Uncover the hidden physics of your business processes
To begin to understand what I mean by the "hidden physics of business processes" have a look at the fragment of a typical enterprise sales process depicted in the diagram above.
The Hidden Physics of Business Processes uses the plumbing metaphor, stocks and flows and valves, to represent business processes. The rectangles are STOCKS which accumulate business objects and money - they are filled by INFLOWS and drained by OUTFLOWS - both shown as arrows. Flows are regulated by VALVES (circles) which control the rate of inflow or the rate of outflow.
These components (stocks, flows and valves) connect to each other to form a complete system much like the multitude of pipes which circulate water in our homes and offices. Just like our plumbing the pipes can have leaks and the stocks can have different internal mechanisms to control how water gets managed within them.
The Hidden Physics of Business Processes provides a powerful and easily understood lens to examine the essence of any business process. Our example shows how Prospects flow into a particular type of STOCK known as a CONVEYOR (a stock with a fixed transit time) depending on prospect flow. A proportion of Prospects flow through to New Customers (also a CONVEYOR) who then go through an induction process before becoming either Good Customers (Active Accounts) or Bad Customers (Inactive Accounts) depending how well they have been Incubated and Developed.
These plumbing diagrams are constructed and refined and calibrated using real data in collaboration with the owners and users of the business process under examination.
A critical point is that it is often the structure (flows, stocks and valves) of a business processes - made visible through this approach - which constrains the financial performance which can be delivered irrespective of how good, well-organized and committed the team of people operating the process are. So if you want to change the performance of the process you must understand and be able to redesign its structure to your advantage. This is what the hidden physics of business processes reveals.
Once we have constructed the basic physics of our processes the next step is to use simple software simulation tools to explore the effects of different improvement strategies on key outcomes. Simulation tools are absolutely essential at this stage as many proposed improvements produce counter-intuitive results when their impact is simulated and analysed over an extended time period. Without the simulation capabilities it can be incredibly difficult to be confident in the result of any proposed improvement over time.
Now there are 3 potential process improvements which, on initial consideration, look promising for this particular sales process:
Improvement Idea No. 1 - Conveyor Streamlining
What if we could streamline the 2 "Process Conveyors"- for example, reducing them from 4 and 3 months to 3 and 2 months respectively? Well when you run it through the simulator in actually makes things a bit worse in this case. The physics of this particular process tells us it is more important to focus on the quality of interaction during prospecting and business development than on trying to do it faster! RESULT: ILLUSIONARY BENEFIT:
Improvement Idea No. 2 - Extra Investment in Account Incubation
Extra Investment in Account Incubation seems like a promising idea as it reduces both leakage of Major Accounts to Inactive Accounts and also improves the rate of new prospects through New Customer Referrals. However simulation shows us quickly that this too just makes things worse. The physics of the process reveals that the transfer of investment from the front-end to the backend to support increased incubation has the net effect of damaging the overall revenue flow through the process. RESULT: ILLUSIONARY BENEFIT
Improvement Idea No. 3 - Extra Investment in Account Development
Similarly to the account incubation it seems that like investment in Account Development might also be worth looking into. This time the simulation shows us (see table of results below for the "before" and "after" financials) that this redirection of investment makes sense within our process and could improves sales by a whopping 25% over a 12-month period through increased revenue per customer as well as reducing loss from active to inactive customer accounts. RESULT: REAL BENEFIT
Good news and Bad news....
The good news is that improvement in almost any enterprise's revenue generating processes can be significant and timely. Hopefully from these simple examples it is obvious that the bad news is that finding genuine process improvements can be like looking for a needle in a haystack with the obvious "no-brainers" often not being the best things to do. Techniques like the "hidden physics of business process" supported by low-cost simulation tools can make the difference between your business making changes and your business making money!
You can read more about the Hidden Physics of Business Process and how it uses low-cost Business Simulation technologies in the paper Create your own business simulation lab for better team decision-making.
For more information on Sales Performance Optimization visit www.salesperformanceoptimizer.com
About Ken ThompsonKen Thompson delivers keynote conference speeches, workshop facilitation and in-house consultancy in four key business areas:
- Creating High Performing Teams in enterprises including Virtual and Mobile Teams (based on the Bioteams Book)
- Establishing effective Collaborative Business Networks enabling companies to co-operate effectively in areas such as sales and product development (based on the book - The Networked Enterprise)
- How to use the latest social media technologies including blogging and online communities to promote enterprises, brand, organisation or event
- Development of graphical on-line interactive Business Dashboards and What-if Simulators for organisations to support Performance Improvement, Strategy Development and Executive Team Development.
Bioteams Books Reviews
Ori Brafman introduces his forthcoming book, “Sway: The Irresistible Pull of Irrational Behavior” by sharing a very sobering tale which illustrates how even the most trusted professionals (airline pilots) can depart wildly from the rational under certain pressure conditions.