“La CULTURA DIGITAL implica el desarrollo de nuevos HÁBITOS Y COMPORTAMIENTOS en los directivos y empleados de una organización que permitan el despliegue, uso extensivo y experimentación continua de las plataformas digitales y las tecnologías de información en la ejecución de sus procesos de negocio. La aplicación de una cultura digital en los procesos de negocio habilita la agregación de valor para los clientes, empleados y accionistas.”

En nuestras investigaciones [ver por ejemplo: (a) Enterprise applications diffusion within organizations: A social learning perspective o (b) the long conversation: maximizing business value from IT investment] hemos adoptado la teoría de aprendizaje social de Albert Bandura para explicar el desarrollo de una cultura digital que lleva al éxito en la implantación y/o despliegue de tecnologías de información y plataformas digitales en las organizaciones.

“Social Learning Theory, also known as Social Cognitive Theory (SCT), has its roots in the work of psychologist Bandura; it is fundamentally learning by observing the actions of other people. It therefore involves three variables: the person, behavior, and the environment. The theory proposes that these three variables interact to explain individual actions (i.e. behavior).” (Lorenzo, O., Kawalek, P., Ramdani, B. Information and Management 2012).

Desde esta perspectiva, los nuevos HÁBITOS (behavior) se logran a través de la conversión del comportamiento actual (por ejemplo, poco uso de las tecnologías, no comprensión de las capacidades de la tecnología, etc.) hacia un comportamiento esperado o deseado  (uso extensivo, apropiado y efectivo de las plataformas y tecnologías de información en los procesos de negocio con agregación de valor para los clientes, empleados y accionistas). Este nuevo hábito se crea a través de la interacción de tres variables: las características cognitivas de la persona, el comportamiento per se, y el ambiente de trabajo que promueve y soporta el desarrollo de la cultura.

Nuestras investigaciones han identificado 6 hábitos o comportamientos claves hacia el desarrollo de en una cultura digital:

Comportamiento 1 – Uso habitual: este comportamiento se refiere al uso habitual de las plataformas y tecnologías en los procesos de negocio para agregar valor al cliente y a la empresa. Por ejemplo, uso de las plataformas que permita automatizar tareas, mejorar el servicio al cliente o mejorar la coordinación entre áreas. Nuestras investigaciones muestran que el nivel de uso en cada directivo o usuario depende de varios factores y es posible tener directivos o usuarios que limiten el uso a solo algunos objetivos (por ejemplo, si para automatización, no para coordinación).

Comportamiento 2 – Aprendizaje continuo: el potencial de la tecnología de información es casi infinito por lo que requiere que los directivos y usuarios tengan una actitud proactiva de aprendizaje continuo. La exploración y curiosidad continua lleva a aprender nuevas funcionalidades que son útiles para satisfacer requerimientos de los clientes u objetivos de procesos de negocio.

Comportamiento 3 – Identificación de inconsistencias: los directivos y usuarios más avanzados en el uso de las plataformas y tecnologías de información son capaces de identificar y corregir, de manera habitual, inconsistencias que existan entre la configuración de sus tecnologías y los procesos reales de negocio.

Comportamiento 4 – Identificación de nuevas oportunidades: los directivos y usuarios más avanzados y con posiciones de liderazgo son capaces de identificar nuevas oportunidades de explotación que ofrecen las tecnologías ya implantadas.

Comportamiento 5 – Desarrollo de proyectos: este hábito se refiere a la habilidad para planificar, implantar y cerrar proyectos con un equipo propio o a través de consultores internos/externos. Es decir, activar y liderar proyectos asociados a las oportunidades de “mejor uso” que permiten las tecnologías.

Comportamiento 6 – Desarrollo de las capacidades de los usuarios: la creación de una cultura digital pasa por el desarrollo de dicha cultura a lo largo de toda la organización. Para ello, es necesario que los directivos y usuarios avanzados desarrollen y soporten al resto de la organización en el fortalecimiento de una cultura digital. Esto implica formación, mentoring y apoyo en la solución de problemas. Asimismo, se recomienda una nueva política de reclutamientos que permita captar empleados con cualidades apropiadas para explotar los hábitos y comportamientos requeridos en la cultura digital.

En la próxima entrega os comentaré de ejemplos específicos de estos comportamientos y nuestra metodología para su desarrollo…

Oswaldo.

