Category Archives: Lean Six Sigma

Increasing Business Value From Customer-Centric Business Processes with @AlexPForrester

The last session of the day at Forrester Business Process Forum (and the last for me, since I’m headed home tonight) is Alexander Peters on increasing business value from customer-centric business processes. Looking at a case study from the energy trading and retail sector, he described how the speed of change requires new ways of thinking, and how processes need to become more responsive and cross-functional.

He believes that process discipline – e.g., Lean, Six Sigma, change management and governance/COE – is the critical differentiator, combined with business knowledge and smart technology such as BPM. His focus is definitely on change management, and sees a change approach based on the level of process maturity, beginning with a maturity assessment. Being at a higher process maturity level means that an enterprise has moved from being fragmented, reactive and tech-driven to a more holistic, business-driven approach to BPM. There’s quite a bit of variability in process maturity levels within organizations, with business architecture receiving the lowest maturity score.

It was a bit late in the day (after a somewhat late night) to be using a lot of my brain on governance, but the basic idea is that governance establishes the roles, responsibilities and interactions of the process stakeholders, and the COE provides support to the business operations and projects. Also, apparently, Lean Six Sigma tools are critical to drive improvements at key points of the maturity curve. I’m not sure that there was anything strikingly new in this message; I also had the sense that the “customer-centric” message was overlaid on existing research and presentations that really didn’t have that orientation in the first place, making the titles a bit incongruous in some instances.

John Bates, CTO of Progress

John Bates started with more of the Progress message on operational responsiveness, highlighting the importance of process and event management in this. He showed survey results stating that companies find it critical to respond to problematic events in real time, but only a small percentage are able to actually do that. Companies want real-time business visibility, the ability to immediately sense and respond, and continuous business process improvement in a cycle of responsive process management. Yeah, and I want a pony for Christmas. Okay, not really, but wishing doesn’t make any of this happen.

By adding BPM to their suite, Progress brings together process and event management; this makes is possible to achieve this level of operational responsiveness, but it’s not quite so easy as that. First of all, we need to hear more about how the suite of products are going to be integrated. Secondly, and more importantly, companies who want to have this level of operational responsiveness need to do something about the legacy sludge that’s keeping them from achieving it: otherwise, Progress (and all the other software vendors) are just pushing on a rope.

Bates then called up James Hardy, CIO at State Street Global Markets Technology, for an on-stage conversation about how State Street is using the Progress Apama CEP product in trading and other applications. They’re a Lean Six Sigma shop, and see CEP as a natural fit for the type of process improvement that they’re doing in the context of their LSS efforts: CEP allows for some exceptions to be corrected and resubmitted automatically rather than being pushed to human exception management. They’re also committed to cloud-based technology, but by building a private cloud, not public infrastructure, and have seen some speedy implementations due to that. They see operational responsiveness as not just about increasing revenue, but also about mitigating risk.

Bates then talked about 3Italia, an Italian telco that was having trouble dealing with the incremental credit checks and revenue generation required for their prepaid mobile customers: since their billing systems weren’t fully integrated with their servicing systems, they sometimes allowed calls to be completed even though a customer had run out of credit and their credit couldn’t be revalidated. They are also a TIBCO enterprise customer, but weren’t able to get the level of agility that they needed, so implemented Progress (this is Progress’ version of story, remember). They managed to stop most of that revenue leakage by providing direct links between billing and servicing systems, and also started doing location-based advertizing to increase their revenues.

He also spoke about Royal Dirkzwager, a shipping line, and how they were able to achieve millions in fuel savings by detecting potential issues with docking and loading before they occured, and avoid burning fuel getting to the wrong place at the wrong time.

