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Variation Is The Enemy

So if you haven't already noticed there's a little toy here on the on the states that we're going to play with in this segment it's a little catapult we like to call it a static pope because we're going to use it to learn a little bit about statistics as we manage our business is in a smarter way statistic can be very very helpful and useful I know sometimes when people hear the word statistics they think sadistic ce and it's a little scary a little frightening but I assure you what we're going to be talking about here is essentially maybe uh seventh or eighth grade statistics nothing too significant nothing too fearful so uh yeah and then we're going to learn about variation because when we look at things from a six signal perspective variations considered the enemy so we have to be aware of it this variation creeps and all kinds of things and it throws us off balance and customers experience in a number of different ways when am I going to get my stuff is it on time not on time is it...

right not right so very issues creeping into our lives all the time so this is about taking variation out of our businesses large and small so that we run them in a very lean predictable um reliable kind of way it's it's pretty kiki um I love this quote from margaret made margaret maids never doubt that a small group of committed people can change the world indeed it is the only thing that ever has so it's a great little quote relative tio what we've been talking about with kaizen you know we can get the right group of people together with a clear mission and the capability and competence he's in the authority and the empowerment in a room for a week it's really remarkable what we can do what we can achieve so we'll take we'll take some advice here from margaret mead and say you know what that's true way can prove it so we've already proven it with one simulation the real benefit of course isn't taking these simulations and then doing it for real in the real world which 00:02:04.723 --> 00:02:07. is what I love doing week after week all right so 00:02:07.9 --> 00:02:10. in uh in this session we're going to go back to the 00:02:10.18 --> 00:02:13. make the m e a I c defined measure analyzed improve 00:02:13.59 --> 00:02:17. and control we could also substitute innovate for 00:02:17.75 --> 00:02:21. improve in the eye section there like we saw last 00:02:21.26 --> 00:02:24. time so truly innovative we're going to go back and 00:02:24.78 --> 00:02:26. visit appoint kaizen so we talked about point caissons and floki eisen's we've we've done an illustration of both using the lean sigma game now we're gonna go back and take another look at a point kaizen using the catapult or static pope tto learn about how do we really identify where variation is coming from and learn how to control it to some extent there's always going to be some normal variation but how do we find that variation that's really hurting us and learn ways to control it that's the point for this this session go back to that point guys and so just his review talked about flow caissons where we're looking at a whole value stream or a slice if he will of a cross functional section of a value stream and the reason we do that of course is because a lot of the waste is not within the functions it's in between the functions and we have to learn ways to take that out and we illustrated that with a lean sigma game where we hit remarkable numbers numbers that seemed impossible at first with a few basic changes we changed our location a little bit we had offered some cross training where appropriate we eliminated a bunch of wasteful activity we changed policy to allow one peaceful oh and one one piece shipment we co located with our client or a customer would get closer to the customer we figured out a wayto to a deliver in a more user friendly way we poke a yoked and um steak proofed our quality we came up with an easier a template or tool use we challenged the diamond paradigm to make it easier to put red circles circles in there without hitting the lines and uh so and with a handful of changes way made we hit astonishing numbers the idea there is to recognize that you know to be successful is an entrepreneur or small business where large business and this day and age we've got to be very creative gotta be continuing to challenge the boxes that were we're in without even knowing we're in him sometimes coming up with ways teo teo to stretch all right, so we're gonna go back to point kaizen in this case and we're gonna use it to learn about six sigma so now we're going to switch from some japanese and german terminology to greek so we've got sigma in their sigma small s sigma in uh in greek is used to reference standard deviation, which is a measure of variability capital s sigma of courses summation so you see that allowed in excel spreadsheets that's okay, add up all these columns you see that capital s signal so we're going to focus on the