Adjunto aquí algunas de los comentarios y análisis de estos expertos:

-España se ve abocada a nueve trimestres consecutivos de caídas del PIB, algo inédito desde que terminó la Guerra Civil hace más de siete décadas.

-Paul de Grauwe (Londoon School of Economics): La política macroeconómica de la Eurozona es un desastre.

-Luis Garicano (London School of Economics): Bruselas es mucho más dogmática que el FMI. En parte se explica porque no se fía de algunos países, que solo reforman bajo presión. Y en parte por motivos políticos: al norte no ha llegado la crisis y no es consciente de que hay países que se están ahogando.

-José Manuel González-Páramo (IESE): Sus propuestas (de La Comisión) para reconstruir los pilares del euro son avanzadas, y dan una visión de largo plazo.

-Paul Krugman (Premio Nobel de Economía): Por desgracia, esta gente ya ha hecho un daño tremendo y todavía tienen poder para seguir haciéndolo.

-Jonathan Portes (Instituto de Investigación Económica y Social): La conclusión optimista es que admite que las justificaciones de la austeridad se están viniendo abajo. Y que los trabajos que demuestran esto quizás puedan impulsar políticas más sensatas.

¿y que podemos hacer?

Mientras no se activen medidas complementarias, tenemos que trabajar con los siguientes escenarios:

-El desempleo seguirá subiendo (la fuga de talentos será mayor y con ello perdidas de capacidades en Europa para afrontar el largo plazo. Curioso que la justificación del largo plazo es lo que sostiene las políticas de austeridad de la Comisión).

-La demanda de consumo final seguirá cayendo y como consecuencia no hay mercado interno. Las empresas deben buscar clientes y demanda en otras regiones, es decir deben internacionalizarse.

-La propensión al riesgo será menor y como consecuencia muchas empresas, lamentablemente, pueden caer en la paradoja de que necesitan más innovación y nuevos océanos, pero no pueden o quieren arriesgarse.

-Todos los ciudadanos, sin importar sus edades o áreas de especialidad, deben reinventarse si quieren tener opciones de largo plazo (por ejemplo, aprendiendo sobre nuevas aplicaciones tecnológicas en sus áreas, fortaleciendo nuevos idiomas, complentando sus áreas de especialidad con otras relacionadas: gestion equipos virtuales gestión de proyectos, etc.)

Estas últimas conclusiones son del autor, basadas en conversaciones con empresarios, academicos y profesionales del día a día.

Oswaldo.

Podría ser entendible, bajo una perspectiva de urgencia, de la necesidad imperativa de llevar a cabo esos grandes recortes, pero no podrá ser entendible para nadie que se continúe únicamente con esta estrategia en el 2013, aunque lo imponga Europa (Alemania).

La alternativa a los recortes es la mejora de la eficiencia y la productividad (no solo en las empresas, también en la administración pública). Es decir, poder hacer más cosas con los mismos recursos, pero de una manera diferente. Es decir, cambiando los modelos de operación y ajustando los modelos de servicio de la administración pública.

Sin embargo, para hacer esto, se debe invertir en nuevas tecnologías y en cambio organizativo. Pero más importante aún, nuestros gobernantes deben tener una perspectiva de mediano o largo plazo. Romper el círculo vicioso de lo urgente y los recortes pasa por pensar diferente, pensar con un horizonte de tiempo más largo. No podemos garantizar el presente a través de la destrucción del futuro. Eso es muy irresponsable. ¿cómo vamos a ser capaces de competir recortando en un 40% el presupuesto de I+D, como se ha hecho hasta ahora? No hay duda, sin investigación no hay futuro.

Haciendo algunas comparaciones, vemos como otros países como el Reino Unido han sido capaces de mejorar la eficiencia de sus procesos de la administración pública a través de la inversión en nuevas prácticas y nuevas tecnologías. En un post anterior comentaba que del sector privado se podían aprender al menos dos métodos y experiencias de mejora e innovación que pueden ser de aplicación en el sector público: la innovación guiada por prácticas Lean y la innovación guiada por la tecnología de información. En ese artículo se describían los fundamentos de ambas prácticas, su aplicación en el sector privado y público y se desarrollaban ciertas recomendaciones metodológicas para su uso en el sector público.

