Brad Power's latest HBR blog Putting Process On The CEO's Agenda is nicely grounded in C-Level realities - but it reflects today's mainstream thinking, not the rapidly emerging future.
The current orthodoxy sees process improvement as being about projects. That's fine - but in practice the project mentality has significant limitations. Re-use is minimal: when project teams disband, things are filed away and not maintained (ie lost and have to be re-created by the next team). Often the handover to the line at the end of the project is poor. And because projects are modular, they may just shift costs around the business rather than truly reduce them.
Small wonder then that, according to McKinsey, many cost-reduction programs (and let's be honest, many process improvement projects are focussed on cost reduction) are "illusory, short lived, and at times damaging to long-term value creation". McKinsey's research concluded that only 10% of cost reduction programs show sustained results three years later.
The future belongs to a conception of process improvement that is far wider. It's about an enterprise culture of continuous excellence (to borrow the term that Nestlé has coined).
In this perspective, there may be a wide-ranging portfolio of process improvement projects running at any one time. Some will be minor short-term improvement projects arising from operational experience at the grassroots. Some will be major projects involving organizational re-structuring and substantial software implementations to support new global processes.
But they are all linked to an engagement with continuous improvement that runs right through the organization at every level. And it's this engagement which is the key to the adoption of change and to sustainable gains.
In this context, the CEO and the senior exec team have two crucial leadership roles:
(1) to walk the talk, encouraging and rewarding commitment to an enterprise culture of continuous improvement
(2) to empower and mentor a center of excellence that defines, and manages the evolution of, the methodologies, tools and governance framework that orchestrate continuous improvement across the enterprise and its ecosystem.
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27 May 2010 Sustainable Improvement: Making Cost Cuts Stick