Business Chaos, Digital Order

Written with Michael Neece

Steven StantonIt has happened before, but never like this.

The prevailing business model has cycled between order and chaos many times before. In the 1960’s the first wave of computing brought order to the mountains of analog data within corporations. The era of ERPs calmed the disorder of multiple disconnected functional systems. Now chaos is back, big time, and the only way to deal with it is reimagining the organization as a digital enterprise.

Look around. Signs of disorder surround you: multiple versions of a transaction, hundreds of uncoordinated projects, systems you can’t connect, hours wasted emailing and meeting. Worse, much of this disarray is invisible:

  • Personal files and spreadsheets
  • Stand-alone data bases
  • Poorly organized shared drives

You think this mess is inevitable, just the cost of doing business. True, it’s expensive and wasteful. But it’s not inevitable, if you can isolate and understand underlying causes. Let’s calculate just three costs.

Cost of searching, coordinating, and reporting

According to McKinsey & Company, IDC, and Interact, knowledge workers waste 30% of their time doing the following:

  • Searching for information,documents and screens
  • Coordinatingstaff, partners, and customers by email and messaging
  • Reportingstatus of past activities via spreadsheets and meetings

All this unproductive activity adds no value to the business or customers. If we made a value-stream map of these pervasive activities, the boxes would reveal no added value.

The average knowledge worker in the US across all industries is paid about $80,000/year. This means $24,000 per employee per year is wasted. A company of 1,000 people wastes $24M every year. For employers with 50,000 people the cost is almost $1.2B/year. The cost to the US economy is $1.47 Trillion annually. Even worse, this waste leads to investing in more systems and apps you don’t need.

Cost of unnecessary projects

Nearly all organizations launch hundreds of disconnected process improvement projects, of which 70% fail, according to John Kotter of the Harvard Business School. Project fragmentation consumes countless employee hours that produce small benefits. And many of these projects are redundant or in conflict with other initiatives. And each project requires human and financial resources.

The CEO of a $1B Fortune 100 company recently discovered that none of the leaders knew how many projects were active in the organization. It took one month to inventory all the projects. They discovered 1,400 in-flight projects. 50% were redundant, and most projects failed. 1,400 projects, 4 team members each, spending 6 hours/week on each project, 8 weeks average project duration, $80,000 average salary, and a 70% failure rate. Of the $10.8M in salaries spend on projects, $7.5M is wasted ($5,376 per project). In the face of this waste, what do most organizations do? Launch more projects of course.

Cost of ineffective meetings

The average associate spends 31 hours per month of unproductive time attending meetings, according to research studies by University of California. That’s $1,240 per employee per month. A 50,000-employee company wastes $744M a year.

This digital chaos exists because it’s hidden and because no one in your organization is actually tracking the costs or is held responsible for solving the problem. These costs live in organizational orphans, parts of the organization that are un-owned, unmeasured, and unloved. No person’s incentive compensation is on the line here, despite the massive waste of time, energy and real cost. Given these huge productivity drains, no wonder automation looks attractive. Robots don’t go to meetings or endlessly look for the latest version of a document, pour through emails, or manually build spreadsheets. Software or robots collect information instantly and report on demand.

Perhaps the only reason robots and automation look more productive is because we don’t burden robots with time wasters like searching for the latest file, coordinating with others, or sitting in status meetings reviewing spreadsheets. Take 30% of the robots’ time off-line and they wouldn’t look so productive either. So how can organizations eliminate the cost and chaos in a digital workspace?

Redesigning the organizational operating system.

Close your eyes and imagine that you are looking at a dashboard containing a exact digital replica of your organization, a model that depicts every process, project, app and system, as well as every participant in your company and those of your trading partners. With this model, you can focus in to see and control those critical processes that make the organization productive. Then you can pull back and see your entire organization as a whole. A control system with these capabilities would finally allow you to see how all your organizational elements fit together.

The organizational operating system could be used to automatically manage projects and processes in a manner that’s linked to each balance scorecard perspective. For example, processes related to the learning and growth or financial perspectives could automatically calculate performance against measurements and targets.

The imagined operating model is actually a reality today, and being used by forward thinking organizations to outperform their competition with greater speed of execution, lower costs, higher quality and compliance. Implementations typically start one process at a time, and then expand across other processes. Here are two examples.

The first involves a cyber security software firm that sells its products and services through channel partners. Implementations require the orchestration of processes, apps, and data across several organizations, including the customers. The security firm used an organization operating system to automate workflows, integrate data and apps, and synchronize privately share information across multiple organizations. The results included flawless implementations and increasing sales through an expanding network of happy channel partners.

The second is a mid-sized investment management firm that was struggling to improve internal operations that depended on coordinating services internally and with several external service providers. Changing domestic and international regulations also hindered business growth. They needed a way to increase operational and reporting efficiency, protect sensitive data across a network of providers, guarantee compliance, and integrate information from multiple data silos and apps. They used an organizational operating system to synchronize and integrate their complex workflows and data-flows internally and with a network of service providers.

Disorder is expensive. Order supports profitability and growth. But it requires reimagining the organization as a digital enterprise.

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