Process Redesign – Do it right or go home.

Posted on October 20, 2011 by Gene Tanski

When approached without a clear understanding of the technological possibilities and a relevant examination of the organizational structure and policies (i.e pay) supporting it, Business Process Redesign is a complete waste of time.

In fact, I will go so far as to argue it is a destruction of shareholder value to invest time, human resources and actual cash in pursuit of improvements that will be minimized and/or never realized.

So what are the risks of the so-called “People, Process, Technology” approach?

You can only contribute your process requirements based on what you know, but you can’t know the possibilities inherent in technology platforms until you’ve explored them
You might design a process that only stays relevant for a year rather than 5 years and/or necessitates expensive upgrades, training and consulting fees with every step
You might end up paying people to perform the old process, not the new process
Your technology may require costly customizations or “work-arounds” to manipulate data outside of system support in order to support the new process

Say your current process involved 4 or 5 steps – it begins with a query to get historical data, extracting that data to a forecasting engine – something like excel or Demantra (no real difference), then running the model, then organizing the output into a useable format, running a series of reality meetings with Sales, Marketing & Operations and then finalizing the execution forecast.

Now, given that background and experience, in a typical process redesign, you would enter a room with big whiteboards or brown paper sheeting taped up and most likely a consultant (internal or external) standing at the front of the room saying – please – give me your requirements so we can design a process. What are you going to pull from in order to provide requirements? Your experience – what you know. Which means in effect you will be paving over cow paths – which might be charming in Verona but not the basis for delivering competitive differentiation for your company.

Perhaps even more frustrating is say that you are able to think out of the box and come up with a truly radical process that cuts out 4 of the 6 steps and if properly executed would increase accuracy by 10% and reduce cycle time by 75% and help improve order fill rates from 90 to 99%? And then you go out and look for a technical platform only to find there is no technology to support your process? Can you say frustrating loud enough?

So what is the right way?

Technology – Process – People

A comprehensive, holistic approach based on the principle that Technology should support Business Process, and Business Process should exploit the capabilities Technology can provide – Davenport & Short dubbed this recursive view of Technology & Process Redesign “the New Industrial Engineering” — Rather than lay out a step by step detailed process (proscriptive process design) you outline specific outcomes for the project (outcome based process design).

This would include:

Identifying what is wrong with the current process,
Creating a general vision as to where you think the current process could improve,
Setting specific measurable goals for improvement – including areas to focus investment and amount or degree of improvement desired.
Considering your pathway toward maturity – how much will it cost to improve down the line?

Within this framework, you can then invite technology providers in for conversations and focus on finding a partner with a technology that can provide measurable performance improvements as well as a platform that is flexible so that it can stay relevant for this process as well as future required changes as your business continues to grow and evolve.

Once you have a partner chosen based on technological prowess, flexibility, industry knowledge and compatibility, you can then engage in detailed process design in tight partnership with the technical platform you have chosen. You can then also do a review of compensation structures and organizational design to ensure these will be flexible in supporting new process and performance expectations.

[Quick word of warning: This does fly in the face of the normal RFP process where a company says, “Hey, we want to do something but we are not going to share the specific details or outcomes we are going to measure nor any of our criteria for success.” What ensues within the responders is a process of guesswork, misdirection, outrageous claims and leverage which, in many cases isn’t entirely dissimilar from a season of “Survivor.” And yet, after it all, many executives end up choosing based on faulty assumptions about long-term cost savings and NOT business outcomes.]

There has been specific research done on this by a few groups and the statistics are frightening:

70% of process redesign projects fail to deliver on the business case and the budget. Only 30% actually hit the minimum marks!!

The holistic approach, however, produced strikingly different results.

50% reduction in total project time,
35% reduction in total project cost,
70% improvement in technology uptake
60% improvement in attaining business case

This really seems like a no-brainer but yet, as noted at the start, people are still approaching corporate performance improvement like it’s 1985.

