Are There Still Cow Paths in Your Life?
If you've been in IT for a while, there's a term you have likely heard called "paving the cow path." It's a concept I first wrote about back in the 1980s, and it comes from observing the path cows take from the field to the barn. They tend to follow a meandering trail that becomes well-worn over time.
Many business processes evolve in the same way. Perhaps it's because few organizations have a disciplined habit of regularly sitting down and thinking through the best way to "get to the barn."
How to avoid paving the cow path is certainly not a new concept. And from my perspective, there is good news to report: businesses and IT have gotten the message. They recognize that before you can get the most from your investments and technologies, you must first optimize the processes that those technologies enable. For example, before putting in new systems, particularly ERP systems, companies know they must take a fresh, healthy look at their processes, particularly whether or not they are employing best business practices which can then be automated through ERP.
In fact, many consultants, system integrators and software vendors now have fairly disciplined "value engineering" approaches to help companies optimize processes that the ERP will support. But, these efforts are normally focused on the transaction processes of an organization like "order-to-cash," "procure-to-pay," etc. What the top quartile of high performance firms have done is extend this focus -- normally as a follow on phase to the main ERP implementation -- to straighten the cowpaths that exists in a higher level of strategic processes.
Consider some advice once given by architect Frank Lloyd Wright, who said, "Get the habit of analysis." It's simple, yet powerful advice that can revolutionize your business. There is a new class of processes that sits above the transactional which can help you reach that goal. It's the concept of business insights, which help you ensure that you are strengthening and optimizing strategic, insight oriented processes -- everything from your assessing the effectiveness and elasticity of your pricing and sales strategies to creating truly differentiated customer service and brand loyalty.
The primary example of this approach is the application of business analytics. For instance, taking the transaction data that your ERP system is generating and combining it with other data, including data from external sources to help you gain insight into the success of a marketing campaign, a new product launch, or the relative profitability of different customers or products. The essence is determining if your strategies are working. Answering that question can only be done through business analytics.
Another example is evolving from transactional to functional excellence, as with a function like procurement, where your ERP can more rapidly process your accounts payable. It does not, however, help you understand if you're optimizing the amount of money you're spending on goods and services. For example, when shifting your focus from transaction processing excellence to business insight, try to determine if there are new ways or processes that you could utilize to optimize spend with your many vendors.
For another example, consider a new type of GPO (General Purchasing Organization) emerging in the marketplace that specifically supports small and mid-sized businesses. GPOs are known for helping multi-billion dollar companies optimize their spend. But in the past, smaller businesses did not have the aggregated spend to provide true leverage with their vendors. So a new class of GPOs has emerged to help them achieve the same negotiating power that a GE or a General Motors has with their vendors. To do that, you need accurate data from your transaction processing systems. This gives you the insight necessary to go to market with this new class of GPO and better negotiate with vendors.
The message I want to get across today is that there still may be some cow paths in your business. It is easy to benchmark transaction level processes and business outcomes … but have you tested the business insight class of processes for optimization of processes like "insight-to-advantage?" You may well feel comfortable with your processes -- that they are optimized at the transactional level, but have you thought beyond your comfort zone? By utilizing business insights and removing any potential cow paths in the processes above the transactional level in your business, you can introduce fresh possibilities and methods to optimize your total business performance. Best of all, you become a differentiated competitor in the market, as well as a low cost one.
Bill Jeffery is National Managing Partner of Tatum's Business Operations and Technology practice. During his 30-year career he has served in executive leadership roles within information services and management consulting organizations, including EDS, Union Capital Group and A.T. Kearney.