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Do You Have a Customer-Driven Process Enterprise?

April 7th, 2013 Comments off

Every company says they want to satisfy their customer. They talk about customer surveys and gathering the Voice of the Customer. They might even have allocated responsibility for collecting and analyzing this information.

But looking past what is being said, how can you tell if your organization is doing the things? How can you tell if you are really there? In essence, let’s define what constitutes a Customer-Driven Enterprise.

Download Business Process Management (BPM) Overviewour BPM Overview presentation

 In our experience, when we have seen strong performance related to customer relationships, we have observed the following characteristics;

  • A focus on process rather than on functions. The reason for this is simple – when you focus on process you focus on resolving the causes of problems and you measure upstream metrics that give early warnings. When you see organizations focused on functions, its usually an indication of the desire to fix or deflect blame. Also, it is when you see a neglect of process that you see lagging indicators such as financial measures dominating attention.
  • Employees know and accept their roles in the processes they either own or of which they are a member. In addition to their recognition, you see their incentive systems tied to the customer metrics. Beware of incentive systems solely tied to financial measures. There is no surer way to take your eye off the customer and develop a short term focus.
  • Everyone understands how the organization’s processes are operating. People know how things fit. They don’t just look at their process or their role in a process but they begin to understand and relate to how the processes are linked. When people focus on the linkages, there is less white space and fewer hidden processes.
  • Processes are measured objectively and measures are reported regularly. In other words, it’s not about the blame and there aren’t any secrets.

If you aren’t there, what do you have to do to achieve that state? Well first there are some prerequisites. An organization needs to bring together all its initiatives under one umbrella responsible for the business’ improvements. Next they need to communicate the seriousness of the need. One of the best ways to do that is to put the customer information in front of the process owners. Too many times the customer data is hidden. People are given just what the organization believes they need to know to do their jobs. The customer data, especially the most unpleasant, which by the way is the most motivating, is locked up so no one knows the bad news…but that just means no one knows the need to change. Finally, leadership must make their commitment. (See Leadership Steps in Becoming a Customer Driven Process Enterprise).

With prerequisites in place, the organization is ready to reorient ifself. Our process is based upon a system where we emphasize (i) Establish, (ii) Deploy, (iii) Implement and (iv) Review. We will get into that four step process in our next Customer Driven Enterprise article. In the meantime, identify if you are a customer driven organization and, if not, set the foundation on which to build. If you would like to discuss, contact me.

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Managing Change Must Be a Core Competency

April 3rd, 2013 Comments off

President Woodrow Wilson

From American history we can learn about driving and managing change. Between the key milestones of the Civil War and the New Deal, Woodrow Wilson’s Progressive Movement provides an interesting study. Wilson, President from ’13 to ’21, formed the Federal Reserve and FTC. He lead efforts to reform anti-trust, workers rights and women’s suffrage. And, he controlled America’s entry into World War I as well as leading the formation of the League of Nations that preceded the United Nations. All in all, it’s fair to say he dealt with change.

And when all was said and done, his lesson to us was “if you want to make enemies, try to change something”. At every level, from American society and global politics to our everyday lives, his warning should ring in our ears.

In business, the question becomes how then do you navigate change to minimize Wilson’s warning of creating enemies? One thing is for sure…currently, it isn’t done well. In 1995 popular change management author John Kotter released a study claiming only 30% of initiatives were successful. Over ten years later in 2008, McKinsey’s follow up study claimed the success rate hadn’t changed one bit. Change fails when you’ve created so many enemies that they kill the change. In other words, the responsibility for success and for failure is with those initiating the change. And it’s clear that while change is constant, we aren’t good at managing it.

What is sad is that we keep recognizing we need to be good at this, we keep recognizing we aren’t and we keep trying to solve it the same way. The “answers” to which we keep looking say we should (i) create a compelling story, (ii) establish role models for successful change, (iii) build systems to reinforce the change and, finally, (iv) establish the skills required for change. It all seems so rational. The only problem is that people aren’t very rational so when the effort meets employees and managers, their respective attitude and behavior don’t change.

These basic assumptions don’t work for a host of reasons. As an example, what seems compelling to managers isn’t always compelling to a workforce. And who we choose as role models isn’t as influential as broad peer to peer (i.e. social) networking. In addition, we to often rely on money as a motivator when it really isn’t that impactful. Finally, we can teach tools more effectively than attitudes toward change.