He finished up the case studies with a couple of airline scenarios for maximizing profits using situational awareness: responding to crew or flight delays proactively rather than just responding to irate customers after the fact (this is a lesson that Lufthansa could definitely learn, based on my recent experience). To bolster this case, he introduced Joshua Norrid of Southwest Airlines – also a TIBCO customer – who discussed their journey from “Noah’s Architecture” (two of everything) to focusing on strategic products and vendor partners. They were an IONA customer, then Savvion, and recently started using Actional: having lived through two of the products that he used being acquired by Progress, he said that the acquisitions where done “in style”, which is pretty high praise considering the usual experience of customers of acquired companies. They’ve started to look at how they can be more operationally responsive: text messages when flights are delayed, for example, but also looking forward to how flight bookings might change during a weather event, or how local hotels might be pre-booked in the case of significant expected delays. They see reducing redundancies and inefficiencies in their architecture as a key to their success: lowered cost and better data integration helps in bottom line IT cost savings, operational savings and customer satisfaction.

After the customer stories, Bates discussed the future of responsive business applications: packaged applications evolving into dynamic applications; a control tower for business users to model, monitor, control and improve dynamic applications; and solution accelerators for pre-built industry-specific dynamic applications. Savvion’s strong focus on pre-built applications is an important synergy with the rest of the Progress suite. Their solution map includes these accelerators supported by a single control tower, which in turn provides access to BPM, CEP and other technology components. For example, their Responsive Process Management (RPM) Suite includes Actional, Apama and Savvion underpinned by Sonic, DataDirect Shadow and Enterprise Data Services, plus the common Control Tower and three vertical accelerator applications for finance, telecom and travel/logistics. They believe that they can continue to compete in their specialty areas such as CEP and BPM, but also as an integrated product suite.

RPM technical won’t be publicly announced until March 15th, but it’s already all over Twitter from the people in the room here in Boston.

LSS and PI Game Changers: The List!

I scored the “Keys to Success” list that Gary Kucera made for the wrap-up session (unedited):

Canadian Pacific Railway (Jeff Adams):  Cultivate Business Relationships:

  • Create a 2010 “Relationship” strategy plan to build relationships with the “right” people who will help advocate and drive Process Improvement results
  • Target “thought” leaders to cultivate process improvement influence
  • Hand out free books
  • People will only “trust” you when they have a positive relationship with you

Direct Energy (David During/Shiraz Bajwa):  Create a Change Management / Influence Strategy to improve engagement of key people:

  • Y = f (x)
  • Ability to influence = function (role, adaptability, coverage, status)
  • Focus on people with political clout who influence people behavior
  • Impact the “Inner Circle” people by spending more time with them or have your “agents” perform this function
  • “Become a relationship Expert” to be an effective change-agent
  • Key Takeaway:  Build an Influence Strategy “UPFRONT”
  • Alternative tool:  Stakeholders Analysis tool

Bantrel (Chris Sandink):  Engage your Customer/Client

  • Use a data based approach to improve KPIs to successfully influence customers/clients
  • Build a process improvement plan by determining what measures can be improved which will result in improving a KPI
  • Get customer/client engaged in building the business case to increase acceptance
  • Key Takeaway:  Use data to make business cases to influence change and get stakeholder engagement as early as possible in this process

Create a Crisis (Multiple Speakers):

  • Process Improvement change is accelerated when a crisis occurs
  • Either “Create” a crisis or escalate an existing crisis to facilitate change
  • Top leaders will “Rethink” business strategies
  • Obtain dialogue among selected “thought leaders” to discuss what should be done “different”

Alignment of Goals within a business:

  • From CEO to associate, goals need to be aligned to improve the probability of success
  • Finance and Human Resources are key members to make this alignment occur
  • Finance should pay bonuses and merit increases based on an aligned goal structure

People:

  • Identify the skill sets needed to be successful for your team and try not to compromise with lower standards
  • Before hiring a person, perform succession planning to build your exit strategy for each person on your team
  • Best Practice Idea:  Have a person sign at the time of being hired a personal commitment to stay at least 2 years to reduce turnover

Project Success:

  • Keep project scopes small and get many “small wins” versus one “big win” as it improves engagement and long term project success
  • Make sure there is strong engagement, resources and commitment of Champion/Sponsor/Line Mgr prior to starting a project.  Planning upfront is critical to ensure project success.
  • All projects should be signed off by a Finance and Operations Mgr to avoid future “fighting”.

