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October 22, 2012

Baby Steps or A Moon Launch - It's Your Decision

Posted by Raj Joshi (View Profile | View All Posts) at 6:49 AM

When the U.S. found itself almost hopelessly behind the U.S.S.R. in the space race in the late 1950s, it made the decision to have man walk on the moon as its goal by 1970.  NASA was created and the space program was totally reinvented.  The U.S. reached the moon's surface earlier than President Kennedy pledged, mainly because it knew that baby steps - small advances - would fall short.

Too many organizations think small when it comes to realizing value from their operations. They focus on a philosophy of continuous improvement. But that approach usually leads only to minor incremental change.
Instead, they need to invest in a true transformation of their business processes. It is, however, easier said than done. Big-change initiatives that are designed to dramatically enhance the efficiency and effectiveness of business processes typically tend to be complex, risky and expensive.

Achieving a specific improvement in business process metrics will drive measurable business value - and this is the premise of the Value Realization Method (VRM).VRM is a framework that provides a structured approach to delivering measurable business value. It creates more predictable outcomes. It enables organizations to align operations with strategy, thereby making processes more effective. And it gives company leadership the confidence and firepower to make courageous decisions that will drive dramatic change for the better.

Realizing business value through measurable improvement in business process metrics is both an art and a science. The art of the game comes into play when leadership must manage diverse, intangible interacting factors to achieve desired process change - such as the talent of the team, level of motivation, desire to innovate, knowledge of the business, acceptance of change and evolving customer expectations. The scientific element is invoked through logic and structure that enables process redesign and the use of technology to drive process efficiency.

Consider the case of a multi-billion dollar company that had seen a gradual erosion of its position in the market. In a highly competitive industry with razor thin margins, the organization had consistently lagged the competition in key financial measures such as market cap-to-revenue and price-to-earnings ratios. The company's competitors were simply more efficient, and were thus rewarded by Wall Street with higher valuations. As the stock price declined, the board became restless. If the market cap continued to slide, it would not be long before the company became a takeover target. At the urging of the board, top management instituted several change initiatives to curtail costs and improve performance.  Small gains were made, but the competitors actually continued to enjoy healthier valuations. It was clear that incremental improvement was not cutting it.
This is not an uncommon situation - especially for mature companies that have been in business for many years. They tend to maintain the status quo. But today, that's a sure-fire way to lapse into mediocrity. And Wall Street punishes mediocrity.
So the company decided to launch a major business transformation initiative. Top management developed and committed to a compelling business case. But that was the easy part. Executing a complex business transformation initiative that actually delivers on its expectations is hard - some would liken it to a death march.  Clearly, the challenges of such an initiative should not be underestimated.  A huge change is always painful. 
Realizing maximum business value can only be attained when the organization's business processes (measured through process objectives and metrics) are in complete alignment with business strategy and operational and financial goals. If every activity within a business process is structured to support the broader business strategy, then all of the organization's assets are aligned in a common direction and are therefore more effective.Most global Fortune 500 companies today can stand to benefit by taking an analytical look at how their processes and strategy are aligned.

Moving the needle on key metrics of a business process is a clear, unambiguous measure of improved process efficiency. For example, if an organization took 15 days to go from quote-to-shipment to 5 days for processing, then this is a clear indication of improved process efficiency and therefore business value. The trick, of course, is to figure out a way to deliver this material improvement. And therein lies the challenge.

Technology, primarily applications software, tends to be the big-dog in the transformation game and the interplay between business processes and enabling technology will consume the bulk of the transformation bandwidth. But the importance of the other enablers should not be underestimated.

Launching a transformation initiative is a big bet on the future. 

One thing is for sure - doing nothing is no longer an option. Companies must constantly monitor their metrics and their competitor's performance, and be ready to change often to stay relevant in the market. And while transformation programs are anything but easy, done right - with a little art, some science, and a whole lot of inspiration and perspiration - business value can indeed be realized.

President Kennedy's audacious goal spurred rapid innovation in the space industry. And there's no reason why the business world cannot be inspired to take that kind of risk.  Their tomorrow depends on it.

Read the publication here

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