The Power of Process

The Power of ProcessThe Power of ProcessFor Driving Business ImprovementFor Driving Business Improvement

Fred Hess, Paramount Strategies LLCFred Hess, Paramount Strategies LLC

Brainstorm Conference - September 28-30, 2008Brainstorm Conference - September 28-30, 2008

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ProcessProcess is the Clark Kent of business is the Clark Kent of business ideas: seemingly mild and unassuming ideas: seemingly mild and unassuming but actually amazingly powerful. but actually amazingly powerful.

Michael Hammer,Michael Hammer, Agenda, 2001Agenda, 2001

The House-Building Contest How long does it take to build a house?

My baseline => 4 months

The rules are simple: normal tools must be used

building codes must be followed

no prefabricated components

only the concrete curing can be accelerated

must be finished and landscaped

The record?

2 hours, 47 minutes! 2 hours, 47 minutes!

Do you think process had something to do with it?

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InsightsInsights

Schedule improvement = 99.6%!Schedule improvement = 99.6%!

May not be the most cost effective approachMay not be the most cost effective approach

Percentage of non-value added tasks?Percentage of non-value added tasks?

Response to proposed project?Response to proposed project?

Teamwork - single focusTeamwork - single focus

Flawless executionFlawless execution

Lessons learned?Lessons learned?

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Definition of ProcessDefinition of Process

A process is a set of activities that produce A process is a set of activities that produce products and services for customers. products and services for customers.

GAO’s BPR Glossary of TermsGAO’s BPR Glossary of Terms

A process is an organized group of related A process is an organized group of related activities that together create a result of value to activities that together create a result of value to customers. customers.

Michael Hammer,Michael Hammer, Agenda, 2001Agenda, 2001

The term The term processprocess is a proxy for a business is a proxy for a business operation which is comprised of process steps, operation which is comprised of process steps, people and tools.people and tools.

Fred Hess, 2004Fred Hess, 2004

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Common Issues in CompaniesCommon Issues in Companies

CEO

Sales Order MfgProcure

mentShipping

VP VP VP VP VP

Functional departments are usually measured and controlled vertically

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Common Issues in CompaniesCommon Issues in Companies

CEO

CUSTOMER

Sales Order MfgProcure

mentShipping

VP VP VP VP VP

Order

Work usually proceeds through the company horizontally

Item

Dept M

tericsWork

An Aerospace ViewAn Aerospace View

PM

CUSTOMER

ProcurElectrical Mfg

FM FM FM FM FM

Contract Deliverable

Design StressF

unctional Focus

Work

Work usually proceeds through the company horizontally 88

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InsightsInsights

Department measurements and the flow of work are Department measurements and the flow of work are typically at right angles to each othertypically at right angles to each other

These vertical measurements typically do not measure These vertical measurements typically do not measure flow of work and can sometimes cause behaviors that flow of work and can sometimes cause behaviors that interfere with the flowinterfere with the flow

Aerospace and other large enterprises have many Aerospace and other large enterprises have many more functions than ordinary businesses so the silo more functions than ordinary businesses so the silo effect is greatereffect is greater

If there are no metrics or ownership related to the flow If there are no metrics or ownership related to the flow of work, it will probably of work, it will probably notnot improve improve

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A Real Life Example – Telecom ManufacturerA Real Life Example – Telecom Manufacturer

Sales

Finance

Mfg

Order

Deployment

Proposal

Billing

Collections

Client defined processes

The client team, with IBM help, had modeled the 8 As-Is processes and were now designing the To-Be processes, starting with Collections.

Do these really look like processes?

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SellFinanceProduct

MfgProcessOrder

DeployProposeSubmitInvoice

Collect

I convinced them that their 8 “processes” were phases of the same process.

What might this process be called?

What was the common business object that made it the same process?

A Real Life Example – Telecom ManufacturerA Real Life Example – Telecom Manufacturer

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The Proposal to Cash ProcessThe Proposal to Cash Process

SellFinanceProduct

MakeProcessOrder

DeployProposeSubmit Invoice

Collect

Order

CUSTOMER

Collections were running at 50% Customer satisfaction was poor.

How would you find the root causes?

The common business object is the “Order”

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Analyzing the Proposal to Cash Process

Sales MfgOrder DeployProposal BillingCollect

ions

CUSTOMER

What were the root causes?

What group suffered the most pain?

At what point did the salesman get his commission?

Who did the customer call for status or problems?

Who was responsible for customer satisfaction?

