Merry Christmas

Just wanted to extend a Merry Christmas and Happy New Year to all reading this blog.  Fortunately we had children and in-laws with us during the holidays and it was wonderful.

This should be an interesting year – globally.  We can see from the US bail outs how interdependent our companies and countries are so we may rise and fall together.  I am not particularly optimistic (short-term) because of the adversion to facing our problems head on.  We create artificial solutions which only buy us some time – in hopes that somehow things change enough to avert a complete melt down.  None of us want severe economic times but we will most likely have to experience more pain than we have thus far.  Bite the bullet and lets get on with recovery.

Beyond Strategy

I have essentially made a career out of being able to dig down and uncover the root cause of problems.  For many years I served at the request of the CFO of a large consumer goods corporation.  He would crunch the numbers, do some analysis and then say “Go down to the plant at Dayton, Tennessee and see what is happening in the warehouse – invoices are arriving to dealers before the product does.”  And off I would go, dig through all the issues, discover the real source of the problem and develop solutions on how to fix the problem.  The CFO would pick from the choices I had offered up and then I would lead the charge to make changes.  It was a great deal of fun.

 

But there were two itches that could not be scratched in the role that I had.  One, often times the solutions I developed were only partially implemented.  I would create what I felt was a great design but reservations of local management would prevent them from fully implementing my solution.  And though improvements were gained, they often fell short of what they could have been.  I wanted to have control of an organization where I could design, implement and then execute. 

 

The other itch was wanting to participate in the setting of direction for the corporation.  One of my inherent strengths is the ability to think strategically.  I wanted to be in the Board Room when direction was being set and strategies were being developed. 

 

In order to gain access to that august group I had to take on the role of an executive so when I was offered the CIO position I took it.  I believed I would now have control over an entire department and could mold it in the image I felt would best serve the corporation.  And I would participate in strategy sessions. 

 

Indeed I did get to shape the IT department but there were constraints placed on me by the CEO.  This is to be expected.  This one form of governance for the IT department.   

 

And I became disenchanted with strategic planning.  If every company goes through a planning process then why do so many companies underperform?  What is it about the planning process that is not working? 

 

Turns out it has to do with design.  A strategy can only be executed if a design can accommodate it.  Executives fail to realize that their business has a design and therefore ignore it or think that changing strategies has an effect on business design.  It does not.  To improve the performance of a business you have to go beyond strategy!  You must look to the business design for success.

General Conversation

I joined two groups on LinkedIn – one for general business opportunities and one for executives.  Since most of the entries in both groups are advertisements for services I decided to use it to spread the word about the value design plays in the success of any company.  I did receive two responses from one thoughtful gentleman and have decided to publish our dialogue.  My comments are in black and his are in blue.

 

This Post will be used to share questions that are posed to me and my responses to them.

 

 

Beyond Strategy! The closest thing to a Silver Bullet in improving performance is Business Blueprints.

 

Strategy alone can not take you where you need to go. The design of each business must factor in the goals it has set and the strategies it wishes to execute. Goals that can not be reached and strategies that can not be executed are harmful to the entire organization.

 

Design is the key to success, not strategy. 80% of performance problems can be tied directly back to a poor design. This is true with businesses, processes and products. Go to my website at http://www.stankirkwood.com and see the top 10 common Business Pain Points that can be addressed with a set of Business Blueprints™. You can also request a presentation of the system we created to address business design issues at http://www.businessdesignconcepts.com.

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Plan you work and work your plan!

 

 

Business Design is much more than creating a plan and then executing that plan. Probably every large business that has failed had annual (business) plans as well as strategic plans.

 

The progression is: establish goals and identify desired strategies; design markets to support those goals; design processes to support the markets; design an organization to execute the processes, and design systems to support all of the above. The overall design must be able to execute the desired strategies. Then you create the implementation plan and execute the implementation plan. After the design is implemented it must be executed. An execution plan must be created and executed.

 

 

 

 

 

In theory I agree, however I’ve been associated with too many businesses that can’t get out of their own way due to the weight of the planning process. And that process allows too many to forge their own agendas, diluting the resources to simply move from “A to B”.

 

I sat in too many senior management planning sessions just mumbling on how we were able to make the simple overly complicated. And generally, once a process document was crafted, the senior most managers went on their way, comfortable in knowing their job was done! Never did it occur to them that outside of making sure their board meetings notes were put in lock step with the plan, did they ever think they actually had to work that plan themselves! That’s why most major companies fail miserably when it comes to a plan.

 

 

I was cleaning up some emails and reread your message to me.  You hit on several problems in your response:  1) the weight of a planning process; 2) covert agendas; 3) making the simple complex, and 4) lack of commitment or understanding on the part of senior management on their role in the implementation of a plan.

 

Each one of those issues does cause problems in many companies today.  If a company were to go through the Business Blueprinting™ process the first three issues would be immediately addressed.  The process itself is intentionally designed to deliver maximum impact with minimal effort required by the senior management team.  The entire process of documenting the design of a company, analyzing that design to determine whether the company’s goals can be achieved and strategies executed and then redesigning the business to ensure success only takes eight days of our clients’ time.  It takes us 8 – 10 weeks, but only eight days for our clients. 