smallest sigmund this session and originally six sigma was a metric it was a measure if you will, of a variation of standard deviation, but it evolved then over the years into much more than that, it was more than just a statistical measure it became a business strategy. How do we use six sigma thinking as a business strategy to be incredibly precise and accurate and reliable and whatever it is we do so that we don't have all of this cost of poor quality we have right first time whether it's a pager a phone a jet engine you know the satellite or yeah a real estate sale we get it right you know it's it's a measure of getting it right the first time all right so it's developed into this better faster lower cost more user friendly business strategy and we're going to demonstrate that once again with a little simulation to put it in perspective uh we'll talk a little bit about the quality movement because if you go back to that value proposition value in the eyes of the of the customer val you usually concludes some element of quality okay think of that is a bucket I want predictability I want consistency I want reliability I want repeat ability I want the same thing over and over and over again I don't want to have to guess what I'm going to get her when I'm going to get it I can count on right is a as a supplier to me as a business I can rely on you 00:06:36.33 --> 00:06:36. so 00:06:38.53 --> 00:06:40. quality started out by saying ok well let's look at 00:06:40.95 --> 00:06:45. spec limits upper spec limits and lower spec limits 00:06:45.23 --> 00:06:49. think of these like goalpost so eh in sports as long 00:06:49.52 --> 00:06:51. as the ball goes through the goal post I get points 00:06:53.33 --> 00:06:55. so that that was the quality movement in the nineteen 00:06:55.51 --> 00:06:58. eighties song is just get it through the goal I get 00:06:58.49 --> 00:07:00. points what difference does it make if it bounces 00:07:00.63 --> 00:07:04. off one side if it still goes through it's centering 00:07:04.11 --> 00:07:06. doesn't really matter doesn't matter I still get points 00:07:06.42 --> 00:07:09. so that's a paradigm that's a mindset and that was 00:07:09.35 --> 00:07:12. the quality moment just just get it in the inspect 00:07:12.04 --> 00:07:15. and you're good but what we've learned over the years 00:07:15.06 --> 00:07:18. is that's actually very wasteful wasteful thinking 00:07:19.43 --> 00:07:21. because the closer we get to those 00:07:23.27 --> 00:07:24. spect limits 00:07:26.03 --> 00:07:28. the more we have to check for example 00:07:29.53 --> 00:07:31. oh yeah we're getting we're getting close so now we 00:07:31.96 --> 00:07:34. have to be sure we're in the inspect so we have to 00:07:34.69 --> 00:07:36. put checkers and we saw that the alien signal again 00:07:36.86 --> 00:07:39. we've got to make sure we're checking with checking 00:07:39.09 --> 00:07:43. cost money inspectors reviewers testers costs money 00:07:44.33 --> 00:07:47. so six sigma was developed to say quality isn't just 00:07:47.81 --> 00:07:51. about getting through the goal post it's about hitting 00:07:51.8 --> 00:07:52. a target 00:07:53.93 --> 00:07:57. it's about it's about hitting a target so that's that 00:07:57.25 --> 00:07:59. doesn't sound like that much of a shift but it's a 00:07:59.67 --> 00:08:02. it's a very significant shift and we'll we'll demonstrate 00:08:02.63 --> 00:08:06. that in this session because outside suspect course 00:08:06.37 --> 00:08:09. we've got major loss that's where we get product into 00:08:09.07 --> 00:08:11. the customers so to speak that's just it's no good 00:08:13.49 --> 00:08:16. but we also have trouble with especially in round 00:08:16.5 --> 00:08:18. one and round two of the lean sigma game where it's 00:08:19.73 --> 00:08:26. it's um it's close but we're not sure so as you know 00:08:26.07 --> 00:08:28. I'm a round one and round two I was getting I was 00:08:28.33 --> 00:08:30. getting stuff that I had to send back for some reason 00:08:30.57 --> 00:08:34. you thought it was good I disagreed and we have we've 00:08:34.04 --> 00:08:37. waste in the system and it's expensive so this is more about hit in the center a little more information around the topic of six sigma and you useful whether you're running a big business for a small business I certainly use it my one person business is ah bench market studies back in the eighties found that the best in class in the world this was in the eighties we're performing with six signal level quality now I've found over the years that organizations who don't even know it's six sigma means hover in the three sigma category area all right now if we were at three sigma and we were an airline we'd have two crashes a date o'hare airport the three sickness not all that great for sigma will spend about ten percent of its revenue gross revenue on cost of poor quality that could add up to be a lot of money from a million dollar business that's one hundred million one hundred thousand dollars if I'm a