Under mounting performance pressure, many corporate leaders are looking to business process reengineering to improve performance, and in many ways that makes sense after all, processes give shape to an organization and are often useful for coordinating routine flows across large organizations. The routine work of a company should be done as efficiently as possible, which increasingly means incorporating automation.
But organizations may be missing a much greater opportunity to improve performance.
Here’s the thing: Much of the work of many organizations today—at least the work that typically offers the potential for differentiation—is no longer routine or even predictable. When conditions and requirements shift constantly, processes fail. While process optimization can still certainly help
- reduce costs
- and streamline operations,
leaders should consider a different kind of organizational rethinking for significant performance improvement. And in an environment of accelerating technological advances and rapid and unpredictable change, constant performance improvement is a must. Competition can come from anywhere—doing well relative to the competitors on your radar isn’t enough. Many barriers to competition are falling, and many boundaries, between industries and between markets, are blurring.
- Consumers have more access to information and alternatives than ever, along with a coincident increase in expectations.
- Workers have more access to information and alternatives—and increased expectations.
At the same time, many employees, in all kinds of environments, face increasing pressure to reach higher levels of individual performance. The useful life of many skills is in decline, creating a constant pressure to learn fast and reskill.
Many companies have struggled to effectively respond to these pressures since long before the Internet of Things and cognitive technologies added new layers of complexity. The average return on assets for US companies has declined for the past several decades, and companies find themselves displaced from market leadership positions more often than they used to. While the price-performance improvement in the digital infrastructure has increased exponentially, most companies are still capturing only a small fraction of the value that ought to be available through the technologies built on this infrastructure. Existing approaches to performance improvement appear to be falling short.
It begs the question: In a world of digital transformation and constant change, what does performance improvement mean? Many companies suffer from at least one of three broad problems that can misdirect their focus:
- Thinking of performance improvement too modestly. Leaders often think of performance advances as discrete, one-time jumps from A to B, or even a series of jumps to C and D. The initiatives that typically generate these bumps are similarly construed as pre-defined, one-time changes rather than as unbounded efforts that have the potential to generate more and more improvement. As we discuss in more detail, not only do most companies need to continually improve their performance— those that don’t start accelerating may fall further and further behind and become increasingly marginalized. Accelerating improvement, then, should be a goal of operations, not just one-off initiatives.
- Thinking of performance improvement too narrowly, focused only on costs. Process dominated much of performance improvement efforts for the past several decades, focusing largely on the denominator of the financial ratio of revenues to costs. But costs can be cut only so far, and technology-based process efficiencies can be quickly competed away, especially at a time when the changing environment and shifting customer expectations are making many standardized processes quickly obsolete. Further reductions can become harder to achieve and have less impact. The relevant performance might be more about an organization’s ability to create significant new value. Workers across an organization regularly encounter new needs, new tools for meeting needs, and opportunities to identify new ways of delivering more value and impact in multiple dimensions, including helping other parts of the organization generate more value. The potential for value creation isn’t confined to certain roles or functions, and is bounded primarily by an organization’s ability to create new knowledge and creatively address new problems. Focusing on new value creation may be the key to getting on a trajectory of accelerating performance improvement. Doing so would require an organization to move beyond efficiency and standardization and begin focusing on cultivating the behaviors—such as experimentation and reflection to make sense of what has been learned—associated with new value creation.
- Thinking of performance improvement at the wrong level. Most organizations manage performance where they measure it—which is to say where they have data: broadly, for the department and organization, and narrowly, for the individual. Both levels can miss where work, especially value-creating work, increasingly gets done: in groups. As a result, organizations can miss the opportunity to shape how work actually gets done. Focusing on performance where it matters most to the organization’s work might be a key to having a significant impact on the performance that matters.
The imperative to act seems simple: Today’s environment seems to offer no reprieve, no stabilization that gives us a chance to catch our breath and say, “OK, now we’ve got it figured out.” The methods and processes that led organizations to great success in the past seem to no longer be working. For sustained performance improvement, companies may need to change their focus and look in new directions.