Strategic Analytics

Yesterday I presented at WCBF's Global Lean Six Sigma Summit, discussing of the importance of strategic analytics (for slides visit my personal homepage). Lean Six Sigma, as you may know, is a data driven framework for reducing variation and defects in a process. The strategic focus on analytics is a concept that Tom Davenport and Jeanne Harris have been advocating for years. Many companies consider themselves "strategically focused" on analytics. In my view strategic focus is not being bogged down by metrics but focus on the strategic metrics. This is akin to Lean Six Sigma's motto: its not about doing things right but rather doing the right things right. Thomas Davenport offers a maturity model (similar to the project majurity model or CMMI) that places at the top of the pyramid companies whose large-scale ambition, senior management commitment, enterprise-wide use of analytics and ability to drive value out of distinctive capability offered by analytics has peaked. He considers these companies analytical competitors as they have turned analytics into a unique comptetitive advantage. Netflix is one such competitor:

They use analytics in their movie recommendation engine. They use analytics to throttle their fulfillment (a practice in which infrequent customers get priority over heavy users because they are more profitable). Netflix uses analytics to predict the commercial success of a film released to DVD to determine the number of copies they will need to license use for. Evidence to their strategic focus on analytics is the fact they awarded $1m dollars (through the Netflix prize) to the group that would develop a recommendation algorhythm that would improve their results by 10%. When was the last time your company offered the public $1m to the first individual(s) who would improve your product performance by 10%?

Google is another obivious analytical competitor as it is core to their financial success in keyword advertising. The focus on data is so strong that when Google's renowned designer, Douglas Bowman left the company 6 months ago he claimed the company's reliance on data was so extreme they would test the effect of 41 shades of blue to determine the impact on user searches.

Irene Au, director of user experience at Google says:

“Search is such a fragile interface. It’s humbling to see how the slightest
changes in design, just pixel-level changes or barely perceptible changes to
colours, can have such a dramatic impact on usage and revenue.”

Is your company an analytical competitor?

30 Rock Lean Six Sigma

The last episode of 30 Rock puts Lean Six Sigma front and center. If you haven't seen it, here is an excerpt, curtesy of NBCU's Hulu, including Jack's meeting with "the six sigma guys", a crazy lego game in which Liz becomes a major embarassment and more! (A must-see for Lean Six Sigma practitioners).

So without further ado, here you go. To view the entire episode, click on the video and a new Hulu window will open:

AHP for up to 6 parameters

In September 2008 I wrote an article on Analytic Hierarchy Process - a method to prioritize and evaluate the weight of factors in a complex decision. Basically it works like this: you come up with the factors for your decision. Rather than trying to figure out their individual weight you pit each factor against any of the other factors. The mathematical model then calculates the weights for you.

Read more in this article

I recently made good use of this method: I am a member of a panel of judges for an international competition for business innovation and quality. We wanted to have a structured way to weigh the factors in deciding the score of an application for the award in one of several categories. This would help create a standardized scoring sheet in which a judge has to decide a "grade" for each factor and that grade is multiplied by the weight to generate a weighted overall score for the applicant.

In each award category we had between 4 and 6 factors: e.g. "strategic impact on the organization", "leadership participation, etc.". With a panel of over 10 judges it would be difficult to agree that "strategic impact" should carry a weight of precisely 40%. Instead we used the AHP process and voted on pairs of factors and weigh them against each other.

I have updated the excel template and enhanced the VBscript code to support the following:

1. The template now allows for as many as 6 factors
2. You can have up to 4 tabs of AHP factors to work with in a single workbook. This was helpful to us because we worked out the weights for 4 categories in the competition, each with 4-6 factors.

Read the original AHP posting and download the updated excel spreadsheet there.

Dealing with complex decisions: Analytic Hierarchy Process

Strategic decisions, project prioritization and dating. We all face complex decisions in our lives and how happy are you that I will share with you a neat technique based on mathematics and psychology developed by Thomas L Saaty in the 70's?! Analytic Hierarchy Process (AHP) helps rationalize and structure a complex problem by decomposing it into a hierarchy of simple problems.

Once the hierarchy is composed the technique allows for comparing pairs of sub-problems against each other rather than trying to immediately prioritize them in a serial fashion. If you have participating in any of the on-line profiling tools (that many dating sites provide for free) you will recognize the technique: rather than ask you to rank your likes/dislikes, you are given pairs of choices: "Do you prefer a candlelit dinner or night at the movies?", "do you prefer night at the movies or going to a club?", etc.

After pairing each factor against the others, the technique allows you to calculate their exact weights so that you can now score your options using these weights. E.g.: If your dating preferences ended up as follows:

• Candlelit dinner: 80%
  
• Night at the movies: 15%
  
• Going to a club: 5%

Then you could score your potential "mates" against these factors and apply the weights to get a weighted score for each.

For a hands-on example of AHP in deciding which job offer to accept, read this example walk-thru and you will quickly understand the concepts at hand. The example is about an employee, Peter, who is mulling over 4 job offers. Rather than decide between the 4 companies he considers factors such as location, salary, job, content and long-term prospects and leverages AHP to formalize the relative importance.

To simplify the calculation of the AHP weights I created a template spreadsheet available for free download:

• Click to download AHP spreadsheet (Updated 11/12/2008)

The calculator contains my (fictitious) factors in choosing an apartment in New York city (inspired by my recent move from midtown to the upper west side). I used Size, Location, Cost and Transportation. Then I entered (into the yellow cells) the names of the features to pair/compare and how they stack up against each other. If you read the example walk-thru document reference above then you will understand how the spreadsheet works. I added some cool features to the mix: After you update the spreadsheet, the "ranking weights" table updates with a bar graph and resizes the fonts in the table based on your calculated weights.

