In today’s highly volatile and changing business market, companies are challenged to innovate for them to thrive. Strategy and innovation consulting firm, Innosight, highlighted in their 2018 Corporate Longevity Forecast how S&P 500 companies’ lifespans continue to shrink – from 33 years in 1964 down to 24 years in 2016. Studies show it would continue to shrink to 12 years come 2027.
Companies that take innovation and processes optimization front and center are poised to overtake those that don’t. Lean processes allow companies to be agile and responsive to market changes. It also allows companies to focus on innovation and creative investments. To achieve this, it’s important to stay on top of your business processes and know when processes optimization is needed.
What is Process Optimization?
Process optimization is the method of examining your current business process and making it more efficient by reducing or eliminating unnecessary costs, time on wasteful activities, bottlenecks, or any process inefficiency. The act of process optimization is usually done through a project. The organization identifies the business areas with processes that need to be optimized and determines the objectives that need to be met through its optimization efforts. So how will you know it’s time for a process optimization project?
3 Signs You Need a Business Process Assessment
If you’re wondering whether your business processes need to be optimized, here are 3 of the most common signs you need to watch out for.
Fragmented Business Processes
Fragmentation happens when business processes are not properly integrated and managed. When organizations continue to work in silos, the process becomes a complex series of handoffs between functions. This setup increases the possibility of delays, errors, and unnecessary costs.
Fragmentation also happens when multiple systems are used and when manual work is still being done despite automation. These gaps make it difficult to control the quality and integrity of the process output.
High Level of Defects
The level of quality of any product or service is directly correlated to the efficiency of a business process. Defects lead to rework and this increases costs. A high level of defect also puts customer satisfaction at risk. Defects, especially recurring ones, are prime candidates for business processes optimization.
High Level of Complexity
When the process has too many layers of approvals, variations, or conditions, it’s a sign that the process is too complex. You can also gauge the complexity of your process by asking your employees for feedback. If they’re having a hard time getting a deliverable out the door, then it’s time to take a closer look at your business process. There’s a good chance that unnecessary steps are complicating things.
Perform Business Processes Optimization in 4 Steps
If you think you need a business process assessment and it’s time to optimize your process, you can follow these 4 easy steps.
The first thing to do is to identify what business process you want to optimize. Go through your business processes and check which one is too complex, has high defects, or is causing fragmentation and stress within your organization. To know how to improve a process, you need to understand what it is. Here are some guide questions to help you.
- What’s the objective of the process?
- What is the intended outcome or output?
- When does the process start and end?
- What are the steps that advance the process?
- What departments or employee groups are involved in the process?
- What information is passed on between steps?
In this stage, it’s important to focus only on what the process is about as opposed to how to do it.
For this step, assess your current process and how it’s currently performing. Create a visual map of your current process to aid your analysis. Gather process metrics, such as cycle times and throughput, to give you a more concrete assessment. Evaluate each step if they are adding value to your end-objective. Identify where you experience bottlenecks or if there are steps that could be automated or removed. Think if there are better and faster ways to execute each step without compromising quality.
Now that you’ve identified the weak spots in your process, it’s time to create solutions for them. Your analysis will guide you in creating an action plan to fully implement your business process optimization project. Together with your team, you can generate several possible improvement solutions and action items. Assess them one-by-one and implement your most viable solution. Create a solution implementation plan and do a pilot run for your improved process. As you go through your pilot run, measure how much the process has improved and tweak your implementation as you go.
Tracking and monitoring are crucial in business processes optimization. You must have a way to continuously evaluate your process. Even after you apply your optimization solutions, there will come a time that your process will need to be reoptimized. This could be brought about by changes in requirements, market demands, and technology. By having a continuous improvement mindset, you and your team will know when another business process optimization project needs to start.
Process Optimization Techniques
There are a number of methodologies that you can use for your business processes optimization project. Kaizen, Value Stream Mapping, and Six Sigma DMAIC are just some of them. These process improvement methodologies put structure to your process optimization efforts and help you cultivate a culture of continuous improvement in your organization. Business process improvement and optimization need to be a shared responsibility of everyone in the organization. Only then will you achieve sustainable change.
Better Business Processes Through Optimization
To stay ahead of the game, companies must keep their business processes lean and focused on producing value. The 3 warning indicators we discussed will help you spot process inefficiencies before they blow up. And if you’re monitoring your process regularly, you’ll be more attuned to it and kickstart a process optimization project as soon as it’s needed.