Tag Archives: Efficiency

Smart Business Process: Wal-Mart Proves (Again) That Reducing Costs & Adding Customer Value Leads to Profits

Wal-Mart aired its latest performance data today and revealed that, despite the recession, they have maintained profitability. Shining a light on Wal-Mart is kind of silly given that virtually no other organization in the world (and most countries, for that matter) are in the same league.  The point is that we can all learn from their lessons. The lessons this week are absolutely central to the argument for  smarter business process management. Wal-Mart applied several elegant tactics with what appears to be precision execution. Firstly, they reduced their inventory which contributed to the goal of reducing costs by 6%. Secondly, they recognized that their customers are facing deep income cuts of their own and identified which product discounts would be perceived as most helpful. They leveraged their world-class inventory data to identify specific products and discounted prices considerably. The result was an influx of new customers who compensated for lower sales per customer thereby producing profits that exceeded everyone’s expectations.

Lessons Learned – What Small Business, Non-profits and Governmental Organizations Can Take-Away From Wal-Mart (without stealing)

In the spirit of keeping it simple, the following lessons can be brought home to your organization:

  1. Visualize, illustrate and understand your supply-chain
  2. Negotiate discounts with your suppliers
  3. Reduce your inventory and reduce inventory costs
  4. Ask your customers what they believe will add value to their lives and modify your offering to reflect that demand…now
  5. Let your prospects and customers know that you have satisfied their demands – promote yourself effectively
  6. Establish clear and specific performance expectations including those for positive financial results
  7. Measure and report results openly (even the bad news)

It doesn’t matter how big or small you are and it is frankly irrelevant which industry you hail from…you can apply all of these lessons and tactics. I have done so in commercial for-profit enterprises, governmental programs as well as in non-profit settings.

BPM – whether it is enabled by software or not – is key to each and every one of these tactics.

  • If you cannot “see” your supply chain;
  • if you cannot model how you will reduce inventory;
  • if you cannot illustrate how you will engage and interact with customers to understand where and how you can create value in your value-stream;
  • if you cannot develop a straightforward mechanism for gathering, measuring and reporting performance data, then you will find managing your business very difficult compared to those who can.

The best strategy and the best intentions will be trumped by lousy, inefficient and absent business processes. Between you and me – when I run across reasonably successful organizations that lack identifiable and manageable business process and controls, I know they are successful quite by accident. Ignorance in managing organizations and performance is not bliss.

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The Leaning of America: The Case for Small Business Process Management is Unequivocal

As a consultant to small and mid-sized business, non-profits and government agencies (with a particular focus on healthcare), I often engage executives on the merits of BPM. Said executives wonder aloud if their time is well-spent documenting, analyzing and re-engineering work and processes.  The common refrain is that they believe they have bigger fires to fight and that their people simply need to be managed to be more productive. Other excuses involve blaming external factors such as unfair competitors,  legislators, suppliers, and fickle customers.

There’s no doubt that the economy is in terrible shape. All of my clients are struggling. However, the data is incontrovertible: organizations that run lean, slick, flexible processes in every dimension of their operations are doing well compared to their less BPM-savvy peers.

In retail, Wal-Mart is peerless. Japanese and European automakers have survived whilst GM and Chrysler went bankrupt. Amazon continues to disrupt the entire universe of commerce. Kaiser has revolutionized healthcare and health insurance. Tata is helping India’s GDP grow while the institutionalized first-world back-slides. The tech sector as a whole has fared better than most other sectors. The only incongruities are the BPM-centric banks that demonstrated ethics, morals, risk-taking behavior and greed can and will outsmart BPM any day.  While there are many factors at play in the world of business and global economics, it pays to study the common traits among the winners and apply them at home.

Think Small and Lean

It’s simply undeniable that investments of time, energy and money in becoming process-centric will pay off in a number of important ways. It is also a fact that the US economy is a function of small business. Our challenge is not in doing more to demonstrate how swell BPM serves multi-national, multi-billion dollar, multi-tech corporations. There is no question that aerospace and supply-chain giants know what they’re doing.

The great challenge lies in packaging BPM approaches, tools and methodologies in right-size, right-time, right-cost portions for healthcare, social services, job training, housing and other sectors. Government and non-profit organizations are crucial participants in our economy and generally suffer from a lack of process savoir-faire.  This is especially true at the local level. Small government and small business must become process-enabled.

