Keynote presentation. Making Process Real Engaging the CXOs. Alec Sharp, Consultant and Founder, ClariteqSystems Consulting Ltd 8:05-9:00

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1 Keynote presentation 8:05-9:00 Making Engaging the CXOs Alec Sharp, Consultant and Founder, ClariteqSystems Consulting Ltd

2 Engaging the Executive July 28, 2010 Sydney, Australia Alec Sharp Consultant Clariteq Systems Consulting Ltd. West Vancouver, BC, Canada

3 Facts and assumptions The facts: I ve spent many years working with process often with people who don t know, don t want to know, or actively dislike it many were C-level executives I ve learned a few things about how to bring them around. The assumptions: You ve read the speaker bio You d prefer I just get on with it So let s dive in with three baseline ideas 3

4 4 Making 1 They might not love process as much as you do Executives It s a ransom note from expensive consultants! Managers I have hundreds, and I don t need any more! Workers It s a horror film: My Incredible Shrinking Employment Prospects!

5 Lots of evidence of fear of process 5 Downsizing and Reengineering: Corporate Lobotomy* * not a nice comparison

6 Six Sigma in particular faces a backlash 6 The cover: 3M s Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture Inside: Six Sigma: So Yesterday? In an innovation economy, it's no longer a cure-all JUNE 11, 2007 A CEO I worked with: I want to disband the Six Sigma group. They think the whole company is just a data collection mechanism being run for their experiments. Many other articles on six stigma

7 7 Making 2 Making the business case for BPM may not work Benefits of BPM the usual suspects 1. Reduce costs and increase efficiency (The perennial #1) 2. Improve customer service 3. Increased responsiveness 4. Regulatory compliance BUT Every other discipline makes the same claims so nobody believes you anyway. Fill in the blanks why not promote BPM with these claims?

8 3 You won t start at the top First, we need executive commitment False! Later, you need executive commitment, but it doesn t start there. Executive We need to do this! Mid-level present compelling idea or information Key elements: Support! Examples are good, stories are better start collecting! Simple visuals everyone can use to support their message Consistency and repetition BP initiatives BP initiatives BP initiatives 8

9 Executive interest three to five key points 9 1. It s essential to have clarity on what a business process really is 2. Existing performance measures are often functionally aligned and work against business processes Whatever you do Don t preach, 3. Success with business processes depends on taking a holistic view don t in which overreach six enablers are considered 4. Enterprise system implementations must include a business process perspective must cover pick and choose 5. Business processes can t be great at everything a single differentiator or strategic discipline should be chosen

10 1 What is a business process? 10 An end-to-end, cross-functional, business process is larger than most people expect when they think of a process. Key point: Different process professionals will have very different ideas of what a process is: Six Sigma ISO 9001 Lean Business Management (that s us!)

11 the elephant in the room 11 It s a PROCESS! The problem process blindness

12 Different perspectives on business process 12 Functional perspective focus on internal efficiencies in our manufacturing process Business Management end-to-end alignment of our Fulfill Order process Sales process Fabrication end-to-end process: Fulfill Order litho Manufacturing process Assembly Packaging & Labeling Procedure: This contains a lot of tiny tiny text that s really much too small to ever be read by mere mortals. It describes a procedure for completing some minor task in a process. And, it goes on for a surprisingly long time, while I try to fill this silly little box just to make a point. Maybe I should have found some clip art of a book, or some such. But, it s late and I just want to get this done! Logistics process A/R process Lean practitioner focus on flow within in our fabrication process Six Sigma focus on defects and variation in our lithography process ISO 9001 focus on documenting procedures in our custom labeling process

13 Does it matter? Yes! 13 At a Financial Services company, important activities were seen as separate processes Identify Prospect Solicit Prospect Qualify Prospect Sequence, metrics, and rewards worked against the sales funnel. Rewarded for number of prospects Expected to contact all prospects Rewarded for long-term viability of client Identify Prospect One process: Acquire Customer Qualify Prospect Solicit Prospect etc. and metrics supports sales funnel. Rewarded for high-quality prospects Identify likely prospects, good fit Smaller number of prospects, more time to tailor solicitation, higher conversion rate

14 An example for your repertoire part 1 14 Telephone company needs to improve its Service Provisioning processes Service Provisioning ins, outs, moves (install new service, disconnect service, relocate service) Five processes misidentified, five teams get started on process improvement the directive is to achieve operational efficiencies Service Order Management process Facilities Management process Installation process Service Assurance process Customer Update process Each team makes substantial improvements to efficiency in their process, largely through new constraints like batching and scheduling of orders The outcome? Service is worse! Financial impact! What went wrong?

