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Transformation? It's in the White Space
You might find a couple of remaining processes in your firm to automate with today’s package software products but it’s doubtful you’ll achieve a real measure of digital transformation. And, worse, all that effort won’t necessarily generate the kind of competitive advantage or financial return that digital or business transformation dictates. Bottom line: the technology you acquire can make a big difference in whether your firm materially changes for the better and/or genuinely transforms itself.
Cleaning up vs. Transformation
A review of the software projects getting funded currently shows many of them falling into one of two camps. One group of projects are attempting to clean up or re-do a number of old, familiar problem areas:
Missing integrations
Manual interfaces
An overabundance of spreadsheets in use
Tackling the technical debt that has accumulated from a lack of maintenance/upgrades to existing applications
Another group of projects are more strategic, target new processes/functions and deliver very different outcomes. These projects are focused on new areas for automation and/or new ways of creating strategic value/advantage. These new projects are looking for those places where:
Automation has never been tried
Big data can be used with transaction data to drive new insights
AI/ML can be used to recognize similarities in events, recommend courses of action and even process the more mundane aspects of these events
These new applications are addressing the new frontier of application software: the vast, untapped white space that contains more than just accounting or business transaction systems. What is white space? CustomerThink has a marketing perspective that is relevant:
“There are many different interpretations of ‘white space’. Some companies consider it to be unchartered territory; others believe it to be where competition doesn’t exist. In this context, it is about mapping out new opportunities that your business has the resources, capability and passion to meet.”
Smart firms move their organization forward. They don’t get caught in endless re-automation of previously automated functions. They look to the new enabling technologies and solutions as these have the ability to create game-changing competitive advantage.
Your old application solution providers, spreadsheets and custom applications have only scratched the surface of applications possible today. Many of those older applications were designed for one functional user (e.g., an Accounts Payable clerk) and to complete a limited number of data entry or transaction processing requests. As a result, many older systems were not designed to serve customers, suppliers, board members, jobseekers and other constituencies. These solutions were never designed for a world with:
Big data
Dark data
Sensors
5G telephony
Powerful smartphones
Anomaly detection tools
Automated work flow and exception handling
Predictive not reactive requirements
Etc.
The great white space is where transactional, machine generated, imperfect (e.g., social sentiment) and other data is acted upon to deliver more value for the firm. This is where opportunities and problems are spotted in seconds and possibly months or years in advance of when they could become problematic for the firm. These new technologies help an organization marshal resources to take advantage of the future potential. The white space is not about data entry or in finding an eighth way to allocate a balance in the general ledger. It’s about creating competitive advantage.
The best of the new tools examines time sinks, wasteful spend, service issues, productivity losses and other opportunities across or between transaction processing apps. These tools identify no or low-value-added tasks, speed decision making, showcase anomalies, automate routine decisions/approvals/entries and find/stop fraud. Whether it’s chatbots or another new age tool, the end result of a great use of these technologies is the freeing up employees’ time to work on more strategic, value-added activities. Those are the capabilities found in today’s white space.
Case Study - One Path Into the White Space
Over the last couple of decades, many firms have created technologies that document a business process or workflow. For many technology vendors, these products allowed software buyers to show how they wanted existing work to be done. Some solutions also offered up a measure of workflow and exception handling functionality with their solution. For example, an invoice that normally is approved by someone on the receiving dock and another in Accounts Payable may also need to be routed to others if it exceeded a certain monetary threshold. The key value proposition in older solutions was to document, control and possibly provide some minor efficiency gains.
That was then. Now, firms like Celonis have moved process technologies into new white spaces: process mining and execution management. According to Wikipedia:
“Process mining is a family of techniques in the field of process management that support the analysis of business processes based on event logs. During process mining, specialized data mining algorithms are applied to event log data in order to identify trends, patterns and details contained in event logs recorded by an information system.”
