Value Chain Or Process? The Costs Of Confusion

iStock_000012210065SmallHere’s a conundrum. Listening to Paul Harmon of BP Trends on Becoming A Process-Centric Organization yesterday, I fell to wondering…

How can it be that process maturity is good (which CEO wouldn’t want flawless execution and a culture of continuous improvement?) – and yet, by whichever scale we choose, most organizations are pitifully low-scoring, and only a handful of the Fortune 2000 are at, say, CMMI Level 5?

One of the biggest barriers to higher levels of process literacy – and to wider C-Level engagement – must be confusion.  The false distinction between value chain and process perfectly illustrates this.

Let me make a claim which some will consider heretical.   Value chains (and value streams) are the same thing as end-to-end processes. They have a different provenance, and vocabulary, but their purpose is identical: they provide a framework for collaboration on performance improvement.

I see nothing in Wikipedia’s description of value chains that Nimbus clients are not already doing in their business process management programs.  Paul Harmon used the two terms interchangeably in his hour-long discussion – as indeed many others do.

It’s not just that we have two ways for describing the same thing.  If you call it eggplant and I call it aubergine, then it’s confusing, and does nothing to help us collaborate in the kitchen, but as long as we are both aware that they are exactly the same thing, there’s no harm done.

But we’re well beyond simple confusion because all sorts of folks have created ‘competing’ methodologies and vocabularies. There are Value Chain and Value Stream frameworks and methodologies, with Lean and Six Sigma variants, that seem to be quite separate from everyday process improvement.  Whereas, to all intents and purposes, they are all doing the same thing.

This confusion matters. It’s a fruitless distinction in a world which is often already ridiculously complex. At the C-Level, it sounds like a cacophany of voices competing for mindshare.  Whereas the truth is that all of them are about building capability to manage the enterprise in a new dimension: end-to-end process, or value chain, or value stream – call it what you will.

Tim Leach, Director of Competitive Excellence at Northrop Grumman, speaking at IP11, described the reality for many organizations when he said (of the situation at Northrop Grumman before adopting Nimbus) :

“How could it be that we have 7,000 people trained in Six Sigma and Lean yielding so little in terms of sustainable cost reductions and service improvement?”

If we want wider process literacy, and wider C-Level leadership in building process maturity, we have to fuse the existing disparate and apparently ‘competing’ approaches.  The start point must be to standardize our vocabulary.

I doubt that the UN or the US Supreme Court is going to take this up and make a definite pronouncement, so it’s up to us.  Value chains have a proud heritage – but in reality they are about understanding and optimizing end-to-end processes.  Simplicity demands that we choose one or the other.

No disrespect to Michael Porter, but I favor the wider adoption of process over value chain, and here’s some reasons why.

End-to-end business process…

dovetails with compliance. Risks and controls, quality and compliance, can all be integrated within the business process management platform

can be integrated with real-time performance metrics, so process improvement opportunities can be more immediately identified

is the language of outsourcing and shared services, which are rapidly transforming the back-office of every organization

bridges the IT divide and enables business-led systems implementation

can be integrated with documents, systems and training – and delivered as a personalized intelligent operations manual to every desktop and mobile device.

Process literacy is growing. The idea of process excellence is gaining currency.  Process maturity models such as CMMI are gaining ground, and even becoming mandatory in some public sector procurement. Let’s go with process and get far wider engagement, at C-Level and across the enterprise, in performance improvement.  Let’s embrace the Global Process Owner role now found in some visionary organizations – and expect that it will increasingly be recognized as a senior management leadership role.

© Text Michael Gammage 2013

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