Business Simplification

The downward pressure on costs is causing businesses to reduce their headcounts, much of which is in their corporate headquarters.  Over the last 18 months BP has made a one fifth reduction in its 25,000 staff out of a total workforce of 92,000 at the end of 2008.  That is approximately 5,000 employees let go who were previously employed in “valuable positions”.

This is a recurring pattern over the last year as the global economy retracts and companies attempt to pull in their belts.  Interestingly as companies go through this culling process they still have the ability to continue doing business.  Despite the moral issues arising from all the talk of layoffs, both before and after the downsizing, companies are still able to adjust their business processes so that they continue doing business.

So were these jobs that were eliminated ever critical to the company or were they just added complexity that is not truly needed to run their business?  Here is a thought that may help answer this question. Noriaki Kano developed a model that classifies customer requirements of a product into “needed”, “more is better”, and “like to have”.  For instance many consumers would agree with the following classification of features for a car:

Needed:
An engine, wheels, seats, legally required features, windshield, etc.

More is Better:
Fuel efficiency, low cost of ownership, engine power, number of options, etc.

Like to Have:
GPS Navigation, On-Star, reversing camera display, iPod docking station, moon / sun roof etc.

This classification model is useful when filtering through the requirements gained from Voice of the Customer studies to understand which features should be designed into the product being offered to the market.

As businesses worldwide take a look at how they are currently doing business and seek for ways to lower their operating costs without eliminating processes and jeopardizing product quality and services critical to their survival, they could well use this type of classification. Doing so may very well identify those processes that are of real value and those that could be eliminated to make the business model leaner and more simplistic.  A company’s classification might look something like this.

Needed:
Product development, Manufacturing, Sales, Logistics, Procurement, Accounts Payable, Accounts Receivable, Accounting and reporting, after sales support. Etc.

More is Better:
IP protection, Process Improvement, IT system, HR management, Quality management, marketing, etc.

Like to Have:
Award ceremonies, Internal communications, Team building events, Customer Relationship management, Community citizenship, etc.

Looking at it in this way it is clear that processes or services in the “Like to have” categories become luxuries that struggling companies can no longer afford and so become the first to either be completely eliminated or drastically downsized.  These are then followed by “More is better”, which again are mostly downsized but in some circumstances are eliminated.  Finally the “Needed” processes are typically the last processes to be addressed.  These are rarely eliminated but can sometimes be “pruned” to be more cost effective.

Using the Kano model it appears that many of these processes, and ultimately jobs, may not be truly critical to doing business.  Rather they are activities that business have introduced over time to fulfill their “like to have” desires.  However, when times get tough these activities take a hit, as they can no longer be afforded.  Removing them reduces cost and also makes for a simplification in the company’s business processes.

So after companies have reduced their headcounts and changed the landscape of how they do business, how long will it be that these auxiliary processes creep back into place?  Is there a way for companies to prevent the complexity and cost of these processes returning?

Author: Paul Lavery
http://www.valleyconsultinggroupinc.com

No more project mining!

I’ve facilitated many of these sessions with teams over the years and they have never really satisfied me.  I’ve even developed prioritization matrices to rank brainstormed projects based on multiple criteria.  Ultimately though I always felt that the brainstorming of the teams issues were biased towards; the burning issue of the day, the bosses “pet” project, the symptom of a deeper problem, or the desire to implement some state of the art IT system.  Coming out of the meetings the teams always seem to be content with the process and quite happy to allocate projects out to individuals to go implement.

Over time though I have observed several things happen that impacts real progress being made.
•    Priorities change as new problems of the day occur.
•    Projects compete for resources, as proper resource availability consideration was not given when multiple projects were launched.
•    Solutions cannot be implemented, as dependencies between projects were not understood.
•    IT systems are implemented with no business benefits, and sometimes they create greater problems than they were meant to solve.
•    Problems reoccur, as the root cause was not addressed.

These failings ultimately put a bad taste in the mouth of the leaders, directors and managers of these groups.  As a Six Sigma expert and one that really believes that solid project management along with rigorous problems solving tools and methodologies can create exceptional business improvements I have searched for something to improve this project mining process.
The answer was staring me in the face for some time but over the last eighteen months I have been using the Strategic Navigation process to develop a fully integrated Strategic plan for organizations, functions, and teams.  This process developed by H. William Dettmer can be used to develop a strategy, identify critical success factors, define gaps to achieving the success factors, and create a portfolio of “injections” or projects that when combined with fundamental project management principles, ensure you attain your strategic goal.
This process is now my “project mining” process of choice.
For more information on how your team can be facilitated through this process drop me a note here.
Recommended reading: Strategic Navigation.  A Systems Approach to Business Strategy.

