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August 13, 2009
Why Business Processes drive Customization... and what to do about it
Customization of business processes means that there is more "precision" in the targeted effort to succeed. But in situations where support may not be up to speed and where targets may change, this precision comes at a high cost of achieving readiness and warding off eventual irrelevance, making it just as risky as it may be attractive.
The general sense of "customization" compares against three basic options for the formations of a business process.
Option 1: One-Size-Fits-All
For business processes, this is a myth, because “business” is primarily about accommodating multiple relationships and requirements, not primarily about manufacturing a standard product. The “process” must support what business “is about”. Relationships tend to be privileged, not indifferently available.
Option 2: Specialization
Sometimes incorrectly called “customization”, specialization is different: it means variations on a single theme. The theme has standard requirements; the fulfillment is where the variety occurs.
Option 3: Customization
Customization begins in the requirements, not in the fulfillment of them.
There are three reasons why requirements may be “custom”:
- Cost structures
- Competitive Innovation
- Capability Immaturity
Three reasons why requirements may be custom, not generic.
Cost Structures:
- Satisfying customers is not profitable if it is too expensive; different organizations (different suppliers, and different consumers) have different cashflows
Competitive Innovation:
- Existing customers, to decide to stick around, need to feel that the relationship is fresh and current
- Potential customers need a reason to prefer one provider over another
Capability Immaturity:
- The time available to use for improving capability may not be in synch (priority, availability) with other resources
Three reasons why requirements may be "custom", explained.
Cost Structures:
- Lack of visibility on true economic impacts puts operations on a risk-aversion basis seen in typical micro-management approches
Competitive Innovation:
- High rate of change is necessary to sustain improvisations that generate necessary nw effects or advantages
Capability Immaturity:
- Required performance level outstrips currently available supporting mechanisms, forcing risky workarounds.
How to mitigate or avoid customization.
Micro-management:
- An operational performance model allows activity to be prioritized and weighed by differential contribution to goals and thus by ROI perspective. (For example, the 80/20 rule.) Relieves pressure to dwell on the microscopic. Define objectives, CSFs and KPIs. Switch to “trust-and-verify” mode.
Improvisations:
- Linking process models to knowledge management allows standardized roles to be able to move quickly and differently on incoming information, without re-organizations.
Workarounds:
- Organizing around known best practices clarifies ways to structurally reduce risk and to more rationally divide the labor required to meet performance targets. Such greater clarity allows managers to make the compelling business case for additional help to cover properly allocated responsibilities.
When to Customize.
Considering the above notes, executives should still project the likely value of customizations. The punchline is that it cannot be taken for granted that customization is the best path to take, neither in the short run nor the long. Customization proposals that withstand comparison to the above considerations should be given even more enthusiasm than usual, as they probably then point at nearly unique opportunities to do something strategically important to the business.
Posted by Malcolm Ryder at August 13, 2009 10:37 AM