 

During the gathering of company and competitive environment information agendas become apparent.  Why?  Because our goal is “Total Business Performance”.  We are looking for what is necessary for the business as a whole to be successful.  As Dr. Farson suggested:  “Leaders have to become designers and designers need to become leaders”.  In actually we do the design with the input from the leaders.  Our design is actually a recommendation which the leaders need to agree upon.  It is exactly the same role an architect has in designing a house.  S/he would gather important information from the prospective home builder and then design a house to meet those requirements. 

 

We do the same in business – which leads to your third point about complexity.  Businesses are complex.  The challenge is to simplify them as much as possible and we are able to do that.  Basically all businesses are the same.  Certainly their products and services vary and how they do their work varies but the foundation is the same.  For instance every business must create demand for its products and services (unless you enjoy being a monopoly or government agency).  And every business must fulfill the demand for its products and services.  We have created a common framework, common structure, common DNA, and common metrics for all businesses.  We simplify the complex.

 

Another way we help address complexity is by documenting the design of the business.  Five people can use the same word and have a different understanding of its meaning.  By putting a picture in front of executives it brings them together and they share a common understanding.  Those meeting rooms you spoke about are often like the Tower of Babel and they don’t even know it.  We give them the common language of pictures.

 

Lastly, we do our best to involve the senior management team by delivering not only an updated business design but also a strategic plan, master project plan and a governance model to keep the design current (Strategic Management).  The master project plan is a very strong reminder that their responsibility is not over when the meeting ends.  If the CEO will take ownership of the master project plan (does not need to manage it but does need to own it) then the issue you surfaced is greatly diminished.

Invalid Business Assumptions

Each person goes through the day making assumptions.  We assume the sun will rise in the east; the light will turn on in the bathroom; the shower will have hot water; the car will start when we leave for work and our computer will connect to the internet.  The number of assumptions we make every day as we walk through our lives must add up into the hundreds.  We are blind to them because events unfolding in front of us do not challenge our assumptions but instead support them.  Unknowingly to us most of our assumptions are strengthened every day. 

 

Perhaps assumptions are mental habits or conditioning and serve a similar purpose to learning how to tie shoes.  When we first learn to tie a shoe it requires considerable attention or intentionality.  We think about each move and either verbally or mentally repeat the instructions.  It is a very manual and slow process.  As we learn to tie our shoes we create ‘moving memory’.  The more we practice the less attention is required and the faster and smoother we become.  After the memory is completely programmed within us there is no benefit to keep thinking about each movement.  Movement without thought can be a good thing.  Ask any athlete about thinking too much when playing a sport.  Just let your body do what it does and it will perform well.

 

Assumptions are often referred to as something bad.  Many times I have heard the phrase:  “You know what happens when you assume something?  Makes an ass out of u and me”.  So what would our lives be like if we didn’t make any assumptions?  What if we thought through every situation and condition before making a decision or taking a step?  If making assumptions is a bad thing then it follows that not making assumptions is a good thing.   

 

We have all had an experience where we made an assumption that led to an unexpected and negative incident.  In those situations we vow to never assume anything again because it can sneak up and bite us.  Is that vow realistic or even desirable?   

 

Why do we make assumptions?  To relieve ourselves of the active thinking about events that almost always occur based upon our experiences.  We don’t waste our time thinking about whether the sun will rise.  We don’t think about how our bodies will digest the food we have for lunch.  We don’t think about many things going on around us.

 

So from one perspective assumptions are time savers.  That is until the assumption does not work in our favor.  It is similar to the noise the refrigerator makes when it is running – you don’t notice it until it stops.  We don’t see our assumptions until things do not go according to plan.  Then we look for what we missed and try to see how it could have gone differently.  Quite often we discover an action we overlooked but did not recognize because we made an invalid assumption.

 

This is especially true in business.  Decisions based upon invalid assumptions can lead to disastrous results but we are blind to the assumptions until the results are coming in.  And then it can be too late. 

 

Imagine the value of a list of common invalid business assumptions that lead to poor performance.  By knowing the assumptions you can avoid making them.  Stay blind and you are doomed to repeat them over and over again. 

 

During the past four years my business partner and I have been compiling such a list and have found them to fall into four categories.  For the sake of brevity I have only included one invalid assumption in each category along with a description of the assumption.  I have three more invalid assumptions for each category listed in a lengthier document.  If you wish a copy of that document  contact me through this blog or directly reach me at skirkwood@gmail.com. 

 

The first category of invalid business assumptions executives make are about the Goals they develop.  These are important assumptions because the goals of a business establish the performance requirements for the entire enterprise.  For instance if a corporate sales goal is to increase revenue by a certain dollar amount then the year will be considered successful only if the business performs at that level.  Anything less is unsatifactory.  Goals and performance requirements are the same thing.