We’ve certainly had our experiences, both good and bad, with driving change both internally and with clients. From those experiences and our studies, we have adapted a change model we find effective for our area of expertise. Here are a few of its unique elements;

Download WP about 10 Essential Do's & Don't's to Driving Change with OpEx

  1. Give people time to digest the change. Often leadership has spent significant time discussing the desired change and its causes. Leadership is no longer wedded to the status quo and is committed to what is ahead. It is unreasonable to expect everyone else affected by the change to need any less. Pushing change just triggers the organization pushing back.
  2. Segment the audience when communicating. Treat the communication like a product or service launch where each segment has a tailored communiqué that addresses their unique position in the organization and how they are affected by the change.
  3. When developing role models, reverse engineer internal successes. What I mean by that is that any successful project has elements of whatever roadmap you’ve chosen. The fact the events took place through unconscious competence is meaningless. What is important is that they took place in your organization and can be used as examples you own.
  4. Treat crisis change different than steady state change. When making a steady state change, spend as much time on the process as the idea of the change. Develop separate roadmaps for crises and steady state. Don’t oversimplify the roadmaps. Ensure there is time for gradual understanding to minimize stress response and push back as well as to avoid lingering mistrust. Don’t try to create crisis where there isn’t.
  5. Provide coaching to key change spots. This may be one-on-one to executives or in mass to groups. It may use internal or external resources. You won’t correctly anticipate all the key spots but thinking about them will prepare you to respond quickly to the one’s you miss and the preparation acts as preventive maintenance. Coaching has a proven impact to help people focus. Add coaching to training and people learn more. Coaches accelerate the acceptance of change and help avoid potential long lasting problems.

Woodrow Wilson was right – if you want to make enemies, try to change something. But if you handle the change correctly, you can minimize the resistance and develop new allies along the way. And to do that, don’t repeat the same mistakes from failed changes. Look to the successful ones for elements that produced better results. Develop successful roadmaps for change based upon your

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experiences. And we would be happy to share our successful roadmaps with you as well. If you’d like to discuss these ideas about change, feel free to contact me.

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Business Process and Performance Improvement – Strategic Initiatives to Tactical Actions?

March 8th, 2013 Comments off
For many companies, CI has has moved from a top-down strategic initiative to tactical activities focused on specific business problems

For many companies, CI has has moved from a top-down strategic initiative to tactical activities focused on specific business problems

I’ve written several articles that talked about how views on business process and performance improvement have changed over the last 3 years.   In the personal development world, there is a mantra that basically says that meaningful change comes only when the pain of not changing becomes greater than the pain associated with change. 

The economic downturn definitely created the pain that caused a lot of companies to change the way they look at their business, and at process and continuous improvement.  I see very few companies saying they want to launch a top-down, enterprise wide Six Sigma (or Lean or BPM) initiative, especially ones that focuses on investing big $’s on training and infrastructure up front.   Those days, for the most part, seem to be over and gone.  Certainly a big change from years past, but is it a bad thing?

Some purists might argue that it is a bad thing, that top-down, large scale change management and process improvement initiatives should be a fundamental part of any enterprise.  Theoretically, yes, but how many large-scale Six Sigma (or Lean or BPM) initiatives basically collapsed under their own weight in years past, after a great deal of money, time, and intellectual capital was spent?   A great many, I can assure you.  Why?   Well, I might argue that it’s because they took on a front-and-center life of their own, as initiatives, growing unbounded for the sake of the initiative when their place should have been in supporting the core value-generating processes of the business.

Download our short guide to project selection and definitiona short guide to project selection and definition.

I would argue that the change is not a bad thing, and was necessary to survive in this new normal.  Let’s think about where are we now?   Companies are lean and mean, operating in very much of a do-more-with-less mindset.  For many, big Six Sigma (or Lean or BPM) organizations have been disbanded.  Productivity is at record levels.  60 hour + work weeks are the norm for many.  But, you can only ask so much of your people for so long.   Sooner or later the business processes have to be looked at, right?

But, now, what I see is that many organizations are taking a very pragmatic and tactical approach to CI.  The competitive environment, the regulatory environment, or maybe even a very important customer is telling them EXACTLY where process problems are, and they are listening.  They then focus like a laser beam by identifying and rigorously defining good projects (see a recent article I wrote on the elements of good project definition) that solve real, specific business problems.  They then develop the process improvement skills in-house or work with a specialist partner to execute what are, by definition, high-impact improvement projects. No guesswork, no unnecessary overhead, no unnecessary infrastructure.

