When it comes to Business Intelligence and what it means within organizations, these days it is primarily Sales Intelligence - Slicing and Dicing data to get insights into which products are selling in which regions/areas/cities, which salespeople are selling which products, etc. They are all possibly different views of the same data but provide different insights for different purposes. They also make a lot more sense, and are more useful if a time dimension is involved. Is a product in a region selling more or less compared to last week, last month or last quarter? Is a particular Regional Sales Manager’s sales of Product A trending up or down or staying the same?

Companies also use Financial Intelligence - slicing and dicing Income, Cash and Expenses to see where income is coming from, what are the trends there, time-wise, and where they are spending their money and what are some of the trends there?

Determining the company’s overall performance to a larger extent is Process Intelligence (Business Process Management + Business Intelligence). Organizations increasingly are outsourcing many of their functions - product design, sourcing materials globally, manufacturing, order management, order fulfillment, collection, Human Resources, Finance and Accounting, etc. End-to-end performance of business processes, especially when it includes third-party actors is extremely crucial. It is like placing your own customers in the hands of third parties, literally.

Guess what? Sales performance and Financial Performance to a large extent is dependent upon Process Performance. If a customer support person provides lousy support, word of mouth from that customer will make your Sales Intelligence show blips in product sales and your Financial Intelligence will reflect blips in income down the road. That’s how they are all connected.

Process Intelligence and slicing and dicing information down to the level where meaningful improvement can be implemented can be as important as Sales Intelligence and Financial Intelligence, if not more. Process Improvement is not possible with aggregate avarages. You need detailed drilldown information so that you fix problems at a level that needs to be fixed. If Customer Support surveys indicate overall negative values, you need information at a customer support person level so that you can reward those that are performing well but address those who are contributing to the overall negative values with training, education or termination.

What is surprising is that Operating Expenses in companies are from 40% to 80% of Income. A large part of this goes to Business Processes, naturally. If they are service oriented companies, the percentages are larger - say a Phone Company or a Electric Utility or a Global Logistics provider like UPS. Profitability in many of these companies is usually in single digits. Using Process Intelligence to improve business processes has the potentail of even doubling profitability or turning a loss making company into a profit making company.

Sales Intelligence and Financial Intelligence are more like rear-view mirrors. They show you the end results of your efforts the past time period. Process Intelligence can be more like the steering wheel which can guide where the vehicle is going! It’s a goldmine waiting to be exploited!

It is wiser to find out than to suppose - Mark Twain

When you consider a process for improvement, there are a number of things you could do it - Train the people better, give them more latitude in decision making and keeping customers happy who bring in more business, invest more in a rules engine that automates many of the otherwise manual decision making, buy three additional servers so that system response time is better or add additional people.

All of these cost DIFFERENT amounts of money, effort and dedication and may produce results of different magnitudes! What is interesting is that some of the results may be different from what was expected and may come as a total surprise! May be adding some better lighting to the location where work was done produces an improvement much more than millions of additional dollars spent on a new software application! The only way to find out is to experiment in a limited way first before committing one or more courses of action among the many available.

This is where Design of Experiments (DOE), originally from the natural and social sciences and now being adapted for use by Lean and Six Sigma experts comes in handy as a rational way to go about process improvement. Every organization has its limits when it comes to resources and so money judiciously spent is always much more appreciated than money thrown wildly at the problem without having some idea of what the end results might be for a dollar spent on each of the different options!

Design of Experiments advocates that perform experiements on a smaller scale, measure the results, compare them to your expectations and use the conclusions further in whatever way your overall objectives dictate.

Sometime ago I had written an article about Cause and Effect Diagrams and Design of Experiments in Process Improvement. These two tools are very useful in effecting rational, focused process improvement that makes the best use of a dollar of resources you may have available for you. The Cause of Effect diagrams systematically may help you identify all the candidate causes for the process Key Performance Indicator (KPI) you are trying to improve. For example, in a Call Center you are trying to improve the Average Handle Time of agents on the phone trying to support customers. The AHT metric can be improved by addressing Additional Training for Agents, Upgrading to a new software application or restructuring your incentive packages. Each of these may have different results in the end and may cost you different amounts of money. How do you ensure that you Optimize your improvement? By actually conducting experiments and measuring the results for each of these approaches. Send a smaller group of agents for training, ask the software vendor for a limited set of licenses for a subset of agents to use the new software application in a pilot implementation or restructure the incentive package only for one team of agents. Measure the results, compare the costs of each and you will find the best ways to spend your limited amount of money for optimum results!

DOE and Cause of Effect Diagrams provide a useful way of making rational process improvement decisions!

I think that in the discussion of natural problems we ought to begin not with the Scriptures, but with experiments, and demonstrations. - Galileo Galilei

Michael J. Hammer, the famous Management Guru, wrote this article - The Seven Deadly Sins of Performance Management and How To Avoid Them in the MIT Sloan Review in 2007. It’s written for the larger topic of Performance Measurement as in Financial or Sales Performance but is just as applicable to Process Performance Measurement also. His seven sins, and how I think they apply to Process Measurement:

1. Vanity - Using measures that look that particular organization look good. In a call center, using the Average Handle Time (AHT) metric is a classic example. Excellent AHT measurements may only apply to the Call Center but customers, and prospects may be unsatisfied with their interactions with the call center agents.