·        All Goals are Achievable.

o       Just because you set a goal does not mean you can achieve it.  Businesses are challenged to set “Big, Hairy, Audacious, Goals” (BHAGs) but if those goals are not achievable then setting and working on the goals is actually harmful.  There is nothing wrong with setting stretch goals but they need to be attainable.  If it is impossible for your business to grow a certain percentage with your existing Business Model – there are five discretely defined components to a Business Model – then you have to either change the goal or redesign your business to be able to achieve that goal.  If you are not designed to achieve the goal then no matter how hard you work or push your people you will not reach the goal.

·        Invalid Goal assumption 2

·        Invalid Goal assumption 3

·        Invalid Goal assumption 4

 

The second category of invalid business assumptions made by executives concern the Design of their business.  There seems to be an intuitive understanding that businesses have a design because the term Business Model is used frequently by CEOs.  A model is the physical manifestation of a design.  When a product is prototyped the designer creates a set of blueprints (designs) that are used to build the model.  The next time a CEO speaks about his/her business model ask him/her to show you the design.  And since the CEO’s understanding of the business design is so vague it is easy to have invalid assumptions about it.  Here is one.

·        Improving Information will Improve the Design of the Business

o       Many executives look to IT systems to solve their problems.  With better information they will be positioned to make more intelligent and timely decisions.  Executives need to remember that systems support organizations / organizations execute processes / processes create products or services / products or services are delivered to customers.  Systems are the last thing executives should be looking to change!  Will replacing the dashboard (information system) in your car change its performance capabilities?  No.  The root cause problem in your business is seldom the result of any IT system.  The fault usually lies in the design of the business.

·        Invalid Design assumption 2

·        Invalid Design assumption 3

·        Invalid Design assumption 4

 

The third category of invalid business assumptions deals with Strategies.  This is an activity that nearly executive has engaged in and can relate to.  It is the source of out-of-the-box thinking and it sets the direction of the corporation for years to come.  Strategic planning is considered essential for the survival of every company because executives know that to be stagnant is to die.  They have to change and the vehicle for change is thought to be strategies.  And if this is indeed the vehicle (which we know it is not) then any invalid assumption in this group can be crippling.  Here is the first invalid business assumption in this group:

·        Strategies are Strategies

o       Not all strategies are created equal.  There are at least three types of strategies:  design strategies, implementation strategies and execution strategies.  The nature of each type of strategy is very different as well as their timing.  Business executives often confuse a design strategy with the design of the business.  They are two completely different ideas and need to be kept separate in order to reduce confusion.  Know the difference between design and strategy.

·        Invalid Strategy assumption 2

·        Invalid Strategy assumption 3

·        Invalid Strategy assumption 4

 

The fourth group of invalid business assumptions is about Performance.  Performance is important for the health of the organization.  If there is substandard performance from the customer’s perspective then sales will suffer and the business will fail.  Customers are looking for companies that can offer the greatest Value Proposition.  If there are performance issues as it relates to the return on investment then stockholders will opt to invest their monies in better performing businesses.  Shareholders are looking to create personal wealth and companies that are not financially successful suffer in the market place and that has a negative impact on the company’s stock price.  Actual Performance is very important in the long-term prospects of any company.

·        Performance Problems are Always Execution Problems

o       Business executives are aware of the impact that the quality of a  design has on the performance of the product but they fail to apply that understanding to their business.  80% of the time the quality and relevance of the business design is at the root of performance problems.  A poor design can never result in good performance.  But since executives are unaware of business design they see execution as the culprit.  Execution is particularly attractive to management since those problems are the fault of the employees while the quality of the design is management’s responsibility.

·        Invalid Performance assumption 2

·        Invalid Performance assumption 3

·        Invalid Performance assumption 4

 

Knowing that you are operating under an invalid assumption may give you the chance to change your decision making.  If you are making assumptions about things that you can control then you do have the option to make changes.  If your assumptions are about large external events such as the economy, then you can not control the outcome but you can develop scenarios.

 

Good, Fast and Cheap

I remember in 1984 walking into a print shop to have some brochures prepared and seeing a sign above the counter which read “Good, fast and cheap – pick any two.”  At the time the meaning behind that sentence was true:

• Good and fast will not be cheap
• Good and cheap will not be fast
• Fast and cheap will not be good.

Surprising how what seem to be incidental moments just stick with us. 

 

Part of the reason why it stuck so firmly to me is I wanted to figure out a way to do all three at the same time.  I felt like the shop owner was throwing down the gauntlet and I needed to come up with a way to solve that problem.  For those of you that have read other postings to this blog know that my background includes many years of designing processes.  That challenge was in the background every time I redesigned an old process or created a new one.     

