Business Excellence Architecture & Organization Design

The Systems Thinking Approach

By Stephen Haines, Founder and CEO of the Haines Centre for Strategic Management
The history of providing customer value has evolved over the past 20 years. During the Industrial Era, mass production and mass marketing manufactured products for the average customer. This created order taking behaviors in which customers selected from what was available. In the 1970s, quality control and zero defects attempted to refine this internally-oriented process even more. In the 1980s, many of the methods made popular by the Japanese came to the United States (Deming, Juran, PDCA, JIT, Kaizen, etc.). In the 1990s, cost-cutting, waste elimination and reengineering were dominant due to cut-throat global competition. Despite their positive aspects, our research of current business trends and client assessments show that these efforts are still separate and fragmented solutions. Most firms in the 21st century still do not have regular and systematic customer feedback mechanisms, so they dont really know what their customers value.

The Systems Thinking Approach to Organization Design

Creating customer value is a tailored and flexible process the Centre uses to assist organizations in providing World Class Star Results and value to their customers. It is the core positioning answer in our customerfocused Strategic Management system and yearly cycle. We install our Business Excellence Architecture as a new Organization Design, using the Systems Thinking Approach as a way to achieve this.

HOW DO WE CREATE CUSTOMER VALUE?

Creating Customer Value is a simple three-step process: Step #1 is a holistic, intensive focus on your customers wants and needs for receiving value from you, now and in the future. It must be the vision and driving force for your whole organization. Step #2 is implementing the needed changes with a passion for airtight integrity of your organization design to your Star Positioning in order to keep all the parts (or hexagon modules, as we shall see) fitting together. Step #3 is organization redesign. It consists of radically and strategically realigning the spectrum of your business design,

Positioning for value is in the eyes of the beholder. It is defined as what the customer perceives they receive uniquely by choosing and using your products and services in relationship to the total cost (financial, psychological, environmental, etc.) of doing business with you instead of your competitor. In systems terms, positioning is the output customers receive in return for giving their input. It is the multiple outcomes they desire from the range of the five World Class Star Results we found in our research (see chart below). YOUR COMPETITIVE BUSINESS ADVANTAGE CREATING CUSTOMER VALUE THROUGH: C = Personal Choice In the 21st century, the competitive advantage Fashion, Control, Self, Customized, Tailored, Variety, Individuality, My/Me Image lies in positioning the overall organization Comprehensive Choices, Mass Customization design to Create Customer Value, as well as customizing it for each market segment and ultimately for each individual customer. R = Delivery Responsiveness S = Caring Service Due to advances in information technology and Customer Service Fast Delivery, Convenience, Methods, Timing, Personal Service, Values, Feeling Important, Speed, Distribution, Flexibility, Access, Customer Relationships, Respect, Caring, Feelings telecommunications, customer value has rapidly Ease of Doing Business, Support Services, Emotions, Recovery Strategy, Integrity, Empathy, Delivery Channels, Cooperation Sensitivity, Familiar, Trust, Cultural, Experience evolved from mass production and distribution for the average customer to selling customized relationships and solutions to individual needs Q = High Quality and problems. Customer value comes whenever (Products & Services) T = Total Cost Features, Authentic, Simplicity, Information, and wherever the customer wants, not when Psychological Cost, Price, Life Cycle, Risk, Technology, Accuracy, Knowledge, Performance, Opportunity Costs, Waste/Environment, Reliability, Functional, Durability, Uses, Consistency, and where the supplier wants. Working Conditions, Product/Services Costs Stability, Soundness, Unique, Innovative, Experiences Customers want relationships and treatment Value Proposition: Outputs What I Get as individuals, not just sales pitches. Individual Brand/Recognition/Positioning = Perceived Customer Value = = = Benefits Inputs What I Must Give customer loyalty matters, not market share. Economy of scope and organizing for the

1420 Monitor Road, San Diego, CA 92110-1545 Phone 619/275-6528 Fax 619/275/0324 www.HainesCentre.com

Fr Do ee No A t D rti cl ist e rib ut e

2

Stephen Haines

processes and competencies to create this customer value. It also means redesigning the fundamental support and capacity-building components of your people (Creating the People Edge ) and your collective leadership (Achieving Leadership Excellence) to better fit and integrate this vision. This step is best depicted in Organization Design terms in our Business Excellence Architecture Model (see hexagon model on page 3), beginning with Module #2: Reinventing Strategic Planning.