15 An example for your repertoire part 2 15 Three errors vague process naming, confusing process with organization, and not focusing on what the client actually wanted from the triggering event Customer Service Facilities Management Installation & Repair Network Monitoring : Move Telephone Service Customer Records & Billing Capture Service Order Assign Network Facilities Install Premise Equipment Confirm Service Quality Activate Customer Account Trigger: Customer wants telephone service moved. : Move Telephone Service Customer result: Telephone service is moved Telco result: Active account with receivable posted

16 2 Cross-functional issues 16 The performance goals of the functions (divisions, departments, ) that participate in a business process usually conflict with the goals of the business process (if process goals are stated at all) Key points: A process vs. function diagram clearly shows the different perspectives A business process needs an owner to rationalize the competing objectives

17 Cross-functional and human issues 17 Wherein we introduce the perverse incentive, the unintended consequence, and their ramifications

18 18 Making Unintended consequences are they the law? In the introduction to Levitt and Dubner s latest Was there a theme to Freakonomics? the book did have a unifying theme, even if it wasn t obvious at the time, even to us. People respond to incentives, although not necessarily in ways that are predictable or manifest. Therefore, one of the most powerful laws in the universe is the law of unintended consequences.

19 19 Making Anticipating the unanticipated What we've got here is failure to anticipate communicate... Unintended consequences are most often a failure to anticipate. There are techniques and frameworks that help.

20 A true story of Function vs. Sales Manufacturing Logistics Accounts Receivable : Fulfill Order goal: Responsiveness by providing the shortest order-to-cash cycle time Receive Order Plan Order Stage Material Fabricate Order Move WIP Assemble Order Deliver Order Collect Payment Sales goal: late-quarter sales Manufacturing goal: maximize machine utilization Logistics goal: lower shipping costs A/R goal: precision in collections Poor process performance because everyone was working hard and meeting their targets! 20

21 This doesn t mean functions are bad! 21 Sales Production Logistics Accounts Receivable triggering event : Fulfill order final results End-to-end business processes deliver essential results by aligning the work of multiple functions Results are discrete countable Must be explicitly identified and managed as a whole Function A centre cylinder of of expertise excellence an efficient way to provide resources across multiple processes Specialized skills, knowledge, tools Work is ongoing Organizational design is usually based on functional areas We prefer not to use the somewhat negative term functional silos Ultimately, business processes are all about alignment

22 22 Making es and functions three key points agency Has an owner! Customer Front Office Finance Back Office Operations Issue Operating Permit Needs an owner! The first step in managing processes is to figure out what they are they don t identify themselves Performance goals for the functions must align with the performance goals of the process es need an owner / steward to set direction, ensure alignment, and resolve conflict It takes concerted effort nothing happens by accident

23 3 The enablers of a business process 23 The performance of a business process is determined by multiple factors the enablers. Key point: The factors that get the most attention (process workflow design and information technology) are seldom the crucial factors. The crucial factors are: Motivation and Measurement Human Resources Policies and Rules

24 24 Making The factors that matter Business mission, strategy, goals, & objectives enables Culture, core competencies, and management style constrains Business enables enables enables enables enables enables Workflow Design Information Systems Motivation & Measurement Human Resources Policies and Rules Facilities (or other) Actors Steps & decisions Flow - sequence and handoffs Applications Data Information Integration Employee assessment and incentives Reward and punishment performance indicators Skills Matching actors to tasks Recruitment, selection and placement Constraints Business rules that the process enforces External & internal Workplace layout Equipment Furnishings Enabler A factor that can be adjusted to impact process performance.

