Digital procurement transformation_roadmap_2020Peter Soetevent
The document discusses transforming traditional procurement processes through digitization, driving insights, and amplifying talent. Key points include:
1) Automating analog and inefficient transactions to minimize errors and rework through digital and collaborative processes.
2) Designing supplier partnerships based on expertise, insights, responsiveness, and business outcomes through a collaborative marketplace.
3) Applying technologies like automation, cognitive computing, analytics to deliver agile, insight-driven procurement processes.
Management model for exploratory investment in IT WGroup
The ability to evaluate these new technologies in a practical environment where their technological value and impact on business and IT operations can be assessed is extremely important. Exploratory efforts should be structured and controlled similarly to other major projects and in addition should be evaluated for use in the production environment. In addition to evaluating the technical capabilities and practical application of the new technology, IT must evaluate the “fit” of the new technology in the existing service portfolio or catalog. In this article, WGroup has developed a new class of IT investment, referred to as “Exploratory,” along with a supporting management model to guide the effort through the evaluation phases and ensure a tight fit within the service catalog.
With the role of key vendors growing in importance and with more vendors being introduced into the workplace, effective vendor management has become a critical capability of any enterprise. This document describes how the design (or redesign) of the VMO needs to be approached with a focus on enlisting top skills, implementing effective processes and tools and establishing an organization whose role is clearly defined in the enterprise.
Across the corporate landscape IT functions are completing their transformation to a service-orientation. Slowly but surely, “governance” has become a core mission, if not yet the core competency, of the IT organization. Governance involves many fronts and addresses many levels – there is architectural governance, IT finance and projects governance, and of course, supplier governance. All call for new skills and new structures. WGroup collectively brings decades of hands-on experience in IT supplier management to assist our clients with the multi-supplier challenge – from building the governance structures to defining sourcing strategies to facilitating contract reviews to transition management. This states how WGroup would implement a multi-supplier governance model successfully.
This document discusses the evolution of e-procurement models from early EDI networks and B2E apps to current trading exchanges and industry consortiums. It outlines the key stages in developing an e-procurement strategy including clarifying goals, auditing processes, building a business case, developing supplier integration plans, selecting applications, focusing on integration, and educating stakeholders. The overall evolution aims to streamline procurement, reduce costs, and bring strategic benefits through automation and collaboration.
Manufacturing a digital transformation - ebookElliot Drabs
The document discusses how manufacturing companies can undergo a digital transformation to improve operational efficiency. It explains that digital transformation involves increasing interconnectivity between business units, gaining granular data insights from processes, and automating repetitive tasks. Case studies show how design changes, supplier relationships, and fault detection can benefit from these approaches. The conclusion emphasizes that digital transformation is a multidisciplinary effort requiring technology and business expertise to strategically leverage data and drive business performance.
WGroup assessed the client's existing vendor management practices and built a case for a new Vendor Management Office (VMO). They designed and implemented a new VMO that was embraced by leadership. The new VMO delivered results including significant cost reductions, risk mitigation, and a highly effective organization with clear responsibilities and processes.
ISM: Power Up! Become a Strategic Influence with Your Company’s Indirect Proc...Mike Inman
Presentation by Mike Inman and Rich Vales given at ISM 2011 conference in Orlando, Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement Spend
Digital procurement transformation_roadmap_2020Peter Soetevent
The document discusses transforming traditional procurement processes through digitization, driving insights, and amplifying talent. Key points include:
1) Automating analog and inefficient transactions to minimize errors and rework through digital and collaborative processes.
2) Designing supplier partnerships based on expertise, insights, responsiveness, and business outcomes through a collaborative marketplace.
3) Applying technologies like automation, cognitive computing, analytics to deliver agile, insight-driven procurement processes.
Management model for exploratory investment in IT WGroup
The ability to evaluate these new technologies in a practical environment where their technological value and impact on business and IT operations can be assessed is extremely important. Exploratory efforts should be structured and controlled similarly to other major projects and in addition should be evaluated for use in the production environment. In addition to evaluating the technical capabilities and practical application of the new technology, IT must evaluate the “fit” of the new technology in the existing service portfolio or catalog. In this article, WGroup has developed a new class of IT investment, referred to as “Exploratory,” along with a supporting management model to guide the effort through the evaluation phases and ensure a tight fit within the service catalog.
With the role of key vendors growing in importance and with more vendors being introduced into the workplace, effective vendor management has become a critical capability of any enterprise. This document describes how the design (or redesign) of the VMO needs to be approached with a focus on enlisting top skills, implementing effective processes and tools and establishing an organization whose role is clearly defined in the enterprise.
Across the corporate landscape IT functions are completing their transformation to a service-orientation. Slowly but surely, “governance” has become a core mission, if not yet the core competency, of the IT organization. Governance involves many fronts and addresses many levels – there is architectural governance, IT finance and projects governance, and of course, supplier governance. All call for new skills and new structures. WGroup collectively brings decades of hands-on experience in IT supplier management to assist our clients with the multi-supplier challenge – from building the governance structures to defining sourcing strategies to facilitating contract reviews to transition management. This states how WGroup would implement a multi-supplier governance model successfully.
This document discusses the evolution of e-procurement models from early EDI networks and B2E apps to current trading exchanges and industry consortiums. It outlines the key stages in developing an e-procurement strategy including clarifying goals, auditing processes, building a business case, developing supplier integration plans, selecting applications, focusing on integration, and educating stakeholders. The overall evolution aims to streamline procurement, reduce costs, and bring strategic benefits through automation and collaboration.
Manufacturing a digital transformation - ebookElliot Drabs
The document discusses how manufacturing companies can undergo a digital transformation to improve operational efficiency. It explains that digital transformation involves increasing interconnectivity between business units, gaining granular data insights from processes, and automating repetitive tasks. Case studies show how design changes, supplier relationships, and fault detection can benefit from these approaches. The conclusion emphasizes that digital transformation is a multidisciplinary effort requiring technology and business expertise to strategically leverage data and drive business performance.
WGroup assessed the client's existing vendor management practices and built a case for a new Vendor Management Office (VMO). They designed and implemented a new VMO that was embraced by leadership. The new VMO delivered results including significant cost reductions, risk mitigation, and a highly effective organization with clear responsibilities and processes.
ISM: Power Up! Become a Strategic Influence with Your Company’s Indirect Proc...Mike Inman
Presentation by Mike Inman and Rich Vales given at ISM 2011 conference in Orlando, Power Up! Become a Strategic Influence with Your Company’s Indirect Procurement Spend
Next generation IT outsourcing and the global enterprise model (GEM)WGroup
Disruptive technologies such as cloud computing and the “as-a-service” model for software, infrastructure and platforms have led to fundamental changes in how IT services are organized, managed and delivered—whether they are outsourced, insourced or a combination. The reality that IT services can be delivered to anywhere on the globe via the “Cloud” has accelerated the commoditization of IT. Ubiquitous access to IT services has lessened business units’ dependency on internal IT and shifted the IT organization’s prime role from process excellence to technology and service innovation. This article discusses through WGroup's perspective how outsourcing can create value through changing the way business is done.
