beyondthemba

Will Processes be Commoditized?

This question is raised and answered with an explosive "yes" in June's Harvard Business Review. Thomas Davenport writes a compelling article titled "The Coming Commoditization of Processes" .While interesting, I think it is a truism of all things in business. All items, whether services or products, eventually become commoditized.

The author argues there are three types of process standards: First, there is the process standard set of activities and flows. This is probably the most familiar to all of us involved in process engineering. This is a basic flow of how activities get done such as order management, sales, etc. It is made up of sub-processes and tasks. While there are some standards for this, for the most part these are developed company by company and since they are not "industry standard" (yet), it is tough to establish good quality performance metrics.

The second set of standards are performance standards. These are typically metrics such as benchmarking "best in class" for performance of a specific process. Of course, since just about every process is slightly different, company to company, the ability to benchmark is hindered dramatically.

Finally, there are Process Management Standards. These are readily available and are growing every day. Things such as ISO-9000, QS-9000 (Automotive), Q1 (Ford, Automotive) are all process management standards. They do not measure how you do your process or what the outcomes are (this is changing rapidly however) but they do measure how you manage your processes.

The author argues, and I agree, that if we can develop a standardization for these three elements of process, then it will become far easier to evaluate companies and their capabilities. It will also be far easier to evaluate outsourcing opportunities. Once this occurs, we will start to see a rapid commoditization of process performance and the companies who make a living from business process outsourcing (BPO) will need to elevate their game a bit to remain competitive and profitable.

Organizations which assist in standardizing processes:

Supply Chain Council
Open Standards Benchmarking Collaborative (APQC)

Process Engineering Conference

I just spent two days at a process engineering conference where we discussed what was needed to convert a company from a functional structure to a process centered structure. Basically, this means identifying your core business processes and managing the company around the processes versus around a stove pipe function or "line of business".

The key learnings centered on the need for executive level alignment and detailed and thorough communication. As you can imagine, a company will take on the personna of the executives. If they believe in the idea of a process centered organization then it will permeate into the ethos of the company as a whole. This does not mean just speeches and talk. Those activities are needed and very vital. However, it is the action taken by the executives during certain "moments of truth" (usually crisises or semi-crisises) that the company watches to understand whether alignment exists or not.

Second, people, especially adult learners, really need consistent communication around any strategy. Process reengineering and a process centered organization is no different. The communication needs to be  crafted carefully and, most importantly, it needs to be consistent. Consistency is what will avoid the label of "flavor of the day" program.

Here is a test for whether you are in a process oriented organization: Where are your best minds assigned? If they are in operations then most likely you have an organization that spends most of its time "fighting fires" and creating as it goes along. That is why you need your best minds doing that work.

If your best minds are not in operations but in process design and engineering then you are in a process centered organization. The process, if tightly defined and if it meets the specifications required, will operate without a lot of direction. You will need very good supervisors to ensure compliance but that is it. This will free time for your best minds to work on the next ground breaking process redesign ensuring you are on the leading edge of ideas. This is the only way to ensure  the long term survival of the organization.