25 Consider each enabler during assessment and design Business mission, strategy, goals, & objectives enables Culture, core competencies, and management style constrains Business enables enables enables enables enables enables Workflow Design Information Systems Motivation & Measurement Human Resources Policies and Rules Facilities (or other) Too many actors Non-value - added steps Duplicate steps Delays and bottlenecks Excessively sequential Unavailable information Re-keying of data Missing functionality Awkward interfaces Lack of support for workflow Inappropriate performer or process measures Internal rather than customer focus Measures of tasks vs. outcomes Mismatches between task value and performer Inappropriate recruiting and placement Too little empowerment Out-of-date policies or numerical limits Excessive review or approval steps Restrictive labor contracts Overly complex coding Mismatch of work needs and facility No support for team work Layout that impedes flow of people or material 25

26 26 Making That s the main reason we model as-is workflow Eventually, we will determine how individual processes really work by mapping who, does what, when. This allows the assessment of the as-is process, and design of the to-be process, enabler by enabler: Workflow Design Information Systems Motivation & Measurement Human Resources Policies and Rules Facilities (or other)

27 4 es and information systems 27 When major information systems are implemented without regard to end-to-end business processes, overall results range from okay to awful. (How awful?) Key point: Major companies often re-implement systems they already have in order to make them more process-oriented

28 Misunderstanding process Global manufacturer implementing ERP Four primary modules: Sales Manufacturing Logistics Finance Determined to do it right: This will be a process-oriented implementation! 28 28

29 29 Making How the process-oriented implementation worked out Experience proves that software implementations are far more successful when they are truly process oriented Missing the point about process : Sales process Production process Logistics process A/R process Sales module Manuf g module Logistics module Accounts Receivable module Conflicts: timing, coding, terminology, data formats, performance targets, Same software, process-driven implementation: Sales function Sales module Production function Logistics function A/R function end-to-end process: Fulfill Order Manuf g module Logistic s module A/R module

30 Success with ERP implementation Study by the late Michael Hammer, godfather of BPR Observed that success of ERP implementations varied wildly Worked with ~200 companies to assess their degree of success with ERP implementation 30 30

31 Success with ERP implementation Number of enterprises Success (ROI, etc.) ranked from

32 The usual guesses 32 Skewed pessimistically Normal distribution Skewed optimistically Number of enterprises ly pessimistic Success (ROI, etc.) ranked from 0-10

33 33 Making Winners and losers in ERP implementation Losers Winners Number of enterprises IT focus, Functional orientation first, IT secondary Success (ROI, etc.) ranked from 0-10

34 5 Choosing what to excel at 34 A business process, like a company, can t be all things to all people it s essential that a differentiator is chosen. Key point: A lack of clarity around the differentiator, or conflicting statements about what it is, are a major source of stress and frustration

35 goals: know your differentiator Too often, companies lack focus or focus on the wrong discipline. The original reference: The Discipline of Market Leaders Michael Treacy and Fred Wiersma Addison-Wesley 1995 Operational Excellence Consistent, predictable, error-free, and efficient. More efficient, but less flexible in changing direction or meeting needs of individual customers. Continuous and rapid introduction of new products and services. Product Leadership Customer Intimacy Tailors service delivery to the processes of individual customers. More flexible for adapting to needs of new offerings, but less efficient. More flexible for adapting to needs of individual customers, but less efficient. Great processes don t try to be all things to all people strive to be great at one differentiator, and good at the other two 35 35

36 The #1 differentiator problem 36 Participants in a single end-to-end business process aiming for different differentiators without realizing it Functional area 1 Functional area 1 Functional area 1 End-to-end business process Sales: Customer Tailored Engineering: Product Leadership Finance: Operational Excellence

37 37 Making More differentiator problems No clear differentiator Stuck in the Bermuda triangle A business process being specifically directed to excel at two differentiators, most commonly: Operational excellence We must be the low-cost provider! Customer intimacy We must do what it takes for each client! Making a strategic change to the differentiators without explaining the rationale to staff

38 Recap the three to five key points It s essential to have clarity on what a business process really is 2. Existing performance measures are often functionally aligned and work against business processes 3. Success with business processes depends on taking a holistic view in which six enablers are considered 4. Enterprise system implementations must include a business process perspective 5. Business processes can t be great at everything a single differentiator or strategic discipline should be chosen

39 39 Making Contact info Me: My company: My book: Workflow Modeling, Second Edition is now available (it s a complete rewrite) Microblog: My ERwin data modeling blog: See for From the Trenches columns

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