This chapter focuses on the execution of e-business projects and emphasizes the importance of tightly coordinating tactical execution to support the overall strategy and vision. It outlines a process for e-business tactical execution that includes defining projects, establishing teams, developing plans, managing requirements, and adopting and measuring outcomes. Successful execution requires addressing both technical capabilities and organizational readiness, maintaining communication, and focusing on customer needs and pain points.
The document discusses the challenges facing banks in modernizing their technology systems. It notes that banks have historically focused on rapid growth and innovation over efficiency, resulting in thousands of fragmented systems. It proposes that banks undergo an "industrialization" process to simplify their technology and business processes. This involves defining core capabilities, processes, and data assets and organizing people and technology to better support standardized processes. The document provides several recommendations for how banks can initiate this change, such as prioritizing data management, adopting service-oriented architectures, and leveraging cloud computing technologies to reduce costs. The goal is for banks to develop a "solid technical core" that is lean, integrated and operates with predictability and efficiency.
Most sourcing organizations focus on direct procurement, potentially overlooking indirect procurement and missing key opportunities to reduce spend. As indirect purchases increasingly become a larger percentage of overall spend, for many organizations, indirect procurement can be a diamond in the rough. This article makes the arguement that the value of indirect procurement should not be overlooked.
Vendor Management System - Introduction2Frank Corris
A vendor management system (VMS) allows companies to efficiently manage temporary staffing needs. It facilitates the requisition, procurement, and billing processes for contract workers. The presentation reviews key aspects of how a VMS works, provides value-added enhancements, and discusses industry trends, challenges, cost savings opportunities, and best practices related to vendor management.
This document discusses strategic vendor management and categorizing vendors. It provides an overview and agenda, then discusses creating a vendor management office to focus on processes and relationships. Vendors are categorized into four boxes: strategic, foundational, niche, and commodity. Strategic vendors are essential partners while foundational vendors provide important products/services. Niche vendors fill unique needs but dependence on them provides less leverage. The goal is managing vendors efficiently based on their categorization.
The document discusses best practices for establishing and operating a Vendor Management Office (VMO). A VMO can help bring governance, structure, and strategic focus to global spend, savings, and vendor management. Key points include how a VMO can deliver scorecards, dashboards, and templates to provide visibility into spend; prioritize strategic vendors; and act as a central point of governance, policy, and escalation. The VMO leader requires experience managing vendors, contracts, finance, and driving change at an executive level.
CPQ - Configure, Price and Quoting ExcellenceBearingPoint
Realizing all potentials of the CPQ Excellence will lead to
reduced process complexity with direct impact on time,
cost and risk. Main key performance indicators will be
both higher win rates of your offers, as well as lower
quotation throughput times. CPQ Excellence takes
advantage of potentials in a systematic configuration,
pricing, and quotation process in a complex
business environment.
This document discusses the importance of developing an e-business blueprint to align an organization's technology strategy and investments with its overall business strategy. It outlines a 5-step process for creating an e-blueprint that includes establishing objectives, scope, prioritizing application frameworks, and execution plans. It emphasizes the need for executive support and cross-functional collaboration to develop a business case and facilitate successful implementation of the e-blueprint over time.
Mit Benchmarking zu standardisierten IT ServicesWerner Feld
Benchmarking von Outsourcing Verträgen erlaubt die Aufdeckung von Ineffizienzen, die typischerweise auf marktunüblichen IT Serviceanforderungen des Kunden beruhen.
Banks are increasingly targeting the large and profitable small- and medium-business (SMB) market but struggle to attract, retain, and serve SMB customers due to a lack of understanding of their needs. Accenture helps banks gain insights into SMB customers through analytics to reduce costs and risks associated with growing their SMB business. Accenture pairs analytics capabilities with technologies to create a rich 360-degree view of each SMB customer and tailor interactions accordingly to drive profitable growth.
Telecom Billing's evolving role in post pc eraEhtisham Rao
With OTT proliferation in the mobile business, telecom operators are struggling to redefine the value of their services for operators. Business models abound, billing remains a key opportunity area for telecoms. this talk covers high level telecom interventions related to billing and their evaluation as source of sustainable competitive advantage.
This document discusses Connecting-Expertise's solution for managing contingent workforces. It defines key terms like VMS, MSP, and contingent workforce. Connecting-Expertise provides a VMS SaaS platform that enables eSourcing, contract management, invoicing, and reporting for contingent workers. Their customers represent over €490 million in annual spend. While contingent workforces are important, they also present challenges around spend control, service quality, and compliance. Connecting-Expertise's solution aims to address these challenges through an automated and transparent procurement process.
The Future of IT: A Zero Maintenance StrategyCognizant
IT organizations walk a fine line in optimizing both maintenance and opportunity costs but our structured approach ensures operational excellence by emphasizing the need to run technical, operational, functional and knowledge "debts" and calibrate applications on business throughput.
The document discusses the importance of relationships in supply chain management. It defines the supply chain and supply chain management. Effective SCM requires integrating and coordinating the entire supply chain through collaborative relationships between partners built on trust. Moving from transactional relationships focused on short-term gains to strategic partnerships oriented towards long-term success provides benefits like improved customer service, lower costs, higher profits and return on assets. Building and maintaining trust between organizations is critical but difficult to achieve.
Given the continued growth of outsourcing, leading organizations are beginning to view effective relationship management with suppliers as a core competency. However, businesses often underestimate the resources and skills required to manage multiple outsourcing relationships. It is critical to begin developing the relationship management model early in the outsourcing process, and to budget 10-15% of the annual contract value to the costs of managing the relationship. Proper governance ensures outsourcing relationships deliver expected benefits.
Applying eTOM (enhanced Telecom Operations Map) Framework to Non-Telecommunic...Alan McSweeney
The document discusses applying the eTOM (enhanced Telecom Operations Map) framework to non-telecommunications companies for product/service/solution innovation. It describes eTOM's processes for product/solution/service lifecycle management from concept to delivery and operation. It also discusses the changes required for companies transitioning to a greater service orientation like utility-based services, including changes to business models, costs, services provided, and customer information and relationships.
The document provides an overview of trends in supply chain technology and logistics, as well as best practices for implementing eProcurement and supply chain systems projects. Key points discussed include the benefits of eProcurement systems in reducing costs and cycle times, best practices for project management including scope control, testing, and change management, and the importance of data integration and stewardship for successful technology implementations.
The document discusses the benefits of establishing a Vendor Management Office (VMO). A VMO can help bring governance, structure, and oversight to global spend, savings, and reporting. It helps maximize profits by applying the right management skills, processes, and tools to contracts, vendor performance, finance, and administration. A VMO also provides strategic guidance, evaluates suppliers, supports negotiations, and helps consolidate vendors for leverage. The goal of a VMO is to align global spend to increasing shareholder wealth through delivering financial and operational synergies from contracts.