Module #2: Reinventing Strategic Planning and Positioning

2010 DO NOT DUPLICATE

1

customer are important, not economy of scale and organizing for efficiency. Collaboration and intimacy with your customers is essential, not an occasional and superficial sales contact. Providing responsiveness and convenience to their needs is what customers want.

4. A set of core values that create this desired culture Overall management of cultural transformation to a customer-focused organization is needed in this module. This management requires flexible, responsive people, participative norms of behavior and empowered work settings. This change is led by setting up specific change management structures, which are the glue to keep all these change tasks on track and prevent status quo behaviors from prevailing. This transformation involves understanding and managing the process of change we call The Rollercoaster of Change . Managing the defensive routines involved in letting go of the past (pain management) and nurturing the persistence and resiliency required for transforming from the old to the new is difficult. Communication and reinforcement plans are essential to change individual behavior over time. Organizational change is a misnomer; organizations change only when people do. Teamwork is also needed everywhere, from department and crossfunctional teams to business processes, both internal and external. The key to success is horizontal cooperation and collaboration to serve the customer, not a vertical hierarchy and bureaucracy. And these teams will work far better if they are initially trained in Systems Thinking and Innovation. In fact, Innovative Continuous Improvement Teams is the right term!

3 Module #3: Leading Strategic Change

STRATEGIC ORGANIZATION REDESIGN

Value results from a total effort rather than from one isolated step in the process. Alvin Tofler, Creating a New Civilization

Creating Customer Value requires a flexible systems approach to Organization Design that deals with the entire organizations efforts, processes and people (as TQM purports to do for the quality outcome alone). This is not necessarily about reorganizing your organization chart, but redesigning the customer mindset and culture of the total organization. Only a systems model can guarantee successful implementation through the application of a holistic methodology to produce desired client outcomes. Our state-of-the-art Business Excellence Architecture Model is the result of more than a decade of comprehensive, Best Practices research. It is validated by the Baldrige National Quality Award systems criteria and by our highly successful Strategic Management results in practice. The resources and work of your total organization and stakeholders (owners, suppliers, employees, etc.) creates a customer value chain, potentially transforming all of your resources into achieving these World Class Star Results. This requires that every organizational element be efficiently aligned and effectively attuned as one system to achieve customer value. This is your positioning. It includes Strategic Plans, operations, policies, measures, structures, resources, technology, competencies and business and human resource processes, as well as leadership at all levels. Thats why our model is significant to this need for airtight organizational integrity. Creating Customer Value through the systematic application of our model expertly guides you along this journey, starting with whatever modules with which you wish to start. The key is the relationships, fit, and integration of all these eight hexagons the parts must be synergistic to support the whole outcome (Quadruple Bottom Line). This is where almost all organizations go wrong: They work each Module separately, with different consultants, different frameworks and self-defeating, piecemeal management initiatives.

