Business Process A NASCAR Perspective

This thought was triggered by an article in the February 2005 issue of Harvard Business Review entitled "Breakthrough Ideas for 2005". The article has a brief synopsis of 20 breakthrough ideas for 2005. One of those was subtitled "Seek Validity Not Reliability" and was written by Roger L. Martin, the dean of the Rotman School of Management at the University of Toronto and director of the AIC Institute for Corporate Citizenship.

Reliability versus Validity

In the above referenced article, the thrust was a challenge to corporations to balance the need for process-driven reliability with a quest for validity. Here is a key paragraph from the article, "Six Sigma, CRM, Sarbanes-Oxley, and most other corporate systems have one thing in common: They are reliability-oriented processes. They are intended to produce identical or consistent results under all circumstances, often by analyzing objective data from the past. For instance, a perfectly reliable poll would be able to produce the same result from ten random samples of voters. By contrast, a perfectly valid poll would be able to predict an election's winner." The article continues to illuminate the negative consequences of highly structured processes: loss of creativity/innovation. Here is a table from the article to add more clarity.

While the HBR article illustrates the negative impact of rigidly applied business processes, it does not provide a model to gauge the degree of structure to be applied for a specific business process. The purpose of this article is to provide such a model.

The NASCAR Perspective

Throughout my business education and career, I have tried to liken businesses and business processes to biological systems, thinking of organizations as organisms. Each organism has its own intellectual and physiological functions. This is the traditional model.

With this model, however, I have struggled with the questions of how much process to apply and to what functions? Instinctively, I understand that business processes are critical to success, regardless of the organization's maturity. They ensure efficiency and consistency. Unfortunately, the quest for reliable results through the application of highly structured business processes has a tendency to quash innovative thought.

I submit that "Excellent Companies" have evolved methods for balancing these competing, but essential components for success. They must sense that the traditional view of a corporation, as a "body corpus", is flawed.

The model I am proposing has an additional component: the machine. To put it in the context of NASCAR, you have the driver's attitude/ knowledge (Intellectual), the driver's physical skill/experience (Physiological) and the vehicle itself (Machine). To win at NASCAR, the driver must possess confidence in her abilities and strategy, she must have mastery of her vehicle and the vehicle must be perfectly tuned to the course.

Intellectual

Developing the confidence to win is the most challenging as it has the greatest number of variables. How does the driver feel today? Is she confident? How are her relationships? Does she have any dependencies? What does she fear? Does she buy into the strategy?

Physiological

Mastery of her vehicle is a function of training, practice, coordination and endurance. She has to be familiar with the course, with the performance characteristics of her vehicle, with the track conditions. She has to be capable of executing the strategy on the track.

Machine

Finally, if she has the right mental state and the physical prowess to achieve the strategic objectives - her car must meet the minimum acceptable performance specifications in order for her to execute the strategy successfully.

The Process Matrix The purpose of this exercise is to identify which of the three aforementioned process areas require focus or review based on the maturity of your company and the respective industry. In the traditional model, the operational (Machine) and coordinating (Physiological) processes were treated similarly with maximum structure. The new model allows for a more moderate structuring of those processes that serve to coordinate the organization. This allows for human involvement. It is the freedom to alter intellectual and physiological business processes to accommodate exceptions that produces robust strategies, intimacy with customers, design excellence, creativity, jobs with meaning, corporate social responsibility and ultimately successful companies. Here is an illustration of the process matrix.

Type I Company (new company in new industry)

This company should focus on the Physiological and Machine processes. The industry is new, so the idea was freshly conceived. Now is the time to focus on execution. However, the intellectual processes (e.g. SWOT analysis, Short Term Strategy, Long Term Strategy, etc.) should be reviewed at regular intervals to ensure that you are on course.

Type II Company (new company in mature industry)

This company should focus on the Intellectual and Physiological processes. The industry, and therefore the "Machine", has been around. The operational characteristics of this industry are widely known and perfected. Your competitive advantage will come from thinking differently and refining your company's coordination (how you control the machine).

Type III Company (mature company in new industry)

This company should focus on Intellectual and Machine processes. The industry may be new, but a mature company may need to alter its thinking to compete in this new space. It will also need to define core machine processes like production, shipping, delivery, order processing, etc. The maturity of the company is an indication that it has decent Physiological processes (e.g. sales training, employee reviews, logistics, goal setting, communications, prioritization systems, compensation systems, etc.). However, it is important that they be reviewed in light of the new pursuit.

Type IV Company (mature company in mature industry)

This company should focus on the Intellectual processes. Both the company and the industry have been around. The company clearly has operational prowess and solid coordination skills. And, it is likely that this is also true of its competitors. The area where the company can still secure competitive advantage is in differentiation, line extension, new product/service development, alternate uses for existing products/services, etc. This is the realm of Intellectual processes - designed for breakthrough thinking.

