Part 3 of 4: There are four distinctly Outside-In ways that you can rethink process and in doing so achieve Triple Crown benefits.

In the first two articles in this four part theme we reviewed ‘Understand and applying Process diagnostics‘ and the ‘Successful Customer Outcome‘ map. We now move our attention to the third  way we can rethink process forever

Reframing process for an Outside-In world

A fundamental principle of Outside-In is the understanding of where your process starts and ends.

In the 20th century many techniques and approaches developed to better understand and create processes. In its earliest form pioneering work undertaken by the United States Airforce created modelling approaches based on the Structured Analysis and Design Technique (SADT) that produced iDEF (Integrate DEFinition Methods). iDEF became recognised as a global standard as a method designed to model the decisions, actions, and activities of an organization or system[1].  iDEF as a method has now reached iDEF14 [i] and embraces a wide range of process based modelling ideas. Concurrent with the development of iDEF technology providers created proprietary modelling approaches, and subsequently developed into modelling language standards, used by many organisations to represent their systems and ways of working. The convergence of business process modelling and business process management (BPM) has now produced a rich set of tools and techniques

able to model and ideally manage an organisation. In fact one of the more accepted definitions of BPM (based on the British Journal of Management[ii]): “Business process management (BPM) is a management approach focused on aligning all aspects of an organisation with the wants and needs of clients. It is a holistic management approach”

Until a few years ago process management approaches looked within the boundaries of the organisation and the combination of modelling and management approaches were adequate to understand the enterprise. The impact of process management in improving organisation performance has been profound however we now face a different reality driven by the customer.

As a consequence both disciplines now present a series of problems that include

(a)    understanding the beginning and end of the process,

(b)   the techniques used to model process are inadequate and focused  on the wrong things

Strangely customer involvement in a process often appears as an afterthought and the actual representation systems (left to right, top to bottom) create an illusion that fosters the belief that “the customer isn’t my job”.

Let’s deal with each in turn by example:
a.     The beginning and end of process

To aid the discussion let’s look at two airlines, British Airways and Southwest, and we’ll review how they ‘think’ about their business through the eyes of process. If you sit down with British Airways executives and asked the question “where does your process start and end?” the response reflects the main source of revenue, seat sales.

So the answer “the process is from the ticket purchase to the collecting the bags off the carousel” is no great surprise. In fact that is the way we have mostly thought about process in that it starts when it crosses into organisation, and finishes when it leaves. We can easily model that, identify efficiency improvements, improve throughput and optimise apparent value add.

As far as British Airways is concerned what you do outside of that process is no concern of theirs, after all they are an airline and that’s what they do. Now let’s change our perspective and visit Love Field in Texas and meet the executive team of Southwest. Ask the guys the same question “where does your process start and end?” and the answer is a whole different viewpoint.

The process begins when the potential customer thinks of the need for a flight, and only ends when they are back at home following the journey. The scope of this process is defined by the phrase “the customer experience is the process”. That’s an Outside-In perspective and creates opportunities across the whole customer experience.

More than that it raises the prospect of additional revenue streams, spreads the risk associated with a dependency on seat sales, reinforces the customer relationship and develops an entirely different way of doing business.  So let’s ask another question of our friends at Southwest “guys, what business are you in?”, and the answer changes everything you ever thought about airlines forever “we’re in the business of moving people”.

Downstream Southwest may well turn the industry further on its head as they move from being the low cost airline to the ‘no cost airline’ and give their seats free of charge. What would that do to your business model if 95% of your revenues, as with British Airways, comes from seat sales?

The business challenge for Southwest becomes one of controlling the process to benefit and maximise the customer experience. That involves partnering, sharing information and doing all necessary to make customers lives easier, simpler and more successful.

Now how do you model that?

b.     The techniques used to model process are inadequate and focused on the wrong things

We have reviewed the ultimate cause of work for all organisations is the customer. Organisations exist to serve the customer though the provision of products and services and in this way develops revenue that goes to the profit and onward distribution to the stockholders.

In other organisations without the profit motivation, for instance the public sector, then the effective delivery of services is measured by citizens and stakeholders.  Accordingly it stands to reason that everything happening within the organisation should be organised and aligned to deliver customer success and anything that isn’t is potentially ‘dumb stuff’. The techniques we use to ‘capture’ process are however not suitable to understanding the causes of work and focus attention instead on the visible tasks and activities that are perceived to create value for customers. In the context of the enlightened customer[iii] this is at best misleading and at its worst actually part of the broader problem. In Outside-In companies the focus has shifted to understanding the causes of work, and then engineering those causes to minimize negative effects.