In essence, what I see is a fundamental shift from CI initiatives that are pushed into the enterprise to an environment where CI and process improvement are pulled in, as specifically needed by the business.  Of course, the pendulum has swung very far from the strategic to the tactical and the optimum is probably somewhere in the middle.  But, was this change a bad thing?   I think not.  I think it will serve to refocus CI on what really matters …. making the business more competitive and profitable in an ever-changing marketplace.

Feel free to contact me directly.  I'd like to hear your thoughts ….

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What is Change Management? The Rule of Three

March 6th, 2013 Comments off

Celebration

Great art can inspire change and drive us to action.  It can make you dream of something better or make you aware of your dissatisfaction with the status quo. The former makes your feelings soar.  The latter can bring pain.  Which do you believe drives us to action?  While I’d like to believe we act on visions of what could be, I think we’re more driven to immediate action by the feelings stirred in the dark painting.

When I reflect on that idea I remember reading how the opposite of satisfaction isn’t dissatisfaction but the lack of satisfaction.  Just because we’re not satisfied, we may not be willing to change right now.  We may in the long run. But maybe not right now.  Meanwhile, when we’re dissatisfied, we act.   Not being satisfied won’t drive new behavior simply because change is scary and painful.  So it’s not until the pain of staying the same becomes greater than the pain of changing that we change.

I thought a lot about this lately because I had three consecutive discussions with new prospective clients about the subject of change.  In each case, the party with whom I was speaking wanted to talk about driving operational excellence. But what we were really discussing was change.  The three conversations were all very different organizations yet they had very common denominators.  So here were the three scenarios;

  1. A state university pushed to change by technology and funding pressure was described as being very resistant to change driven from outside its culture.  Yet they lack an acceptable and successful internal change model so they remain wrestling with how to proceed.
  2. A heavily regulated division of a large insurance company described itself as having little process discipline and is considering BPM software to lock down processes.
  3. A successful manufacturer that implemented Six Sigma using an outside party five to ten years ago saw few meaningful results and quit.  Now they look to restart but recognize how hard it will be to get everyone to buy in a second time.

Download WP about 10 Essential Do's & Don't's to Driving Change with OpEx

In each case, I strongly advised against three things;

  1. Don’t emphasize form over substance.   You don’t have to sell a big change model, adopt a new software application or role out a headline OpEx initiative.  You just have to move some things forward and make some gains to win hearts and minds.  They’ll take it from there.
  2. Don’t superimpose an external set of rules such as a software program.  Everyone organization has successes internally.  Focus on those. Build on them.
  3. Recognize what may seem like dysfunctional behavior to you is probably quite normal.  Someone whose profession is to improve is often puzzled by those that don’t embrace it.    The problem is the subject never said they were dissatisfied.  While they may agree things could be better, they aren’t motivated to change.   That isn’t irrational.  We seek self actualization in the long run but in the short run we change when we are unhappy.

War

So what can we do at those three organizations to avoid the pitfalls and drive some much needed change?  We recommended the following actions;

  1. Celebrate your own successes.  But reverse engineer them so the success is replicable.  And improvement may have occurred through hard work but there were probably some unconscious best practices that can used as examples for the rest of the organization.  Advertise the success and highlight the best practices that can be replicated.
  2. Find who is dissatisfied and wants to change.  Don’t try to convince people to change with arguments of a better life.  Instead, find who is dissatisfied and willing to go through the pain of the change.  If you find someone with pain that isn’t acting, help them become aware of the level of pain.  If they begin to show signs of a willingness to change, start working with them.  If not, come back to them.  If it’s real long term, chronic pain, they’ll be ready one day.
  3. Let the organization pull what it needs rather than a centralized group pushing what they think is needed.  This isn’t to say a centralized group doesn’t know what is needed.  It very well may in which case it should make it available. But you dictate change.  You are better off giving them the ability to drive the change they see as needed.

The bottom line is that very different businesses have very common needs when it comes to change.  The core elements of change are universal.  I’ve tried to identify a couple of key “don’t do’s” and an equal number of “do’s.  Hopefully, these will help you avoid some potholes and accelerate success.  If you’d like to discuss, please contact me.