Regardless of where your company falls in the matrix (mature or new), once you identify the areas of focus, you simply apply a set of rules: if intellectual - minimum structure, if physiological - moderate structure, if machine - maximum structure. It is not complicated!

What's the Point

The point is that people perform tasks in three areas: Intellectual, Physiological and Machine. Rather than a binary approach to how much process/structure to apply - it should be graduated to maximize the potential for human creativity and innovation where appropriate. This article is intended to help you determine where to place your focus and how much structure to apply to the relevant process or processes.

Advantages Business Process Outsourcing

BPO possesses many advantages when compare to other BPO providers. The strategic location and adaptability as well as a huge pool of talented workforce are the country's primary competitive advatanges. The has many more advantages when compared to other providers of business process outosurcing.

Business Process Outsourcing or BPO is globally acknowledge to be the fastest growing industry in the world with a market that is expected to each almost $200 billion by the end of the decade. The industry has also remained stabled despite the global financial crisis. Customer contact services has the biggest share in the industry, followed by finance and accounting, and human resource services. Skills quality and competence is the primary driver why so many multinational companies prefer to outsource their non-core functions, plus the cost-effectiveness derived from entirely or almost entirely eliminating the fixed expenses of the outsources activities.

Business process outsourcing is the assignment of one or more business processes to an external usually offshore provider that specializes in the desired processes. The said process provider in turn owns, administers and manages the delegated process according to definite and measurable criteria of performance. The is internationally well known for the skills and competence of its BPO workforce.

The huge and continuously rising demand for call center services continues to lead the gigantic BPO boom in the country. The archipelago's 62% growth rate in 2006 when the industry earned $2.1 billion compared to the $1.3 billion it earned in 2004 was what has placed the country in the global BPO spotlight. It now ranks third in the world, slightly behind India, and a little more to go to reach the current BPO king, India. The 2,400 BPO workforce in 2004 increased exponentially to 200,000 Filipinos working in 120 BPO companies, most of which were call centers, in 2006. Overall, the BPO industry is expected to reach a demand of $11 billion with a workforce of 900,000 people before the start of the next decade.

Though the BPO boom was initiated by the traditional low-cost call centers, the growth was sustained by the great increase in the demand for the higher earning outsourcing services such as legal services, Web design, medical transcription, software development, animation, and shared services. The has already taken steps to elevate its large pool of highly skilled yet cost effective pool of lawyers and accountants and managers.

The government has expressed its full support to the countries BPO industry with its various significant fiscal and non fiscal incentives directed in attracting foreign direct investment on BPO companies. The government is determined to exercise all possible means to sustain this rapid growth and expansion.

Metro Manila houses the majority of the country's BPO facilities, along with Cebu and Bacolod Cities. The development however has reached other regional areas and eventually led to the establishment of BPO infrastructure in areas such as Baguio City, Cagayan de Oro, Clark (Angeles City), Dagupan City, Davao City, Dumaguete City, Lipa City, Iloilo City and Legazpi City. No wonder the has been cited as one of the top 10 choices for offshore operations.

The has definitely evolved into a global BPO leader where the most skilled and effective workforce and cutting edge technology and infrastructure can be availed without the need for a huge capital outlay. If you want to get away from the increasing cost structure of a competitive business while at the same time increasing the quality of your business processes, the is indeed the place to go.

BPO has transcended from being mere means of cost savings in transaction-intensive, back office business processes to being a very adaptive and strong approach to the realization of a wide array of strategic and tactical claims.

General BPO Benefits

1. Speed to Market - BPO quickly hastens the process of getting fully operational allowing a startup business to be fully stable in weeks rather than months through the use of state-of-the-art capabilities. 2. Competitive Capabilities - established businesses can evolve their current processes into globally competitive capabilities. 3. Cost Savings - BPO dramatically lowers the cost of processes through the elimination of fixed costs. 4. Growth stimulus - BPO can be utilized as a learning tool to get acquainted with the latest, unique and competent capabilities. 5. Revenue - higher quality capabilities brought about by BPO can cause great increase in a company's income generation capacity.

BPO is now generally considered as an edge to having that unique competitive advantage. With non-core processes being done by the external provider that is specialized in the said activities, the company is able to focus more on its core processes. In the case of human resource outsourcing, HR functions such as payroll and benefits, recruitment, and personnel evaluation are passed on to an outsourcer that specializes in human resource management (HRM) and who will keep the company abreast of constant change in the field of HRM.

The is deemed to have a stable grip in its place as a global leader of BPO. The country is in a very good position to accommodate outsourcing demands with its outstanding pool of superior yet cost-effective workforce and its excellent telecommunications software and infrastructure.