 

Apparently I was not the only person who felt this way.  Over the years the expectations of customers changed.  First companies differentiated themselves with quality.  After a while quality was assumed and price became the breaking point when making decisions.  And finally in certain industries lead times were the key.  Dell became the model for Good, Fast and Cheap.  You could get on line, customize your computer and have it delivered to your home in a matter of days.  Dell’s computers were often priced lower than its competitors and the quality was every bit as good.  Why wouldn’t people buy Dells?  Dell had solved the challenge and its sales went through the roof.  By being able to sell Good, Fast and Cheap Dell had changed the rules and customers expectations were never the same.

 

However there is another factor that customers consider before making a purchase and that factor is called Desirability.  If I could put in front of you a car or television that meets your expectations for price, quality and lead time but the vehicle is unattractive or does not have the options you are looking for are you going to buy it?  Not if you can find something comparable in price, quality and lead time that comes much closer to what you are looking for. 

 

The term Value Proposition is used when referring to the four considerations when making a purchase.  Price, quality and lead time are fairly straight forward – at least on the surface.  How much is this going to cost me, will it last and perform the way I expect it to and how long do I need to wait to have it available?  If any of the answers to those questions are outside your tolerance limit you will not make that purchase.  You will either buy a competitor’s product, buy a substitute product that meets your needs or you will put off the purchase.

 

As I mentioned earlier the Desirability factor weighs into each decision.  Desirability is very product specific.  If you are looking at a car Desirability may be defined as:  appearance, options, and gas mileage.  If you are talking about a PC your definition of Desirability may include:  size of memory, size of storage, speed of CPU, graphics capability…  There are many considerations when defining Desirability in relation to each product or service. 

 

Just one other thought on the idea of Value Proposition.  Though there are four factors when making a decision about a purchase not all of them have the same weight.  When buying a car a person just out of college may be willing to sacrifice some on quality, lead time and desirability for the sake of price.  More affluent buyers may weigh Desirability the highest and insist on leather seats, sun roof, media capabilities (iPod hook ups, GPS,) and sheer comfort. 

 

So the challenge is not just Good, Fast and Cheap any longer.  As customers we have expanded the challenge to include Desirability.  We want our purchases to also look good and have everything we want it them.  Our expectations keep changing which puts pressure on the suppliers of our products.

 

Suppliers are in a very difficult position.  If they could deliver on the Value Proposition without consideration of profit their lives would seemingly be much easier.  They could have the attitude of just getting the product out there, price it to sell and their customers will be happy.  Problem is there is the other side of the equation. 

 

For a business to be successful it must make both customers and stakeholders happy.  For a customer to be happy the business must offer a compelling Value Proposition.  A shareholder is looking for a strong return on their investment (ROI).  I will write a different posting on the idea of Return on Investment.

 

I also intend on providing a more detailed, somewhat academic, article on the idea of Value Proposition.  For the sake of brevity and to have this post be somewhat casual reading I did not drive down very far with that concept.  If you have questions about Value Proposition please feel free to ask any questions and I will respond.  

 

 

Context of Operations

This is most of an email I sent to a colleague who was about to teach a class on Operations.  This was my introduction to him of me and what I do.   

“I have spent the past 23 years designing processes (12 years), designing departments (7 years) and designing businesses (4 years).  If you don’t mind I will recount how that progression occurred.  Initially I worked on determining the root cause of process performance problems (nice alliteration) and designing solutions.  The effort was typically directed to one department.  As the projects grew so did the breadth of the processes.  It did not take long until I was working on processes that spanned departments which definitely increased the complexity.  I did have great success and eventually was asked to step into the CIO role at La-Z-Boy (LZB).  In that role I redesigned the IT department for the LZB division (3 years) and then created an entirely new IT department to service the all 14 divisions at LZB (4 years) plus the corporate office.  Though my title was CIO my actual role was IT Department designer, leader and manager.

 

As a Vice President I did have control over those areas reporting directly to me and so I could design them to work the way I wished them to.  IT, HR and Finance are all support functions and because each area is asked to participate in all projects you can see how important it is for them to work closely together.  If you know anything about IT you will be aware of the challenge made to every CIO – Align IT with the business.  Problem is businesses are not aligned with themselves and therefore there isn’t just one thing IT can align to.  (I contend that there really is not something called “the business” but instead a collection of departments that share a common business name.)  

 

Businesses need a way to have all of the parts working together.  It does not benefit a company to let each department go off and try to optimize itself thinking it will have an optimized whole.  It simply does not work that way.  Optimizing all the parts does not optimize the whole.  After leaving LZB four years ago I started documenting the design of the entire business to show relationships and how the parts needed to work together.  It actually shows how to align the parts of a company – the holy grail of business.

 

You have some process work in your course.  If you are a process designer you know that processes are invisible until each activity/component is documented.  Documenting processes is actually documenting process designs.  It is only when the entire process is visible that you can determine if a change is warranted and what the impact of that change will be.  By documenting the process before making changes you minimize risks of unintended results.  Also by documenting the process you can determine whether the process needs to be changed in order to achieve certain performance goals or if it is a matter of execution.  Poor process performance is the result of either a poor design or the poor execution of the design.  Until you document the process you can not know where the problem exists.  More than 80% of the time it is design-related.

