These are two business terms that can be confused, leading to potential problems down the road. So what are they and how are they different? In a nutshell, variety is what your customers want but may not necessarily get. Variation is what your customers don’t want, but may get anyway. Let’s walk through the following case.
Joseph Kumar enjoys ice cream. There is nothing like the coldness of the dessert to satisfy his occasional ice cream craving. Joseph’s favorite place to buy and enjoy ice cream is Smiley Ice Cream. Smiley carries 33 flavors, and they can mix and match flavors, add toppings, etc. This variety is what Kumar desires, and he is very willing to part with his money for access to the variety. Even though like most people he has favorite flavors, he wants to have multiple choices and variety.
However, during a recent business trip, Kumar decided to visit a Smiley in another city. The store looked like a copy of the one back home, so he felt like he knew exactly what to get. Ordering a single scoop of pistachio, the anticipation mounted until he took the first bite. “This doesn’t taste as good as what I am used to,” he thought. Double-checking with the server to verify that it was indeed pistachio, he realized that something was different about it and he didn’t care for it at all. He thought, “Why is there so much difference in taste between stores for the same company and flavor?”
Kumar was experiencing variation. Variation might not be intentional, but it does drive business away. He decided to give up the ice cream and ask for a refund. The store lost the sale, and worse, lost the goods served and the added queue in the line that delivered zero revenue. Customers are willing to pay for variety, choices. But once that choice is made, they expect what they pay for will be delivered as intended, without deviation or variation from their expectation.
As simple as it may be, these two concepts have been confused and used interchangeably by industries, and assuming that variation is what the customers are willing to pay for can truly cost a business in lost revenue, excessive returns, profit erosion, unexpected costs.
Types Of Variation
Variation can exists in two distinct forms, common and assignable. Common variation is the inherent variation in any process. It occurs due the expected, standard, and typically small changes in a process, and cannot be attributed to any particular cause, but rather natural occurrence. Assignable variation, as the name implies, can be assigned to a cause or event that transpired during the process. These are unexpected, non-standard occurrences that can change the outcome of a process and create artificial variation.
Reactions To Variation
The kinds of actions to reduce the amount of variation in any process are very different depending upon whether the type of variation is common or assignable. Common variation should be treated with long term, process moving actions. Assignable variation should be attacked by removing or reducing the event that caused the change in the first place. Assignable causes can be pin pointed and, if possible, managed to the extent of the process to ensure business success.
Reacting to common cause variation as if it was assignable can create a lot of extra work for nothing, tie up resources unnecessarily and waste capital. Similarly, not reacting to an assignable cause of variation can almost guarantee that the event will occur again in the future, very likely at the worst possible moment for the business.
Putting It Together
At Mr. Kumar’s home Smiley store, the pistachio ice cream does not have variation in his eyes (or taste buds). However, we can easily imagine that even when the recipe is strictly followed natural variation may occur; pistachio nuts, a key ingredient, will naturally have different sizes, flavor intensity, growing season variation, etc. There is variation, but it is expected, normal, and not assignable to any one particular event or issue. The range of the variation is contained and in control.
What happened at the other store? A quick investigation showed that the shift manager likes to add a “secret ingredient” to make his pistachio ice cream special. The road to ruin is partially paved with these best intentions. The result for this unexpected and artificial variation was loss of business. Customers want Smiley pistachio ice cream to taste like Smiley pistachio ice cream no matter what location they visit.
They still want the 33 flavor variety to be available to them, a flavor to suit almost any palate. But each and every one of the 33 flavors must taste the same, day-in and day-out, in every location across the country to avoid the unexpected variation that will drive customers away.
As professional Lean Six Sigma practitioners, we often observe the type of best intentions that drive artificial variation, extra costs, and loss of revenues. Variation will occur in very business process. It is inevitable. But understanding the variation and its root causes will ensure your business will operate under sustainable, effective and efficient processes to deliver your products and services.