The document discusses product proliferation, which is when organizations market many variations of the same products through different colors, sizes, and uses. While this diversity can help firms capture market share, it can also waste economic resources and confuse consumers. The document also discusses cost leadership strategies, product bundling, and economies of scope. Product bundling involves offering multiple products together as one combined product, while economies of scope are cost advantages from providing a variety of products rather than specializing in one. Finally, the document outlines the value chain concept and primary and support activities in value chain analysis.
The document discusses product proliferation and strategic leadership. It provides examples of companies that offer many variations of products through different sizes, colors, and uses. This allows companies to target different market segments but can also confuse consumers. The document then discusses 11 characteristics of strategic leaders, including having a clear long-term vision, articulating their business model, commitment, being well-informed, willingness to delegate, astute use of power, emotional intelligence, balancing present and future needs, influencing rather than dominating, managing in both good and bad times, and anticipating and managing chaos.
Next generation IT outsourcing and the global enterprise model (GEM)WGroup
Disruptive technologies such as cloud computing and the “as-a-service” model for software, infrastructure and platforms have led to fundamental changes in how IT services are organized, managed and delivered—whether they are outsourced, insourced or a combination. The reality that IT services can be delivered to anywhere on the globe via the “Cloud” has accelerated the commoditization of IT. Ubiquitous access to IT services has lessened business units’ dependency on internal IT and shifted the IT organization’s prime role from process excellence to technology and service innovation. This article discusses through WGroup's perspective how outsourcing can create value through changing the way business is done.
This chapter focuses on the execution of e-business projects and emphasizes the importance of tightly coordinating tactical execution to support the overall strategy and vision. It outlines a process for e-business tactical execution that includes defining projects, establishing teams, developing plans, managing requirements, and adopting and measuring outcomes. Successful execution requires addressing both technical capabilities and organizational readiness, maintaining communication, and focusing on customer needs and pain points.
The document discusses the challenges facing banks in modernizing their technology systems. It notes that banks have historically focused on rapid growth and innovation over efficiency, resulting in thousands of fragmented systems. It proposes that banks undergo an "industrialization" process to simplify their technology and business processes. This involves defining core capabilities, processes, and data assets and organizing people and technology to better support standardized processes. The document provides several recommendations for how banks can initiate this change, such as prioritizing data management, adopting service-oriented architectures, and leveraging cloud computing technologies to reduce costs. The goal is for banks to develop a "solid technical core" that is lean, integrated and operates with predictability and efficiency.
Most sourcing organizations focus on direct procurement, potentially overlooking indirect procurement and missing key opportunities to reduce spend. As indirect purchases increasingly become a larger percentage of overall spend, for many organizations, indirect procurement can be a diamond in the rough. This article makes the arguement that the value of indirect procurement should not be overlooked.
Vendor Management System - Introduction2Frank Corris
A vendor management system (VMS) allows companies to efficiently manage temporary staffing needs. It facilitates the requisition, procurement, and billing processes for contract workers. The presentation reviews key aspects of how a VMS works, provides value-added enhancements, and discusses industry trends, challenges, cost savings opportunities, and best practices related to vendor management.
This document discusses strategic vendor management and categorizing vendors. It provides an overview and agenda, then discusses creating a vendor management office to focus on processes and relationships. Vendors are categorized into four boxes: strategic, foundational, niche, and commodity. Strategic vendors are essential partners while foundational vendors provide important products/services. Niche vendors fill unique needs but dependence on them provides less leverage. The goal is managing vendors efficiently based on their categorization.
The document discusses best practices for establishing and operating a Vendor Management Office (VMO). A VMO can help bring governance, structure, and strategic focus to global spend, savings, and vendor management. Key points include how a VMO can deliver scorecards, dashboards, and templates to provide visibility into spend; prioritize strategic vendors; and act as a central point of governance, policy, and escalation. The VMO leader requires experience managing vendors, contracts, finance, and driving change at an executive level.
CPQ - Configure, Price and Quoting ExcellenceBearingPoint
Realizing all potentials of the CPQ Excellence will lead to
reduced process complexity with direct impact on time,
cost and risk. Main key performance indicators will be
both higher win rates of your offers, as well as lower
quotation throughput times. CPQ Excellence takes
advantage of potentials in a systematic configuration,
pricing, and quotation process in a complex
business environment.
This document discusses the importance of developing an e-business blueprint to align an organization's technology strategy and investments with its overall business strategy. It outlines a 5-step process for creating an e-blueprint that includes establishing objectives, scope, prioritizing application frameworks, and execution plans. It emphasizes the need for executive support and cross-functional collaboration to develop a business case and facilitate successful implementation of the e-blueprint over time.
Mit Benchmarking zu standardisierten IT ServicesWerner Feld
Benchmarking von Outsourcing Verträgen erlaubt die Aufdeckung von Ineffizienzen, die typischerweise auf marktunüblichen IT Serviceanforderungen des Kunden beruhen.
Banks are increasingly targeting the large and profitable small- and medium-business (SMB) market but struggle to attract, retain, and serve SMB customers due to a lack of understanding of their needs. Accenture helps banks gain insights into SMB customers through analytics to reduce costs and risks associated with growing their SMB business. Accenture pairs analytics capabilities with technologies to create a rich 360-degree view of each SMB customer and tailor interactions accordingly to drive profitable growth.
Telecom Billing's evolving role in post pc eraEhtisham Rao
With OTT proliferation in the mobile business, telecom operators are struggling to redefine the value of their services for operators. Business models abound, billing remains a key opportunity area for telecoms. this talk covers high level telecom interventions related to billing and their evaluation as source of sustainable competitive advantage.
This document discusses Connecting-Expertise's solution for managing contingent workforces. It defines key terms like VMS, MSP, and contingent workforce. Connecting-Expertise provides a VMS SaaS platform that enables eSourcing, contract management, invoicing, and reporting for contingent workers. Their customers represent over €490 million in annual spend. While contingent workforces are important, they also present challenges around spend control, service quality, and compliance. Connecting-Expertise's solution aims to address these challenges through an automated and transparent procurement process.
The Future of IT: A Zero Maintenance StrategyCognizant
IT organizations walk a fine line in optimizing both maintenance and opportunity costs but our structured approach ensures operational excellence by emphasizing the need to run technical, operational, functional and knowledge "debts" and calibrate applications on business throughput.
The document discusses the importance of relationships in supply chain management. It defines the supply chain and supply chain management. Effective SCM requires integrating and coordinating the entire supply chain through collaborative relationships between partners built on trust. Moving from transactional relationships focused on short-term gains to strategic partnerships oriented towards long-term success provides benefits like improved customer service, lower costs, higher profits and return on assets. Building and maintaining trust between organizations is critical but difficult to achieve.
