Chapter
5

Using the Process Lever to Transform
to a More Real-Time Organization

Consciously or unconsciously, customers move from first deciding they have a product need, then to acquisition and use, and finally to product retirement. Customers go through a series of identifiable processes that move them through that journey. Each process represents a series of activities that customers, employees, suppliers, and other partners must complete to move through the life of a product or service. Some processes require interactions between participants, whereas others build on the outputs from the prior steps. One example of a process is the development of a new product or service. Another example is producing a product. Still another is the customer’s use of the product. Within each process are a series of detailed steps that must be achieved to complete the overall process. Each of these steps in every process represents a potential core lever to be optimized in an effort to transform an organization to become more real time.

A real-time organization understands that time is a critical component of the customer experience and that any effort to change the steps in a specific process should result in an improved real-time customer experience. For example, if the steps required to deliver a product to the customer could be changed so that delivery time is reduced from a week to two days or even less, these changes have the potential to improve the customer’s real-time experience. If the customer recognizes that the new delivery time is better than the competition, this transformation will stand out as tangible proof that the organization understands the value of the customer’s time better than its competitors.

Process-related levers for transformation include the procedures, physical resources, and personnel used for each step. The physical resources include materials that become part of the product or service, supplies that are employed during the process, and tools that support the process. In the digital age, the tools that are utilized in the process ordinarily include digital interfaces, which produce data; accept data entered by employees, customers, or others; and display results. The tools also include an information and communication technology (ICT) system connected to the interface. The ICT system accepts data from the interface and may transmit it, combine it with other data from other processes, manipulate it, and return results. For example, a factory-based machine can support an interface to a system that manages the entire factory line, and it can also feed data to a spreadsheet-like display on a dashboard that allows management to monitor the process for deviations in production. As a lever for transformation, the dashboard can be changed to automatically highlight significant deviations in performance and automatically shut down the line if critical operational parameters are exceeded.

Before deciding that using the process lever is a priority, the company must understand how proposed changes improve both product quality and the real-time perception of the company by its customers. If the company decides the net improvement to the customer experience justifies pursuit of such a transformation, it must first analyze the people, tools, data, data flow, and ICT system support required to make such a transformation. The necessary changes would then be identified and implemented by the company’s staff, its suppliers, and its partners as appropriate.

More effectively valuing customer time should be the overarching driver of all processes selected for transformational activities through analysis of data in the RTMR system. Such transformation of processes must not be viewed as a one-time event. The evolution to becoming an increasingly real-time organization is a long-term process that should be addressed through a series of incremental programs. Continually identifying and implementing incremental and sometimes radical innovations should become an ongoing business practice. Considering that competitors will be continually exerting efforts to unseat a company’s market position, there is not an ultimate finish line as much as a continual transformation process.

Using a Process Lever: Review Current Steps and Make Modifications

One approach to transforming a process is to review the current steps and then simply make modifications to them. For example, within a process, one or more steps could be merged so that two activities are accomplished simultaneously. A process could also be improved by dividing a single step into separate steps so that additional concepts can be included in the flow (e.g., adding an additional quality check or integrating a new feature to the product at that point in time). Perhaps the improvement calls for changing some aspect of the step, such as converting to a new and more advanced tool, or rearranging the steps of the process.

As an illustration of the step-wise nature of a product process, consider the following example:

Step 1: Customers make use of an online shopping application when they know what they intend to buy. First customers open and initiate the application (which is assumed to exist on a cloud server and the computer/smartphone is providing application access). Once customers have entered the application, it presents a virtual store that allows them to browse the goods. Customers have the option to limit the products presented to those currently available in the inventory of the local store or alternatively the store’s complete inventory, including the products at a central warehouse. The application also supports an order history function to permit customers to recall prior orders that they may wish to replicate.

