CPOs and Black Belts: Process Improvement Missing Links?

Add AMR Research’s Eric Austvold to the growing list of industry experts advocating creation of a Chief Process Officer (CPO) position to help companies become agile, efficient, process-oriented enterprises.



During the ebizQ webinar Extending BPI Beyond the Enterprise, part of the series A Manager's Guide to Enterprise Integration, sponsored by Sterling Commerce, the AMR Research Director showed how organizations could do just that: extend Business Process Improvement outside their corporate boundaries to their customers and trading partners, extend expensive but tough-to-integrate ERP systems, and generally reap the rewards of being process-oriented.

Those rewards include being able to respond quickly to competitive threats, streamlined responses to mergers and acquisitions, constant improvement of business processes, reusing enterprise assets, and improving relationships with those customers and suppliers through real-time collaboration.

Austvold said a pivotal factor is really structural, not technological: using Six Sigma-oriented principles, with CPOs as the central figures, to spearhead process improvement.

“A lot of people synonymously interchange Six Sigma with a process technology, like, ‘I’ll buy workflow or process technology and therefore we are going to initiate Six Sigma process plans within our organization,’ and unfortunately that’s not true,” Austvold said. He explained that Six Sigma is really an initiative aimed at pushing continuous process improvement.

While allowing that he has “yet to meet someone at a company with that exact title (CPO),” Austvold said he has witnessed the appointment of vice president-level executives charged with process improvement and the exploitation and reuse of existing technology.

“You have the current executives, VPs or C-level executives you put together by function, and where the process breaks down is where it has to cross boundaries; that’s the ‘Is that your responsibility or my responsibility?’ kind of thing. What we do in this particular scenario is take a person that’s responsible for all those gaps, and it’s their job to see that processes get developed,” he noted.

He displayed Six Sigma-based organization charts showing process “master black belts” and “green belts” matrixed throughout an organization’s engineering, manufacturing, sales and service and financial departments. “You have the black belts who are initiating the process and they’re the ones who are pushing the ball forward. When they run into obstacles, they work with the champions (green belts) who are there to break down the barriers and facilitate the process improvement.”

Better processes could be used to find and plug up market and revenue “leakage,” and add agility to enable, for instance, the building of products to order. Austvold cited as an example a car that could be built in only five days after a customer specified desired features.

Another benefit? An easier time complying with laws and regulations, such as Sarbanes-Oxley, which requires certification of processes used to report data such as revenue recognition. “If Morley Safer or someone like that from “60 Minutes” shows up at your door, you know you’re in trouble,” Austvold observed. “But if you have something that says that this rogue person in Malaysia who was doing that thing was doing it on their own and wasn’t doing it as a part of a corporate initiative, it won’t bring the whole company down. Yes, it’s a bad person, but we can get rid of that person and fix that problem.”

But perhaps the biggest benefit? “We’re seeing real savings in managing customer and supplier interaction. And it changes the business model of most of the software that we own or operate today. It pushes the actions beyond the ERP footprint and requires that you actively start thinking about infrastructure,” Austvold said.

While “ERP did a great job of improving processing behind the firewall, that is, behind the four walls of your organization, it does very little to improve processes and collaboration with key customers or trading partners,” Austvold stressed.

Companies that have spent up to $15 million dollars for ERP packages and have achieved only 60 to 80 percent success rates are prime targets for low-cost up-front integration solutions that Austvold pointed out can be done for “well-below $100,000.”

“Research of ours has shown that better than 80 percent of all kinds of integration efforts … have been done by what I call a hand-coded method, which is to write some code and extract some key data out of (for instance) SAP and transform and load it into PeopleSoft or Seibel or whatever the case might be,” he said.

“And that goes on and on; it’s expensive, it’s redundant, it’s costly to maintain and quite frankly, I think that it’s crippling a lot of innovation that goes on inside organizations and how you go about becoming a service-oriented enterprise,” he added. Nor does it lend itself to exposing particular functionality or business assets to partners via composite application development.

“So it’s fundamentally changing all the business models of those that sell software,” Autsvold noted before detailing how SAP’s NetWeaver, Seibel’s Universal Application Network, PeopleSoft’s AppConnect, Oracle’s 9i AS and Sterling Commerce’s Gentran Integration Suite provide solutions.

“It’s what’s next and what’s needed and when we say it’s what’s needed it’s because we’ve reached a level of stagnation within an organization. It’s what’s next because there’s this level of technology among process management (vendors) that enables this service-oriented architecture which allows you to create composite applications.”

To find out many more ways to improve process and technology, watch a replay of Extending BPI Beyond the Enterprise.

About the Author

Gian Trotta is ebizQ's managing editor. Before joining ebizQ, he developed a wide variety of virtual news and community features for Newsday, Prodigy, Time Inc., Excite, About.com and MSNBC.

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