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Will process efficiency become one of the central factors to success for many industries in the future?
Tuesday, October 14 2014, 09:52 AM
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    Tuesday, October 14 2014, 10:05 AM - #Permalink
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    The short answer is; yes it will be one of the central factors for many industries. Put the other way... process inefficiencies limit an organization's competitiveness, either by adding cost, limiting the organization's ability to adapt or by exposing the organization to risk. But the term "efficiency" bothers me, I much prefer "Process effectiveness". When I work with clients I often use Cost, Risk, and Change as a mantra - The most effective process change results in lower cost to the organization, lower risk, and a greater ability to change. But "efficiency" tends (somewhat like "lean") to be tied far too much to "cost" at the expense of the other two elements. Now, for some processes, which may be essential but are not differentiating, a narrow focus on cost might make sense, but as the processes get closer to the customer (and inevitably become more differentiating) the ability to adapt in the face of changing market demands (which includes the ability to innovate by offering new services) becomes more important, and a narrow focus on cost can be limiting. [EDIT TO ADD..] I would also say that process efficiency is already a key factor in a number of industries... If you take semiconductor manufacture, for example, the margins are typically so slim that even a tiny improvement in the efficiency of a manufacturing process can have an enormous impact on profitability.
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    Tim Bryce
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    Tuesday, October 14 2014, 10:12 AM - #Permalink
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    I certainly hope not. This may seem trivial but there is more to improving productivity than just efficiency, namely effectiveness. It has long been our contention that: Productivity = Effectiveness X Efficiency Effectiveness addresses, "Are we doing the right things?" Efficiency addresses, "Are we doing things right?" Whereas efficiency considers speed and volume, effectiveness questions the necessity of the task itself. To illustrate: Robotics in a manufacturing assembly line is an efficient way to perform certain tasks, such as welding. However, if the weld is being performed at the wrong time or in the wrong place, it is not effective (and quite counter productive).
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    Tuesday, October 14 2014, 10:14 AM - #Permalink
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    Two very broad terms - "process" and "efficiency" - that, when combined, cast an even wider net. Within the context of this forum and this crowd per the original question though? No. Those who engage in BPM and use BPMS platforms, however, may use that "process efficiency" as a potential differentiator.
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    Tuesday, October 14 2014, 10:54 AM - #Permalink
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    The stormy history of BPR is littered with examples of processes that produced entirely the wrong thing, but were operated so efficiently that managers clung to them like lifebelts in a typhoon. We saw endlessly repeated corrective actions that had to move up three levels of an organisation in order to go across to another department, and then down three levels so that a rework could take place. When the decision makers could no longer spot the difference between 'efficient' and 'effective' at the redesign stage, we changed the language and asked them if they really wanted more of the same process outputs, or would they prefer some better business outcomes? So to answer Peter's question: No, winning a 'process efficiency' battle in isolation becomes a Pyrrhic victory in a globally competitive war.
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  • Accepted Answer

    Tuesday, October 14 2014, 10:59 AM - #Permalink
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    Yes, they will become digital battlegrounds for process efficiency. It will be just one part of the business battleground as it is today but digital battlegrounds. Process efficiency is a core driver in cost and it can and should lead to the revenue opportunities as well. With the digital enterprise, its a new battleground and one process will help shape. Great topic
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    Tuesday, October 14 2014, 11:35 AM - #Permalink
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    First visualise the future that new “outside in” driven by BPM thinking delivering truly Adaptive process applications wrapped around the whole business will actually look like. Old legacy retired or now the slave to be orchestrated by operational needs. No need for double entry book keeping systems as creation of all information now has audit trail the one version of the truth! Silo IT becomes history as barriers removed. Change will be welcomed even encouraged to be efficient and competitive and at last Enterprise Software truly delivers on decades of unfulfilled promises…..? So “yes” to the question but as Ross points out the journey will be painful as described but with a steep but logical learning curve it will happen. But as they say true transformation starts with transformation of management!
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    Tuesday, October 14 2014, 11:55 AM - #Permalink
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    Consider the effect of process on the Bell curve. In its early stages, no-one knows what is optimum, as there is no established market methodology to work from. Flexibility trumps process efficiency. The answer here is to run multiple processes in AB test mode to see which gains traction. Towards the top of the Bell curve market is most important as a large number of players consolidate into a few efficient ones. Process becomes vital to success, delivering more money per transaction to drive success. In the ski-slope section of the Bell curve commoditisation sets in. Here efficient process is the only thing making you a profit. But traditional process improvement has been divorced from this cycle. We are now seeing product lifecycles measured in months and whole business models change every few years. We cannot reconcile this with two year process improvement projects – by the time the process is in place the market has moved on. It doesn’t have to be like this. A first iteration can be in place within days, along with an AB testing process and metrics to drive constant re-iteration. By the end of month one, it should be working at 80%+ efficiency – better than the old process - with constant iterative improvements from there. This will give a first mover advantage – by the time the older slower process team has caught up, the market will be lost as higher margins can be used to undercut or outspend the less efficient company. For this to work, however, process design and evolution must be integral with other parts of the company, no longer in isolation. Just as in Darwinism, victory doesn’t go to the fastest or strongest, but the most adaptive to change. There is a second aspect. Marc Andreasson put it succinctly. He said “In future there will be two types of people – the people who tell computers what to do and the people who are told what to do by a computer. We are at last embracing the power of computing in process. It is like machine learning – it can use its own data to continually optimise and improve. The battleground will not be between people, but between algorithms.