Once more to go Outside-In we need a perspective shift and we can achieve this by identifying those three causes of work and then set out to reveal them and their negative impact.

How big is the size of the prize? Efficiency and productivity gains of 30% to 60% are common. Cost reduction of services by 50% is not unusual.

Cause elimination is a seek and destroy mission. It’s the challenge to weed out the “dumb stuff” in our organizations.

By truly fixing the Causes of Work, rather than messing around with the Effects (a bit like moving the chairs on the deck of the Titanic) we will all find our customers and employees life simpler, easier and more successful. Are you ready to challenge your assumptions and start eliminating those causes of work? Fix the Cause, remove the effect.

[1] http://www.idef.com/IDEF0.htm

[i] http://en.wikipedia.org/wiki/IDEF

[ii] Understanding Business Process Management: implications for theory and practice, British Journal of Management (2008) (Smart, P.A, Maddern, H. & Maull, R. S.)

Part 2 of 4: There are four distinctly Outside-In ways that you can rethink process and in doing so achieve Triple Crown benefits.

In the first article in this four part theme we reviewed ‘Understand and applying Process diagnostics’. We now move our attention to the second  way we can rethink process forever –
Identify and aligning to Successful Customer Outcomes

“Businesses can be very sloppy about deciding which customers to seek out and acquire” Frederick F. Reichheld

The six questions we ask ourselves in this iterative process are:
I.    Who is the customer?
At first glance should be an easy answer however it is not as obvious as it seems. The ultimate customer for any profit making enterprise is the person, or company who provides the revenue by purchasing the products or services we produce. It is a matter of fact that in our inside-out legacy world we have created multiple customer-supplier relationships which include internal ‘service’ providers such as Information Services, Human Resources and so on. In mature Outside-In organisations the internal customer ceases to exist as we progressively partner to align to Successful Customer Outcomes and artefacts such as Service Level Agreements become a thing of the past.


II.    What is the Customers current expectation?
The 2006 book “Customer Expectation Management “ Schurter/Towers reviewed in detail the of creating and managing customer expectations and how through clear articulation companies such as Virgin Mobile in the US redefine their market place. In the context of the SCO map we need to understand the customers (as identified in the answer to question 1) current expectation. This often reveals both a challenge and opportunity. Customers will tell it as it is, for instance in an insurance claim process “I expect it is going to take weeks, with lots of paperwork and many phone calls”. That should tell you the current service is most likely poor and fraught with problems, delays and expensive to manage however this presents the opportunity. If that is a market condition (all insurance claims are like this) then moving to a new service proposition will be a potential competitive differentiator.  


III.     What process does the customer think they are involved with?
In the inside-out world we see process in a functional context. Therefore insurance claims are dealt with by an insurance claims department. Customer Retention is the baby of you guessed it, the Customer retention department and marketing is done by the marketing people. This split of responsibility is a legacy of functional specialisation created by relating to business as a production line. Adam Smith wrote in ‘The Wealth of Nations’ (1776) of an English pin factory.  He described the production of a pin in the following way: ”One man draws out the wire, another straightens it, a third cuts it, a fourth points it, a fifth grinds it at the top for receiving the head: to make the head requires two or three distinct operations: to put it on is a particular business, to whiten the pins is another … and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which in some manufactories are all performed by distinct hands, though in others the same man will sometime perform two or three of them”. The result of labor division in Smith’s example resulted in productivity increasing by 240 fold. i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division. The insights form Smith underpinned the industrial revolution however using this principle to organise ourselves in the 21st century is to a very large part the wrong approach. That is precisely what the answer to the question will tell us – “sorry sir you are talking to the wrong department, let me transfer you”. Or even getting stuck in automated response system hell “press 1 for this, 2 for that, 3 for the other and 4 if you have missed the first three options.” These are features of the labor division mindset. Ask a customer what process they think they are and you will frequently be surprised by the answer.


IV.    What do we do that Impacts customer success?
Often we ask customers to do numerous many activities which appear sensible  to receive service or indeed buy products. Relating back to the insurance claim we can see rules and procedure around how to make claims, the correct way to complete forms, the process of collating the information, the timeframes within which to claim, the way we can reimburse you and more.  Often times these restrictions that we impose made sense at some time in the past however they may no longer be relevant.

