President Obama recognises the role of performance management in organizations if they want to be relevant in the future. He was not successful in getting McKinsey consultant Nancy Killefer on board (apparently she had some personal tax issues) as the Chief Performance Officer but he managed to appoint Jefferey Zients a while ago. Zients comes with an impressive record. He has 20 years of business experience as a CEO, management consultant and entrepreneur and has helped lead firms that provide performance benchmarks and best practices across a wide range of industries. Sounds like the man for the job. There seem to be renewed interest in the role of performance management in organizations.
Tom Davenport , a process management thought leader at Harvard, wrote in his “The Next Big Thing” blog about “The Rise of the Chief Performance Officer” appointment. The interesting is thing not his view on President Obama’s appointment but rather his view on the convergence of process management, knowledge management and performance management. Tom refers to a debate on merging various thought leader discussion groups and I quote his blog
“They noted, for example, that if you want to align knowledge and learning with work, you need to know something about business processes and how to improve them. And if you’re going to align processes with the content needed to perform them effectively, you need to know something about the technology that would deliver the content in accordance with job tasks. What this begins to suggest is that the era of siloed business improvement activities will give way to applying a variety of interventions to improve work. In other words, an organization run by a Chief Performance Officer might be called for. “
This has been the point of Performance Focused Process-Centric organizations and this blog all along. Knowledge Management in today’s organizations are tied to the hip with processes. Every process has contextual knowledge, transactional knowledge and procedural knowledge that makes the process work. Performance management endeavours to make processes effective, efficient, consistent and even predictable. Performance, process and knowledge management are inseparable in support of the business drivers mentioned in a previous post on this blog. Processes need to designed for performance and embed critical knowledge.
Most of today’s process, performance and knowledge management methodologies are supported by IT based tools. There are content, performance and process management solutions that can manage the transactional side of all these components, but the role of the Chief Performance Officer (CPO) will be to ensure a synergistic approach to methodology and tools. There is no one single solution that will work for all organisations that cover all 3 areas (there are not even tools in the 3 areas that cater for everything in that area) and the CPO will need to ensure that process are designed for performance and that it takes knowledge management into consideration. Knowledge Management should support performance and process management while performance management solutions should be based on quality information from knowledge based business processes. Definitely some food for thought.
Well done President Obama on recognizing the need for a Chief Performance Officer. Let’s see how well they perform
There is a Business Process Group on Linkedin that is very active with numerous posts on BPM related subjects everyday. I try to comment when I get a chance and this specific thread asked “What’s the best way to pitch BPM to a company that doesn’t know that it needs it?”. I commented as follows and then got a private message from John Wurl.
PvS Comment: These are always the most difficult. In all honesty, we don’t sell them BPM if they don’t know what it is. We rather engage with them and identify some “pain points” in their business. We then solve the problem by addressing the process and we show them what it means to “manage” their processes. This approach takes less time with a higher conversion rate than trying to educate them at the start.
Message from John: I enjoyed reading your reply to this post. It seems that many of our posts get into the technology agnostic debate and I was curious how you managed this? You seem to have a very simplistic and elegant approach. Does it remain that way for long when you integrate a tool? Thank you and I hope I am not asking a dumb question.
PvS reply to John:
Our objective is to sell our software in the end but we’ve learnt that we have to solve the “business problems” if we want to have a long time relationship with our client. Taking a business improvement approach mostly leads to the question on how to implement the process change to make it consistent, repeatable and sustainable. That inevitably leads to employing a tool like XMPro. We never started XMPro with a view to become a BPMS. We come from a background of developing bespoke solutions for ERP solutions. That generally requires solving the business problem. The focus is not on the tool but the objectives and performance indicators of the process. We then decided to build a tool for composite process applications with complex integration requirements and it turned out that Gartner coined it BPMS. So our focus is on solving a business problem and you will have a customer for life.
Once they see that they have multiple process (pain point solutions) in one process portal, they start to see the value of “managing processes” proactively. Then we introduce them to fully fledged BPM.
I hope this answered your question and thanks for commenting.
So the best way to pitch BPM to a company that know that it needs it, is not to pitch it at all. Show how process performance improvement can solve business problems. It is not about the methodology, technology or the tool. It is about solving a business problem.