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    Tuesday, October 14 2014, 11:57 AM - #Permalink
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    “process efficiency” is just a tip of the iceberg. The battle is “efficiency of delivering process-centric solutions” - with the pace of the business, - without adding extra complexity, - by adding automation into business processes, - and liberating business people for innovations. Thanks, AS
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    Tuesday, October 14 2014, 12:04 PM - #Permalink
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    Yes, in that this is already the case. If you look at commodity suppliers, efficiency is one of the very few variables under their control. A good friend of mine runs a fleet of petroleum delivery trucks. His business is about two things: the effectiveness of his safety programs, and the efficiency with which he can move a truck full of hydrocarbons from refinery to filling station. I'd argue the same for 3PL, airlines, etc.
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    Tuesday, October 14 2014, 12:27 PM - #Permalink
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    Efficiency? Who would argue with wanting to get the most bang for the buck? But there is a trap! Think about a restaurant. What qualities would make it an "efficient restaurant"? Fewer servers? No waiting? Decreased food wastage? Is this how you choose the restaurant to have dinner at? Think about efficiency at a sporting event. Get people in and out quickly? Reduce the number of performers? Is that how you choose the sporting event to go to ... the one that is most efficient? Efficiency is about cutting costs. We all agree that that is not what it is supposed to be. It is supposed to be getting the BEST output and trimming unnecessary expenses. The problem is that is it often very hard to measure the value of a good meal, or the value of a good event. The value of good service is hard to measure, while the cost is easy to measure. Nobody ever says: lets increase the efficiency of this restaurant by adding items to the menu. This might actually increase the service with a smaller increase in costs, and that would increase efficiency. But this is never done. Instead, efficiency typically means one thing: cut the costs because we can measure those, and lets hope that the quality of the service is not effected. I show that a particular primitive society was dependent upon being inefficient in this post about ancient wisdom. A modern anthropologist declared them to be stupid for not consolidating their fields which would be more efficient. What he didn't see is that that might allow a small problem to be lethal. It is better to focus on "customer satisfaction" and not efficiency.
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    Amy Barth
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    Tuesday, October 14 2014, 02:38 PM - #Permalink
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    I don't think so. Haven't we always been improving processes? There will always be new problems to tackle and different ways of resolving them, not to mention new technology...if we continue to invent at the same rate as the past 100 years, we will be looking at life and business in a completely different way, barring a zombie apocalypse or the like, of course. Also, companies are still formed of people, meaning that personalities and relationships will still matter in the future...not just the nuts and bolts of delivery. Branding and reputation matter, too. Yes, process efficiency matters to companies to stay competitive, but I don't think it will be the sole basis of success.
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    Tuesday, October 14 2014, 11:23 PM - #Permalink
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    no. process efficiency has almost no bearing on the success of industries or companies. making buggy whips more efficiently didn't save the industry.
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    Wednesday, October 15 2014, 01:46 AM - #Permalink
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    Efficiency is a means, not a goal. If you only can survive by becoming more efficient, you're in the wrong business; a business with too many competitors where another one will always be cheaper than you.
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    Wednesday, October 15 2014, 02:03 PM - #Permalink
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    In classic marketing theory, there are two main ways to compete sustainably: differentiate or be the cost leader (ok, a third way is to first differentiate then be the cost leader in that segment - see Apple and Samsung for two different approaches). There is no way to become a cost leader unless you nurture extreme efficiency in your organization. This is being done by deeply embedding processes. I was just discussing this night with my partner, who gave me the example of a major-major retailer that is ruthless about costs and about the way they manage their negative working capital. Their business systems stack? a basic accounting module surrounded by low-cost/high-performance BPMS. Absolutely everything is run by processes. Yes, there are many industries where the only directive is efficiency - these are the low-margin ones: logistics, manufacturing, retail...
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    Wednesday, October 15 2014, 08:23 PM - #Permalink
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    OK, I'll stick my hand up for "yes" (that efficiency will be the battleground of the future for many industries). Sure, let's all agree that "efficiency" is somehow not as important as "experience" or "customer satisfaction" or "effectiveness" or other outcomes of any process. But at the same time, let's not define efficiency so narrowly that the concept becomes meaningless. Consider two customer services organizations which both have the same drive to provide great experiences and customer satisfaction. Which company will have more resources (for research on better experiences, for example) to compete more effectively? What will happen if one company can deliver the same experience at lower cost than the other? We live in a time of rapid technological and social change, and creative destruction is the order of the day for many industries and companies. It is possible in such circumstances that for periods of time, executives can imagine that efficiency is not at the core of their business -- and because "we are special" we can afford to focus on everything but efficiency. Such temporary monopolies don't necessarily provide bad service -- except until they do. Think the Bell system, until it was broken up. Imagining that efficiency is not the order of the day, every day, is hubris. It's "whistling past the graveyard". Here's another example of effectiveness versus efficiency. The "checklist movement" has the practice of surgery in its sights. Surgeons don't like to think of themselves as needing checklists. But even professionals need checklists. We appreciate the craft and hard work of surgeons, and we certainly want our surgeons to be effective. But the government or the insurance company also demand that they be efficient. If you lose a patient because you lost a sponge, your customer sat is zero. Instead you should learn how to do your job, and you should accept that you're doing a job. And then do it well. Business is defined by repetitive processes of work; this principle of organization is explored in the work of economist Ronald Coase and others. David C. above hinted at "operations". There is a certain sense in which the future is all about operations, and that is great for anyone who likes BPM technology. Operational work processes are inherently measured on efficiency. And that includes how fast operations can be efficiently evolved.
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