Así, por ejemplo, en un estudio patrocinado por The Scottish Executive y realizado por los profesores Radnor y Walley de la Universidad de Warwick, se investigaron ocho casos de implantación de la filosofía Lean en instituciones del sector público, entre ellas al Servicio Nacional de Salud (National Health Service-NHS), ayuntamientos y agencias gubernamentales. Las mejoras conseguidas incluyeron reducción en los tiempos de espera y tiempos de procesamiento, mejora de la calidad, e incremento de la satisfacción del personal. Algunos ejemplos específicos incluyen: reducción de los errores de nómina del 75% al 2%, reducción del tiempo de preparación de informes o documentos en el sistema judicial de 77 días a 6 días, reducción del tiempo promedio para la primera cita en el NHS de 23 días a 12 días, reducción del 48% del tiempo que lleva el tratamiento de un paciente. Asimismo, y en relación a la innovación guiada por la tecnología de información, Baluti encontró que los proyectos de e-government en el sector público han evolucionado a través de cuatro fases: diseminación de información a los clientes (ciudadanos, empresas, empleados u otras instituciones de la Administración), entrega de formatos o plantillas, transacciones electrónicas, por ejemplo el pago de impuestos, transformación del gobierno – es decir, iniciativas que cambian la estructura del gobierno para prestar servicios públicos. Sin embargo, esta última fase ha sido la menos explotada en España y donde hay muchas oportunidades para la mejora radical de la productividad del sector. Ver más en Practicas de Mejora e Innovación en la Gestión Pública.

2013 será un año clave en el proceso de construcción de una nueva España más eficiente y productiva, pero para ello será necesario un liderazgo transformacional desde el gobierno, las organizaciones y las empresas. Estos son mis deseos para este nuevo año 2013.

Happy New Year!

Oswaldo.

Algunas de estas aerolíneas han sufrido ataques significativos a su reputación basados en una posible mala calidad de servicio y/o prácticas indebidas. Historias de horror son vistas en prensa y redes sociales de manera frecuente. Sin embargo, es paradójico observar como esas mismas aerolíneas se mantienen en un nivel muy alto en el ranking de servicio al cliente. Por ejemplo, Ryanair ha mostrado resultados excepcionales en porcentaje de llegadas a tiempo  (más de 90%), número de reclamaciones (menos de 1% por 1.000 pasajeros) o número de maletas extraviadas (menos de 1% por 2.000 pasajeros). ¿Cómo es posible esta paradoja? La respuesta es indiscutible: La crisis ha llevado a los clientes a cambiar sus hábitos de consumo y sus parámetros de selección. El modelo low-cost es aprobado porque el cliente quiere ahorrar dinero y reducir el desperdicio (esta palabra es usada en el mundo de los procesos para reflejar la reducción continua de costes y de elementos de no agregación de valor para el cliente: Modelo Lean). Es una actitud que no sólo aplica a la conservación de los recursos naturales, sino que ahora más que nunca también aplica a su dinero: “ni un Euro al suelo.” Una vez que el cliente acepta que paga por un asiento y por llegar a tiempo, todo lo demás es desperdicio.

El modelo low-cost se ha extendido con éxito a muchos otros sectores. Otra empresa que está teniendo resultados extraordinarios es Primark. La cadena irlandesa de ropa, zapatos y artículos para el hogar ofrece precios ultra bajos por prendas de moda de alta rotación. Muchos clientes reconocen que el formato de las prendas de Primark es muy contemporáneo y reflejan las tendencias del momento. Es muy buen valor por el precio de compra. Primark es líder en el mercado de ropa ultra-low en UK, con un 17,7% de participación. En España también sube como la espuma y es muy común ver a sus tiendas a tope de clientes con largas colas.

La aceptación del modelo low-cost y ultra-low por parte del cliente se ve reforzada por el modelo Free de los negocios digitales. La reducción (casi a cero) de los costes de almacenamiento y procesamiento en Internet ha disparado la posibilidad de recibir gratis productos basados en información. Por ejemplo, hemos sido testigos de como empresas del sector medios y prensa, telecomunicaciones, editorial y libros, música, entre otros, han visto amenazados sus modelos de negocio por nuevos modelos y competidores que se abren espacio de manera explosiva en el market-share de esas industria. Skype, por mencionar sólo un ejemplo, ofrece llamadas gratuitas de una cuenta skype a otra cuenta skype. La calidad de servicio de este proveedor ha mejorado de manera significativa siendo muy fiable hacer una llamada de videoconferencia entre dos países por un coste de cero. Yo soy un usuario frecuente de este servicio que tengo integrado a mi Smartphone y, a través del cual, me comunico con mis colegas y familiares por todo el planeta. Adicionalmente, aquellas empresas ofreciendo productos tangibles (ropa, calzado, dispositivos, etc.) también han visto reducidos sus costes operativos de manera significativa y son capaces de ofrecer ciertos servicios de transacción o logísticos de manera gratuita (por ejemplo, pagos, obtención de tarjetas de embarque, envíos o devoluciones). El cliente obtiene un máximo valor por casi nada o nada (low-cost, ultra-low, free).