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Root Cause AnalysisRoot Cause Analysis

Customers won’tpay until systeminstalled

Customer paysslowly

Order notcorrect

Installation notcorrect Order must

matchproposedconfiguration(SAP)

Customerfacility notready

Scheduleslip

Customerscan’t pay

Collectionsrate notacceptable

Caused ByCaused By

Caused By

Caused By

Caused By

Caused By Caused By

Caused By

Configuratorout of date

Caused By

Customerschedulenot tracked

Caused By

Installationnot onschedule

Caused By

Proposedconfigurationnot correct

Caused ByConfiguratornot available

Prices in 3differentdatabases

Caused By

Caused By

Caused By

No one isresponsibleCaused By

FindingsFindings

The root cause of the collections problem was The root cause of the collections problem was primarily in salesprimarily in sales

No single role owned the customer for the No single role owned the customer for the duration of the transactionduration of the transaction

No one realized the number of potential No one realized the number of potential customer touchpointscustomer touchpoints

There was no mechanism for collecting and There was no mechanism for collecting and utilizing all customer informationutilizing all customer information

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A Touchpoint Analysis Was PerformedA Touchpoint Analysis Was Performed

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# TOUCH POINT DOCUMENT CUSTSAT

EFFECT. EFFIC. ACCESS CHANNELS

OVERALLPERF

TREND BUSINESS IMPACT

CURRENT IMPACT/ CHARACTERISTICS

DESIRED IMPACT/EXPERIENCE

GAP

1 Marketing/Sales

22

Advertising

Branding

Communications

Product Launch

Public Relations

Trade Shows

6 Future Product Development

Develop Customer Plan

Develop Service Plan

Approve Service Plan

Develop Partnership Plan

Develop Account Plan

Clarification of Customer's Business Reqmt's

How did we proceed?How did we proceed?

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Salesman

Order/Finance

Mfg Engr

Buyer

Billing

Deployment

Collections

Customer

Got all roles together in workshop

Developed to-be requirements

Worked out the handoffs and interactions

Designed the end-end to-be process

RecommendationsRecommendations

Adjust the SAP business rulesAdjust the SAP business rules

Maintain current configurators and price Maintain current configurators and price databasesdatabases

Form customers teamsForm customers teams

Appoint a Chief Customer OfficerAppoint a Chief Customer Officer

Acquire/develop a customer information Acquire/develop a customer information database and applicationdatabase and application

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InsightsInsights

The focus on departmental, instead of end-to-The focus on departmental, instead of end-to-end, processes precluded their ability to end, processes precluded their ability to determine the root cause of the issuesdetermine the root cause of the issues

There was no ownership of the end-to-end There was no ownership of the end-to-end process measurementsprocess measurements

Business growth of 30%/year contributed to Business growth of 30%/year contributed to lack of focus on the customerlack of focus on the customer

The Request for Service Process

An outsource process for obtaining additional An outsource process for obtaining additional computing resourcescomputing resources

Projects take from 8 to 16 weeks to Projects take from 8 to 16 weeks to implementationimplementation

Average transaction time = 47 daysAverage transaction time = 47 days

Could take as long as 14 days to obtain a Could take as long as 14 days to obtain a license key to run an installed applicationlicense key to run an installed application

Quick-hit teams trying to improve process Quick-hit teams trying to improve process performanceperformance

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The Approach – Step 1The Approach – Step 1

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1. Analyze the Current State

DesignFlow As-is DesignFlow To-be

As- Is

To -Be

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1ScopeWork

EA1Assign Number

TL2Check Concept

RN0-1Create/ModifyDesign Model

TW1Develop Spec.

Choose 1

Dev. Concept Desgn

Disapprove scope

Use Existing Dsgn

DE1R2

Choose 1RejectApprove

R2

D1

Doc. Detail Dwg

A1Submit Analysis

C1

Check Drwgs

Multithread

Reqts Cgng

Model OKModel not OK

2R4

R4

1

Choose 1Approve ResultsChnge ConceptChnge Design

DE2 DE3

TL3R1

R1

R3

R3

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1Scope Work

EA1Assign Number

TL2Check Concept

RN0-1Create/Modify Design

Model

TW1Develop Spec.

Choose 1Dev. Concept Desgn

Disapprove scopeUse Existing Dsgn

DE1R2

Choose 1Reject

Approve

R2

D1Doc. Detail Dwg

A1 Submit Analysis

C1Check Drwgs

MultithreadReqts CgngModel OK

Model not OK2R4

R4

1

Choose 1Approve ResultsChnge Concept

Chnge Design

DE2 DE3

TL3R1

R1

R3

R3

Application Function, Data, Infrastructure

Org Design, Teaming, Skills,

Knowledge

Issues

Root Cause

Desired Capabilities

Process Enablers

OrganizationEnablers

ApplicationReqmts

Solution Ideas

End

Process Roles

E2E Current RFS Process (As-Is)

State 40

QA2/3 Check (state 33)Rework Loop

Approve

Approve

= Silo

Current State ProcessCurrent State Process

Requester

Delivery

Project Mgr

Solution Team

Prop Mgr

OutsourceMgr

Procure

Starts With: Request for ServiceEnds With: Implementation plan and solution components ready for implementation

Develop & DeliverProposal

DevelopSolution

Obtain Approval

Obtain Approval

Obtain Approval

Perform Acquisition

Services

Evaluate Request

Initiate Request

Package Request

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Project Goal:Systematic and Repeatable Approach


As- Is

To -Be

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1ScopeWork

EA1Assign Number

TL2Check Concept


TW1Develop Spec.

