Adaptable companies have specific qualities that result in dynamic business processes. Based on research into the differences between market leaders and laggards during economic crises, and our collective seven decades of experience in running Fortune 20 operations, we have crystallized them into three distinctive drivers of dynamic business processes (Figure 1). These are:
Open Market Rules
Dynamic Operating Engine
Open Market Rules for business processes: To understand the concept of Open Market Rules, let’s contrast how most businesses work with their external customers, as opposed to how their functions, like finance and IT, work with their internal employees. Let’s start with the fact that a business cannot compel its customers to buy products. In-stead, it focuses on creating product value so that customers want its products. In contrast, internal functions rely heavily on mandating that their employees use particular business processes (e.g., they dictate the steps that must be followed to process a customer’s order, and the software tool that must be used). To be clear, we are not about to suggest that the proven strategy of streamlining and standardizing business processes needs to be abandoned in favor of allowing every employee to do their own thing. Far from it. In fact, the word “rules” in the heading “Open Market Rules” was deliberately chosen to highlight the need for clear regulations. The point being made is that these rules need to be determined by open market competitive forces; overreliance on mandates and “one-size-fits-all” business processes must be avoided.
To be fair, when organizations first start to standardize their internal business processes, they may need to enforce certain specifications. For example, the templates used to process customer orders must have certain standard fields—order number, date, and so on. However, in our experience, this reliance on mandates and one-size-fits-all processes turns into a liability when some parts of the process need to change. When processes rely too heavily on mandates, the efficiency gained from top-down standards comes at the cost of ignoring valid change signals from employees, technology alternatives, and best-in-class benchmarks. This results in outdated business processes getting calcified, or in an unhealthy compromise between standardization and specific business needs.
Leaders of dynamic process operations use well-established and accepted Open Market Rules instead. They incorporate elements of the mindset that companies use externally with the consumers of their products. For instance, a consumer-centric company like Apple builds trust with its customers by being in touch with their needs, by constantly evolving product offerings, by being transparent about its products, and by effectively pulling the customers into their offerings. Apple couldn’t possibly push the product onto them, nor would they want to. Similarly, dynamic process leaders will be mindful to blend the minimally mandated “push” of legal, ethical, and corporate standards with the open market forces arising from employees, competitors, technology capabilities, and external benchmarks.
Unified Accountability: A key reason why companies like Amazon, Zoom, and the aforementioned local Cincinnati wine retailer are nimble is that they have been able to place limits on internal organizational silos. Amazon could not possibly have hired hundreds of thousands of people, added a ton of new delivery infrastructure, and introduced new IT capabilities during the pandemic had human resources, supply chain, IT, and finance been unable to move together rapidly as one unit. The challenge, especially for large organizations, arises when the goals for one function (e.g., managing capital investments for the finance function) become misaligned with those of another function (e.g., the need to rapidly buy more delivery vehicles during the pandemic). To be clear, functional organizations within the company play vital performance, efficiency, and compliance roles. You do want finance to strictly manage capital investments and supply chain to ensure high delivery service levels. The challenge is to optimize decisions that must cross functional silos. That’s where the principle of Unified Accountability comes in. That principle drives clarity of ownership for end-to-end business process outcomes. It prioritizes overall business results over siloed considerations.
To be clear, functional organizations do have their merits. They are established structures, and their procedures, standards, and measures have been developed over decades. They exist because they are very effective, especially in stable environments. However, there is a downside when it comes to end-to-end business process optimization. Siloed business processes within companies inevitably slow things down and fall out-of-sync as the business grows and becomes more complex. The trade-off between speed and scale of business processes is a well-known phenomenon. It needs to be approached with finesse. For instance, you cannot just sweep up all functions (finance, IT, supply chain, etc.) under one owner and assume that the silo problem has been solved. Detailed cross-functional business processes must be re-designed at a very granular level.
Another known trade-off relates to innovativeness versus stable structure. It’s important to acknowledge that this is an inherent paradox for large-scale business processes. Dynamic business processes require ideas to germinate from all parts of the organization (as in “let a thousand flowers bloom”). However, stable processes require a deliberate structure and defined standards. In our experience, this trade-off is better managed when the organization has a clear single owner for a given end-to-end business process.
These two paradoxical issues—speed versus scale, and innovation versus stability—point to why a Unified Accountability model is required. It does address and reconcile them.
Excerpted from Revolutionizing Business Operations: How to Build Dynamic Processes For Enduring Competitive Advantage with permission from Penguin Random House India.