La actual crisis económica, los nuevos hábitos del consumidor, y la potencialidad de la Internet están empujando a las organizaciones a construir nuevos modelos de negocio basados en precio y cero desperdicios. La eficiencia ante los recursos escasos será la clave del éxito, en al menos esta década. Para ello las empresas deberán rediseñar sus modelos operativos introduciendo prácticas Lean y/o habilitándolos con las plataformas digitales.

Oswaldo

(Este articulo ha sido publicado en Cinco Dias el dia 25 de Octubre de 2012)

Os invito a leer el articulo completo en la edición especial II/2012de Ekonomiaz en el siguiente link:

Practicas de Mejora e Innovación Empresarial al Servicio de la Gestión Pública

Gracias,

Oswaldo.

Four guest speakers presented their experiences and recommendations: Fabrizio Tesolato (Foster Wheeler), Juan Ignacio Burgaleta (Torresol Energy), Almudena Gallego (IFS Software) and I, from Deusto Business School.

I will try to upload part of my colleagues’ presentations. At the beginning, my presentation focused on the identification of new challenges for the project management practice in a new era driven by technological advances, social and economic issues, and globalization.  I argued that we live in exponential times and organizations have the big challenge of continuously adapting to avoid being left behind. This is critical for business sustainability. From my point of view, this implies the development of new capabilities based on three postulates:

1. Extended (massive) and proper use of information technology and digital platforms.
2. Development of new business models based on business networks.
3. Continuous adaptation of the organizational processes and structure.

With respect to the project management practice, the extended and proper use of IT and digital platforms should ensure the following three main objectives:

a. Make information available from anywhere (for example, using ERPs, social and collaborative networks, wikis, web services such as dropbox, etc.)

b. Keep continuous communication (for example, using videoconferencing, skype calls, instant messages, social networks, etc.)

c. Take full advantage of everyone through collaboration. (for example, using project management functionality, discussion forums, social networks, etc.)

Thanks,

Oswaldo.

Amazon deserves a special mention. In an article written in Knowledge@Wharton we can probably see the key elements of the new Amazon`s leadership based on its SCM best practices. As a summary, the article mentioned the following practices: confronting competitors from a position of strength (e-commerce is continuously growing), improvements in the online shopping experience (leak through its books, one-click shopping, displays in key areas), free two-way shipping policy (zappos), manage and ship not only its own inventory, offering same day, second-day and other fulfillment options, drop shopping, digital distribution: kindle device. W should also mention the IT investment on the back-office processes. As mentioned by Jeff Bezos in the HBS teaching case:

“80% of the company’s investment in software development since its founding in 1995 has not gone into its famously user-friendly screens, but to back-office logistics.”

Oswaldo

I think people do not have a clear answer of it, they only have more questions:

Why don’t leaders have continuous conversations with the society clearly explaining options, challenges and dilemmas? On the contrary, it seems they avoid talking to people – By the way, there is an interesting debate about austerity vs. growth in this BBC program. A more specific question is around the people’s mind: Is austerity the best option for everybody? Why growth is not in the agenda? How will we increase consumer demand?

Why is one country in Europe making the decisions for many countries? Is this country making decisions based on Europe’s interests or based on their own interests?

How is it possible that the plan already implemented does not resolve the problem? Even worse, how it is possible that the plan already implemented would worsen the situation (e.g. higher unemployment rate for 2014-2015 in Spain?

Why is not it possible to know who are the managers and policy makers responsible for the debacle of Bankia? How it possible was this bank started trading in the Madrid’s stock exchange market without a signal of risk identified by the regulators?

I have been reflecting on these questions the last few hours. A priori, it seems that we will have to make tough decisions in the next days. In doing so, we will need a bright political class.