The situation is compounded by the way internal functional specialism focus on project objectives. Richard Prebble, a respected New Zealand politician writes in his 1996 book “I’ve been thinking” of the inability of organisations to think clearly of the amount of work they create and in fact “they spend a million to save a thousand every time”.
His story of the challenge within large organisations is typical “The Post Office told me they were having terrible problems tracking telephone lines … They found an excellent program in Sweden which the Swedes were prepared to sell them for $2m …. So the managers decided to budget $1m for translating into English and another $1m for contingencies. But, as the general manager explained, it had turned out to be more expensive than the contingency budget allowed and they needed another $7m. “How much”, I asked, “have you spent on it so far?” “Thirty-seven million dollars” was the reply. “Why don’t we cancel the programme?” I asked “How can we cancel a programme that has cost $37m?” they asked   “Do you believe the programme will ever work?” I asked “No, not properly” “Then write me a letter recommending its cancellation and I will sign it” The relief was visible. I signed the letter, but I knew I needed new managers.”

This type of inside-out thinking causes companies to create apparently sensible checks and controls within processes that actually manifest as customer inconvenience, cost and delay. Are you making the customers lives easier, simpler and more successful?


V.    The Successful Customer Outcome – what does the customer really need from us?
At this point we should have enough information to objectively create several statements that articulate the SCO. These statements should be specific, measureable, attainable, relevant and time-bound (SMART). Usually there will 6-10 such statements which become the actual key performance measures as move the process Outside-In. For example a North American business school completed the SCO map and created these statements from the customer perspective for an ‘Education loan application’ process:
a.    I need to receive my financial assistance
b.    I need to receive aid  before the semester starts
c.    I need to attend the classes I have chosen
d.    I do not want to call to chase progress
e.    I need to receive the correct amount
f.    I do not want to have to fix your mistakes

There is no ambiguity here and we avoid a common mistake of using management weasel words such as ‘efficient, effective, timely’ which may mean things internally but to a customer are of little help. Creating SCO statements that may be used as measures for process success is a key aid on the journey to Outside-In.


VI.    And now we reach the core of the onion. What is the one line statement that best articulates our Successful Customer Outcome? This one-liner embodies the very nature of the process and sometimes the business we are in. In ‘Thrive- how to succeed in the Age of the Customer’ McGregor/Towers (2005), Easyjet (Europe’s second largest airline) is used as an example in this quest. Their simple “Bums on Seats” SCO sentence works both from a company perspective (we must maximise utilisation, offer inexpensive seats, get people comfortably and safely to their destinations) and the customers needs  “I need a cheap safe seat to get me to the sunshine quickly without a fuss”.  

The company one liner will become part of a series which are measureable through the SCO statements and can be tested and revised depending on evolving customer expectations and needs. It may in fact ultimately replace the inside-out strategic process and provide the organisation with its Raison d’être.

Of course when we start the journey it is often sufficient to create SCO maps to help grow understanding and even if the actual SCO Map is subsequently replaced (as we take a broader view) the improvement in understanding around the customer is invaluable.

In the third part of this four part series we will review “Reframe where the process starts and ends”

Part 1 of 4: There are four distinctly Outside-In ways that you can rethink process and in doing so achieve Triple Crown benefits.

I explore these more thoroughly in the new book however for now let’s take them in bite sized chunks.
•     Understand and applying Process diagnostics
•    Identify and aligning to Successful Customer Outcomes
•    Reframe where the process starts and ends
•    Rethink the business you are in

Let’s start with…
1. Understand and applying Process diagnostics:
(These will be familiar to CPP people however a refresher is always nice)
Earlier we have mentioned Moments of Truth, those all important interactions with customers. Let’s take that discussion further and include other closely related techniques for uncovering the real nature of process – breakpoints and business rules.

Firstly Moments of Truth (MOT) were first identified by Swedish management guru Richard Normann (1946-2003) in his doctoral thesis “Management and Statesmanship” (1975).
In 1989 Jan Carlson, the CEO of Scandinavian Airlines (SAS) immortalized the phrase with his book ‘Moments of Truth’. He clearly linked all customer interaction as the Causes of Work for the airline and set about eradicating non value added MOT’s and then improving those he couldn’t remove. 
a)    Moments of Truth are a Process Diagnostic
b)    They occur ANYWHERE a customer “touches” a process
c)    They can be people-to-people, people-to-system, systems-to-people, system-to-system, and people-to-product
d)    ANY interaction with a customer is a Moment of Truth
e)    Moments of Truth are both process Points of Failure and Causes of Work

Carlson transformed the fortunes of SAS with this straightforward insight – all work in our organisations is ultimately caused by the Moment of Truth. Fix them and you fix everything else.
All Moments of Truth should be eradicated and those remaining improved. In doing so the customer experience is improved, costs are reduced and productivity maximised.