Choose 1

Dev. Concept Desgn

Disapprove scope

Use Existing Dsgn

DE1R2


R2

D1

Doc. Detail Dwg

A1Submit Analysis

C1

Check Drwgs

Multithread

Reqts Cgng


2R4

R4

1


DE2 DE3

TL3R1

R1

R3

R3

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1Scope Work

EA1Assign Number

TL2Check Concept


Model

TW1Develop Spec.



DE1R2

Choose 1Reject

Approve

R2

D1Doc. Detail Dwg

A1 Submit Analysis

C1Check Drwgs


Model not OK2R4

R4

1


Chnge Design

DE2 DE3

TL3R1

R1

R3

R3



Knowledge

Issues

Root Cause


Process Enablers


ApplicationReqmts

Solution Ideas

2. Develop the Requirements

The current Request for Service (RFS) is burdened by a process that contains a high number of roles, tools, hand-offs, manual activities and rework.

As-Is Baseline - Analysis

= 32

1. Initiate Request

State 0, 5, 10

Submit RFS

2. Evaluate and Route RequestState 15

Receive RequestValidate Request TypeAssign the RFS Category + QueueReroute as NeededValidate Form Content and Notify RequesterValidate Funding InformationLog Project/New Business RequestAssign to Resource

4. Develop and Deliver Proposal to Customer

State 30, 33Finalize Project Scope SummaryFinalize Proposal OutputsObtain Pricing AgreementPerform QA2/3Submit to Governance for Review and ConcurrenceRework as neededDeliver FAL and Project Scope Summary to

Customer

5. Obtain Approvals

State 40, 50, 60, 100

Route to Customer for Approval and SignoffPerform Customer Review/ResponseReceive Signature / Rework as NeededRoute to Governance for Final ApprovalObtain Governance

Approval

6. Perform Acquisition

ServicesState 162, 1 63

Acquire Hardware and SoftwareSchedule and Begin

Implementation

3. Develop Solution

State 20, 23

Identify Required Work ProductsContact Customer Within 5 DaysAssign ResourcesGather/Validate RequirementsPerform Quality Review w/in TeamFinalize Solution OutputsPerform QA1

Review

37Activitiesper step: + 14 + 26 + 20 + 56 = 209+ 56

Choicesper step:

Handoffsper step:

19 + 6 + 13 + 4 + 36 = 114+ 36

9 + 4 + 9 + 7 + 24 = 66+ 13

IT Toolsper step: 15 9 141015 11

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Major Contributor to Schedule Delay Major Contributor to Schedule Delay – Capital Requisition Approval– Capital Requisition Approval

13 roles required for approval

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FindingsFindings

Excessive number of non-integrated applicationsExcessive number of non-integrated applications

Many manual handoffsMany manual handoffs

Quick-fix teams were changing rules weeklyQuick-fix teams were changing rules weekly

Lengthy approval cyclesLengthy approval cycles

Manual trackingManual tracking

Multiple procurement systemsMultiple procurement systems

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Project Goal:Systematic and Repeatable Approach


As- Is

To -Be

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1ScopeWork

EA1Assign Number

TL2Check Concept


TW1Develop Spec.

Choose 1

Dev. Concept Desgn

Disapprove scope

Use Existing Dsgn

DE1R2


R2

D1

Doc. Detail Dwg

A1Submit Analysis

C1

Check Drwgs

Multithread

Reqts Cgng


2R4

R4

1


DE2 DE3

TL3R1

R1

R3

R3

Checker

Eng Designer

Technical Writer

Drafter

Analyst

TeamLeader

Eng. Administrator

Design Eng

TL1Scope Work

EA1Assign Number

TL2Check Concept


Model

TW1Develop Spec.