IQPC Conference in January 2008

In Jacuary 19-22, 2009 IQPC will be holding the 10th Lean Six Sigma & Process Improvement summit in Orlando, Florida. Over 1000 people are expected to attend from both manufacturing and services organizations. I am honored to be one of the guest speakers at the conference. The title of my presentation is: "Driving change with Lean Six Sigma without alienating jargon".

Global Lean Six Sigma Summit

You are invited to join me at the conference where I will be co-presenting with John Sabino, SVP Commercial Operations on the topic "NBC Universal Case Study on Streamlining Sales Processes". The conference takes place on October 14-17 in Orlando, FL.

In the first quarter of 2007, NBC Universal’s Strategic Initiatives & Analysis (SIA) in conjunction with Ad Sales Commercial Excellence Team launched a major transformation initiative to streamline sales processes across eight cable, TV and digital properties. Recognizing new market needs, NBCU’s new strategy and resulting capabilities created a strong platform for growth and a shared vision across a traditionally silo organization. In this sales operations case study we will explore the cultural challenges facing SIA and the use of simple yet powerful process improvement tools and methods to drive ground-breaking change.

Furthermore, we will share some of the strategic changes that NBCU is making to transform its advertising sales models to create new value for its customers and the required cultural, organizational, and process changes that are underway to unlock future commercial opportunities.

Link to information on the conference website: http://www.wcbf.com/quality/5087/

Crowdsourcing: Your Life May Depend On It

In the Sept 4th article "Following the crowd", the Economist revisits a popular topic in Internet computing. When we hear of crown innovation we typically think of Wikipedia - the crowd-crafted authority on knowledge (though the courts might not agree). Some people suggest that a large crowd lends itself to a multitude of voices to a point where it is hard to find the needle in the haystack (See James Todhunter's article on "Crowd Innovation").

On the other hand the phenomenon known as Emergence was vividly described in Steven Johnson ("Emergence: The Connected Lives of Ants, Brains, Cities, and Software"). Scientists have long ago discovered that a swarm of ants (who are individually dumb) use pheromones to mark their trails. The first ant to return "home" with food, thus reinforces her pheromone trail. Other ants start following the strongest "smelling" trail and before long you end up with a single line of ants traversing the shortest path to food.

When we outsource complex questions to a crowd of singularly inferior "experts" - will they conform to the most accurate answer? What if your life depended on it?

Companies have long relied on the power of the crowd to poll for ideas and test new product ideas ("what new themed restaurant would you want to create?"). Crowds have been used to track war criminals on Google maps, spot CIA airplanes by their call signs as they travel around the world and to report on traffic conditions.

Alpheus Bingham founded a marketplace for crowdsourcing complex questions. His site - innocentive.com - ellicits individuals to compete for solving some of science's most perplexing challenges by connecting companies, academic institutions and NPOs "with a network of 160,000 engineers, scientists, inventors and business people."

If we are to agree that the crowd is greater than the sum of its parts, how would you like to outsource your medical diagnosis to 1000 individuals around the globe? A reader on the blog "Crowdsourcing" suggests just that. Having endured conflicting interpretations of her own MRI scans she puts her trust in a crowd's ability to read the images.

Formerly I owned and managed a diagnostic imaging facility where we provided nuclear imaging, echocardiography and bone density testing. There are many factors that impact the outcome of a "read" (the interpretation of test results). For example, in our myocardial perfusion imaging (nuclear cardiac stress test) there were at least three:

1. The imaging process: we used a 2 day procedure that enabled us to give two identical doses of radioactive tracer in two separate procedures (one for rest imaging and one for post-stress-test). Most hospitals used a single day procedure using Thallium or Cardiolite. In a same-day procedure you use a low dose followed by a high dose in order to mask the remnants of the first injection. If the time between both doses is too short then the interference of isotope from one injection to the other greatly impacts how they get "read".
   
2. Imaging quality: The radiation technologist can help or hinder the correct interpretation of the results. After the images are taken various filters are applied to enhance the results and the images arearranged on "film". If the procedure was a single-day process then the technologist might over-compensate for the difference in dose sizes (see #1) thus resulting in a false positive or false negative
3. Quality of the "reader": Many physicians are installing diagnostic equipment in their offices as a means to increase revenue. Their experience as clinical diagnosticians differs from that of a radiologist who typically "reads" these images. Accuracy is 70-90% depending on the expertise of the reader.

The crowdsourcing of diagnostic imaging neglects the other factors that render an accurate determination: do you have an inferior wall defect or do you not?

The classic value chain here is:

Technician prepares images to -> radiology who reads them and sends them to -> physician for diagnosis

Does a crowd "vote" help improve the odds of a correct diagnosis?

Related Books: "Crowdsourcing: Why the Power of the Crowd is Driving the Future of Business"

Psychographic Analytics & Behavioral Targeting

A recent Forrester study reveals that MSOs (cable carriers) and broadcasters have finally teamed up to deliver relevant advertising to viewers, thus overcoming the challenge inherent in ad-skipping from viewers with access to DVR viewing-boxes or those using digital recording devices that make it easy to move entertainment content from place to place (e.g. the Neuros OSD).

This new partnership will allow MSOs to analyze information about our viewing patterns from the cable box and would result in non-skippable ads being inserted into our viewing content based on our personal interest, even during DVR playback, hence the name "Personal TV".

In an April 2008 Forrester survey, 90% of advertisers polled indicated that they were interested in targeted Video On-Demand ads. This response has prompted me to look into psychographic modeling and targeted advertising technologies.

