With the econoclapse in full effect, most companies are cutting back, trimming the fat, stopping non-essential spend. Which is good, but what if the budget you’re about to slash is the one that’s keeping you alive?
The trouble with businesses is that once they get bigger than a couple guys with laptops in a Starbucks (and sometimes even before then) they get complex. When you have to do lots of things more than once, you tend to set a routine, because this helps save time and money and ensures consistancy.
The trouble with people is that (with a couple of exceptions, I’m not one) they can only cope with 7±2 ideas at a time. Which means lots of fudging and scribbled notes to remember for next time. Unfortunately, decisions get forgotten and when times change, who knows which of those routines are the ones that are critical and which were the nice-to-haves because someone at a masterclass suggested all well run businesses applied a 15 point check list to Quality Assurance…
Setting up automatic routines/reports/etc on Remember the Milk, or Basecamp doesn’t get away from the problem, it just automates it.
What you need is a picture of how your business works. The series of inter-linked activities that between them represent your unique business. Something that’ll allow you to hack’n’slash at your business in theory and diagrammatically before actually making a change that’ll piss of your best customer.
What you need is a business process model.
What you don’t need is a legion of McKinsey consultants. At the most profound level, process models are diagrammatic representations of the systems that make your business function. Boxes and arrows. Easy.
There are two simple things to remember with process maps (OK, there are a couple more but to get started in a blog post…); 1) the ICOM is your friend; 2) decompose where sensible.
There are lots of methods for developing business process models, I quite like IDEF0 (its what I used in my research work, it’s simple and robust, which is handy when developing models ‘on the fly’; there aren’t to many things to remember – back to the 7±2). The basic unit of the IDEF0 method is the ICOM; which stands for Inputs, Controls, Outputs & Mechanisms.
This basic unit forms the basis for modeling the business. As always there are two general approaches to generating a model, top-down or bottom-up. Bottom-up generally involves stapling yourself to an order and recording every activity that happens between the customer placing the order and the end of the cycle (either payment or receipt of goods). In larger companies this is how you find out how things actually work, rather than how the ISO9000:2000 manual says they work.
Top-down is often easier to explain how the method works. At the top level, there a 3 things that all businesses do, Manage, Operate and Support the business. You can decompose the Operate Process into Get Order, Fulfill Order, Develop New Product, and Support Product. Then start with Get Order, what does this involve? What controls how you get orders, what outputs are generated to enable you to fulfil those orders, what mechanisms do you use to make all this happen, what triggers the process in the first place?
Keep breaking these actions down until you get to the smallest unit of actionable work. When you get to ‘pour water into teacup’ you’ve gone too far! 🙂
The idea is to be able to remove, combine, move, change an activity and be confident that there are no unexpected impacts that aren’t captured by the diagram.
It doesn’t have to be a long draw-out process, you can sketch quickly with pen and paper and have a reasonably good set of diagrams after a couple hours. You also don’t need to model every..single…process in the business, just the ones you’re looking at.
Providing every box has an output, control and mechanism and that if you’ve decomposed a box the arrows that touch that box are represented in the child diagram; then you’re good to go.
Now if you cut an activity you’ll be able to see the wider impact. You can see which activities to combine and which are obsolete.
You can have a look at other businesses and see how they handle those processes, and copy them (best practice and all that). Rather than just cut’n’paste’n’hope you can figure out how processes fit together.
Plug the savings into your cash flow forecast, see what effect it has, rinse, repeat until you’ve looked at everything.
Whilst you’re plugging through the accounts, check every line against the business model; where does it fit in, which process does it relate to, does it add value or costs?