How Problems enter Organization?

Business is created to solve the problem in the market. Which is the desired effect. It will be in form of either product or service. However the business will also create some loss.Because business is not 100% efficient. The product or service is desired effect, the loss is undesired effect. This side effect is the source of the problem.

We can define effdiciency of business = Effect /( loss + resources)

Now inefficiency is opposite of efficiency, Therefore ,Inefficiency = (Losss +resources) /Effect)

The business consumes resources to produce effect which is a product or a service. Therefore the term effect will be replaced by Product. It is the product for which the business is created for. At the same time business also produce some loss which is not desirable. Loss is created because of system flaws because business systems are not 100% efficient. The flow diagram illustrates how problems are generated and solved.

  • From the flow diagram we can see that the business consumes resources to deliver the product. At the same time it also generates a loss. This loss is the source of the problem. There are two types of the loss. They are Inherent loss and Unanticipated  loss. 

Inherent loss

Inherent loss means means the inefficiency, an undesired output that we are aware of and knew existed from the beginning. For instance, we manufacture a car, but we are aware that the engine, transmission parts, and tires will wear with time and will eventually need to be replaced. We build a house that’s comfortable and beautiful, but we know that the plaster and paint will crack and fade with time. We setup  a high-volume manufacturing plant even if the output yield is less than 100% and even less than initially desired, and so on. Now you must have understtod the concept. What else you can think of? use your imagination and write your thoughts in the comments box below. 

Such inherent loss generates a set of predictable problems – the problems that we are all very familiar with. The examples of predictable problems are as follows: the car should be periodically  brought  to a car service center after certain mileage to perform technical service. The walls of the house should be repaired and repainted after some years The cost of the product will be increased due to reduced output yield.

Such problems cause inconvenience in our lives, but we knowingly agreed to face them. We accomodate them by the fact that these are inherent problems we know they’re coming.

All inherent problems can and should be solved. Solutions of the inherent problems, in the examples discussed above, will result in an increase of car mileage to service, increased period of time between repairing of walls in the house, higher yield of the product that is produced at high volume manufacturing.

Solutions of inherent problems involve fundamental changes in the system. The tools used are NewProduct development, Manufacturing tehnology development, design improvements, New machinery and manufacturing processes, automation of the servics we provide or Busines process re-engineering.  They improve the system, make the system reduce the amount of “loss” and  increase the efficiency. By solving inherent problems, we develop the system, push technology forward,make busineses more efficient. We also improve our lives and improve the quality of life (QOL).

Unanticipated loss

Unanticipated loss is the second type of loss produced by a system. These are not inhernt in the system. These are not re3lated to the natural wear and tear and degeneration of the system.   the Examples could be as follows: a rattling noise is heard in the car engine, a huge crack suddenly occurred in the wall of а house, the production of the manufacturing plant suddenly dropped.

All these unanticipated loss generate unpredictable behavior; they are sudden deviations from the norms. We definitely need to solve the issues. In case of examples cited : we should bring the car to a professional car service center for diagnosis and repair; we should invite civil engineer to fix the cracked wall and investigate the process to resume production levels. By solving of sporadic  problems, we never move forward or progress; we just return the situation back to basic (BTB). Even if we find an excellent solution to the sporadic problems, the system will not be transformed and its design will not be improved. They arise due to unanticipated  lapses in the system. Material properties may change radically, power failurs my affect processes, a bug in your computer may upset your systems or  a human behaviour which is always unpredictable caused some system interruptions. Experienced investigators can dignose the cause and bring situation under control. It’s a fire fighting process.

“Do not spend too much time to solve sporadic problems. It will not lead to growth.”

Convert unanticipted loss to inherent loss.

As long as the occurance of sporadic problems are very low we should not invest too much time and resources for it’s investigation. Situation can be controlled by  just resstoring affected parameters. However if the occurances are chronic in nature, then we need to convert unanticipated problems into inherent problems. Solving inherent  problems will allow us to grow our business and career. The flow diagram of the conversion is shown below:

We need to take different approacch in case of unanticipated loss of chronic nature. We should convert it to inherent loss first. This is not an easy operation at all. This is an investigation that can be successfully completed only with the help of Problem solving Tools. These tools will help you to define the root cause of the failure, create a model of the failure and to understand the mechanism of the sudden unanticipated loss occurrence. The Problem solving tools will make you think “out of the box” and understand something that you were unable to understand before. When the precise nature of the loss becomes clear, the unanticipated  loss (sporadic) is automatically gets converted to inherent in nature which generates predictable problems.


Problems are generated in the busienss because none of them are 100% efficient. Business consume resources to deliver the desired effect which are product or a service. Some resources are lost due to inefficiency  in the process. This loss is of two types. The first one is inherent to the system. Reducing this loss we push technology forward. The second one is unanticipated. We should reduce it by converting it to inherent loss. It is to be done by  use of  problem solving tools. 

Problems enter business in two forms – inherent and unanticiplated. Do not spend too much time on unanticipated problems. Businesses should allocate maximum resources for inherent problems. That’s the way to grow. Otherwise they will be in continuous fire fighting mode.