As companies look at new ways to scour the wealth of information we leave behind while we click through our daily online lives, each time we buy something we contribute to a database of purchasing decisions. Additionally, ad-exchange networks which position themselves between ad serving and content delivery are in a unique position to track our movement around the internet. These companies "mark" us when visiting an ad-exchange site and track us through other unrelated websites, thus accumulating an incremental portfolio of our activities and online patterns. This is a gold mine for advertisers who are now able to piece together the visiting patterns of a 30 year old visitor on 10 different web sites and deduct the psychographic profile (known as "persona") for that person: the visitor is a female; she is a single mother (she visited a support site for single mothers); she in an accountant (she has an online account with a Web 2.0 accounting software platform) and she is in the market for an new car (she visited a carmaker's website).

Now imagine if they can stream relevant ad content to this person's home via her MSO?

How else is psychographic analysis used?

A recent Business Week review of the book "The Numerati" reveals the power of analytics when it is applied to human behavior patterns. Scientists at IBM research have analyzed data about internal IBM's consultants. They looked at emails singling out communication patterns (who was sending emails to whom within the company); knowledge circles (who was being cc'd and who was being blind copied) and power circles (which managers were unaware of communications among their employees and knowledge circles been built by their direct reports).

Samer Takriti, a Senior Manager at IBM's TJ Watson Research Center, led this significant "deep computing" initiative which incorporated a team of specialists in data mining, computational biology, financial mathematics and statistics. His team constructed a mathematical model of 50,000 of IBM's consultants incorporating information about their skills, communication patterns and other demographics. The goal was to form an inference engine which could help future managers compile optimal project teams. Need to put together a team for a project in Malaysia? The algorithm would recommend a talent fluent in the local dialect, a system architect, developers, etc. Financial information would include, for instance, the hourly rate of each team member so that the manager can substitute lower cost consultants based on required skill set proficiencies and the project timeline. And that $1000/hr consultant that you decided should not be included on the project? He remains "on the bench" for longer periods of time because the model has attrition knowledge built into it so less experienced consultants are treated as "commodities" while the experienced consultants are given greater consideration to job satisfaction.

I find this application quite interesting in light of the Rummler-Brach method to improve organizational performance ("Improving Performance"). The authors hypothesize that in order to truly improve performance, a company must address operational efficiencies at three levels: organization, process and the individual employee.

The lowest level of their model, the individual employee, is where they claim many companies go wrong. Rather than throw unnecessary training at the employees and reprimand employees for inadequate job performance, the authors define the job of managing employees as managing the "Human Performance System". It is based on the premise that people are motivated and talented but are at time put in situations that are suboptimal to their skills. The questions that need to be addressed when managing the Human Performance System are: do the performers understand the outputs they are expected to produce? Do they have the proper support? Are they rewarded for achieving job goals? Do they have the necessary skills, knowledge and capacity to achieve the job goals?

Takriti's model may be a step in the direction of automating the management of the Human Performance System and can perhaps be an interesting incumbent to prevailing analytics aimed at building psychographic models of web visitors.

The penalty for task switching

In today's demanding business world we are expecting more and more out of our employees. They should be cross-trained and should be "wearing many hats" and handling many tasks. There is a point in which multitasking (the habit of working on multiple projects at any given time) takes a toll on productivity.

Your intuition tells you this is true but to what extent does it compute into reality? Let's examine the most efficient of task handlers: the computer.

If two tasks take 10 seconds each to computer then executing them sequentially would look like this:

Process 10 seconds of task 1
Process 10 seconds of task 2

If we decide to multi-task them, the outcome would be as follows:

Process 1 second of task 1
Process 1 second of task 2
Process 1 second of task 1
etc...

In an ideal world, each task would consume the same 10 seconds of processing time, although as you might have observed, Task #1 was completed within 10 seconds and Task #2 though completed in 10 seconds time, had to wait for task 1 to complete. If you were able to prioritize task 1 over task 2 then sequential process let you complete it much sooner.

Lets take another look at the multi-processing timeline for tasks 1 and 2:

Time: __1__2__3__4__5__6__7__8__9_10_11_12_13_14_15_16_17_18_19_20
Task: __1__2__1__2__1__2__1__2__1__2__1__2__1__2__1__2__1__2__1__2

Task 1 will complete after 19 seconds after it began, and task 2 will complete after 20 seconds.

Now consider this: in order for the processor to switch between task 1 and task 2 it needs to save the data in memory for the first one and load up task 2. If task switching only takes half a second then the total time from start to finish for task #1 is 19 seconds + 18 * 0.5 second = 28 seconds and task #2 will take 29.5 seconds.

What about human task switching?
A friend of mine, Jochen Krebs, asked me to review his new book to be released July 2008 on Agile project management (highly recommended, buy it on Amazon). Jochen references to human task switching penalty as he discusses resource utilization in project portfolio management. Research has shown that humans spend on average 15% of their time switching between tasks when they are multi-tasking. To use the numbers in the above example, a project where key resources are shared (multi-tasking), will take more than twice the amount of time to complete, in fact at least 115% more in order to accommodate for task-switching. In fact on average, task switching costs 20 minutes to 1 hour a day of "mental time" needed to refocus on the task at hand.

Gurus in space of project management have come to the conclusion that it is better to have one person working less than maximum capacity than 4 people interrupted daily.

Should we never multi-task?

Studies have shown that productivity is significantly impacted when multitasking more than 2 activities. It is for this very reason that organizations that adopt a rapid delivery methodology such as Agile - stay away from sharing resources across multiple projects. Merely the multitasking that occurs in our regular work activity is enough to take a toll on our productivity. To compound that with inherently different roles (projects) is a direct shot at productivity.

If you want to read more on this subject, here are a few recommended books:

Critical Chain by Eliyahu M. Goldratt
Slack: Getting Past Burnout, Busywork... by Tom DeMarco
Peopleware: Productive Projects and Teams by Tom DeMarco and Timothy Lister

Don't Judge Me...