Sorry, Could you repeat that?

What a beautiful day.  Look at the bird outside.  I’m hungry.  I would love a Subway sandwich right now.  I wonder what time this meeting will finish?  Oh, I really want a sandwich right now.  The beach is going to be so much fun this weekend.
“Paul?” Eh, what…
“Ah… sorry, could your repeat that?”
You can’t blame me for letting my mind wander.  This meeting has been going for 45 minutes now and those two have been going at it for 30 minutes now, each one arguing their part.  No one else was contributing so it was just natural for me to drift away into my own little world of “head trash”.
Now the sound of my name has snapped me back to the present.  Back to now.  I have no clue what has just been discussed.  I can’t come clean and admit to daydreaming so I’ll pretend I just didn’t hear and throw out that oh so frequently used question, “Could you repeat that?”
I must admit that this was not the first time this has occurred to me in a meeting.  I’ve also had that question asked back to me in a meeting.  I am sure it will happen again, many times.
It makes me think that although there may be ten people present in a meeting, how many people are really PRESENT in the meeting?  I would challenge anyone to stand up and say they have never slipped into their “head trash world” in a meeting.  As for virtual meetings, well that’s a whole other world.  It’s not uncommon to hear someone whacking away on his or her keyboard as another monologues.
The human brain is a wonderful thing and it enables us to multitask.  Or does it?  Research actually shows we cannot multitask, but we just switch between tasks VERY quickly.  So when we are head trashing we are not contributing.
Staying on task takes focus.  I feel I owe it to those who have demonstrated that they value my input by inviting me to the meeting, to stay focused.  I now recognize when I am slipping into my head trash world and by doing so I find it’s easier to stay on task, stay focused, and provide the value colleagues want me to provide.
Next time your in a meeting take a note on when you are slipping away from the present and look around the table and ask yourself “Who is present around this table?”

This must be real.  Look here.
http://www.dilbert.com/strips/comic/2009-03-20/

The Ego Has Landed

EGO:  Noun – A person’s sense of self-esteem or self-importance.

The ego is a very powerful thing. I have found it gets in my way more than I would like. It drives that old “I must be right” or “ I must win mentality”. Have you noticed in meetings how win – win outcomes are very rare. People don’t discuss points of view they debate them. Which viewpoint is right and which is wrong, because for every winner there has to be a looser? Does your ego cause you to fall into this trap? I know my ego has.

One thing that was pointed out to me by a gentleman by the name of Stuart Scott was that it is very hard to come up with new ideas if you never think thoughts you have never thought before.

Think about that now… When was the last time you had a brand new thought?

You can’t have new thoughts if your ego prevents you hearing different points of views than yours. Even Buddha states, “All that we are is the result of what we have thought.” So if you are where you are because of your thoughts you are going to remain in that place if your thoughts do not change.

What I have learned is that it is possible to get past my ego by setting myself a new goal, a goal that will boost my self-esteem and my self-importance. My goal is to think at least one new thought everyday. Doing so boosts my ego in a positive way and allows me the freedom to reach win wins.

No longer will I look for right or wrong when presented with a different point of view and I will celebrate the fact that someone has given me the gift of making me have a thought I have never thought before.

Go on, land your ego!

The Complexity Resulting From Outsourcing

In 2006 the revenue from call centers in India grew to $6.2 billion. This was a growth of 37% from the previous year and that growth trend continues. India is not the only country to benefit from the outsourcing trend as counties in Africa are starting to leverage their French, Spanish and English language capabilities of their cheap workforce.

There is no doubt that there are many benefits from US companies outsourcing some of the services. They can save millions of dollars considering they can pay an offshore worker ~$200 a month as compared to 20x that for an onshore employee. In the short term the benefit is clear, and in the long-term the debate for the overall good for the US economy continues as the off shoring trend reduces the number of jobs available to middle class Americans. I am sure that debate will continue for many years to come.

Customer satisfaction with the provider remains a key concern for the client company and management of this plays a big part on the outsourcing process. However there may be other hidden costs that are not quite so visible for companies.

I heard many people jokingly say,  “Life would be so easy if it wasn’t for those damn customers.”

Indeed if we were the only entity we would not have to worry about customer service teams, sales teams, sales managers, or sales operation functions.  We would however be out of business very quickly.  So like it or not we need our customers to buy our products and services and we must be prepared to enter into a two way relationship with each of our customers.