billion dollar business it's ah a hundred million dollars that's a significant number that's it for signal at three sigma it hovers in the twenty five to thirty percent range of gross revenue that adds up to a significant amount of money spent on cost of poor quality which comes from variation essentially so you can see on this this graph here that will we drive out that variation and we drive down that standard deviation to the point where it's a very it's a very tight precise fit were hitting targets okay our cost of poor quality drops now significantly and we're we're three point for defects per million I've quoted that number a few times now all right as opposed to almost sixty seven thousand three seven per million and we were well below that in our darlene sigma game earlier well below three sigma maybe maybe a signal or two at best I didn't calculate it this is an interesting chart this actually came out of the six sigma research it's too is part of motorola university and what it shows us it's not an eye exam by the way in case you're wondering but what it shows us is that there's a correlation between lean and six sigma now these two things didn't get along all that well you know in the in the nineties 00:10:56.09 --> 00:10:59. termina lean was coined in nineteen ninety and it 00:10:59.14 --> 00:11:02. competed with six sigma cause lien said and there 00:11:02.18 --> 00:11:04. was a paradigm with lean because lane initially was 00:11:04.6 --> 00:11:07. announced his lean manufacturing people still use 00:11:07.72 --> 00:11:10. that terminology today lean manufacturing what happens 00:11:10.69 --> 00:11:13. when I put the word manufacturing after the word lean 00:11:13.24 --> 00:11:15. and your happened you happen to be in banking 00:11:16.49 --> 00:11:21. you happen to be and ah hotel business running airlines 00:11:21.31 --> 00:11:24. like well lean's for those guys making widgets doesn't 00:11:24.68 --> 00:11:26. have any to do with me what if you live in an office 00:11:26.58 --> 00:11:29. environment are only your work for a law firm so now 00:11:29.77 --> 00:11:32. what lean has done is we've eliminated that word manufacture 00:11:32.56 --> 00:11:34. yes it applies to manufacturing of course but we've 00:11:34.75 --> 00:11:37. been taking away the word manufacturing calling just 00:11:37.62 --> 00:11:42. lean orleans six sigma orlean enterprise arlene thinking 00:11:43.19 --> 00:11:45. it now we say when you know why we comply lean anywhere 00:11:45.49 --> 00:11:47. we have a customer anywhere we have a process we can 00:11:47.82 --> 00:11:50. write use it in small businesses large businesses 00:11:50.45 --> 00:11:53. lean is a way of understanding where the waste isn't 00:11:53.09 --> 00:11:53. getting rid of it 00:11:54.85 --> 00:11:57. all right where the complexity isn't taking the complexity 00:11:57.44 --> 00:12:00. out doesn't matter if you know we're flying airplanes 00:12:00.91 --> 00:12:01. there were 00:12:02.83 --> 00:12:06. we're you know we're selling mortgages weak and so 00:12:06.58 --> 00:12:09. now you see lena and you and virtually every industry 00:12:09.78 --> 00:12:12. it's found its way into all of these different industries 00:12:12.69 --> 00:12:16. all right summer well ahead of others but but pay 00:12:16.79 --> 00:12:19. attention leans all around us these days the lean 00:12:19.88 --> 00:12:23. on this chart is about going north 00:12:24.24 --> 00:12:27. lean is about saying how do we reduce steps how do 00:12:27.23 --> 00:12:31. we reduce components how do we reduce complexity in 00:12:31.67 --> 00:12:35. our business because by simply reducing steps in complexity 00:12:36.39 --> 00:12:40. we've eliminated opportunity for error opportunity 00:12:40.62 --> 00:12:43. for mistakes way have less handoff so we're gonna 00:12:43.6 --> 00:12:47. have less fumbles that's the idea of going north in 00:12:47.26 --> 00:12:50. this case so can we take our process from one hundred 00:12:50.47 --> 00:12:51. steps down to ten? 00:12:53.59 --> 00:12:56. All right answers in many cases we can we can eliminate 00:12:56.43 --> 00:13:00. a lot of fumbles we saw that in the lane signal game so that would be going that would be going north you know there's a reason when herb kelleher started southwest airlines one of the most successful airlines in the united states and created a huge market cap on it you know, one time southwest was larger than the top four airlines put together and market camp market cap and wealth uh but how many different types airport airplanes did south what's fly for many years until it recently you know acquired was that airtran I believe so one type airplane so here's an airline running with one kind airplane to seven thirty seven below shin we have more kinds of airplane shouldn't we complicate things to think about that from a training perspective a maintenance perspective you know spare parts perspective so by leaning out the complexity that came up with a brilliant service model dell computers you've