I was asked to be a panel judge for the Global Six Sigma & Business Improvement Awards 2008, which celebrates outstanding organizational achievements.

The Global Six Sigma and Business Improvement Awards are given to the most outstanding organizational achievements through the deployment of business improvement programs.

The focus of this elite awards program is to demonstrate to the global business community the real results and excellence which organizations achieve through the successful deployment of Six Sigma and other business excellence programs.

The Awards present a great opportunity for organizations to win recognition for the great work that their Six Sigma and business excellence people are delivering to customers, shareholders and other key stakeholders.

Visit the award website http://www.tgssa.com/judging-panel.html for more information.

Information Gathering: Turning mounds of data to neatly stacked knowledge. (Part 1 of 2)

Effective process improvement begins with an intimate understanding why people do what they do and how the current process oeprates. As an external consultant or a strategy & transformation leader within your organization you will ultimately find yourself "facing the music" during a pitch-out: will someone in the crowd stand up and say "this is b#**" or will you get enthusiastic nods for your keen insight? We will discuss the most fundemental ways in which data (easy to find) turns into knowledge (hard to get)

Where in the world is my process analyst today?

For the purpose of our discussion I will assume you are familiar with one of the prevailing quality/capacity improvement methdologies such as Lean, Six Sigma, TQM, etc.

If you were convinced that the two consultants depicted by "office space" were effective, your approach to "process improvement" begins with firing everyone involved in the process, bulldozing the buildings they occupied and rebuilding your company all over again (a-la "office space). If you find that this approach generates some "friction", I would suggest another way:

Make yourself credible enough to convince the people who live the process you know what it feels like sitting in their chairs. That you are able to demonstrate uncommon wisdom about the root causes and that when you guide them to a solution that they will follow you with blind obedience knowing they are doing the right thing.

Wow! you say? How do I become the piper?

Your first step is to learn 10+ years of process pains/aches within the prep period prior to an attempt at a process change. Hopefully your project charter allots at least 2-3 months to gather information (notice I did not say "gather data") and so become an imbed within the process. The reason I mention the fact you need to gather information is because data is usually abundant. It is your role to turn that data into information and knowledge. A good (and smart!) friend of mine, Harold Rudolf, is an expert at building mental models and has a very simple view of the genesis of knowledge:

The "X" axis of this chart denotes the level of maturity of the knowledge & understanding you have of the process (where "you" refers to the process analyst or the business leaders managing these processes).

The "Y" axis ("Risk") is interchangeable with "process improvement success" or "tranformation impact".

The idea behind this mental model is that data, the most rudimentary form of knowledge puts us at the low end of the "X" axis, thus exposing us to greater risk. There are many data systems available in every business whether this data resides on an accounting system, in people's heads or on customer orders in paper form. The risk is associated with the fact thatat this level of process maturity you are not truly "managing" the process; your processess are probably ill-defined and your business is not making decisions based on the data beeing collected but is rather "reactive". This implies a "lagging" effect the data has on your business: when managers look at "data" - they are examining this month's sales reports or last quarter's aging report and can only react to what has been set in stone (hence the term "lagging").

The higher level of matury (traversing the "X" axis to the right) is "information". Here you have added your analytical insights to the data and created extracts, dashboards and queries to take mounds of data and turn them into decision making points. Most organizations claim to have this level of maturity in managing their processess though I would argue that I have seen some leading Fortune 500 companies whose data is so "immature" that it is still "lagging"

A collection of "data" points is meaningless unless you are able to turn it into "information" by asking the right questions (and I might add - view the data in the context of your process).

Knowledge is a higher level of insight into your processes which is forged by applying your experience to the information you gathered.

Transforming Data -> Information -> Knowledge

In a past project for a Fortune 100 bank we examined the granting and revocation of access to the bank's systems. There were SOX compliance issues relating to employee terminations whose access rights were not revoked on a timely basis because the staff at the risk office could not handle the high volume of requests hitting their queue.

Mounds of Data
We readily learned that data was not in shortage. In fact we hard hard pressed to have the data center produce an extract of 1 year's worth of data without continuously crashing the Oracle server. Finally we had several hundred million records of data on our hands. Data that had been used to create management reports on productivity.

Information
One of the biggest challenges we faced with the data was its "collapsed" form. There was a single field of data containing all of the details for each access/revoke request, specifically which system needs to be added/removed for access, which types of access are asked for, etc. This data was not previously used because of the way it had been recorded by the designers of the original system who only tracked the data for the purpose of handling a single request. However it was nearly impossible to generate a report that compares bits of this information across multiple records.

So we designed a set of complex queries and decomposed the data to its original elements and turned this data into information by measuring the volumes of requests by system name and access type.

Knowledge
The last step in our analytical process was to convert the information we marshaled into actionable knowledge: Armed with the experience we gained by walking the process, we started tagging the systems (for which access was requested) by their type, platform and a few other attributes. We classified the volume for requests by the teams assigned to them.

Most importantly, we were only able to calculate cycle time only after mapping the current state process. In the previous "compressed" form, the records indicated a single transaction in the process: the user request generated a single record. The handling of the request (the point in which an operator pulls a request from the queue) yielded yet another record and the abdication of the request generated another record. Each approval of the request generated another record. By understanding the business process we were able to tie the threads together and calculate cycle times from request to handling, handling to approval, approval to approval, and approval to abdication.

At this point the data "sings" with knowledge and it became evident that there were significant delays in the process stemming from the second of the three approval levels. The company agreed to remove this approval layer since the last approval was by a senior manager/business group manager.

We also learned that certain type of requests took a significant longer time to process. So we created what is known in Lean manufacturing as a "supermarket express checkout lane". The majority of the requests which were easy to fulfill were handled by the main process. The exceptions and complex requests were assigned to a new group within the risk office dedicated to these requests.