This call to action is all the more reason to simplify and de-code the way we talk about BPM. The more cryptic and foreign something sounds, the more geeky the approach, the less accessible and more expensive it becomes in the minds of government and small business leaders. Similarly, the more BPM is a product of software developers and the more is aimed strictly at automation, the less attractive it becomes. Electronic medical records (EMR) are a terrific example. Software developers sell software in a way devoid of attention to the most basic workflow and implementation issues; 60% of implementations fail; and today a dismal 2% of hospitals and 10% of doctors offices have a fully-functioning EMR in place. No matter how badly our country needs EMR proliferation, if our approach is tinged with greed (which it is), the initiative will stall (which it has). Compare that performance to the spread of VistA (the VA’s answer to open source, simplified solutions to the same problems). VistA is standard across the DoD, VA and many other public health domains today and spreading quickly.

Lean Initiative

True, government, social service, health, and non-profit sectors – who are often smothered under the weight of social and economic pressures in ways you and I can’t relate to – need to modernize, get lean and automate. However, so long as the architects of change speak a foreign language and offer up expensive software solutions, progress will be glacial. I propose that this country needs a Lean Agenda as much as it needs a Green Agenda. Frankly, we need lean to get to green. But it has to happen in all sectors, fields, industries and domains. And in order for that to happen BPM ambassadors need to come back to Earth and engage people in a multi-cultural fashion. We should all be painfully aware that big business relies upon small business and affordable health and social services. Unhealthy, unemployed, uninsured, homeless and penniless people make lousy customers. Get real.

Prioritizing BPM Projects is a Sign of Effective, Experienced Leadership

I received an email from a friend of mine today lamenting the projects he’s had to wave good-bye to. The email read: “That other process improvement stuff is nice, however, right now…revenue generation is the only process that matters. We have to keep the doors open”.  It made me think deeply about my clients and the projects we’re working on. How many of  them have leaders who’ve called emergency meetings in the past 12 months to reconsider and re-prioritize their approach and focus? None. How many of them have since been panicking and flailing? All of them. Most of them have reduced schedules and laid people off lately. Not a single one ever stopped to prioritize and shift attention when they could.

What’s a Priority?

First of all, if you’re still slogging through 4-6 month process improvement projects, you’re braver than I am. Get lean in your approach, folks. Secondly, if you don’t know how to prioritize in this economy and are struggling to choose which of your projects should “rise to the top of the list”, please ask your peers and ask the big boss. Go to the executive team and ask them to help you decide if you need help. But no matter what, show some initiative and demonstrate that you’re thinking like an executive. If not, you’re setting yourself up for disappointment.

Short answer: it’s a priority if it will immediately help us make more money (sales) or save on costs (making us more profitable). Sales are tough now so anything that can reduce costs is a big hit with executives and shareholders. If you’re a non-profit, cost reductions are popular with boards and donors. Toot your horn. If you’re a government entity, you have serious challenges too. You must get costs under control. Government doesn’t often lay people off but I have seen it happen in the past 6 weeks. I have seen it happen where people dragged their heels, hemmed and hawed, went to far too many meetings, and took too many vacation days. They complained and wondered who was in charge. They failed to prioritize and act swiftly and assertively. Now they’re looking for work.

Inventory your projects, identify the revenue generators and cost-efficiency opportunities and move them to the top of your to-do list. Everything else takes a back-seat until your executive team gives you the green light to relax and do something interesting. That may be months from now so get comfortable fighting fires.

It’s Time for Strategic Business Process Management

I am coming off several weeks’ having to reassure clients that they are doing well and that – so long as they stick to their knitting – they’ll be ok a year from now. I have others who have required some serious, adult discussions. They lack a cohesive strategic plan, therefore, they lack in the areas of discipline, direction, commitment and – frankly – workflow IQ. They struggle with change, flexibility and orientation (“where are we?!”)

The disconnect is rampant. Perhaps it’s in the name. Shall we refer to business process management (BPM) as Strategic Process Management (SPM) from now on? You heard it here first, folks.

Strategy+Goals+Objectives+Metrics

I’ve heard others call it Business Motivation Modeling and agree that we need a deeper understanding of critical business drivers. This field and the broader business interests and stakeholders it serves needs to reminded constantly of the “means”, the “ends”, and the “influences”.  By keeping a strict focus on strategic goals (building the business, becoming #1, being fastest, cleanest, safest, whatever) and tactical objectives, business analysts and process engineers ought to be able to produce the outcome they’re looking for and they ought to be measure whether they’ve achieved their goals or not.

Environmental Analysis

However, failing to manage strategy and failing to carefully and comprehensively assess what is happening economically, politically, socially, technologically, competitively and legislatively will absolutely result in painful surprises. I have seen people very proud to have hit sadly meaningless targets lately.