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The Next Generation of BPM

February 27th, 2013 Comments off

The Next Generation of BPMWhat is BPM? Simple question, right?  Is it about aligning the organization with the wants and needs of clients?  Is it about deploying scorecards and dashboards to provide real-time visibility to performance?  Is it about using things like Lean and Six Sigma to improve processes and make workflows more efficient?  Is it about software platforms that provide sophisticated workflow and real time visibility and control of operations?   Is it a process, technology, or management discipline?Tips for gardening in winter months Cheap Burberry Bags Outlet

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Waterfall Design (QFD): Looks Good but Watch Your Step

February 24th, 2013 4 comments

Pretty but Watch Your Step

Waterfall design looks so good on paper.  You start by defining customer requirements and then each step naturally leads to the next until the service is offered, product produced or new process is launched.  A QFD is a waterfall design process and it expresses this natural progression as linked matrices.  Anyone who has ever seen a presentation for QFD sees and accepts the logic of the waterfall concept.  Why then is it that what seems like a smooth running machine usually ends up a painful and burdensome process?

The problem is that elements of a product or service are usually put through in phases to keep the whole work flow running.  If that weren't done, the Company would have the vast majority of the people in the process idle having either finished, or still waiting for their turn, to contribute to the final work.  Such massive underutilization is no way to run a company.  So we avoid the poor utilization by breaking things down into pieces and sending them through the process in components.  The pressure to maintain utilization and the resulting flow of components creates a tremendous problem in waterfall design processes.

The problem is the series of rework loops caused by gaining buy-in and responding to feedback from internal customers. As each segment flows through the maze of work, each functional area has valuable feedback and expects to be heard.    Once again, using the QFD process as an example, as the output of each matrix becomes an input to the next matrix, the new parties have comments.  And as such, the input to a particular matrix gets kicked back along with the new functional area’s thoughts and comments. The water is now flowing up the waterfall!

Now the problem starts to compound when you have more than two matrices in the process.  When its just two, the rework and new work cross and loop until their joint work product meets exit criteria.  They are just handing off to each other like two people having a catch with two balls.  Every now and then one player may have both hands full but the waste of his compatriots empty hands is short lived.

Download WP “Design Basics – QFD Overview”

But once past two players, problems arise quickly.  As a simple example, let’s imagine three matrices starting with product definition.  Product definition provides input to design which, in turn, provides input to Service Operation or Manufacturing, as the case may be.   Now imagine, just like when there were two matrices, that the output of the first matrix (i.e. product or service requirements) goes to a design team which provides feedback.  They remain in equilibrium until the design team’s output goes to a production or delivery team which has its input.  As Player 2 passes reworked Cycle 1 to Player 3, they are also receiving reworked Cycle 2 from Player 1.  It isn't long before a ball hits the ground.

Irrespective of how fast everyone can be, if you add enough matrices or steps, the process breaks down.    What usually happens is that Player 1 ends up with a stack of balls on the ground around him.  The system was designed for one set of requirements to flow smoothly.  When multiple rework loops occur, the perfectly designed machine collapses under its own weight.

There is no easy and universal problem for this breakdown.  Some possible solutions are for fully integrated teams representing all functional areas to work on components together through all phases.  A design “cell” if you will.  Another solution might be to design from the back to the front.  And yet another might be to simply accept underutilization as a cost.  But whatever the case, you should be aware and step outside the box before you drown in the waterfall.  If you have comments, please contact me.

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Alignment through Business Process Management

February 20th, 2013 Comments off

Strategic Alignment, Organizational AlignmentWhat do we enjoy about leisure activities?  A symphony’s crescendo.  A well executed touchdown.  A sunset from a summit.  We love the harmony.  But in business, there is also value.  Along with that feel good moment, alignment creates value.  It ensures the whole is worth more than the sum of the parts.  And the potential for alignment is in many directions.  We want to be aligned to customers, shareholders, employees and our communities.  But alignment only occurs through design.

In a phone conversation this week, someone asked me what BPM is.  To me it is the design of the alignment.  BPM isn’t the only discipline driving alignment.  In another conversation with a private equity sponsor, when asked about their upstream measures of alignment, I was quickly given financial metrics which if crossed triggered an action.  In such an advanced market economy, we have very refined measures for alignment to the requirements of capital.  And alignment with customers is the essence of Voice of the Customer.