1 Excellence

Module #1: Building a Culture of Performance

Along with positioning the organizations uniqueness in the marketplace, there is a need to develop the organizations culture and core values for performance excellence. Module #1 includes four key items: 1. A culture of innovation and creativity 2. Language, thought processes and practical tools of Systems Thinking 3. Fact-based decision-making with good information and analysis

Fr Do ee No A t D rti cl ist e rib ut e

4 Module #4: Creating the People Edge

A key approach to customer value through Organization Design is having the soft people and support elements strategically in tune to achieve ongoing World Class Star Results. Strategic People/HR Management practices and the system of people management must be attuned to create The People Edge. They include attracting, hiring, motivating, developing, empowering, rewarding and retaining all crucial staff. (Our HRM Systems model and diagnostics detail this vital area. Call us for our free article on this subject.) Leadership and management competencies, skills and strategic communications practices are needed at all levels to ensure Star Results are achieved. It is vital that management has the skills of trainer, coach, conflict-resolver and facilitator, as well as the ability to become passionate customer advocates who develop close relationships with the customer. Leadership is the foundation for everything in Organization Design, and leadership development must be an initial and ongoing priority for the collective management team. This is especially true for the middle and senior executives of the organization who need all six levels of our natural leadership competencies: 1. Enhancing Self-mastery 2. Building Interpersonal Relationships 3. Facilitating Empowered Teams 4. Collaborating Across Functions

5 Module #5: Achieving Leadership Excellence

2010 DO NOT DUPLICATE

2

www.HainesCentre.com World Leaders in Strategic Management

5. Integrating Organizational Outcomes 6. Developing Strategic Positioning

6 Module #6: Becoming Customer- Focused

Becoming customer-focused includes: Choices and customization controlled by the customer Quality products and services delivered through TQM concepts High quality customer service Low total cost of doing business with you In addition, the need for strategic budgeting and resource allocation to support all the selected priorities is crucial. It takes resources of all types to make customer value a basic instinct throughout the entire firm, including people, money, facilities, space, technology and information.

The last key to success in your Organization Design to Create Customer Value is to strategically realign the entire delivery system to provide value to the customer every time. The model highlights the many organizational elements that require strategic realignment toward your desired customer vision of World Class Star Results.

Module #7: Aligning Delivery & Distribution

These Star Results must be delivered through operational,

Fr Do ee No A t D rti cl ist e rib ut e

VALUE

value-added Supply Chain Management (supplieremployee customer), including: Process improvement including the continuous improvement (or Kaizen) concept. Enterprise-wide technology organizational design, restructuring and technology tools to make sure all of the organization is supportive in Creating Customer Value. Waste and bureaucracy eliminated and replaced with simplicity. On time delivery, convenience, speed and response to customers.

Module #8: The Quadruple Bottom Line

Feedback is the key to organizational learning and results. It includes curiosity, risk taking and unlearning old individual, group and organizational processes.Feedback and data must be used in systematic problem solving and decision making and in discovering our hidden assumptions about behaviors and performance, as well as in individual, group and organizational benchmarking. It is also essential in daily reflection and education, and in constant reinforcement of your desired changes. Without setting metrics in Module #2 for all four bottom lines, you will not know if youve achieved themnot only for customers, but also for employees, shareholders and society.

SUMMARY: CREATING VALUE IN THE TOP LINE

There is a significant problem with focusing exclusively on the bottom line. Reengineering, cost cutting and flatter organizations are not forward-looking customer strategies, but tools for survival. Lowering costs may bring an improved bottom line in the short run, but often severely damages long-term viability. Positive, customer-focused strategies and product innovation are key sources of building a competitive advantage. And it is only in the hands of truly differentiating leadership that these competitive customerfocused strategies become effectively implemented. Anyone can cut to the bottom line in the short term. But few can Create Customer Value in the top line over the long term and fewer can do it. While also reducing costs and increasing synergy, alignment and attunement through effective

2010 DO NOT DUPLICATE

Published by Systems Thinking PressTM Specialist in Systems Resources www.SystemsThinkingPress.com
3

Organization Design. The critical steps to Creating Customer Value include: 1. Determinimg your primary customer and marketplace areas. 2. Analyzing what your customer values and your ability to deliver it versus our Star Results positioning criteria. 3. Assessing sources of differentiation versus the competitors. 4. Estimating the cost of each source of differentiation. (Adding features usually increases your cost or complexity, while improving quality usually simplifies and reduces cost.) 5. Testing each source for sustainability versus the competition and defining your positioning in the marketplace in the eyes of your customers. 6. Reducing activities or waste that do not affect your chosen positioning. 7. Aligning and attuning your complete Strategic Business Design to this positioning with airtight organizational integrity. 8. Implementing, protecting, changing and continuously improving your competitive edge.