Leadership Behavior (multiple speakers):

  • Encourage leadership to change their behaviors to become more “advocates and teachers” to help motivate, encourage, and share their knowledge.
  • When teaching leaders Six Sigma education, take it slow and make sure they fully understand to avoid potential future adversity.
  • Need Leadership’s commitment to sustain long-term process improvement

Finance & Process Improvement Team:

  • For Xerox, and Kaplan Higher Education, it has worked very well for Process Improvement team to be aligned under Finance.
  • It has accelerated Process Improvement acceptance within the business since Finance controls the purse for the business and it improves Process Improvement’s accountability since Finance wants “Proof” of project savings.
  • Align project savings with department budgets.
  • A finance person is always recommended to sign off on project savings.

RBC Bank (Jennifer Thompson):  Continuous Certified Greenbelt/Champion Engagement 

  • Goal:  Increase Effectiveness of Process Improvement Program by keeping people engaged
  • E = f (Quality of change, acceptance of change)

Continuous Engagement Strategies:

  • Bi-Annual Internal LSS Conference for GB’s
    • Education
    • Networking
    • Celebration Certification
  • Monthly Lunch and Learns
    • Education
    • Continuous Encouragement
  • Champion Roundtable
    • Program Tracking
    • Continuous Feedback
    • Continuous Encouragement

CLG (Annemarie Michaud) Improving Behavior Effectiveness To Drive Business Results

  • Approximately 80% of behavior is driven by consequences
  • Create positive and negative reinforcements to increase desired behavior
  • Align desired behavior with desired goals
  • Put in place consequences to drive behavior
  • Behavior change environment will create long-term change

LSS and PI Game Changers: High-Impact Ideas From The Conference Sessions

The final session was supposed to be a brainstorming session with Debra Yeager of Xerox Canada and Gary Kucera of Kaplan Higher Education, working with us to come up with a list of LSS and process improvement ideas that can have maximum impact within an organization, but was really the points that they gleaned from the presentations over the past two days. The lists went by past way too fast to transcribe, and I’m hoping that this will be posted on the conference website at some point (or maybe Gary will read this and send me his notes).

To wrap up the conference, it’s probably clear if you’ve read my posts that I found this worthwhile. I have a couple of local customers who practice LSS, and I can’t understand why they didn’t have someone here: a conference in your back yard is practically a gift in this economic climate, and there was definitely value here. This was a great opportunity for LSS professionals to exchange ideas and best practices with their peers – I think that I was the only non-black-belt in the room – and there was a great deal of interaction between the participants both in the sessions and at the breaks. Lots of practical ideas for everyone to take back and apply to their own projects, even for me. :)

Applying LSS And Process Reengineering To Achieve Consolidation And Organizational Restructuring

Rick Hefner of Northrop Grumman gave the last full presentation of the conference before the brainstorming and wrapup. At this point in the schedule, a lot of the material that he was going to cover has already been said, leaving him free to ignore most of his slides and give more of an anecdotal talk about their journey with Six Sigma. He was originally part of TRW before their acquisition by Northrop Grumman, and acquisitions have continued to occur regularly; this meant that multiple implementations and cultures of LSS within the acquired organizations collided head on, and that constant restructuring necessitated a more consistent view of how LSS is to be applied across the organization.

Organizational restructuring, because it involves significant changes to goals, practices and operations, is a perfect opportunity for LSS and process improvement: although the initial goal of the restructuring is usually cost cutting, the long term goal is providing the greatest customer value for the least cost. LSS provides with a number of tools that can be used during restructuring, for everything from determining overall strategy to measurement and control to employee needs. The problem, however, is that everyone is caught up in the reorganization itself (or ensuring that they still have a job), and it’s difficult to get people’s attention for process improvement at the same time. LSS and process improvement teams can feel threatened by the lack of focus on their contributions, as well as not necessarily know where they’ll end up within the restructured organization.