Oswaldo.

See the video of story in the following link: M-pesa Mobile Money

Oswaldo

In the previous post, we brought out the controversy about IT being a commodity or a strategic resource. Depending on what side you take, IT management could be about administering costs and risks (commodity) or about envisioning and making the most of the business value of IT (BVIT).

In that post, we already commented on the first dimension of BVIT, related to the role IT (technology + content) plays on supporting decision processes. Another dimension of BVIT is linked to the role of IT in automating and coordinating business processes, which in turn can be intra-organizational (involving internal activities) or inter-organizational (concerning interactions with markets and partners).

In this post, let’s explore IT’s value automating and coordinating internal business processes. Since we want to discuss the business value of the technology, I will not emphasize the means (IT functionality), centering attention of the ends (business impact). Thus, let’s start by digging into the process paradigm, which is relatively recent in the business world, as compared to the functional paradigm.

The functional paradigm

A little history is useful here. When Adam Smith proposed the functional division of labor, back in 1776, he insisted that by dividing complex work in small tasks and assigning each one of them to a specific worker, greater productivity will result from the underlying specialization (learning + repetition). Of course, functional division of labor had been around for centuries. Early civilizations recognized that as the human species keeps producing knowledge, it becomes quite difficult for people to master an ever broadening and deepening set of skills. Trades, crafts, professions, all resulted from individuals learning to align their natural talents and inclinations with a specific subset of human knowledge. Individuals became economic agents exchanging the fruits of their labor, first through barter, and later through currencies, leading to price-mediated markets. Peasants, artisans, shoemakers, barbers, blacksmiths, and so on: functional division of labor defined the identity of economic agents.

Renaissance, scientific method, and finally the industrial revolution enter the picture. Technological innovations create new production machines that increasingly automate certain manual tasks. Industrialists set up complex mass-production systems around these new machines. Simple products that had been manufactured by craftsmen for centuries now face strong competition by cheaper mass-produced goods. As the nascent industrial companies learn to impose their technology-driven cost advantage, they face an organizational challenge: how to configure a complex productive work-system within the firm? This is the context where Adam Smith’s proposal of functional division of labor comes in.

Previous to the industrial revolution, functional division of labor created identity for economic agents, as a combination of technological (know-how) and psychological (talent and personality type) factors. After the industrial revolution, functional division of labor appears within industrial organizations as an economic driver of productivity. The technological and psychological factors are still there, but now they create identity for organizational roles and positions. Over the last two centuries, the functional paradigm has evolved, from its micro-level origin, to the macro-structuring level, so that nowadays it is noticeable in the way complex firms have structured themselves around organizational units specialized to perform functions.

Modern industrial organizations have become so large that workers have a hard time fitting in and identifying themselves with such broad and complex social systems. We, human beings have a strong tribal orientation. We tend to look for small social systems where we feel we do belong. This is a socio-cultural driver of functional division of labor. Salespeople, plant workers, marketers, and IT specialists may work for the same company and share some corporate values, but at the end, they “belong” to their functions, and this explains while many companies are better understood as a federation of loosely-coupled units as opposed to an integrated organization.

In summary, the functional paradigm to work configuration is very strong because it has several underlying mutually-reinforcing support forces: technological (know-how specialization), psychological (alignment between task, talents and personality types), economic (productivity associated to learning and specialization) and socio-cultural (”my tribe”). Thus, the silo-mentality is not so easy to dismiss as some authors would like to dictate; the strong forces behind the functional approach to work are very strong and will not disappear any time soon from modern organizations.

The process paradigm

Back in the 1980s, the western world watched with surprise and disbelief how emergent Japanese multinational companies were able to supply products of great quality at much reduced prices. Toyota competed with cars that used to cost around half of the “equivalent” General Motors´ car, without compromising quality, features and performance. It took some time for the western companies to recognize that whereas they were competing with a functional approach to work configuration, their Japanese counterparts used a process approach.

The process paradigm is a systemic approach to work configuration:

a) It considers the individual tasks, but it goes beyond, to the integration of those tasks into a meaningful whole: “the process”

b) It recognizes that workers are key stakeholders in the execution of work, but it goes beyond, and includes the clients/customers for whom the work is performed and “delivered” via a product or service.

c) It is aware of time and costs incurred in the execution of individual tasks, but it goes beyond, and reflects on the total time and cost incurred to execute the process, deliver the product or service, and satisfy the customer/client.