Alignment and Balanced ScorecareSo where can the elements offered in SSQ’s business process alignment focus?  How do we contribute to an organization’s quest for value?  We focus on aligning processes vertically and horizontally using KPI metrics.

We introduce scorecards or dashboards as a way to monitor alignment vertically in an organization. The built-in ability of cascading scorecards, regardless of the number of hierarchies, depicts how the business rolls up from any perspectives.  While easily attained but it is readily understood and accepted.  It fits our view of organizations and compensation systems.

A greater challenge is achieving horizontal alignment.  Even though vertically defined functions and groups have a stake in a company's outcomes, many times the overall company fails to optimize its potential because resources and information are “owned” by the vertical components. Thus, we create silos.  I am an optimist and believe people want to work together.  But I also believe in our quest for simplicity and accountability, we’ve failed to fully understand horizontal relationships and created incentive systems that drive people to work on their own.

So our implementation of BPM seeks to facilitate an organizations’ understanding of how a course of action adopted by one function impacts other functions. We seek to aid the company building a systems approach by giving the various vertical entities visibility into each other’s plans, resources and performance gaps based on internal and external customer requirements.

BPM Whitepaper – A Structured Approach to Delivering Value

We finally seek to redefine the KPI’s balancing the vertical requirements with the horizontal requirements to get the alignment in harmony.  By comparing those KPI’s with actual performance we help a company define the projects and activities that will close the gaps to the highest scorecard to ensure we also meet external alignment.

The BPM we introduce has many benefits.  It examines and aligns to scorecards.  In ensures financial and vertical measures are met by building the muscle tissue in the form of process definitions.  It focuses on KPIs, performance gaps and prioritized project lists.  But it is unique in its facilitation of an understanding and acceptance of horizontal alignment and thus takes organizations a step closer to its optimal value creation.

So in answer to the question for a definition of BPM, I say the essense is alignment.  And in answer to what we bring different than any other focus, we feel we facilitate overcoming horizontal barriers to value creation.  If you’d like to discuss these concepts and how we can help your organization, contact me.

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Strategy, Execution and Operational Excellence

February 17th, 2013 2 comments

Hmm…something's wrong

What is a strategy?  Where do you separate strategy from execution?  What value does Operational Excellence offer?  Why does any of this matter?

Quite simply, strategy is a decision about who you wish to serve, how you wish to serve them so as to deliver value and what capabilities are needed to succeed.   Answering these questions provides the guidelines by which to allocate resources.

On the other hand, execution takes your strategic decisions and converts them into a vision, mission and operational plans.  If you’re a regular reader of our blog, you’ll know we connect operational plans from each functional area to improvement projects by using core value streams.  Identified performance gaps in the value streams are the building blocks of an Operational Excellence effort.

Why are these distinctions important?  Describing vision, mission, operational plans and operational excellence activities as strategies confuses the journey with the destination.   That mistake ensures you'll never arrive anywhere.   It also strips away the value of helping a client choose the means by which to execute a strategy.  Putting the cart ahead of the horse, yields both a useless cart and useless horse.

I tell prospects, clients and partners; we’re here to help execute on strategies but we assume those strategies are in place.  One of our value propositions to our clients is that we will develop a governance map from a top level scorecard at the highest point to the deepest sub-processes at which improvement opportunities reside.  There we specify business improvement cases and projects.  However, we expect the client to choose and weight the criteria by which to prioritize the projects for execution so we can allocate resources such as budget and personnel.

It is the choosing and weighting of criteria for project ranking that tells me if a company has a clear strategy.  As previously stated, a strategy specifies what customers a company wishes to serve, how it wishes to serve them to deliver value and what capabilities are needed.  These decisions provide the guidelines by which to allocate resources.  When a company has a very difficult time ranking and rating projects, much less being consistent over time, it is clear they don’t have a clear strategy that is understood by everyone.

Systematically Driving Value with OpEx

When a company doesn’t have a clear strategy, improvement initiatives run into common problems.  The company develops a long list of projects but they are all equally critical.  People work on many projects spending a little time on each and never getting any of them done.

So for those of you about to start or restart an improvement initiative, the first thing you want to make sure of is that you have a clear strategy.  Test yourself by looking at the many projects currently running in your organization.  Are they prioritized?  If prioritized, do the priorities change on short notice or are they consistent?  If not, try to prioritize them.  Can it be done without ending up with all high priority? Can you get to three or four key initiatives?
In conclusion, make sure you separate strategy from execution.  Use the allocation of resources to various execution problems as a test of whether you have a clear strategy.  If you have trouble prioritizing, go slow with your improvement efforts lest you expend a lot of resources on shifting priorities.  Press for clarity and use the many iterations of prioritization as exercises in drawing out a strategy.

