Strategy Dynamics Briefing 82: Capabilities and business processes

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The mapping and deliberate design of effective business processes has become almost ubiquitous amongst larger organizations since business process re-engineering (BPR) came to prominence in the 1990s. At the time, many businesses were using information technology to automate activities that were pointless, rather than redesigning processes to incur the minimum essential activity. The result of redesigning or re-engineering the process would often be a considerable improvement in speed, reliability and cost efficiency.

In summary, BPR first identifies the activities involved in current processes and the problems that these activities cause. A revised (and usually reduced) set of activities is developed, together with any new HR and IT systems that are needed. Finally, the revised process is introduced, its effectiveness monitored, and any necessary adjustments made. Today, the worst business processes found in the 1990s have by now been redesigned, or else the firms that held on to them declined or died, so attention now focuses on designing business processes correctly in the first place.

Every resource flow in an organization’s strategic architecture is a process, perhaps of several steps, and each requires strong capability. So it is important to clarify how processes contribute to capabilities. Briefing 80 showed how opening stores is a critical capability in retailing, so this flow is shown in Figure 1 to consist of individual store locations moving from stage to stage along a chain. At each stage, the locations are having something different done to them; they are being assessed, negotiated for, and so on. The stock-and-flow view shows how many individual units exist in each state at any time, and the rate at which they are moving between them. The business process view, in contrast, highlights the activities that are being performed on each entity whilst it is in each state, and the cost and elapsed time involved in each activity.

Figure 1: Contrasting business process vs. stock-and-flow views of a resource flow—opening retail stores. (Click image to view larger)

Contrasting business process vs. stock-and-flow views of a resource flow—opening retail stores

Figure 2 gives a similar translation of the staff hiring rate – this too is broken down into the detailed stocks and flows of applicants, and the corresponding detail of the processes involved. Figures 1 and 2 clarify some useful points:

  • Delays arise between wishing something to occur (“Hire more staff please”) and delivery of that desire, due to the stages through which resources must move, and the time taken by each element of the process—hence the importance of BPR in speeding the acquisition and development of resources.
  • We do not always get all of what we want. Resources can be lost along the chain, both for reasons outside our control, and because of process activities designed to ensure quality of those resources, such as assessing the retail locations or screening initial job applications.

The hiring example also illustrates some activities captured by the BPR perspective that are not visible in the stock-and-flow view. For example, specifying the job and placing advertisements happen before any applications arrive in the stock-and-flow structure. The BPR perspective also clarifies where work and costs arise, and therefore contributes powerfully to our three strategic concerns regarding resource development; speed, quality and low cost.

For strategic purposes, we do not usually need to worry about such low-level operational details of how resource-flows happen. However, it is important to recognize that creating new capabilities to drive those flows is not a trivial exercise, and certainly requires more than simply exhorting teams to ‘do better’. Once we have identified that improving a key resource-management activity would make big difference to performance, we must make sure that the effort gets the backing, resources and time it needs to succeed.

Until next time…

 

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Business processes vs. resource flows

These two views can be confused with each other, but are in fact quite distinct.

Strategic Management Dynamics book coverBusiness process mapping traces the sequence of activities that happen in order to get something done. It therefore quantifies how much activity takes place. Strategy dynamics tracks the location and movements of resources as they arrive, are developed and leave the enterprise. It therefore focuses on quantifying how much resource exists at each stage of this development, and how much is moving between states in each period.

This briefing summarises material from chapter 10 of Strategic Management Dynamics, pages 637-645.

Read more about the book on our website

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