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February 15, 2007

Why "Best Practices" Improve Efficiency

Inefficiency comes from disorganization. To gain efficiency, and get ROI in that effort, typically we must organize specifically to meet demand. Naturally, this organization (verb) will rely on distributing responsibility (accountability) and assignments (resource investments).

But in the context of managing value, "inefficiency" is often attacked at the wrong level. Operational inefficiency is important but the more significant issue is the efficiency of the relationship with the "customer".

For a customer, the most valuable efficiency is about how consistently and readily events in the relationship are satisfying on demand, as opposed to how much there is a necessity for extra effort on the part of the customer if customer satisfaction is to be achieved.

This is efficiency in the same sense that we say a market is efficient: that is, where supply readily meets demand under terms that are economically favorable to both parties. In the matter of "best practices", supplier readiness is the focus.

So what exactly is "best" about best practices?

1 - "Best" doesn't assume any perfect world of complexity. It is problem oriented. It directs an approach to solving and preventing problems.
For different kinds of problems, different practices are best.

2 - "Best" is not about execution under supervision; instead, it's about managing by plan.
It is not primarily about processes, but instead about what expectations of processes are most reasonable and why they are.

3 - Yet, "best" is not about promised outputs. Instead, it's about optimization that removes barriers to availability and capacity.
It's about inputs, not outputs... environment, not results.

The following illustrates the relationship of factors in the best practice equation.

First there is an operational underlayer for driving quality and cost to needed levels. This is about production.

Then there is a governance layer that provides the organizational context and principle
for bringing production to customer relevance. This is where practice makes "best" or not.
It generates reliability by optimizing conditions in which cost and quality can increase
availability and capacity.

The punchline is that in the context of the customer relationship, operational "efficiency" is predominantly about the reliability (efficiency) that the customer finds in the relationship with the supplier, or else it doesn't matter.

Posted by Malcolm Ryder at February 15, 2007 12:35 AM

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