A GUIDE TO IMPROVING BUSINESS EFFICIENCY
In an age of disruption, a difficult challenge for a business is to re-invent itself while maintaining strong momentum. Companies that sit on the laurels of past successes risk losing everything. Bold leaders recognize that a company must focus on improving performance if it wants to maintain its competitive edge.
The Simplicity Cycle
As a business grows, it becomes increasingly complicated with more customers, more employees and more systems. While complexity may be the price an organization pays for growth, experts such as Dan Ward warn that after a certain point, it can become costly.
Ward—a retired Lieutenant Colonel who spent 20 years in the US Air Force as an acquisition officer—warns that additions that once led to improvement can end up making things worse.
“When our additions get out of control, the plot becomes jumbled, the colors muddied, the flavors discordant or overpowering,” he writes in his book The Simplicity Cycle: How to Make Things Better Without Making Them. “The new pieces do not simply add less than the previous pieces—they actually diminish the value of the whole.” Ward acknowledges that businesses must increase in complexity to service markets and customers. Ward argues that simplicity is not the goal but an essential tool for balancing the tendency toward complexity with the “goodness” of serving customers with a profitable and growing business.
Start the Improvement Process
Guided by this principle of simplicity, effective leaders need to look at ways to improve their business efficiency without adding a burden of complexity to their organizations. Businesses need to continuously improve their processes to become successful and remain competitive. Failing to do so can produce higher costs, lower revenues, dissatisfied employees and customers. A useful tool for process improvement is SIPOC—an acronym for Suppliers, Inputs, Process, Outputs and Customers—a system that summarizes the inputs and outputs of one or more processes in table form. Used since the late 1980s, the SIPOC model is still utilized today in Six Sigma, lean manufacturing and business process management.
The SIPOC visual tool produces a high-level process map typically used during the design phase of a process improvement project. It helps to identify the purpose and the scope of a process and becomes a primary input to the detailed process map construction.
Creating a SIPOC diagram is a team activity that requires brainstorming to identify known and hidden details about each element of a process: suppliers, inputs, process steps, outputs and customers.
The ideal way to create a model for a new process is to start with the customer and work back to the supplier.The benefits of creating a SIPOC diagram include capturing the current state of the processes in question, bringing colleagues together in a way that encourages collaboration and allowing the team to review all the processes so that next steps are easily identifiable. For organizations considering digitization, tools such as SIPOC can map current business processes and design new processes to chart the path to digital transformation successfully.
Create a Digital Enterprise
Despite its seemingly ubiquitous adoption, digital technology has only begun to penetrate industries. According to a February 2017 McKinsey report: “As it continues its advance, the implications for revenues, profits, and opportunities will be dramatic,” the McKinsey report predicts. “On average, industries are less than 40 percent digitized, despite the relatively deep penetration of these technologies in media, retail, and high tech. As digitization penetrates more fully, it will dampen revenue and profit growth for some, particularly the bottom quartile of companies, while the top quartile captures disproportionate gains. Bold, tightly integrated digital strategies will be the biggest differentiator between companies that win and companies that don’t and the biggest payouts will go to those that initiate digital disruptions.”
At a high level, digitization is a three-step process. The first is to digitize content and store the information in a digital repository. The next step is to create an automated process that delivers this digitized content to existing information systems such as data management software. As well as eliminating manual data management tasks, it provides leaders with visibility throughout the enterprise, delivering access to previously difficult-to-obtain data. The final step involves creating digital workflows which enable an organization to reduce errors, provide more accurate results, improve compliance standards and enhance competitiveness.