1. Determine Who Are Your Customers and Stakeholders, and What Benefits Your Organisation Offers Them
In our previous article we emphasized the customer/stakeholder focus of the business process approach to management. The first step is therefore clearly determining who those customers and stakeholders are. Who buys or uses your product or service offering? Who makes the buying decision? What exactly are they buying in terms of benefits? Who else is affected by your activities and what are their expectations?
A small pharmaceutical manufacturer of multivitamins, antibiotics, syrups and OTC medicines for children, located in a large African city, was trying to answer these questions for their own organisation. They came up with the following.
Customer/Stakeholder and Benefits Sought
- Wholesalers: Availability, reliable delivery, favourable payment terms, margins, marketing support
- Retailers: Availability, quality, clear product information, price
- Suppliers: Guaranteed business, prompt payment
- Hospitals and HMOs: Quality, price
- Doctors: Quality, efficacy, product information
- Consumers: Price, efficacy, pleasant taste
- Shareholders/bankers: ROI, growth
- Regulatory authority: Safety, quality, efficacy
2.Determine the Value Chains that Deliver these Benefits
The information obtained from the above step should be formed into benefit clusters. Next, trace those benefits back from your products and services through to the inputs. The identified paths form your value chains or end to end core business processes.
Our pharmaceutical company took this step and concluded they had one major value chain consisting of two major processes – the new pharmaceuticals development process and the sales and production process.
All the benefits to the customers and other stakeholders are derivable from their product range, their distribution and market support and their information dissemination.
3. Decompose into Processes and Determine the Process Boundaries
The previous step yields an end-to-end view of the organisational value chains. We now need to determine the core processes and sub-processes that make up these value chains, and the support processes that enable them. The determination of process boundaries should combine top-down and down-up approaches applied iteratively.
Listing out the major processes in the value chain as we did in the previous step, is top-down. We might then take each major process identified and using the following procedure suggested by Patrick and McDermott, break them down into sub processes.
- Brainstorm the milestones or necessary results of the process
- Link the milestones together, such that the output of one is the input of the next
- Note steps within one-to-one, one-to-many and many-to-one relationships from the above. Assemble all one-to-one steps to form the individual sub-processes within the major process.
In the case of the pharmaceutical for example, we might find, after going through this sequence that the sales and production process decomposes into the customer acquisition (identify prospect, qualify prospect and establish contract) and order fulfilment (receive order, produce and assemble order, and ship order) sub-processes.
4. Select Appropriate Metrics Based on Critical Success Factors for the Identified Processes and Overall Strategy
It is well known that measurements and rewards drive behaviour. To ensure proper balance between focus on past/current performance, and the need to build capabilities that drive future success, we need metrics that track results, processes, organisational capability and the environment.
Result measures are generally lagging in that they track past performance. By the time the result is measured, it is too late to do anything about it. Process measures are generally leading and prescriptive, since they predict future performance. Acting on factors that affect these measures will impact on future results. Care must be taken that metrics which drive the desired behaviour and customer valued outcomes are selected.
Having determined the critical factors that drive delivery of customer and stakeholder metrics or indicators of performance must be chosen, with targets for each measure, and cascaded down to individual sub processes. A line of sight must exist between overall organisational measures and the detailed measures at process and activity level.
Our pharmaceutical company chose to measure four categories. At the top level, the chosen metrics were:
- Financial – ROI, earnings from new products
- Customer/ consumer: Market share growth, price vs competition, value perception, on time delivery
- Internal: Process improvement index, employee satisfaction index, environmental compliance index
- Learning/growth: Number of patents, applied learning index5. Appoint Process Owners for Each Core Process
A major flaw of the functional orientation is that there is no one within the organisation that has a complete view of the process as experienced by the customers and stakeholders. The appointment of process owners overcomes this flaw.
The job of process owner is to manage the processes in the critical areas of improvement, boundary management, metrics, collaboration and advocacy. The process owner coordinates the functions and activities at all levels of the process, and has the authority and ability to makes changes to the process. He is responsible and accountable for its outcome.
6. Begin a Never Ending Cycle of Business Process Improvement
With your core processes defined and documented, appropriate metrics selected and process owner appointed, the next step is to begin an improvement cycle.
Using process diagrams, value stream maps and metrics, determine the current capabilities of your core processes. Identify and quantify areas of greatest opportunity using information from customer surveys, comparison of your process performance with a similar ideal process, etc.
Continuous business process improvement is the subject of our next article. Be sure to watch out for it.