Global competition, increasing customer power, and quantum advances in technology have combined to demand a new and more adaptive approach to managing the business. In spite of significant advances in methods to improve business performance, such as TQM, Six Sigma, Lean, BPR, ERP, CRM, SaaS, and the cloud, many organizations continue to struggle in executing improvements to business performance. In many cases, the culprit is a traditional functional view of the business, where organizations develop plans, budgets, and even reward systems mainly in a functional or departmental context, paying little attention to the “critical few” measures of performance that matter to customers and failing to gain clarity on the type of cross-departmental collaboration needed to create value for customers.
Instead, when organizations begin with a customer perspective, and then take an end-to-end, process-based view of the business, there’s a greater likelihood of success in improving business performance and mitigating the following three problems associated with a traditional departmental view of the business:
- Myopic measurement practices. When traditional financial measures of revenue, expenses, earnings, and cash flow dominate, the metrics that really matter to customers — on-time delivery of product or service (complete and defect-free), accurate and user-friendly invoices, rapid and courteous responsiveness — often don’t make it to the front page of the executive dashboard or scorecard. Even when organizations monitor such metrics, they typically lack the next level of diagnostic measurements and the infrastructure for corrective action. Misaligned recognition and reward systems compound the impact of these myopic measurement practices.
- Lack of accountability. In the traditional view, nobody is accountable for the end-to-end flow of activities that truly matter to customers. Executives neither concisely define the end-to-end activity flows nor understand them in the same way. Even though the root causes of excessive costs and errors, including delays and inflexibility, are often found where work crosses organizational boundaries, nobody is tasked with the performance monitoring and continuous improvement of the entire flow of activities from receipt of order to delivery of the firm’s product or service. Instead, common practice assigns accountability solely according to business unit, departmental, or functional parameters.
- Lack of focus. In traditional organizations, many companies launch more concurrent projects than they can successfully execute. Due to a lack of attention to the end-to-end work that creates value as well as a predominant focus on departmental needs, organizations often deploy valuable resources on overlapping and sometimes even redundant projects. This is particularly true of essential IT resources, which today are invariably part of practically any improvement effort.
The approach outlined in our recent Executive Report (“Improving Business Performance“) describes how a process-based view highlights both the need for cross-departmental collaboration and attention to the critical-to-customer metrics, thereby mitigating the three issues outlined above. The report covers the following six areas as guidance to organizations, directly addressing the issues of a traditional functional view, myopic measurement practices, and a complex IT environment:
- Shifting management attention
- Achieving strategic alignment
- Improving business performance
- Establishing governance
- Assuring architectural alignment
- Embedding a systemic view
A systemic view of the business is at the foundation of shifting management attention from how the organization structures itself to how it creates value. The report shows how the development of a process relationship map provides a high-level, one-page schematic that depicts the major end-to-end processes involved in delivering products and services to customers. Such a diagram will help drive dialogue at the senior leadership team level concerning what to measure from a customer perspective, which departments need to collaborate to create value for customers and the organization, and what information systems the organization should deploy to create such value. Organizations can then support this diagram using a set of one-page schematics that represent the flow of activity for each major, customer-touching business process.
Expressing strategic objectives in the context of value-creating business processes requires an organization to ask and answer the question, “What scope of business performance improvement will be needed in each major end-to-end process for us to succeed in achieving our strategic objectives?” Asking and answering this question leads to making tough choices regarding where to focus business improvement efforts for optimal results in value creation.
In taking action to improve business performance, we advocate an integrated, architectural method that increases the likelihood of crafting a compelling case for change, providing an overall perspective for prioritization and optimization, assuring the right pacing through capturing “quick wins,” and taking steps to establish the infrastructure for continuous improvement.
Establishing governance for value-creating business processes enables the enduring focus needed for continuous improvement. The report emphasizes using a governance framework built on process management principles as the means to assure ongoing executive attention to the metrics that matter to customers and cross-departmental collaboration.
Just as the traditional functional view of a company is too narrow, business performance improvement efforts should not be narrowly focused on a single end-to-end process. Alignment of the process view with business architecture puts the process, customer metrics, and improvement activities into the context of the overall enterprise. This allows management to identify redundancies, inconsistencies, and interactions in information, systems, and organizations and to coordinate multiple improvement efforts across the enterprise.
Finally, we discuss that embedding a systemic view of the business involves nothing less than a fundamental shift of culture. To embed new business practices and institutionalize a new way of “how we do things around here,” organizations must pay attention to five key areas: simple, visually compelling models; customer-focused metrics; an integrated approach to performance improvement; a governance framework; and aligned recognition/reward systems.
There is neither a “silver bullet” nor a “secret sauce” for improving business performance. While it’s a lot of hard work, we are confident that the view outlined in the report can assist your organization in improving business performance and becoming more adaptive.