Given the continued growth of outsourcing, leading organizations are beginning to view effective relationship management with suppliers as a core competency. However, businesses often underestimate the resources and skills required to manage multiple outsourcing relationships. It is critical to begin developing the relationship management model early in the outsourcing process, and to budget 10-15% of the annual contract value to the costs of managing the relationship. Proper governance ensures outsourcing relationships deliver expected benefits.
Applying eTOM (enhanced Telecom Operations Map) Framework to Non-Telecommunic...Alan McSweeney
The document discusses applying the eTOM (enhanced Telecom Operations Map) framework to non-telecommunications companies for product/service/solution innovation. It describes eTOM's processes for product/solution/service lifecycle management from concept to delivery and operation. It also discusses the changes required for companies transitioning to a greater service orientation like utility-based services, including changes to business models, costs, services provided, and customer information and relationships.
The document provides an overview of trends in supply chain technology and logistics, as well as best practices for implementing eProcurement and supply chain systems projects. Key points discussed include the benefits of eProcurement systems in reducing costs and cycle times, best practices for project management including scope control, testing, and change management, and the importance of data integration and stewardship for successful technology implementations.
The document discusses the benefits of establishing a Vendor Management Office (VMO). A VMO can help bring governance, structure, and oversight to global spend, savings, and reporting. It helps maximize profits by applying the right management skills, processes, and tools to contracts, vendor performance, finance, and administration. A VMO also provides strategic guidance, evaluates suppliers, supports negotiations, and helps consolidate vendors for leverage. The goal of a VMO is to align global spend to increasing shareholder wealth through delivering financial and operational synergies from contracts.
The document discusses product proliferation, which is when organizations market many variations of the same products through different colors, sizes, and uses. While this diversity can help firms capture market share, it can also waste economic resources and confuse consumers. The document also discusses cost leadership strategies, product bundling, and economies of scope. Product bundling involves offering multiple products together as one combined product, while economies of scope are cost advantages from providing a variety of products rather than specializing in one. Finally, the document outlines the value chain concept and primary and support activities in value chain analysis.
The document discusses product proliferation and strategic leadership. It provides examples of companies that offer many variations of products through different sizes, colors, and uses. This allows companies to target different market segments but can also confuse consumers. The document then discusses 11 characteristics of strategic leaders, including having a clear long-term vision, articulating their business model, commitment, being well-informed, willingness to delegate, astute use of power, emotional intelligence, balancing present and future needs, influencing rather than dominating, managing in both good and bad times, and anticipating and managing chaos.
The document discusses Prime Value Chain Analysis (PVC), a technique used to analyze an organization's critical activities that deliver value to customers. PVC helps organizations realign around key priorities by breaking down silos and prioritizing improvement efforts. It creates a dynamic view of major value-creating activities across the organization, regardless of functional boundaries. This helps organizations understand how different parts of the business support strategic goals and identify opportunities to improve performance through better alignment, structure, and execution. The document provides an example of a company that used PVC analysis to improve product development efficiency and effectiveness across silos.
This document discusses strategies for companies to manage complexity and increase profit margins. It begins by describing how increasing globalization, customization, and technological sophistication have led to greater product, customer, and operational complexity for many companies. This complexity often hides real costs that significantly reduce profitability. The document then recommends that companies:
1) Analyze product cost and value data to understand profitability and position products on a "cost/value matrix" to determine strategic actions.
2) Explore eight strategies to reduce complexity across the value chain and increase margins by 25-100%, including making complexity transparent, applying the 80/20 rule, optimizing cross-functional processes, and bundling product features.
This document discusses balancing operational value, pace, and risk in mid-market acquisitions. It focuses on sources of value and risk, including revenue stream growth, cost element efficiency, working capital efficiency, and fixed asset efficiency. Some example improvement areas are product value engineering, purchasing cost reduction, management information systems alignment, and improving attendance. The document emphasizes that value and risk are often linked, and managing risks involves understanding sources of inherent and change-related risks. It also notes the importance of cross-functional cooperation to improve operational performance.
The Balance Scorecard: Presentation to the Institute of Electrical EngineersKinetik Solutions Ltd
The balanced scorecard is a crucial methodology for manufacturing managers to identify bottlenecks and exceptions in processes. It measures performance in financial, process, customer, and people areas to create a balanced and sustainable approach, rather than just focusing on targets. The scorecard is created by cross-functional teams and measures underlying drivers of performance like process velocity. It is reviewed regularly to focus on problem areas and drive process improvement through teams addressing the root causes of issues. Using a balanced scorecard approach frees up management time and empowers employees to make improvements.
Benchmarking is the process of identifying and measuring best practices to evaluate an organization's performance and identify areas for improvement. It involves examining both internal business units and external competitors or leaders in other industries. The goal is to understand where an organization excels and where others perform similar functions better in order to implement changes that close performance gaps. There are different types of benchmarking that focus on strategies, processes, functions or specific business units depending on the goals. An effective benchmarking process involves understanding current performance, analyzing others, comparing performance, and implementing steps to improve.
I. Stages of Operational Competitiveness the different levels of customer con...Lena Argosino
I. Stages of Operational Competitiveness
the different levels of customer contact in the service firm
II. Classification of the different strategies in different service operation
Executing a Total Solutions Strategy - And Other Complex Selling and Pricing ...CIT Group
This document discusses how companies are moving from traditional product-focused strategies to "Total Solutions" strategies in order to better meet customer needs and combat commoditization. It outlines the evolution from standalone products to more customized bundled offerings and total solutions. A total solutions strategy involves complex product structures incorporating multiple components from both in-house and third-party suppliers. It also requires sophisticated billing, invoicing, and accounts receivable/payable systems to handle the complex pricing structures and ensure accurate allocation of payments. While challenging to implement, a total solutions approach can provide a sustainable competitive advantage through highly customized offerings that are difficult for competitors to replicate.
Localizing Localization is the adaptation of a product or ser.docxsmile790243
Localizing: Localization is the adaptation of a product or service to meet the needs of a particular language, culture or desired population's "look-and-feel."
+High Flexibility on local scale (silos apps) and low flexibility on Global.
+ You want you get
- Mess
- Costly and expensive .
- needs technical people
- can't operate on a national or global scale
Standardizing (about level of architecture):
+ reduce # hardware, vendors
+ Cost saving
- Same # of application ( work with IT )
Optimizing (business processes) (The use of one global instance)
+ Higher level of visibility and business control on data
+ Less software
+ build kind of ERP architecture( Enterprise resource planning (ERP) is business process management software that allows an organization to use a system of integrated applications to manage the business and automate many back office functions related to technology, services and human resources. ERP software integrates all facets of an operation, including product planning, development, manufacturing, sales and marketing.)
Expensive, less flexible on local scale
go to globally .
4- modality :it is about IT and move to the solution , high flexibility in global and local , speed ( use agility ) , complexity , how build IT in sample way , careful with cost saving . have simple product . to achieve modality we need granularity ( reusing ,agility,cost reduction )
Organization’s digital maturity level
How are companies using digital technologies such as social media, data and analytics, mobile devices and cloud computing to compete and operate differently?
in particular, strategy, culture and talent development. These differences represent an important distinction between companies with high and low digital maturity and offer insights for executives.
