ISO, TQM, Paradigm Shift, SCM, CRM, PRM, DRM, Whatever!

(Originally published in the May/June 2003 issue of AFSMI's Sbusiness.)

By Leo A.P. Moerkens and William K. Pollock

We have all been barraged with a seemingly endless list of terms and acronyms over the past couple of decades that have been hyped to solve all of our business problems. These include ISO 9000; Total Quality Management (TQM); Paradigm Shift; Supply Chain Management (SCM); Customer, Partner or Device Relationship Management (CRM/PRM/DRM); whatever! At some point during our careers, each of us has probably sponsored or served on one or more of these initiatives in an earnest attempt to change or improve our respective businesses. We know that we personally have been part of these initiatives in one role or another over the past 25 years either as a manager, executive and/or consultant. While some of these initiatives may have fallen in and out of favor, others are still squarely on today's radar screen.

However, the question still arises: Are all of these terms and acronyms nothing more than smart marketing campaigns devised by innovative software vendors and consultants, or is there something more to them? What do they all have in common, and how do they relate to one another, if at all? How can you make sure that you focus on the right things to improve your business and make sure that you stay competitive and profitable?

We believe that the commonality among all of these initiatives is the ability to focus your efforts on the improvement of your business, and create both an atmosphere and an environment for change that ultimately result in a true competitive edge. In the past, depending on how you scoped out or executed any of these individual initiatives, you may have been able to change or improve your business to some degree. However, as we have seen in many client situations, this success represents a hollow victory when the realized results turn out to be only minimal, unmeasurable, or not directly correlated back to the original goals of the program.

This does not necessarily mean that the initiatives themselves were not important, or that they didn't lead to at least some improvement. What it does mean, however, is that the real challenge - upfront - is to focus on the business improvement aspects that are necessary to move your business forward and keep your customers satisfied - regardless of the specific name or acronym. The one constant that we know for certain is that if you don't keep changing and updating your business, you will fall behind the competition, and ultimately lose customers. However, this can be avoided if you take the right approach.

Drivers for Change
The first things you will need to look at are the reasons - or drivers - for change. Some of them originate internally, based on the business strategy you select to go into new markets or launch new products and services. Others come as the result of external factors (i.e., market characteristics, competition, etc.). However, regardless of the specific business you are in, there are some common drivers for change that impact all businesses in some fashion, including:

  • Technology - is the most important driver, encompassing automation systems and communications. Most of us still remember the old environment that was very inflexible and did not allow for real-time operation, let alone global integration. However, changes in information systems technology (both hardware and software) and the integration with communication technology (especially the Internet) have led to great opportunities for businesses over the last couple of years. This has allowed many to completely re-think the way they operate, and how they will need to optimize both their processes and organization to control costs and maintain customer satisfaction.
  • Globalization - has been around for quite a while, and large corporations have been dealing with it for decades. However, it requires significant change from a local, regional or national orientation, and impacts every internal business function and process. It also requires different skill sets for all of your personnel, as well as their awareness and understanding of cultural differences, knowledge of local regulations and accounting principles, etc. We have become a global society, but not all organizations have yet risen to the occasion.
  • Competition - has always been a driver for change for most businesses. It forces us to keep pace with the products and services that our competitors are offering - and exceeding them where we can. A successful competitive approach will also change our customers' perspectives and expectations and, as a result, we will have to be able to react quickly - or risk losing market share. However, keeping pace strictly from an external (i.e., competitive) perspective is not good enough; you will also need to focus - hand-in-hand - on controlling costs in order to maintain your profit margins. In short, the competitive environment pushes us to become better - and lower our costs - all at the same time. The old cliché about "doing more with less" is as valid today as it ever was.
Symptoms that Indicate the Need for Change
But, how do you know that it is time to change? Sometimes it is obvious, and sometimes it is not - but by the time you realize that change is necessary, you're probably already significantly behind! Based on our mutual experiences we have identified some symptoms that indicate that something is wrong, and that change may be required:
  • Profitability is lagging behind due to declining sales and/or severe price competition. This is an indicator that your go-to-market approach and, perhaps, your product and service portfolio, require review. It may also be a signal that either your customer focus has fallen off the mark, or that your internal costs for doing business are getting too high. In either case, it is clear that change is required.
  • Customer satisfaction is declining. This indicates that either your customers' needs and requirements are becoming more demanding, or your performance is slipping for whatever reasons - or both! Once again, it is a strong indication that change is necessary. However, the great danger of this symptom is that if you don't already have a structured approach to continuously measure and track customer satisfaction, by the time you realize that there is a problem, you might have already lost customers to the competition.
  • The business is too focused on internal issues. Many organizations tend to focus too much on internal issues, as a result of politics and sometimes infighting, which takes the attention away from the primary focus of your business: the customer! This may also be a very dangerous symptom because it is extremely counterproductive, and takes away the necessary attention from the customer, generally resulting in internal inefficiencies and a negative working environment. One of the very visible aspects of this symptom is a reactive or firefighting mode of operation where problems seem to pop up faster than you can resolve them - at all levels in the organization - keeping you from running either efficiently or effectively. Over the years, we have seen many situations where this was the main cause for both declining profits and decreased customer satisfaction.
What to Do if You Recognize these Symptoms
Recognizing where you stand with respect to any of these symptoms, and developing a plan for overcoming them, will ultimately determine how successful your business can be. However, the most dangerous approach is to start reacting to any of these symptoms as if they were standalone issues. Such a myopic determination usually leads to a fragmented approach that will ultimately do the business more harm than good. For example, if profitability goes down, you can start cutting costs to maintain your profit targets. Sometimes, this is unavoidable, but can be very dangerous if you don't address the underlying root causes of the problem. Not facing the totality of the problem may ultimately lead to a downward spiral that can ruin your historical customer relationships, and send the business into an even more pronounced tailspin.

