Operations, efficiency and costs are only part of the Internal Process Perspective
Once I built a motorbike, a BMW R60. I mixed with motor-mechanics. They had a joke about a ‘Freestate’ torque-wrench (you can apply your favourite ethnic, cultural or tribal slur). There, they said, you get the biggest spanner onto a nut, turn it till it strips, then turn it back a quarter turn.
Figure 1: Torque Wrench
This story occurred to me when I experienced the ‘Value Improvement Process’ in the oil industry. Consultants came in and cut costs from the operation, mostly through retrenchments. As one of the first massive restructuring exercises in South Africa there were some sad stories of people who did not cope with the changes. The company flourished. Costs were slashed, processes improved, customers received a better experience and many new ideas were launched. There were some ‘quarter-turns back’. The woman who worked in the cubicle next to me managed the government debtors and had very valuable relationships with clerks and managers who cleared the necessary cheques. With many years of service she was retrenched with a comfortable pay-out and hired back at very nice consulting rates to continue to manage the delicate balance in bringing in government payments.
How would you go about planning such changes? Strategy Map provides an elegant device.
Figure 2: Strategy Map
Strategy Map provides a systemic view of your strategy. The Financial Perspective is the summary of all your financial targets. These are the essential numbers. The Customer Perspective describes your value proposition. This is how you plan to differentiate yourself in your target market. This is how you want to ‘be’ to your customers and clients. The lowest row, ‘Learning and Growth’ describes your intangible assets. These are your resources and capacity. But how do you harness these intangible assets and put them to work to create your value offer? What do you do?
Internal Process Perspective: What you do governs the value you present
Your value offer is created through internal business processes. Kaplan and Norton defined four categories of internal processes. Each of these clusters may include hundreds of processes. Your role as leader is to identify and focus on the handful of processes to produce the highest impact in converting your intangible assets (your people, resources, skills, knowledge and culture) into your differentiated value proposition.
The four categories, or generic themes, are as follows
|Operations||Producing products and delivering to customers|
|Customer management||Establishing and leveraging relationships with customers.|
|Innovation||Developing new products, services, processes and relationships.|
|Governance||Being a good corporate citizen. Conforming to regulations and societal expectations and contributing to building the community in which you operate.|
You will most likely run these four strategic themes concurrently. However, each may deliver benefits over a different time period.
You can get short-term cost-savings and quality enhancements through improving operational processes. But customers are the point of business. Your customer experience depends, first of all, on how well you create and distribute your product. If your product doesn’t work and takes too long to deliver, you set your marketing and sales team up for failure. Then there is specific work to be done to create your desired customer experience. This work may only start delivering value well after you have upgraded your customer processes. A differentiated customer experience may also require innovation. And innovation may take even longer to deliver value. The benefits from well-defined regulatory and social processes, ‘Governance’, may happen even further in the future as you build your reputation in your customer communities and avoid fines and litigation. A strategic objective in each theme defined in the Internal Process Perspective may build sustainable growth into your strategy.
The contribution from these strategic themes may be shown as follows:
Figure 3: How internal process perspective themes may deliver at different rates.
These four internal process perspective themes are generic. As you refine your strategy you are likely to develop specific themes relating your particular strategy. You may also identify the essential processes in each theme. Here is a somewhat stylised view of a more specific strategy.
Instead of four distinct intangible asset related strategic objectives, one for each theme, it is more likely that you will find one or two Intangible asset objectives relating to all of your internal operations. You will know what works for you.
So are you designing for steel hawsers, or for cylinder head gaskets? Or do you have more delicate (read ‘fussy’) requirements:
Or have you chosen to rig your own Heath-Robinson solution:
Whatever your approach to the internal process perspective.
However you plan what you do.
Avoid the ‘quarter-turn back’.
Describe your internal process perspective to see how your plan fits together and to plan the payback period on initiatives.