 

Now reread the last paragraph and substitute the word ‘process’ with the word ‘business’.  The principles are exactly the same.  Most executives (people in your class) do not understand that businesses have designs.  They know products have designs and some will know processes have designs but few if any will know that the business has an actual design.  And because they do not know designs exist in businesses they do not look at the design when they are having performance issues.  They look at their employees (remember performance = design + execution) and if you can not see the design you go after execution.  This is why so many projects in companies have such a low ROI and management is frustrated with their investments.  They are not resolving the root cause.

 

I know this is a roundabout way of getting to one suggestion I would have with your course.  And that is context.  Context provides the appropriate background for any area of study.  One pet peeve of mine is when people judge actions taken decades ago and use today’s mores as the backdrop.  Without knowing what was going on in the past those judging do not have the right context to understand the actions that were taken.  Without understanding the entire business your students may not fully grasp Operations.  I do see that you speak about business and process design and I want to encourage you to show how things are connected, not separated.  It really is not ‘business and operations’ any more that it was ‘the business and IT’.  All of it is the business because “Everything is connected to everything”.

 

There is a particular sequence that leads up to the performance requirements for Operations.

Ø      Capstone. 

o       Strategic information such as the determination of the performance goals for the company.  What are the revenue goals and profit goals?  They drive everything. 

o       In addition you have to understand the competitive environment.  Without knowing the competitive environment you are making plans in a vacuum.  Returning to the idea of context, the competitive environment provides the context for designing the business for success. 

Ø      Market Model.

o       Markets, customer segments, product groups, products and Value Propositions.

o       Determine whether your Market Model can deliver on your revenue goals.  If not you have to make adjustments to the Market Model design.  You may increase your markets, sell to new customers, develop new products or redesign existing products.  You may acquire an existing company which will broaden your Market Model.

o       Part of the work in documenting the Market Model is determining customer expectations.  This is critical because Market Model requirements are input into Operations (Process Model).

Ø      Process Model. 

o       The Process Model contains all of the processes that the business performs.  What I am referring to may be slightly different than how you think about it.  Selling is a process.  Marketing is a process.  Assembling components is a process.  Making components is a process.  There are processes that focus on Creating Demand for a company’s products and services.  There are processes created in order to Fulfill Demand for those products and services.  I expect that in your course you equate Operations with Fulfill Demand processes.  If I am correct in that assumption I would suggest that in the future you consider all processes as part of Operations.  That is why Lean concepts work on the shop floor and in the office as well. 

o       The point I wish to make here is that the performance requirements for processes is not arbitrary.  The market place will determine what is an acceptable price or acceptable lead time both of which are determined by the Process design (Operations).  The market gives Operations the minimum requirements in order to be competitive.

 

I will stop here.  I have probably worn out my welcome by now.  You should know there are two more Models that are part of a business design:  Organizational Model and Systems Model.  If you wish to have an overview of them I would be glad to share it with you.

 

Everything I have written comes from my business partner and me.  I can not direct you to a different source because we are the sources for these ideas.  This is just the tip of our ice berg.  I have much, much more I could discuss. 

 

Let me know if you wish any clarification on the ideas I have presented.  I will be glad to respond.”

Customer Focus

This post is actually a response I gave to a blog from the ITtoolbox.  The gentleman I was responding to takes the position that companies may believe themselves to be customer focused when in fact they fail to take into consideration what the customer wants.  Seems fairly obvious but he is correct.  It isn’t unusual for executives to not understand who their customers are and still  believe they are customer focused. 

 

But the author of the original post and I quickly diverged when it came to how we see the organization.  It is his contention that the organization (especially in those companies that view its employees as their number one asset) should drive the design of the processes.  Read on to see how his opinion may contradict his own view of being customer focused.

 

There is one more point I want to make before you begin reading this blog.  I view publicly-held companies, privately-owned businesses, government agencies, non-profit organizations and even departments to be basically the same.  Each one of those entities has customers they are serving and processes they are executing.  As you read through my response don’t think it does not apply to you if you don’t work in a ‘business’ – these ideas do relate to you.   

 

 

I agree with your initial premise that a value chain that does not consider the customer is in trouble.  How can a company believe it is customer focused if it does not take the time to define and quantify the expectations of the customer and take into consideration what the competition is offering?

 

How a business is designed will determine whether it is customer focused and plays a huge part in its level of performance.  I know this to be true since I am a business architect.  I provide customized business design tailored to reach the goals of my customers.  In order to do that I have to understand all the components of a business and how they relate to each other.

 

Business designs have 5 components:

Ø      Capstone – all strategic information about the business

o       Internal:  Vision; Mission; Values; Principles; Goals; Business Strategies, etc.

o       External:  The competitive environment (trends, obstacles, risks, critical business issues, …).  Designs that do not take into consideration the competitive environment are flawed.  It is a big mistake to not understand the context in which your business exists.  A once robust design can become quickly obsolete if the context (environment) changes.  As Joel Barker once said:  “When the paradigm shifts everyone starts back at zero.”