If you’d like to discuss, feel free to contact me

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Leadership Steps in Creating a Customer-Driven Process Enterprise

February 13th, 2013 2 comments

Everyone in an organization has a responsibility and something to contribute to Process Management.  Executives, Process Owners and Process Team Members all have a role to play to create a Customer-Driven Process Enterprise.  But leadership’s role is the most impactful in truly achieving the end state.

Leaders need to have a map in their mind and understand their vital role.  They should know the foundation they can lay, the steps along the way and how to identify when they have arrived.  But first and foremost, they must understand what they can do as individuals and buy into those actions.

Download BPM Overview PresentationOur BPM Overview Presentation.

So what personal role must leadership take to create a customer-driven process enterprise?  We believe those steps are as follows:

  • Demonstrate commitment.
    • Stake your own reputation to the transition
    • Commit to the goals in public
    • Adjust reward and recognition programs
  • Commit the required resources
    • Fund in full the up-front investments to get started
    • Dedicate excellent people to the effort
  • Demand participation and engagement
    • Stay personally engaged throughout the process
  • Be passionate about change
    • Talk about it to everybody and get them emotionally engaged

If a leader can’t buy into those steps, don’t go any farther. But if they see the risk worth the reward, they should first focus on building a foundation in the organization which ensures success.  So here are the prerequisites for transitioning to a customer driven process enterprise.

  • Bring all initiatives together under the umbrella of business process management
  • Communicate the seriousness of the need for a customer-driven process enterprise
  • Determine an implementation plan for becoming a customer-driven process enterprise

With a foundation in place, how do you get from point A to point B?  Here are the phases of the process and what you have to do at each step along the way –

  • Stage 1 – Establish.  Set a Vision, Mission and the elements of a balanced scorecard.
  • Stage 2 – Deploy. Identify Key Business Processes and their Process Metrics.
  • Stage 3 – Implement. Provide Process Owners and Team Members the support to establish a management system which measures actual results, gaps to the desired state and actions by which to improve.
  • Stage 4 – Review.  Evaluate and tie performance evaluation and rewards to how the management system operates.

Download BPM Scorecards executive briefDownload our new executive brief discussing scorecards as part of BPM.

Often, you work so hard at something that it is difficult to know when you’ve realized your goal.  Keep in mind the goal isn’t simply achieving the numbers established for process metrics.  The goal is a cultural shift that orients the company to the customer using processes.  So how do you know when you’ve arrived.  When all is said and done, you’ll know you are there when you see the following –

  • More focus on processes than on functions
  • Employees know and accept process goals
  • Everybody understands how the processes are performing
  • Processes are measured objectively and frequently

So if you are a leader in an organization, or working closely with one, think about whether you exhibit those last four bullet points today.  And if your organization doesn’t, ask whether you need to before one of your competitors does.  If the answers tell you to start changing, feel free to contact me to begin your efforts.  In the meantime, if you want more information, see the complimentary downloads featured in this article.  Upon download, we’ll follow up to offer a complimentary copy of our two day course “Establishing the Strategic Vision” which gets into much deeper reviews of all my points above.

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Productivity – The Coming Golden Age of Continuous Improvement

February 10th, 2013 Comments off

A Drive for Productivity

Last week I wrote a post entitled Value Creation for Private Investors that went largely ignored as it was one of my lowest viewed posts of the new year for a Monday when most of you tune in.  The idea about which I wrote was a revelation to me but it was still nascent at the time and thus very undeveloped and weakly presented. But it gnawed at me and so it kept turning in my head.  And now it pops out again this week hopefully a bit more developed.  The idea is the transition we are making from creating the illusion of wealth with financial engineering to needing to truly drive wealth with productivity gains which will make for a golden age in Operations and Operational Excellence.

As a nation, we will flourish based upon our ability to drive productivity.  You see wealth, as measured by GDP, during the majority of our lifetimes has been driven by population growth.  But as our population growth slows, wealth will only be created by increased productivity.  This transition has been hidden from us for some time by the illusion of wealth creation brought about by high capital liquidity and inappropriately priced risk which eventually lead to the bursting of a financial bubble.  But with risk being more appropriately priced, the illusion is gone and we are now faced with long term slow growth and the only way to stoke it is with increased productivity.