Step 2: Once they are done browsing inventory and prior orders, customers select products and place them in the shopping cart. After opting to check out, they can review the shopping cart contents to verify the desired type, quantity, and price of the products they are interested in. They then choose whether they wish to pick up the purchased items at the local store, have the products shipped by the default shipping process, or request expedited shipping. Once customers confirm the contents of the shopping cart, they enter any optional promotional codes and click on the order button.

Step 3: After a customer has created an order, the application might ask if the customer is a new or returning customer. A returning customer would be asked to enter a user ID and password so the system can associate the current order with the customer’s prior orders. If the customer is new, the system could ask the customer to enter personal contact information, including name, email, and phone number, which allows the company to reach out if ordering problems arise or if the customer wants to be notified about future product sales. The application might give the customer the option to save the order to facilitate ordering of future purchases.

Step 4: Once the order has been confirmed, it is summarized and totaled before the customer is allowed to select the desired form of payment. As a further verification of the order, the customer is shown pictures along with a brief description of the selected items. In this example, the customer can specify special handling instructions (e.g., whether the order should be flagged as a gift, etc.). Upon finishing the confirmation, the customer clicks the submit button.

The process changes below show examples of levers that a company can use in its desire to provide a better real-time customer experience:

Option 1. When the company analyzes historic purchasing behaviors, it recognizes that some products are frequently purchased in tandem with other products the store has available. The company determines that one way to improve the customer’s real-time experience would be to recommend additional products to the customer based on the decision to purchase a specific product already in the shopping cart. Putting these associated recommendations in front of the customer would save the customer from having to browse for those products. It could also keep the customer from visiting another store. In some instances it could also save the customer from receiving the purchased product only to discover that an associated but independent product is required to facilitate use of the received product.

Option 2. Part of becoming a real-time company implies that a company understands that customers want to know when an ordered product will be delivered so they can plan their time accordingly. If product delivery has been scheduled for a certain date, the company can inform the customer of the expected delivery date. That will allow the customer to use the intervening time productively. By posting an estimated delivery time in the order confirmation, the customer is freed to pursue other interests while awaiting product delivery. The customer can also be given the option to receive ongoing notifications as the order is tracked through the delivery process.

Option 3. By analyzing historic purchases for a specific customer, the company is able to forecast future needs for product consumables. For example, a company might understand that a customer places an order for additional printer paper every month and that the same customer places an order for printer toner every six months. As an aid to the customer, the company can allow the customer to place a scheduled standing order so the required consumables will be automatically ordered, saving the customer from having to frequently visit and place additional orders.

Option 4. The company realizes that many of its customers prefer to conduct business with companies that maintain a positive relationship with them long after they have received and placed the product into use. To expand the customer-company relationship, the company could follow up with customers two months after a purchase to gauge satisfaction and offer suggestions on how the product can be used to better serve them.

Option 5. The company can use its RTMR data to determine the expected time for customers to arrive at the local store to collect the products they ordered online. To accelerate the order fulfillment process, the company should assign employees trained to meet customer demand within the expected arrival time. To support the tasks of those employees, the company should ensure that local store inventories are organized to streamline employee access to products. Furthermore, the pickup process should be designed to provide customers with real-time experiences that meet or beat their expectations for the amount and quality of time spent on picking up their orders.

Using the Process Lever: Reinvent Processes, Involve Customers, Use Cross-Functional Teams

Another approach to transforming a process is to ignore the current process steps and imagine the best real-time experience a customer could have when completing the process. This approach has been referred to in various ways, including reinventing processes, zero-based redesign, and starting with a blank slate or a blank sheet of paper.³⁶ Such a process reinvention begins by envisioning the desired results of the customer experience for a given process. Once the results of the real-time experience have been envisioned and specified, the process is divided into a set of steps and technologies that support the achievement of those results.

As an example of the blank-sheet process, consider the following example:

Step 1: To open a new bank account, a customer first must visit the local branch of the bank and meet with a representative to consider different account options and provide the necessary identification to ensure the account represents a legitimate bank customer.

