The Elusive Art of Making Processes Pay
By Louis Columbus
There’s a major disconnect between the expectations and results companies are getting when they re-align processes aimed at serving their customers. Several manufacturers spoken with have bought into the process re-design vision, but report the effort to turn the benefits into reality is much more difficult to attain than originally believed.
There are several reasons for these unrealistic expectations taking hold. First, nearly every manufacturer that has complained about a lack of progress didn’t really have a solid handle on the lost time, dollars and productivity attributed to a process being broken in the first place. Take quote-to-order for example. Manufacturers who have not seen re-designing this process take off didn’t really have a handle on the cost per order to begin with, and in the rush to automate the process of creating quotes, just sped up the mistakes the company was making to begin with. Without the metrics in place to measure it before the process redesign, the company didn’t know where to start modifying the process to make it more efficient. Second, many manufacturers get swept up in the tidal wave of process centric messaging, promises, and even case studies, but don’t really ever get a roadmap defined of how they can accomplish the same result. Third, companies are failing more than ever before despite the best-intentioned guidance about best practices being the path to profitability from vendor and system integrators. What’s missing is the concept of best practices being a benchmark instead of a roadmap that must be adhered to in lock-step precision. There are many more failures out there of process redesign than anyone would care to admit. Let’s take a look at how you can sidestep this problem by learning from other’s mistakes.
Culprit #1: Untrustworthy data kills every strategy it touches
Ever since line-of-business managers climbed into the driver’s seat of IT spending, process-centric messaging spread faster than Google. Today these companies are disillusioned after having spent in some cases over $3.5M in licenses and services for channel programs and have little if anything to show for it. When line-of-business managers started dictating how much was being spent and on what, everyone else in both the companies looking to solve problems and the people selling to them couldn’t get enough of metrics, analytics and performance management. But in that rush to measure so many companies measured the wrong things and as a result build quoting, channel management and order management strategies on the shifting sand of incomplete and inaccurate data.
Culprit #2: Don’t buy the process-centric hype; any lasting result requires hard work
For companies facing a crisis on the customer side of their business there’s a strong tendency to buy first and ask questions later. The promises of quick returns from redefining processes is alluring to a company in trouble with its channels, customers and prospects. What gets lost in the rush is the hard work of really understanding why quote-to-order is broken for example – and if the quoting process is even needed still in the order workflow.
Quickly layering on CRM, whether its hosted or licensed or both, without first cleaning up the many processes that touch a channel or customer, is a recipe for disaster. The rationalization is that once the software is in, users will be weaned away from the manual process of entering orders, or that quotes and special pricing requests will be moved to the new system at the end of the quarter. Too often the software is found to not be as efficient as the manual process in the first place, because the root cause of error-filled order entry or incomplete customer records never got addressed in the first place. So many companies find they do more orders, but just get to error counts earlier in the quarter. That’s a dubious accomplishment for a $1M+ investment in license and services in many instances.
Culprit #3: Best practices is a benchmark not a roadmap
Now saying all this was driven by making a technology-centric purchase is a copout, what really happened is that these failed CRM, channel management and order management implementations are best-practices-gone-bad poster children. No vendor will ever admit it, but a best practice for one vendor in a specific industry doesn’t come close to fitting the requirements of the customers’ competitor in the same industry. The fact that applications are now more modular gives vendors the chance bring selective tools to the biggest pain points that manufacturers have. Yet it’s no excuse for selling a vision that best practices can be pumped out like Happy Meals when in fact each implementation needs the speed, strength and precision of a sushi chef.
Here’s a reality check: best practices are far more valuable as a benchmark instead of a roadmap. There is no such thing as one-size-fits-all best practices. That has to be a core assumption about any strategy and ensuing software implementation before a dime is spent. One-size-fits-all best practices is an oxymoron.
Creating a process Roadmap
The following steps highlight what companies are doing that do get the highest potential returns from redesigning their customer-facing, order management, and quoting processes:
- Prioritize the processes that touch your customers and channels the most. For larger manufacturers these will be in the thousands. Typically order capture, order management, lead management and escalation, and pricing requests are the most costly processes and the ones where improvement is most needed.
- Spend time redefining the processes internally first. Before ever meeting with a vendor, integrator or consultant see if you can fix the processes internally first. Many times order capture for example can be fixed by re-defining roles in Sales Operations or even Sales management.
- Processes that require automation need to be prioritized on a roadmap. If the customer- and channel-facing processes you have isolated need software to automate them, first create a roadmap. Prioritize based on the financial pain of each process, estimating the lost revenue and increase in costs associated with each.
Which Processes Pay?
It’s troubling to find so many companies not really getting the results they expected after spending so heavily on customer-facing strategies. There are however processes that have proven themselves over years of research. These include the following:
· Automating special pricing requests. There’s ample evidence from the results of high-tech, financial services, and discrete manufacturing companies that automating special pricing requests pays off. Of the manufacturers I have spoken to, taking this process from being manual to automated and adding rules to approve pricing requests by reseller level pays the highest dividends of all.
· Quote-to-Order Processes Integrated To Manufacturing And Supply Chain Systems. There are dozens of software companies that have come and gone that just offered one aspect of this equation: some have just offered the quoting system; some just the integration; and others, just the ERP or supply chain system. But for the company using these, when all three work in synchronization with each other, more accurate quotes are produced and cost per order is reduced.
· Cross-selling is more than jamming as many products as possible on a website. Many manufacturers have learned this lesson the hard way, selling related products at a loss due to the blended margin being below their company’s SG&A requirements. Up-selling and cross-selling has everything to do with a deliberate strategy of managing margins and attach rates.
· Service strategies are neglected yet have the greatest potential. Get beyond the RMA process and the pile of returned products in the corner of your Operations Department. Just getting RMAs automated has a proven payoff, and warranty reimbursements can make or break an entire channel strategy. It’s because warranties are often the cash that gives resellers the liquidity to re-invest in their businesses.
· Order cycle times always have room for improvement. Going through the steps in this article could show areas for improvement for order cycle times. This is however not a quick fix when it comes to software. Integration between order capture, order management, supply chain and fulfillment systems is a must-have to drive order cycle times down.
Bottom line: Many CRM and sell-side implementations fail, and no one wants to ever admit they have them. It’s because these companies have bought into a best practices vision that isn’t accurate or that the processes that were broken to begin with have just been accelerated. Stop and look at the processes first and be selective about applying software to your biggest CRM and customer-facing pain points.
Posted by LOUISCOLUMBUS on August 2, 2005 at 11:50 AM in Business Infrastructure | Permalink
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