2. Provincialism: Organizational Boundaries - This happens often with localized Six Sigma or other process improvement efforts. What if you increased the Order Processing speed in the Order Processing Process. Does this cause orders to be backlogged in production? Suboptimization can happen a lot if an overall picture of the end to end process is not kept in mind.

3.Narcissm: Measuring things from the company’s point of view rather than the customers’. Excellent internal metrics without a Customer Satisfaction Score to balance out internal concerns, is a recipe for kidding ourselves!

4. Laziness: Not placing enough thought into a company’s stage in the industry, strategy and objectives when deciding on what is important to measure. Efficiency measures may be more appropriate for an established company with a huge customer base. Customer delight may be more important for an upstart company that is trying to grab market share.

5. Pettiness: Measuring only a small component of what is important. Many times, measuring some of the things, and not measuring some others, may make the department or function look better.

6. Inanity: Measurement itself produces consequences by way of employee behavior. If you place too much emphasis on Average Handle Time in a call center, and employees are compensated by how they perform on this metric, they will be hanging up the phone quickly just to make this metric look better.

7. Frivolity: Not being serious about measurement itself. Sometimes Process Measurement becomes important only in the context of outsourcing where you need to have some SLAs and measurements in the contract. Many organizations think it is important to measure only in those cases.

Michael J.Hammer gives us all something to think about seriously!

Sin is sweet in the beginning, but bitter in the end - The Talmud

The Toyota Production System (TPS) is much studied and emulated for use in other companies around the world. Unfortunately, many study the Toyota Production Systems’ Tools and Tactics such as the Kanban pull systems, cords, production cells, etc rather than the underlying principles!

Ran across this very interesting article published in 2004 in the Harvard Business Review - Learning to Lead at Toyota.

The author Steven J.Spear argues that the underlying principles of TPS are more useful to study, and emulate, rather than the Tools and Tactics. Could not be more useful for Process Improvement in Services! Let’s see how Stevn Spear’s principles apply to services:

1. There Is No Substitute For Direct Observation : Improvement of business processes is impossible without direct observation of how business processes are executed now, today, no matter what the Visio diagrams of the business processes say how they should be executed! Invariably,studying how business processes are being executed today is the only way to unearth process improvement possibilities. Currently, most process improvement efforts seem to be focused on measurements and improvement of Key Performance Indicators. They may miss a whole boatload of improvement opportuities related to elimination of waste in the process.That can be best done only with direct observation and lots of it.

2. Proposed Changes Should Always be Structured As Experiments: If you want to improve a business process, you can spend money on employee training, buying a new software package and implement it, or address the way the process itself moves forward, eliminating steps that are non-value adding, or speed up value adding steps. Now which of these may be the most effective for the time and money spent? Not all improvement efforts yield the same magnitude of improvement. Design of Experiments in Six Sigma practices have long offerred a very useful technique to effect improvements as experiments. These can be rolled back if they have unintended consequences or they don’t yield the expected results!

3.Workers and Managers Should Experiment As Frequently As Possible: In many Six Sigma and Lean Six Sigma process improvement activities, the emphasis may be on a single consolidated effort in process improvement, as opposed to a committment to improve business processes constantly! TPS advocates standardization of a process and once it standardized, it emphasizes constant improvement! If that approach is used in business process improvement, you can get significantly better results. This underlying principle can make a lot of difference than specific tactics and tools that are used without experimentation first.

4. Managers Should Coach, Not Fix: This principle that has worked very well in Manufacturing and in the Toyota Production System is perhaps the least used one in business process improvement. Many process improvement activities are organized and conducted by management rarher than the people who do the work. Of course, manufacturing may be different somewhat from services where you may need to have an eye on the overall process flow and avoid any sub-optimization at a process step level. This principle is also a great way to ensure buy-in of the participants!

Good article and good principles to think about when thinking about continuous business process improvement!

Rules are not necessarily sacred, principles are. - Franklin D. Roosevelt.

When applying the notion of Value and Value-Adding steps in a Service, the idea is not as clear-cut as in a product. For example, if you were to buy a car, fastening the door on to the car when it is manufactured is clearly a Value-Adding step for the end consumer. They need a door for the car.On the other hand, the factory worker in the assembly line filling out a production form may not add direct value to the end consumer and may clearly be a Non-Value Adding step.

Many Value Stream Mapping articles paint with a broad brush that value stream mapping is easily applicable for "products or services". It may not be that simple when you actually try to apply the same!

Let’s assume that we are doing Value Stream Mapping of a busy doctor’s rounds in a Hospital. The doctor checking the patient’s bedside medical record and making sure that the right medications have been given at the right time, is clearly a Value Adding step. Now, how about the Doctor chatting for 10 minutes with the patient on how he or she is feeling at that time? Is that a value-adding activity? From the point of view of most patients, it may be a value adding activity, adding a sense of comfort that may even speed up recovery. Who knows? The doctor may find out something totally new about the patient or the side-effects some of the medications may be having. Alternatively, some patients may feel that this talking did not add any value to them directly.

This is where things that are cut-and-dried in the case of a product, may wander into some uncharted territory when it comes to services! In fact, many companies advertise on TV about the personal attention that they provide in addition to say an Insurance policy or some other service they provide.

For the purposes of Value Stream Mapping how do you treat these differences? Are they differences that matter? Is there any other way to look at these?

All interesting questions! Looking for some answers...

A business absolutely devoted to service will have only one worry about profits. They will be embarrassingly large. - Henry Ford