How can we evolve this conversation beyond old paradigms? What can be done to help drive efforts to improve corporate performance such that our companies not only survive but thrive?

More about our forecasting and planning software.

Why IT projects fail: changing client expectations for technology vendors

Posted on February 13, 2010 by Gene Tanski

Client expectations for their software and technology providers have got to change.

Major technology implementations are significant investments: money, people taken away from their day jobs, and opportunity costs. With all that at stake, why is there such an extreme lack of accountability for specific business results? It is utterly baffling to me. How often do clients get demonstrable business value — features and functionality that actually make their business better in terms of customer relationships, revenue and profit? Not very often. There is not much good about the current recession, but here’s one potential silver lining: it is forcing more companies to think of IT decisions as business decisions that need to demonstrate an auditable link to driving growth and revenue for mission-critical operations.

The rate at which business technology implementations are considered failures is north of 70%, according to multiple studies from McKinsey, AMR and Forrester. What would you do with a stamping press, paint line or vendor that failed 70% of the time?

Vendors simply have to stop BSing. And clients have to quit letting them get away with it. Technology, and software in particular, has to work as advertised, or clients should get their money back so they have a chance to work with something better. We can’t afford the old way anymore.

Two pitfalls that doom business technology projects: requirements gathering and the old “over-promise, under-deliver”
When clients change their expectations and clearly define the business outcomes by which the project must be judged, we clear the way to improve formative stages that are a two-step to frequent failure: requirements gathering and promised results.

Requirements gathering
Here’s something that happens at way too many companies: the vendor puts their client’s team in front of a whiteboard and encourages them to dream up software in a vacuum. They really don’t know what they want or the capabilities of the software in context of their actual business processes. They don’t know the capabilities of what’s out there, nor are they, during this critical process, asked to see their company in terms of the software. Their understanding is limited to what they know from their day-to-day experience and whatever chock-full-of-functionality marketing brochure they’ve seen last. In other words, they are limited to what they know, and that limited knowledge drives the outputs from the requirements gathering sessions. But what about what they don’t know? What about the possibilities? If there is a software tool functionality that would eliminate three steps from a process, wouldn’t you want to explore that impact?

Requirements planning should be done within the context of the technology platform chosen — in this case, the software. Wouldn’t it be more powerful if you could react to the software by visualizing your company within it? What if you could react to what works and what doesn’t in context of your actual job and responsibilities? Wouldn’t that be more meaningful than a whiteboard? Wouldn’t you feel more ownership of the end product if you got to provide informed, constructive feedback and really help your team decide which features work and which are a waste of time?

Overpromising
Once we’ve made our choice and undergone implementation, the technology should then do what we all agreed it was going to do. When it doesn’t, this is when the “partnership” to which both sides professed early on starts to fall apart. Rather than focusing on addressing the problems or the misunderstanding, usually there is an investigation, fingers are pointed, and then the negotiations begin as to the solution. Not surprisingly, the new solution requires yet more money, and somehow, despite the best corporate negotiators, the customer ends up footing the bill. Only the software industry (and maybe the finance industry over the last couple of years) can look people in the eye, tell outright lies as to what is really going to happen, and then make the customers pay for the result.

Until the people who actually write the checks start refusing to perpetuate this dynamic — you demand more, you demand measurable results, you demand outcomes and refuse to pay if your investment does not deliver — then the majority of these projects will continue to be failures. Ultimately, the customers will lose an opportunity to become more competitive, both domestically and internationally. And that is a large and painful cost that rarely is identified and discussed. Changing our expectations and avoiding these pitfalls sets the stage for IT to truly improve your business.

The first step is simple: decide that you deserve better and act to make it happen.

An open letter to the C suite about your integrated IT shop (Pt. 2)

Posted on January 29, 2010 by Gene Tanski

Dear C Suite:

Hi, it’s Gene Tanski again. In my last missive I talked to you about how IT is really about driving better business performance, creating cash flow, and giving your teams the tools they need to compete — and how going across the board with an integrated IT suite means at least some of these teams are going to be stuck with sub-par functionality. And that is going to cost you.