DE1R2

Choose 1Reject

Approve

R2

D1Doc. Detail Dwg

A1 Submit Analysis

C1Check Drwgs


Model not OK2R4

R4

1


Chnge Design

DE2 DE3

TL3R1

R1

R3

R3



Knowledge

Issues

Root Cause


Process Enablers


ApplicationReqmts

Solution Ideas

3. Develop the To-Be Process

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1. Initiate Request

State 0, 5, 10

Submit RFS

2. Evaluate and Route RequestState 15

Receive RequestValidate Request TypeAssign the RFS Category + QueueReroute as NeededValidate Form Content and Notify RequesterValidate Funding InformationLog Project/New Business RequestAssign to Resource

4. Develop and Deliver Proposal to Customer

State 30, 33Finalize Project Scope SummaryFinalize Proposal OutputsObtain Pricing AgreementPerform QA2/3Submit to Governance for Review and ConcurrenceRework as neededDeliver FAL and Project Scope Summary to

Customer

5. Obtain Approvals

State 40, 50, 60, 100

Route to Customer for Approval and SignoffPerform Customer Review/ResponseReceive Signature / Rework as NeededRoute to Governance for Final ApprovalObtain Governance

Approval

6. Perform Acquisition

ServicesState 162, 163

Acquire Hardware and SoftwareSchedule and Begin

Implementation

3. Develop Solution

State 20, 23

Identify Required Work ProductsContact Customer Within 5 DaysAssign ResourcesGather/Validate RequirementsPerform Quality Review w/in TeamFinalize Solution OutputsPerform QA1

Review

To-Be Process - 1st Release To-Be Process - 1st Release

As-Is Activitiesper step

To-Be Activitiesper step

11 + 7 + 28 + 7 + 7 + 49 = 109

37 + 14 + 56 + 26 + 20 + 56 = 209

Results - Phase 1 Results - Phase 1

Removed non-value add activities 209 => 109Removed non-value add activities 209 => 109

Reduced roles from 37 to 30Reduced roles from 37 to 30

Reduced applications form 32 to 24Reduced applications form 32 to 24

Reduced handoffs from 66 to 30Reduced handoffs from 66 to 30

Removed many sources of reworkRemoved many sources of rework

Implement with WBI workflowImplement with WBI workflow

Focus on 21 most critical process stepsFocus on 21 most critical process steps

Set objectives for Phases 2 and 3Set objectives for Phases 2 and 3

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InsightsInsights

There was a lack of both a tool and data There was a lack of both a tool and data architecturearchitecture

Lack of clear process governanceLack of clear process governance

The process was assembled, not designedThe process was assembled, not designed

The quick-fix attempts actually degraded The quick-fix attempts actually degraded process performanceprocess performance

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The Dell Process AdvantageThe Dell Process Advantage

OrderBuy Parts

Look upstream and downstream for additional improvement opportunities

IdentifyNeed

InstallConfig

Solution

MaintainInventory

Get OK

Order

Ass’y Ship

Extranet

Upgrade

InsightsInsights

Dell’s integration with their customer’s processes Dell’s integration with their customer’s processes added valueadded value Control of standard configurationsControl of standard configurations

Workflow for approval and orderingWorkflow for approval and ordering

Easy inventory managementEasy inventory management

Provided clear competitive advantageProvided clear competitive advantage Harder for customers to buy from competitorsHarder for customers to buy from competitors

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Process Can Drive Schedule ImprovementProcess Can Drive Schedule Improvement

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• What percentage of the time (schedule) would you estimate is in the tasks?

• How much in the white space?

Proxy for elapsed time

Time

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Process Can Drive Cost ImprovementProcess Can Drive Cost Improvement

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• The Cost of process execution equals the sum of the cost of all activities times the number those activities are executed.

• How much cost is in rework?3434

Process Can Provide Tool RequirementsProcess Can Provide Tool Requirements

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Roles

1 hr

• Tool requirements are obtained by compiling the functional requirements from all the tasks that use the tool.

• Integration requirements can be derived by identifying tasks that require more than one tool.

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Process Can Provide Skill RequirementsProcess Can Provide Skill Requirements

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• Skill requirements are obtained by compiling the requirements from all the tasks on the role swimlane

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Process Has PowerProcess Has Power

An end-end cross-functional process can: An end-end cross-functional process can:

define how all groups/departments/roles must work define how all groups/departments/roles must work together to achieve the business objectivestogether to achieve the business objectives

show where the time is spent and where to reduce it show where the time is spent and where to reduce it

identify the cost of the activities in the process and show identify the cost of the activities in the process and show which ones can be reducedwhich ones can be reduced

identify the skill requirements required by each roleidentify the skill requirements required by each role

establish the functional requirements the applications must establish the functional requirements the applications must have to support the processhave to support the process

provide the context for root cause analysisprovide the context for root cause analysis

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Process is the most powerful and effective driver of business alignment and improvement

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Thank You!

Questions?

References:• Google: 4 Hour House• www.2hourhouse.com

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