Dynamic Processes In Business

DYNAMIC PROCESSES IN BUSINESS

Processes are central to the proper continued functioning of an organization, and its achievement of objectives on all parameters; however, the main thrust of this short article is to argue that it is these very processes which used to deliver results in earlier times, lead to disaster as the market and environment conditions change, making the processes in question out of sync. This creates a time lag in organizational response, creates a drag on productivity as results are sub-optimal, and ultimately leads to erosion of profitability of the organization

The Enviroment

Further, the past 10 to 15 years have seen a sea-change in both the  internal and external environments organisations operate in, with the information technology value additions, as well as increased global connectivity. All this operates in a much stronger global trade network with increased cooperation and/or blocs and/or trade wars, all  being played out with twin Globalisation + Localisation trends being present in the background. Despite these sea-changes in the overall ecosystem organisations operate in, companies have insisted on maintaining the old style of processes, with zero thought towards modulating internal processes to cater to the changed environment.

The Organisation

Perhaps the biggest erroneous assumption that organisations and the leaders therein make is that it is primarily the external environment that changes; nothing could be farther from the truth. Organisations are not static creatures, they are alive, vibrant and dynamic with real energy and real people, and are in a state of constant flux. And the factors identified above-  Information Overload, Global Connectivity, Technology, Globalisation, Localisation {rightwing protectionism} have also changed the internal organizational culture of nearly all companies. And in this scenario, Leaders habitually continue blithely in the belief that internally the company is the same it was; sadly – most leaders also assume the external environment will also respond to the same strategies and tactics in use in old times.

The People

In this backdrop, little attention is given to people in the Organisation, and the need to keep them attuned to the epochal changes that have ripped apart the fabric of what was hitherto known as the Business Environment; in its place is now a completely different organism, another genus / species almost compared to the earlier. Trainings in this are limited to Seniormost staff – by which time attitudes have hardened, and ideas fixed. Changing these takes time; leading to disaster; examples aplenty of Organisational collapse. Little or no training or attention is given to an examination of the internal and external operating environment of Organisations, at any level and any function; when in fact this forms one of the most critical interventions an organization can make in the longer term.

The Processes

Thus, it is in this scenario that we operate our internal processes and external touchpoints to the external environment- wherein we tend to operate them from a fixed perspective. I appreciate that a process is by nature fixed; it is this dependable predictable nature of processes that enables performance and acts as a guideline. Yet,  when  the environment we operate in is Dynamic, how sensible is it for us to be wedded to a fixed sequence?

This brings me to the concept of a Dynamic Process. While a process is by nature a predetermined sequence of steps, we need to constantly monitor the internal and external environments of our company, and ensure continued fitment to them. This does not mean we change the process at the drop of a hat; all it means is we monitor the environment, and, when required, change the process to align it with the external / internal environment. This is not easy – for processes can be and are regularly subverted by Managers in the system, who know only too well how to game it.

A strong process is one that cannot be easily subverted by a powerful manager. Now, there are two reasons why processes lead to failure of companies- one is subversion. A defined process is regularly subverted, exceptions sought – sometime undocumented. Rarely is any effort made to examine the cumulative impact of these subversions of the process on the top and bottomline, whereas this should be De-Jure in companies. Thus, strong firm implementation of processes is a must, and yet…

A large number of failures can also be traced to the failure of internal processes to capture & reflect external or internal environmental changes on time. The faster your internal processes modulate to external changes, the more nimble your market response mechanism.

An Example:

For example, there may be a defined trend shift in customer demand relative to your products; if the existing processes in Marketing / Production / Supply Chains do not capture this change early, it can and has lead to disaster. These departments regularly interact externally, how they capture the information, for example, {if they capture it}, how much importance & thought they give to it, and what they do is the determinant.

The Purchase department may note a change in raw material price trends that is not explained by developments; the upstream / downstream vendors in the Supply Chain may give hints – or the employees dealing with these vendors might note changes in the pricing, delivery, availability, investments being made by these vendors, etc. All these are lead indicators. The Production team might come across a new technology scheduled to come on-stream; and so and so forth.

 

Drawing Lessons

The point is that one has to monitor all external touchpoints in the company – any external interface may give hints to coming change. This has to be captured in the system and properly used. And more to the point, if and when needed, one has to alter the current process to cater to the change. You also have to constantly monitor the internal culture of working in a company, and modulate accordingly. It might be that the Sales / Marketing teams are operating at so high a pressure that they miss the vital signs of coming change – this has actually happened. And this is where process subversion starts, with the need to perform, and meet expectations. And that is why a Leader should keep a strong measure on all exceptions to process, and subversion, whether approved or otherwise.

It is in these exceptions, these subversions that you get a hint that something is wrong somewhere - that your internal processes are now not in sync. For example – Purchase sources Raw Material at much cheaper rates. Instead of just congratulations, a Leader should also examine why this happened? Is it a one-off, or a sign of change? Your Logistics from Warehouse Operations shows  a paucity of available vehicles; ask, in this scenario – why has this happened? Is it a change in the market, has some sudden demand arisen, are rates not in sync, or is there an internal issue wherein loading is taking too much time leading to losses for the transporter? Sales asks for a discount -  track it; don’t let it become systemic. Why are discounts needed? Is this a change in the demand curve – or is it a short term thing?

The price-off for Raw Material could be due to on-streaming of massive industry capacity for example. Or the paucity of vehicles could be as all transport are being pulled in by a much larger capacity plant; or the sales discounts could be due to fall in the demand curve as the product enter maturity. In each case, adherence to existing process will lead to sub-optimal results; the need was for a modulated response to this, wherein the change from usual result was captured, analysed and acted on. Unmodulated processes don’t lead to immediate losses; they allow errors to remain in the system, and allow them to build up till they reach a breaking point. That breaking point is called Organisational Disaster!

Conclusion

Thus, a Dynamic Process is one which changes and responds on a need basis, with the response being superior to the existing process options. In the SCM example above, the standard response would be pressure, insistence of agreed contract performance with vendors, and changed rates; a modulated response would have all of these, plus a longer term examination of other options – namely, backward integration or renegotiated contracts or wider sourcing or alternative logistics partners etc. The discount in sales would have the discounts, but would also have a product-price trade off examination, relook at various marketing options etc. Key point is that this should not be an approval based system, as that would mean hesitant employees do not escalate; the modulation should be hard-coded into the process response. This will actually improve the end result.