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.