Ø      Market Model

o       Here is where your perspective comes into play.  Business leaders need to understand what each market place is looking for from products and services being sold into that market.  Leaders must take the time to define the expectations of customers and then quantify them.  Vague and arbitrary requirements do not provide good input into product development.

o       Here is where we appear to diverge.  Business leaders have to understand if their existing Market Model can deliver on the growth goals of the company.  The Capstone creates the performance requirements for the Market Model.  The performance requirements for the Market Model are not arbitrary.

o       If the Market Model is not designed to achieve the growth goals then either the goals need to be adjusted or the design needs to be updated.  By having defined and quantified the expectations of the customers it is possible to analyze whether one’s offerings to the market place need to be redesigned.  This is being customer focused – you are delivering what the market wants.

Ø      Process Model

o       Input – Process – Output.  Every business has processes to fulfill the demand for its products and services.  Those processes do affect how the customer is being served.  All of the processes performed by a company are considered to be its Process Model.

o       Here is where we definitely differ.  The Process Model receives its performance requirements from the Market Model.  For instance, if the market place establishes a two week lead time your business will not be competitive with a four week lead time.  You will have to reengineer your processes to deliver on the promises made to your customers.  This is in keeping with being customer focused.

o       Your processes will determine what skills, talents, knowledge and experience you need in your organization.  Therefore processes create performance requirements for organizations.

Ø      Organizational Model

o       Processes are executed by the organization.  As mentioned previously the design the Organizational Model receives its performance requirements from the Process Model.  If the business needs to outsource some of its work and has never done that before then new skills such as Vendor Management and Service Level Agreements will be need to be executed and either the existing staff will be trained or experienced personnel will be brought in.

o       Process designs should factor in the skills of the organization but the company should not under deliver to the market place due to inabilities of the organization.  If you under deliver to the market place your sales will suffer accordingly. 

o       The organization needs to be designed in order to execute the processes that deliver its products/services and achieves the strategic goals of the company.  The models are all connected and when designed to support each other the business can actually achieve alignment.  Alignment has to be designed into an organization.

Ø      Systems Model

o       The organization uses systems to execute the processes.  Many executives start with systems and work backwards.  This is the reason why there are so many dissatisfied business leaders.  They are applying a new system to an outdated business design. 

o       Will changing the dashboard in your car have an effect on the design of your car?  Investing in new IT systems before updating the overall business design can only bring marginal improvements.

 

Designing a business is a cascading process and if you are changing your processes or organization before defining and quantifying the goals of the company and the design of the Market Model then you can not consider your company to be ‘customer focused’ and you can not know if your goals are even achievable. 

Silver Bullet

Every business leader is looking for a “silver bullet” to help them solve all of their critical issues.  Many executives mistakenly thought a new information system was the answer they were seeking, hence the well documented dissatisfaction with IT investments.  We have found that the closest thing to a silver bullet is Business Blueprints™. 

 

Here is a list of business problems that a set of Business Blueprints™ can resolve.  Don’t keep treating the symptoms but instead get rid of the problem.  Business Blueprints™ allow you to go right to the root cause of many business ills.

 

Read through this list and see how many sound familiar.  It is not uncommon to recognize three or four as being challenges your company is facing.

 

1.      Performance Not Meeting Expectations

 

–          80% of performance issues are the result of the design of your business.

–          How can you solve design problems if you can not see the design?

 

The business design needs to be visible to know whether your strategic sales and profit goals are reasonable.  Changing strategies has absolutely no effect on the design of a company.  The key to performance is Design, not strategy.    

 

2.      Disagreement on Direction and Strategies

 

–          Are you certain everyone is going down the same road?

–          How did you decide to go in a particular direction?

 

The Pareto Principle is intended to focus businesses on what is critical.  Even with that tool most businesses are uncertain about what to do next.  Business Blueprints™ provide clarity in determining what is important in order to achieve strategic goals.

 

3.      Technology Selection

 

–          Are you interested in minimizing the risk of selecting the wrong technology?

–          Do you want to spend millions to automate the same ineffective processes?

 

A well-selected piece of software will support the updated design of a business.  Selecting a piece of software before knowing the design of your business is very risky.  Most companies do not know their design and most ITsolutions are considered to be a business failure for that reason.

 

4.      Problem Prioritizing Projects

 

–          How difficult is it for your management team to prioritize projects?

–          What method do you use when prioritizing your work?

 

Companies look for quick wins when selecting projects.  But the greatest ROI is not necessarily the best project to pursue.  Most of the work after updating a design is centered on implementing the new design so that the desired strategies can be executed.  Prioritize initiatives and sequence projects.

 

5.      Unproductive Strategic Planning

 

–          If strategy execution is dependent upon the capabilities of a design (and it is), how can you create strategies if you can’t see your design?

–          How much more productive would strategy meetings be if everyone was looking at the same blueprints?