Marketing gurus have long used split testing as an iterative process to find the best performing adverts in direct mail marketing. It is a simple process where 2 different adverts are created, sent out, and the responses to each ad are recorded. It is generally referred to as A/B split testing. The conversion rate of ad A is measured against ad B and the worst performing advert is then dropped. A new ad is created and put through the same process against the remaining (better performing) ad from the previous round of A/B split testing. Simple but effective. Many companies now do it with their Google Adwords. So what does split testing have to do with business process and performance management. Everything…
Why don’t we split test processes for performance optimisation? Why don’t we create two streams of a process and use some randomisation algorithm to send a particular transaction down a specific process stream? We can then record and measure the performance of each stream based on pre-defined process performance indicators to the process analytics module of the BPMS and determine the best performing process. Rinse and repeat.
This iterative process will provide an alternative to modelling and simulation techniques that many process analysts employ to try and improve process performance. It provides a practical approach that proved successful in other areas such marketing and it is an evolutionary approach where the best performing processes survive. Many organisations implement a business process without ever re-visiting it. No one knows where to start looking for changes. This split testing process will take care of that.
A word of caution thought. Make sure that the BPMS solution can support this type of versioning of processes and that it doesn’t impact negatively on the quality of information on the user interface and that audit trails and worklists maintain their integrity. Processes need to be designed for split testing.
The possible benefits of A/B split testing for processes can be significant in organisations where process improvement plays a significant role. It can possibly save jobs and improve bottom lines in the current economic circumstances. It is worth a try.
Sean Silverthorne, editor of Harvard Business School Working Knowledge, posted a blog article titled “The Mother of All Disruptions” that starts off with the following statement : The corporation is tumbling through a period of uncertainty it has never seen before, one that will change the nature of business forever. Sean states that through all the wars, energy crises, technology revolutions and economic instability it was only a matter of time until equilibrium was restored and the world went on more or less as it was. But it seems that is no longer the case. It seems that the big thinkers at Harvard believe that constant change will now be the norm as the core technologies (computing, storage and bandwidth) that are now the utilities in our new world, are not stabilizing. But should this be news to us? Evolution has long been how we develop, improve and sometimes destroy our hard work.
Reading Sean’s blog reminded me of a book that I bought around 2000 or 2001 that takes natural laws from physical sciences and applies it to business. Richard Koch’s “The Power Laws: The Science of Success” is a compelling read and probably more applicable now than it was in 2000. One of the paragraph headings in the introductory chapter speaks of “The progress from order to chaos” and this statement always intrigued me. It seems that the world becomes more complex and less explainable the more we learn and the cleverer we get. Koch starts off in the first chapter with Darwin’s theory on Evolution by Natural Selection. “If selection did not apply to ideas, technologies, markets, companies, teams and products in precisely the same way as it applies to species, we would all be working on the land struggling to avoid malnutrition and famine. Selection drives all material progress” according to Koch.
So what does that have to do with the current economic turmoil in the market and “The Mother of all Disruptions”? The answer may be in Koch’s analysis of Natural Selection applied to economic sciences. First off, he states that Darwin’s theory of natural selection is based on 3 simple observations:
Creatures systematically overproduce their young, without exception. Not all the young will survive.
Secondly, all creatures vary.
Thirdly, the sum of that variation is inherited.
The first observation can be seen in the fiercely competitive and overcrowded economic markets and still it seems to spawn new start-ups in every industry. All these businesses and markets vary and these variants develop from similar businesses and markets. But Darwin observed that there is a process whereby some species survive and he coined the term Natural Selection defined as “The preservation of favourable variations and the rejection of injurious variations”. The book provides a detailed explanation of Koch and Darwin’s theory on applying natural selection to business but the fundamental ideas are:
There is variation (we breed new adapted species), then selection (only a few make it in the new conditions), then more variation based on those that survive, the selection and so on. Variation is based on the fact that the parents of the offspring are individually unique and this gives birth to a unique new offspring. No two entities are the same.
Being successful or “surviving” is based on fitting the “conditions of life”. The mutation from the unique parents creates a new entity with its own characteristics and these may improve or worsen the odds of survival. Those that don’t improve may disappear, just look at the dinosaurs.
Diversity leads to efficient use of the land, but only those best suited to adapt to the environment will survive.
I think you get the point and we are currently faced with a situation where conditions were favourable for a long period of time, businesses overproduced their products, services and their young. Conditions have changed, it is now time for selection, we have the “Mother of all Disruptions” and it may never return to the stable state that we are used to. Those that are not suited to adapt will not survive. It is a law of nature.
I believe that many of the large organizations that are now closing their doors, and the sad loss of jobs, are directly related to the fact that they only marginally survived in the good times and now that the next selection cycle is on us, they are ill-equipped to deal with Darwin. Geoffrey Moore (author of Crossing the Chasm) released a book in 2005 titled ” Dealing with Darwin: How great companies innovate at every phase of their evolution“. I highly recommend it.