1.HOW DIGITAL STRATEGY OBJECTIVES VARY ?
1-Improve customer experience and engagement
2-Increase efficiency
3-Improve business decision making
4-Improve innovation
5-Transform the business
THE KEY ABILITIES COMPANIES LACK ?
1-Knowing the business and being able to conceptualize how new digital technologies can impact current business processes/models .
2-Willingness to experiment and take risks
3-Ability to use digital technologies such as social, mobile, analytics and the cloud to execute one’s job
4-Ability to manage or work in distributed, digitally savvy teams in fast-paced environments; flexibility
5-Willingness to share and be collaborative
The Importance of Digital Strategy ?
Companies must know what to listen for, how to analyze and interpret the data, and how to respond. be able to act quickly on the information the platform provides.
EMPLOYEES’ PERSPECTIVES ON DIGITAL LEADERSHIP?
Many survey respondents from companies at early-stage and developing digital maturity levels are not satisfied with the way their organizations are responding to digital trends. Such attitudes likely have implications for recruiting and retaining talent.
1-How important ...
This document introduces the Bureaucracy Measurement Index (BMI) as a tool to help companies assess and address bureaucracy. The BMI breaks down a company's processes, assigns scores based on performance, risk, and impact, and identifies the most bureaucratic and problematic areas. This allows companies to prioritize reducing bureaucracy in efficient, low-risk processes, while maintaining appropriate oversight for high-risk processes. Once areas of unnecessary bureaucracy are addressed, companies can focus on differentiating capabilities that drive growth. Robotic process automation is also introduced as a way to reduce bureaucracy by automating repetitive manual tasks. An example of applying the BMI at an oil company to streamline capital expenditure approvals is provided.
1) The document discusses pragmatic approaches to optimizing operational costs during times of radical change and uncertainty. It outlines a 3 step process of engage and set up, discover and diagnose, and iterative design and implementation.
2) The discover and diagnose step involves defining customer segments, attributing costs, conducting a holistic analysis of the operating model, and identifying cost optimization opportunities across components like customers, processes, partners, organization, locations, and technology.
3) The iterative design and implementation step defines initiatives, establishes waves for iterative delivery, and tracks benefits to realize savings on the bottom line. Various levers are discussed like shifting customers to lower cost channels, reducing failure demand, streamlining processes, rationalizing applications,
This document discusses business process reengineering (BPR). It defines BPR as fundamentally rethinking and radically redesigning business processes to achieve dramatic improvements in performance. The document outlines the nine dimensions of BPR which include physical/technical, infrastructure, and value dimensions. It describes the benefits of BPR such as increasing customer satisfaction and decreasing response times. Warning signs that indicate a need for BPR are discussed, such as the explosion of bureaucracy and bottlenecks between functions.
Process excellence being efficient & effectiveSumit K Jha
This document discusses process excellence and how it can be applied holistically across an organization's key processes to improve efficiency and effectiveness. It provides examples of how processes in areas like product development, marketing, sales, finance, HR, outsourcing, and innovation can impact business performance if not managed effectively and efficiently. The document also introduces two common frameworks used for process excellence - Lean and Six Sigma. It notes that while these frameworks overlap, they differ in their underlying philosophies and both have been adopted by many global and Indian companies to improve processes.
2Photo of a man holding a knight chess piece and using it to tip.docxtamicawaysmith
2
Photo of a man holding a knight chess piece and using it to tip over a bishop chess piece.
Dominik Pabis/Vetta/Getty Images
Gaining Competitive Advantage Through Operations
Learning Objectives
After completing this chapter, you should be able to:
Understand how business processes create competitive capabilities that enable organizations to satisfy customer requirements.
Explain how operations management can maintain an organization's competitive edge through high-quality production, convenient delivery, effective customer service, and competitive cost.
Describe key business processes including strategy development, product development, system creation to produce services and goods, and order fulfillment.
Discuss why operations are strategically important.
List and define the steps necessary to link operations to corporate strategy.
Describe how operations managers use information technology to increase productivity, improve quality, provide a safer environment, and reduce costs.
2.1
Achieving Competitive Advantage
Photo of a runner crossing the finish line.
Stockbyte/Thinkstock
A competitive advantage gives an organization the edge over its competition. By improving profits, increasing market share, and expanding into new areas, operations can work toward achieving this desired advantage.
Operations presents top management with many opportunities to develop competitive advantages. A competitive advantage is a capability that customers value, such as short delivery lead-time or high product quality that gives an organization an edge against its competition. When properly used, operations can be an important tool for improving profits, increasing market share, and developing new markets. A firm's market share is its percentage of sales in a particular market, that is, its sales divided by total sales for all organizations competing in a particular market.
An organization creates a competitive advantage by giving customers what they want in a better way than other companies. What do customers want, or in other words, what do they value? Figure 2.1 provides a model for understanding how an organization can deliver competitive advantage to its customers. An organization should know its external environment (threats and opportunities) and its internal environment (strengths and weaknesses), and have a clear understanding of the customers it is trying to serve. This is often called "SWOT analysis," for strengths, weaknesses, opportunities, and threats. An in-depth understanding of customer requirements allows the firm to determine a set of competitive capabilities that will enable it to delight, rather than merely satisfy, customers. These competitive capabilities are, in turn, the result of well-designed business processes. These key business processes are cross-functional and require operations managers to work closely with their counterparts in accounting, finance, information systems, marketing, and other d ...
Organizations can transform their product disclosure processes through seven innovative approaches:
1. Roll automation can increase efficiency and reduce time-to-market by automating tasks and allowing parallel work.
2. Common content management can reduce verification time by centrally managing repeated content.
3. Master shells can improve time-to-market for entire portfolios by authoring content once for conditional use.
4. White labelling can produce branded variants without duplicating verification.
5. Verification certification provides transparency and auditability of the disclosure process.
6. One-click publishing can generate documents from a single verified content source.
7. Data integration can leverage business data to populate disclosure documents.
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Learning Objectives
After completing this chapter, you should be able to:
• Understand how business processes create competitive capabilities that enable
organizations to satisfy customer requirements.
• Explain how operations management can maintain an organization’s competitive
edge through high-quality production, convenient delivery, effective customer
service, and competitive cost.
• Describe key business processes including strategy development, product develop-
ment, system creation to produce services and goods, and order fulfillment.
• Discuss why operations are strategically important.
• List and define the steps necessary to link operations to corporate strategy.
• Describe how operations managers use information technology to increase produc-
tivity, improve quality, provide a safer environment, and reduce costs.
2 .Dominik Pabis/Getty Images
Gaining Competitive Advantage
Through Operations
von70154_02_c02_033-060.indd 33 2/22/13 3:31 PM
CHAPTER 2Section 2.1 Achieving Competitive Advantage
2.1 Achieving Competitive Advantage
Operations presents top management with many opportunities to develop competi-tive advantages. A competitive advantage is a capability that customers value, such as short delivery lead-time or high product quality that gives an organization
an edge against its competition. When prop-
erly used, operations can be an important tool
for improving profits, increasing market share,
and developing new markets. A firm’s market
share is its percentage of sales in a particular
market, that is, its sales divided by total sales
for all organizations competing in a particular
market.
