Can Business Process Change Really Help Control Costs?

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It’s central to business process management that process variables are going to become known, managed, quantified and improved. It’s also a core concept that we go to this trouble in order to affect certain outcomes including: compliance, quality improvement, productivity and efficiency improvements and the facilitation of new product development. In the process, what kinds of changes wind up making a difference to the bottom-line? Without some degree of cost-control (which would produce a cost-neutral outcome or worse), I would strongly suggest opportunities are being missed. I contend that this is true in those cases where quality or compliance is your highest priority. It’s our job to quantify the savings and build the business case for the changes we’re recommending.

Lean Changes

Lean Methodology offers many kinds of variables you can analyze, modify, design, validate and simulate for the purpose of finding a bottom-line impact. However, Lean is not just about cost-efficiency so think more broadly than that. There are other variables and factors that produce savings if you know what to look for. Let’s start with Lean opportunities for MEASURABLY doing more with less. They include (arguably, with some overlap):

  • less human effort
  • less transportation and movement from place to place
  • less inventory and fewer carrying costs
  • less over-production and related waste
  • less set-up and “change-over” time
  • less time spent waiting in queue
  • less non-value-add time (usually between 90-98% of process time)
  • finding added capacity for production, quality improvement or innovation
  • fewer wasted parts and material resources

Lean Change Fundamentals

Essentially, Lean ought to be producing three core changes:

  1. Less Variability in the process
  2. Fewer Inter-Dependent Steps in processes
  3. Less Uncertainty in process

Other Changes to Control

The following categories or classifications of change can be addressed in your business process analysis, re-engineering and improvement initiatives. Further, you can continue to consider and modify these as long as you’re interested in finding cost savings in a process-driven fashion.

  • Changes in Frequency – consider changing an activity, step or task to hourly, weekly, monthly or strictly on-demand. What happens to your cost?
  • Changes in Scope – what happens to cost if you change your scope to the level of activity, process, department, or company-wide?
  • Changes in Role – what impact can you have on cost by assigning role/responsibility to a consultant, systems analyst, business analyst, line-of-business manager?
  • Changes in Mode – if you change your medium for an activity like customer service from the phone to IM or email, what impact can you have on cost?
  • Changes in Trigger – can changing from internal to external or business partner to customer triggers have an impact on cost?
  • Changes in Predictability – by changing the degree of certainty you have in a process, do you positively impact cost?
  • Changes in Duration – by modifying the process timeline, does change decrease costs?

Making the Business Case for Change

By assessing, simulating, or otherwise analyzing the cost side of these changes (despite my gross, over-generalized examples), you’re informing your cost-benefit analysis and can make a very strong business case for the changes you’re proposing. Stay focused on scenarios and provide leadership with pictures and data you can validate. Proving the cost control inherent in BPM is not only possible, it’s relatively straightforward and absolutely critical for good business decisions. Just bear in mind (in a process-oriented way) that some changes may have the “appearance” of cost savings at first but produce unintended and costly consequences later so devote some time to simulating and validating your assumptions.

All the best,

Patrick

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2 responses to “Can Business Process Change Really Help Control Costs?

  1. Making a business case for change is one of the most important things that you need for a process improvement effort.

    In a recent poll I ran at the Process Cafe (http://process-cafe.blogspot.com) the single biggest cause of process failure was ‘lack of buy-in’. This directly links to the comments in your post.

    The ability to identify quantifiable cost savings/revenue increases to a process implementation or a process modification will directly affect the business case thereby reducing the resistance to change.

    A well thought-out post. Thank you.

  2. Patrick Joseph Gauthier

    Thanks Gary – widening the lens to include discussion of resistance to change is a nice touch. I appreciate your input.

    Patrick

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