From here the project took a major leap forward and the team was asked to lead the development of dashboard for management, redesign the queueing method of incoming requests, develop data drill-down interactive reports and measure processing effectiveness based on the critical factors that surfaced in the data analysis phase of the project. The project lead was able to score the SOX compliance level for the process and draw a list of controls based on COBIT framework to significantly improve compliance.

Talk the talk and walk the walk
So now that you are familiar with the data to knowledge model the question you must answer to yourself is do you possess the experience necessary to take information and make it into usable knowledge?

I typically spend a great deal of time talking to people who "live" the process before I get into data collection. For one project this meant "shadowing" news producers and walking with them from their station to the media library to the viewing station to the satellite feed room back to their floor just in order to understand the process complexity they were facing. In another case I spent several weeks shadowing marketing managers in their job to understand how their requests end up in a bottleneck downstream from them (at the end of the process). The other day I spent 4 hours with a member of my team at a large warehouse facility to understand how they receive and handle fulfillment requests for one of the tens of millions of media assets under their care.

The insights you gain by "walking the process" are priceless when you find yourself in a room, facilitating a process improvement event, and need to drive the discussion to where the root cause process breakdowns occur. If you do not understand how much time your employees spend running across a 300 foot access way back and forth to retrieve physical assets then how can you possibly drive them to real-world solutions?

In a follow up article I will share with you ideas for shadowing and collecting process information.

Pockets of Knowledge, Islands of Excellence

When I am asked to help with a strategy transformation I commonly encounter what I would call process entropy: the notion that "this is how we have always done it" compounded with the knowledge that things need to change so please, oh outsider, come and help us.

The surprising, and little known, fact is that there are certain individuals in every organization that know the ins and outs of your process, can pin-point the process breakdowns and help avoid making the wrong turns in designing a new process.

I am reminded of a former financial services organization which asked me to help with the requirements for an enterprise fulfillment solution. Our business sponsor was astute to recognize the need to "Lean" out the process first. The difficulty was that each line of business seemed to have their own process for accomplishing the exact same thing and they dreaded at the thought that anyone would take away their "uniquenesses". So we started out by creating process maps for documenting the "as-is" state. We quickly realized that there are similarities that can not be refuted. These similarities were easier to depict at a higher level view of the process than at the task level. Clearly the activity level for one LOB differed from another. If you pull back and take a holistic view then everyone pursues the same common purpose they go about it in different ways.

This similarity is covered by Cedric Tyler and Steve Baker in their book "Business Genetics", where they suggest a comprehensive view of an organization consists of pursuing the five "W"'s: Why, What, Where, When and Which. These pillars can be posited as follows: understand WHO is doing WHAT, WHEN are they doing it, WHERE are they doing it and WHICH information do they need to do it. They suggest simple mapping efforts to accomplish this.

Funny - every time I start a project I always chart out the territory by building my own "org" chart of sorts: not a traditional who-reports-to-who but a hierarchical diagram of functional ownership. I usually use a tool such as Freemind (a mind mapping tool)

Pockets of Knowledge
So after you interviewed and built an "as-is" understanding of your process, the next step is to "improve" it. You might be following DMAIC if you are executing your project as a Six Sigma effort, or have Lean Action Workouts to let the business drive the change if you are executing Lean/TPS.

What I would like to draw your attention to is the "pockets of knowledge" that exist within the process. These are individuals, from the most unlikely places in the organization, who possess the most extensive amount of knowledge about the business process.

In the past, I have found certain IT people, who were so experienced in responding to system enhancements and had been with their organization for long enough, that they understood the most intricate process challenges and gaps across functional silos. I have encountered these "local experts" at every part of the value chain and they always surprise me with their directness, non politically correct depiction of the present state and their eagerness to help move the organization to the future state.

At NBC I found people who came from accounting and moved into operational roles to have similar insights into revenue generating processes. Sometimes it is simply a user of a system that is part of the workflow of a core business process - someone who had to "invent" ways to interact with the system that were not thought of when it was originally designed.

These experts do not live in constant fear that their job might be made redundant by improving the process, the kind of fear that can put the Kibosh on any well intentioned process improvement initiative. Some organizations even hire FUD managers (Fear, Uncertainty and Doubt) to handle those aspects of organizational change.

Pay closest attention to the local experts of your process. They have been through many previous attempts to make change, and if you establish a reasonable amount of trust and are sincere about your desire to help the process (and not just cut "heads", or as it is known in corporate lingo "cost-out") - then you will find them a wealth of information to understand the gaps between the current state and help you build a transition plan.

How do you identify a local expert?

The most direct answer to the question is unequivocally simple: Walk the process! Take your but out of the chair, out of the constant meetings (even action work outs) and go walk the process. This means you need to meet with people at their desk, see with your own eyes their problems, understand what they go through to deliver what they are expected to deliver and "feel their pain". This pain might be a cumbersome system they need to interface, or an unbelievably complex process that boggles their minds each time they need to work through it.

Here are my persona experiences of "walking the process" and the surprising results they yielded:

By walking the process I learned that although a system was available to complete a task, the person was so frustrated from trying to get real results that they walked one flight up to another department each time they needed materials, and brought them back downstairs to their working area.

By meeting with an individual in their working area I was able to observe an enormous pile of folders on their desk. I drilled down into the root cause of this "stockpiling" and 6 months later that person's desk is not littered with photos of the family and excellence awards...

By "shadowing" another person to meetings with their internal stakeholders, I was able to observe a pattern of communication breakdowns that was causing misunderstanding between functional areas. After a few facilitated sessions, the participants adopted simple prioritization tools and collaboration techniques that helped deliver high performance results, increase in sales and reduction of process defects that they were previously unable to address.