The Oracles and SAPs of the world buy other companies because they know their current offerings are not competitive. And in the process of acquisition and all the resultant difficulties, the purchased technology gets watered down and ultimately the functionality loses its relevance because it is no longer the one and only focus of the company that made it. It has to compete for resources and time; it no longer represents the business value for which it was originally purchased.

In the integrated ERP strategy, the sales and operations planning groups usually get stuck with the sub-par functionality. This is in part due to the nature of salespeople: anything they can do to stay focused on selling and not having to do any “administrative” work will be supported. So if they get stuck with something that doesn’t work all that well, isn’t easy to use and doesn’t add measurable value, then they can say it doesn’t work and it’s wasting their time.

But there’s a bigger problem here: a vital group of professionals are not actively participating in the S&OP process and focusing on forecast accuracy — potentially costing the company huge amounts in reduced revenue growth and increased production costs. If there is any area where your professionals need the best tools and support, it’s in sales and operations planning. Their activity drives the forecast, and forecast error negatively impacts the operations side, the customer service side and the finance side (how many times have you seen a stock get hammered because of a missed forecast?). It is a bit like flying: even being a degree or two off (your forecast) leads to a big miss in your final destination (customer service levels, inventory amounts, etc).

Again, this is usually countered with the “line item cost” response. However, even this doesn’t hold up when you consider the total cost of ownership (TCO). Maybe purchasing officers are able to claim huge value add because the ERP vendor bundles together the functionality, and because Oracle threw in the Demantra licenses for free. Free? Really?

What happens when it is time to upgrade? See all those attractive, bright kids wandering around with the consulting logos on their shirts? Are they free? While the initial license might have been thrown in, do you really think they are not included in the maintenance cost? When something is not working and you need support and fixes, are those free? If your business changes and you need to rearrange some of the process flow within the software and change the configuration? Free? Do you really believe that? Didn’t think so, but these issues are tragically not brought up often enough when your ERP rep is dangling free shirts and big “value adds.”

And where are the professionals who question why the licenses were thrown in free in the first place? Could it be that these companies know the stuff is sub-par, doesn’t add value, and basically has to be given away?

Lastly — and this is the cruel irony of the thing — in the fevered pursuit of a single vendor and the associated wardrobe enhancement opportunities, IT shops are setting up their own demise. By using a single ERP vendor, companies are forced to simplify and homogenize their processes, becoming more and more similar to competitors who use the same system. The work within the department is also homogenized — there is very little difference between one Oracle support person and another. This is not a knock on the people themselves, but rather an acknowledgment that the skill sets required are standard and easily replicable. And since the whole justification of the single-ERP strategy is cost savings, the IT department has allowed their value to be defined solely in terms of cost rather than the ability to help their team compete better. Do you really think Q branch would have been tolerated had it continued to equip 007 with the same equipment that enemy spies were using?

Don’t think for a second that the aforementioned consultants don’t know this. They are vested partners in pushing this strategy. Why? Outsourcing. The more homogenized that IT departments become, and the more they define themselves on cost, the easier it is to make the case for outsourcing. “Hey, it’s just an Oracle/SAP/Infor/JDA environment, just like all these other guys. We can take it over, consolidate support and deliver to defined service levels for a lot less than your in-house department.” Ironic, don’t you think?

When focused on the correct areas of the business, best-in-performance environments are easy to support and maintain, result in a lower total cost of ownership, and allow IT and business to work together and create competitive advantage and profits.

I know it was a long letter. But I felt like you had to hear it.