Koch concludes in the chapter on natural selection that there are four lessons for economic selection for products and marketing:
Product ideas will be stronger, more likely to survive and reproduce, if they have emerged from a struggle for life from substantial competition.
New product variants will arrive sooner or later, whether you introduce them or not.
Scatter new breeds around your core product: fill up the potential product spaces so that newcomers can’t move into these niches.
Product and service development should always be accelerated.
RA Fisher developed a theorem in 1958 based on Darwin’s law of natural selection that markets, products, brands, technologies, companies and individuals who improve their fit with the environment faster (than other markets…) will expand faster and be more profitable. It sounds logical and stating the obvious, yet many businesses don’t know how to leverage this basic law.
Business processes are the DNA strings that make a business unique and business performance management provides the vital signs of life in an organization, showing whether it is improving, stagnating or dying. By combining these two methodologies into Business Process and Performance Management (BPPM) creates an opportunity to adapt the organization to better suit the conditions and improve the chance of survival.
Businesses should use this current disruptive business cycle to best adapt themselves to what the future conditions may require, whether we return to our previous equilibrium state or whether we have now entered the “Mother of all disruptions” and constant change will become the norm. Take the pulse and vital signs of the business, adapt the DNA to make it suit the environment, measure the impact of the changes and repeat the process. Establish the key process performance indicators of your business, automate those processes that are suited in a flexible Business Process Management Suite (BPMS), analyse the results and trends of the performance indicators and maintain an agile approach to the business processes. Change them to fit the environment or stand the chance to loose out in the Natural Selection cycle. It is a law of nature.
The question is often asked why you would need BPM software if your business already has implemented ERP and business specific applications. What makes a process important and why does it matter?
If you are in a competitive market, then it does matter. Porter recognised this in the mid eighties and wrote Competitive Advantage: Creating and Sustaining Superior Performance. In this book Porter shows that competitive advantage depends on all of the specific activities needed to create products and services and on the way the company organised those activities together into processes and ultimately into value chains. Porter’s concept of value chains links business processes across the organisation into measurable, end to end actions that define the way the organisation delivers its value proposition.
These value chains are the entities that make companies unique. It is the specific way that they transform their input into products or services that are deemed “valuable” by their customers.
This Geary Rummler diagram describes Value Chains or Core Business Processes in the context of resources, customers and markets, competition, social and regulatory environments and the internal “silo” structure of most organisations. The structure of the internal functions may differ from business to business but the fundamental principles remain the same. The Value Chain of Core Business Processes drives each organisation’s unique competitive advantage. All businesses operate in this framework even though the internal structure may differ.
Customer expectations are based on how effective and efficient these processes work. Effective processes help organisations in fast growth scenarios whereas efficient processes optimise resources without compromising service levels in slow growth or recessionary business cycles. Customer retention in these recessionary cycles is as important as finding new customers while servicing them with fewer resources.
Business Process Management becomes a strategic initiative in this framework. It becomes a planned approach to understand, maintain and improve the Value Chain that is at the core of the business. Business Process Management (BPM) focuses on understanding the Value Chain by:
- documenting (mapping and modelling) the core business processes;
- maintaining these processes through automation, process controls and integration; and
- improving the Value Chain by analysing process performance indicators, implementing process changes in an agile process management environment and measure the results of those changes in a continuous improvement effort.
Porter’s Value Chains evolve with and organisation as business models, conditions and the competitive landscape change. It requires a flexible environment and processes can’t be “cast in concrete” as many failed ERP implementations show. The challenge is not with the transactional capability of the ERP solution, but rather its ability to adapt to changing business processes that are often external to the control of the business. The competitive advantage of most of the successful businesses today is not in the capability of their ERP but in their ability to deliver valued products and services through flexible, adaptive and unique processes.
Processes do matter and so does the technology that supports them. Many processes can be maintained without systems but the November 2008 Aberdeen Research Report – BPM and Beyond : The Human Factor of Process Management – reports that Best in Class organisations that have implemented BPM systems achieved a 53% improvement in process consistency, compared to a 13% improvement for the Industry Average and a 13% decline for Laggards.
The same report reveals the strategic nature of processes in the Value Chain as business executives listed the following as the top priorities that drive the focus on process management:
45% – Need to reduce operational cost;
41% – Need to improve process agility and innovation;
26% – Challenge of managing multiple disparate information systems;
22% – Pressure to improve customer service; and
17% – Pressure to increase sales and drive new business
Processes do matter. It is the only leverage that a business has to distinguish itself from competitors, operate in a compliant efficient way and deliver the unique value proposition that will keep it in business in time to come.