 

Strategies must be embedded into the business design to enable the strategies to be executed.  It is harmful to create strategies that can not be executed with your current design.

 

6.      Alignment of the Organization

 

–          Are all the departments within your company going in the same direction?

–          How can you empower your people if they do not share a common understanding which is only possible with a set of Business Blueprints?

 

Alignment must be designed into a business; it can not be managed in.  Therefore the design of each business must be documented and made visible and the parts designed to ensure Total Business Performance through alignment. 

 

7.      Value Provided by Departments

 

–          How can you measure the value provided by the organizations within your business?

–          Has each department defined and quantified the expectations of its customers for its products and services?

 

By having the design of a department documented you can see its critical customers, services and processes.  You can also tell how well the department is performing against its customers’ expectations.  Raise the value of critical departments.

 

8.      New Management

 

–          How long does it take a new executive to understand all the parts of the business and their relationship with one another?

–          Would it be helpful if an executive could see pictures of all the parts of the business and how they fit together?

 

By having a documented set of Business Blueprints™ an executive can understand in two months what it will take 12 months without them.  This means better decisions can be made more quickly.

 

9.  Mergers and Acquisitions

 

–          Do you think that merging two cultures, product lines,   customer segments, processes, organizations,…. is more difficult than adding a room onto a house?

–          Would you like to significantly increase the likelihood of successfully merging two companies while reducing the time and cost?

 

Having the blueprints of two companies make mergers possible.  You can actually see how the parts of one company compares to the other and how to best combine them.  The costs and time necessary to create blueprints will pale in comparison to the risks and the efforts necessary to try and merge two undocumented businesses.

 

10.  Growing Faster than an Organization can Accommodate

 

–          How can you tell if each executive shares the same understanding about the destination of the company and how it will get there?

–          How are you changing the company to accommodate your growth?

 

Growing too fast can introduce serious challenges to any organization.   Communication become exponentially more complex as businesses grow.  You need to ensure that the design of your business can support the increased growth and it won’t collapse upon itself.  A set of Business Blueprints™ allows you to see your existing design and to make adjustments to accommodate that growth.

 

It is interesting that so many diverse issues within a business can have the same root cause.  And it is even more interesting to understand that having a set of Business Blueprints in your hand will position you to go after any of these issues within your business.  What problems are giving you pain?

 

 

Eight Steps to Business Excellence

Success will be defined differently for each area of our lives.  For some personal success is measured by the size of their bank account while others look to their marriage and children.  Professional success may be looked at from how high in the organization you have climbed or it can be the degree of delight received from a job well done.

 

The eight steps I am going to discuss does not address either directly but if you look closely and think about each one you will find many applications for these steps.  This “process” was developed to assist businesses in achieving sustained Business Excellence but its application goes beyond strictly business. 

 

Too many businesses are on the down-side of their growth curve and are facing very difficult times and decisions.  Executives at these companies are not in enviable positions.  They have an entity that has existed for many years, was successful and is now struggling.  Some have been at the helm during the good times and bad while others have been brought in to ‘right the ship’.  Regardless the challenge is the same.

 

As they work with their management team and try to address the situation they will repeatedly ask themselves these four questions: 

·        “How did we get here?” 

·        “How could things have gotten this bad?”

·        “What could we have done differently”

·        “What can we do to get out of this mess?”.

 

An answer to the first two questions can be found in Tom Peter’s book Re-Imagine.  Mr. Peter’s identifies some very interesting facts.  In 1917 Forbes magazine first identified the top 100 companies in America.  These were the best and the brightest.  One could make the argument that these companies had everything they needed to ensure their survival.  Fast forward 70 years and 61 of those 100 companies were not to be found.   

 

Next Mr. Peters investigated the performance of companies listed in the S&P 500.  Again these are top companies with money and people to drive their businesses forward.  The span of time is now from 1957 to 1997, so the window of change has been reduced by 30 years.  Here we are shown that 426 of the 500 S&P companies ceased to exist.

 

From 1917 to 1987 – 60% of top companies did not make it.  From 1957 – 1997 81% of the largest companies no longer existed.  The percentage and speed of becoming obsolete is increasing.  But what causes companies to become obsolete? 

 

It would be interesting to establish a correlation between the rate of change in the world around us and the rate of obsolescence in business.  Who doesn’t say things are happening faster and faster – that the merry-go-round of life isn’t speeding up?  While a part of us yearns for the good old days at the same time we want our HD TV and Blue ray technology.  As the world turns faster and the globe becomes smaller, customer expectations change more rapidly and businesses are challenged to keep up.

 

The relevance of any business and the products/services it offers to the market place is determined by the world external to it.  I refer to the external world as the competitive environment.  Businesses don’t get to decide how relevant they are, instead it is the competitive environment that determines the relevancy of a business.  Each business, its suppliers, business partners, competitors, customers, distributors, sales, …are all within a competitive environment.    The environment provides the context in which to evaluate the relevance of the design of every business and its products/services.

 

So in response to the questions:

·        “How did we get here?”  