Systemic Innovation & Process Improvement

If you have been keeping up-to-date on articles relating to Lean, Six Sigma and BPM then you will notice that there is a repeating pattern that can be found in every new methodology that has become a recent fad. Six Sigma is in fact the product of re-branding of models and tools that have been available since early 20th century. Lean, Six Sigma and BPM all dervice from tried and tested theorems such as statistical controls, Deming's PDCA cycle, facilitation & brainstorming techniques and more.

Recently I have become engrossed in a long forgotten and little publicised methodology for creativity and systemic innovation - TRIZ. Learn more about TRIZ by visiting the TRIZ trade journal website or look it up on WikiPedia.

I have been re-reading a book written by Genrich Altshuller (the visionary behind TRIZ) titled "And Suddenly the Inventor Appeared". Altshuller described the development of innovative systems as one having four periods:

1. Selection of parts for the system: This is akin to the initial development of airplanes when inventors interested in creating a flying machine had very basic questions such as "what materials should it be made of?", "what are the basic parts?", "should it have fixed wings?", "how will it be powered?", etc.
2. Improvements to the parts: Now that the invention (airplane for instance) has been proven to work we can set on improving its individual components: a more powerful engine, lighter wings, larger fuselage, etc
3. Dynamization of the system: Parts shift their role to assume a different one. Wings that change their profile, collapsible fuselage, propeller that can operate vertically as well as horizontally for upward lift, retractable landing gear.
4. Self-development of the system: The system can adapt to changes in its environment. Today's rockets and space systems that dispose of their own parts, adjust their position automatically to maintain orbit or open up solar panels to replenish energy using solar power.

If you examine this list is sounds slightly like Demings Plan, Do, Check and Act cycles. However as I thought about the four periods I realized that it mimics exactly what we do in our work on improving core business processes or when we try to transform organizations to a process-centric thinking:

1. Selection of parts for the system: When an organization lacks any process definitions (i.e. it is in the initial phases of the process-maturity curve) we find ourselves scrambling to select the parts for the process that will become the permanent and formal definition for the process. When I think of my past initiatives, the first thing I do what assessing a process that has never been defined, captured and documented is to decide how to call the individual pieces (process steps or components) and how they inter-connect. This is based on interviews and informal process mapping techniques ("what do you do with the paper once you get it from X? Who do you send it to?") For a newly defined process, these parts have to be selected and given a title, even if people are repeatedly performing tasks within the individual process steps being assembled in the definition of the overall process.
   
   For more ideas on a component approach to business processes and the impact SOA has had on business component thinking see IBM's excellent article: "Impact of Service Orientation at the Business Level", IBM Systems Journal, Vol 44, No 4, 2005 Cherbakov Et Al . 653.
2. Improvement of the parts: So now that you have gone through an assessment of the business process the next thing you will probably do is look for low hanging fruit and follow a methodology such as Lean or Six Sigma (or combination thereof) to improve the process capabilities. Sounds similar to improving the airplane parts above, doesn't it? In transactional processes this means automatic certain steps (e.g. combustion engine on an airplane versus human-powered airplane) and eliminating unnecessary steps in the process (e.g. eliminating additional wings from tri-plane to bi-plane to monoplane)
3. Dynamization of the system: One technique we use in business process management is reusable components or shared services. For instance: if multiple creative processes use the "legal review" process step then it can become a reusable or shared service. Thus the individual step "legal review" take a modified form in that i can be invoked for more than a single purpose and alters from its originally intended purpose.
4. Self-development of the system: Lean Six Sigma gurus will immediately recognize this period as the continuous improvement. A stable and mature process that has been brought under control reaches a higher level of existence by developing continuous improvement capabilities. In reality this has to do with roles and responsibilities and an incentive to continuously improve a process from within: incentives, roles & responsibilities and policies & procedures established with the goal in mind to be able to detect opportunities to improve a process on an ongoing basis.

Business Process Mapping: A deep dive into the weeds

Having just completed a large scale enterprise-wide process mapping initiative for a financial institution I thought it would be helpful to post some ideas and suggestions that may help you in your process mapping initiatives in your organization.

Who would benefit from this information?
Any process engineering group, Six Sigma practitioner or person in Enterprise IT who are being tasks to help the business create an "as-is" (current state) of the business processes.

Why this post?
There are many books and articles written on the subject of process mapping, Lean Six Sigma current state, etc. You might find it helpful to get a view "from the trenches" of tackling a complex set of process in your current state documentation.

How do you capture current state?
Many financial organizations, especially those contending with the Sarbanes Oxley requirements, have begun capturing their transactional activities from a compliance standpoint. In most cases this consists of "process documentation" documents which are usually in text form.

The "current state" of core business processes that I refer to here is an entirely different beast. It is the shift from functional-area optimization to true business process management (BPM). BPM is the meta-framework which envelopes common business tools such as Lean Six Sigma, Balanced Scorecard, TQM, etc. It is the state-of-mind shift from "I am responsible to get my department to work in the most efficient manner" to "I am responsible to deliver a streamlined efficient experience and the value demanded from me by the customers of the process I am in charge of".

This means that production managers can not be solely interested in efficient production processes. They are a part of the larger value chain. In a Lean manufacturing environment which produces on-demand they are part of the order delivery value chain. This value chain begins in the order taking (call center, sales reps, etc), through order assembly (create order, order parts, order assemblies) continues through production processes and ends in the order being delivered to the requester. Does this sound too "manufacturing-ish" to you? Not at all! A custom life insurance quote could follow the same value chain. A custom marketing material as well. What about the order for a new custom hosting services from an ISP?