An organization creates a competitive advan-
tage by giving customers what they want in a
better way than other companies. What do cus-
tomers want, or in other words, what do they
value? Figure 2.1 provides a model for under-
standing how an organization can deliver com-
petitive advantage to its customers. An organi-
zation should know its external environment
(threats and opportunities) and its internal
environment (strengths and weaknesses), and
have a clear understanding of the customers it
is trying to serve. This is often called “SWOT
analysis,” for strengths, weaknesses, opportu-
nities, and threats. An in-depth understanding
of customer requirements allows the firm to
determine a set of competitive capabilities that
will enable it to delight, rather than merely sat-
isfy, customers. These competitive capabilities
are, in turn, the result of well-designed busi-
ness processes. These key business processes
are cross-functional and require operations managers to work closely with their counter-
parts in accou ...
Activity Based Profitability ManagementMiguel Garcia
Activity Based Profitability Management (ABPM) and Activity Based Budgeting (ABB) offers organizations a complete tool to gain a competitive advantage and provides crucial information to support the process of making strategic and operational decisions in the current business environment. It might seem that having this type of information for the management of profits, costs and budgets is not necessary to implement Digital Transformation solutions because the implementation of new technologies does not require an evaluation of this type, and it is assumed that it must be implemented independently of what it implies and at any cost, but this is an error because it will always require business processes, products or services, customers or users, service channels, etc. that must be evaluated from the financial and business process point of view, implemented, measured and improved within a competitive and market environment. In this sense, the profitablitiy, cost and budget information provided by the approach of ABPM and ABB will lead to better business decisions that significantly increase the performance and profits of the companies.
The document discusses the lack of integration between retail merchants' various automated systems for merchandise ordering, planning, distribution, and in-store inventory, despite progress in automating these individual processes. It argues that retailers have failed to take a strategic, holistic view of integrating their systems in a way that could eliminate thousands of labor hours per week and improve executive decision-making. True productivity gains require "efficiently integrated systems" that link both automated and human-driven activities across the enterprise through a coherent business strategy and operating model. The 8 major steps to achieving full systems integration are outlined.
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Cost reduction tool_complexity_management_2020
1. Part 3 of my PE Value Portfolio: Complexity Management
Introduction
For senior executives facing requirements to optimize the value of their investment
post investment, reducing the cost base of their business operations sits squarely
at the top of the agenda. There are multiple components that contribute to these
initiatives:
• cost reductions through effective sourcing;
• optimizing margins through effective branding and pricing strategies;
• eliminate IT redundancy and outsource non-core functions;
• evaluate why company “this is the way we do things around here” mindset
introduces complexities that are not necessary – and how to eliminate those
After decades of product and service variation, channel diversification and
geographic and operational expansion, all supported by layers upon layers of
technology, many PE companies are forcing their acquisitions to deal with a
fundamental reality: their businesses are overly complex for the value they
generate.
2. Not only is this “excess” not valued by customers, it actually impedes value delivery,
by limiting the sales force’s ability to respond, increasing service and fulfillment
costs, compounding operational risk and making the organization more unwieldy
to manage. The siren call for a simpler “core business” approach, incorporating
elements of modular design and industrial engineering, is again being heard across
the industry. Customers are rebelling against overly complex products.
To sustain success, I work with PE clients to force adoption a philosophy of fewer,
simpler products that are engineered for low cost delivery and ease of
consumption.
This is usually a major shift in customer sentiment from the drivers of profitability
over the last 15 years, and adaptation will not be culturally easy for most firms.
Grappling with underlying complexity is a thorny challenge for organizations that
achieved success under a “more is better” philosophy but are now sitting atop
successive generations of operations and systems decisions that cannot easily be
unwound. This paper explores the nature of the underlying business complexity in
financial services – how to evaluate and get at it, and how to begin to transform
the enterprise into a more flexible and scalable business.
3. It is possible to make substantial progress in complexity reduction by applying a
“front-to-back optimization” approach focused on the drivers of complexity.
Revenues everywhere are under pressure. Geographic expansion is being
questioned. Product diversification, especially in the “synthetic” space, has
mutated from a growth engine to a dysfunctional and risky adventure for most
players.
4. When I work with senior executives to take the first steps toward “dialing down”
complexity, they tend to rapidly come up against three immutable features that
overshadow their ability to make change in their environment:
1. Complexity is structural; deeply-embedded in the business and operating
models of their institutions
2. Complexity is cultural; organizations have been unintentionally designed to
produce complexity based on behavior that has driven profits over the last
several years
3. The linkages between delivery systems and product organizations have grown
in an unstructured manner instead of being engineered to avoid unnecessary
complexity
4. Without clear top-down definition of value to the customer, organizations will
freelance and create overly complex operations, processes and systems
Finding the organization’s complexity “sweet spot”:
The first step to optimization companies interested in transforming, not just
reducing, the costs of business and product lines need to find their “sweet spot”
which balances the value-generating aspects of business complexity with the
negative network effects of inherited complexity.
In economic terms, they have to identify the point at which incremental complexity
in their business operating model costs no more than the value it creates. In
practice, this means: „ Unwinding entrenched operations and systems complexity
to around the “sweet spot” level „ Protecting those aspects of operating
environment complexity that either create or directly support value creation „
Continuous monitoring of external or internal factors that might move the “sweet
spot” one way or the other (see Exhibit 2)
5. 1. Business “over-complexity” – the kudzu of operations
Complexity comprises several distinct yet inter-related characteristics.
In practical terms, complexity may entail:
• Too many process or product variants
• Too many interdependencies and interfaces
• Process bottlenecks and fragmentation
• Technology legacy proliferation
• Lack of structure and clear rules
• High cost and management effort attributed to running and improving the
organization
6. Executives rarely use the words “managing complexity” when describing the
challenge of upgrading the operational performance of their organizations. Instead,
they struggle to cope with the symptoms of complexity – issues that have arisen
out of underlying business decisions, policies and practices over time. The following
quotes from a sample of banking and insurance clients put voice to typical
manifestations of the complexity problem
2. Identifying and evaluating complexity: Moving from perception to facts
To begin unraveling the sources of business complexity for clients, I find it helpful
to use a model of the enterprise that starts with the drivers of complexity in the
business and shows how these – reinforced by business practices – cascade
through the entire organization. This “front-to-back” framework addresses
complexity along four dimensions as follows (see Exhibit 3):
7. Using these dimensions to assess the sources and impact of complexity, leading
players are engaged in a more end-to-end analysis of complexity based on facts –
moving away from the traditional way of looking at symptoms or basing their
evaluation on perceptions.