Strategic and Technical Advisory Groups (STAGs)

I am calling for the formation of STAGs in every organization with 25+ employees. This committee will review and evaluate business process and other organizational change from both a technical standpoint and a strategic standpoint. Strict adherence to strategy (bearing in mind that strategy – not values – can and ought to change to reflect the environment) will be their direct responsibility. There will be an executive on each STAG until and unless every organization recruits a Chief Process Officer. Perhaps then, the brilliance of BPM will have been fully activated.

Spy: Small Business Process Improvements Based on Process Benchmarks

I have to admit to being a chronic process observer and critic. Every time I sit in a restaurant, go into a store, arrive at a hotel, go to the doctor or shop online I pay attention to what staff and managers are doing and I judge. Sometimes I am deeply fond of what I see and other times I am vicious in my critique. While I am a little obsessive about all this, there is some virtue in the exercise. As a consultant, it’s important to have had exposure to tactics and process that work especially well in order to make stronger recommendations for clients. It’s also important, working across sectors to develop a mental inventory of what doesn’t work, what can be emulated and what can be tweaked to serve cross-purposes. Frankly, I would hope that anyone aspiring to build a business, product or consultancy in this domain would be doing the same kinds of things.

Spy versus Spy: Lean Innovation

Welcome to the age of transparency, reverse engineering and piracy. Watching the equivalent of So You Think You Can Dance on Indian TV broadcast by satellite last night, my Indian friend quipped: “They copy everything we do”. Reading about the new film Duplicity in the latest issue of Fast Company I am reminded that the “leanest” forms of adaptation are mimicry and emulation. It’s called “evolution” folks.It’s the 100th Monkey Theory in blazing sound and technicolor. In some cases, it’s downright criminal so be careful where you draw the line.

I’m sure by now you’ve heard that the sum total information in the world is doubling every 3-6 months or something like that. Similarly, in an open information age, we have the capacity to observe, re-engineer, implement, measure and observe again at dizzying rates. Knowing that competitors are observing and mimicking us should serve as a catalyst for greater and faster innovation (and ever more patent filings).

How About A Small Business?

Small enterprises can’t afford teams of engineers and analysts that prowl the web and deconstruct rival products the way Toyota and Honda tore into the Saturn. There is no virtue in piracy so what’s a small business to do? Give observation and emulation a try. Watch what others do and then think in terms of business process. What process can you borrow and pilot in your own shop?

Process Benchmarking

A Benchmark is a standard and, for our purposes, the Gold Standard. The Best Practice. I want to advocate for an open process exchange that enables up-and-coming enterprises to learn from the best. This idea may never take root in the private sector but it might in government and non-profit sectors. For example, what can my library learn from the Pentagon? What can a Blood Drive learn from the Census? What can the EPA learn from Green peace?

As a small business owner, I can effectively identify the leader in my market, the highest quality product or the lowest priced competitor and I can start studying how they deliver their products and services. Similarly, I can go to the leader in a totally unrelated field and observe them in action.

Benchmarking

Rivals’ and leaders’ strengths my not be in their products (engineering, materials, quality and performance) alone. You can look for benchmarks in the following areas:

  • Suppliers – supply chain, quality, ethics
  • Human Resources – recruiting, hiring and retention
  • Customer Service – walk-in, online and telephone, service responsiveness policies, dress code, etc
  • Marketing and Sales – packaging, pricing, branding, placement, promotions, sales tactics and pitches
  • Finance – pricing, financing, terms

The point is, identify some leaders, grab a pad of paper and a pen and go observe what they do and HOW they do it. Imagine how you could mimic, emulate or adopt what they do.

Keep it Simple

A final word on simple. While their algorithms are crazy complex and probably cannot ever be emulated, Google stands as the single greatest example of simplicity in customer experience. That simple one-box web page with scarcely 50 words on it – as of today – owns 64.2% of the world wide web’s search activity. They are killing their rivals with simplicity. How can you do the same?

The Leaning of America: How BPM Can Play A Vital Role

I’m not sure what industry you work in but my chosen field – healthcare – has been on the short-list of sectors that are under a microscope AND looking at significant investment (stimulus is such a loaded term these days!). There are others: automobile manufacturers, education, border patrol, banking and finance. I frankly love the position the President has taken. He is asking for accountability and demanding an end to wasteful practices. While it’s still way too early to judge his performance, I believe he will continue to push for efficiency and better throughput and outcomes for our money.

Lean Healthcare

I have worked on all sides of this equation. As a healthcare provider in non-profit, social service, for-profit and government agencies. As a healthcare payer (insurer) in managed care and other insurance models on both the public and private sector sides. Let me assure you, there are mountains of waste to recoup in every corner. I will not suggest that a single-payer system is the answer (though it may be) but I will assert that there are scant examples of healthcare organizations in this country who run truly efficient and high-quality shops. Our system irrefutably, immutably wastes money. Our care costs much more and produces a poorer outcome than that of our global counterparts. Now that we are in a global economy, any country that can keep its workforce healthier than ours at a lower cost has a competitive advantage.