All of the above examples are transactional in nature and help illuminate one key point: If each of the individuals who participate in the entire value chain is only interested in the optimization of their work area then who is looking out for the customer between the hand offs? How can we assure timely delivery if requests are queued in the inboxes of each department tasked with requests for the next phase of the value chain? Who is asking the most fundamental questions about the customer's true needs?

If this all seems to digress from the topic at hand, mind you it is not! Business process mapping requires that the "mapper" align themselves to the value chain which they are documenting. This means that if you are being asked to map a narrow aspect of a much larger value chain, stop and think if you are not erring in a too narrowly defined scope.

The importance of a model
So you have properly defined the scope of the business processes you will be mapping. Perhaps this was done in the context of a Lean Six Sigma Define Phase, which creating a project charter. Next you next to determine how will you present processes that span multiple functional areas.

A hierarchical representation of these processes is essential to the success of your effort. This allows you to create a top level enterprise wide model, and drill down levels of detail before you even start tracking the activities and hand-offs that are part of your business processes.

Example 1:

You are capturing the core business processes for the credit card operations of a financial institution. At the highest level you will probably list the following possible core business processes in what we, at CC Pace, like to call "Level 0":

1. Product Management: This would include the creation and modification of new credit cards and account types, including all benefits attached, regulatory filings, SarbOx requirements, etc.
2. Application Processing: This high level process would incorporate all the processes that begin with an individual or business entity applying for participation in one of the product groups managed by Process #1
3. Account Servicing: Sending out statements, handling inbound calls/customer service, web account services and contested charges processing.
4. Funding Processing: Processing of check payments, roll-overs from other credit card accounts, online payments, etc

This would be a great opportunity for you to create a nomenclature for designating a code to each business process. If we are capturing the as-is state of a credit card LOB within a banking organization, perhaps we would call these CC1, CC2, CC3 and CC4. Whereas retail banking Level 0 processes would begin with RB1, RB2, etc.

You might come up with more examples, but the ultimate result is a limited inventory of very high level processes without which your line of business would not be operating as a credit card company.

Once you have created the Level 0 diagram you are ready to inventory all the processes underlying the Level 0 core processes in a Level 1 diagram. What does account servicing exactly entail? Should we group or bundle similar processes? Level 1 processes for CC3 - Account Servicing would possible look like this:

• CC 3.1: Statement Handling
• CC 3.1.1: Paper Statement Generation
• CC 3.1.2: Paper Statement Mailing Consolidation
• CC 3.1.3: Electronic Statement Generation
• ...
• CC 3.2: Customer Servicing
• CC 3.3: Web Processing

At this level (Level 1), you are still creating an inventory of business processes.

It is at the next level - Level 2 and beyond where you will start creating process flow swim lane diagrams. Swim lane diagrams represent how activities within a process are organized by roles, systems, and business units and are useful for understanding the hand-offs between and among people and systems.

You might want to check out Laury Verner's article posted on BP trends: The challenge of process discovery.

One picture is better than a thousand words

The most imporant part of your process mapping initiative lies in your presentation. Many people have tried to capture business processes and the chances are someone has already done so in your organization. What you may be doing differently is in helping create an enterprise-wide view of the core business processes, break it down to a layered structure (Level 0, Level 1, Level 2) and only then start capturing the actual activities that these processes consist of. How you represent Level 0 and Level 1 is up to your creative ingenuity. The more thought you put into migrating away from text towards graphical objects, the easier it will be for others to understand your thinking.

Using a reference model

When you embark on your journey you will be asked for the methodology driving your implementation. Aligning yourself to an industry standard can go a long way to creating a common understanding that is supported by benchmarks and best practices that were developed by an industry group. There are great reference model out there that you can align your project to, which will help you to quickly populate your Level 0 and Level 1's in addition to the benchmark/best practices benefits. Here are a few examples:

Supply Chain Management Reference models: SCOR, DCOR, CCOR: These standard frameworks are high-level supply chain definitions used by over 700 members of the Supply-Chain Council. Using standardized supply chain process definitions and their associated performance metrics allows your organization to identify and benchmark your processes with the same processes of another Supply-Chain Council member

Open Standards Group (OSG) ITIL: an industry standard source for information technology activities and best practices which facilitates the strategic management of IT by identifying strategic objectives for IT. These objectives define the different perspectives for how the business views the overall value delivered by IT.

TelManagement Forum (TMF) Telecom Operations Map® (eTOM): is the TeleManagement Forum’s industry standard business process framework used by telecommunications service providers and their suppliers of all kinds.

Good luck in your work! Let me know how I can make this information more helpful to you in the future!

Tiran

Supply Chain Management: Who are your customers?

I am reading a great book on SCM titled: "Esstentials of Supply Chain Management" by Michael Hugos. In it he has a great chart which suggests a three step technique to align supply chain & business strategy (pp 37): (1) Understand the requirements of your customers; (2) Define core competencies and the roles your company will play to serve your customers; and (3) develop supply chain capabilities to support the roles your company has chosen. He then goes on to describe the 5 principle drivers of SCM: Production, Inventory, Location, Transportation and Information.

What I found intriguing was his suggestion that as you improve your understanding of your customers you should develop supply chain capabilities to support the roles your company will play to serve your customers: Responsiveness or Efficiency. For instance:

• Production Responsiveness consists of: Excess capacity, flexible manufacturing and many smaller factories.
  Production Efficiency consists of: little excess capacity, narrow focus and few central plants.
• Inventory Responsiveness: High inventory levels and wide range of items.
  Inventory Efficiency consists of Low inventory levels and fewer items.
• Location Responsiveness: Many locations close to customers
  Location Efficiency: Few central locations serve wide areas
• Transportation Responsiveness: Frequest shipments; Fast and flexible mode
  Transportation Efficiency: Shipments few, large; Slow, cheaper modes
• Information Responsiveness: Collect & share times, accurate data
  Information Efficiency: Cost of information drops while other costs rise.