Step 2: The customer waits in a line to meet with the bank’s representative, which is often the branch manager or assistant manager. On average the lines are short, but they can become long during peak times.

Step 3: The customer is walked through the account setup interview where the various accounts are reviewed, identification information is collected and validated, and finally the account is set up.

The process changes below demonstrate examples of levers that a company can employ to provide a better real-time customer experience:

Option 1: The bank finds that to open an account, the bank representative has to interview the customer and fill in forty-five different data fields before the new account can be opened. The bank starts over with a blank sheet and discovers that a new account can be opened with as few as fifteen fields. When the bank compares this blank-sheet approach to the established processes, it finds that ten fields are never used once the account is opened, ten fields can be populated from outside online sources, and ten more fields can be eliminated by making changes to other long-established banking processes. If the bank reduces the account opening process from forty-five questions to fifteen, customers will likely respond positively because the time savings would mean less time spent with the bank representative; furthermore, the bank representative would be able to support more customers, thereby reducing the time customers spend in the queue.

Option 2: The bank understands that when customers seek to open a new account, they especially dislike having to sit in the lobby while waiting for the bank representative to become free. The bank also understands that many new customers first stand in line to see a teller before they are directed to the representative for an interview. If the bank trained and authorized the tellers to open new bank accounts, the time spent waiting for a bank representative would be reduced.

Option 3: Though the process of opening a new account does require that a bank representative validate customer identification documents, the bank accepts that if a new customer were to enter information online (either from a mobile phone while in the lobby or from a computer prior to visiting the bank), the time spent with the bank representative would be reduced to mere minutes.

The examples above, although realistic, are not intended to represent any specific bank. They do represent options intended to make improvements in the customer’s real-time interactions with the company. Making a change to customer interaction processes can provide significant real-time value enhancements, but it is notoriously difficult to develop customer- friendly user interfaces. The realization of user-friendly software is a subjective art. Kanban and agile design philosophies employ customer advisory teams and focus groups in an effort to achieve an optimal user interface. Because customers are directly involved in the design process, these same customers can often provide feedback on the real-time savings associated with a specific design option. Moreover, because these philosophies are incremental in nature and encourage the development of prototype user interfaces that can be evaluated by real customers, each prototype evaluation session provides an opportunity for customers to directly voice an opinion about the potential time savings that each option represents.

As an example, consider the case where a Latin American bank consulted customers for advice at every stage of a customer-driven redesign of the process for opening new accounts.³⁷ The customer-advisors were first shown sketches of various solutions so they could prioritize the bank’s efforts in a way that reflected customer perceptions. An early prototype included a recommendation engine that asked customers questions on their banking patterns and then recommended a specific account type based on their answers. During testing, it became clear that customers almost always wanted to compare account types rather than just accept the recommended type. Thus, the questions asked by the recommendation engine provided little incremental value to the customer real-time experience and, in fact, extended the account setup time longer than was necessary. Based on customer involvement, the solution was redesigned. The recommendation engine with its questions became an option rather than part of the normal flow of the process. With customers’ direct involvement with the development team, the bank could be confident that the resulting new customer experience would be acceptable when the updated user system was launched.

Beyond involving customers, organizations should consider establishing a strong cross-functional team to evaluate potential real-time transformational levers. A team made up of experts from different functional areas within the company must have the ability to determine when a proposed transformational lever will increase the complexity of other processes at play. If a transformational lever makes one process more efficient while making others more cumbersome, the value of the transformation could easily be undermined.

Using another banking example, a long-established bank determined it could open a new customer account based on customer input of four critical data fields. This is a significant step forward from banks requiring forty-five, thirty-five, or even fifteen data fields. However, the proposed collection of such a limited amount of data upon account opening meant that other processes in the bank (e.g., compliance) would need to independently gather additional data. The bank needed to decide whether to extend customer time in the account opening process or add customer time in other processes needing additional data. A cross-functional team could provide an informative evaluation of these alternatives.