mastered this in many ways so we take away the complexity and just by going north looks what had look what happens to our yields by going north they improve the reason they improved because we've reduced the number of opportunities for error now we might run a business that's just got a lot of complexity or a cell phone that's got a lot of components its there's just it's complicated so if we've got an operation with thousands of components or parts or a product with a thousand different things that could go wrong etcetera and where they were three signal we're not getting anything right first time we're just getting killed by the hidden factory are the hidden workplace as we go across to six signal we're still at a ninety nine per cent true yield so the drive to go east with six signal was to say hey we can lean things out to some extent but we still have a lot of steps we still have a lot of complications and complexities so we've got to go after the variation so lean is about going after the waste in the complexity six it was about going after the variation it's not an either war like it was considered in the nineties and early two thousand's where it was lean or six sigma needed lean people saying don't do that six sigma stuff that's analysis paralysis and sick sick with people that don't know waste your time with lean that's careless it sze don't call there the ad organisations competing for resource is in fact he had lean typically coming into an organization through the manufacturing very operations director vp six sigma coming into the organization through the quality vp and they didn't necessarily speak the same land language you get along so you had too great tool kits and methodologies competing with each other and costing time and energy and resource is in business were in fact there's a great synergy when you put these two things together. So there was a consortium of people that got together in the nineties and way usedto figure out ways to teach, energize and put these two things together. And this is a nice illustration of how what can happen when we when we pull together, and we take different tool set sets and build on them. I've had people over the years go, you know, that issue college, I diagramed daniel, that fishbone chart. Is that a lean tool, or is that a six sigma tools? Do you care that's, where we get so wrapped around the axle we get, in our own way, it's, a tool for problem solving, to cause an effect tool. And when we get out of this box of lean six or six sigma it's, a very useful tool to solve certain types of problems we don't have to worry about whether it's your label it a lean tool or six sigma tools. So some people get very wrapped up in those boxes and not even realizing it doesn't matter. I challenge you to think about that. They might say, well, where did these numbers come from? I don't get it. If I've got a twenty step process, and I met three signal, you tell him that I only get fifty percent of it right first time. It doesn't sound right, and if I'm in it, you know. 00:17:08.06 --> 00:17:10. Forty steps what I mean that doesn't look right let 00:17:10.68 --> 00:17:12. me show you where these numbers come from just so 00:17:12.5 --> 00:17:16. you can you can have a look if I've got a a process 00:17:16.65 --> 00:17:19. in this case let's just say we have a ten step process 00:17:20.21 --> 00:17:24. we have ten components in a widget ten opportunities 00:17:24.1 --> 00:17:24. for error 00:17:26.02 --> 00:17:29. and in step one I've got a ninety three percent yield 00:17:29.81 --> 00:17:32. doesn't sound bad does it in school that's like a 00:17:32.75 --> 00:17:35. a minus maybe it was pretty good ninety three percent 00:17:35.9 --> 00:17:39. yield but that means seven percent's going somewhere 00:17:40.36 --> 00:17:42. and we call that the hidden workplace where the hidden 00:17:42.68 --> 00:17:45. costs it's cost of poor quality so seven percent's 00:17:45.99 --> 00:17:48. going down here it's either being reworked or scrapped 00:17:48.35 --> 00:17:50. we saw that lean sigma game by the way we were nowhere 00:17:50.92 --> 00:17:54. close to ninety three percent yields in some cases 00:17:55.16 --> 00:17:57. being while that ninety three percent goes on to step 00:17:57.48 --> 00:17:59. two and let's say step two's ninety three percent 00:17:59.55 --> 00:18:02. yield to just to keep the math simple each of our 00:18:02.66 --> 00:18:05. steps is operating at ninety three percent now that's 00:18:05.32 --> 00:18:07. not going to net naturally be the case that would 00:18:07.65 --> 00:18:10. be variation among the different steps in terms of 00:18:10.3 --> 00:18:13. yields but what's point nine three times point nine 00:18:13.6 --> 00:18:17. three we start to do the math now who is going down 00:18:18.16 --> 00:18:20. that's going to yield about point eighty six percent 00:18:22.26 --> 00:18:24. so where's the other seven percent going back down 00:18:24.47 --> 00:18:24. here again 00:18:26.06 --> 00:18:29. and if we