In contrast, the functional approach to work configuration, tends to emphasize individual tasks at the expense of the whole process. It tends to have an inward-looking perspective to work, being less sensitive to the external stakeholders. And it tends to think that the total time and cost incurred can be computed by adding the individual tasks´ time and cost.
Western companies expected their larger volume would translate into economies of scale and cost advantages at diverse functions. So they had a hard time figuring out where the competitive advantage of their Japanese counterparts came from. If you want to know what is the source of the competitive disadvantage of the functional approach compared to the process approach, then look at the coordination costs for the answer.

Coordination costs occur at the interfaces between functions. As work flows across functions and interfaces, three elements add up: value (to customers and other stakeholders), cost and time. Of course, we want to accumulate value, while controlling the accumulation of cost and time; that is what productivity is all about! At interfaces between functions, there are unfortunately abundant opportunities for exactly the opposite to happen: time and cost increase while value may even decrease. Think of it as a 4×100 relay run. You may have the best runners in each of the four segments; however if the interfaces don’t work right, time accumulates, or even worse, somebody may drop the baton, and your team loses. In a working environment, dropping the baton at the interface creates defects, quality mishaps that reach the final customer as an inferior value and/or products and services that have to be re-processed again, adding costs.

We know there is a problem with coordination when these symptoms are prevalent: a) high defect rates, b) long end-to-end time to execute work, c) over-abundance of people in charge of making sure the baton is not dropped at each side of interfaces, and d) use of buffers, inventories and other slack resources to connect activities. These four symptoms decrease value and increase costs, a dual negative impact on competitiveness.

But, why do these coordination costs tend to escalate under the functional approach to work configuration? It is explained by the way costs behave with scale and task variety. If the company supply one product or service, as market share and volume increases, economies of scale and learning (scale accumulated over time) reduce unit cost at each task in the work-system. Scale dilutes fixed costs at the unit level. Learning reduces mostly variable costs. In this scenario, task variety is low (remember: one product or service).

However, after successful companies saturate their initial markets, they tend to add business by diversification: new products, customer segments, geographies and distribution channels. Obviously, management wishes that each diversification thrust can be accomplished by leveraging most of the current business model; at least that would be great for financial results! Though, as the complexity of business diversification is deployed over the existing work-system, task variety escalates. Each new product, segment, geography or channel, needs a “little” adaptation at the work-system. Eventually, as diversification continues, efficiency drops at the task level because variation introduces switching and set-up times, and economies of scale and learning may weaken. But the greater effect tends to occur at the interfaces.

A functional work configuration subject to a diverse product-customer-geography-channel mix has a hard time juggling with so much variation at the interface level. Imagine heavy traffic trying to cross a bridge: cars, trucks, motorcycles, and bicycles of different size and speed, coming from a four-lane highway, converging into a one-lane bridge. At the other side of the bridge another four-line highway is available. You could expect a real mess at that bridge.

In an organization with a functional work system, functions are strong (remember the four forces underlying the silo mentality) and interfaces are weak; they do no have many friendly management sponsors, except for high level executives who always seem to wonder why they do not work! When weak interfaces are challenged with the complex “work traffic” that is typical of a highly diversified company, defect rate increases (collisions), more buffers and inventories are required (long waiting lines) and more interface people are used (traffic officers). Coordination costs escalate and eventually mask scale and learning efficiencies resulting from specialization at the functional task level. These are the direct consequences of fragmented business process.

There are also some indirect consequences of fragmented business processes that have not been designed to deal with variety and exhibit weak interfaces. When a business process does not work properly at the operational level, exceptions grow. How do we handle this case? People at function xyz do not care about not letting the baton drop, so who fix this? The problem with process exceptions is they end up being solved by the most expensive coordination mechanism a company has: its management hierarchy. Coordination mishaps ascend the hierarchy looking for someone with the authority to handle the exception. The larger the process scopes, the higher in the hierarchy process exceptions tend to climb. Organizations where key business processes are fragmented use up an important fraction of management time handling operational process exceptions. No wonder, their management hierarchies are taller and fatter. This is not only costly, it slows down the capacity to react to the environment and adjust to changing conditions. Higher management costs and slow management processes are two indirect effects of business process fragmentation.

