Synopsis
In PartOne of this three part article we reviewed the factors driving transformational change and how the old ‘inside-out’ approach to business is about as useful as a steam engine in getting to the moon. In Part two we’ll look at how some of the world leading trend setter companies are embracing the new outside-in challenge and creating new powerful business models driven by advanced forms of BPM such as the Customer Expectation Management Method (CEMM).

Alignment that achieves the Triple Crown
The ultimate success of any commercial business is its ability to generate returns for its shareholders. Achieving healthy and sustained returns requires a deep and broad understanding of customer’s needs and wants and the enterprise capability to turn these into profitable services and products. The easiest way to express this requirement in corporate objectives is through triple crown capability – the ability to increase revenues, reduce costs and enhance service simultaneously. Inside out organizations often behave as if these there ultimate objectives are mutually exclusive so, for instance enhancing service increases costs. Increasing revenue also increases costs. Service becomes worse when we cut costs.

Why is this so? We need only look back to the 1970’s and 80’s which saw a flourishing of Total Quality Management (TQM) and it’s offspring (still with us – Six Sigma and Lean). Our attention is drawn to the inside-out activities that seemingly contribute to delivering a product service. We then examine these activities and seek to streamline them and in doing so create an illusion of control and ‘process excellence’. This misleading adventure has led many to an ultimate dead-end of diminishing returns and ultimately the search for a new formula, which unfortunately is often an extrapolation of the previous approaches, again destined to fail.

What’s required here is a change in perspective, a new way of looking at things and seeing them for what they are. This perspective shows us that fixing effects (what we thought was the process) leads eventually nowhere. We actually need to fix the Causes of Work and in doing so we change forever the underlying set of activities that deliver Successful Customer Outcomes. This new process perspective opens our eyes to previously unthought of possibilities and begins a journey that leads to greater gains the more we learn.

South West airlines, now Americas largest passenger airline, made this change to their perspective resulting in a quantum shift that is evident in their financial results. Initial ‘outside-in’ success leads to progressively more gains as the people and company have grown an understanding unrivaled* until recently on the US airline industry. Despite the volatility of world markets, terrorism, globalization and the politics of their industry (much of the US airline industry has to be supported by the US tax payer and lurches from one state of bankruptcy to another) South West stand head and shoulder above the crowds with 57 successive quarters of profit.

Virgin America are newcomers to the US airline business. Starting from the ground-up (which somehow seems very appropriate for an airline) they have completely designed their enterprise on outside-in principles, under pinned by Successful Customer Outcomes and Customer Expectation Management. After a difficult birth (the US authorities are lobbied strongly by the existing moribund players) VA emerged to the world in 2007. It is still early days however already the increased competition on key internal routes is changing the market. As VA expands and knits its hubs with those of Virgin Atlantic the industry changes forever. VA understand the reality of the 21st century - If you are not making your customer lives simpler, easier and more successful your competitors will.

Velocity of Business
Zara, the high street largest fashion retailer, have contributed to a sea change in the fashion business. With a dynamic, agile enterprise they have grown from a Spanish famility owned business in the 1970’s to be the worlds largest and most successful fashion retailer.

A major contributor to this success has been their understanding of customers needs as opposed to customer wants. In a different industry in a different century Henry Ford stated “if we’d have asked the customers what they want they would have said faster horses” and so it is with Zara. Their insight to customer needs has developed a set of processes that can deliver concept to wear in less than 10 days. Compared with an industry average of over 12 months this is a major competitive advantage which brings with it many attributes that make outside-in thinking and practice so compelling.

Those companies that take 12 months to bring clothes to market share a mindset developed in the Victorian era which says that successful business is complicated, requires sophisticated management approaches, needs logistics and supply chain management, enterprise systems (thank you SAP and Oracle) and reward remuneration systems requiring a degree in Rocket Science to navigate them. All this ‘stuff’ slows things down and causes problems –ask yourself the question of how many things can go wrong in 12 months? and more so how long does it take to fix them? The cost of putting things right causes these companies to become more risk averse and we now witness the consequences – they are going broke.