To drive the growth in productivity, I wish to cite a recent blog post by GE’s Jeffrey Immelt a portion of which read as follows;

There are four new drivers of productivity, and success in each depends on the technology and talent we develop. The first is how the sheer volume and increased access to shale gas in regions around the globe is changing the energy debate and the balance of energy power. It would require real infrastructure and pipeline integration between Canada, Mexico and the U.S., but North America could achieve energy independence within 10 years. The second driver for dramatically increased productivity is applying the lessons of social media to the industrial world and building what we call the Industrial Internet. By owning and connecting the analytical layers around industrial products – and using real time data to extract real timeknowledge – we can improve asset performance and drive efficiency. The third driver is speed and simplification because the only way to serve our customers better and compete in a complex world is by working faster and smarter. The last productivity driver, and related to the other three, is the evolution of advanced manufacturing. Manufacturing excellence, forgotten for too long, is once again a competitive advantage.

Drive Value with OpEx

Now when you look at this argument about from where we will get the productivity growth, a problem jumps out.  Namely, we have to generate non-population related productivity gains with a population that isn’t geared to Immelt’s productivity drivers.  Our younger citizens certainly are better aligned and skilled but as population growth slows, they will be the minority.

So guess what — the knowledge of how to improve services, products and processes is really valuable.  Now I’m not talking about how to write a project charter or write up a SIPOC.  I’m talking about revolutionizing energy with process innovation in the extraction of natural gas, the development of the cloud so we can jettison underutilized servers from expensive IT budgets and citizen publishing of information so knowledge flows freely and into every nook and cranny of the population instantaneously.  Imagine – those have all happened in the last five years.  Those are the types of improvements that transform an economy.  But there is plenty of room between a project to save an AP process two days and reinventing the extraction of fossil fuels.  And every time a new industry is targeted, all the operating processes below the top level change will also be looking to improve.

Can you imagine where these big seismic changes will happen next?  How about redesigning education so everyone has access to knowledge inexpensively?  Or health care where we can all see an insanely low level of simple IT tools that if applied would eliminate gobs of waste.  Or all levels of government where we have constantly rising costs with little measureable gains in services.  These trends will continue.  They must continue or we, as a nation, will slowly lose our global relative wealth.  And I just don’t think Americans are ready for that.  But the changes will be disruptive.

In the race to drive wealth through productivity gains, we will see the greatest impact in processes and services simply because they are the largest percentages of the economy.  I’ve already named drilling services, the cloud, newspapers & magazine publishing, health care and education as service companies which either have gone through or are poised to go through significant redesign. What of the process side?

Systematically Driving Value with OpEx

Well I think we are going to see work get reinvented.  My former colleague at Qualtec, Mitch Lawrie, is working on software to focus management on results versus activities and my recent blog on the subject drew significant attention from many of you.  We have worked with several clients in financial services, telecom and transportation which are redesigning long accepted processes to drive greater than 50% reductions in key process cycle times by making them leaner, reducing complexity and capturing information better as well as analyzing it for knowledge.

To return to my original post, my “aha” moment was that I was at a private equity conference where investors of all sizes where lamenting they could no longer make easy money.  That easy money was driven by a combination of capital liquidity, high tolerance for risk and poor quantification of that risk.  It was a recipe for a bubble.  If you bought an asset, held it and sold it before the bubble burst, you made money.  If it was levered, you made a lot of it. The funny thing is that private corporate investors weren’t the only players at the casino. We were all there with real estate and stock portfolios.

But that is gone now.  And as we look into a new environment, we realize we are facing the longer term challenge of slowing population growth and an aging population that isn’t skilled at what is needed to drive the sort of productivity gains needed to maintain historic wealth creation.  To create wealth as a country, we now have to earn it the hard way.  And since there are only so many hours available in the work force, it means we have to work smarter.

And a clearer definition of that “aha” moment brings me to the message in this post.  We figure out ways to work smarter – whether it is a fifth level sub-process or an entire industry.  The result is that we are entering a golden age for people focused and skilled at how to work smarter.   We have the opportunity to make great contributions to our economy.  I urge you all to THINK BIG.  If you’d like to discuss, feel free to contact me.

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