2. Understand the drivers of business value and embed that insight in performance measures

Fortunately all enterprises are logically similar, consisting of process groups, those being Management, Support and Core Processes.

The core insight is while value is in fact a function of FRARCR, it is resource allocation over those cycles that drives value.

Value is fundamentally driven by decisions managers make about the way resources are allocated over life cycles and the way the enabling processes are designed and executed.

This means that we can link what every single person does directly to value via the processes they execute and that we can measure performance in simple economic terms.

3. Understand criteria customers use to set prices and hence the total value

Customers ascribe value based on a few characteristics of products and services. In financial services it is alignment of interest or even more fundamentally trust. Further, customers increasingly value the intangibles as their key differentiator, that is, on the nature of the experience they feel during the acquisition or use processes associated with the product or service.

In addition we need to understand the other experiences that are shaping customer expectations, not just those provided by competitors but also their experiences in the wider environment.

Investing in characteristics which are not valued by customers has an impact on the price they set and, by definition, is value-destroying unless it reduces other pieces of the value equation such as cost or risks.

So to design processes we must understand the qualitatives around tangible and intangible decision criteria, for the current environment but even more importantly the future.

Most fundamentally of all, consumers are becoming increasingly experienced at judging organisational intent. That is: whether the enterprise means what it says it means.

4. To simplify design, focus on underlying customer need first, not the product or service

Maintaining focus on the needs of customers, dramatically simplifies the product and process design and guides development.

The place to start is always with the “end customer”, then to work back into the distribution and processing process.

5. Link process measures to business value (including customer value criteria)

Performance metrics have to be related to ‘what is done’ while at the same time directly linked to the holistic value indicators. This linking can be readily achieved using processes as a key business focus.

Value focused performance improvement is therefore achieved by a consistent focus on process definition, execution and improvement in all parts of the business.

Three key metrics are:
Effectiveness - that is the extent to which the defined customer and shareholder intent of each process is achieved, then
Service Level - that is the speed of process execution (e.g. responsiveness to customers) and process capability, and only then
Efficiency - given the preceding Effectiveness and Service criteria are met this metric refers to the use of minimum input resources for the specified outputs.

In addition there are three typical performance ‘overlays’:

• Uncertainty
• Value / Cost, and
• Location / Channel Accountability

6. Recognise that each class of process has an explicit role, and match metrics accordingly

Each process type (or class) has a specific role in value creation and can be correlated with an organizational function. For example, Enterprise Management Processes select the businesses in which to participate, allocate resources across the Business Units, identify dependencies, identify synergies, set policies and standards, undertake external communications.

Business Unit Management Processes plan the business within the constraints determined by corporate planning processes, control the business, allocate resources. These processes should be as business specific and value related as possible.

Core Operating Processes execute the value creating processes of the business.

Business Unit Support Processes are business specific processes that enable the core business and management processes to achieve their intents. These processes should be as business specific and value related as possible.

Enterprise Support Processes are processes that are sufficiently generic to be executed on behalf of the businesses. These will be more prevalent if the interdependencies between the businesses are high or if there is a low volume of specialist activity in each business or if the requirements are common.

7. Enterprises should be thought of as “fractals”, operating in a “sea of fractals” (economy)

The notion of fractals is drawn from the natural world and refers to entities that retain the same logical structure whether large or small e.g. crystals remain complete ‘units’ of structure with similar characteristics whether large or small.

In our work we have applied this notion to business so that all business activities, whether at a corporate, business, function, work-team or individual level, all exhibit an identical logical process structure.

This means that the rate of analysis and design can be accelerated frequently having elapsed time whilst simultaneously improving quality and the level of re-use. The level of re-use is about 90%.

As a result, we can think about business as streams or, if you prefer, strings of value.

This means that value, process, information and strategic analysis can be very rapid, thus increasing the potential for increased speed and flexibility.

In addition these approaches fundamentally change the role of senior executives and create transparent economic accountability, enable progressive change to capital and ownership structures to optimise their value, allow varying cultures and leadership styles to meet the competitive environment of each business, increased flexibility, and decreased risk to cash flows.

In summary, this represents a paradigm shift.

8. Always determine ‘Why?’ before ‘What?’ before ‘How?’ so that success can be defined and measured

We start with the Why? which includes confirming, or re-establishing enterprise direction and customer alignment. Why is the business rationale for processes being executed. More specifically it focuses on purpose, competitive environment, customer segmentation, strategy and measurement, customer/consumer needs, product, channel and media. Why in effect defines what success looks like.

Processes are the What?, that is the Management, Core Operating and Support Processes needed to deliver the Why. There are various states involved in process design. The What defines the process changes and initiatives required to transform performance.

The final step is the How?, i.e. the Why and the What determine the requirements for all the enablers (or the nature of process capabilities) - these are the How dimensions. The How describes the transition including the projects and initiatives to be completed and what will be required to sustain and further improve process performance. The transition will generally embrace (and often concurrently) both technical and social solution sets.

The Why?, What? and How? are applied at three distinct levels - the total system, the internal architecture, and at the operational level.

9. Understand that transition management is permanent and that it must be holistic

Transition is often the greatest challenge.

Effective transition processes involve all dimensions and frequently include all stages in the value chain. A single failure to integrate is sufficient to cause failure overall.

Change or transition processes are frequently the competitive differentiator.

Competitive advantage is generated if the processes have the capabilities to enable, transition faster, more frequently, at the right time, at lower cost and at lower risk than competitors.

10. Recognise that change is permanent and uncertain �“ sometimes we will get it wrong, so design to ‘un-build’ as well as to ‘build’

Finally we must recognise that change is permanent and uncertain and that sometimes we will get it wrong so design to ‘un-build’ as well as to build.

Sometimes there is a ‘slow mover’ advantage, i.e. it is better to analyse and design early, but implement late if the risk curve declines rapidly with time.

The key is to design to un-build as well as to build and design to change quicker, at lower cost and risk than current and future competitors.