Yours in creating your future profits,
Gene Tanski, CEO
Demand Foresight
Golden, CO

An open letter to the C suite about your integrated IT shop (Pt. 1)

Posted on January 17, 2010 by Gene Tanski

Dear C Level:

On the surface, riding the trend towards integrated vendor strategies — moving all functionality under one vendor brand name — seems to make sense. So do the routine justifications: that one vendor allows for a more integrated data environment, a simpler maintenance and support structure, and potentially lower costs. Simpler support means fewer people. A single vendor’s technology means fewer skill sets are required in your IT shop, and your company has more leverage over the vendor for better pricing in return for a better footprint. But you’re ultimately paving the way for poorer business performance — and maybe your own obsolescence, if you’re the CIO.

Your IT department is typically seen as an overhead cost, so you view anything you can do to drive down that line item number as a good thing. However, the one-vendor strategy ultimately yields a Pyrrhic victory. While you do get some potential short-term cost reductions, you’re ultimately setting your company up for diminished competitive advantage. Now the sales and operation professionals are forced to use less-than-class-leading software tools, your company faces huge opportunity costs in revenue growth and customer service capabilities, and there are very real and measurable negative impacts in the areas of production, inventory and working capital. Plus, you’re one step closer to making your whole IT department superfluous. Wow. Hope the free dinners and rounds of golf were worth it.

Let’s be really clear here: no manufacturing or distribution company in any industry has ever gained competitive advantage because it could generate a nice balance sheet or produce a purchase order or an invoice two days more quickly. Now, I am not arguing that — if everything else is absolutely perfect — these are not reasonable areas on which to focus, but with most companies operating with 40% or more forecast error at the execution level, your focus needs to be on driving company cash flow and profitability.

That means that you have to give tools to your company’s professionals that allow them to perform measurably better. Best-in-class, or better yet, best-in-performance software strategies focus on what the people in your company need to outperform the competition. Your big, single-vendor ERP strategy does not allow for this. The integrated ERPs have never been, are not currently, nor will they ever be best in performance for each area of functionality that gets listed in their official footprint. Which means that in a single-vendor strategy, at least one critical group in your company’s business is going to get stuck with sub-par functionality.

You may reason that the advantage in data integration and the other “benefits” listed above more than outweigh the inconvenience that the afflicted group or groups have to face. After all, who really knows if some of those opportunity costs really exist, and even if they do, it’s too hard to measure them, so let’s go with what we can measure. Big mistake, and in my humble opinion, a complete shirking of an officer’s fiduciary responsibility to owners. I’m looking at all of you, C suite.

Data integration is no longer an issue with the advances in database, middleware and interface technology. Data is now basically platform-agnostic; really, the only focus needs to be identifying systems of record, reducing multiple data entry situations, and keeping the data clean through standards. This can be done as easily in a best-in-performance environment as it can in an ERP environment. Don’t believe me; for you business people out there, what exactly do you think Oracle and SAP and Infor are doing behind the scenes when they roll out new functionality on the heels of acquiring yet another software company? They are creating a quasi-best-in-performance environment that would be exactly what your IT shop would create if it managed such an environment consciously.

Is there more to it? You bet. I’ll take it all up in part two of my letter.

Yours in creating your future profits,

Gene Tanski
CEO, Demand Foresight
Golden, Colorado

Youthful inspiration + experienced implementation = competitive advantage

Posted on December 22, 2009 by Gene Tanski

One recent morning as I was dropping off my kids at
their regular 4:45 a.m. swim practice, I was really struck by it: here
were a bunch of kids, none older than 16, who were choosing to
physically abuse themselves and were actually looking forward to it.
By the time they were done with practice, they were joking with each
other, playing around, talking about the weekend, what was going on at
school — real energy and optimism and “Hey, what are we going to
achieve today?”

It reminded me of how a 25-year-old teammate issued us a challenge that led to a transformational moment for the company. This is kind of a left turn from my usual post, but the topic has been rattling insistently around in my head like so many anchovy-stuffed olives (my favorite in a martini).

It’s a prevalent theme in our discussions with potential customers: the corporate leaders with whom I regularly speak are tired of the uncertainty in the current regulatory environment, are concerned about growing their business, and want to nurture enterprises that are win/win for employees, shareholders and their communities. But how? And how to do it better, faster, more efficiently than other well-run competitors, where smart people are asking the exact same questions that you are?