Next let’s review Breakpoints. Breakpoints (BP’s) are the direct consequence of MOT’s and are all the internal interactions that take place as we manage the processes caused by the customer interactions. 
a) Any place that a hand-off occurs in the process is a Break Point
b) Break Points can be person to person, person to system, system to person or system to system
c) Break Points are both process Points of Failure and Causes of Work

By identifying BP’s we can set about uncovering actions that would in turn remove them, or if not improve them. BP’s are especially evident were internal customer supplier relationships have been established say between Information Systems departments and Operations. Empirical research suggests that for every Moment of Truth there are an average of 3 to 4 Breakpoints. In other words a process with ten MOT’s will typically yield 30-40 Breakpoints.
All Breakpoints should be eradicated and if not at the very least improved. In doing so we get more done with less, red tape is reduced, control improves and the cost of work comes down.

The third in our triad of useful Outside-In techniques is Business Rules.
Business Rules are points within a process where decisions are made.
a)    Some Business Rules are obvious while others must be “found”
b)    Business Rules can be operational, strategic or regulatory and they can be system-based or manual
c)    Business Rules control the “behavior” of the process and shape the “experience” of those who touch it
d)    Business Rules are highly prone to obsolescence
e)    We must find and make explicit the Business Rules in the process

Business Rules (BR’s) are especially pernicious in that they are created for specific reasons however over time their origin is forgotten but their effect remains. For instance one Life insurance company had a delay of eight days before issuing a policy once all the initial underwriting work was complete. This has a serious impact on competitiveness as newcomers were able to issue policies in days rather than weeks. After some investigation it was discovered that the ‘8 day storage’ rule was related to the length of time it takes ink to dry on parchment paper. This rule hadn’t surfaced until the customer expectations changed. There are many examples of previously useful rules evading 21st century logic and blocking the achievement of successful customer outcomes. All Business Rules should be made explicit and challenged in todays context.

Next time we’ll take a look at the second way to radically redefine process:

  • Identify and aligning to Successful Customer Outcomes

Is BPM trending Outside-In?

Through 2009 we ran a survey, for a large part in conjunction with LinkedIn.
Thank you to all the contributors especially so the BP Group (www.bpgroup.org) membership.

More than 260 people took the time to respond and produced the following result. A selection of supporting comments and authors reveals a startling trend as business process management as a purely ‘inside’ the organisation activity, to one now best reflected in the phrase “the customer experience is the process”. This latter view coined ‘Outside-In’ fundamentally changes every aspect of the way we do business in terms of people, processes, strategy and technology. The next poll will build on this understanding….

Comments include:

BPM will never die. It may change names and technology, but never die. It is essential for continuous improvement. Without continuous improvement an organization dies.
By Fred Held Former Marketing and Operations Executive Mattel for McDonald’s and Burger King.
Executive Consultant IBM
 
Process improvement is essential, however the vernacular will continue to evolve.
By Lezlee Emerson Customer Care Manager at Gilsa Products & Services Co
I voted for the outside-in approach by definition (after attending your excellent training). I think, that those three BPM should be separated EXPLICITELY — this will help us to move from current vendor-centric BPM to correct customer-centric BPM. Thanks, AS
By Alexander Samarin Enterprise & Business Architect / BPM & SOA & ECM & IT Governance / Business process modeling
“Encouraging” results. Good to know that enterprises and specialists are converging to an approach that delivers value. Successful BPM has to be is client-oriented / ”outside-in”. (I know … some still disagree …). If possible Top-Down. Never a Technology. Regards, NMusa
By Nilson Musa Quality & Corporate Process Manager at Brasil Telecom.
It’s crazy that so many organisations still focus on the inside-out approach. It seems that fundamental marketing practises are forgotten as soon as we get to work. I still recall Kotler from my MBA over 10 years ago defining marketing as understanding and producing what the customer wants… When we link our internal processes and architecture to truly deliver that then we succeed!
By James Rosenegk (Smith) Consultant at Kaizen Training and Managing Director of Future State Consulting Ltd
However I think this comment sums up the majority:
Imagine designing anything from the inside out. What is the likelihood that if you had all the components of a car designed separately that it would ever fit together? What if you designed a house by having people design each room and then see how they fit together. A design principle is: Top Down Outside In.
By Stan Kirkwood Business designer, Process designer, Leader
You can join the follow-up survey here – Is your business ‘Inside-Out’ or ‘Outside-In’?  

“The Successful Customer Outcome (SCO) – how, when and where”

Space is limited. Reserve your Webinar seat now at:
https://www2.gotomeeting.com/register/909507898