For instance in 1969 astronomer J. Donal Fernie made an observation many of us will understand. In writing about the decades it took his fellow professionals to spot a fundamental error.. “the definitive study of the herd instincts of astronomers has yet to be written, but there are times when we resemble nothing so much as a herd of antelope, heads down in tight formation, thundering with firm determination in a particular direction across the plain. At a given signal from the leader we whirl about, and, with equally firm determination, thunder off in quite a different direction, still in tight parallel formation”The previous three articles in this four part theme we reviewed Part 3: ‘Reframing process for an Outside-In world‘, Part 1: ‘Understand and applying Process diagnostics‘ and the Part 2: ‘Successful Customer Outcome‘ map.
We now move our attention to the fourth way we can rethink process forever
Rethinking the Business you are in.
In the Southwest airlines example reviewed earlier we referred to the different viewpoints of the ‘business’ you are in. The two views – one the organisations, regarded as inside-out reflect the activities and functions undertaken. So British Airways see themselves in the business of flying airplanes and approach the customer with that product/service in mind. They set about marketing and selling the flights and hope to pull the customers to the product through pricing, availability and placement. In a slowly changing world where customers have little choice this strategy can provide a route to success.
As we have already seen the tables have turned and the enlightened customer demands so much more.
Southwest and other Outside-In companies understand this challenge and take a customer viewpoint.
What business would you say these six companies are in: Hallmark Cards, BMW, Disney, Zara, AOL, OTIS elevators, China Mobile? Try it from the customers perspective and you’ll arrive at a very different answer – try these, expression, joy, magic, style and comfort, community, moving people, connectivity. Yes they are very different and will reframe the way you think of the service and products you provide. Go further and look inside your existing company.
Are you still separated into functional specialist areas providing specific outputs to other departments in the so called ‘value chain’? Do you have internal ‘service level agreements’ that specify what you’ll deliver and when? How much of our internal interaction adds ultimate value for the customer? This way of organising work imposes limitations on our ability to truly deliver successful customer outcomes. The Inside-out viewpoint is inefficient, prone to red tape, is extremely risk adverse (checkers checking checkers) and slow in delivering product and service.
Many inside-out organisations actually regard customers as an inconvenience rather than the reason why they exist.
What business are you in? Past, present, future?
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“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”
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We’ll discuss the ‘solutions’ in the next update.
Meanwhile what is your view?See the latest at http://linkd.in/ProcessControl
If you are new to this debate you might want to join EA Connections, chaired by Steve Melville who penned the following words….
Your value proposition sets expectations with potential customers. The more compelling your value proposition, the larger the pool of potentially interested customers and the fewer competitors that can match it. So, the goal is to create product and service offerings that set expectations that more customers find compelling and few competitors can match. In so doing, you have re-set the bar for customer expectations within your market and created the foundation for your organization’s success.
But here’s the catch… you have to deliver against those expectations. One failure and you begin to lose your customer’s trust. You lower their expectations with your actions, regardless of your lofty initial promises of value. And, with the explosion of social networking, blogs, 24 hour news channels, online reviews, etc., any failure to deliver against expectations, gets broadcast pretty quickly. Ask BP or Toyota what happens when you fail to meet customer expectations of safety.
So… to match the high expectations of your value proposition, the delivery processes of your organization need to consistently meet those expectations. And it is in the design and deployment of those delivery processes that the critical dependency on EA surfaces. For, in the 21st Century, such processes are heavily dependent on technology:
eCommerce and online support sites, mobile applications, ERP systems, RDBMS, SOA, SANs, etc. And not just some delivery processes, Outside-In companies recognize that the entire enterprise needs to be focused on delivering successful customer outcomes.
So the challenge becomes to align all of the process, application, information and technology resources across the entire enterprise to deliver successful customer outcomes in order to support higher and higher customer expectations. And alignment is the sweet spot of enterprise architecture. EA is the right fit because both its sweep (across the entireenterprise) and its scope (processes, information, application, and the technology that supports them) match the demands of the Operational Framework Layer of the Outside-In enterprise.
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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.)
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