Zara on the other hand takes 10 days to achieve a new fashion line. What’s the consequence when things go wrong in that time scale? How long does it take to fix it? Accordingly learning and experimentation is a highly prized skillset and with a process velocity of this speed the organization can change direction overnight to capitalize on emergent trends. In fact Zara have moved themselves to a place where they are actively managing Customer Expectations and in doing so continue to raise the competitive bar even further. This dominance has changed another industry forever and everyone of us has a whole new bunch of expectations when it comes to buying clothing – we can thank Zara’s innovation for that.

Customer Centricity
There are enough hackneyed phrases littering the world of management and business to last us an eternity. Customer Centricity as a term first saw the light of day in the header 80’s in another management brainstorm – Customer Relationship Management (CRM). A software industry developed to automate front-ends and create the automated customer interface (I really hate those Automated Voice Response Systems and actively choose to do business with companies who use human beings instead – much smarter and nicer).

These CRM systems promised to change the way we deal with customers (and they have unfortunately with bad side effects) and along the way become customer centric. It never happened, another promise made of the snake-oil software purveyors which cost lots of money, led to the abortion of Cost based outsourcing and moved organizations away from the very people they needed to develop intimacy with – you and me.

So when we talk of customer centricity we do not mean those isolated islands of automation linked to those intensive call centers fill of clucking chickens. The good news is we mean Customer Centricity as pushed by companies such as Best Buy, Americas leading electronics retailer. The philosophy and practice of putting the customer at the center of your Universe and making sure that everything is aligned with achieving Successful Customer Outcomes. Every Moment of Truth.

Zen and Processes
This is where we go real freaky. The organizations that are most successful consistently use processes to effectively remove processes. Stay with me… If we acknowledge that much of what we have been doing for the greater part of the last 100 years is fixing effects, and these effects in turn are actually the aggregate of numerous activities that we mostly call processes then applying an outside-in perspective to these ‘processes’ achieves something remarkable – the effects disappear as we deal directly with the Causes of Work and what remains is radically simplified. In reality our research and findings suggest that more than 60-70% of current work, in traditional organizations is effect based. This opens a massive potential to both remove unnecessary activities, speed processes and enhance customer service.

To fully understand process you need to see beyond to the place that proposes architectures, taxonomies, and process languages. The world really isn’t that complicated, albeit we often seem to make it appear that way.

The former CEO of Citibank, John Reid put this concept very well when articulating what his banking business actually does “We get money in, move it around, and give it out. How difficult do you want to make that?”.

Applying our focus to Cause, rather than Effect eliminates much of what we think of as process. The golden nugget that remains is indeed our ability to create the Successful Customer Outcome, and as we do so progressively eliminate unnecessary time consuming and costly work.

FedEx applied this thinking to their newly acquired printing operation Kinko and in doing have changed the business model in their sector forever. By looking at the SCO and seeking to align everything with Causes of Work have been removed and Points of Failure eradicated. The resulting process bears very little resemblance to the starting point and as a consequence FedExKinko now lead their sector in term s of volume and profitability.

In the final part of this mini series we will review how you can embrace these ideas and make them your own to help transform and realign your organization towards Successful Customer Outcomes. In doing so creating a sustainable, agile and responsive enterprise where everyone explicitly contributes to individual, team and corporate success.

References:

Business Transformation - Article part 1 of 3, Steve Towers See
http://www.bennugroup.net/2008/02/03/business-transformation-are-you-on-board/

HerculesX – Whitepaper, Terry Schurter & Steve Towers (2007) See http://bennugroup.net/category/herculesx/

Successful Customer Outcomes (SCO’s) See http://bennugroup.net/category/successful-customer-outcomes/

Charles Handy – The Empty Raincoat (1995)

Kaplan & Norton – The Balanced Scorecard (1996) and Strategy Maps (2003)

Peter Fingar – BPM The Third Wave (2003), Extreme Competition (2005)

Tom Davenport – Process Innovation (1992)

Robert M. Pirgis– Zen and the Art of Motorcycle Maintenance (1974)

Madan Birla - FedEx delivers (2005)

About the Author

Steve Towers, Senior Vice President of Bennu Group and founder of Towers Associates, is an expert on process and performance transformation.
Steve founded the first community focused on business process management in 1992.
Steve has bases in Europe (UK), Texas and Colorado.

Meet Steve at http://www.towersassociates.com/SBT_services.html#upcoming