do the math and we go out to the third power 00:18:29.02 --> 00:18:32. out to the tenth power using the ninety three percent 00:18:32.53 --> 00:18:37. yield our true yield all the way through point nine 00:18:37.87 --> 00:18:40. three times point nine three times point nine three 00:18:40.17 --> 00:18:43. you could see it's just going down down down down 00:18:44.69 --> 00:18:47. in this simple illustration we're only getting about 00:18:47.28 --> 00:18:52. half right first time truly right first tack right 00:18:52.02 --> 00:18:54. first time where's the other half 00:18:55.46 --> 00:18:57. it's being circulated through here 00:18:58.9 --> 00:19:02. and that is a significant cost of poor quality now 00:19:02.63 --> 00:19:04. if we're not aware of this what white what if we're 00:19:04.83 --> 00:19:07. running this business with ten steps in ninety three 00:19:07.34 --> 00:19:10. percent yield what white what might we think our yield 00:19:10.42 --> 00:19:10. is ninety three percent because we're looking at maybe at this last step ninety three percent good and that that's what we call this the hidden workplace this is all noise in the system that's amounting to a significant amount of money but we don't even see it because we're seeing this number and people in businesses do this all the time it's like well who's going to tell mom or dad that way broke the vase I'm telling on telling them people are doing that business all the time he's gonna tell the boss that we got you know a whole lot of money were thrown away down here I don't so there's a fear factor in businesses where we're just people are hiding stuff this is why it's so revealing when I you know ceo goes undercover so to speak and some of these shows and sees what's really going on quite revealing because a lot of that gets hidden all right and how are we supposed to fix it if we don't know about it so we want we want actually dig up the brutal facts we've talked about that now a number of times in order to fix anything to really get after it so first past yield f p why here? What is it first past yield is ah what's getting through each step all right artie why rolled through put you throw rolled through put yield is thie first past yield for each step times each step all the way through so it's rolling all the way through and it's very important to know the difference between that because the rolled through put yield just keeps going down the more steps we have in our process thus calling for leaning out waste an opportunity for errors and keeping things simple and then standardizing the work so we get good control around it and I get a very predictable output, which is what we're going to play with with the catapult so we've we've spent a lot of time now and unleash leaning out steps and coming up with a nice high junk a system it's peaceful and were flowing, 00:21:12.893 --> 00:21:16. but we still got an opportunity to to tighten up on 00:21:16.43 --> 00:21:17. on the quality part of it 00:21:19.02 --> 00:21:22. incidentally, if you're going to do lean caissons 00:21:22.15 --> 00:21:24. and six sigma chi zins in isolation in some way I 00:21:24.83 --> 00:21:27. always like to do lean six sigma chi xenzai integrate 00:21:27.7 --> 00:21:30. but sometimes it's like let's lean this process out 00:21:30.52 --> 00:21:35. and then six sigma it okay that's fair but because 00:21:35.12 --> 00:21:37. be careful doing it the other way around and one of 00:21:37.15 --> 00:21:39. the reasons I say be careful doing it the other way 00:21:39.17 --> 00:21:41. around is because what happens if you go out and you 00:21:41.39 --> 00:21:43. do it? Six sigma kaisa 00:21:44.62 --> 00:21:46. on a non value added process that you should have 00:21:46.89 --> 00:21:47. gotten rid of 00:21:48.92 --> 00:21:52. lean might reveal that we don't need the requisition 00:21:52.32 --> 00:21:55. department as we know it today it's just pure waste 00:21:57.52 --> 00:22:01. but what if we six sigma it or five s it like we did 00:22:01.12 --> 00:22:04. we spend a lot of time and energy improving a department 00:22:04.47 --> 00:22:07. that should have been eliminated because we didn't 00:22:07.02 --> 00:22:09. know the difference between value had not value add 00:22:10.02 --> 00:22:12. and we weren't thinking about things from the customer's 00:22:12.2 --> 00:22:14. point of view we just thought it was a good idea to 00:22:14.53 --> 00:22:17. check off things and sign names and patch things and 00:22:18.28 --> 00:22:20. we're on our business that way we were not thinking 00:22:20.92 --> 00:22:24. in terms of lean six sigma and what really matters 00:22:24.74 --> 00:22:26. and what doesn't what are we getting paid for and 00:22:26.46 --> 00:22:29. what do we not so it's a it's an awakening for a lot 00:22:29.69 --> 00:22:30. of people 00:22:31.42 --> 00:22:33. so cost the poor quality c o p q 00:22:34.79 --> 00:22:36. this just shows us again some of those numbers I talked 00:22:36.94 --> 00:22:39. about the cost of poor quality