2.1Business model complexity drivers One of the major sources of complexity is
the proliferation of products, distribution channels, pricing, customer segments
and locations. In seeking to enhance a product feature, such as interest terms
or account bundling, companies all too often simply add a new product where
they lacked a product framework (i.e., structured, modular, hierarchical) that
could differentiate between a new product, an existing product variant, a new
product feature, a product parameter, or the associated service dimensions –
and facilitate rationalization.
From a sales perspective, this can compromise effectiveness as the sales force
has to come to grips with a myriad of new products and pricing schemes, and
the training department scrambles to design the appropriate curriculum. From
an operations perspective, each new product or variant entails its own set of
business rules.
Managing these business rules efficiently is a challenge because the associated
systems are not flexible enough to support the new requirements in a
standardized way.
As a result, systems must be heavily modified and the processes surrounding
them become increasingly customized and siloed. This product dynamic
translates into higher cost of complexity than the value to the customer and the
cost-of-sales would warrant.
One way to gauge complexity on this dimension is to analyze product
profitability based on a “total cost” model. So far, only a few firms routinely
perform complexity analyses of their product portfolio, allocating the full front-
8. to-back cost base to products and services and determining the incremental
cost of individual product introductions and product ranges. Most firms lack a
true single-product, total-cost allocation method. Yet, such an exercise provides
the basis for a fundamental complexity analysis of products and product families
(see Exhibit 4).
In multi-line organizations, the typical result of such analysis yields the following:
• Some products and product clusters are inherently unprofitable. If they get
eliminated along with the supporting cost base (which is the challenge), value
will be created, not destroyed
• Another set of products can be made profitable by simplifying and streamlining
their main features, e.g. as part of a “product architecture”
• Only a smaller number of products (with higher volumes) are truly profitable
and/or differentiating in the market; resources should be focused on this set of
products
9. 2.2. Operations and process complexity drivers Complexity in operations and
process can be caused by over-customization, lack of automation, inflexibility
in process design or application (e.g. a “one size fits all” process), and even
unclear process ownership and roles typically from cultural or governance
barriers that systematically prevent businesses from sharing operations or
underlying technology, and from unfinished acquisitions, i.e., with incomplete
operational or technical integration. A key success factor in complexity
reduction in this arena is to focus on the highest value/highest cost
components of the business and delivery model. For operations this suggests
focusing on operations cost per process as a percentage of total process costs
and the value- add of the process in business terms. Processes can thus be
clustered and prioritized according to their share of overall cost and value (see
Exhibit 5).
10. A more structural consideration is the complexity caused by duplicated and
redundant functions.
The next step is to scan “priority” processes for traditional complexity drivers, such
as:
• Synergies between similar process steps that are not shared across business
lines, products and units (functional redundancies)
• Unjustified process variations or steps that deviate from company standard
• Process deficiencies (poor design, missing or unnecessary steps,
inefficiencies between steps, bottle necks, single failure nodes, etc.)
• Unwarranted manual effort (e.g., under-automation, prevalence of
workarounds and interfaces requiring intervention)
• Over-capacity and idle time (people, systems, infrastructure); under-capacity
and lack of bandwidth (routine reliance on external resources, outages,
late/missed processing deadlines)
• Mixed media (e.g., processes that require going back and forth between
phone, paper/fax and electronic data media)
A third prerequisite for addressing Operations and Process complexity at its source
is to take the results of the foregoing assessment and, for each process architecture
“problem”, analyze and quantify the underlying cause of complexity:
• To what extent is the complexity driver compromising effectiveness
• To what extent is the complexity driver creating incremental cost without
commensurate value?
The outcome of this analysis can form the basis for a comprehensive remediation
program and is a necessary corollary to the investigation into the sources and
causes of IT complexity.
11. 2.3. Information technology complexity drivers
Complexity in the application systems and platforms arena can be caused by
a variety of well-known factors such as
• inflexible, outdated code;
• overlapping and redundant systems;
• excessive patching and interfacing;
• technology proliferation;
• competing IT standards, vendors, architectures and philosophies; and
• immature or under-developed IT management practices.
The most severe handicap for addressing IT complexity reduction in a
fundamental way is the investment typically required for such an exercise.
Why this is such a challenge – beyond the multi-million dollar or Euro price tag
– stems from a complicated dynamic of management will vs. average executive
tenure, the inter-temporal nature of the investment vs. the realized benefit, and
the generally reliable performance of legacy infrastructure (mainframes) vs. the
hidden effects of compounding systems complexity over years.
Unlike in a manufacturing plant where operational complexity is in plain view,
the raw material of finance is information, and it is difficult for senior IT
management to experience the “spaghetti” that characterizes their information
processing plant.
If they could, it might make it easier to gain consensus on the need for re-
architecting and re-platforming core applications. It is this compounding effect
of business complexity on IT over time that must be understood (quantified) to
break the cycle of successive layers of kudzu in the business operations over
time.
12. In my client experience, two sets of analyses are needed:
• Identification of IT complexity drivers resulting from the business or
operating model. IT systems architecture generally reflects underlying
business requirements, responding to business demands. Thus, business
complexity inevitably “propagates” into IT and creates a corresponding,
but more persistent, level of complexity. This “persistence of legacy
complexity” over time creates a non-linear increase in the complexity of
IT, which is much harder to change than the business it supports
• Examination of the main complexity drivers in IT itself. IT in turn can
create cost and complexity back in the business if requirements are over-
specified or not well implemented, systems are costly or unstable and
services are spotty or of low quality.
Typical analytic lenses would include:
• How many systems and applications deliver the same or similar
functionality to the business?
• Which systems have a user base or actual usage below efficient scale?
• How many point-to-point interfaces are connecting applications and data
stores?
• How many redundant or highly overlapping data stores are being
accessed by different applications?
• What is the extent of additional efforts such as data consistency checks,
data cleansing and data integrity analyses?
13. 2.4. Governance and organizational complexity drivers
A fourth major instigator of complexity can often be traced to governance and
organizational design. Many comapnies have evolved structures, governance
models, planning and budgeting processes that are prone to create non-value
adding complexity. Moreover, autonomous organizations, along with
decentralized incentives, motivate business heads to optimize their own units’
performance at the expense of externalizing complexity costs to the wider
group.
Most often, there is no business-aligned “operating architecture” that would
define the overall target operational blueprint across business model,
operations and IT in a clear and binding way.
This lack contributes to misalignment between businesses, operations and IT,
and can lead directly to greater complexity. Similarly, long term planning that
does not consider the choices and trade-offs that could result in reducing or
contributing to complexity is the norm and often does not go so far as to
address standardization and sharing opportunities.
Finally, most organizations lack a market-emulating and transparent
chargeback mechanism for shared IT and operational services which could
make enterprise cost impacts more apparent and would permit establishing a
“complexity tax” for decentralized decisions that increase costs to the group
14. Front-to-back complexity reduction: Next steps
For instance, in Financial Services, Complexity is prevalent in the array of financial
services businesses: Retail banking, Commercial banking, Wealth and Asset
Management, Capital Markets and Insurance.