Innovation is difficult because it requires a change from an established process. As a normal practice, people are generally resistant to change where an established process is working. Although many people will accept that processes can be improved after adoption of an innovation, they also understand that a new process carries some risk that it might compromise the effectiveness associated with the legacy process. Fear of failure may, thus, drive risk-avoidance behavior even when risks can be managed. An important driver of a real-time organization, though, is the realization that a lack of customer-focused real-time innovation carries with it a significant risk of competitive obsolescence.

Becoming Adept at Collaborative Innovation

The Marshall School of Business at the University of Southern California (USC) is the home of the Institute for Communication Technology Management (CTM). CTM is an industry-funded think tank that considers how technology impacts markets and business processes. CTM research projects have focused on mechanisms that drive collaborative innovation for business entities. Its efforts to understand the importance of information systems (IS) personnel to the collaborative innovation process are particularly relevant for digital transformation programs. Further, the adoption of open innovation methodologies, which encourage collaboration with external parties, also plays a significant role in enabling innovation. Research on both these topics, presented below, is relevant for using the process lever to become a more real-time organization.

Collaborative Innovation of Functional Area Personnel with IS Personnel—A USC Marshall Research Project³⁸

Collaboration between professionals with different areas of expertise, different motivations, and potentially different employers makes it possible to develop and implement innovations that are more comprehensive than more targeted innovation efforts. Collaborative functional specialists and IS personnel involved in an innovation program are expected to bring a variety of knowledge, skills, and abilities when they join a cross-functional innovation team. Each member of the cross-functional team plays a different role in the innovation program. For example, the project champion would take the lead in advocating for the innovation within the company, whereas other members could serve as targeted specialists. Generally speaking, functional specialists are expected to understand a functional role within the company, whereas the participating IS personnel are expected to understand the nature of digital technology and information flows within the company.

To better understand situations where collaborative innovation would occur, CTM asked corporate leaders to rate their organizations’ level of innovation and identify whether the IS function was viewed as a cost of doing business, an enabler of greater efficiency and service, or a strategic partner. The expectation was that innovative organizations would be more likely to view the IS function as a strategic partner. The results confirmed that expectation. Furthermore, CTM found that although some companies consider themselves to be driven primarily by innovation, more companies are driven by a desire to respond to the market, such as customer needs or competitive threats. Firms successfully competing primarily on the basis of innovation are rare (one in fifteen).

Organizations where the IS function is a strategic partner should have IS and functional area staff working collaboratively throughout the innovation process as coequal partners. Besides bringing expertise in their own areas, IS and functional area personnel must also bring an appreciation and understanding of the other area. For example, IS personnel must earn their right to participate in the discussion by bringing an awareness of the organization’s mission and current functional area practices/processes along with a deep understanding of how digital assets are tied to the support of those processes. Each member of these collaborative innovation teams needs to be able to look beyond parochial departmental needs to understand the larger role the organization is trying to fulfill. Leaders who want collaborative innovation to succeed must, therefore, prepare people to innovate collaboratively and, as needed, provide appropriate resources. From a long-run perspective, this implies the need to provide opportunities for individuals to be educated and practice collaborative innovation at all levels within the organization, starting with small projects and progressing to more complex ones.

Open Innovation—A USC Marshall Research Project⁴⁰

Open innovation (OI) is an initiative that employs know-how and capabilities of external partners as a key component of a firm’s larger innovation effort. Rather than innovation occurring exclusively from within, the firm opens its boundaries to collaborate with external partners. Companies can seek to partner with others under various forms of private and public consortiums. A company can be involved in many such OI efforts where the mission is shared among potential partners that include users, suppliers, competitors, entrepreneurs/start-ups, and universities.