Healthcare is the last industry to “automate the shop floor”. Frankly, it’s ironic. So much information and so many processes can be automated. This country lags far behind other industrialized nations in the adoption of electronic medical records. Today, the New England Journal of Medicine reported that only 1.9% of US hospitals use a fully functioning electronic health record, for instance.

Prior to automation, however, so much can be accomplished using BPM methodologies, particularly as they relate to Lean and aspects of Six Sigma. Anyone who has ever worked in the field can attest to the waste and now, more than ever, we need to work together to eliminate all of the waste we can no longer afford. Healthcare is rapidly approaching 20% of our GDP. That’s not only astronomical, it’s unnecessary.

Wherever you are, whatever you do, whatever your motive, please spread the word and get into action. BPM and Lean methodologies can have a profound impact on the way things are done today so that tomorrow will be cost effective. If you’re not excited about the impact you can have, you should be!

Non-Profits Benefit From Business Process Management and Improvements

Non-profit organizations are near and dear to my heart. I have worked for several (hospitals, social service agencies, quasi-governmental) and have volunteered as a board member for three. I am a current board president for a global organization serving children in poverty in India and Cambodia (www.lotusoutreach.org) so this affinity for charitable organizations is fresh.  Not unlike their for-profit counterparts, non-profits want to deliver their services effectively, efficiently and produce the outcomes they’d hoped for at a cost that is at least equal to the revenue (donations) they generate. In other words, in their business model, it’s “ok”  to break even though not ideal. Reserves and income on reserves are much better than breaking even. If that equation sounds familiar to profit-seeking capitalists, it’s because it’s essentially the same equation. What’s different, of course, is the mission, customers are “beneficiaries”, and there are no shareholders to answer to…only a board of directors and donors. Quite daunting, actually.

Like investors, major donors and grantors expect to see results. The demand for performance indicators is, frankly, equal to the demand for metrics in any business. Philanthropists, after all, are almost always successful business people.

Enter BPM

All of the conditions that underlie and are so fundamental to business  – from HR and finance processes to supply-chain and customer service processes – are present in non-profit organizations. The value stream is clear, waste is common and the benefits of automation are real. The role of process improvement – driving waste and inefficiency out of processes while infusing them with information and visibility – is best evidenced in healthcare settings. Hospitals and clinics are the closest cousins to  non-profit agencies and are proving that the application of methods like Six Sigma and Lean in addition to standardizing processes for the sake of quality, compliance and shared services is in every body’s best interest. Emergency rooms around the country are now simulating changes in their workflow using BPM tools like ProModel and Visio diagrams are as common in some public health clinics as PowerPoint presentations. Healthcare has caught on to BPM.

Invest-able Change

I suspect the biggest determinant for hospitals’ and public health agencies’ enthusiasm for BPM has been their ability to pay for the consulting support they receive. It’s quite common to see firms like KPMG, Accenture, FCG, IBM, BCG and other global firms competing for BPM work with large state and federal public health entities related to Medicare and Medicaid as well as large county general hospitals who are taking great strides toward electronic medical records. The money is there so the consultants are eagerly positioned to deliver their BPM offering and support.

Most non-profits are of the social service ilk and have much shallower pockets. $300 and $500 per hour consultants in Italian suits are not an option. Similarly, top-flight MBA grads who have never imagined serving soup in a shelter or working with children in slums are not a good fit when it comes to maintaining the integrity of a process. The truth is, we’re out there. There are seasoned professionals and subject matter experts who bring to bear an abiding commitment to mission-driven work in addition to a proficiency in quality improvement and business process management.

Don’t Let The “B” Fool Ya

I think the hang-up people in the non-profit sector have with BPM is with the B.

“But we’re not a business. We’re not in business. We need to be effective, not profitable.” – I hear these refrains often and I gently remind folks that they are an organization of people, process, systems and tools organized to deliver a service or product to a consumer. And they get paid to do it (whether they’re volunteers or not, money is coming in the door somewhere). Non-profit does not mean broke. They are just as bound to a continuous need for quality improvement, safety, efficiency and measurable results. Anyone who doubts the future course of non-profits should take a look at the Gates Foundation expectations for efficiency and results. Donors care whether or not their contributions are paying for results or being squandered on wasteful practices.

BPM is in no way incongruous with the purpose, cause and mission of any non-profit. From this day forward, I pledge – when addressing the non-profits in my life – to use the term Organizational Process Management. OPM it is!

I’d love to hear how your non-profit organization benefited from or could benefit from some old fashioned OPM. Chime in…and thanks for listening.