Across business types, there is a fairly consistent “back to basics” approach that I
would recommend to identify and realize comprehensive complexity reduction:
Benchmark the organization against best-in-class peers
• Benchmark using the four dimensions discussed, i.e. business model,
processes, IT, and organization and governance
• Understand differences in efficiency ratios owing to products, customers, and
geography mix
• Based on this benchmarking exercise, identify material opportunities for
improving productivity and efficiency
Uncover the complexity drivers that need to be remedied
• Use the “Front-to-Back” method to uncover complexity root causes in the
context of identified opportunities Be prepared to confront what may be
inherent, long-standing drivers of operational, IT and organization complexity
Develop a simplified target operating model
• Focus on simplification and rationalization while directly addressing the root
causes
• Look to solve issues end-to-end – across business model, process, IT, and
organization and governance
15. Execute and manage change
• Mobilize the right cross-functional teams and empower them with executing the
target operating model
• Put in place the right governance and incentive structure
• Ensure close measurement of the performance improvement achieved
Today’s economic climate is driving a renewed focus on front-to-back cost
structure among financial institutions that want to fundamentally rationalize their
business model or cost base.
While short-term measures, such as headcount reduction through de-layering, are
regularly adopted by organizations looking to contain costs, these costs tend to
creep back over time because their structural causes have not been addressed.
Plainly stated, financial institutions have too many non value-adding products and
service variants, fragmented pricing and distribution models, and manual-intensive
and siloed processes – all based on an unwieldy and expensive to modify IT
“architecture”. Best-in-class approaches we have observed emphasize addressing
root cause complexity by streamlining business and delivery models from the client
interface in the front office all the way to the back office. Such “front-to-back”
complexity reduction approaches remove costs radically and sustainably – and,
importantly, without destroying value.
16. Why is complexity elimination important? All companies must grow. It’s an
imperative that drives companies to create new products and services, enter new
regions, and move into new businesses.
As they expand, they inevitably become more complex. Their organizational
structures develop layers upon layers, their reporting lines become tangled, and
their people – from senior management through to the front line – find it harder to
get work done. When time, energy, and resources are spent on activities and
interactions that don’t create value, complexity starts to damage a company’s
performance.
But complexity isn’t always a bad thing. When I analyze drivers of perceived value
creation, I find that some of the most important tend to create complexity as well
as value.
The number of customers you have; the number of products or services you deliver;
the extent to which people cooperate and multi-task within your organization; the
number of countries you operate in; and the number of people you employ all
increase the level of complexity in your company as well as helping you to make
more money.
Handled well, this kind of complexity helps rather than hinders your company’s
performance. On the other hand, some factors destroy value as well as adding
complexity. The amount of regulation in your industry and how quickly it changes;
the extent of duplication of activities, roles, and responsibilities in your
organization; the frequency of change in your organization structure; and the rate
of new entry and change of strategy by your competitors all tend to make your
company less profitable and more complex. This is the kind of complexity that you
may well want to tackle.
17. Managing complexity well can create three major benefits:
1 Higher returns. In research with 1,150 senior executives of major companies
(each of which had at least 1,000 employees), we found that the companies
reporting low levels of complexity (those where it was “easy to get things done”)
had the highest returns on capital employed and the highest returns on invested
capital
2 Lower costs. In my experience, four out of five organizations that reduce
complexity also reduce their costs. Some have saved almost 20 percent of
personnel costs by eliminating activities that create complexity but add little
value.
3 Improved employee satisfaction. Reducing complexity removes barriers to
getting things done.
When I talk to executives, they recognize the scope for creating value from
complexity, but they are equally aware of the problems it can cause: poor
responsiveness to customers, weak risk management, inefficient processes, and
confusion and stress among employees.
Worse, they feel the problems are becoming more acute, fuelled by such factors as
rising levels of M&A, product proliferation, increasing regulation, and greater
emphasis on internal collaboration.
What can we do, they ask, to manage our rising levels of complexity more
effectively?
My approach is simple: focus on the issues that make it hard for employees to get
things done and develop their ability to cope with the complexity in their roles. For
most employees, dealing with the complications arising from increased regulation
and M&A activity is less critical than having clear roles, targets, and accountabilities
within an organization that encourages initiative and cooperation. How do I
manage the complexity in my organization? What do I need to know? In a PE value
optimization activity, leaders wanting to manage complexity well should be aware
of a few insights that could make all the difference.
18. Not all complexity is bad Complexity isn’t always harmful. There is often value in
having multiple business units and operating on a global scale. Complexity can be
part of a successful business plan. Similarly, broadening a product offering may
bring benefits that far outweigh the costs.
Other forms of complexity, such as those resulting from regulatory or trade union
demands, may be imposed by the environment in which a firm operates.
But there is no denying that complexity can also destroy value: witness the
company that ends up being present in a long “tail” of countries that barely break
even.
The answer is not to make an organization as simple as possible, but rather to
eliminate the complexity that makes it hard to get things done and creates little
value. If complexity can been seen not as a problem to be eliminated but as a
challenge to be managed and even exploited, businesses can generate additional
sources of profit and competitive advantage. What leaders see as complexity isn’t
what the organization experiences as complexity intervention from the top.
19. Case Studies
Supply Chain Network
Objective: Reengineer a global supply chain network (production and
distribution) with $1 billion (€800 million) in annual variable costs. The complex
network consisted of 20 manufacturing plants using numerous mixtures of raw
materials to produce different end products for more than 5,000 clients.
Concept: SAT AG mapped the company's individual value chain in a suitable
optimization algorithm, making it possible to determine monthly production
allocations and costs, which were at a minimum level globally at all times. A
technical tool was created simultaneously and used to revamp the entire
decision-making process.
Result: Achieved annual savings of 4 percent in variable costs, mainly material
and shipping costs.
Air Traffic Control
Objective: Minimize the number and duration of the holding patterns of waiting
aircraft in the vicinity of an airport caused by limited runway capacity.
Concept: After modeling the airport and air traffic, a discrete-event simulation
(coupled with optimization algorithms) was carried out and simultaneously
incorporated into the air traffic control system.
Result: The so-called "de-peaking" of runway usage, in particular, resulted in a
more even distribution of takeoffs and landings; lower fuel consumption
translated into more than $27 million (€20 million) in annual savings.
HR Management
Objective: Ensure future viability of a large energy supply company in the face of
changing demographics and a decline in qualified engineers.
Concept: Used a discrete-event simulation to develop a future view of all units
and individual employees in them based on certain factors (age and
qualifications). The simulation included effects arising from years with low birth
20. rates, declining demand for certain engineering specialist areas, and "war for
talent" scenarios.
Result: Identified present and future weak points in HR planning, enabling the
firm to systematically identify and foster high-potential individuals at an earlier
stage, and launch more targeted recruiting efforts. The company gained a
measurable competitive edge, reduced HR budgets, and increased
professionalism and acceptance of the HR sector