OI can be employed in a variety of contexts, e.g., when collaborating teams are in different parts of the world, such as the US and Europe, or when collaborating teams come from both the public and private sectors. Further, OI can be utilized to create or improve either products or services. The concept of open innovation has evolved and grown significantly over the last couple of decades. Indeed, some view OI as the key to a growth strategy.⁴¹ Given that OI has been used successfully in a variety of contexts, organizational leaders would be wise to ask themselves, “How could we use OI to improve our existing innovation efforts?”

Open innovation requires trust and sharing of information between different companies involved in the same ecosystem. A major challenge for each participating company is to avoid becoming overly dependent on one or more external parties for its essential innovations. Dependence on such parties could be potentially disastrous if those parties fail. To establish alternative paths to success, a company should participate in open innovation relationships with more than one party and limit how much it relies on them for its essential innovations.

Assuming the other OI participants are also collaborating with multiple parties, some of a company’s shared data may find its way to an unintended competitor. A potential solution is to establish an exclusive and explicit relationship with a single collaborator. However, that precludes collaboration with other desirable companies.

This USC Marshall study examined factors contributing to OI success. OI adoption is more likely in larger firms that have other resources that allow differentiation from the other OI partners. Non-adopters often raise concerns as an explanation for their nonparticipation, especially over losing core assets and intellectual property (IP). Self-reported data suggests that among OI adopters, revenue growth, profit growth, and innovation capability exceeds that of non-adopters. These results suggest that such cooperative development arrangements create a positive innovation climate. Collaborating with external parties is not necessarily going to be an effective contributor to every firm’s innovation programs; nevertheless, many firms have adopted OI and are witnessing positive results from such efforts.

Key Takeaways

  Organizational leaders who seek to guide their organizations toward becoming more real time will find that the process lever is a powerful tool in their toolbox. Processes represent the activities that customers, employees, suppliers, and other stakeholders complete throughout the life of a product or service. Examples of two processes include producing a product and using the product. Within each process are a series of detailed steps. Each of the steps in every process represents a potential core lever to be optimized in an effort to transform an organization to become a real-time organization.

  Process-related levers for transformation include the procedures, physical resources, and personnel used for each step. In the digital age, these levers include digital interfaces and the information and communication technology (ICT) system connected to the interfaces.

  Leaders of real-time organizations regularly specify, develop, and implement process innovations with the goal of valuing customer time more than competitors do.

  Using the process lever, invent a new process or transform an existing process. One approach to transformation is to reinvent an existing process from scratch, similar to inventing a new process. Another approach is to make modifications to the existing process, such as merging one or more steps, dividing a single step into separate steps, rearranging the steps, or changing the way one or more steps are completed.

  In any approach to process design or transformation, ask, “How will the new or revised steps, including changes to the process-related levers, provide a better real-time customer experience?” To develop and evaluate the feasibility and potential success of a transformation, consider involving customers and a strong cross-functional team.

  Organizational leaders should provide an environment where employees and other stakeholders can become adept at collaborative innovation. In this age of digital transformations, corporate leaders who view the IS function as a strategic partner will want to develop their process innovations in collaboration with IS personnel. Furthermore, leaders seeking to foster a climate of innovation should consider collaborating with external partners on open innovation projects. Even if those projects are not focused on transforming processes, employees participating in those projects would gain experience that could be applied to process innovations.

  Many potential innovations could use the process lever, but organizations have limited resources. Business leaders are responsible for identifying and prioritizing the process innovations to implement. These decisions and assignment of the organization’s limited resources to specific transformational programs should be aided by data from the RTMR system. More specifically, those who are involved in making process improvement recommendations should review data on the real-time experiences of customers who have interacted with the company and its products or services. Process innovations that are implemented should address problems or opportunities revealed by analysis and interpretation of the RTMR data.

  Organizations leading the real-time revolution will have the agility to detect and respond to changing customer real-time expectations more rapidly than competitors.