·        “How could things have gotten this bad?”

Answer is:

·        Your business became obsolete due to a changing environment.  

 

And that leads to the next two questions:  “What could we have done differently?” and “What can we do to get out of this mess?”.

 

Just as the first two questions had a single answer so do the second set of questions.  Allow me to develop this idea by returning to the ideas of environment and Context.

 

Businesses are created in the environment in which they are going to compete.  As a business takes off its products/services are designed to meet the needs of the customer – otherwise the customer would not buy them and the business would fail to exist.  Along the way the business grows and adds new functions and internal services to support the increasing demand for its products/services and the operations to fulfill that demand.  All this is happening in the original environment.

 

Over time that environment will change.  Customers will expect new levels of quality, service and options; competitors will offer new and improved products; new materials will become available; new suppliers will arrive on the scene; trade barriers will be erected or torn down,…. and your business, which was designed to compete in the old environment becomes less and less relevant.

 

Here I introduce the idea that businesses have a design just like products or services.  That may be hard to conceive since you have never seen a set of Business Blueprints™.  It is hard to visualize something that you have not seen but that does not mean it does not exist. 

 

Sadly, Dr. Michael Hammer passed away recently.  For those of you who are not familiar with his writings, he made popular the idea of reengineering processes to improve business performance.  When his first book came out in the early 1990’s I had already been doing process design work for years but did not have a name for what I was doing.  I just thought of it as solving problems at the root cause level. 

 

Dr. Hammer came along and was able to have people understand that a set of activities used to accomplish a purpose could be defined as a process and that the design of any process has the largest impact on how well work is performed.  By documenting every activity and placing those activities side-by-side the process design becomes visible, enabling you to analyze and subsequently intelligently reengineer that design to meet performance goals.   

 

Understanding process design remains important in business today.  BPR, Lean Six Sigma, Kaizan, Total Quality,… are all extensions of this concept.  Many consultants are referring to business processes when they speak about business models (processes are only one perspective of a business design).  Executives are looking for ways to improve the performance of their businesses and actively seek it through process reengineering. 

 

All designs become obsolete.

 

Earlier I spoke about businesses becoming obsolete – the same thing happens at the process level for all the same reasons.  Thanks to people like Dr. Michael Hammer and Mr. Derril Watts with Mountain Home Training and Consulting, http://www.mhc-net.com/, people have come to understand that just because you can’t see processes does not mean they don’t exist and that they don’t have a design.  It took years for this concept to work its way into most businesses and I would argue that any business that does not have Process Management as one of its disciplines is lacking as a professional organization.

 

As process designs are invisible until they are documented so are business designs.  The impact that designs have on process performance is even more powerful at the business/organization level.   

 

Design Dictates Performance.

 

So in response to the questions:

·        “What could we have done differently?”   

·        “What can we do to get out of this mess?”

Answer is:

·        Design your business to compete in today’s environment.  

 

If you are part of a business or organization and wondering what you should have done or what you can do to get out of your current dilemma it comes down to executing these Eight Steps to Business Excellence. 

 

1. Document the existing business design

·        When a business is not meeting performance expectations you can not know whether it is a design or execution problem if the design can not be seen.

·        More than 80% of the time an obsolete design is the root cause of performance issues.

 

1. Establish the performance goals you wish to achieve

·        Every company has growth and profit goals.

·        Business designs must support business goals.

·        Setting goals that are not attainable with the existing design is harmful.

·        Unrealistic goals are a waste of money and represent lost opportunities.

 

1. Establish the strategies you want to execute

·        How will the strategic goals be reached given the environment and company’s organization?

·        How you will accomplish something is deciding what strategies you wish to execute.

 

1. Analyze the design of your business model in light of your goals and strategies

·        Just because a goal is set does not mean it can be reached.

·        Can you execute your strategies given the constraints of your design?

·        If a design can not be seen it how can it be analyzed?

 

1. Update the design to achieve goals and execute strategies

·        The words design and strategy are not interchangeable.

·        Changing a strategy has absolutely no impact on the design of a business.

·        Designs determine what strategies can be executed.

 

1. Create Strategic Plan and Master Project Plan

·        A Business Strategic Plan:
o      Strategic goals

o      Analysis of the changing environment and the impact to business

o      Clearly identified strategies and a description of each one
o      All strategic initiatives and the rationale behind each one.  

                   

·        A Master Project Plan is the ‘road map’ all executives want to see:

o    Initiatives, dependencies and the sequence of projects
o    Project prioritization no longer exists
o    All initiatives from the Strategic Plan are in the Master Project

      Plan.  

 

1. Implement the new design

·        A Master Project Plan is the ‘road map’ all executives

·        The design has to be in place in order for strategies to be executed.

·        The Master Project Plan shows how to implement the new business design.

·        To receive the full benefit of a new design it must be completely implemented.

 

1. Execute the strategies

·        The entire design does not have to be in place before management starts to see positive results.

·         Some strategies can be executed with the existing design while others can be executed after particular initiatives are completed.