In summary, when a corporation faces a large and diversified business mix with a functional approach to work-systems, it ends up with less quality, larger process cycle time, higher costs at interfaces, a taller, fatter, costly and slow management hierarchy. This whole deterioration in competitiveness is sometimes called diseconomies of scale; although they are really caused by scale associated to excessive variety and fragmented business processes.

That is why, back in the 80s, GM’s cars cost almost twice as much to produce compared to Toyota’s. GM responded by heavily investing in further automation at the task level, but the challenge was not there, but at the interfaces. Toyota, on the other hand, used a process perspective considering how value (quality), cost and time were simultaneously affected as work flowed through the whole process, and instead of creating local optimal configuration at each task, it designed for global optimal configuration at the process level, and they did not stop at their boundaries but included the whole supply chain in the definition of process. That is why the process approach is systemic. Starting with the voice of the customer (grater value at lesser price), Toyota’s workers and managers got involved to design a process-optimized work-system.

It is very important to notice that the (effective) process approach is not anti-functional, and it is not naïve ignoring the strong psychological and socio-cultural forces that make functions strong and interfaces weak in most organizations. It does recognize the economic benefits of the functional division of labor, but it does no look for local optimal configuration at the task level. It does recognize that people at the functions have a hard time getting out of the “please the boss” mentality to the “please the customer mentality”; thus process methodologies start with the voice of the customer and involve functional people in the design of the overall process. Respecting the pros and cons of functional division of labor, the process approach concentrates on creating coordination capabilities at the work-system that match coordination needs of the business model, always with the customer in mind. This translates into interfaces with higher “work bandwidth”. Sometimes, this entails building a four-lane bridge and other times the whole highway system needs to be reconfigured.

IT as a key enabler of the process paradigm:

IT is not the only enabler of coordination capabilities that the process approach demand. There are several organizational arrangements that can enhance coordination. Physical layout improves coordination when “tangibles” flow through interfaces (including people!). Flow configuration, considering sequencing, concurrent parallel work, control points, reciprocal interdependence, all of them dependent on business policies and rules, are key enablers of coordination. These “other” coordination enablers are very relevant and deserve separate posts to talk about of them. But here we are exploring the fundamentals behind the business value of IT.

In our first post in this series, we explore IT as an enabler of decision processes. This is the world of business intelligence, multidimensional databases, data warehouses, data marts, decision support systems, smart analytical agents, and so on.

When IT support business processes, that is the world of enterprise systems (ERPs) and their relatives core systems (as they called them in the financial service sector), customer or supplier relationship management systems (CRMs, SRMs), workflow systems, groupware, web-based (internet, intranet, extranet) systems, enterprise architecture integration (EAI) and the emerging and promising business process management systems (BPMs)

These categories differ in flexibility (for example, workflows and BPMs are more flexible than ERPs), richness of functionality which affect the degree of automation (ERPs and CRMs being strong in this aspect), scope of the value chain covered (broad vs. focused). Whatever the differences, they all share a common trait: process orientation. They provide coordination bandwidth because they were all conceived and designed under the process paradigm, allowing for both strong functions (automation) and strong interfaces (coordination). They are prepared to handle the effect of business diversification on process variety (task + interfaces). In particular, BPMs represent the most promising category in terms of flexibly digesting process variety.

Of course, flexible coordination capabilities are not limitless. Thus, although investing in these information technologies will help the organization deal with increasing variety, diseconomies of scale will eventually appear, although at a much larger level of variety than the non-IT-supported business process.

In conclusion, a key business value of IT is to improve process integration and flexibility, reducing defects, compressing process-cycle-times, reducing costs and buffers at interfaces, decreasing operational exceptions that climb through the management hierarchy, and freeing up management time for decision making. If a company develops a superior strategic capability for identifying the key processes where cost and value drivers lie, and deploy the right IT system to those processes, it will improve efficiency and effectiveness.

As I also mentioned in the first post in this series, this does not mean any IT investment aimed to improved process integration will create economic value. Sound IT management directs such investment to those initiatives with a positive business case. A good starting point is to create a process architecture for the business, and identify critical processes, those with the greatest sensitivity to financial and strategic goals. These are the leverage points for investments, where small improvements in process integration create greater value for fundamental stakeholders.

In the next post, I will comment on business value of IT associated to inter-organizational business processes, as well as the implications on IT management.

Gastón