While large companies have spent the better part of the past decade focusing on how to rationalize and optimize their existing business processes, the way many companies have pursued this task may actually have limited the efforts of IT executives.
More than 80% of the executives I visited in the last two years report that their companies have been following a strategy of rationalizing practices and deploying common or shared services to improve business-process efficiency. Practice rationalization typically seeks to reduce the number of informal approaches and formalize the way their firms do things either around a best-practice or process-improvement approach such as Six Sigma. While the majority of executives said they've made gains in efficiency, a significant percentage also felt that something important may be missing from their efforts—namely a rethinking of IT's role, perspectives, strategies, and tactics.
All of the CEOs I interviewed believe IT is an increasingly important function and expressed confidence in their CIOs. But nearly all also expressed a sense of frustration: Many felt that current IT approaches were far from optimal and that, somehow, important opportunities were being missed.
For their part, CIOs grapple with how long it takes to orchestrate process optimization, and the inconsistency between adoption and the realization of benefits in the wake of a process-optimization initiative.
More than three-quarters of CIOs say they achieved only 20% to 25% of their process-optimization goals. Everyone agrees that business-process optimization will continue to be important, but there's growing concern that an obsession with process is creating important limitations in perspective.
As one CEO from a packaged-goods company put it: "IT people are obsessed with a perspective that everything in the business can be reduced to a process diagram [that can be] improved, optimized, or outsourced. This myopic view limits our success, and misses many opportunities. When someone only has a hammer, everything looks like a nail. Process efficiency is important, but it's only one element of our business."
Two key things appear to be missing.
The first is effective human adoption. A number of IT shops are making available to their organizations new, elegant, enterprise architectures and applications. Yet, many CEOs are stymied by a fundamental lack of participation by the people who matter the most: end users, customers, and business partners.
Second, while processes may be optimized, the overall business model suffers when customer service, product innovation, and organic growth decline.
Despite the existence of successful business cases, many process-optimization initiatives simply aren't being fully utilized by employees or customers, or deployed in supply chains. Executives most often cited strategic initiatives such as ERP, CRM, knowledge management, self service, or E-commerce as under-delivering on their promises. (For another view on strategic IT initiatives, see the Q&A with Michael Treacy).
The traditional mission of most IT organizations has been to improve formal or "hard" process efficiencies. To that end, IT departments have pursued opportunities to reduce transaction-processing times, eliminate unnecessary administrative activities, consolidate IT assets, and automate wherever possible. In short, IT has been tasked with the mission to measurably squeeze time, money, and human resources from as many business operations as possible, so that these so-called improvements can be expressed on a spreadsheet.
Given global competition, continuous process optimization has been accepted as a basic fact of life in major corporations. According to one CEO, "Process optimization has become like breathing"—a company can't survive long without doing it. But despite the practice, all of the CEOs interviewed reported that their companies still needed to get much better at this fundamental task.
When questioned further, some executives wondered whether the narrow-minded view that "everything's a process waiting to be optimized" can differentiate companies from their competitors and stimulate long-term, sustainable business growth. It begs the question, Where will the next generation of technology-enabled differentiation come from?
The answer, according to many of the executives interviewed, is to shift attention to the "softer" processes—critical activities that don't follow a linear process. Among the soft processes identified are innovation, product design/development, marketing, organizational-change management, motivation/incentives, personnel deployment, knowledge exploitation, and customer service.
The companies that were achieving the greatest business-optimization yield appeared to be following what one CIO called the "Real Estate Developer Model." Developers, he pointed out, are generalists who work with a wide array of specialists, and harness disparate talents and resources to create not just a new physical reality but, more critically, a new experience. It's in this way that a new segment of society arises from a raw plot of land. While developers depend on an assortment of processes, their main focus is on enabling a vision. They must take a holistic approach to their projects. And the final objective—rather than the demands of discrete processes—drives decisions about when, where, and how key human, financial, and technical resources are deployed.
This model synthesizes the ideas of several CIOs. Those who adopted a perspective beyond processes and data elements managed the IT shops that better differentiated their companies from the competition and contributed more to their businesses.
