The Value of Simplicity – #1 Process Harmonization

  • Staying competitive in a volatile, uncertain, complex and ambiguous business environment requires companies to continuously harmonize business process landscapes
  • Process harmonization is about designing and implementing business process standards to achieve targeted business benefits while ensuring a harmonious acceptance of the new processes by various stakeholders
  • The value is straightforward: Increased transparency and consistency lead to better integration, elimination of waste, cost- and cycle time reduction. Even more important in the current climate is the ability to change faster to a changing business environment, to capture digitalisation opportunities and to extract more value from investments

Business Process Management is not new. Why should I bother?

To evolve alongside a dynamic market, organizations must ensure that they are capable of smooth, well-coordinated, and broad-based organizational transitions, in which every element of every process can make the necessary adjustments.

Many companies, large and small, suffer from a lack of ability to integrate the organisation to provide a faster response to changing market needs. This often can be seen by a number of perceived issues and pain points that Management Teams complain about:

Organizational inertia – The resistance or difficulty to adapting to an evolving market, where changes are induced by multiple players; customers and competitors. This multi-directional change requires a swift response, but these responses are often limited when the organisational operating system is called bureaucracy.

Missing opportunities to gain or defend market share – Consider the following possibility -> a new opportunity emerges in the digital landscape, of a variety that your company has not yet encountered. Capturing the opportunity requires the kind of agility and speed that can snap up the chance before some other organizations move in. While many companies react with setting up task forces and a lot of good intentions, they often get stuck in execution as the required alignment of processes is not available or the required new processes are missing at all.

Delayed product launches and campaigns – The same is true for product launches or marketing campaigns that are not being delivered on time due to process gaps or long process execution times.

Excess cost an cycle time – Every process that doesn’t deliver value to the customer is waste. That is intuitive but most companies struggle to make processes and their efficiency visible. Process waste costs money through duplication of work, poor decision making and wasted time through lack of clarity.

“Let’s simplify to gain speed’: Becoming more versatile through process harmonization

The work of preparing for market changes begins well before the changes occur – and one of the best ways to get prepared is to enforce process harmonization

A process is a series of actions that an organization takes in order to generate value for customers. Processes can take a wide variety of forms, but they share the common element consisting of a series of steps or actions that relate to each other but are nevertheless discrete points.

Process harmonization refers to the activity of designing and implementing process standards across different regions, business units or functional departments. The goal of process harmonization is to achieve targeted business benefits that arise from standardization, while at the same time ensuring that stakeholders’ acceptance of the new processes is harmonious with the nature of the change [1].

For example, a CIO who is dedicated to automating processes in his systems landscape isn’t able to do so until processes have been harmonized in order to facilitate that change. Setting limits to process variations requires a review of the context of the business model that the processes need to support. It is important to find the right balance between keeping things simple (standard) and allowing non-standard but value adding variations.

While process harmonization shares some of the goals and characteristics of process standardization, they remain distinct from one another. The primary difference between the business process standardization and harmonization lies in the degree of strictness of the standards and the integration into the overall management system.

Business process harmonization involves a reduction in variations, while standardization entails moving towards the eradication of any variation whatsoever. The objective is to create uniform business processes across divisions or locations. The distinction is more than just a difference of degree: harmonization is a more flexible practice that can be tailored toward the needs of your organization, as opposed to the strictness of standardization, which may be a more severe process than your business requires.

A common misconception regarding process harmonization is that IT Standardization is a prerequisite for business process harmonization, while in fact, the reverse is true. Harmonizing processes is dedicated to improving the interaction between various process elements – which includes IT. A Supply Chain Manager who needs to standardize IT infrastructure can, therefore, implement his project as an element of process harmonization because of the way that IT acts as an integrated element across an entire organization.

Thus process standardization is often applied in businesses that focus on cost reduction, efficiency and reduced risk. Process harmonization is more often seen in companies that want to accelerate the business or that want to capture market opportunities.

“Where is the value?” – The benefits of process harmonization

While the act of process harmonization can seem nebulous in its application, implementing it leads to direct and quantifiable benefits on several levels. Successful process harmonization creates value across the economic, societal, and environmental dimensions.

Economic value:

Improved customer service – Process harmonization delivers a more uniform customer experience. Elimination of duplications and unnecessary process variants (which can also be a source of errors) enables much more consistent delivery of value to customers. Increased customer satisfaction and retention lead to better sales performance.

Sustainable growth – Achieving clean processes as a result of harmonization is an essential requisite for digitalization, which adds value on multiple fronts.

Increased efficiency – In this way, process harmonization leads to improved efficiency, as new systems (such as the automation example above) by streamlining a process to operate with similar output at less cost. Sample areas of efficiency increase: Reuse of information systems between different processes and departments, …

Cost reduction – Consolidating processes, structures and applications that are performing similar tasks is an essential element of reducing operational costs, and it’s a useful tool in every COO’s toolkit. To reduce operational cost the transparency that is gained from process harmonization helps to get rid of duplicate processes, applications that are performing similar tasks and supports decision making during consolidation in a post-merger integration phase.

With the successful implementation of process harmonization, it is possible to reduce up to 25% in costs and increase productivity by 50%, and more efficient process execution can lead to as much as 30% cycle time reduction. Sample cost reductions areas: Process cost reduction, Software license fees, …

Getting more value from investments, especially during post-merger integration – Another distinct advantage that it provides is the facilitation of rapid integration of new acquisitions — efficient on-boarding with clean and understandable processes to eliminate wasted time and resources.

Societal value:

Better morale through reduction of wasted time – Process harmonization’s societal benefits stem chiefly from the notion that they allow employees to truly “live” the processes with which they’re occupied, as opposed to spending time documenting processes that are not an accurate reflection of reality – cutting down on wasted time has tangible benefits when it comes to morale and the working environment.

Environmental value:

Reduced resource intensity – The environmental value of process harmonization is a result of an overall efficiency increase. Production processes that occupy space, use natural resources, or pollute will reduce their environmental impact, allowing your organization to take an important step with regard to environmental responsibility.

How to get started

Implementing process harmonization in companies requires a careful and considered approach, but the benefits can be of enormous significance to your working environment and to the bottom line.

1. Articulate the design principles that will govern your process harmonization efforts. Be clear on what you want to achieve, so that the business process harmonization team can direct their efforts on the most important dimensions of value.

2. Model the processes and the associated data using standard frameworks that are accepted across multiple industries.

3. Focus on the people and systems that are executing the processes. Process harmonization is more than drawing up a process map. It requires working with people, to change minds and working practices.

4. Introduce measures to evaluate to what extend processes are harmonized. Without measurement, any process harmonization will be subjective. If you want to demonstrate the value-add of process harmonization be clear on how you measure the improvements from the as-is state to the desired future state.

Learn more about our Business Simplification Service here.

References: [1] J. Fernandez, J. Bhat, Addressing the complexities of global process harmonization. In: Handbook of Research on Complex Dynamic Process Management: Techniques for Adaptability in Turbulent Environments, IGI Global, 2010, pp. 368–385.