So what is the best way to approach these symptoms and effectively address the root problems? First, you must be proactive and structured in your approach. We believe that the best way to proceed is to stay ahead of the curve by utilizing the appropriate mix of customer satisfaction measurement and analysis that focuses on all key aspects of the business, including the ongoing assessment of customer needs and requirements, and corresponding levels of customer satisfaction. In many cases, it is only through these ongoing market research programs that management can be kept fully aware of exactly what customers need, require and expect; where the company is presently meeting - or failing to meet - their expectations; how they rate the company's overall product and service performance; and how to translate all of these findings into effective operational processes. Besides that, it requires continuous attention to, and an ongoing re-evaluation of, your products and services, business processes, Information and Communications Technology (ICT) tools, and organization.

Based on over 25 years each of either managing and operating businesses - or consulting to them - we have developed a structured approach designed to help you stay ahead of the curve. Over the years we have seen many organizations increase their chances for success by following this model.

Structured Approach
The recommended approach to business change needs to be structured and focused to ensure that you use the available resources in the most optimum way to maximize the results. It is a continuous process that must be managed very carefully from the top down. It is also very important that all primary business functions are included in the planning and execution phases, and that all actions are carefully coordinated to maximize the results.

Based on our mutual experience, we recommend a four-step approach, executed in a continuous cycle. These steps, in turn, ultimately impact all areas within the organization, including marketing, development, manufacturing, sales, and service and support, (Figure 1). The four steps are:

  • Strategy verification
  • Assessment of the existing situation
  • Solutions development
  • Implementation
Figure 1

There Is a Four-Phased Approach to Organization Change Management
that Should Be Executed in a Continuous Cycle


Figure 1

Phase 1 - Strategy Verification
Because of all the changes - both internal and external - that continually impact your business, it is necessary to verify your strategy on a regular basis. We recommend doing so at least once a year as part of your regular business planning cycle. However, in order to effectively verify - and update - your strategy, you will need a constant inflow of relevant market and customer satisfaction information, combined with your internal process and performance measurements. For this reason we recommend designing an annual program for market research and customer satisfaction measurement at each of the levels in line with your business planning cycle. This helps both to identify possible problem areas, as well as lay the foundation for supporting a more gradual change and updating of the strategy in an effort to avoid any of the "leaps and bounces" that some companies experience when trying to change too much, too soon - or too late! The use of the ongoing survey results will also ensure that you are always focusing on the explicit needs, requirements, and expectations of your customers while also keeping an eye on the internal business processes ad performance.

In any case, these programs need to be carefully designed and executed in order to effectively complement the internal measurement systems you already have in place, thereby serving as an early warning system that will allow you to be more proactive in identifying and responding to potential problems - and avoiding them. The output of this phase is a validated and updated strategy that will provide both the vision and future direction of the business. This will be extremely critical to communicate within the organization, and can also be incorporated directly into a customer-focused marketing strategy.

Phase 2 - Assessment
Depending on how much information is gathered during the strategy verification phase, additional assessments may still need to be done at more tactical levels to identify any gaps or opportunities in greater detail. This usually involves both an internal and external assessment to validate the strategic assumptions and identify any internal gaps inherent in the existing business processes, ICT tools, or organizational structure.