in terms of dollars 00:22:39.35 --> 00:22:43. as a percentage of sales it's it's significant so 00:22:43.7 --> 00:22:46. you know it's six segments down below five percent 00:22:47.72 --> 00:22:48. and that's 00:22:50.07 --> 00:22:53. that's so heck of a lot better then twenty five or 00:22:53.26 --> 00:22:57. thirty percent for operating around three sigma and 00:22:57.25 --> 00:23:01. blow three it's it's just a it's a huge number so 00:23:01.42 --> 00:23:03. some businesses will say I'm going to calculate what 00:23:03.65 --> 00:23:06. my signal level is and I'll show you how to do that 00:23:06.52 --> 00:23:09. I'm gonna calculate that to give me some idea of what 00:23:09.53 --> 00:23:10. I might be thrown away 00:23:11.92 --> 00:23:14. and then I want to come up with some caissons to capture 00:23:14.18 --> 00:23:17. some of that a lot of businesses used six sigma then as a strategy to capture the waste that they statistically calculate based on on research right so where's cost of poor quality coming from think of these is five buckets so to speak one bucket is internal failure internally we we mess things up we make mistakes that we have that in a line segment game serrated especially around one and two we had a lot internal failure many weeks we made a mistake but we caught it internally and then we fixed it we reworked it or scrapped it external failure would be where it got by us and it got to the customer you know and some of us know this in uh in the business world is consumers is recalls it could get really expensive cars get recall drugs get re called lawsuits happen and it's just it's big those would be external failure costs we have appraisal cost appraisal cost would be checking costs were checked auditing were checking we're inspecting we're testing we're reviewing you know we're trying to find the the defects before they they go out or before they move on to the next step prevention costs would be we are investing in pokey oh technologies were investing in mistake proofing we're investing in prevention obviously so that we don't have the mistakes and then finally we have opportunity costs which are what we're making lousy stuff what else could we be doing we could be making good stuff so there's revenue loss or what we're dealing with the recalls we're dealing with aa lot of noise as it relates to things like that what could we be doing so there's huge opportunity costed tuft even calculate that in many ways but when you we talk about at three signal you know it might be twenty five even thirty percent of revenues and cost of poor quality that seems like a huge percentage in huge number where is that coming from it's coming from all of this right here incidentally if we did a peredo chart on this and we said right there's five slices of the pie which one do you suppose is typically the smallest slicing and an average business and the answer is prevention which is the one where you should probably put the most investment okay we spend less on prevention which would be a potentially really good thing and we spend a ton of money fixing stuff that's broken internally and externally and ah testing and checking for things like that so in many cos we've got the equation backwards we're not investing in the prevention the pokey yoke we're just trying to catch it before it gets out the door recover when it does very important to keep this in mind we're back to our hypo you know I mentioned the other day that this is one of my favorite tools because this is where this is a tool we can use to gain knowledge so we were called the transfer function where y is a function of x why is thies outputs on these otherwise the measurables we need to make sure we measure him so you know in terms of ah human health this could be cholesterol level blood sugar body mass index whatever okay ph balance things like that overhears all the inputs that propagate to those outputs so a knowledgeable person a knowledgeable business and knowledgeable process is about understanding that correlation between exes and wise so if I tweak this exit and I change this sex and I do something with this axis going I can predict what's gonna happen with the wise so we're going to play with without with our little catapults here all right so one of the critical to measure outputs with our catapults just to play with is going to be distance. How far does the ball travel? And we're gonna measure where the land's, wherever he's going to get to shoot this catapult three times, and you're gonna we're gonna measure where the ball lands, and we're all going to shoot the same catapult with same ball with same pull back. So you think, well, if we all just do the same thing, wouldn't it all, you know, basically land in the same place you can imagine? There's gonna be much variation? Well, let's, see, and that's what we're going to play with here. So we're going to use this I, p o now to really understand and gain knowledge around variation where it comes from and what we can do to control it.