By Shahar Markovitch and Paul Willmott
‘Born digital’ attackers are raising the bar on business process performance
Business processes are the DNA by which all businesses operate. Many businesses now use continuous improvement methodologies (e.g. lean management or systems thinking) to achieve routine year-on-year improvements in process performance. But continuous improvements are no longer sufficient. Customer expectations of process performance are undergoing a step-change thanks to ‘born digital’ companies such as Amazon and Apple. Customers now expect intuitive interfaces, 24×7 availability, real-time fulfillment, personalized treatment, global consistency and zero errors. And these processes come at lower cost – and hence lower prices – and with better controls.
Meeting raised expectations requires end-to-end process digitisation
To deliver on these raised expectations, firms need to digitise their own processes. Some information intensive processes (e.g., order to cash) can be entirely automated, reducing process costs by up to 90%. Asset-intensive processes also show significant digitisation potential. To digitise, firms need to a) improve connectivity with customers, colleagues, suppliers and distributors b) automate manual work such as quoting & invoicing c) use ‘big data’ to take better decisions and d) innovate business and operating models for example by ‘crowd-sourcing’ customer service from unpaid advocates. These changes need to be under-pinned by evolution to flexible technology platforms and reliable, consistent data models. However, technology change is insufficient. Firms also need to align their organization, skills, performance management and mindset & behaviors – for example, by creating structures that bring together all colleagues involved in an end-to-end customer journey – including IT developers – into a single organizational unit.
The need for a new methodology
Historically, processes have been optimized using either methodologies (e.g., agile) that focus on the IT aspects of change, or methodologies (e.g.., Lean, Six Sigma) that don’t focus on IT. But process digitisation requires step-changes to technology, processes and organization to be made in lock step. So successful digitisation programs develop their own, hybrid methodologies that can ‘discontinuous improvement’. Effective digitisation methodologies have these characteristics:
1. Set ‘unreasonable’ aspirations. Successful digitisation programs set aspirations that are achievable, but only when radical thinking is brought to bear. Being asked to improve process productivity by 1000%, for example, drives a different mindset.
2. Build a capability not a team. Process digitisation skills are in short supply, so successful programs put emphasis on building capabilities in-house. Process digitisation teams need representation from every function involved in delivering the customer journey, and need external stimulation to challenge ‘received wisdom’.
3. Centralise and decentralise governance. In a world where an ‘app’ can be developed in under a day, business decision-making is the bottleneck more often than IT development. Digitisation programs need strong central sponsorship (e.g. CEO, COO) to align the many stakeholders but high-velocity decision making can only be achieved by delegating all other decisions (e.g., end-state process design) to the working team.
4. Borrow what you can. Most organizations have existing capabilities that can be harnessed as part of a process digitisation program. For example, tools for process optimization can be re-used as part of the baselining phase. Agile IT teams can be expanded to iterate software, process, customer proposition and organizational model in parallel.
5. Ensure ‘end-to-end’ really means that. Digitising selective pieces of a customer ‘journey’ may deliver savings and fix a burning customer issue. But it will never deliver a seamless experience, and will leave value on the table. Importantly, the end customer also needs to be heavily involved in the design.
6. Start at the end, and work back. Digitisation often enables a process to be fundamentally reconfigured – for example removing entire process steps Designing the future state requires a ‘leap’ of thinking – it can’t easily be inferred from the starting point. Successful digitisation efforts start by ‘zero basing’ i.e., designing the ideal future state for each process without regard for current constraints.
7. Expect in-year payback. Traditional IT-intensive projects have long payback profiles. But process digitisation can deliver improved process performance in similar timescales to classic process reengineering projects – often 15-20 weeks – by developing on next generation IT platforms and deploying rapid development methodologies.
8. Roll in, not out. Traditional methodologies use a ‘roll-out’ approach, whereby a solution is progressively deployed across sites. Digitisation may make such a radical change to a process (and the supporting organization) that it’s easier to ‘roll in’ than ‘roll-out’. Practically the pilot site is used to perform a ‘reverse take-over’ of other sites.
First steps to process digitisation
Firms wishing to embark on process digitisation should take 3 initial steps:
1. Raise enthusiasm. Talking to customers about their digital experiences can be a good way to illustrate the opportunity (or threat).
2. Size the prize. The total value at stake depends on the business model and starting point, but can be rapidly estimated by allocating costs to end-to-end processes and benchmarking vs. peers.
3. Prove the point. To kick-start the approach and build capabilities and momentum, organisations should start by transforming only one or two pilot processes and then scaling rapidly (“think big, start small, scale fast”).
To conclude, ‘born-digital’ attackers are setting radically new standards for customer service, cost and control. Incumbents will need to digitise their own processes if they wish to remain competitive. To do so, they need to develop a new generation of discontinuous improvement methodologies.