How Inefficient Processes Are Hurting Your Company Siloed, difficult-to-use business systems complicate processes and hamper operations. Is this true of your organization?
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Companies today are burdened by siloed, difficult-to-use business systems that complicate processes and hamper operations. According to market research firm IDC, companies lose 20 to 30 percent in revenue every year due to inefficiencies.
And yet, many companies continue to "make do" with their current applications and systems even though those may not be the right solutions. Unfortunately, companies will often repurpose one of these systems for a task which has a plausible functionality for the project -- imagine using a flashlight to crack open a walnut -- but is still not the right tool for the job.
Sooner or later, that misapplication is likely to cause a problem.
The consequences for using antiquated business process solutions or, gulp, no solutions at all, can be multi-faceted and ultimately damaging to a company's bottom line. Here are six common pitfalls that plague companies in nearly every industry due to inefficient or siloed business processes.
1. The silos themselves
Regardless of what industry you are in, or the type of customers you serve, the challenge of managing process flow and operations across diverse platforms and systems is universal. Combining tedious manual tasks with the reliance that company departments have on a smooth daily workflow makes it virtually impossible to maintain any kind of competitive advantage. Yet, this is how most companies operate.
There have been studies done on the effect siloing has on efficiency within certain industries. And the general conclusion has been that silos eat up a huge amount of resources, particularly in terms of interdepartmental cohesiveness. One noteworthy example referenced by author Gillian Tett in her book, The Silo Effect was Sony, whose successful PlayStation department jealously guarded its independence, even as the company's then-new CEO, Howard Stringer, tried to break down silos.
As a result, Sony failed to capitalize on a series of technology shifts -- such as the iPod and the rise of digital music devices -- that at the time it was in a good position to dominate.
The fix. One of the ways companies can successfully break down work silos is to provide mechanisms to achieve transparency and openness. Companies may want to consider a "single system of record" to achieve transparency, streamline communications and manage performance.
A number of companies have built highly successful systems of record: Salesforce, in the sales function, Intuit in finance and Workday, in human resources are notable ones. Systems of record are typically the backbone of core business processes. Without a solution that keeps everyone and everything connected, an organization is vulnerable to the common issues that plague distributed teams.
2. Poor systems integration
The growth of automation has led to more systems and solutions being in place than ever before, each requiring a set of processes to enable its successful use. According to an IDC survey, The Document Disconnect, over 80 percent of business leaders surveyed from sales, HR, procurement and other departments agreed that problems "arise because they have different internal systems/applications that don't "talk' to each other," while 43 percent of workers surveyed said they often have to copy/paste or rekey in information.
Without a standardized solution, such as a SaaS platform that streamlines processes, employees are forced to continuously shift between disparate sources of information, resulting in productivity issues and even greater employee churn.
One major Fortune 500 automotive company cited in the report uses Sharepoint for document repository, Lync for collaboration, two separate document management systems and email for collaborating on critical business processes, such as managing supplies for a new product development initiative. Each process flow lives in a disparate system.
Just because a process has been executed one way for a long time doesn't necessarily make it the best option. Often, companies will overlook sources of process slowdowns because of their lack of visibility and inability to understand the impact of a bottleneck.
These bottlenecks are sometimes the result of not adapting to new technologies -- or "gatekeepers" demanding control over a specific phase of a process.
Regardless of the reason, process hurdles can cause major slowdowns, with far-reaching financial impacts.
General Electric reported that just a 1 percent improvement in oil recovery was worth 80 billion additional barrels per year -- the equivalent of billions of dollars in additional revenue. Another GE finding: Avoiding just one day of down-time on an offshore platform can prevent $7 million per day in lost production.
The fix. Adapting to new technologies and being open to new solutions is the best way to improve processes. Be aware of a process that seems to be slowing down your business and actively pursue a way to improve it.
Another common problem for companies of all sizes is process duplication. Repeating steps dilutes the quality of a process and confuses those who execute the steps. This is commonly seen when there is a lack of departmental collaboration, or processes have been adapted in a less-than-systematic way.
The fix. Improving departmental collaboration can bring major benefits. One Fortune 50 consumer-package goods company was able to manage and improve its process flow by eliminating non-value-added activities. These included wasted time, wasted movement, wasted inventory due to overproduction, customer delays, waits for approvals, delays due to batching of work, unnecessary steps, duplication of effort and errors and rework.
5. Lack of insights
Even when companies have the right business intelligence information available, it may be inaccessible or erroneously reported due to a lack of real-time data. Leaders who don't have the most relevant insights at their fingertips are less likely to make smart choices.
If a leader or sponsor doesn't know exactly how you're progressing (for example, where in the given initiative tasks are stalled, how cycle times are being impacted, whether the time line is being adhered to or whether a task is in the red or the black), it's difficult to competently prioritize activities.
The fix. Oil and gas companies are an example of what can be gained by using real-time data analysis. They generate massive volumes of data from wells and sensors on their equipment and other assets they have already deployed. Concurrently, drillers and maintenance staff add to this volume by documenting their observations and the issues that concern them.
However, this potentially valuable data is often inaccessible or difficult to analyze because it's in a text format or locked away in data silos.
6. Loss of operational performance
Without a complete understanding of all components of their business, executives lose the ability to identify critical weaknesses and plan for predictable growth. Simply put, they cannot remain reactive to operational vulnerabilities or mitigate the complexities of running a business in a global economy.
Ultimately, a lack of process visibility leads to the assumption of greater risk, a loss of stakeholder trust and less positive growth.
The fix. Processes that digitally connect suppliers, customers and assets are creating unique and unheralded efficiencies and customer value. From connecting machines on the shop floor to connecting data from different asset vendors, operations in the new digital economy entail using information to inspire new processes.
Those processes, in turn, help close the gaps between companies and their customers. And that leads to a more positive bottom line.