When analyzing a business, it’s easy to look at incremental change. Whether it’s in identifying problems with processes and systems, designing solutions or new processes. When it comes to developing a business case to get investment, it’s typical that a conservative approach is taken. It’s a way of making incremental improvements. But, it’s not necessarily a great process to deliver the greatest improvements. It’s certainly not the best way to create an order of magnitude change. One way to make a far bigger impact is to use design criteria to drive value.
A regular enterprise approach
Imagine you sell widgets. Sometimes people want to complain or return the widgets you’ve sold them. Now, imagine it costs you £100m per year to service all of those returns. And, to cap things off, imagine that most people don’t love returning their items. The process certainly doesn’t lead to a case of creating customer advocates who love the brand. However, the customer experience isn’t that bad. It’s okay, and it’s not the thing that drives much of the cost. The issues are more with the backend systems and processes that add burden to the P&L.
The normal approach from here will be to do some business analysis work to identify process failures, drop-off rates, and other impacts. It will typically include systems analysis to see which systems might help, and which ones could help automate process failures. All the improvements are analyzed and benefits calculated from the bottom-up.
Now, there’s nothing inherently wrong with this approach. If you make assumptions, construct models and quantify the value and costs you will be able to write a business case with a positive return. It will likely lead to some incremental improvement in cost reduction. Using a process of business process re-engineering or lean six sigma should hopefully result in efficiencies. However, there is a better approach to delivering a greater impact.
Defining design criteria
Much of the process described before is typical for an enterprise. It’s also very internally focused. It doesn’t put the customer first. That said, sometimes advice that comes from people outside of your direct team can sound hollow and superficial. Customer first can be one of those. Especially when we’ve already suggested the bigger issue is with the backend and the customer experience isn’t that bad.
One way to challenge a team of business and technology people is to create some design criteria that forces them to become creative, free-thinking and ambitious as to the extent of the change achievable. It also means that you can start with the customer from a clean slate, and remove the problem of knowing too much about the existing processes.
Design criteria can be anything that puts constraints or ambitions around a problem – it could help frame the opportunity in a different way.
For instance, here are two potential constraining design criteria:
- Service the whole returns process at the cost of £10m per year (one order of magnitude lower than today)
- Ensure that the Returns process is such a great experience for customers that they share that experience with their friends and family.
These two constraints should encourage a different perspective. When coupled with questions like ‘What if?’ and ‘How might we?’, it should lead to different answers. These factors may also help place the customer at the heart of the process again.
Remaining open for bigger benefits
No-one understands your problems like you do. Sometimes external advice like ‘Put the Customer First’ can sound hollow or feel like a platitude. And this leads to resistance to an idea or it can mean missed opportunities. The challenge many enterprises face is sticking with existing and defined solutions in the hope that’s the quickest way of getting to value. But, if it’s not the best approach. New ideas will rise throughout the process which creates a lot of change over time. It is more effective to adopt an approach that maximizes learning upfront. The solution-focused approach doesn’t always lead to the best answer or, indeed, the shortest overall time-to-market performance. It is quicker to define constraining design criteria that leads to faster exploration of different solutions.
Set-based concurrent engineering
This is similar to the approach Toyota had in developing multiple competing solutions which, paradoxically, led to quicker deliveries and better returns.
Toyota refers to the approach as Set-Based Concurrent Engineering which uses different constraints or parameters that might be traded-off in solutions. This method allowed teams to explore what the ‘Best’ solution might be versus ‘Cheapest’ or the one that delivers the best miles per gallon performance (a very car-oriented example). Ultimately, it was about creating as many options and knowledge to maximize learning to see what ideas might generate the best returns.
Over the last couple of decades, there have been many examples of how technology has created order-of-magnitude improvements. Think cloud, big data, AI and the like as ways for either processing hundreds and thousands of more transactions or being able to do it at a fraction of the cost. By setting a design constraint in costs, it creates an opportunity to examine how technology might radically transform the way a customer might get served. The good thing about it is even if you don’t manage to do it for an order of magnitude less, some of the ideas might still lead to a significant improvement in returns. Even if you fall short, the likelihood of outperforming the incremental approach of the first solution is far greater. The question is really by how much?
You might as well set out an approach that has a potential for a massive improvement. One that takes into consideration the latest technology and customer expectations.
One way is using an innovation accelerator approach such as a hothouse. It can dramatically increase the amount of knowledge created in a short time that leads to faster development cycles. Given the original example outlined above, you could run a hothouse on Returns. If you give the teams different design constraints, it will lead to a quick, and thorough, examination of the problem and solution space. The groups will examine different challenges, and devise alternative solutions. These solutions are shared each other over the course of three days. The best scenario is one where some great ideas and options come out of each team using different design constraints that can then be blended.