HOW TO GET STARTED

Option 1: Start with our Executive Briefing and Plan-to-Plan event on Positioning and Strategic Organization/ Business Design through our Business Excellence Architecture. This is Step 1 of our Reinventing Strategic Planning process: Educating about Systems Thinking, Strategic Planning and customer focus; organizing for the actual planning process and tailoring the process to your unique needs. (See our article The ABCs of Strategic Management for more detail.)

Option 2: Start wherever you want on our five-phase A-B-C-D-E systems model. Since a system is circular, you may enter at any phase. Our flexible model can help you pick it up from there. Option 3: Assess your organization using our Business Excellence Architecture assessment as an online web-based Enterprise-Wide Assessment Instrument. Once you get started: We can then work with you through our A-B-C-D-E systems phases as follows: Phase EConduct environmental scanning and market/ competitor research to clarify your customers wants and needs versus Star Results. Phase AThe Ideal Future Vision 1. Set up the planning or Strategic Change Leadership Team as well as the rest of the crucial processes and infrastructures for success in Strategic Management (Planning and Change). 2. Make Creating Customer Value a major strategy and change project. We assist in clarifying your vision and values around this. Phase BMeasures of Success 3. Determine your goals and their measures of success using the five Star Results and Quadruple Bottom Line categories.

Fr Do ee No A t D rti cl ist e rib ut e

Another in the Aligning Delivery and Distribution Series. DO NOT DUPLICATE WITHOUT EXPRESSED WRITTEN CONSENT For additional copies or a one-year unlimited INTERNAL REPRODUCTION ONLY (IRO) license, contact us at [email protected] For books and comprehensive materials, visit www.SystemsThinkingPress.com
7/2010

Phase CStrategic Business Redesign Using our Business Excellence Architecture Model 4. Conduct a complete Strategic Business Assessment and Redesign of the total organization: Assess your organization versus our Business Excellence Architecture using our online web-based Enterprise-Wide Assessment Instrument. (It combines the Best Practices research of Baldrige Award Criteria, the Centre and Carla Carter and Associates.) Conduct an initial series of Blowing Out Bureaucracy workshops and use the massive savings as a down payment toward Star Results. (Our Blowing Out Bureaucracy workshop saves more than $2 million in two days; call for more information.) Map the key processes. Identify and eliminate waste by setting up a Simplicity Police Team. Set up core strategies as the primary means to redesign your organization toward your customer value vision. Use the eight hexagon modules of our Business Excellence Architecture Model as the Organization Design framework. Establish small voluntary Continuous Innovation Teams of executives, managers and key employees with a passion for each strategy/module. Conduct a Plan-to-Implement day to kick off the implementation process. Assist in automating and networking processes once they are realigned, using a Technology Steering Group to coordinate. Phase DImplementation and Change 5. Begin strategy implementation (and culture change) using the Change Leadership Team (CLT) and the Continuous Improvement Team as the primary vehicles to guide and support implementation of Creating Customer Value. But first: Educate the CLT and the Continuous Improvement Team. Assist the teams in identifying, leading and implementing specific activities under each core strategy. 6. Lastly, conduct the Annual Strategic Review (and Update) each year to formally keep your Organization Design Creating Customer Value process fresh and successful. Detailed Workbook: See www.SystemsThinkingPresss.com for the Executive Briefing Booklet on Creating Customer Value.

2010 DO NOT DUPLICATE

4

Founded in 1990 Offices in Over 25 Countries