Given that my blog is about demand forecasting software and value chain management, maybe you were expecting an answer pertaining to improved forecast accuracy and everything that entails — closer relationship with customers, expanded uses of external information to more clearly delineate demand signals, better inter-company collaboration — and you would be partly right.

But it is not the only answer. In fact, true to the very basic tenets of capitalism, it struck me this morning that there is no one right answer. The key is finding creative, individual answers and then executing properly and with conviction. I realize this seems obvious, but I talk with a lot of companies for whom the reality of “getting it right” remains elusive. How do you generate a constant stream of creative, fantastic, bizarre, untethered ideas and distill those ideas into actionable, executable building blocks for competitive advantage?

I think this is one of the forgotten lessons of the dot-com boom and bust. Against a backdrop of new technologies, a large majority of new business were founded on completely new thinking by young professionals. They were founded on great ideas that were unencumbered by fear or reality or personal perspectives of what is or is not possible. Pundits labeled the era the new Industrial Revolution, and the superlatives didn’t stop there.

However, given the end result at least of the first wave, the potential was never realized because the youthful visionaries had no fear, no sense of reality, nor a grounding in the necessary disciplines that would sustain their vision over time. I’m convinced that the companies that succeed are the ones who find a
way to fuse the experience of the “old hands” with the starry-eyed,
“anything is possible” optimism of younger employees and business
partners.

At Demand Foresight, we got this lightning-in-a-bottle process right in what became a watershed moment for the company.

We offer a guarantee — both for overall performance of the software and a specific reduction of execution level forecast error by 25% both over what a client currently produces and against anything the competition can offer. No other software company offers anything even remotely similar. Why? Well, one reason is that they probably can’t back it up, but more importantly, no one every really considers it a possibility. I know for a fact that we didn’t until a 25-year-old Xbox fanatic, snowboarder, and dating Lothario named Coleman Hutchins looked up at me during a fairly heated sales meeting and said, “Dude, if we’re that bitchin’, why don’t we guarantee it?”

“What?” I asked him. “Are you nuts? Do you have any idea how software works?”

“No, not really, but I hear you guys constantly complaining about how everyone else over-promises and under-delivers. Why not do something about it?”

It was a little bit like learning how to fly, as characterized by Douglas Adams in his Hitchhiker’s Guide to the Galaxy books: the key to flying was to throw yourself at the ground really hard and miss. It was exhilarating. I felt like we had just missed the ground.

Once we got our minds around the concept, the experienced guys on the team were able to adjust some long-held assumptions and work through how to handle the risk, build the pricing and generally operationalize a concept that has become our competitive differentiator.

I was forced to face the power of this unvarnished, un-cynical, everything-is-possible type of thinking again when our company got the opportunity to work with Charlie Besecker from Summit Outsourcing. We had been working with lead generation, cold calling groups for a number of years with limited success and a lot of frustration — with groups led by experienced salespeople.

Charlie and his team had no real sales experience — heck, no real experience running a company. But they had a couple of really intriguing ideas about how to improve the effectiveness of cold calling and an idea on how to prove them. Combined with the necessary experience from the Demand Foresight side (and a bit of cash), we gave it a go. I cannot give away Summit’s secret sauce, but the effectiveness of our lead generation programs increased by over 500%. Once again, we had thrown ourselves at the ground and missed. Feel free to call Charlie at 720.874.9757, and tell him Gene sent you. Just be prepared for something different.

You shouldn’t be afraid to take advantage of the multi-generational strengths under your company’s roof — youthful exuberance side by side with experienced implementation. Bring all of them together. If managed and lead correctly, it could be something special — something that didn’t quite see fruition during the dot-com era or subsequently, but did generate enough signs of success to prove that this needs approach should be considered by all leaders within established businesses (constant force of rejuventation) and those starting new enterprises (competitive differentiation).