4. Frank Mosuch says on :

    Dennis;
    Great post on Demings principles. Having been involved in using his ideas in various projects I have always been amazed and just how resistant average American management is to the very idea of actually “knowing” how their business process’s work and what variables make a difference. It has seemed that executives often believed that really understanding a process was a waste of thier time. Acting surprised or casting blame when the process fails tends to be far more valuable.

  5. Dennis Stevens and Associates » Blog Archive » What’s Deming Got To Do With Agile? says on :

    [...] creates an environment that is especially effective for knowledge work. As I discussed last week, Deming’s System of Profound Knowledge has four points: 1. Understand the System, 2. Understand Variation in the System, 3. Have a Theory [...]

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