James Taylor's Decision Management

I am attending the Delphi Business and Process Innovation Summit this week and blogging as I go. Next up is Thomas Koulopoulos on Smartsourcing: A Method-based Framework for Making Sourcing Decision Thomas was introducing his Smartsourcing framework. He made some nice introductory comments:

• 10% savings from wage arbitrage and this is one time saving
• Rest comes from process improvement and execution excellence
• Very hard to outsource processes we don't understand but this is often the main objective
• Most organizations cannot allocate costs like IT to processes
• Ownership no longer denotes control - no need to own the whole chain any more
• Mostly about risk transference so accurate risk assessment is key
• One of the side-effects of outsourcing is documentation of the process!

Thomas then outlined a classic graph showing how rate of change and core v non-core gives candidates for outsourcing but reality can be more complex as I am still on the hook to my shareholders and regulators so perhaps have to keep some control. For instance, if a really good customer calls and the call center is outsourced, how do I make sure the cross-sell happens? I could route to the onshore person who is better or I could automate the decision.

Thomas's Smartsourcing methodology has a core level (a dashboard and some analysis - subjective and quick) and an optional level (starts getting into gap analysis, innovation assessment and benchmarking). Key concept is a two by two matrix with axes of "How good is your performance" and "How core is this is"

• Functional Processes are Core and Excellent execution- optimize and continuously improve
• Re-engineering candidates are Core but Poor execution - need to do better
• Outsourcing candidates are Non-Core and Poor execution (because you won't know a good version)
• Offshoring is good when Excellent execution but Non-Core as you could describe it to someone else to do more cheaply

This all changes all the time - time is a fifth dimension to this view.

Tom's assessment comes in a subjective approach (Level 1), more objective (Level 2) or scenario based Level 3). At each level the staff plot each process in the excellence v core chart as a bubble where size of bubble reflects uncertainty - a small bubble shows agreement in terms of mapping where a large one shows uncertainty of ideal outcome. Each bubble might be within just one of the four quadrants or might straddle several. Assumptions can then be analyzed to see who the processes move around the graph. Very effective discussion tool as it makes people think about processes and how they might be managed.

This seems like it would complement the work around decision yield, though I have to think about it some to explain how. Thomas wrote a book on this that I have not read yet but seems like it would be good - you can buy it and check it out here.

BTW I am speaking tomorrow.

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