Process mining tools essentially do three things:
They review logs of transaction processing systems to identify clues as to how processes actually work
They identify which aspects of processes are out of conformance, take too long, and/or are wasteful
They capture process performance statistics (processing times, cycle times, waiting times, costs, etc.) so that performance improvement opportunities can be identified
Celonis’ Execution Management capabilities go beyond process mining. The technology should drive greater productivity, increased efficiencies and optimized business events. This is accomplished via the software learning not just how processes are configured but how processes actually complete transactions and resolve an ever greater and more sophisticated set of difficult process challenges. Their software currently focuses on four core business areas: customers, finance, supply chain, and products/services.
The software identifies where execution gaps exist and assesses which of these could represent a great savings opportunity (or reputational improvement, quality improvement, etc.) for the company. It may even know what the best practice for this improvement could be. The focus of these tools is to improve the business (or execution) outcomes for the enterprise.
Benefits may include:
Reduced time to market
Reduced procurement costs
Improved timely delivery of raw materials
Reduced re-work
Facilitation of efforts by internal and external auditors
White Space and the Path Forward
Unless your firm just opened for business, the odds are pretty great that many of your processes are already partially automated. Going forward, you will want to close remaining automation gaps, improve the performance of existing processes and find ways to support the organization’s efforts to grow margin, enhance its competitive advantage and expand into new markets.
If those are indeed the directional aims of your firm, then your technology focus should be:
Less focused on the pastoral care of systems that delivered earlier rounds of automation
More focused on all-new kinds of automation that deliver new kinds of insights, recommend courses of action, and, perform an ever-greater degree of decision making without human intervention
Acquiring new technology should result in your firm deriving competitive advantage not competitive parity. That is why the focus must be transformational and not focused on incremental upgrades to existing transaction processing applications. The focus should be in all-new applications that utilize all-new advancements in technology (e.g., machine learning). Stated differently, transformed businesses will be rewriting the rules of competition and commerce in their industries while companies still clinging to nostalgic methods of yore will painfully suffer.
There are four main activities to successful transformation:
See – Business people must take the time to uncover what is the art of the possible today. If you haven’t been to a venture capital pitch event, to Silicon Valley, to numerous all-new vendors, etc., your technology knowledge is probably years out of date. Many of you are very current with personal technologies (e.g., smart phones) but your business may still be relying on fax machines, spreadsheets, paper forms, email and application software that is saddled with lots of technical debt. Get out of the office and see what new capabilities exist!
Think – After you’ve unearthed dozens of new solutions, you will want time to imagine how all of these new tools (e.g., bots, smart analytics, automated workflows, etc.) can be used in redesigned processes. You’ll want to understand how your people, processes and systems can better serve not just your department but all of your extended constituents. This is where you document and design the future of your firm and how it will interact with customers, suppliers, regulators, jobseekers, etc.
Reconcile – Not everything you’d like to implement can be done with the people, capital, time and other resources your firm possesses. You’ll need to prioritize and focus on the transformational initiatives that possess the biggest upside for your firm. These are the projects and technologies that let you rewrite the rules of competition in your industry.
Transform – This is the actual transformation effort itself. You can’t just jump to this step directly. You first have to complete the above work!
Bottom Line
There is change and then there’s change that matters. Hopefully, you understand the difference.
Businesses today live in an abundance of options. You can find scores of solutions that will generate change at the margin for your firm (i.e., incrementalism) but you probably should pass on most of these. In contrast, there are solutions that don’t resemble your current technologies or how your processes function today. The trick is to find these and determine which ones can deliver outsized benefit for your firm.
Businesses are constrained entities. They only have so much time, capital and staff to work on transformational initiatives. Why waste it on low-value-added efforts that cost a fortune? Worse, there’s an opportunity cost and loss of competitive advantage when companies focus on minor incremental efforts while competitors are leaping forward. Be smart with your processes, technology, people and your firm’s future. These all must be aligned.
Good luck!
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