By adding one customer we add two relationships that then need to be managed.  We must manage the relationship we have with our customer and they must manage the relationship they have with us.  So we need our customer service teams, sales teams, sales managers, sales operation functions, billing and account receivables.  We check how we are doing with customer satisfaction surveys, customer visits, capturing voice of the customer to hear what they want, transact sales orders, ship/provide our service, and provided invoices and account statements.

From the customer perspective they also have to manage the relationship the company.  They have their purchasing teams, supplier quality teams, legal teams, and all the managers associated with them.  They carry out supplier audits, provide supplier scorecards, complaints, and most importantly, payments.

The addition of only one customer has already added much more complexity to the business processes and an added infrastructure of people and systems to support it.  With these systems in place though, the addition of additional customers become less of an issue for the company.

This infrastructure produces overhead for the company.  It does not provide value add for them but it is required just to do business.  So when a company wants to reduce its costs these processes are ripe areas for outsourcing.  Not only is it cheaper but it also appears to take the headache out of managing these functions internally.

What does happen when we out source just one of these internal processes?

Now that the service provider has been added the complexity of the business model has increase dramatically.  Now our company has to manage the relationship with the service provider in addition with the customer.  The service provider also has to manage its relationship with the company.  This is not too surprising though as this is a typical customer / supplier relationship with the Service provider being just another supplier to the company.  What is less obvious is the effect we have on our customer.  We have generated two new relationships for them to manage.  They now need to deal with the service provider and the service provider now has a day-to-day relationship with our customer.

This day-to-day relationship with the service provider is very important for the company.  If the service provider does a bad job then that may as well be like the company doing a bad job.  This is obviously a concern for the company and this adds a new level of complexity.  Now there are not just relationships between each of the entities but there is also relationships between relationships.

Now the company has to consider the relationship of its service provider with its customer and also its customer’s relationship with the service provider.  Certainly the company is responsible for the introduction of this added complexity.  The onus is with them to manage this relationship, not only for the easy and comfort of the customer, but also for their own piece of mind that the service provider is not negatively impacting the original company – customer relationship.  Even though the onus is with the company it does not stop the customer considering the relationships between the company and the service provider, and also the service provider considering the relationship between the customer and the company.

The system of doing business has now become extremely complex.  Imagine if this was just the accounts payable process outsourced with one customer.  Now make this for two customers.  Maybe even outsource post sales support with a call center.  The business system now becomes super complex and this does not even consider the new relationships generated between the service providers (assuming they are different).

In today’s tough economic climate businesses are continually under pressure to perform and cost pressures are incredible.  In the last 10 years a large service provider / outsourcing industry has been created to help reduce the costs of business, and these they are perfectly positioned to profit from the additional business that is bound to come their way.  The debate on the macro effect on the US economy of all this work going offshore is going to continue, but what will the longer-term effect be for businesses?

Will the complexity of managing these relationships prove too much in the long run?  Will service provider poor performance ultimately result in lost business because of poor customer satisfaction? These questions have yet to be answered and hopefully corporate America will consider the impact on business system complexity during their outsourcing decisions.

Just like getting fit.

Three weeks ago I joined my local gym. Like many newbies I went for the first three days. Each day on the treadmill I got stronger, ran faster, and climbed higher. Improvements came pretty easy considering it was about 15 years since I had been to a gym and I’m approaching 44.
Day four was not so good. I got on the treadmill and immediately felt my knees hurt. “What the heck? This really hurts! What should i do?”.
Not wanting to look like I was just giving up after 5 minutes, I turned the machine down to a walk.
“Ah, that is better.”
I turned up the incline and still no pain, so I continued for another 30 minutes. Having worked up a sweat I felt I had done enough to justify a workout.
Day five was not good. My knees were extremely sore so I decided it was just easier to stay home.
Day six was better but I made the same decision. “Best to rest those knees.”
Day Seven.. “oh, heck it’s Sunday. I’ll pass on the gym today.”
Day Eight my knees were feeling much better so off to the gym I went. This time I jumped on a cycle machine and had a great, hard work out. “Wow, that was good and my knees feel great!”
Day Nine I went back and did the bike again, this time on a harder setting and again I thought I was on the road to improvement.
Day Ten. I felt my knees a little so,  “I’ll just rest I don’t want to hurt my knees too bad”
Day Eleven. “I don’t have time”
Day Thirteen… I realized that I hadn’t even thought about the gym on day Twelve.

Isn’t his just typical I thought to myself. I knew I needed to improve my fitness. I was not overweight but I was not fit. I knew I needed to strengthen my body otherwise I was going to suffer with ill health as I got older. I identified a proven method of getting fit. I started to program all enthusiastically and saw immediate improvements. I boasted to friends that I started at this great gym and was doing great. But then things got hard, I decided to rest up, look for excuses not to go through the pain again. Then guilt kicked in and off to give it a second chance. This time I’ll try something different and still got improvements. Still though… why did I stop going back. Why was I making excuses not to attend the gym. Why was it so easy to go back into my old routine and even forget about going to the gym?

