Paradigm Shifts for Operational Excellence

(Written with Michael Neece)

Paradigm shift: A fundamental change in basic concepts and practices
Thomas Kuhn, physicist and philosopher

“When something changes by two degrees of magnitude, we need a new name”
Michael Hammer, originator of business reengineering

Hold on to your seat belt, we’re experiencing an unprecedented magnitude of simultaneous changes coming at us at an astounding rate of acceleration. The ride is already bumpy. At this point we’re all used to change, it’s part of our daily lives. But it’s mostly gradual change. As a result we have many words for small changes – continuous, incremental, progressive – but fewer words for big change. Reengineering is one of those, introduced by Dr. Hammer to express a revolutionary level of disruption.

What we have today are paradigm-busting changes, catalyzed by digital technology and globalization. The result is a strange brew of acceleration, complexity, and novelty manifesting in a six humongous shifts in organizational dynamics.

Orchestration

The value of a business in the collective capabilities of its network of partners. That network has become fragmented. Now Humpty Dumpty must be put back together in a new way!

These days the value of a business is no longer measured by counting internal resources. Work is conducted by teams separated by distance and organizational boundaries. Internal teams are scattered across departments and countries. And hundreds of external providers, suppliers, and partners, are critical to profitability and productivity. The best response to this fragmentation is re-integration.

We try to coordinate work activities by using project-specific chat apps, instant messaging, shared folders, and email. But this multitude of media has caused even more fragmentation of information and people.

We’ve entered the age where savvy business leaders are yearning for ways to reorganize and re-orchestrate work activities throughout their value-chain, and integrate critical information throughout internal and external participants. When mangers ask for status reports, they don’t just mean shared documents or chat streams. They’re looking for substance: Are we on-time, on-budget, on-target?

To provide that information and synchronize activity, we must orchestrate people, processes and systems, by design, and within a coherent process architecture.

Integration

Modern managers think performance is all about having the right data. They’re used to have too little data; today they have too much. Overwhelmed, hoping data alone will result in better decisions, they’re blind to the obvious – it’s the quality of data, and the flow, not the quantity that matters most.

It’s easy to measure everything, and digitize it, transforming physical phenomena into bits and bytes. But this pervasive explosion of fragmented and conflicting data leaves us without a coherent whole, a big picture, a single source of truth. And even while managers cry out for data integration they continue the failed practice of purchasing single-purpose systems, creating yet another isolated data silo.

To realize our dream of integrated information we have to abandon the data-centric world-view in favor of an integrated, end-to-end view of information flow.

Automation

We ain’t seen nothing yet!

The real impact of work automation is just beginning to show up. No longer can businesses tolerate the delays, cost and quality problems resulting from people doing repetitive tasks that machines could perform much better. We’re increasingly using software algorithms and simple robotics to automate repetitive tasks. Every day sees the introduction of automation in new areas, notably including knowledge work such as mortgage origination, engineering change management, medical image interpretation – all processes that, until recently, were assumed to be the exclusive domain of skilled workers.

And robots are now performing more complicated tasks, like warehouse picking, highway driving, even surgery. The man-machine boundary is being redefined as we automate more complex tasks that were reserved for human-only skill.

Augmentation

The biggest corporate lie, “People are our most important asset”, must now become real instead of a mendacious cliché.

Artificial Intelligence, speech recognition, machine learning, and other cognitive technologies can now augment humans. They help people find answers hidden in big data sets, predict future actions based on trends and probabilities, make sense of information flows that would otherwise overwhelm front line teams.

We’ve entered the age where human-machine collaboration can produce insights, reveal options and predict outcomes. But this actionable intelligence requires intelligent actors, people to understand the big picture, make difficult tradeoffs, consider ethical and cultural constraints as well as operational and financial objectives. And most important, people who design, guide, direct and improve their machines after each cycle. Humans are still the most important resource in the value chain.

Compliance

The environment keeps evolving. The rules keep changing.

Players in every industry must track the physical, technical and political environment and comply with changing regulations both local and global. Organizations of all sizes are impacted. Privacy laws enacted in Europe affect practices in other countries. Hacking by Russians of systems in North America results in breaches in Asia. Financial regulations govern monetary transactions around the world. Environmental problems cross country boundaries.

For example, in the USA we have Dodd–Frank Wall Street Reform and Consumer Protection Act governing financial regulations and HIPPA rules protecting health data portability and privacy. And in May 2018 companies will be impacted by new European Union (EU) privacy laws, called General Data Protection Regulation (GDPR), that bring order to a patchwork of privacy rules across the European Union.

Audits do not ensure regulatory compliance, let alone privacy, safety, security or public health. Auditing samples only past transactions; audit recommendations can be interpreted, delayed or even ignored. Even when built into business processes, audits are insufficient.

What’s required is a culture shift, making everyone from the top team to front line associates aware of, and active in, maintaining high standards.

Market Power

Power is inexorably flowing downstream and customers are the beneficiaries.  The golden rule is “Those who have the gold, make the rules.” We’ve seen similar shifts before, but this time the customer-seller relationship is blurred. In the past, vendors offered solutions and the customer picked their preferred vendor. Now the boundary between customer and service provider is more intimate. Customers are now active participants with the vendors during the selection, purchase, customization, and implementation of products and services.

If you’re in denial about these six paradigm shifts, beware. If you think going slow will work well, good luck. And if you’re not acknowledging and leveraging these six big changes, you’ll soon be a victim of them. The biggest risk is taking it slow and indecision.

One Comment

  1. Didier Tournier

    Michael,
    refering to “To realize our dream of integrated information we have to abandon the data-centric world-view in favor of an integrated, end-to-end view of information flow.”, I fully agree with that statement. But isn’t it a challenge to move to E2E info flow when most companies are not even yet at the data centric point? (still document centric, I mean)

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