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Value disciplines and the operational excellence model for BPM

While the first wave of business process management (BPM) focused on internal, back-office operations, enterprises are now using BPM techniques to improve their critical, customer-facing processes. That's because enterprise CIOs now seek to support the rise of digital business. Digitization spreads an organization’s business processes across multiple platforms and sets into motion numerous complex workflows. The CIO's task is not only to automate those workflows, but to make sure the underlying business processes are optimized for improved customer interaction and business outcomes.

In this webcast presentation, Ken Lewis, ITIL consultant at PA Consulting, advises businesses to figure out how they're creating value for their customers and to focus on a "value discipline" -- first described by Michael Treacy and Fred Wiersema in a February 1993 Harvard Business Review article -- where customer engagement and experience is key. Here he explains Treacy's and Wiersema's three value disciplines -- operational excellence, product/service leadership and customer intimacy -- and delves into goals for a company that prioritizes the operational excellence model.

See other excerpts from this webcast presentation

Part 2: Second value discipline: Product/service leadership

Part 3: Third value discipline: Customer intimacy

Part 4: Future trends and the role of technology

Questions about this webcast excerpt on value disciplines and the operational excellence model? Email stroy@techtarget.com.

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Transcript - Value disciplines and the operational excellence model for BPM

Editor's note: The following is a transcript of the first of four excerpts from Lewis' webcast presentation on business process management for business outcomes. It has been edited for clarity and length.

Ken Lewis: [Michael] Treacy and [Fred] Wiersema back in a 1990s Harvard Business Review article ... proposed there were three [fundamental] approaches to providing value to the customer that lead to market leadership: [operational excellence, product/service leadership and customer intimacy]. They looked at many companies at that time and said that these companies focused in one of these three vectors.

[Companies] had to be champions in their discipline while meeting industry standards, as they say, to execute competently in the other two vectors. So, you couldn't just be somebody that's very good at operations and not worry about what kind of product you deliver or how you deal with your customer in the first place.

So, companies like Walmart and FedEx were known as operational excellence firms.

Intel and I would consider Tesla and, in some people's minds back in that day, Apple were product leadership companies.

In the customer intimacy space, this is where you have IBM and Home Depot.

So, let's dive into each of these a little bit and take a look at how the processes themselves may be slightly different from the other two propositions. This is why it's important to understand the value proposition you're looking for.

In the operational excellence model, these are firms that provide efficient, effective transactional operations that attract customers looking for the lowest cost. … The customer is expecting zero defects when they order products. They're looking for service turnaround.

If you were [considering contracting for] a VPN service, you'd want the VPN to be set up immediately, for example. Or if you're looking at Amazon and you want a new virtual machine for your business, you're going to be expecting to have that virtual machine up and running quickly. By the same token, there's a low cost of that service and product. [In] most cases, the customers in this space know what they want and they're self-sufficient.

So, the … the design principle here is keep it simple. Keep it simple, straightforward and make sure you minimize the number of scenarios and options. The key processes in our life cycle are product information, order tracking and self-service.

Governance … has to have the mindset to look at the way these business mechanics work. They need to make sure the performance is closely controlled and managed. The metrics and measurements of those processes will focus on activity, speed and accuracy.

[In this model], the [staff] will be team players -- very little room for creativity. They basically have to stick to the process. In this space here, most of the interfaces to customers tend to be much more automated. This is where the engagement model is all represented by the technology that you have in front; hence, that's why you have to keep it simple.

The distinction here, again, [is] it's low-cost, highly integrated technology. [There's] a lot of automation here. Process data, the business data associated with this … is price, sales, logistics, linkage to the store, stock. [Customers] know they can get it. If they have multiple fronts, [that's even better]. I … like to buy [books] from Amazon, but in many cases I [will] go to Barnes & Noble, look at the stock that [is] there … and pick it up. Now, of course, in that competitive market, now Amazon is talking about flying you your book.

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Which value discipline does your company prioritize: operational excellence, product/service leadership or customer intimacy?
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I would say that my company prioritizes product leadership. It's difficult to say because there are always different groups with competing priorities. Operational excellence is definitely not on the radar, though. I'd be glad if we could even reach operational competence!
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