The Cost of a Process Breakdown

The Cost of a Process Breakdown

In this series, we talk a lot about business process modernization/optimization in terms of becoming a more flexible, agile enterprise; one that is better able to deliver new, integrated customer and employee services faster than ever. What's missing from this discussion is cost: specifically the cost of not opening up your business process in a way that lets your customers and employees interact with you the way they want.

Since every process serves a different purpose and some, as we've discussed, have to be rigidly followed or, as the expression goes, "the machine breaks down", there is no direct dollar value to associate with any one process not meeting every need in every way. But that does not mean hard costs cannot be measured: loss of customers to competitors and internal inefficiencies that negatively impact the bottom line are two that jump to mind.

Banking is a great example of the latter. On the surface, customers can scan checks, make deposits, take payments, and transfer funds from one person to another using their smartphones. But, internally (in the US anyway) it can still take days for those transactions to actually transpire. This is because the process was only optimized to accept a new form of input; image capture from a mobile device, for example. But in countries like South Africa, the entire process is optimized to take full advantage of mobile, so when it looks like funds have transferred, they actually have; saving time, money, and improving customer loyalty.

From a customer retention point of view, the advent of omni-channel marketing in retail provides ample evidence of where a new, customer-facing front-end bolted on to old back-end processes can actually backfire. How many systems, for example, does a retail store associate have to access to handle an in-store return from an online purchase? As often as not they are using the same online resources you are – and taking twice the time to do it. This inefficiency highlights the lack of true process integration required so a purchase, regardless of where it is made, can be processed by the same system regardless of where it is returned.

There are also soft costs such as employee retention. Rigid processes applied to information workers can dampen innovation and risk-taking -- the very things companies need to remain competitive today. These employees also tend to be less interested in the long-term health of your organization; instead collecting a paycheck until a more interesting opportunity comes along. Rigid processes also increase the incidence of shadow IT, where employees work around corporate IT to find solutions.

The main obstacle to overcoming this challenge is everything is connected yet still hardwired and siloed. Because of these process dependencies the entire process becomes brittle. Small inefficiencies in multiple processes lead to systemic inefficiencies that, in turn, either drive up costs, reduce margins, and/or remove customer loyalty (i.e., revenue). Or all three.

What's needed it is to view process improvement as a lifecycle. Changes made to solve problems today also have to take into account tomorrow's problems. Taking this approach works to make your processes more flexible and responsive because, by definition, it will open to change and adaptive. Add in a portfolio view mindset, and you will understand how as one change is made, one problem solved, it affects the entirety of the process from end to end. When you integrate these kinds of insights into your BPM initiatives, problem solving becomes much more holistic and effective.

To learn more about the future of business apps, read the white paper: “What is the cost of business process breakdown?”