Hopefully, you found my column from last week valuable as you reflected upon how your company provides your target market with what it values most. In case you missed last week’s column, it addressed how a firm uses its “order winner(s)” to provide its target market with a compelling reason to purchase its goods and services. To review, an order winner is something that a firm’s product does better than any of its competitor products. It is important to remember that what it does better has to be something the target market highly values. Some examples of order winners include being the lowest priced, being the best at some aspect of performance, having the most consistent quality, being the fastest or most dependable in terms of delivery time, or being the most able to offer a variety or high level of customization. Firms typically communicate their order winner(s) through their marketing messages. For instance, from the early 1960’s to 2007, Wal-Mart’s tagline was some variation of “Always Low Prices,” and since 2007, it has been “Save Money. Live Better.” For more than sixty years, Wal-Mart has highlighted its order winner as low price/low cost, and everything Wal-Mart does is focused on delivering low prices.
Hopefully, you and your business have identified what compels customers to buy from you. That is, you have a good understanding of how you differentiate your products from your competition, you communicate that differentiation to your customers, and most importantly, you deliver on that promise of differentiation. In order to deliver on that differentiation, you must have processes in place that correlate with your competitive strategy. So, this is where I am going with my MBA students for the next few weeks, and I thought I would deliver that message to you first. In the rest of this column, I will provide some guidance on how to identify your key processes, what you should know about those processes, and how to start fixing them if they are not delivering to your customers what you promise.
I was once told by a very wise person that if your processes are good and working well, then you do not have to worry about the output of those processes. While that statement is true, as business leaders, we must make sure we are focusing on the most important processes. So, in my many years of teaching and consulting on process improvement, I have found that when addressing processes, we must first identify those which are most important to delivering on competitive strategy. For some companies, this might seem easy. For instance, a manufacturing company is likely to identify its production process as the most important. However, there may be other processes, such as its research and development process or its order fulfillment process which might be just as, or more important. For companies who compete on customer service, their hiring and/or training process might be paramount to achieving its differentiation in the marketplace. So, your first step in delivering your order winner(s) is identifying those processes that are most critical to achieving those order winners.
Once you have identified those processes most important to you in delivering your order winner(s), it is time to start evaluating how well those processes are performing. While you probably have a pretty good idea of how they are performing based on both observation and how your firm is doing in the marketplace, you must be able to quantify process performance. This starts by determining the most important “Measures of Merit” of the process. These Measures of Merit should be quantifiable measures connected to your order winners. If you are competing on speed, you should be measuring the time it takes for the process to perform its transformation. If you compete on price, obviously, the cost of the process becomes one of your primary metrics. For each of your critical processes, you should develop a series of metrics that you will monitor to help determine if your process is functioning as well as it should. Once you start collecting these metrics, you should find benchmarks which will indicate how you are doing. This might include past performance in your business or maybe how well your competitors or companies in other industries perform on these metrics. If you find your performance is not meeting your benchmarks, then the hard work begins. You need to examine your processes in detail to determine the reasons for less-than-optimal performance.
The easy, but expensive solution is to bring in an expert consultant who can use various techniques to determine your issues and recommend solutions for improving your processes. There are steps you can take on your own that will be cheaper and quicker. It is important to realize that many process problems are what we call “low-hanging fruit;” obvious problems that can be readily observed and rapidly addressed. Spend time observing your sub-optimal processes and look for “non-value-added” steps; things that are done in the process, but not really adding any value to the process. Look for bottlenecks that are restricting your capacity. Determine if the labor performing the process is adequately trained and if the equipment used in the process is well maintained and working as efficiently and effectively as possible. These are the most common and addressable issues that you can fix on your own. However, if you are really struggling, please reach out to me and you may be a candidate for a class project to address your issues.
No matter what you choose to do, if you are trying to compete successfully in your markets, realize that it is all about your processes. If you promise your customers that you have a differentiable product, it will be your processes which will ultimately deliver on that promise!