What strikes me immediately is this deliniation for strategy alligntment to either responsiveness or efficiency. In my work in Lean Six Sigma consulting, we are often confronted with a process which is not delivering value expected by the customers to the process. There are, however, business processes which are distinguished from each other based on whether they serve internal customers or external customers:

• Internal customers are interested in increasing operational efficiency of a business process because it affects their line of business level of profitability. The billing operations of an IT department serve other business units of the company who are interested in the efficiency of the billing process.
• External customers are more interested in the responsiveness of a business process and its ability to deliver value because they are paying for it. The consumers of a certain product are interested in the responsiveness of the billing process at the same company and do not care at what operational efficiency you operate your billing department. You could employ 35 CPA's for all I am concerned as long as my bill is timely and accurate.

Gee, have you realized how supply chain management, the relentless pursuit of quality (Six Sigma anyone?) and core business processes seem to be aligned if proper consideration is made to ensure the value chains of a company truly address the customer needs?

underTHEhood: Banking Online Bill Pay Services

Have you ever wondered how your bank's online bill pay service works? Working with a life insurance client on streamlining their payment processing required research into internet bill pay services. So here's the deal:

When you use your bank's website to setup a new payee, you will notice that the website informs you if your payments can be sent within 1-2 business days or 4-5 business days. The reason for this is that in order for your bank to send an electronic (ACH) transaction directly (1-2 business days) to the payee they need to have an existing relationship with that company. Your phone company for instance would need to directly contact Bank of America (for example) and establish an EFT (Electronic Funds Transfer) relationship with them. This would enable BOA to credit the phone company's bank account directly.

According to a recent Forrester study, the number of Generation Y’ers (defined by Forrester as those born from 1976 to 1990) paying bills online will grow by 219% to 20 million in 2010.

What happens, you would ask, if the phone company (or any other payee) does not have a standing EFT relationship with my bank? In fact there are so many banks, large and small, that to have this relationship with all of them becomes very difficult to manage. That is where Internet Payment and Presentment vendors (lets call them IBPPs) fit in. Companies such as Checkfree, Metavante, iPay, Integrated Payment Services are such vendors and they handle any online bill pay transaction for a payee with whom your bank does not have an EFT relationship. IBPPs electronically process the online bill payment transactions in aggregate for your bank and handle the relationship with multiple payees thus acting as a hub for bill payment services. Usually IBPPs take your internet payment transaction and print a paper check with your identifying information and the account number you included with your payment printed on the check. When you select a payee that your bank does not have an EFT arrangement with you will be notified the transaction may take 5-6 business days your payment to be received because that is the time it take the check to be printed, mailed and delivered.

Bill Pay Processing companies fill a void in the market which serves two purposes: smaller banks can outsource their bill pay services and enjoy the economies of scale that these vendors offer in handling large volumes of transactions.

Small payee organizations who see an increasing amount of pre-printed checks coming from their customers should realize that these checks come from the Bill Pay processing vendors (usually the checks have the name of the vendor or other identifying information). The payee has the option of establishing an ACH arrangement with the vendors (usually at no cost) to receive batch electronic transactions and reduce their incoming paper check workload thus significantly reducing the cost of their bill payment operations.

Links:

• Check Free
• Metavante Bill Pay Solutions
• Online Resource/Princeton eCom

Digital Business Network (DBN)

In the world of BPMS a new concept is emerging: Digital Business Networks (DBN). In reality DBN is a mature model of what has formerly been known as "eBusiness network". Here is an example of DBN at work: chip manufacturer AMD brokered a DBN to deliver a $250 personal Personal Internet communicator (PIC) to India, Carribien and Latin America.

Instead of a single corporation putting together this business on their own (such as Dell or Lenovo), AMD acts a broker agent in the design of the product idea, the transformation of the concept into a product using an array of companies (Indicom, Solectron, Micro finance loan companies and NGOs) and in the sales and services (actually handled by intermediaries). BPMS traditionaly helps bridge the gaps between an organization's functional silos. DBN extends this capability to bridge across functional areas in different organizations. For instance: each of the design organizations on the PIC project has a product design functional area. DBN creates a secure transactional network between these areas so that the network (all of AMD's partners) can integrate their work to deliver the best value to the customer leveraging their combines skills and capabilities, acting as a more cohesive end-to-end organization. For more information on DBN and the technologies that enable this collaboration and further details on the AMD example view the Forrester Research roundtable discussion on DBN.

BPMS Series #1: Putting the sorcerer's (IT) wand in the hands of the business

Last month I attended a two day workshop on BPMS (Busines Process Management Suites) in Reston Virginia. In case you are not familiar with BPMS here is a short introduction:

BPMS represents a new paradigm in business and IT collaboration in that it allows the business side of a large enterprise to be more involved in the design and changes-to core business processes. Using an integrated suite of tools and runtime components, BPMS enable the automation, integration, optimization and monitoring of business processes. Using a business modeling tools to visualy create and modify a process (similar to Visio), a business user can lay out the activities that make the process work. For instance you could define the process of approving a consumer loan, including all the human-centric interactions (reviewing the application, retrieval of credit score, forward to risk group for feedback, communication with applicant, etc). A technical team (IT) will typically use a BPMS process design tool to establish the integration links with the underlying software packages which are activated by the process (think Orcale, SAP, CRM, ERP, etc) as well as designing data, flow, business rules and user interaction forms. The Process Engine then executes the process design, applying the business rules, interacting with the underlying systems on one end and with end users on the other, in effect acting as an intermediary or abstraction layer.

In the next posts on BPMS I will discuss the impact of using BPMS and some products available in the market.