Sunday, July 7, 2019

Building Blocks

Driven by rational self-interest, human beings have always been drawn towards activities that create economic value. And over the last century, pioneers in scientific management techniques, such as time-motion studies, laid the groundwork for improving work methods in a manual, mechanised, and progressively digital world.

Technically, a series of work methods, or process, is defined as “a sequence of actions undertaken to achieve a particular end. Furthermore, a process comprises discrete tasks that generate a rate of output per unit of input, and understanding how work activities produce an outcome is fundamental to how businesses gain competitive advantage. Essentially, these building blocks of productivity growtdepend on tasks being undertaken faster, error-free, and cheaper without sacrificing quality.

With this backdrop, the foundation for process innovation rests squarely on the quote attributed to the late management visionary, Peter Drucker, who stated that “what gets measured, gets managed” or “if you can’t measure it, you can’t improve it.” Now almost a cliché, when Drucker published this insight in 1954, the mechanical tools that would undergird performance measurements were very rudimentary. Still, many companies adopted a continuous improvement mindset and sought opportunities to establish baseline data, against which they could then track progress.

As automation capabilities expanded, sensors and productivity tools became more miniaturised and smarter, as did the ability of businesses to measure and improve efficiency. During this initial phase - Process Innovation 1.0, increasingly sophisticated computer technology boosted productivity, and induced the streamlining and periodic realignment of companies’ organisational structures. Essentially, businesses hunkered down to compete for market share by leveraging key performance indicators and metrics such as speed of processing, cost efficiency, quality consistency, and customer satisfaction.

Expectedly, there are always exceptions to the rule. Luxury brands, for example, do not necessarily compete based on speed or price; rather, high marketing costs are expended for brand-building. By contrast, for the majority of large and small businesses, most of their products and services are commodities that attract low to modest margins. Under such circumstances, whether operating online or offline, process differentiation can be a winning strategy.

Unsurprisingly, hordes of management thinkers jumped on the process improvement and quality management bandwagon. Concepts such as Business Process Reengineering (BPR), and Six Sigma infiltrated the business ranks and instigated an explosion of How-To books. On the shop floor, the sales department, the back office, and within core business functions, management consulting firms introduced performance metrics to assess how well companies were meeting their set targets. Before long, cross-industry best practices became widely available, and enabled businesses to benchmark their internal processes against global standards for improved performance. As an illustration, BPR entails the radical overhaul of value chains, the elimination of non value-adding activities, and bold implementation of information technology solutions.

Shadowing the decades-long productivity push was the migration from mainframe to mini to personal computers, local to wide area networks and, ultimately, the invention and growth of the Internet. Advances in enterprise collaboration software also created a platform for better in-house communication and data-sharing. Externally, peak globalisation occurred as supply chain management, demand forecasting, contract management, and risk mitigation became ever more complex.  

During this period, the volume of data generated grew exponentially, and data sets became more intractable. Process innovation, like many other spheres of business, is being re-imagined in the wake of new analytical tools, and emerging technologies such as 5G telecommunications networks, Internet of Things, and autonomous systems. As usual, the way forward would require thought leadership and creative disruption. It is still all to play for.

Ironically, a fly in the ointment has emerged just as multinational companies were gearing up for closer integration. The widening trade friction between major economic powers may be contained in the near term but, then again, it could trigger a de-coupling of supply networks, and a retreat into regional trade blocs. Not only will this not augur well for the global economy, it could cause a temporary slowdown in the evolution of Process Innovation 2.0.       


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