The results of this phase will clearly identify areas for improvement based on the updated strategy, and help to define specific executable actions and priorities. During this phase strategic alternatives will also need to be developed and presented to executive management for their approval. The outcome of this phase will be a plan for the development of the accepted direction that is necessary to close the gaps and capitalize on the opportunities. All outcomes will also need to be clearly articulated and communicated within the organization in order to fully motivate the staff and create an atmosphere that both promotes - and effects - the desired change.

Phase 3 - Solutions Development
This phase is, next to the implementation phase, the most labor-intensive and critical component for success. It will be here where the accepted direction will be designed in detail, starting with the process development. It is our strong recommendation that all of the key process owners are directly involved - via focused workshops - to assure the quality and appropriateness of the output, as well as to create organization-wide "buy-in". Once the recommended business processes are developed and fine-tuned, the specifications for the required ICT tools can be developed and the organizational requirements can be defined to the level of detail that is necessary to create a organizational transition plan.

The development of the new ICT requirements will then lead to a transition or reconfiguration plan for migrating the existing systems or, if the gap is too large (e.g., if you still have legacy systems that will need to be replaced), to the development of an RFP for selecting a new system. In either case, we strongly recommend developing the new processes first, before specifying your requirements in detail, so that you can select the most appropriate system to fit the specific needs of your updated strategy. This is an important consideration to avoid the possibility of investing in an inadequate system solution that may limit your possibilities, or - worse - prevent you from attaining a maximum ROI.

The development of these new processes will also lay the foundation for the definition of the functions and functional requirements that will be needed to properly execute them. As such, both a transition and training plan can also be developed to support the organizational changes, and motivate the people who have to implement and execute the new strategy. This will all come together in terms of a detailed implementation plan and implementation timeline.

Phase 4 - Implementation
By now, all of the pre-implementation details have been worked out during the development phase, and a recommended ICT plan and organizational transition plan has been developed to meet your specific needs. As such, the implementation itself can be very focused, and performed within a relatively short timeframe. Because all the details have been worked out already, all resources can be focused on the implementation tasks, without being bogged down by developing alternatives. Systems experts can configure and test the appropriate ICT tools based on the detailed process information. A training plan, focusing both on the new processes, and how to apply the new tools, can then be developed and executed. We recommend that the same project teams that originally helped to develop the solutions are also included in any testing and training (e.g., train the trainers) to ensure consistency and continuity. Following implementation, we also recommend performing a post-implementation audit after two and six months to ensure that everything is running smoothly. Findings from this audit can then be easily fed into the next iteration of strategy verification, and serve as the basis for the next steps.

Sequentially, the change management cycle moves from strategy development through the assessment, development and implementation phases, before once again cycling through the entire process as the situation warrants. The overall process is illustrated in Figure 2.

Figure 2

The Organization Change Management Cycle Is an Ongoing Process
that Moves from Strategy Development through Implementation


Figure 2

Results
While this approach may look like a cumbersome way of driving change in business, you will find that the overall scope is greatly dependent on how much change is actually necessary, and how deep the change needs to be. If the required change is not that dramatic, you will be able to go through each of the phases relatively quickly - and without a great deal of additional capacity requirements. However, if your business requires more dramatic change, it is our recommendation that you look for external help to assist you from an expertise, experience, and capacity point of view.

In either case, utilizing this structured approach will guarantee that all of the activities emanating from the strategy are focused on yielding a maximum return on investment and that neither time, nor resources, are being wasted. Like anything else, there is no guarantee for success - but without utilizing a structured and orchestrated approach such as the one we have outlined in this article, there is less chance for any success at all! However, if these steps are taken, you will see the results manifest themselves in terms of increased customer satisfaction, and maintained or improved profitability - all at the lowest possible integral cost, and in the shortest possible time. Even more, it will provide your organization with a strong foundation for embarking on the next set of steps in its ongoing business improvement process.



Leo A.P. Moerkens is president of Hands-on Management Consultants, Inc., an international management consultancy firm that assists clients in developing and implementing business improvement programs. Leo can be reached at 203-888-1671, or via e-mail at LMoerkens@Hands-onMC.com.

William K. Pollock is president of Strategies For GrowthSM, a consulting firm specializing in strategic, marketing and business planning; market research and customer/market surveys; customer satisfaction measurement and tracking; services marketing; and Customer Relationship Management (CRM). He may be reached at 610-399-9717, or via e-mail at wkp@s4growth.com.


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