They created a number of tools that could be used in the business areas for process improvement: value stream maps, process maps and flowcharts (similar ideas, different perspectives and level of detail, although it’s not clear where the distinctions lie). Some of this required defining “value” – which is really something that only the customer can define, and is usually something for which they are willing to pay – especially in their world of cost-plus contracts where they are not really financially incented to make processes more efficient. The cost-plus contract model is slowly being phased out in the defense industry, being replaced by fixed-price contracts; this will drive them to look for more process improvements in the future.

His summary:

  • Current economic problems have caused many companies to focus on consolidation and organizational restructuring.
  • Proper use of LSS tools (and LSS professionals) can help a company balance tactical cost-cutting with long-term strategic change programs.

Lean Sigma Tools Applied to BPM

Chris Rocke and Jane Long from Whirlpool presented on their experiences with integrating LSS tools into BPM practices to move beyond traditional process mapping. Whirlpool is a mature Six Sigma company: starting in their manufacturing areas, it has spread to all other functions, and they’ve insourced their own training certification program. Six Sigma is not tracked as separate cost/benefit within a project, but is an inherent part of the way every project is done.

They introduced BPM during to a large-scale overhaul of their systems, processes and practices; their use of BPM is includes process modeling and monitoring, but not explicit process automation with a BPMS outside of their existing financial and ERP systems. However, they are creating a process-centric culture that does manage business processes in the governance and management sense, if not the automation sense in all cases. They brought LSS tools to their BPM efforts, such as process failure mode and effects analysis (PFMEA), data sampling and structure methods, thought maps and control charts; these provide more rigorous analysis than is often done within BPM projects.

Looking at their dashboards, they had the same problem as Johnson & Johnson: lots of data but no consistent and actionable information. They developed some standard KPIs, visualized in a suite of seven dashboards, with alert when certain control points are exceeded. Their Six Sigma analytics are embedded within the dashboards, not explicit, so that the business owners view and click through the dashboards in their own terms. The items included in the dashboard are fairly dynamic: for example, in the shipping dashboard, the products that vary widely from expected and historic values are brought forward, while those that are within normal operating parameters may not even appear. Obviously, building the models underlying this was a big part of the work in creating the dashboards: for example, shipping dashboard alerts are based on year-over-year differences (because sales of most products are seasonal) with control limits that are the mean of the YOY differences +/-  two standard deviations for a yellow alert, or three standard deviations for a red alert, plus other factors such as checking to see if the previous year’s value was an anomaly, weighted by the number of units shipped and a few other things thrown in.

The analytical calculations behind a dashboard might include internal forecasts or market/industry values, include seasonal fluctuations or not, depending on the particular measurement. The dashboard visuals, however, conceal all the complications of the underlying model. Alerts aren’t necessarily bad, but indicate a data point that’s outside the expected range and warrants investigation or explanation. They’ve seen some success in reducing variability and therefore making their forecasts more accurate: preventing rather than detecting defects.

They’re also using SAP’s Xcelsius for the dashboard itself; that’s the third company that I’ve heard here that is using that, which is likely due in part to the large number of SAP users but also gives credit to the flexibility and ease of use of that tool. They’re using SAP’s Business Warehouse for housing the data, which extracts from their core ERP system nightly: considerably more up-to-date than some of the others that we’ve seen here, which rely on monthly extracts manipulated in Excel. Although IT was involved in creating and maintaining BW, the LSS team owns their own use of Xcelsius, which allows them to modify the dashboards quickly.

Identifying and Evaluating Performance in Transactional Environments

Last up before lunch was Sarah Snyder, who works with the US Army, discussing how they use dashboards to measure and tune their performance. The examples that she showed were not about the actual “business” processes, however, but measures on LSS projects, such as initiated and completed projects, LSS training, LSS belt utilization, and other meta measurements that aren’t directly indicative of business performance. Although measurement of project execution efficiency can be used as something of one indication of how well the Army is running, and measurements like this are important for justifying and ensuring ongoing funding of LSS programs (over $100M to contractors alone over the last 4-5 years), it doesn’t seem all that useful for general operational process improvement. Am I missing something, or is this LSS navel gazing?

I will blame my crankiness about this presentation on my grumbling stomach, and head off to lunch.