Last week, the topic centered on capturing the ‘as-is’ of business processes. This week, let’s talk about which processes we should be concerned about.
Applying the 80/20 rule to process management
The theory is that by managing/automating a select 20% of your processes, you will achieve 80% of the value. Managing the last 80% will yield only 20% of the value. How does one identify those 20%?
The first task is to define ‘value’. When we talk about value, are we talking about dollar savings; customer satisfaction; innovation; what?
Is the value about dollar savings?
This is where you document the ‘as-is’ and collect metrics expressed in time [dollars]. Then you attempt to improve the process and measure again. If you are successful in improving the process, you will see dollar savings.
Is the value about customer satisfaction?
In this case, you will need to survey your customers. Then you implement changes in your process and survey again. If you are successful, your customer will let you know.
Is the value about innovation?
This one is more difficult – how do you define innovation? If innovation is the opposite of a commodity, as I have proposed before, then you will measure your success by the royalty [profit margin] that you are able to charge.
Still, there are only certain processes that are worth the effort to improve. Once you define what ‘value’ means to your company, you will know where to look for the 20% of the processes in your company that will generate 80% of the value.
How does your company define ‘value’? Has your company attempted to manage [improve] any of their high value processes?