Maybe the gym isn’t for me. Perhaps my knees are not good enough for me to workout. Am I really in such a bad condition anyway? Do I really need the gym; I could just walk my dogs?

This story was all too familiar to me. I’d observed this type of behavior before with many organizations. They decided they were fatter than they wanted to be. They joined a Lean Six Sigma gym and started their new fitness program. They boasted to other industries that they were doing the trendy thing. They got improvements pretty quickly. Then they started to back off. It got painful. It’s not all a bed of roses, getting healthier meant making hard decisions, staying focused, working through difficulties, making an investment of time and money. Some just stopped going to their gym.

But not all go down this path. Some individuals become gym rats. They love it. They are super fit. They don’t even think there is an option of not going to the gym. It’s they say they are.

It’s the same in business. Some organizations keep going. Keep changing things up to keep their workouts fresh. They don’t balk when things get tough. They keep improving, they keep going. They are improvement freaks. It’s just the way they do business. Because they know that there is no other option. If they don’t go to the gym, they will turn into THAT guy, that FAT guy, that UNFIT guy that would put them out of business.

I’m off to the gym in the morning.  I’m not giving up.  I will be the change that I want to see.

Zappos – Celebrity Apprentice

It’s great entertainment but it is also a great demonstration of how the dynamics of individuals can really affect team productivity.
I sat down to the second episode of the show that turned into the war between teammates Scott Hamilton and Tom Green, Skating Champ vs. Comedian.  The task this week was for the teams to design a comic book character to promote Zappos.com.
The Scott (the project manager) started his team out with a brainstorming session, not untypical of many sessions common in business.  It was pretty unstructured with no plan of attack and it soon turned into a pitching battle of ideas.  It was clear that Scott as project leader had no clear plan and was determined to show the rest of the team that he was the leader.  With no plan however no progress was being made.
When the focus group showed up the team had nothing for them and it turned into a continuation of the brainstorming session.  It was just after this I noticed an interesting dynamic.  It was one I have observed many times in business.  With the deadline coming up and critical decisions needing to be made more pressure was falling on Scott’s shoulders.  It was clear that Scott felt he had heard enough and now just wanted to get stuff done. He stopped taking input from his team and started to make some critical decisions.  The biggest decision was the name of the character.  He came up with the name “eee” that stood for “everything, everywhere, every-time.”

When Scott made the decision he loved it but he was the only one.  The only one to speak up and challenge him on his naming decision was Tom.  Scott now under ever increasing pressure for progress closed his ears and failed to listen for Tom’s suggestion to stay with the letter “Z” to support the Zappos brand.  Tom was determined to be heard, and he tried and tried and tried to get his point over.  His persistence was now just an irritant to Scott who stereotyped him as a person trying to throw the project off track, someone just being negative, and someone who had nothing positive to contribute.
So why did the other team members not stand up and speak out.  Well, maybe they just wanted to keep their heads down so they did not get perceived as a troublemaker.  Or, perhaps they saw an opportunity when a colleague made a bad decision that would get him fired and give them a better opportunity of individual success.   Whatever the reason, they didn’t speak up and it became a battle between Tom and Scott.

The outcome was that Scott really closed down and took three of the team members, who he perceived to be on the same page as him, away to completed the script for the presentation.

In the end the team did surprisingly well, but not good enough.  What lost it for them?  The name.  The Zappos CEO really could not understand the “E” based name and really wanted “Z”.  This got Scott fired.

Much of the behavior in the show is common in business today.  The team got off to a bad start by not spending time agreeing HOW they were going to tackle the task.  Without the plan they were not able to stay disciplined and on the same page.  Individuals started to make up their own plans, do their own things, or not contribute.  This lead to frustration on the project owner’s part and as time started running out pressure mounted.  With pressure mounting communication collapsed.  People kept talking but they also stopped listening.  Focused on making progress the project manager stopped delegating and started doing.  The things that were important were messed up and failure resulted.

How would this have been different if a clear plan was laid out at the beginning and people understood the path they were all going down together?
How often do you sit down and put a plan together before starting your task?
Do you feel frustrated like Scott?

It doesn’t have to be his way.

As Napoleon Bonaparte said “Few things are brought to a successful issue by impetuous desire, but most by calm and prudent forethought.”

You can watch the show here: http://www.nbc.com/the-celebrity-apprentice/